sc13d

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N5JCFgX85QMu87JWWGx5LdtuoNRhvzTMngfEiYVpRDzGzadWIQK3n/4zIZa1q3kH Thp7z/lBwXWRaiEQjOhe1Q== 0000950123-10-100592.txt : 20101104 0000950123-10-100592.hdr.sgml : 20101104 20101104100745 ACCESSION NUMBER: 0000950123-10-100592 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20101104 DATE AS OF CHANGE: 20101104 GROUP MEMBERS: JEN I, L.P. GROUP MEMBERS: JEN PARTNERS, LLC GROUP MEMBERS: JEN RESIDENTIAL LP FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LEIBOWITZ REUBEN S CENTRAL INDEX KEY: 0001210982 FILING VALUES: FORM TYPE: SC 13D MAIL ADDRESS: STREET 1: 466 LEXINGTON AVENUE 10TH FL CITY: NEW YORK STATE: NY ZIP: 10017 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: AVATAR HOLDINGS INC CENTRAL INDEX KEY: 0000039677 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 231739078 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-20987 FILM NUMBER: 101163516 BUSINESS ADDRESS: STREET 1: 201 ALHAMBRA CIRCLE CITY: CORAL GABLES STATE: FL ZIP: 33134 BUSINESS PHONE: 3054427000 MAIL ADDRESS: STREET 1: 201 ALHAMBRA CIRCLE CITY: CORAL GABLES STATE: FL ZIP: 33134 FORMER COMPANY: FORMER CONFORMED NAME: GAC CORP /DE/ DATE OF NAME CHANGE: 19801023 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL ACCEPTANCE CORP DATE OF NAME CHANGE: 19710208 SC 13D 1 g25091sc13d.htm SC 13D sc13d

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 13D

UNDER THE SECURITIES EXCHANGE ACT OF 1934

Avatar Holdings Inc.

(Name of Issuer)

Common Stock, $1.00 par value

(Title and Class of Securities)

053494-10-0

(CUSIP Number)

Reuben S. Leibowitz
JEN Partners, LLC
551 Madison Avenue, Suite 300
New York, NY 10022-3212
(212) 755-4300

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

— With a copy to —

Steven C. Koppel, Esq.
Andrew M. Levine, Esq.
Jones Day
222 E 41st Street
New York, NY 10017
(212) 326-3939

October 25, 2010

(Date of Event Which Requires Filing of This Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


CUSIP No.		053494-10-0	SCHEDULE 13D						Page	2

NAME OF REPORTING PERSON

JEN I, L.P.

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP

(a) o

(b) o

SEC USE ONLY

SOURCE OF FUNDS

CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

630,343

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

WITH

SHARED DISPOSITIVE POWER

630,343

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

630,343

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

5.1%*

TYPE OF REPORTING PERSON

* Based on 12,411,903 shares of common stock outstanding, which is the aggregate of (1) 11,361,331 shares of common stock reported outstanding on the issuer’s Quarterly Report on Form 10-Q for the quarterly period ended on June 30, 2010 and (2) an additional 1,050,572 shares of common stock that were issued as described herein. JEN I, L.P. (“JEN I”) directly holds 630,343 shares of common stock (the “JEN I Shares”). Reuben S. Leibowitz (“Mr. Leibowitz”) is the managing member of JEN Partners, LLC (“JEN Partners”), the general partner of JEN I. Accordingly, JEN I, JEN Partners and Mr. Leibowitz may be deemed to share voting and dispositive power over the JEN I Shares.


CUSIP No.		053494-10-0	SCHEDULE 13D						Page	3

NAME OF REPORTING PERSON

JEN Residential LP

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP

(a) o

(b) o

SEC USE ONLY

SOURCE OF FUNDS

CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

420,229

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

WITH

SHARED DISPOSITIVE POWER

420,229

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

420,229

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

3.4%*

TYPE OF REPORTING PERSON

* Based on 12,411,903 shares of common stock outstanding, which is the aggregate of (1) 11,361,331 shares of common stock reported outstanding on the issuer’s Quarterly Report on Form 10-Q for the quarterly period ended on June 30, 2010 and (2) an additional 1,050,572 shares of common stock that were issued as described herein. JEN Residential LP (“JEN Residential”) directly holds 420,229 shares of common stock (the “JEN Residential Shares”). Mr. Leibowitz is the managing member of JEN Partners, the general partner of JEN Residential. Accordingly, JEN Residential, JEN Partners and Mr. Leibowitz may be deemed to share voting and dispositive power over the JEN Residential Shares.


CUSIP No.		053494-10-0	SCHEDULE 13D						Page	4

NAME OF REPORTING PERSON

JEN Partners, LLC

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP

(a) o

(b) o

SEC USE ONLY

SOURCE OF FUNDS

CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

SOLE VOTING POWER

NUMBER OF

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

1,050,572

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

WITH

SHARED DISPOSITIVE POWER

1,050,572

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

1,050,572

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

8.5%*

TYPE OF REPORTING PERSON

* Based on 12,411,903 shares of common stock outstanding, which is the aggregate of (1) 11,361,331 shares of common stock reported outstanding on the issuer’s Quarterly Report on Form 10-Q for the quarterly period ended on June 30, 2010 and (2) an additional 1,050,572 shares of common stock that were issued as described herein. JEN I directly holds the JEN I Shares and JEN Residential directly holds the JEN Residential Shares. Mr. Leibowitz is the managing member of JEN Partners, the general partner of JEN I and JEN Residential. Accordingly, JEN I, JEN Partners and Mr. Leibowitz may be deemed to share voting and dispositive power over the JEN I Shares, and JEN Residential, JEN Partners and Mr. Leibowitz may be deemed to share voting and dispositive power over the JEN Residential Shares.


CUSIP No.		053494-10-0	SCHEDULE 13D						Page	5

NAME OF REPORTING PERSON

Reuben S. Leibowitz

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP

(a) o

(b) o

SEC USE ONLY

SOURCE OF FUNDS

CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

United States

SOLE VOTING POWER

NUMBER OF

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

1,050,572

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

WITH

SHARED DISPOSITIVE POWER

1,050,572

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

1,050,572

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

8.5%*

TYPE OF REPORTING PERSON

* Based on 12,411,903 shares of common stock outstanding, which is the aggregate of (1) 11,361,331 shares of common stock reported outstanding on the issuer’s Quarterly Report on Form 10-Q for the quarterly period ended on June 30, 2010 and (2) an additional 1,050,572 shares of common stock that were issued as described herein. JEN I directly holds the JEN I Shares and JEN Residential directly holds the JEN Residential Shares. Mr. Leibowitz is the managing member of JEN Partners, the general partner of JEN I and JEN Residential. Accordingly, JEN I, JEN Partners and Mr. Leibowitz may be deemed to share voting and dispositive power over the JEN I Shares, and JEN Residential, JEN Partners and Mr. Leibowitz may be deemed to share voting and dispositive power over the JEN Residential Shares.

Page 6

Item 1. Security and Issuer

This statement of beneficial ownership on Schedule 13D (this “Schedule 13D”) relates to common stock, $1.00 par value (the “Common Stock”), of Avatar Holdings Inc., a Delaware corporation (the “Issuer”). The principal executive offices of the Issuer are located at 201 Alhambra Circle, Coral Gables, Florida 33134.

Item 2. Identity and Background

The names of the persons filing this Schedule 13D (collectively, the “Reporting Persons”) are:

	•		JEN I, L.P. (“JEN I”);

	•		JEN Residential LP (“JEN Residential”);

	•		JEN Partners, LLC (“JEN Partners”), the general partner of JEN I and JEN Residential; and

	•		Reuben S. Leibowitz (“Mr. Leibowitz”), the sole managing member of JEN Partners and also a limited partner of JEN I and JEN Residential.

The Reporting Persons have entered into a Joint Filing Agreement, dated as of the date hereof, a copy of which is filed with this Schedule 13D as Exhibit 99.1 (which is hereby incorporated by reference) pursuant to which the Reporting Persons have agreed to file this statement jointly in accordance with the provisions of Rule 13d-1(k)(1) under the Securities Exchange Act of 1934.

JEN I and JEN Residential are Delaware limited partnerships. Each is a private equity fund engaged in investing in real estate.

JEN Partners is a Delaware limited liability company. The principal business of JEN Partners is the management of private equity investment funds. JEN Partners is controlled by Mr. Leibowitz, whose principal occupation is as the managing member of JEN Partners. Mr. Leibowitz is a citizen of the United States. The principal business address of each of the Reporting Persons is 551 Madison Avenue, Suite 300, New York, New York 10022.

None of the Reporting Persons has, during the last five years, been (1) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (2) a party to any civil proceeding of a judicial or administrative body of competent jurisdiction that resulted in or was subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or a finding of any violation with respect to such federal or state securities laws.

Item 3. Source and Amount of Funds or Other Consideration

On October 25, 2010, JEN I and JEN Residential were issued 630,343 and 420,229 shares, respectively, of Common Stock, pursuant to the Master Transaction Agreement, dated as of October 25, 2010, by and among Terra West Communities LLC, JEN JCH, LLC, Joseph Carl Mulac III, Stephen Adams and Sun Terra Communities, LLC (collectively, the “Sellers”), the Issuer, Avatar Properties Inc., a wholly owned subsidiary of the Issuer (“Avatar Properties”), and JEN Partners (the “Master Transaction Agreement”). Under the terms of the Master Transaction Agreement, the Sellers sold entities comprising a portfolio of real estate assets to Avatar Properties in exchange for the receipt by JEN I and JEN Residential of (1) $30 million in cash, subject to adjustment as described in the Master Transaction Agreement, (2) $12 million in promissory notes of Avatar Properties (the “Notes”), and (3) 1,050,572 shares of Common Stock. As additional consideration for the sale, JEN I and JEN Residential may receive in 2015 up to 420,168 additional shares of Common Stock (the “Earnout Shares”), subject to the achievement by December 31, 2014 of certain agreed upon metrics relating to one of the purchased assets, pursuant to the terms and conditions of the Earnout Agreement, by and among the Issuer, Avatar Properties, JEN I and JEN Residential (the “Earnout Agreement”).

No cash payments were made by or on behalf of the Reporting Persons in connection with the acquisition of the shares of Common Stock to which this Schedule 13D relates. The descriptions of the Master Transaction Agreement and the Earnout Agreement are qualified in their entirety by the terms and conditions of the Master Transaction Agreement and the Earnout Agreement, which are filed as Exhibits 99.2 and 99.3 hereto, respectively, and incorporated herein by reference.

Page 7

Item 4. Purpose of Transaction

The Reporting Persons hold the shares to which this Schedule 13D relates for investment purposes.

Pursuant to the Master Transaction Agreement, the Issuer agreed to (1) appoint Mr. Leibowitz and Allen Anderson to the Issuer’s Board of Directors and (2) nominate Messrs. Leibowitz and Anderson for election to the Issuer’s Board of Directors at the next two annual shareholders meetings. Messrs. Leibowitz and Anderson each became directors of the Issuer on October 25, 2010, following the closing of the transactions contemplated by the Master Transaction Agreement. Mr. Anderson is employed by an affiliate of JEN Partners and is a non-controlling member of JEN Partners. Riverside Ventures LLC, an affiliate of Mr. Anderson, is a limited partner of JEN Residential. The description of Mr. Leibowitz’s relationship to the other Reporting Persons is described in Item 2 and incorporated herein by reference.

Notwithstanding the foregoing, the Reporting Persons intend to continually review various factors relevant to their investment, including trading prices for Common Stock and conditions in the capital markets generally, developments in the Issuer’s business, financial condition, results of operations and prospects, the Reporting Persons’ capital resources and other factors, and, based thereon, the Reporting Persons may take or propose to take, alone or in conjunction with others including the Issuer, other actions intended to increase or decrease the Reporting Persons’ investment in the Issuer, including in open market or privately negotiated transactions, subject to any applicable legal and contractual restrictions on their ability to do so, including the contractual restrictions described in Item 6 of this Schedule 13D. Notwithstanding anything contained herein, the Reporting Persons specifically reserve the right to change their intentions with respect to any or all of the matters referred to in this Schedule 13D.

The description of the Master Transaction Agreement is qualified in its entirety by the terms and conditions of the Master Transaction Agreement, which is filed as Exhibit 99.2 hereto and incorporated herein by reference.

Item 5. Interest in Securities of the Issuer.

(a)-(b) JEN I is the beneficial owner of 630,343 shares of Common Stock (representing approximately 5.1% of the outstanding Common Stock), JEN Residential is the beneficial owner of 420,229 shares of Common Stock (representing approximately 3.4% of the outstanding Common Stock) and each of JEN Partners and Mr. Leibowitz is the beneficial owner of 1,050,572 shares of Common Stock (representing approximately 8.5% of the outstanding Common Stock).

The number of shares of Common Stock with respect to which each of the Reporting Persons has or shares voting or dispositive power is set forth in Items 8 and 10 of each of the inside cover pages to this Schedule 13D relating to each Reporting Person (which is incorporated into this Item 5 by reference).

The voting and disposition of the shares of Common Stock held by the Reporting Persons are subject in certain respects to limitations under the Voting and Lock-Up Agreement (see Item 6).

(c) Except as described in this Schedule 13D, none of the Reporting Persons has effected any transaction in Common Stock during the past 60 days.

(d) Not applicable.

(e) Not applicable.

Item 6. Contracts, Arrangements, Undertakings or Relationships with Respect to Securities of the Issuer.

In connection with the Master Transaction Agreement, JEN I and JEN Residential entered into a Voting, Standstill and Lock-Up Letter Agreement, dated as of October 25, 2010, with the Issuer and Avatar Properties (the “Voting and Lock-Up Agreement”), pursuant to which JEN I and JEN Residential have agreed, among other things, (1) to vote any Common Stock held by JEN Partners, JEN I and JEN Residential in favor of all individuals nominated by the Issuer to be elected to its Board of Directors until the date that neither Mr. Leibowitz nor Mr. Anderson serves on the Issuer’s Board of Directors, (2) to certain standstill restrictions that generally restrict the ability of JEN I, JEN Residential and their respective affiliates to acquire more than 15% of the outstanding Common Stock or seek to engage in a change of control of the Issuer, and (3) not to transfer, subject to certain exceptions, any of the Common Stock acquired pursuant to the Master Transaction Agreement until October 25, 2012.

In addition, under the Voting and Lock-Up Agreement, each of JEN I and JEN Residential have pledged any shares of Common Stock acquired pursuant to the Master Transaction Agreement as collateral to secure certain indemnification obligations of the Sellers until October 25, 2012.

Page 8

Pursuant to an Agreement Among Transaction Participants, dated as of October 25, 2010, by and among JEN Partners, JEN I, JEN Residential, the Sellers, Mike Jesberger, John Kraynick, Richard Jerman, Riverside Ventures LLC, Peter Bay Investment LLC and William and Ruth Bloom (the “Participant Agreement”), JEN Partners has agreed to cause a portion of the Common Stock issued to JEN I and JEN Residential at the closing of the transactions contemplated by the Master Transaction Agreement, not to exceed 48,294 shares of Common Stock in the aggregate (representing less than 0.4% of Common Stock currently outstanding), to be transferred to Joseph Carl Mulac III, Mike Jesberger, Stephen Adams, Richard Jerman and John Kraynick (collectively, the “Potential Recipients”). Pursuant to the Participant Agreement, JEN Partners has also agreed to cause a portion of any payments made under a Note to be transferred to the Potential Recipients. The actual number of shares and amount of Note proceeds will be determined following the satisfaction of any indemnification obligations to Avatar Properties and the determination of responsibility for such indemnified matters among the Potential Recipients pursuant to the terms of the Participant Agreement. Additionally, under the Participant Agreement, JEN Partners has agreed to cause a portion of the Earnout Shares, to the extent issued, to be transferred to Joseph Carl Mulac III, Mike Jesberger and Stephen Adams.

In addition, JEN I, JEN Residential and the Issuer entered into a Registration Rights Agreement, dated as of October 25, 2010 (the “Registration Rights Agreement”), pursuant to which JEN I and JEN Residential have customary registration rights in respect of their acquired shares.

The descriptions of the Master Transaction Agreement, the Voting and Lock-Up Agreement, the Participant Agreement and the Registration Rights Agreement are qualified in their entirety by the terms and conditions of the Master Transaction Agreement, the Voting and Lock-Up Agreement, the Participant Agreement and the Registration Rights Agreement, which are filed as Exhibits 99.2, 99.4, 99.5 and 99.6 hereto, respectively, and incorporated herein by reference.

Item 7. Material to be Filed as Exhibits.


99.1		Joint Filing Agreement, dated as of November 4, 2010, by and among the Reporting Persons

99.2		Master Transaction Agreement, dated as of October 25, 2010, by and among the Issuer, Avatar Properties, JEN Partners and the Sellers

99.3		Earnout Agreement, dated as of October 25, 2010, by and among the Issuer, Avatar Properties, JEN I and JEN Residential

99.4		Voting, Standstill and Lock-Up Letter Agreement, dated as of October 25, 2010, by and among the Issuer, Avatar Properties, JEN I and JEN Residential

99.5		Agreement Among Transaction Participants, dated as of October 25, 2010, by and among JEN Partners, JEN I, JEN Residential, the Sellers, Mike Jesberger, John Kraynick, Richard Jerman, Riverside Ventures LLC, Peter Bay Investment LLC and William and Ruth Bloom

99.6		Registration Rights Agreement, dated as of October 25, 2010, by and among the Issuer, JEN I and JEN Residential

Page 9

SIGNATURES

After reasonable inquiry and to the best of their knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct.

Dated: November 4, 2010


JEN I, L.P.
By:	JEN Partners, LLC, its general partner

By:	/s/ Reuben S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member

JEN RESIDENTIAL LP
By:	JEN Partners, LLC, its general partner

By:	/s/ Reuben S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member

JEN PARTNERS, LLC
By:	/s/ Reuben S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member

REUBEN S. LEIBOWITZ
/s/ Reuben S. Leibowitz

EX-99.1 2 g25091exv99w1.htm EX-99.1 exv99w1

Page 10

Exhibit 99.1

Joint Filing Agreement

The undersigned acknowledge and agree that the foregoing statement on Schedule 13D is filed on behalf of each of the undersigned and that all subsequent amendments to this statement on Schedule 13D will be filed on behalf of each of the undersigned without the necessity of filing additional joint filing agreements. The undersigned acknowledge that each will be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning it contained therein, but will not be responsible for the completeness and accuracy of the information concerning the other, except to the extent that it knows or has reason to believe that such information is not accurate. It is understood and agreed that a copy of this Joint Filing Agreement will be attached as an exhibit of the foregoing statement on Schedule 13D.

Dated: November 4, 2010


JEN I, L.P.
By:	JEN Partners, LLC, its general partner

By:	/s/ Reuben S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member

JEN RESIDENTIAL LP
By:	JEN Partners, LLC, its general partner

By:	/s/ Reuben S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member

JEN PARTNERS, LLC
By:	/s/ Reuben S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member

REUBEN S. LEIBOWITZ
/s/ Reuben S. Leibowitz

EX-99.2 3 g25091exv99w2.htm EX-99.2 exv99w2

Exhibit 99.2

EXECUTION COPY

MASTER TRANSACTION AGREEMENT

among

AVATAR PROPERTIES INC.
(the “Purchaser”)

TERRA WEST COMMUNITIES LLC

JEN JCH, LLC

JOSEPH CARL MULAC III

STEPHEN ADAMS

SUN TERRA COMMUNITIES LLC

(collectively, the “Sellers”)

and

AVATAR HOLDINGS INC.
(solely for purposes of Sections 2.2, 2.3(d), 3.2, and 9.1 and Articles VIII and X hereof)

and

JEN PARTNERS LLC
(solely for the purposes of Sections 2.2, 7.5, 7.6, and 9.2 and Article X hereof)

__________________

Dated as of October 25, 2010

__________________

MASTER TRANSACTION AGREEMENT

MASTER TRANSACTION AGREEMENT (the “Agreement”), dated as of October 25, 2010, among Avatar Properties Inc. (“Purchaser”), Terra West Communities LLC, a Delaware limited liability company (“Terra West”), JEN JCH, LLC, a Delaware limited liability company (“JEN JCH”), Joseph Carl Mulac III (“JCM”), Stephen Adams (“SA”), and Sun Terra Communities LLC, a Delaware limited liability company (“Sun Terra” and, collectively with Terra West, JEN JCH, JCM and SA, “Sellers”), solely for purposes of Sections 2.2, 2.3(d), 3.2, and 9.1 and Articles VIII and X hereof, Avatar Holdings Inc. (“Holdings”), and, solely for purposes of Sections 2.2, 7.5, 7.6, and 9.2 and Article X hereof, JEN Partners LLC (“JEN Partners”).

RECITALS

WHEREAS, Terra West is the sole member of JCH Estrella, LLC, an Arizona limited liability company (“JCH Estrella”), which owns the real property located in Maricopa County, Arizona defined herein as the “CantaMia Phase 1 Estrella Land” and holds certain option rights to the CantaMia Phase 2 and Phase 3 Land.

WHEREAS, JEN JCH, JCM and SA are the sole members of JCH Group, LLC, a Delaware limited liability company (“JCH Group”), which is the sole member, directly or indirectly, of each of Joseph Carl Homes, LLC, an Arizona limited liability company (“JCH AZ”), Joseph Carl Homes, LLC, a Nevada limited liability company (“JCH NV”), JCH Construction, LLC, an Arizona limited liability company (“Construction AZ”), JCH Construction, LLC, a Nevada limited liability company (“Construction NV”), JCH Denali, LLC, a Nevada limited liability company (“Denali”), JEN Arizona Acquisitions 2, LLC, a Delaware limited liability company (“JEN AZ”), and PV Landbank, LLC, an Arizona limited liability company (“PV Landbank”).

WHEREAS, Sun Terra is the sole member of JEN Florida II, LLC, a Delaware limited liability company (the “Sharpe Entity”), which owns certain rights to the real property located in Orange County, Florida defined herein as the “Sharpe Land.”

WHEREAS, JEN AZ owns and holds rights to the real property located in Maricopa County, Arizona defined herein as the “PV-Golf Land.”

WHEREAS, PV Landbank owns and holds rights to the real property located in Maricopa County, Arizona defined herein as the “PV-Sereno Land.”

WHEREAS, JCH AZ is the sole member of JEN AZ and PV Landbank and owns and holds rights to the real property defined herein as the “CantaMia Phase 1 JCH AZ Land,” the “Arboleda Ranch Land” and the “Blossom Hills Land.”

WHEREAS, Purchaser desires to acquire 100% of the ownership interests in each of the Purchased Parents for the purpose of obtaining control of the Properties and the Purchased Entity Assets, and Sellers desire to sell, transfer and assign to Purchaser all of their rights, title and interest in and to all of the membership interests in the Purchased Parents, subject to the terms and conditions of this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, each of the parties hereto hereby agrees as follows:

ARTICLE I

DEFINITIONS; CONSTRUCTION; USAGE

Capitalized terms used and not defined herein shall have the meanings ascribed to such terms in Annex I, which also sets forth rules of construction and usage that shall be applicable herein.

ARTICLE II

TRANSACTIONS

2.1 Transactions.

(a) In contemplation of the execution of this Agreement and the consummation of the Transactions, JCH AZ acquired all of the outstanding membership interests of JEN AZ and PV Landbank. The consummation of the transfers contemplated by this Section 2.1 is an essential part of the agreements set forth herein, and are made to induce Purchaser to enter into this Agreement.

(b) At the Closing, each Seller shall and hereby does sell to Purchaser, free and clear of any and all Liens (other than any restrictions on or relating to the transfer thereof under the Securities Act, the Exchange Act or such other state, federal, local or foreign securities laws (collectively, the “Securities Law Restrictions”)), and Purchaser shall and hereby does purchase from each Seller, the Interests set forth opposite such Seller’s name on Schedule 2.1(b), including all of such Seller’s rights in and to the assets, distributions, profits and losses of the Purchased Parents with respect to such Interests (the “Transactions”).

2.2 Operative Documents. In connection with the consummation of the Transactions, each of the following documents and agreements (all of which are material to the consummation of the Transactions) (collectively, the “Operative Documents”) shall be executed and delivered to each of the parties thereto:

(a) Notes. At the Closing, Purchaser shall execute and deliver two promissory notes of Purchaser, each in an aggregate principal amount of $6 million, in the forms of Exhibits A-1 and A-2 attached hereto (the “Notes”), together with a guarantee of such obligations from Holdings in the form of Exhibit A-3 (the “Holdings Guarantee”).

(b) Earnout Agreement. At the Closing, Holdings, Purchaser and each of the other parties thereto shall enter into an earnout agreement in the form of Exhibit B attached hereto (the “Earnout Agreement”).

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(c) Independent Contractor Agreements. At the Closing, Purchaser and the Independent Land Developers shall enter into the independent contractor agreements in the forms of Exhibit C-1 and C-2 attached hereto (the “Independent Contractor Agreements”).

(d) Employment Agreement. At the Closing, Purchaser and JCM shall enter into an employment agreement in the form of Exhibit D attached hereto (the “Employment Agreement”), and each of the Services Agreement dated April 30, 2009 between JCH Group, LLC and JCM, as amended, the Services Agreement dated April 30, 2009 between JCH Group, LLC and SA, the acknowledgment letter dated March 26, 2009 from JEN Partners to Melissa Jones and the acknowledgement letter dated March 26, 2009 from JEN Partners to Dennis Palmer, and any other written agreements relating to such Persons’ employment shall be terminated.

(e) Lockup Agreement. At the Closing, Jen Partners shall cause JEN I and JEN Res to execute and deliver, and Holdings shall execute and deliver, the voting, standstill and lockup agreement in the form of Exhibit E attached hereto.

(f) Registration Rights Agreement. At the Closing, JEN Partners shall cause JEN I and JEN Res to execute and deliver, and Holdings shall execute and deliver, the registration rights agreement in the form of Exhibit F attached hereto.

(g) Assignment of Membership Interests. At the Closing, each of the Sellers and Purchaser shall execute and deliver an assignment of membership interests for the transfer of the Interests owned by each such Seller (as reflected in Schedule 2.1(b)), in the form of Exhibit G-1 through G-3 attached hereto (the “Interest Transfer Agreements”); provided that in lieu of the foregoing, with respect to each Seller holding Interests that are certificated, such Seller shall deliver to Purchaser such certificated Interests; together with membership interest powers in form reasonably satisfactory to Purchaser, with all transfer Tax stamps affixed, duly endorsed by such Seller in blank for transfer.

2.3 Additional Sellers’ Closing Deliveries. In furtherance of the transactions contemplated by the Operative Documents, Sellers shall take the following actions or deliver the following additional deliverables on or prior to the Closing Date:

(a) Payment of Indebtedness and Release of Liens. (i) Sellers shall cause all of the Indebtedness of the Purchased Entities (other than the Indebtedness described on Schedule 2.3(a)), to be paid in full and all of the Liens with respect to any such Indebtedness (other than Liens with respect to Indebtedness described on Schedule 2.3(a) or that are Permitted Exceptions), to be released, and (ii) Sellers shall deliver letters evidencing the payment in full of such Indebtedness and the release of such Liens.

(b) Consent and Notice Letters. Sellers shall deliver the consents required for the consummation of the Transactions and evidence of the notices given as described in Schedule 4.3 and Schedule 5.3.

(c) Certificates of Good Standing. Sellers shall deliver certificates of good standing for each of the Purchased Entities issued by the applicable State agency within three Business Days prior to the Closing Date.

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(d) Releases.

(i) Holdings shall assume all of JCH Estrella’s obligations under the Letter of Understanding dated April 28, 2010 between JCH Estrella and Jane Leibowitz relating to the irrevocable Standby Letter of Credit No. S202939 with Bank of America issued to JCH Estrella on April 26, 2010.

(ii) Sellers shall have received from Mutual of Omaha a release of JEN Partners and JCM from all guaranties entered into in connection with the loan from Mutual of Omaha described in Schedule 2.3(a) in the amount of $3 million.

(e) Closing Statement. The parties shall agree on a closing settlement statement with regard to the Cash Consideration.

(f) Sharpe Property Matters.

(i) Sellers shall cause the Sharpe Entity to execute and deliver to First American Title Insurance Company (the “Title Company”) an affidavit stating that it is in sole and exclusive possession of the Sharpe Land and attesting to the absence of any mechanic’s, materialmen or other liens or potential liens (if there are no such liens) with respect to the Sharpe Land.

(ii) Sellers shall cause the Sharpe Entity to provide the Title Company with a gap affidavit in form reasonably acceptable to the Title Company to permit the Title Company to insure against any Subsequent Adverse Title Matters and in accordance with the requirements of Section 627.7841 of the Florida Statutes.

(iii) The Title Company shall be unconditionally committed to issue to the Sharpe Entity a title insurance policy insuring the Sharpe Land and any Subsequent Adverse Title Matters, in an amount to be solely determined by Purchaser, subject only to commercially reasonable exceptions.

(iv) Within 30 days following the public announcement by Purchaser of the Transactions, Sellers shall deliver to Purchaser a copy of the unanimous consent of the members of Reams Road Construction Group, LLC pursuant to the operating agreement of such entity consenting to the “Indirect Transfer” (as defined in the operating agreement of such entity) by the Sharpe Entity of its membership interests in such entity in connection with the consummation of the Transactions.

(v) Within 45 days following the public announcement by Purchaser of the Transactions, Sellers shall deliver to Purchaser a copy of a binding agreement with RA Investment Holdings, Inc. and Grant-Allan Enterprises, Inc. allocating development density rights to the Sharpe Entity, within Parcel 2 of the Land Use Plan for the Lake Reams Neighborhood Planned Development, of 155 residential dwelling units.

(vi) Sellers shall cause Richard Jerman, John Kraynick and Jennifer Jerman to resign as directors and officers of Windermere Trails Homeowners Association, Inc., a

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Florida corporation not-for-profit, and shall replace them with individuals designated by Purchaser.

(g) CantaMia Property Matters.

(i) Sellers shall cause JCH Estrella to execute and deliver to the Title Company a letter in the form previously agreed to with the Title Company stating that JCH Estrella is in sole and exclusive possession of the CantaMia Phase 1 Estrella Land and attesting to the absence of any mechanic’s, materialmen or other liens (other than preliminary twenty day notices given by contractors during work at the Properties) with respect to the CantaMia Phase 1 JCH Estrella Land.

(ii) Sellers shall cause JCH AZ to execute and deliver to the Title Company a letter in the form previously agreed to with the Title Company stating that JCH AZ is in the sole and exclusive possession of the CantaMia Phase 1 JCH AZ Land and attesting to the absence of any mechanic’s, materialmen or other liens (other than preliminary twenty day notices given by contractors during work at the Properties) with respect to the CantaMia Phase 1 AZ Land.

(iii) The Title Company shall be unconditionally committed to issue to JCH Estrella a title insurance policy as of Closing insuring the CantaMia Phase 1 Estrella Land, the Newland Option Contract and any Subsequent Adverse Title Matters, in an amount to be solely determined by Purchaser, subject only to commercially reasonable exceptions.

(iv) The Title Company shall be unconditionally committed to issue to JCH AZ a title insurance policy as of Closing insuring the CantaMia Phase 1 JCH AZ Land, the Rolling Option Agreement between JCH Estrella and JCH AZ dated January 19, 2010, and any Subsequent Adverse Title Matters, in an amount to be solely determined by Purchaser, subject only to commercially reasonable exceptions.

(v) Sellers shall deliver to Purchaser a duly executed consent and estoppel certificate from Mutual of Omaha Bank in the form of Exhibit I attached hereto (the “Omaha Estoppel”).

(vi) Sellers shall cause Melisa Boross to be elected as Vice President of the CantaMia at Estrella Community Association, Inc., an Arizona nonprofit corporation, and all actions taken prior to the Closing Date to be ratified by the board of directors of the CantaMia at Estrella Community Association, Inc.

(h) Arboleda Ranch Property Matters.

(i) Sellers shall cause JCH AZ to execute and deliver to the Title Company a letter in the form previously agreed to with the Title Company stating that JCH AZ is in sole and exclusive possession of the Arboleda Ranch Land and attesting to the absence of any mechanic’s, materialmen or other liens (other than preliminary twenty day notices given by contractors during work at the Properties) with respect to the Arboleda Ranch Land.

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(ii) The Title Company shall be unconditionally committed to issue to JCH AZ a title insurance policy as of Closing insuring the Arboleda Ranch Land, the Arboleda Option and any Subsequent Adverse Title Matters, in an amount to be solely determined by Purchaser, subject only to commercially reasonable exceptions.

(iii) Sellers shall cause Melisa Boross to be elected as Vice President of the Arboleda Ranch Homeowners’ Association, an Arizona nonprofit corporation, and all actions taken prior to the Closing Date to be ratified by the board of directors of the Arboleda Ranch Homeowners’ Association.

(i) Blossom Hills Property Matters.

(i) Sellers shall cause JCH AZ to execute and deliver to the Title Company a letter in the form previously agreed to with the Title Company stating that JCH AZ is in sole and exclusive possession of the Blossom Hills Land and attesting to the absence of any mechanic’s, materialmen or other liens (other than preliminary twenty day notices given by contractors during work at the Properties) with respect to the Blossom Hills Land.

(ii) The Title Company shall be unconditionally committed to issue to the JCH AZ a title insurance policy as of Closing insuring the Blossom Hills Land and any Subsequent Adverse Title Matters, in an amount to be solely determined by Purchaser, subject only to commercially reasonable exceptions.

(j) PV-Sereno Property Matters.

(i) Sellers shall cause JCH Group to execute and deliver to the Title Company a letter in the form previously agreed to with the Title Company stating that JCH AZ is in sole and exclusive possession of the PV-Sereno Land and attesting to the absence of any mechanic’s, materialmen or other liens (other than preliminary twenty day notices given by contractors during work at the Properties) with respect to the PV-Sereno Land.

(ii) The Title Company shall be unconditionally committed to issue to JCH AZ a title insurance policy for the PV-Sereno Land, the PV-Sereno Option Agreement and any Subsequent Adverse Title Matters, in an amount to be solely determined by Purchaser, subject only to commercially reasonable exceptions.

(k) PV-Golf Property Matters.

(i) Sellers shall cause JCH Group to execute and deliver to the Title Company a letter in the form previously agreed to with the Title Company stating that JCH AZ is in sole and exclusive possession of the PV-Golf Land and attesting to the absence of any mechanic’s, materialmen or other liens (other than preliminary twenty day notices given by contractors during work at the Properties) with respect to the PV-Golf Land.

(ii) The Title Company shall be unconditionally committed to issue to JCH AZ a title insurance policy for the PV-Golf Land and any Subsequent Adverse Title Matters, in an amount to be solely determined by Purchaser, subject only to commercially reasonable exceptions.

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2.4 Powers of Attorney; Bank Accounts.

(a) Sellers shall cause to be prepared and provided to Purchaser at the Closing a schedule setting forth a list, as of the Closing, of the names and addresses of all Persons holding a power-of-attorney on behalf of any Purchased Entity and all deposits and accounts, including impound accounts and principal and interest accounts, lockboxes and safe-deposit boxes maintained by the Purchased Entities (the “Bank Accounts”), the account or box numbers thereof, the names and addresses of all banks or other financial institutions in which any of the Purchased Entities has any such Bank Accounts, with the names of all Persons authorized to draw on Bank Accounts or to have access to such Bank Accounts.

(b) Sellers shall, on the Closing Date, take all steps necessary to remove all Persons who are signatories or holders of powers-of-attorney in respect of any Bank Accounts who are not employees of a Purchased Entity or Independent Land Developers from the list of such authorized signatories and holders and otherwise extinguish their signing authority with respect to such Bank Accounts; provided that Purchaser has timely delivered to Sellers the names of any Persons to replace such authorized signatories and any information requested by the applicable bank with respect to such Persons. After the Closing Date, the parties to the Bank Account Side Letter shall take the actions described therein.

2.5 Other Seller Closing Deliveries. Sellers shall deliver or cause to be delivered to the Purchaser (i) such other appropriately executed instruments of sale, assignment, transfer and conveyance (in addition to the Interest Transfer Agreements) as may be necessary to evidence and effect the transfers contemplated by or in connection with the Transactions (it being understood, however, that such instrument shall not require any Sellers or any other Person to make any additional representations, warranties, covenants or agreements, express or implied, not expressly set forth in this Agreement), (ii) certified copies of resolutions duly adopted by the board of directors or other governing body of each applicable Seller authorizing the execution, delivery and performance of this Agreement and the other agreements contemplated hereby, as applicable, (iii) a certificate of the Secretary, Assistant Secretary or such other authorized person of each applicable Seller as to the incumbency of the authorized signatory or signatories of such Seller (who shall not be such Secretary, Assistant Secretary or other authorized signatory with respect to any of the Operative Documents) executing this Agreement or any ancillary agreement, as applicable, (iv) an affidavit of non-foreign status in the form attached hereto as Exhibit J (in the case of an individual Seller) or the form attached hereto as Exhibit K (in the case of a non-individual Seller), as appropriate, and (v) the IP Side Letter.

2.6 Additional Purchaser’s Closing Deliveries. In furtherance of the transactions contemplated by the Operative Documents, Purchaser shall deliver or cause to be delivered to the Seller Representative the following additional deliveries on or prior to the Closing Date: (i) certified copies of resolutions duly adopted by the board of directors or other governing body of the Purchaser authorizing the execution, delivery and performance of this Agreement and the other agreements contemplated hereby, as applicable, (ii) a certificate of the Secretary, Assistant Secretary or such other authorized person of the Purchaser as to the incumbency of the officer(s) of Purchaser (who shall not be such Secretary, Assistant Secretary or other authorized person) executing this Agreement or any ancillary agreement, as applicable, (iii) a short-form certificate of good standing of Purchaser, certified by an appropriate

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government official of the applicable jurisdiction of organization as of a date not more than three Business Days prior to the Closing Date.

2.7 Books and Records. At the Closing, Sellers shall deliver to Purchaser (i) complete copies of the minute books of each of the Purchased Entities and (ii) an electronic copy of the materials contained in the online data room establish by JEN Partners as further described in the definition of “Document Vault.” Within five days following the Closing Date, Sellers shall deliver to Purchaser all of the following documents, to the extent Sellers are in possession of same, provided that any such documents shall be deemed to have been delivered to the extent complete copies thereof are contained in the Document Vault as of the Closing Date: (a) copies of all books and records of the Purchased Entities (including complete and correct copies of the organizational documents of each Purchased Entity), financial statements (audited or unaudited) of the Purchased Entities and Tax Returns of any type or nature filed by the Purchased Entities and (b) any and all surveys, engineering, soil or environmental studies or other studies of any type or nature with respect to the Properties made by Sellers, the Purchased Entities, or in the possession or control of any of them.

ARTICLE III

CLOSING; PURCHASE PRICE

3.1 Closing. Upon the terms and subject to the conditions set forth herein, the consummation of the Transactions (the “Closing”) shall take place on the date hereof, at the offices of Weil, Gotshal & Manges LLP located at 767 Fifth Avenue, New York New York 10153 (or at such other place as the parties may mutually designate in writing). (The date on which the Closing shall be held is referred to in this Agreement as the “Closing Date”).

3.2 Purchase Price.

(a) Purchase of Interests; Payment to Sellers. As consideration for the transfer of Sellers’ Interests, Purchaser shall pay to Sellers US $62 million, consisting of (A) US $30 million in cash plus an amount in cash equal to the Adjustment Amount (if the Adjustment Amount is positive) or minus an amount of cash equal to the Adjustment Amount (if the Adjustment Amount is negative), as the case may be, as determined under Section 3.3 (collectively, the “Cash Consideration”), (B) the Notes, and (C) the issuance by Holdings to Sellers of 1,050,572 shares of common stock of Holdings (the “Shares” and, together with the Cash Consideration and the Notes, the “Purchase Price”).

(b) Cash Consideration. At the Closing, Purchaser shall pay the Cash Consideration (determined in accordance with Section 3.3(a)) to Sellers by wire transfer of immediately available funds into an account or accounts designated in writing by JEN JCH to Purchaser.

(c) Issuance of Holdings Common Stock to Sellers. At the Closing, Holdings shall issue to JEN I, L.P. (“JEN I”) and JEN Residential LP (“JEN Res”), all of the Shares, for the benefit of the Sellers hereunder, as directed by the Sellers’ Representative.

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(d) Notes. At the Closing, Purchaser shall issue to JEN I and JEN Res, for the benefit of the Sellers hereunder, the Notes as directed by the Sellers’ Representative.

3.3 Adjustment Amount.

(a) For purposes of determining the Cash Consideration paid at the Closing, the “Adjustment Amount” is US $3,292,480.58, representing Sellers’ calculation of the following (which may be negative): (i) all investments and capital contributions made by or on behalf of the Sellers in the Purchased Entities or their businesses or operations during the period commencing August 1, 2010 and ending on the Closing Date, minus (ii) all dividends or other distributions declared or paid by the Purchased Entities to any of their respective equity holders during the period commencing August 1, 2010 and ending on the Closing Date, plus (iii) $0.00 (Purchaser’s share of any Prorated Taxes paid prior to the Closing Date, as further detailed in Schedule 3.3(a)), minus (iv) $324,935.17 (Sellers’ share of any Prorated Taxes not paid as of July 31, 2010, as further detailed in Schedule 3.3(a)). Schedule 3.3(a) sets forth Sellers’ summary of the date and amount of each investment, capital contribution, dividend, distribution and Prorated Tax proration.

(b) Purchaser may, within 60 days after the Closing Date, deliver a notice to Sellers indicating its disagreement with the Adjustment Amount. Any such notice must be in writing and detail Purchaser’s calculation of the Adjustment Amount and specify each item set forth (or excluded from) Schedule 3.3(a) as to which it disagrees. Purchaser shall be deemed to have agreed with all other items and amounts set forth on Schedule 3.3(a) not expressly disputed in the written notice. If no notice of disagreement is delivered within 60 days after the Closing Date, Purchaser shall be deemed to have agreed with all items and amounts relating to Sellers’ calculation of the Adjustment Amount.

(c) If a notice of disagreement is duly delivered pursuant to Section 3.3(b), Purchaser and Sellers shall, during the 30 days following such delivery, use their commercially reasonable efforts to reach agreement on the disputed items or amounts. If following such period, Purchaser and Sellers are unable to reach an agreement, they shall promptly thereafter engage Margolin, Winer & Evens LLP as the independent accountant mutually agreed upon by Purchaser and Sellers (the “Independent Accountant”) to review this Agreement and the disputed items or amounts with respect to the calculation of the Adjustment Amount and to calculate the final Adjustment Amount. In making such calculation, the Independent Accountant shall consider only those items or amounts disputed in the written notice delivered in accordance with Section 3.3(b). Any determination by the Independent Accountant shall be final and binding upon Purchaser and Sellers. The fees, costs and expenses of the Independent Accountant shall be shared equally by Purchaser and Sellers.

(d) If, following the application of Sections 3.3(b) and 3.3(c), the Adjustment Amount is determined to be less than the amount set forth in Section 3.3(a), Sellers shall pay the amount of such difference to Purchaser within 15 days after such determination.

3.4 Allocation of Purchase Price. As soon as practicable following the Closing Date but in no event later than 120 days thereafter, Purchaser shall deliver to Sellers’ Representative a schedule (the “Allocation Schedule”) allocating the Purchase Price (together

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with all other amounts treated as consideration for U.S. federal income tax purposes) among the Purchased Entity Assets in accordance with Section 1060 of the Code and the Treasury Regulations promulgated thereunder. Purchaser shall prepare and deliver to Sellers’ Representative from time to time revised copies of the Allocation Schedule (the “Revised Allocation Schedules”) so as to report any matters on the Allocation Schedule that need updating (including for adjustments to the Purchase Price, if any, or to conform to adjustments to Purchaser’s audited financial statements). The Allocation Schedule and each Revised Allocation Schedule shall be subject to a dispute mechanism comparable to the procedure described in Section 3.3 hereof (provided that Sellers’ Representative must provide any objection to the Allocation Schedule or a Revised Allocation Schedule within 30 days of receipt thereof). Except to the extent otherwise required by Law, each party hereto shall prepare and file all Tax Returns and other statements in a manner consistent with the Allocation Schedule (or the most recent Revised Allocation Schedule, as applicable) and shall not make any materially inconsistent statement or adjustment on any Tax Returns or otherwise during the course of an audit, investigation or other dispute with any Taxing Authority or otherwise.

3.5 Closing Costs. All recording fees and other closing costs shall be paid by Purchaser.

3.6 Closing Deliveries. Purchaser acknowledges and agrees that the payment of the Cash Consideration on the Closing Date will be conclusive evidence that all conditions precedent to the Closing and all other closing deliverables required to be met or delivered prior to Closing have been met, received or satisfied.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES RELATING TO SELLERS

Each Seller, severally and not jointly, hereby represents and warrants to Purchaser that:

4.1 Organization and Good Standing. Each Seller that is an entity is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority to own, lease, develop, sell and operate its Assets and to carry on its business as now conducted. Each Seller that is an entity is duly qualified or authorized to do business as a foreign entity and is in good standing under the laws of each jurisdiction in which it owns or leases real property and each other jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification or authorization. The Operating Agreements are in full force and effect and are valid, binding and enforceable against the respective parties thereto in accordance with their respective provisions. No Seller has received any notice that it is in breach of any Operating Agreement or that any member intends or desires to modify, waive, amend, rescind, release, cancel or terminate any Operating Agreement.

4.2 Authorization of Agreement. Each Seller has all requisite power, authority and legal capacity or has otherwise been given a legally valid and binding consent to execute and deliver this Agreement and each other agreement, document, or instrument or

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certificate contemplated by this Agreement or to be executed by such Seller in connection with the consummation of the Transactions (the “Seller Documents”), and to consummate the transactions contemplated hereby and thereby. Each Seller has taken all necessary corporate, limited liability company or other action to authorize the execution, delivery and performance of this Agreement and each of the Seller Documents to which such Seller is a party, and the consummation of the transactions contemplated hereby and thereby. This Agreement and each of the Seller Documents have been duly and validly executed and delivered by such Seller and (assuming due authorization, execution and delivery by Purchaser) each of this Agreement and the Seller Documents constitute, legal, valid and binding obligations of such Seller, enforceable against such Seller in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles, whether considered in a proceeding in equity or at law (collectively, the “General Enforceability Exceptions”).

4.3 Conflicts; Consents of Third Parties.

(a) Except as set forth on Schedule 4.3, none of the execution and delivery by each Seller of this Agreement or the Seller Documents, the consummation of the transactions contemplated hereby or thereby, or compliance by such Seller with any of the provisions hereof or thereof will conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination or cancellation under any provision of (i) the certificate of formation or organization or bylaws, partnership agreement or operating agreement of any Seller that is an entity, (ii) any Contract or Permit to which any Seller is a party or by which any of the Assets of such Seller are bound, (iii) any Order of any Governmental Body applicable to such Seller or by which any of the Assets of such Seller are bound, or (iv) any applicable Law.

(b) Except as set forth on Schedule 4.3, no consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of such Seller in connection with the execution and delivery of this Agreement, the Seller Documents, the compliance by such Seller with any of the provisions hereof or thereof, or the consummation of the Transactions.

4.4 Ownership and Transfer of Interests. Each Seller is the record and beneficial owner of the Interests indicated as being owned by such Seller on Schedule 2.1(b), free and clear of any and all Liens other than any Securities Law Restrictions. As of immediately prior to Closing, such Seller has the power and authority to sell, transfer, assign and deliver such Interests as provided in this Agreement and such delivery will convey to Purchaser good and valid title to such Interests, free and clear of any and all Liens other than any Securities Law Restrictions.

4.5 Litigation. Except as set forth in Schedule 4.5, there is no Legal Proceeding pending or, to the Knowledge of such Seller, threatened against such Seller or to which such Seller is otherwise a party relating to this Agreement, the Seller Documents or the transactions contemplated hereby or thereby.

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4.6 Financial Advisors. Except as set forth on Schedule 4.6, no Person has acted, directly or indirectly, as a broker, finder or financial advisor for any Seller in connection with the Transactions and no Person is or will be entitled to any fee or commission or like payment in respect thereof.

ARTICLE V

REPRESENTATIONS AND WARRANTIES
RELATING TO THE PURCHASED ENTITIES

Each Seller hereby represents and warrants to Purchaser that:

5.1 Organization and Good Standing. Each Purchased Entity is duly organized, validly existing and in good standing under the laws of the state of its organization and has all requisite corporate power and authority to own, lease, develop, sell and operate its Assets and to carry on its business as now conducted. Each Purchased Entity is duly qualified or authorized to do business as a foreign entity and is in good standing under the laws of each jurisdiction in which it owns or leases real property and each other jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification or authorization, except where the failure to be so qualified, authorized or in good standing would not have a Material Adverse Effect.

5.2 Authorization of Agreement. Each Purchased Entity has all requisite power, authority and legal capacity or has otherwise been given a legally valid and binding consent to execute and deliver each agreement, document, or instrument or certificate contemplated by this Agreement to be executed by it in connection with the Transactions (the “Company Documents”), to perform its obligations thereunder and to consummate the transactions contemplated thereby. Each of the Purchased Entities has taken all necessary corporate, limited liability company or other action to authorize the execution, delivery and performance of each of the Company Documents to which such Purchased Entity is a party, and the consummation of the transactions contemplated thereby. Each of the Company Documents is duly and validly executed and delivered by each Purchased Entity party thereto and (assuming due authorization, execution and delivery by the counterparties thereto, as applicable) each of the Company Documents constitute legal, valid and binding obligations of each Purchased Entity party thereto, enforceable against them in accordance with their respective terms, subject to the General Enforceability Exceptions.

5.3 Conflicts; Consents of Third Parties.

(a) Except as set forth in Schedule 5.3, none of the execution and delivery by any Purchased Entity of this Agreement or the Company Documents, the consummation of the transactions contemplated hereby or thereby, or compliance by any Purchased Entity with any of the provisions hereof or thereof will conflict with, or result in any violation or breach of, conflict with or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or give rise to any obligation of any Purchased Entity to make any payment under, or to the increased, additional, accelerated or guaranteed rights or entitlements of any Person under, or

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result in the creation of any Liens (other than Permitted Exceptions) upon any of the Purchased Entity Assets under, any provision of (i) the certificate of organization or operating agreement of any Purchased Entity, (ii) any Contract or Permit to which any Purchased Entity is a party or by which any of the Purchased Entity Assets are bound, (iii) any Order applicable to any Purchased Entity or any of the Purchased Entity Assets, or (iv) any applicable Law, except as would not (in the case of clauses (ii) through (iv)), individually or in the aggregate, have a Material Adverse Effect.

(b) Except as set forth in Schedule 5.3, no consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of any Purchased Entity in connection with the execution and delivery of this Agreement, the Company Documents the compliance by the Purchased Entities with any of the provisions hereof and thereof, or the consummation of the Transactions.

5.4 Capitalization.

(a) The holders of the ownership interests, whether by membership, profit, loss or capital, of each Purchased Entity are as set forth on Schedule 2.1(b). Each Seller has made all capital contributions as required by it (if any) in the Operating Agreement for each respective Purchased Entity. None of the interests of the Purchased Entities were issued in violation of any purchase or call option, right of first refusal, subscription right, preemptive right or any similar rights.

(b) Except as set forth on Schedule 5.4(b), there are no outstanding options to purchase ownership interests, whether by membership, profit, loss or capital, of the Purchased Entities (“Purchased Entity Options”). There is no existing option, warrant, call, right or Contract to which any Seller or any Purchased Entity is a party requiring, and there are no securities of any Purchased Entity outstanding which upon conversion or exchange would require, the issuance, sale or transfer of any additional ownership interest in any Purchased Entity or other securities convertible into, exchangeable for or evidencing the right to subscribe for or purchase ownership interests or other equity securities of any Purchased Entity. There are no obligations, contingent or otherwise, of any Purchased Entity to (i) repurchase, redeem or otherwise acquire any ownership interests or other equity interests of any Purchased Entity, or (ii) provide material funds to, or make any material investment in (in the form of a loan, capital contribution or otherwise), or provide any guarantee with respect to the obligations of, any Person. There are no outstanding interest appreciation, phantom interests, profit participation or similar rights with respect to any Purchased Entity. There are no bonds, debentures, notes or other Indebtedness of the Purchased Entities having the right to vote or consent (or, convertible into, or exchangeable for, securities having the right to vote or consent) on any matters on which members (or other equity holders) of any Purchased Entity may vote. There are no voting trusts, irrevocable proxies or other Contracts or understandings to which any Purchased Entity or any Seller is a party or is bound with respect to the voting of any ownership interest of any Purchased Entity.

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5.5 Subsidiaries.

(a) Schedule 5.5(a) sets forth the name of each Purchased Entity and each Subsidiary thereof, and, with respect to each such Subsidiary, the jurisdiction in which it is incorporated or organized, and the jurisdictions, if any, in which it is qualified to do business.

(b) Other than the entities set forth on Schedule 5.5(b) or a Purchased Entity, the Purchased Entities do not own, directly or indirectly, any equity or ownership interests in any other Person.

5.6 Corporate Records.

(a) Sellers have made available to Purchaser in the Document Vault true, correct and complete copies of the certificates of organization or articles of organization (each certified by the Secretary of State or other appropriate official of the applicable jurisdiction of organization) of each Purchased Entity and its respective Operating Agreements in each case as amended and in effect on the due date hereof, including all amendments thereto.

(b) Sellers have made available to Purchaser in the Document Vault true, correct and complete copies of all written consents and minutes of meetings of the Purchased Entities.

5.7 Financial Statements.

(a) Sellers have delivered or made available to Purchaser copies of (i) the unaudited balance sheets of JCH Estrella as at December 31, 2009 and Joseph Carl Homes — Consolidated (also known as JCH Group) as at December 31, 2009 and the related statements of income and of cash flows of such Purchased Parents for the year then ended, (ii) the audited balance sheet of JCH Group as at December 31, 2009 (the “Audited JCH Statement”), (iii) the unaudited balance sheet of the Sharpe Entity as at October 8, 2010, and (iv) the unaudited balance sheets of JCH Estrella as at August 31, 2010 and Joseph Carl Homes — Consolidated (also known as JCH Group) as at August 31, 2010 and the related statements of income and cash flows of such Purchased Parents for the 8 month period then ended (collectively, the “Financial Statements”). The Audited JCH Statement and the other financial statements relating to JCH Group (collectively, the “JCH Financials”) have been prepared in accordance with GAAP consistently applied without modification of the accounting principles used in the preparation thereof throughout the periods presented and presents fairly in all material respects the assets, liabilities, financial position, results of operations and cash flows of JCH Group as at the dates and for the periods indicated therein.

The balance sheets of such Purchased Parents as at December 31, 2009 is referred to herein as the “Balance Sheet” and December 31, 2009 is referred to herein as the “Balance Sheet Date.”

(b) All books, records and accounts of the Purchased Entities are accurate and are maintained in all material respects in accordance with good business practice and all applicable Laws. JCH Group maintains systems of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with

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management’s general or specific authorization; (ii) transactions are recorded as necessary to permit the preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the actual levels at reasonable intervals and appropriate action is taken with respect to any differences.

5.8 No Undisclosed Liabilities. No Purchased Entity has any liabilities of a nature required to be reflected on a balance sheet prepared in accordance with GAAP (including any contingencies required to be reflected in any notes thereto), other than those (i) specifically reflected in the Financial Statements, (ii) incurred in the Ordinary Course of Business since the Balance Sheet Date or (iii) that are immaterial to the Purchased Entities taken as a whole.

5.9 Absence of Certain Developments. Except as expressly contemplated by this Agreement or as set forth on Schedule 5.9, since the Balance Sheet Date and through the Closing Date there has not been any event, change, occurrence or circumstance that, individually or in the aggregate with any such events, changes, occurrences or circumstances, has had or could reasonably be expected to have a Material Adverse Effect. Without limiting the generality of the foregoing, except as set forth on Schedule 5.9, since the Balance Sheet Date and through the Closing Date:

(i) no Purchased Entity has (A) made, changed or rescinded any election relating to Taxes; (B) settled or compromised any claim relating to Taxes; (C) surrendered any Tax refund; amended any Tax Return; or filed any Tax Return prepared not in accordance with past practice; and

(ii) no Purchased Entity has (A) mortgaged, pledged or subjected to any Lien any of its Purchased Entity Assets, or (B) acquired any assets or sold, assigned, transferred, conveyed, leased or otherwise disposed of any of its Purchased Entity Assets, except, in the case of clause or (B), for assets acquired, sold, assigned, transferred, conveyed, leased or otherwise disposed of in the Ordinary Course of Business.

5.10 Taxes.

(a) Each of the Purchased Entities is, and has been since its formation, properly treated as either a partnership (in the case of JCH Group) or a “disregarded entity” (in the case of all the Purchased Entities other than JCH Group) for U.S. federal and all applicable state and local income tax purposes.

(b) (i) All Tax Returns required to be filed by or on behalf of a Purchased Entity or any Affiliated Group of which any Purchased Entity is or was a member have been duly and timely filed with the appropriate Taxing Authority in all jurisdictions in which such Tax Returns are required to be filed (after giving effect to any valid extensions of time in which to make such filings), and all such Tax Returns are true, complete and correct in all material respects; and (ii) all Taxes payable by or on behalf of a Purchased Entity and any Affiliated Group of which any Purchased Entity is or was a member have been fully and timely paid.

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(c) Each Purchased Entity has complied in all material respects with all applicable Laws relating to the payment and withholding of Taxes and has duly and timely withheld and paid over to the appropriate Taxing Authority all amounts required to be so withheld and paid under all applicable Laws.

(d) Purchaser has received from the Sellers complete copies of all federal, state, local and foreign income or franchise Tax Returns of Terra West, JCH Group and Sun Terra relating to all the taxable periods since their formation. All income and franchise Tax Returns have been filed by or on behalf of JCH AZ. Schedule 5.10(d) sets forth the Tax Returns of the Purchased Entities to the extent complete copies thereof have been provided to Purchaser.

(e) Sellers have received no written (or, to the Knowledge of Sellers, other) notice from a Taxing Authority in a jurisdiction where any Purchased Entity does not file Tax Returns such that it is or may be subject to taxation by that jurisdiction.

(f) All deficiencies asserted or assessments made as a result of any examinations by any Taxing Authority of the Tax Returns of, or including, any Purchased Entity have been fully paid, and, to the Knowledge of such Seller, there are no other audits or investigations by any Taxing Authority in progress, nor have Sellers or any Purchased Entity received any notice from any Taxing Authority that it intends to conduct such an audit or investigation. No issue has been raised by a Taxing Authority in any prior examination of any Purchased Entity which, by application of the same or similar principles, could reasonably be expected to result in a proposed deficiency for any subsequent taxable period.

(g) No Purchased Entity nor any other Person (including the Sellers) on their behalf has (i) executed or entered into a closing agreement with any Taxing Authority with respect to any Purchased Entity, (ii) requested any extension of time within which to file any Tax Return, which Tax Return has not since been file, (iii) waived any statute of limitations or granted any extension for the assessment or collection of Taxes, which Taxes have not since been paid, or (iv) granted to any Person any power of attorney that is currently in force with respect to any Tax matter.

(h) No Seller is a foreign person within the meaning of Section 1445 of the Code.

(i) No Purchased Entity is a party to any tax sharing, allocation, indemnity or similar agreement or arrangement (whether or not written) pursuant to which it will have any obligation to make any payments after the Closing.

(j) No Purchased Entity is subject to any private letter ruling of the IRS or comparable rulings of any Taxing Authority.

(k) Except as set forth on Schedule 5.10, there are no Liens as a result of any unpaid Taxes upon any of the Purchased Entity Assets.

(l) There is no taxable income of any Purchased Entity that will be required under applicable Tax Law to be reported by the Purchaser or any of its Affiliates, including any

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Purchased Entity, for a taxable period beginning after the Closing Date which taxable income was realized (and reflects economic income) arising prior to the Closing Date.

5.11 Real Property.

(a) Sharpe Property. In addition to (and without limiting) any other representations and warranties set forth elsewhere in this Agreement that are applicable to the assets of Sellers, Sellers make the representations set forth on Schedule 5.11(a) with respect to the Sharpe Property.

(b) CantaMia Property. In addition to (and without limiting) any other representations and warranties set forth elsewhere in this Agreement that are applicable to the assets of Sellers, Sellers make the representations set forth on Schedule 5.11(b) with respect to the CantaMia Property.

(c) Arboleda Property. In addition to (and without limiting) any other representations and warranties set forth elsewhere in this Agreement that are applicable to the assets of Sellers, Sellers make the representations set forth on Schedule 5.11(c) with respect to the Arboleda Property.

(d) Blossom Hills Property. In addition to (and without limiting) any other representations and warranties set forth elsewhere in this Agreement that are applicable to the assets of Sellers, Sellers make the representations set forth on Schedule 5.11(d) with respect to the Blossom Hills Property.

(e) PV-Sereno Property. In addition to (and without limiting) any other representations and warranties set forth elsewhere in this Agreement that are applicable to the assets of Sellers, Sellers make the representations set forth on Schedule 5.11(e) with respect to the PV-Sereno Property.

(f) PV-Golf Property. In addition to (and without limiting) any other representations and warranties set forth elsewhere in this Agreement that are applicable to the assets of Sellers, Sellers make the representations set forth on Schedule 5.11(f) with respect to the PV-Golf Property.

(g) There is no condemnation or eminent domain proceeding pending with respect to any portion of any of the Properties and no Seller or Purchased Entity has received notice, nor do Sellers have Knowledge of any pending or contemplated condemnation proceeding which could affect any portion of any of the Properties.

5.12 Tangible Personal Property.

(a) The Purchased Entities have good and valid title to all of the items of tangible personal property used in the business of the Purchased Entities, including the sales trailer at the CantaMia Property (except for any leased personal property described in Schedule 5.12(b), free and clear of any and all Liens, other than the Permitted Exceptions.

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(b) Schedule 5.12(b) sets forth all leases of personal property (“Personal Property Leases”) relating to personal property used in the business of any Purchased Entity or to which any Purchased Entity is a party or by which any Purchased Entity Assets is bound. All of the items of personal property under the Personal Property Leases are in all material respects in the condition required of such property by the terms of the lease applicable thereto during the term of the lease. Sellers have delivered or made available to Purchaser true, correct and complete copies of the Personal Property Leases, together with all amendments, modifications or supplements thereto.

5.13 Technology and Intellectual Property.

(a) Schedule 5.13(a) sets forth (i) all the material Intellectual Property, including all pending registrations and applications therefor, that the Purchased Entities own, use or license and (ii) all contracts, agreements or other arrangements under which the Purchased Entities have granted, or are obligated to grant, rights to others to use, reproduce, market or exploit any Intellectual Property. All owned and registered Intellectual Property used by or in connection with the conduct and operation of the businesses relating to the CantaMia Property, including rights to any architectural and engineering plans and designs and any materials relating thereto with respect to the homes, the clubhouse and the grounds in respect of the CantaMia Property (the “CantaMia IP”), are subsisting, and all necessary registration, maintenance, renewal, and other relevant filing fees due through the date hereof in connection therewith have been timely paid and all necessary documents and certificates in connection therewith have been timely filed with the relevant patent, copyright, trademark, or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such registered Intellectual Property in full force and effect in all material respects.

(b) Except as set forth on Schedule 5.13(b), the Purchased Entities own all right, title and interest in and to, or have valid and continuing rights to use, sell and license without limitation including the right to copy, distribute, display, prepare derivative works of any CantaMia IP subject to copyright protection) all material Intellectual Property, Software and other Technology used in the conduct of the business and operations in respect of the Properties as presently conducted, free and clear of all Liens or obligations to others other than Permitted Exceptions. Except as set forth on Schedule 5.13(b), to the Knowledge of Sellers none of the Purchased Entity Assets (including any Intellectual Property of the Purchased Entities as used in connection with their respective businesses, including but not limited to the names of any Purchased Entity or any other Purchased Entity Assets), or the business or operations of the Purchased Entities, infringe upon, misappropriate or otherwise violate any Intellectual Property of any third party in any material respect. To the best of the Sellers’ Knowledge, no third party is infringing on any rights of the Purchased Entities’ Intellectual Property.

(c) Except as set forth in Schedule 5.13(c), there is no action, suit, proceeding, hearing, investigation, notice or complaint pending or, to Sellers’ Knowledge, threatened by any third party before any court or tribunal (including the United States Patent and Trademark Office or equivalent authority anywhere in the world) relating to any of the Intellectual Property or Technology owned by the Purchased Entities, nor has any claim or demand been made by any third party that (i) challenges the validity, enforceability, use or exclusive ownership of any Intellectual Property or Technology owned by the Purchased Entities or (ii) alleges any

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infringement, misappropriation, violation, or unfair competition or trade practices by the Purchased Entities of any Intellectual Property or Technology of any third party.

(d) The Purchased Entities are in compliance in all material respects with any posted privacy policies and any laws or regulations relating to personally identifiable information.

5.14 Material Contracts.

(a) Schedule 5.14(a) sets forth, all of the following Contracts to which any Purchased Entity is a party or by which any of them or their respective Purchased Entity Assets are bound (collectively, the “Material Contracts”):

(i) Contracts with any Seller or Affiliate thereof or any current or former officer, director, stockholder or Affiliate of any Purchased Entity (other than a Purchased Entity);

(ii) Contracts for the sale of any material assets of any Purchased Entity other than in the Ordinary Course of Business or for the grant to any Person of any preferential rights to purchase any of its material assets;

(iii) Contracts for joint ventures, strategic alliances, partnerships, licensing arrangements, or sharing of profits or proprietary information;

(iv) Contracts containing covenants of any Purchased Entity not to compete in any line of business or with any Person in any geographical area or not to solicit or hire any person with respect to employment or covenants of any other Person not to compete with any Purchased Entity in any line of business or in any geographical area or not to solicit or hire any person with respect to employment;

(v) Contracts relating to the acquisition (by merger, purchase of stock or assets or otherwise) by any Purchased Entity of any operating business or material assets or the capital stock of any other Person;

(vi) Contracts relating to the incurrence, assumption or guarantee of any Indebtedness or imposing a Lien on any of the material assets of any Purchased Entity;

(vii) all Contracts providing for payments by or to any Purchased Entity in excess of $50,000 in any fiscal year or $200,000 in the aggregate during the term thereof;

(viii) all Contracts obligating any Purchased Entity to provide or obtain products or services for a period of one year or more;

(ix) Contracts for the employment of any individual on a full-time, part-time or consulting basis; and

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(x) development agreements setting forth duties and obligations relating to the Properties, public disclosure reports issued by the Arizona Department of Real Estate, and storm water plans filed with the Arizona Department of Environmental Quality.

(b) Each of the Material Contracts is in full force and effect and is the legal, valid and binding obligation of any Purchased Entity which is party thereto, and of the other parties thereto enforceable against each of them in accordance with its terms. No Purchased Entity is in default under any Material Contract, nor, to the Knowledge of Sellers, is any other party to any Material Contract in breach of or in default thereunder, and, to the Knowledge of Sellers, no event has occurred that with the lapse of time or the giving of notice or both would constitute a breach or default of any Purchased Entity or any other party thereunder. Any payments due under each Material Contract have been timely made by the applicable Purchased Entity. No party to any of the Material Contracts has exercised any termination rights with respect thereto, and no party has given notice of any significant dispute with respect to any Material Contract. Sellers have delivered or made available to Purchaser true, correct and complete copies of all of the Material Contracts, together with all amendments, modifications or supplements thereto and assignments thereof, if any.

5.15 Employee Benefits Plans.

(a) Except as set forth in Schedule 5.15(a), no Purchased Entity has any material Liability in respect of (i) any “employee benefit plan” (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, or (ii) any bonus, incentive compensation, deferred compensation, tax gross-up, salary continuation or other material employee benefit plan or agreement, in each case of clauses (i) and (ii) that is sponsored or maintained by a Purchased Entity. Sellers have made available to Purchaser correct and complete copies of each plan or agreement set forth in Schedule 5.15(a).

(b) Neither the execution of this Agreement nor the consummation of the transactions contemplated by this Agreement, will result in any “excess” parachute payment for purposes of Section 280(g) of the Code for which any Purchased Entity has any Liability.

(c) Seller has provided a complete and correct list of all Employees, and each Employee’s base salary, target annual cash bonus, position of employment and location of employment in the Benefits Side Letter.

5.16 Labor. Except as disclosed in the Labor Side Letter:

(a) No Purchased Entity is a party to any labor or collective bargaining agreement and there are no labor or collective bargaining agreements which pertain to employees of any Purchased Entity.

(b) There are no unfair labor practice charges, grievances or complaints pending or, to the Knowledge of Sellers, threatened by or on behalf of any Employee or group of Employees.

(c) There are no complaints, charges or claims against any Purchased Entity pending with or, to the Knowledge of Sellers, threatened by any Governmental Body based on,

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arising out of, in connection with or otherwise relating to the employment or termination of employment of or failure to employ, any individual.

5.17 Litigation; Disputes.

(a) Except as set forth in Schedule 5.17, there is no Legal Proceeding pending or, to the Knowledge of Sellers, threatened against any Purchased Entity (or to the Knowledge of Sellers, pending or threatened, against any of the officers, directors or employees of any Purchased Entity with respect to their business activities on behalf of the Purchased Entities), or regarding any of the Purchased Entity Assets, or to which any Purchased Entity is otherwise a party before any Governmental Body. Except as set forth on Schedule 5.17, no Purchased Entity nor any Purchased Entity Asset is subject to any Order, and no Purchased Entity or asset thereof is in breach or violation of any Order. There are no Legal Proceedings pending or, to the Knowledge of Sellers, threatened against any Purchased Entity or any Purchased Entity Asset or to which any Purchased Entity is otherwise a party relating to this Agreement or any Company Document or the transactions contemplated hereby or thereby.

(b) (i) Sellers have received no notices in writing regarding any pending disputes, claims or events of default (or events, with the passage of time, would give rise to any events of default) under the Newland Agreements and (ii) to the Knowledge of Sellers, none of the Purchased Entities or, to the Knowledge of Sellers, any of the counterparties are in material breach of the terms of the Newland Agreements.

5.18 Compliance with Laws; Permits.

(a) Except as set forth on Schedule 5.18, each Purchased Entity is, and since its formation has been, in compliance in all material respects with all Laws applicable to its business, operations or Assets. No Purchased Entity has received any notice of or been charged with the violation of any Laws. To the Knowledge of Sellers, no Purchased Entity is under investigation with respect to the violation of any Laws and there are no facts or circumstances which could form the basis for any such violation.

(b) The Purchased Entities currently have all Permits that are required for the operation of the business of the Purchased Entities as presently conducted (“Company Permits”), other than those the failure of which to possess would not, individually or in the aggregate, cause a Material Adverse Effect. No Purchased Entity is in default or violation, and no event has occurred which, with notice or the lapse of time or both, would constitute a default or violation, in any material respect of any term, condition or provision of any Company Permit. To the Knowledge of Sellers, the consummation of the Transactions will not materially impair the Company Permits.

5.19 Environmental Matters. Except as set forth on Schedule 5.19:

(a) to the Knowledge of Sellers, no Purchased Entity has stored, disposed of or released Hazardous Materials at or from any Property except in accordance with applicable Law;

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(b) no Purchased Entity is the subject of any outstanding written Order or Contract with any Governmental Body or Person with respect to (i) Environmental Laws, (ii) Remedial Action, or (iii) any Release or threatened Release of a Hazardous Material; and

(c) to the Knowledge of Sellers, there is not located at any of the Properties currently or previously owned, operated or leased by any Purchased Entity any (i) underground storage tanks, (ii) landfill, (iii) surface impoundment, (iv) asbestos-containing material, (v) dipping vats, or (vi) equipment containing polychlorinated biphenyls.

5.20 Insurance. Set forth in Schedule 5.20 is a list of all insurance policies and all fidelity bonds held by or applicable to any Purchased Entity setting forth, in respect of each such policy, the policy name, policy number, carrier, term, type and amount of coverage and annual premium, and a list of all material claims made since January 1, 2009 under any such insurance policies and binders (specifying the nature and amount of the claim, current status and resolution, if any). Except as noted on Schedule 5.20, all such insurance will remain in full force and effect immediately following the consummation of the Transactions on the Closing Date.

5.21 Accounts and Notes Receivable and Payable. All accounts and notes receivable of the Purchased Entities have arisen from bona fide transactions in the Ordinary Course of Business. To the Knowledge of Sellers, none of the accounts or the notes receivable of any Purchased Entity are subject to any setoffs or counterclaims.

5.22 Related Party Transactions. Except as set forth on Schedule 5.22, immediately after consummation of the Transactions, no employee, officer, director, stockholder, partner or member of any Purchased Entity, any member of his or her immediate family or any of their respective Affiliates (“Related Persons”) (i) owes any material amount to any Purchased Entity nor shall any Purchased Entity owe any amount to any Related Person, (ii) shall have any claim or cause of action (other than claims relating to the payment of salary or employee benefits in the Ordinary Course of Business) against any Purchased Entity or (iii) shall own directly or indirectly any interest of any kind in, or control or be a director, officer or employee of, any Person which is a competitor, supplier, customer, landlord, tenant, creditor or debtor of any Purchased Entity.

5.23 Banks; Power of Attorney. Schedule 5.23 contains a complete and correct list of the names and locations of all banks in which any Purchased Entity has accounts or safe deposit boxes and the names of all persons authorized to draw thereon or to have access thereto. Except as set forth on Schedule 5.23, no person holds a power of attorney to act on behalf of any Purchased Entity.

5.24 Financial Advisors. Except as set forth on Schedule 5.24, no Person has acted, directly or indirectly, as a broker, finder or financial advisor for Sellers or any Purchased Entity in connection with the Transactions and no Person is or will be entitled to any fee or commission or like payment in respect thereof.

5.25 Recorded Restrictions. No Purchased Entity has received any notice of or been charged with the violation of any obligations, requirements and standards imposed by or under any restrictions, covenants, easements, conditions, requirements or other provisions of

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record (“Recorded Restrictions”) and applicable to its business, operations or Purchased Entity Assets (including, but not limited to, real property interests), and no event has occurred that with the lapse of time or the giving of notice or both would constitute a violation by any Purchased Entity or any other party under any Recorded Restrictions.

5.26 No Requested Funds. No Purchased Entity has requested a sale of bonds or an issuance of funds from any community facilities district or other taxing district that affects any real property interest held by any Purchased Entity and that has not been issued, and no Purchased Entity has any knowledge of any such requests pending by any other party.

5.27 Parties-In-Possession. Except as set forth on Schedule 5.27, there are no parties-in-possession, leases, tenancies or claims to occupancy of any of the Properties.

5.28 Ordinary Course Operations. Since its respective formation date, each Purchased Entity has been operated, and has conducted its business, in the Ordinary Course of Business.

5.29 No Other Representations or Warranties; Schedules. Except for the representations and warranties contained in Articles IV and V (as modified or supplemented by the schedules attached hereto), none of the Sellers or any Affiliate or representative makes any other express or implied representation or warranty with respect to the Purchased Entities, the Purchased Entity Assets, the business operated by the Purchased Entities or the Transactions, and Sellers disclaim any other representations or warranties, whether made by Sellers, any Affiliate of Sellers or any of the Sellers’ or their Affiliates’ respective representatives. Except for the representations and warranties contained in Articles IV and V (as modified or supplemented by the schedules attached hereto), Sellers (a) expressly disclaim and negate any representation or warranty, expressed or implied, at common law, by statute or otherwise, relating to the condition of the Purchased Entities or the Purchased Entity Assets (including any implied or expressed warranty of merchantability or fitness for a particular purpose) and (b) disclaim all liability and responsibility for any representation, warranty, projection, forecast, statement or information made, communicated or furnished (orally or in writing) to Purchaser or its Affiliates or representatives.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser hereby represents and warrants to Sellers that:

6.1 Organization and Good Standing. Purchaser is duly organized, validly existing and in good standing under the laws of the state of its organization and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now conducted and as currently proposed to be conducted.

6.2 Authorization of Agreement. Purchaser has all requisite power, authority and legal capacity to execute and deliver this Agreement and each other agreement, document, or instrument or certificate contemplated by this Agreement to which Purchaser is a party or to be executed by it in connection with the Transactions (the “Purchaser Documents”), to perform its

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obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. Purchaser has taken all necessary corporate, limited liability company or other action to authorize the execution, delivery and performance of this Agreement and each of the Purchaser Documents, and the consummation of the transactions contemplated hereby and thereby. This Agreement and each of the Purchaser Documents is duly and validly executed and delivered by Purchaser and (assuming due authorization, execution and delivery by Sellers and/or each Purchased Entity party thereto) this Agreement constitutes, and each of the Purchaser Documents when so executed and delivered will constitute, legal, valid and binding obligations of Purchaser, enforceable against it in accordance with their respective terms.

6.3 Conflicts; Consents of Third Parties.

(a) None of the execution and delivery by Purchaser of this Agreement or the Purchaser Documents, the consummation of the transactions contemplated hereby or thereby, or compliance by Purchaser with any of the provisions hereof or thereof will conflict with, or result in any violation or breach of, conflict with or default (with or without notice or lapse of time, or both) under any provision of (i) the certificate of incorporation and by-laws or comparable organizational documents of Purchaser, (ii) any material Contract to which Purchaser is a party or by which any of the properties or assets of Purchaser are bound, (iii) any Order applicable to Purchaser, or (iv) any applicable Law.

(b) No consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of Purchaser or its shareholders in connection with the execution and delivery of this Agreement, the Purchaser Documents, respectively, the compliance by Purchaser with any of the provisions hereof and thereof, or the consummation of the transactions contemplated hereby or thereby (including the issuance of any Shares hereunder or any other shares).

6.4 Status of the Shares. The Shares, and all of the shares of common stock issuable pursuant to the Earnout Agreement, have been duly authorized and, when issued in accordance with the terms of this Agreement or the Earnout Agreement, as applicable, will be validly issued, fully paid and nonassessable shares of common stock of Holdings and will be free and clear of all Liens. The issuance and delivery of all of such shares is not, and will not be, subject to any preemptive right of shareholders of Holdings that has not been waived or to any right of first refusal or other right in favor of any Person that has not been waived.

6.5 SEC Filings. Since January 1, 2008, Holdings has filed all required reports, schedules, forms, statements and other documents with the Securities and Exchange Commission (the “SEC”) (such documents filed since January 1, 2008, collectively referred to herein as the “Holdings SEC Documents”). As of their respective dates, the Holdings SEC Documents complied in all material respects with the requirements of the Securities Act, or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to the Holdings SEC Documents, and none of the Holdings SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of Holdings included in the Holdings SEC Documents, as

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of their respective dates, complied in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, were prepared in accordance with GAAP (except, in the case of unaudited statements to the extent permitted by the SEC’s instructions to Form 10-Q and Article 10 of Regulation S-X) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the financial position of Holdings and its consolidated subsidiaries as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments and other adjustments described therein that are not expected by Holdings to be material individually or in the aggregate).

6.6 Litigation. There are no Legal Proceedings pending or, to the Knowledge of Purchaser, threatened against Purchaser or to which Purchaser is otherwise a party relating to this Agreement, any Purchaser Document or the transactions contemplated hereby or thereby.

6.7 Financial Advisors. Except as set forth on Schedule 6.7, no Person has acted, directly or indirectly, as a broker, finder or financial advisor for Purchaser in connection with the Transactions and no Person is or will be entitled to any fee or commission or like payment in respect thereof.

ARTICLE VII

COVENANTS

7.1 Other Actions. Each of Sellers and Purchaser shall use its commercially reasonable efforts to take all actions necessary or appropriate to consummate the Transactions.

7.2 No Solicitation. For a period from the date hereof to the second anniversary of the Closing Date, no Seller shall, and each Seller shall not, and shall cause its controlling and controlled Affiliates not to (i) seek to cause the termination of employment of, or solicit for employment, any Employees of the Purchaser or of the Purchased Entities or hire, employ or otherwise engage any such individual or (ii) seek to cause the termination or non-renewal of any relationship between Purchaser and any Independent Land Developer or any other Person who has a similar business relationship with the Purchased Entities; provided, however, that nothing herein shall restrict any Seller or any of its Affiliates from making employment solicitations to the general public.

7.3 Preservation of Records. Purchaser agrees that it shall preserve and keep the records held by it relating to the business of the Purchased Entities in accordance with its records retention policy as the same may be in effect from time to time (the “Records Retention Policy”) and shall make such records and personnel available to the other as may be reasonably required by such party in connection with, among other things, any insurance claims by, legal proceedings against or governmental investigations of Sellers or any of their Affiliates or in order to enable Sellers to comply with its obligations under this Agreement. At any time that Purchaser wishes to destroy such records, such destruction will occur in accordance with the Records Retention Policy.

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7.4 Publicity. Sellers and Purchaser shall not issue any press release or public announcement concerning this Agreement or the Transactions without obtaining the prior written approval of the other parties hereto, which approval will not be unreasonably withheld or delayed, unless such disclosure is otherwise required by applicable Law or by the rules of any applicable stock exchange on which a party’s or its Affiliates’ securities are listed, provided that, to the extent required by applicable Law, the party intending to make such release shall use its commercially reasonable efforts consistent with such applicable Law or rules to consult with the other party with respect to the text thereof; provided, further that nothing herein shall prohibit any party from making any disclosure consisting of information that has previously been disclosed to the public by any party in compliance with this Section 7.4.

7.5 Confidentiality. Except as and to the extent required by Law or the rules of any applicable stock exchange on which a party’s or its Affiliate’s securities are listed, each of the Purchaser, on the one hand, and Sellers, on the other hand, shall not disclose or use, and shall use its commercially reasonable efforts to cause each of their respective Representatives not to disclose or use, any Confidential Information (as defined below) of the other that was or will be furnished by the disclosing party or its Representatives to such party or parties, or such party’s or parties’ Representatives in connection with the Transactions; provided, however, a party may disclose Confidential Information of the other to another party or such other party’s Representatives to the extent necessary or required in connection with the consummation of the Transactions. For purposes of this Section 7.5, “Confidential Information” of a party means the existence of this Agreement, the Operative Documents and their contents, any information about the Transactions and any information about such party or any of its Affiliates that may be proprietary; provided, however, that Confidential Information shall not include information which the party receiving such information can demonstrate (i) is generally available to or known by the public other than as a result of improper disclosure by such party or (ii) is obtained by such party from a source other than a party hereto, which source is not bound by a duty of confidentiality with respect to such information; and provided, further, that after the Closing, Confidential Information of Sellers shall not include any proprietary information of or relating to the Purchased Entities. If Confidential Information must be disclosed by Law or pursuant to the rules of any applicable stock exchange, prior to making any such disclosure, the party required to make such disclosure shall use its commercially reasonable efforts consistent with such Law or rules to consult with the other parties with respect to the text and the disclosure of such Confidential Information. Notwithstanding anything to the contrary in this Section 7.5, nothing herein shall prohibit JEN Partners from disclosing Confidential Information to the limited partners or investors of JEN I or JEN Res to the extent that such disclosure is of a type normally disclosed to a limited partner or investor in connection with a transaction of the type contemplated in this Agreement; provided that such limited partners or investors are advised of the confidential nature of the Confidential Information and are required to keep the same confidential.

7.6 Right of First Offer.

(a) For a period of two years following the Closing Date, JEN Partners shall and shall cause the Persons identified on Schedule 7.6 (collectively, “Grantors”) to grant, and Purchaser shall have, a right of first offer (the “ROFO”) with respect to any and all opportunities with respect to the acquisition of real property or development of land with a value in excess of

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$2.5 million that would reasonably be expected to be used for the development of single-family residential communities or active adult communities in Florida (other than Cypress Lakes, Live Oak Preserve, and Eagle Bay located in Orlando, Florida), Arizona (other than San Tan Heights located in Pinal County, Arizona) or Nevada or any option relating to the acquisition of any such real property or development of any such land (to the extent such land or real property has a value in excess of $2.5 million), in each case in respect of which any of the Grantors receives written notice of or is actively engaged in or reviews an offer or proposal to acquire or develop land (whether directly or indirectly through one or more entities), on and subject to the following terms (collectively, the “Qualifying Opportunities”):

(b) Each Grantor shall promptly notify Purchaser in writing (such notification, the “Recommendation”) of all Qualifying Opportunities and, as requested, assist the Purchaser in the design and execution of development plans for such Qualifying Opportunities at the Purchaser’s cost and expense. Purchaser shall notify the Grantors of its decision to pursue any Qualifying Opportunity, or to waive its ROFO with respect to such Qualifying Opportunity, no later than 20 days after its receipt of the Recommendation.

(c) JEN Partners and its Affiliates that are investment funds will have an option to co-invest in up to 20% of the aggregate investment in each Qualifying Opportunity on the same terms as Purchaser; provided that Grantors shall have no voting rights in any vehicle utilized to acquire such Qualifying Opportunities.

(d) To the extent that any Qualifying Opportunity presented by any Grantor is waived by Purchaser, the applicable Grantor shall have the right to pursue such Qualifying Opportunity on the terms no more favorable to Grantor than those presented to Purchaser without further compliance with this Section 7.6.

7.7 Use of Name. Following the Closing, none of the Sellers, any Affiliate of Sellers, or any spouse of JCM or SA will (and each of the foregoing individuals will cause such Person’s spouse not to), directly or indirectly, use or otherwise exploit (or allow any other third party to use or exploit) in any manner, or claim any interest in, the Intellectual Property owned or used by or relating to the Purchased Entities, including the name “Joseph Carl” or use “Joseph Carl” or any similar name or expression in such a way or manner as would likely cause confusion, mistake or deceit with any of the Purchased Entities or suggest any sponsorship, affiliation or relationship with any of the Purchased Entities. Notwithstanding anything to the contrary in this Agreement, JCM may continue to use the words “Joseph Carl” (i) in connection with any business unrelated or dissimilar to the acquisition and/or development of real property or the sale or provision of any products or services customarily ancillary to such acquisition or development, real estate sales and brokerage services, mortgage and financial services, or recreational facilities or (ii) in connection with any business that could not reasonably be expected to injure the goodwill associated with the “Joseph Carl” name, any Intellectual Property containing the name “Joseph Carl”, or any Intellectual Property similar thereto or otherwise denigrate any such Intellectual Property or bring any such Intellectual Property or the name “Joseph Carl” into disrepute.

7.8 Benefits. Each employee of the Purchased Entities as of the Closing (including those employees whose employment contracts are terminated pursuant to

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Section 2.2(d), an “Employee”) will continue to be employed by Purchaser or one of its Affiliates following the Closing until December 31, 2010 for at least the same total compensation and in substantially the same position as was in effect immediately prior to the Closing; subject to the employment policies of Purchaser, provided, however, that nothing contained in this Section 7.8 shall be construed to prevent the termination of employment of any individual Employee. Purchaser shall take the actions set forth in the Benefits Side Letter.

7.9 Copyright Litigation. Sellers, on behalf of and for the benefit of JCH AZ, and JCM shall (a) at their sole expense and represented by counsel of their choice, actively and diligently defend against, negotiate, settle or otherwise seek to resolve the Copyright Litigation; (b) keep Purchaser reasonably informed of the progress of the Copyright Litigation; (c) actively consult and in good faith with Purchaser with respect to significant developments in the Copyright Litigation and of significant communications involving the plaintiff therein; and (d) provide Purchaser with any settlement offers made by the plaintiff therein and give serious and good faith consideration to any comments or suggestions that Purchaser or its advisors may have with respect thereto. Sellers may compromise, settle or consent to the entry of any judgment with respect to the Copyright Litigation without the prior consent of Purchaser, provided that as a result of any such compromise, settlement or judgment, JCH AZ will be entitled to utilize the Arboleda Ranch Documents that are the subject of the Copyright Litigation without an increase in the amount of payments required to be made by Purchaser under any agreement for use of the Arboleda Ranch Documents in effect as of the Closing Date.

ARTICLE VIII

INDEMNIFICATION

8.1 Survival of Representations and Warranties. The representations and warranties of the parties contained in this Agreement and any certificate delivered pursuant hereto shall survive the Closing through and including the 18-month anniversary of the Closing Date; provided, however, that the representations and warranties (a) set forth in Article IV (Representations and Warranties relating to Sellers) , 5.1 (Organization), 5.2 (Authorization), 5.3 (Conflicts; Consents of Third Parties), 5.4 (Capitalization), 5.5 (Subsidiaries), 5.10(a), 5.10(b) and 5.10(c) (Taxes), 6.1 (Organization), 6.2 (Authorization), 6.3 (Conflicts; Consents of Third Parties), 6.4 (Status of Shares) and 6.7 (Financial Advisors) (collectively, the “Fundamental Reps”), shall survive the Closing indefinitely, and (b) set forth in Section 5.19 (Environmental) shall survive the Closing until 90 days following the expiration of the applicable statute of limitations with respect to the particular matter that is the subject matter thereof (in each case, the “Survival Period”); provided, however, that any obligations under Sections 8.2(a)(i), 8.2(a)(ii) and 8.2(b)(i) shall not terminate with respect to any Losses as to which the Person to be indemnified shall have given notice (stating in reasonable detail the basis of the claim for indemnification) to the indemnifying party in accordance with Section 8.3(a) before the termination of the applicable Survival Period.

8.2 Indemnification.

(a) Subject to Sections 8.1, 8.4 and 8.7 hereof, Sellers hereby agree, jointly and severally (except with respect to Section 8.2(a)(ii), severally, but not jointly), to indemnify,

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defend and hold Holdings, Purchaser and their respective directors, officers, employees, Affiliates, stockholders, agents, attorneys, representatives, successors and assigns including the Purchased Entities (collectively, the “Purchaser Indemnified Parties”) harmless for, from and against, and pay to the applicable Purchaser Indemnified Parties the amount of, any and all losses, liabilities, claims, obligations, deficiencies, demands, judgments, damages, interest, fines, penalties, claims, suits, actions, causes of action, assessments, awards, costs and expenses actually incurred (including costs of investigation and defense and attorneys’, paraprofessionals’ and other professionals’ fees and liquidated damages solely with respect to employment and Fair Labor Standards Act matters, but excluding punitive damages (except to the extent payable under Third Party Claims)), whether or not involving a third party claim (individually, a “Loss” and, collectively, “Losses”), based upon, attributable to or resulting from:

(i) the failure of any of the representations or warranties made by Sellers to Purchaser in this Agreement (other than in Article IV) or in any Seller Document or Company Document to be true and correct in all respects at and as of the Closing Date (or, in the case of any such representation or warranty made as of a date specified therein, any inaccuracy therein as of such date);

(ii) the failure of any of the representations and warranties made by each Seller to Purchaser in Article IV or in any Seller Document or Company Documents to be true and correct in all respects as of the Closing Date (or, in the case of any such representation or warranty made as of a date specified therein, any inaccuracy therein as of such date);

(iii) the breach of any covenant or other agreement on the part of Sellers under this Agreement;

(iv) the JCH AZ FLSA matter, to the extent provided for in the Labor Side Letter;

(v) the Copyright Litigation or the claims asserted in the Copyright Litigation;

(vi) any and all Taxes of the Purchased Entities (or any predecessors thereof) for any taxable period (or portion thereof) ending on or before July 31, 2010, determined in accordance with Section 8.5(a); and

(vii) any failure by Sellers to timely pay any and all Taxes required to be borne by Sellers pursuant to Section 8.5(g).

(b) Subject to Sections 8.1, 8.4 and 8.7 each of Purchaser and Holdings hereby agrees, jointly and severally, to indemnify, defend and hold Sellers and their respective Affiliates, stockholders, agents, attorneys, representatives, successors and permitted assigns (collectively, the “Seller Indemnified Parties”) harmless for, from and against, and pay to the applicable Seller Indemnified Parties the amount of any and all Losses based upon, attributable to or resulting from:

(i) the failure of any of the representations or warranties made by Purchaser in this Agreement or in any Purchaser Documents to be true and correct in all respects

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at the Closing Date (or, in the case of any such representation or warranty made as of a date specified therein, any inaccuracy therein as of such date);

(ii) the breach of any covenant or other agreement on the part of Purchaser under this Agreement;

(iii) any and all Taxes of the Purchased Entities (or any predecessors thereof) for any taxable period (or portion thereof) commencing on or after August 1, 2010, determined in accordance with Section 8.5(a); and

(iv) any failure by Purchaser to timely pay any and all Taxes required to be borne by Purchaser pursuant to Section 8.5(g) or Section 8.5(i).

8.3 Indemnification Procedures.

(a) A claim for indemnification for any matter not involving a third party claim may be asserted by notice to the party from whom indemnification is sought; provided, however, that failure to so notify the indemnifying party shall not preclude the indemnified party from any indemnification which it may claim in accordance with this Article VIII, except to the extent that the indemnifying party can demonstrate actual loss and prejudice as a result of such failure.

(b) In the event that any Legal Proceedings shall be instituted or that any claim or demand shall be asserted by any third party in respect of which indemnification may be sought under Section 8.2 hereof (regardless of the limitations set forth in Section 8.4) (a “Third Party Claim”), the indemnified party shall promptly cause written notice of the assertion of any Third Party Claim of which it has knowledge which is covered by this indemnity to be forwarded to the indemnifying party. The failure of the indemnified party to give reasonably prompt notice of any Third Party Claim shall not release, waive or otherwise affect the indemnifying party’s obligations with respect thereto except to the extent that the indemnifying party can demonstrate actual loss and prejudice as a result of such failure.

(c) Subject to the provisions of this Section 8.3, the indemnifying party shall have the right, at its sole expense, to be represented by counsel of its choice, which must be reasonably satisfactory to the indemnified party, and to defend against, negotiate, settle or otherwise deal with any Third Party Claim which relates to any Losses indemnified against hereunder; provided that the indemnifying party shall have acknowledged in writing to the indemnified party its unqualified obligation to indemnify the indemnified party as provided hereunder, subject to the limitations set forth in Section 8.4. If the indemnifying party elects to defend against, negotiate, settle or otherwise deal with any Third Party Claim which relates to any Losses indemnified by it hereunder, it shall within five days of the indemnified party’s written notice of the assertion of such Third Party Claim (or sooner, if the nature of the Third Party Claim so requires) notify the indemnified party of its intent to do so; provided, that the indemnifying party must conduct the defense of the Third Party Claim actively and diligently thereafter in order to preserve its rights in this regard. If the indemnifying party elects not to defend against, negotiate, settle or otherwise deal with any Third Party Claim which relates to any Losses indemnified against hereunder, fails to notify the indemnified party of its election as

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herein provided or contests its obligation to indemnify the indemnified party for such Losses under this Agreement, the indemnified party may defend against, negotiate, settle or otherwise deal with such Third Party Claim unless it has contested its obligation to indemnify the indemnified party as of such time. If the indemnified party defends any Third Party Claim, then the indemnifying party shall reimburse the indemnified party for the expenses of defending such Third Party Claim. If the indemnifying party shall assume the defense of any Third Party Claim, the indemnified party may participate, at his or its own expense, in the defense of such Third Party Claim; provided, however, that such indemnified party shall be entitled to participate in any such defense with separate counsel at the expense of the indemnifying party if in the reasonable opinion of counsel to the indemnified party, a conflict or potential conflict exists between the indemnified party and the indemnifying party that would make such separate representation advisable; and provided, further, that the indemnifying party shall not be required to pay for more than one such counsel for all indemnified parties in connection with any Third Party Claim. The parties hereto agree to provide reasonable access to the other to such documents and information as may be reasonably requested in connection with the defense, negotiation or settlement of any such Third Party Claim. Notwithstanding anything in this Section 8.3 to the contrary, neither the indemnifying party nor the indemnified party shall, without the written consent of the other party, settle or compromise any Third Party Claim or permit a default or consent to entry of any judgment unless the claimant or claimants and such party provide to such other party an unqualified release from all liability in respect of the Third Party Claim. If the indemnifying party makes any payment on any Third Party Claim, the indemnifying party shall be subrogated, to the extent of such payment, to all rights and remedies of the indemnified party to any insurance benefits or other claims of the indemnified party with respect to such Third Party Claim.

(d) After any final decision, judgment or award shall have been rendered by a Governmental Body of competent jurisdiction and the expiration of the time in which to appeal therefrom, or a settlement shall have been consummated, or the indemnified party and the indemnifying party shall have reached an agreement, in each case with respect to an indemnifiable claim hereunder, the indemnified party shall forward to the indemnifying party notice of any sums due and owing by the indemnifying party pursuant to this Agreement with respect to such matter and the indemnifying party shall pay all of such remaining sums so due and owing to the indemnified party in accordance with Section 8.4.

8.4 Limitations on Indemnification for Breaches of Representations and Warranties.

(a) An indemnifying party shall not have any liability under Section 8.2(a)(i), Section 8.2(a)(ii) or Section 8.2(b)(i) hereof unless the aggregate amount of Losses incurred by the indemnified parties and indemnifiable thereunder based upon, attributable to or resulting from the failure of any of the representations or warranties to be true and correct exceeds US $250,000 (the “Basket”) and, in such event, the indemnifying party shall be required to pay the amount of such excess; provided that the Basket limitation shall not apply to Losses related to the failure to be true and correct of any of the Fundamental Reps.

(b) Neither Sellers nor Purchaser shall be required to indemnify any Person under Section 8.2(a)(i), 8.2(a)(ii) or 8.2(b)(i) for an aggregate amount of Losses exceeding US

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$9,300,000 (the “Cap”) in connection with Losses related to the failure to be true and correct of any of the representations or warranties of Sellers or Purchaser in Articles IV, V and VI, respectively; provided that there shall be no Cap with respect to Losses related to the failure to be true and correct of any of the Fundamental Reps.

(c) Sellers shall have no right of contribution or other recourse against the Purchased Entities or their respective directors, officers, employees, Affiliates, agents, attorneys, representatives, assigns or successors for any Third Party Claims asserted by Purchaser Indemnified Parties, it being acknowledged and agreed that the covenants and agreements of the Purchased Entities are solely for the benefit of the Purchaser Indemnified Parties.

(d) If a Purchaser Indemnified Party is entitled to indemnification from Sellers hereunder, such indemnification obligation of Sellers will (i) first, be satisfied by offsetting any amounts otherwise payable under the Notes and (ii) to the extent any such indemnification obligations are not so satisfied, and any remaining indemnification obligations of the Sellers will be satisfied (A) against any Shares issued pursuant to this Agreement and (B) to the extent of any indemnification obligation of the Sellers remaining after any offsets pursuant to the foregoing clause (A), by offsetting any amounts payable as Earnout Shares (as defined in the Earnout Agreement) under the Earnout Agreement. Except in connection with or relating to a breach of any Fundamental Reps or covenants of Sellers, Sellers shall not be entitled to satisfy any indemnification obligations hereunder other than by offsetting against the Notes, the Shares issued pursuant to this Agreement or the Earnout Shares, as set forth in this Section 8.4(d), and Purchaser acknowledges that its recourse is so limited.

(e) In determining the amount of any Losses for which the indemnified parties are entitled to assert a claim for indemnification hereunder, the amount of any such Losses will be determined after deducting therefrom (i) the Tax benefit actually realized by such indemnified parties arising from the incurrence or payment of any such Losses in the taxable year in which the Losses are incurred or paid and (ii) the amount of any insurance proceeds (after giving effect to any applicable deductible or retention and resulting retrospective or other premium adjustment) actually received by such indemnified parties in respect of such Losses, in each case net of costs and expenses incurred by such indemnified parties or their Affiliates.

(f) Notwithstanding anything to the contrary set forth in this Agreement, SA shall not have any indemnification obligation under this Agreement for an amount greater than his share of the Purchase Price received.

8.5 Tax Matters.

(a) Tax Returns.

(i) Sellers shall timely file any income Tax Returns required to be filed by or on behalf of any Purchased Entity in respect of any taxable period ending on or before the Closing Date.

(ii) Sellers shall timely file all Tax Returns that are required to be filed by or on behalf of any Purchased Entity on or before the Closing Date. In the case of any non-income Tax Return required to be filed by or on behalf of any Purchased Entity on or before the

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Closing Date in respect of any taxable period that includes (but does not begin or end on) July 31, 2010 (a “Straddle Period”), Purchaser shall pay to Sellers the amount of Taxes, as reasonably determined in accordance with Section 8.5(a)(v), allocable to Purchaser. Sellers shall be liable for the payment of all other Taxes with respect to such Straddle Period not otherwise allocable to Purchaser.

(iii) Purchaser shall timely file (or cause to be timely filed) all non-income Tax Returns required to be filed by or on behalf of any Purchased Entity for a Straddle Period (which Tax Returns are not otherwise described in Section 8.5(a)(ii)). Sellers shall pay to Purchaser the amounts of Taxes, as reasonably determined in accordance with Section 8.5(a)(v), allocable to Sellers, provided that Sellers shall not be required to make any payment to Purchaser to the extent such Taxes allocable to Sellers have already been accrued by Sellers according to its accounting methods for the accounting period ending on July 31, 2010. Purchaser shall be liable for the payment of all other Taxes with respect to such Straddle Period not otherwise allocable to Sellers.

(iv) In the case of any Prorated Taxes, the provisions of Section 8.5(g), and not this Section 8.5(a), shall apply as between Sellers and Purchaser for purposes of allocating Taxes.

(v) Taxes attributable to a Straddle Period under this Section 8.5(a) shall be allocated, on a closing-of the-books basis, (i) to Sellers for the period up to and including the close of business on July 31, 2010, and (ii) to Purchaser for the period subsequent to July 31, 2010.

(b) Tax Audits.

(i) If notice of any Legal Proceeding with respect to Taxes of any Purchased Entity (a “Tax Claim”) shall be received by either party for which the other party may reasonably be expected to be liable pursuant to Sections 8.2(a)(i) (on account of Section 5.10), 8.2(a)(vi), 8.2(a)(vii), 8.2(b)(iii) or 8.2(b)(iv) as applicable, the notified party shall notify such other party in writing of such Tax Claim; provided, however, that the failure of the notified party to give the other party notice as provided herein shall not relieve such failing party of its obligations under Section 8.2 or this Section 8.5 except to the extent that the other party is actually and materially prejudiced thereby.

(ii) Except as provided in Section 8.5(g)(iv), Purchaser shall have the right, at the expense of Sellers to the extent such Tax Claim is subject to indemnification by Sellers pursuant to Section 8.2(a)(i) (on account of Section 5.10), Section 8.2(a)(vi) or Section 8.2(a)(vii) hereof, as the case may be, to represent the interests of the Purchased Entities in any Tax Claim; provided, that, in the case of Tax Claims subject to indemnification by Sellers pursuant to Section 8.2(a) hereof and provided that Sellers acknowledge in writing their indemnification responsibilities in connection therewith, (A) Purchaser shall keep Sellers’ Representative reasonably informed of the progress of such Tax Claim and consult seriously and in good faith with Sellers’ Representative and its tax advisors with respect to any issue relating to such Tax Claim; (B) Purchaser shall provide Sellers’ Representative with copies of all correspondence, notice or other written materials received from any Taxing Authorities and shall

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otherwise keep Sellers’ Representative and its tax advisors advised of significant developments in the Tax Claim and of significant communications involving representations of the Taxing Authorities; (C) Purchaser shall provide Sellers’ Representative with a copy of any written submission to be sent to a Taxing Authority prior to the submission thereof and shall give serious and good faith consideration to any comments or suggested revisions that Sellers’ Representative or its advisors may have with respect thereto; and (D) there will be no settlement, resolution, or closing or other agreement with respect thereto without the consent of Sellers’ Representative, which consent shall not be unreasonably withheld, conditioned or delayed.

(c) Disputes. Any dispute as to any matter covered hereby shall be resolved by the Independent Accountant. The fees and expenses of such accounting firm shall be borne equally by Sellers, on the one hand, and Purchaser on the other.

(d) Conflicts. In the event of a conflict between the provisions of this Section 8.5, on the one hand, and the provisions of Sections 8.1 through 8.4, on the other, the provisions of this Section 8.5 shall control.

(e) Tax Treatment. The parties agree that the acquisition of the Interests by Purchaser shall be treated in a manner consistent with “Situation 2” of Internal Revenue Service Revenue Ruling 99-6, 1999-1 C.B. 432, and no party shall take any position on any Tax Return or with any Taxing Authority that is inconsistent with such treatment.

(f) Cooperation. Purchaser, Sellers and the Purchased Entities shall cooperate fully, as and to the extent reasonably requested by each other, in connection with all Tax matters of the Purchased Entities, including (as relevant) Tax Claims and Tax Returns of the Purchased Entities, and including for the avoidance of doubt the provision by the Purchased Entities to the Sellers of such information as is necessary for the preparation and filing of the final IRS Form 1065 of JCH Group.

(g) Prorated Taxes.

(i) In the case of any Prorated Taxes that are subsequently adjusted or redetermined (by any Taxing Authority or otherwise) after being taken into account under Section 3.3(a), appropriate payment shall be made between the parties to take into account such adjustment or redetermination.

(ii) In the case of any refund received by either party attributable to Prorated Taxes, the recipient of the refund shall pay to other party such other party’s proportionate share of such refund, calculated in accordance with the principles set forth in the definition of “Prorated Taxes.”

(iii) Sellers, at Sellers’ sole cost and expense, have the right to contest the real property Taxes assessed against the Properties prior to August 1, 2010 and appeal any payment thereof. If such contested Taxes relate to a taxable period ending on or before July 31, 2010, Sellers’ Representative shall keep Purchaser informed of the progress of such contest or appeal and shall provide Purchaser with copies of all documents and other written materials either received from the relevant Taxing Authority regarding such contest or submitted to the relevant Taxing Authority and Sellers shall not settle or otherwise resolve such contest or appeal

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without the written consent of Purchaser, such consent not to be unreasonably withheld or delayed. If such contested Taxes relate to a taxable period that includes July 31, 2010, but does not begin or end on such date, Sellers and Purchaser shall jointly control such contest or appeal. If such contest (and/or appeal, if appealed by Sellers and/or Purchaser) is successful, any refund shall be shared in the manner described in subsection (iii) above.

(h) Treatment of Consideration. For all relevant Tax purposes, (i) the Shares issued pursuant to Section 3.1(c) hereof and the Notes issued pursuant to Section 3.1(d) hereof shall be treated as having been issued to Sellers and (ii) any Earnout Shares issued pursuant to the Earnout Agreement (if any) shall, when and if actually issued, be treated as having been issued to Sellers when so issued. All parties hereto shall report consistently with this Section 8.5(b) for all Tax purposes.

(i) Transfer Taxes. Purchaser shall be liable for and shall pay all sales, use, stamp, documentary, filing, recording, transfer or similar fees or taxes or governmental charges as levied by any Taxing Authority including any interest and penalties) in connection with the Transactions.

(j) The parties hereto acknowledge that the Sharpe Entity is party to that certain Loan Purchase and Assumption Agreement, dated as of March 2, 2010, by and among the Sharpe Entity and Fifth Third Bank (“Fifth Third”), an Ohio banking corporation (the “Fifth Third Agreement”). Pursuant to Section 27 of the Fifth Third Agreement, Fifth Third is required to reimburse the Sharpe Entity for certain real estate taxes borne by the Sharpe Entity, if and to the extent Fifth Third receives proceeds from the “KB Litigation” (as defined in the Fifth Third Agreement) and after reduction for certain costs and expenses borne by Fifth Third. If and to the extent the Sharpe Entity receives any payment from Fifth Third pursuant to Section 27 of the Fifth Third Agreement, the Sharpe Entity shall, and Purchaser shall cause the Sharpe Entity to, promptly pay over such amounts to Sellers’ Representative, but not in any event to exceed $160,657.

8.6 Tax Treatment of Indemnity Payments. Sellers and Purchaser agree to treat any indemnity payment made pursuant to this Article VIII as an adjustment to the Purchase Price for all income tax purposes.

8.7 Exclusivity. Except with respect to any claims relating to, arising from or in connection with any breach of any Fundamental Reps or covenants, fraud and claims for equitable relief, the indemnification provided for in this Article VIII shall be the sole remedy of each of the parties hereto.

ARTICLE IX

OTHER AGREEMENTS

9.1 Board of Directors.

(a) As promptly as practicable following the Closing, Avatar Holdings Inc. shall take such actions as may be required to appoint Reuben Leibowitz and Allen Anderson of JEN Partners to the Board of Directors of Holdings (including by filling any vacancies on the

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Board of Directors with Messrs. Leibowitz and Anderson). In connection with such appointments, Holdings shall also take such actions as may be necessary or appropriate to cause Reuben Leibowitz and Allen Anderson to be appointed to such committees of the Board of Directors of Holdings as such Board of Directors shall determine.

(b) In connection with the next two annual meetings of shareholders of Holdings (and any special meetings of shareholders of Holdings held during the period starting on the Closing Date through the date of the second annual shareholders’ meeting following the Closing Date) at which directors are to be elected that follows the Closing Date, Holdings agrees to nominate Messrs. Leibowitz and Anderson for election to the Board of Directors of Holdings and to recommend that the shareholders of Holdings vote for each of Messrs. Leibowitz and Anderson at such meeting of shareholders. For the period contemplated by the preceding sentence, Holdings agrees to use the same efforts to cause such individuals to be elected to the Board of Directors as it uses to cause other nominees of its Board of Directors to be elected and, once elected, each such individual shall serve until his or her respective successor is elected and qualified or until his or her earlier death, disability or resignation or removal by the shareholders of Holdings.

9.2 Appointment of Sellers’ Representative.

(a) JEN Partners is hereby appointed, authorized and empowered by each of Sellers to act as a representative, for the benefit of Sellers (the “Sellers’ Representative”), as the exclusive agent and attorney in fact to act on behalf of each Seller, in connection with and to facilitate the consummation of the Transactions, which shall include the power and authority:

(i) to execute and deliver such waivers and consents in connection with this Agreement and the consummation of the Transactions as the Sellers’ Representative, in its sole discretion, may deem necessary or desirable;

(ii) to enforce and protect the rights and interests of Sellers arising out of or under or in any manner relating to this Agreement, and each other agreement, document, instrument or certificate referred to herein or therein or the transactions provided for herein or therein (including, receiving (or directly the receipt of) and allocating the Cash Consideration and the other portions of the Purchase Price, determining the Adjustment Amount or any adjustment thereof pursuant to Section 3.3 hereto and in connection with any and all claims for indemnification brought under Article VIII (but excluding any agreements to which Purchaser or any of its Affiliates are not a party, the Independent Contractor Agreements and the Employment Agreement), and to take any and all actions which the Sellers’ Representative believes are necessary or appropriate under this Agreement for and on behalf of Sellers;

(iii) to pledge all Issuer Stock issued pursuant to this Agreement as collateral to secure the obligations of Sellers under Article VIII; and

(iv) to make, execute, acknowledge and deliver all such other agreements, guarantees, orders, receipts, endorsements, notices, requests, instructions, certificates, stock powers, letters and other writings, and, in general, to do any and all things and to take any and all action that the Sellers’ Representative, in its sole and absolute discretion, may

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consider necessary or proper or convenient in connection with or to carry out the Transactions and all other agreements, documents or instruments referred to herein or therein or executed in connection herewith and therewith.

(b) Purchaser shall have the right to rely upon all actions taken or omitted to be taken by the Sellers’ Representative pursuant to this Agreement, all of which actions or omissions shall be legally binding upon Sellers.

(c) The grant of authority provided for herein (i) is coupled with an interest and shall be irrevocable and survive the death, incompetency, bankruptcy or liquidation of any Seller; and (ii) shall survive the consummation of the Transactions.

(d) Sellers agree that all actions, decisions and instructions of the Sellers’ Representative will be conclusive and binding upon each of the Sellers and no Seller will have any cause of action against the Sellers’ Representative for any action taken, decision made or instruction given by the Sellers’ Representative under this Agreement, except for fraud or willful breach of this Agreement by the Sellers’ Representative. Sellers hereby agree to jointly and severally indemnify and hold harmless the Seller Representative from and against (i) any losses incurred without fraud or willful breach on the part of the Seller Representative and arising out of or in connection with the acceptance, performance or nonperformance of its duties hereunder and (ii) any related out-of-pocket costs or expenses (including reasonable attorneys’ fees).

9.3 Fees and Expenses. On the Closing Date, Sellers shall deliver to Purchaser a certificate of the Sellers confirming that there is no unpaid balance with respect to any Company Transaction Expenses as of immediately prior to the Closing.

ARTICLE X

MISCELLANEOUS

10.1 Expenses. Except as otherwise provided in this Agreement, Sellers and Purchaser shall each bear their own expenses incurred in connection with the negotiation and execution of this Agreement and each other agreement, document and instrument contemplated by this Agreement and the consummation of the transactions contemplated hereby and thereby (including, with respect to Sellers, the Company Transaction Expenses), it being understood that in no event shall any Purchased Entity bear any of such costs and expenses.

10.2 Specific Performance. The parties acknowledge and agree that a breach of this Agreement would cause irreparable damage to the other parties hereto and that such other parties will not have an adequate remedy at law. Therefore, the obligations of the parties under this Agreement, including Sellers’ obligation to sell the Interests to Purchaser and the Purchaser’s obligation to purchase the Interests from Sellers, shall be enforceable by a decree of specific performance issued by any court of competent jurisdiction, and appropriate injunctive relief may be applied for and granted in connection therewith. Subject to Section 8.6, such remedies shall, however, be cumulative and not exclusive and shall be in addition to any other remedies which any party may have under this Agreement or otherwise.

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10.3 Submission to Jurisdiction; Consent to Service of Process; Waiver of Jury Trial.

(a) The parties hereto hereby irrevocably submit to the exclusive jurisdiction of any federal or state court located within the State of New York over any dispute arising out of or relating to this Agreement or any of the Transactions and each party hereby irrevocably agrees that all claims in respect of such dispute or any suit, action or proceeding related thereto may be heard and determined in such courts. The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(b) Each of the parties hereto hereby consents to process being served by any party to this Agreement in any suit, action or proceeding by delivery of a copy thereof in accordance with the provisions of Section 10.6.

(c) THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

10.4 Entire Agreement; Amendments and Waivers. This Agreement (including the schedules and exhibits hereto, which are incorporated herein by reference), the Seller Documents, the Company Documents and the Purchaser Documents represent the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and can be amended, supplemented or changed, and any provision hereof can be waived, only by written instrument making specific reference to this Agreement signed by the party against whom enforcement of any such amendment, supplement, modification or waiver is sought. No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of

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such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.

10.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and performed in such state, without regard to principles of conflicts of laws thereof (other than Section 5-1401 of the New York General Obligations Law).

10.6 Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed given (i) when delivered personally by hand or (ii) one (1) Business Day following the day sent by overnight courier, in each case at the following addresses (or to such other address as a party may have specified by notice given to the other party pursuant to this provision):

If to any Seller, to:

c/o JEN Partners, LLC
551 Madison Avenue
Suite 300
New York, NY 10022
Attention: Reuben Leibowitz

With a copy to:

Jones Day
222 E. 41^st Street
New York, New York 10017
Attention: Steven C. Koppel
Andrew M. Levine

If to Purchaser or Holdings, to:

Avatar Holdings Inc.
201 Alhambra Circle, Suite 1200
Coral Gables, FL 33134
Attention: General Counsel

With a copy to:

Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Simeon Gold
Jon-Paul Bernard

and

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Akerman Senterfitt LLP
One Southeast Third Avenue, 25th Floor
Miami, FL 33131
Attention: Stephen K. Roddenberry

10.7 Severability. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any law or public policy, all other terms or provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the Transactions are consummated as originally contemplated to the greatest extent possible.

10.8 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any person or entity not a party to this Agreement except as provided below. No assignment of this Agreement or of any rights or obligations hereunder may be made by either Sellers or Purchaser (by operation of law or otherwise) without the prior written consent of the other parties hereto and any attempted assignment without the required consents shall be void; provided, however, that Holdings and Purchaser may assign this Agreement and any or all rights or obligations hereunder (including Holdings and Purchaser’s rights to purchase the Interests and Holdings and Purchaser’s rights to seek indemnification hereunder) to any Affiliate of Holdings or Purchaser (i) as long as such assignment does not relieve Holdings or Purchaser, as the case may be, of any of its obligations hereunder or (ii) in connection with any consolidation or merger of Holdings or Purchaser with or into another Person, to such other Person. Upon any such permitted assignment, the references in this Agreement to Holdings or Purchaser shall also apply to any such assignee unless the context otherwise requires.

10.9 Non-Recourse. No past, present or future director, officer, employee, incorporator, member, partner, stockholder, Affiliate (other than any Affiliates of Sellers that are parties to this Agreement or any applicable Operative Agreement, including JEN I and JEN Res), agent, attorney or representative of Purchaser or JEN Partners or their respective Affiliates, shall have any liability for any obligations or liabilities of Purchaser or JEN Partners or their respective Affiliates under this Agreement or for any claim based on, in respect of, or by reason of, the Transactions.

10.10 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and a complete set of such counterparts shall constitute one Agreement.

10.11 Electronic Delivery. This Agreement, the agreements referred to herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent executed and delivered by means of a photographic, photostatic, facsimile, pdf or similar reproduction of such signed writing using a facsimile machine or electronic mail shall be treated in all manner

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and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or electronic mail to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or electronic mail as a defense to the formation or enforceability of a contract and each such party forever waives any such defense.

[Signature pages follow.]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first written above.


AVATAR PROPERTIES INC.
By:	/s/ Patricia Kimball Fletcher
	Name:	Patricia Kimball Fletcher
	Title:	Executive Vice President

AVATAR HOLDINGS INC. (solely for purposes of Sections 2.2, 2.3(d), 3.2, and 9.1 and Articles VIII and X hereof)
By:	/s/ Patricia Kimball Fletcher
	Name:	Patricia Kimball Fletcher
	Title:	Executive Vice President

TERRA WEST COMMUNITIES LLC By: JEN Partners LLC, its Manager
By:	/s/ Reuben S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member

JEN JCH, LLC By: JEN I, L.P., its Manager By: JEN Partners LLC, its General Partner
By:	/s/ Reuben S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member


/s/ Joseph Carl Mulac
JOSEPH CARL MULAC III



/s/ Stephen Adams
STEPHEN ADAMS

[Master Transaction Agreement]


SUN TERRA COMMUNITIES LLC JEN Partners LLC, its Manager
By:	/s/ Reuben S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member

JEN PARTNERS LLC (solely for purposes of Sections 2.2, 7.5, 7.6, and 9.2 and Article X hereof)
By:	/s/ Reuben S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member

[Master Transaction Agreement]

ANNEX I

DEFINITIONS

For purposes of this Agreement, the following terms shall have the meanings specified in this Annex I:

“Adjustment Amount” has the meaning set forth in Section 3.3(a).

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.

“Affiliated Group” means any affiliated group within the meaning of Section 1504 of the Code or any comparable or analogous group under applicable Law.

“Agreement” has the meaning set forth in the Preamble.

“Allocation Schedule” has the meaning set forth in Section 3.4.

“Arboleda Ranch Commitment” means that certain First American Title Insurance Company Commitment with an effective date of September 10, 2010 at 7:30 a.m.

“Arboleda Ranch Documents” means any licenses, approvals and other permits relating to the Arboleda Ranch Land, and any permits, licenses, soil tests, engineering and architectural plans, designs and specifications, insurance policies, reports, studies, surveys, contracts, warranties, guarantees, agreements and any and all other documents which Sellers or JCH AZ may have or have the right to obtain, if reasonably available, pertaining to the Arboleda Ranch Land or any entitlement of or development on the Arboleda Ranch Land.

“Arboleda Ranch Improvements” means any and all improvements and fixtures located upon the Arboleda Ranch Land to the extent owned by JCH AZ.

“Arboleda Ranch Land” means the real property described in Exhibit A to the Arboleda Ranch Commitment, together with all easements, water rights, rights of way inuring to the benefit of the Arboleda Ranch Land and all right, title and interest, if any, of Sellers and JCH AZ in and to any land lying in the bed of any street, road, avenue, open or proposed, in front of or adjoining the Arboleda Ranch Land to the centerline thereof, and all right, title and interest of Sellers or JCH AZ in and to any awards made or to be made in lieu thereof, and in and to any unpaid awards for damage to the Arboleda Ranch Land.

“Arboleda Property” means the Arboleda Ranch Land, the Arboleda Ranch Improvements, the Arboleda Ranch Documents.

“Assets” means with respect to any Person, all property and assets, tangible and intangible, owned by such Person, including any real or personal property, Intellectual Property, Software, Technology, Contracts and Permits.

“Audited JCH Statement” has the meaning set forth in Section 5.7(a).

“Balance Sheet” has the meaning set forth in Section 5.7(a).

“Balance Sheet Date” has the meaning set forth in Section 5.7(a).

“Bank Account Side Letter” means that certain letter between Purchaser and JEN Partners of even date herewith.

“Bank Accounts” has the meaning set forth in Section 2.4(a).

“Basket” has the meaning set forth in Section 8.4(a).

“Benefits Side Letter” means the letter agreement, dated as of the date hereof and signed by Purchaser, in respect to certain employee benefits matters.

“Blossom Hills Commitment” means that certain First American Title Insurance Company Commitment with an effective date of September 10, 2010 at 7:30 a.m.

“Blossom Hills Documents” means any licenses, approvals and other permits relating to the Blossom Hills Land, and any permits, licenses, soil tests, engineering and architectural plans, designs and specifications, insurance policies, reports, studies, surveys, contracts, warranties, guarantees, agreements and any and all other documents which Sellers or JCH AZ may have or have the right to obtain, if reasonably available, pertaining to the Blossom Hills Land or any entitlement of or development on the Blossom Hills Land.

“Blossom Hills Improvements” means any and all improvements and fixtures located upon the Blossom Hills Land to the extent owned by JCH AZ.

“Blossom Hills Land” means the real property described in Exhibit A to the Blossom Hills Commitment, together with all easements, water rights, rights of way inuring to the benefit of the Blossom Hills Land and all right, title and interest, if any, of Sellers and JCH AZ in and to any land lying in the bed of any street, road, avenue, open or proposed, in front of or adjoining the Blossom Hills Land to the centerline thereof, and all right, title and interest of Sellers or JCH AZ in and to any awards made or to be made in lieu thereof, and in and to any unpaid awards for damage to the Blossom Hills Land.

“Blossom Hills Property” means the Blossom Hills Land, the Blossom Hills Improvements, the Blossom Hills Documents.

“Business Day” means any day of the year on which national banking institutions in New York are open to the public for conducting business and are not required or authorized to close.

“CantaMia Documents” means any licenses, approvals and other permits relating to the CantaMia Land, and any permits, licenses, soil tests, engineering and architectural plans, designs and specifications, insurance policies, reports, studies, surveys, contracts, warranties, guarantees, agreements and any and all other documents which Sellers, JCH Estrella or JCH AZ may have or have the right to obtain, if reasonably available, pertaining to the CantaMia Land or any entitlement of or development on the CantaMia Land.

“CantaMia Improvements” means any and all improvements and fixtures located upon the CantaMia Land to the extent owned by JCH Estrella.

“CantaMia IP” has the meaning set forth in Section 5.13(a).

“CantaMia Land” means, collectively, CantaMia Phase 1 Estrella Land and CantaMia Phase 1 JCH AZ Land.

“CantaMia Name” means the name “CantaMia” as used in connection with the CantaMia Land.

“CantaMia Phase 1 Estrella Land” means the real property described in Schedule A to the CantaMia Phase 1 Commitment, together with all easements, water rights, rights of way inuring to the benefit of the CantaMia Phase 1 Estrella Land and all right, title and interest, if any, of Sellers and JCH Estrella in and to any land lying in the bed of any street, road, avenue, open or proposed, in front of or adjoining the CantaMia Phase 1 Estrella Land to the centerline thereof, and all right, title and interest of Sellers or JCH Estrella in and to any awards made or to be made in lieu thereof, and in and to any unpaid awards for damage to the CantaMia Phase 1 Estrella Land.

“CantaMia Phase 1 JCH AZ Land” means the real property described in Schedule A to the CantaMia Phase 1 Commitment, together with all easements, water rights, rights of way inuring to the benefit of the CantaMia Phase 1 JCH AZ Land and all right, title and interest, if any, of Sellers and JCH AZ in and to any land lying in the bed of any street, road, avenue, open or proposed, in front of or adjoining the CantaMia Phase 1 JCH AZ Land to the centerline thereof, and all right, title and interest of Sellers or JCH AZ in and to any awards made or to be made in lieu thereof, and in and to any unpaid awards for damage to the CantaMia Phase 1 JCH AZ Land.

“CantaMia Phase 1 Commitment” means that certain First American Title Insurance Company Commitment with an effective date of October 4, 2010 at 7:30 a.m.

“CantaMia Phase 2 and Phase 3” means the real property described in the Newland Option Contract.

“CantaMia Property” means the CantaMia Land, the CantaMia Improvements, the CantaMia Documents and the CantaMia Name.

“CantaMia Rolling Option Memorandum” means that certain Memorandum of Rolling Option Agreement recorded January 19, 2010 as 2010-044066, and re-recorded January 25, 2010 as 2010-060511, and further re-recorded on January 26, 2010 as 2010-065404

official records of Maricopa County, Arizona, describing that certain Rolling Option Agreement dated January 19, 2010 between JCH Estrella (as seller) and JCH AZ (as buyer).

“Cap” has the meaning set forth in Section 8.4(b).

“Cash Consideration” has the meaning set forth in Section 3.2(a).

“Closing” has the meaning set forth in Section 3.1.

“Closing Date” has the meaning set forth in Section 3.1.

“Code” means the Internal Revenue Code of 1986, as amended.

“Commitments” means the Arboleda Ranch Commitment, the Blossom Hills Commitment, the CantaMia Commitment, the PV-Sereno Commitment, the PV-Golf Commitment, and the Sharpe Commitment.

“Company Documents” has the meaning set forth in Section 5.2.

“Company Permits” has the meaning set forth in Section 5.18(b).

“Company Transaction Expenses” means, except as otherwise expressly set forth in this Agreement, the aggregate amount of all out-of-pocket fees and expenses, incurred by or on behalf of, or paid or to be paid by, the Purchased Entities in connection with the process of selling the Purchased Entities or otherwise relating to the negotiation, preparation or execution of this Agreement or any documents or agreements contemplated hereby or the performance or consummation of the transactions contemplated hereby, including (A) any fees and expenses associated with obtaining necessary or appropriate waivers, consents or approvals of third parties on behalf of any of the Purchased Entities (net any benefit to the Purchased Entities post-Closing), (B) any fees or expenses associated with obtaining the release and termination of any Liens, and (C) fees and expenses of counsel, advisors, consultants, investment bankers, accountants, and auditors and experts engaged solely for purposes of the transactions contemplated by this Agreement (and the employer portion of any employment Taxes payable with respect thereto).

“Confidential Information” has the meaning set forth in Section 7.5.

“Construction AZ” has the meaning set forth in the Recitals.

“Construction NV” has the meaning set forth in the Recitals.

“Contract” means any contract, agreement, indenture, note, bond, mortgage, loan, instrument, lease, license, warranty, guaranty, commitment or other arrangement, understanding, undertaking, commitment or obligation, whether written or oral.

“Copyright Litigation” means that certain complaint (copyright infringement), Merit Homes, LLC, an Arizona limited liability company vs. Joseph Carl Homes, LLC, an Arizona limited liability company and Joseph Carl Mulac III and Jane Doe Mulac, husband and

wife, Case No.: 2:10-cv-02030-NVW, filed in the United States District Court, District of Arizona.

“Denali” has the meaning set forth in the Recitals.

“Document Vault” means documents delivered by Sellers, or their Affiliates to Purchaser or its employees or legal counsel by electronic mail prior to the Closing Date, and the documents contained in the online data room established by JEN Partners for the purpose of sharing with the parties information and documentation in connection with the Transactions originally located at jenpartners.collaborationhost.net as of the date hereof.

“Earnout Agreement” has the meaning set forth in Section 2.2(b).

“Employee” has the meaning set forth in Section 7.8.

“Employment Agreement” has the meaning set forth in Section 2.2(d).

“Environmental Law” means any Law, as now or hereafter in effect, in any way relating to the protection of human health and safety, the environment or natural resources including the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. App. § 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Clean Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.) the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq.), and the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), as each has been or may be amended and the regulations promulgated pursuant thereto.

“Environmental Permit” means any Permit required by Environmental Laws for the operation of the Purchased Entities.

“Exchange Act” has the meaning set forth in Section 6.5.

“Financial Statements” has the meaning set forth in Section 5.7(a).

“Fundamental Reps” has the meaning set forth in Section 8.1.

“GAAP” means generally accepted accounting principles in the United States as of the date hereof.

“General Enforceability Exceptions” has the meaning set forth in Section 4.2.

“Governmental Body” means any government or governmental or regulatory body thereof, or political subdivision thereof, whether federal, state, local or foreign, or any agency, instrumentality or authority thereof, or any court, arbitrator or mediator (in each case public or private).

“Grantors” has the meaning set forth in Section 7.6(a).

“Hazardous Material” means any substance, material or waste that is regulated, classified, or otherwise characterized under or pursuant to any Environmental Law as “hazardous,” “toxic,” “pollutant,” “contaminant,” “radioactive,” or words of similar meaning or effect, including petroleum and its by-products, asbestos, polychlorinated biphenyls, radon, mold and urea formaldehyde insulation.

“Holdings” has the meaning set forth in the Preamble.

“Holdings Guarantee” has the meaning set forth in Section 2.2(c).

“Holdings SEC Documents” has the meaning set forth in Section 6.5.

“Indebtedness” of any Person means, without duplication, (i) the principal, accreted value, accrued and unpaid interest, prepayment and redemption premiums or penalties (if any), unpaid fees or expenses and other monetary obligations in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (ii) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable and other accrued current liabilities arising in the Ordinary Course of Business (other than the current liability portion of any indebtedness for borrowed money)); (iii) all obligations of such Person under leases required to be capitalized in accordance with GAAP; (iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction; (v) all obligations of such Person under interest rate or currency swap transactions (valued at the termination value thereof); (vi) the liquidation value, accrued and unpaid dividends; prepayment or redemption premiums and penalties (if any), unpaid fees or expenses and other monetary obligations in respect of any redeemable preferred stock of such Person; (vii) all obligations of the type referred to in clauses (i) through (vi) of any Persons for the payment of which such Person is responsible or liable, directly or indirectly, as obligor, guarantor, surety or otherwise, including guarantees of such obligations; and (viii) all obligations of the type referred to in clauses (i) through (vii) of other Persons secured by (or for which the holder of such obligations has an existing right, contingent or otherwise, to be secured by) any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person).

“Independent Accountant” has the meaning set forth in Section 3.3(c).

“Independent Contractor Agreements” has the meaning set forth in Section 2.2(c).

“Independent Land Developers” means Michael Jesberger, John Kraynick and Richard Jerman or their respective entities, Residential Real Estate Advisors, LLC and Terra West Management Co. LLC.

“Intellectual Property” means any rights available (including with respect to Technology) under patent, copyright, trade secret or trademark law or any other similar statutory provision or common law doctrine in the United States or anywhere else in the world, and also websites and domain names.

“Interest Transfer Agreements” has the meaning set forth in Section 2.2(g).

“Interests” means the ownership interests, by percentage, whether by membership, profit, loss or capital, held by each Seller in the Purchased Parents set forth opposite such Seller’s name in Schedule 2.1(b).

“IP Side Letter” means the letter, dated on or about the date hereof, between Purchaser and Carl Mulac IV.

“IRS” means the Internal Revenue Service.

“JCH AZ” has the meaning set forth in the Recitals.

“JCH Estrella” has the meaning set forth in the Recitals.

“JCH Financials” has the meaning set forth in Section 5.7(a).

“JCH Group” has the meaning set forth in the Recitals.

“JCH NV” has the meaning set forth in the Recitals.

“JCM” has the meaning set forth in the Preamble.

“JEN I” has the meaning set forth in Section 3.2(c).

“JEN AZ” has the meaning set forth in the Recitals.

“JEN JCH” has the meaning set forth in the Preamble.

“JEN Partners” has the meaning set forth in the Preamble.

“JEN Res” has the meaning set forth in Section 3.2(c).

“Knowledge” means (a) with respect to Sellers, knowledge of each of the individuals listed on Schedule 1.1(a) hereto after due inquiry and (b) with respect to Purchaser, knowledge of each of the individuals listed on Schedule 1.1(b) hereto after due inquiry.

“Labor Side Letter” means the letter agreement, dated as of the date hereof, by and among JCH, AZ and the other parties thereto, in respect to certain labor matters.

“Law” means any foreign, federal, state or local law (including common law), statute, code, ordinance, rule, regulation, Order, stipulation, condition of approval, requirement of any Governmental Body.

“Legal Proceeding” means any judicial, administrative or arbitral actions, suits, mediation, investigation, inquiry, proceedings or claims (including counterclaims) by or before a Governmental Body.

“Liability” means any debt, loss, damage, adverse claim, fines, penalties, liability or obligation (whether direct or indirect, known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, matured or unmatured, determined or determinable, liquidated or unliquidated, or due or to become due, and whether in contract, tort, strict liability or otherwise), and including all costs and expenses relating thereto including all fees, disbursements and expenses of legal counsel, experts, engineers and consultants and costs of investigation).

“Lien” means any lien, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement, servitude, proxy, voting trust or agreement, transfer restriction under any shareholder or similar agreement, or any other encumbrance.

“Loss” and “Losses” has the meaning set forth in Section 8.2(a).

“Material Adverse Effect” means a material and adverse effect on (i) the business, Purchased Entity Assets, results of operations, or condition (financial or otherwise) of the Purchased Entities, taken as a whole or (ii) the ability of the Sellers to consummate the Transactions or perform their obligations under this Agreement or the Seller Documents.

“Material Contracts” has the meaning set forth in Section 5.14(a).

“Newland Option Contract” means that certain Option Contract and Joint Escrow Instructions dated December 29, 2009, under which NNP III — Estrella Mountain Ranch, LLC is the seller and JCH Estrella is the buyer of CantaMia Phase 2 and Phase 3.

“Notes” has the meaning set forth in Section 2.2(c).

“Omaha Estoppel” has the meaning set forth in Section 2.3(g)(v).

“Operating Agreement” means each of the following: Operating Agreement of JCH Estrella, dated September 25, 2009; Amended and Restated Organization and Limited Liability Company Agreement of JCH Group, dated January 1, 2009; Operating Agreement of JCH AZ, dated May 5, 2009; Operating Agreement of Construction AZ, dated May 5, 2009; Operating Agreement of JCH NV, dated July 1, 2009; Operating Agreement of Construction NV, dated July 1, 2009; Operating Agreement of Denali, dated September 9, 2009; Operating Agreement of PV LandBank, an Arizona limited liability company, dated May 25, 2010; and Limited Liability Company Agreement of the Sharpe Entity, dated February 23, 2010. “Operating Agreements” means the foregoing agreements collectively.

“Operative Documents” has the meaning set forth in Section 2.2.

“Order” means any order, injunction, judgment, doctrine, decree, ruling, writ, assessment or arbitration award of a Governmental Body.

“Ordinary Course of Business” means the ordinary and usual course of day-to-day operations of the business of the Purchased Entities through the date hereof consistent with past practice.

“Permits” means any approvals, authorizations, consents, licenses, permits or certificates of a Governmental Body.

“Permitted Exceptions” means (i) all defects, exceptions, restrictions, easements, rights of way and encumbrances disclosed in policies of title insurance which have been delivered or made available to Purchaser; (ii) statutory liens for current Taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings, provided an appropriate reserve has been established therefor in the Financial Statements; (iii) mechanics’, carriers’, workers’, repairers’ and similar Liens arising or incurred in the Ordinary Course of Business that are not material to the business, operations and financial condition of the Sellers or the Purchased Entities (as applicable), or any of their property or asset so encumbered, and that are not resulting from a breach, default or violation by any Seller or Purchased Entity (as applicable) of any Contract or Law; (iv) zoning, entitlement and other land use and environmental regulations by any Governmental Body, provided that such regulations have not been violated; and (v) any Liens with respect to the Indebtedness described on Schedule 2.3(a).

“Person” means any individual, corporation, limited liability company, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other entity.

“Personal Property Leases” has the meaning set forth in Section 5.12(b).

“Properties” means, collectively, the Arboleda Property, the Blossom Hills Property, the CantaMia Property, the PV-Sereno Property, the PV-Golf Property and the Sharpe Property.

“Prorated Taxes” means all real property Taxes or similar ad valorem obligations with respect to real property levied with respect to the Purchased Entity Assets for any taxable period that includes July 31, 2010 and ends after July 31, 2010, whether imposed or assessed before or after July 31, 2010. Prorated Taxes shall be pro rated between Sellers and Purchaser as of 12:01 a.m. (Eastern time) on August 1, 2010 based on the relative number of days in each portion of the relevant taxable period.

“Purchase Price” has the meaning set forth in Section 3.2(a).

“Purchased Entities” means the Purchased Parents and their Subsidiaries known as JCH AZ, JCH NV, Construction AZ, Construction NV, Denali, JEN AZ and PV Landbank.

“Purchased Entity Assets” means the Assets of the Purchased Entities, including the Properties, any assets described in Section 5.11 with respect to any Purchased Entity and the personal property described in Section 5.12.

“Purchased Entity Options” has the meaning set forth in Section 5.4(b).

“Purchased Parents” means JCH Group, JCH Estrella and the Sharpe Entity.

“Purchaser” has the meaning set forth in the Preamble.

“Purchaser Documents” has the meaning set forth in Section 6.2.

“Purchaser Indemnified Parties” has the meaning set forth in Section 8.2(a).

“PV-Golf Commitment” means that certain First American Title Insurance Company Commitment with an effective date of September 10, 2010 at 7:30 a.m.

“PV-Golf Documents” means any licenses, approvals and other permits relating to the PV-Golf Land, and any permits, licenses, soil tests, engineering and architectural plans, designs and specifications, insurance policies, reports, studies, surveys, contracts, warranties, guarantees, agreements and any and all other documents which Sellers or JCH AZ may have or have the right to obtain, if reasonably available, pertaining to the PV-Golf Land or any entitlement of or development on the PV-Golf Land.

“PV-Golf Improvements” means any and all improvements and fixtures located upon the PV-Golf Land to the extent owned by JCH AZ.

“PV-Golf Land” means the real property described in Exhibit A to the PV-Golf Commitment, together with all easements, water rights, rights of way inuring to the benefit of the PV-Golf Land and all right, title and interest, if any, of Sellers and JCH AZ in and to any land lying in the bed of any street, road, avenue, open or proposed, in front of or adjoining the PV-Golf Land to the centerline thereof, and all right, title and interest of Sellers or JCH AZ in and to any awards made or to be made in lieu thereof, and in and to any unpaid awards for damage to the PV-Golf Land.

“PV-Golf Property” means the PV-Golf Land, the PV-Golf Improvements, the PV-Golf Documents.

“PV-Sereno Commitment” means that certain First American Title Insurance Company Commitment with an effective date of September 15, 2010 at 7:30 a.m.

“PV-Landbank” has the meaning set forth in the Recitals.

“PV-Sereno Documents” means any licenses, approvals and other permits relating to the PV-Sereno Land, and any permits, licenses, soil tests, engineering and architectural plans, designs and specifications, insurance policies, reports, studies, surveys, contracts, warranties, guarantees, agreements and any and all other documents which Sellers or JCH AZ may have or have the right to obtain, if reasonably available, pertaining to the PV-Sereno Land or any entitlement of or development on the PV-Sereno Land.

“PV-Sereno Improvements” means any and all improvements and fixtures located upon the PV-Sereno Land to the extent owned by JCH AZ.

“PV-Sereno Land” means the real property described in Exhibit A to the PV-Sereno Commitment, together with all easements, water rights, rights of way inuring to the benefit of the PV-Sereno Land and all right, title and interest, if any, of Sellers and JCH AZ in and to any land lying in the bed of any street, road, avenue, open or proposed, in front of or adjoining the PV-Sereno Land to the centerline thereof, and all right, title and interest of Sellers

or JCH AZ in and to any awards made or to be made in lieu thereof, and in and to any unpaid awards for damage to the PV-Sereno Land.

“PV-Sereno Option Agreement” means that certain Option Agreement evidenced by the Memorandum of Rolling Option Agreement between PV Landbank and JCH AZ, dated as of May 26, 2010, and recorded June 1, 2010 at 2010-0463560 on the PV-Sereno Land.

“PV-Sereno Property” means the PV-Sereno Land, the PV-Sereno Improvements, the PV-Sereno Documents.

“Qualifying Opportunities” has the meaning set forth in Section 7.6(a).

“Recommendation” has the meaning set forth in Section 7.6(b).

“Recorded Restrictions” has the meaning set forth in Section 5.25.

“Records Retention Policy” has the meaning set forth in Section 7.3.

“Related Persons” has the meaning set forth in Section 5.22.

“Release” means any release, spill, emission, leaking, pumping, poring, injection, deposit, dumping, emptying, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, or into or out of any property.

“Remedial Action” means all actions including any capital expenditures undertaken to (i) clean up, remove, treat or in any other way address any Hazardous Material; (ii) prevent the Release or threat of Release, or minimize the further Release of any Hazardous Material so it does not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (iii) perform pre-remedial studies and investigations or post-remedial monitoring and care; or (iv) to correct a condition of noncompliance with Environmental Laws.

“Representatives” of a Person means the directors, officers, members, managers, limited and general partners, employees, advisors, agents, consultants, attorneys, accountants, investment bankers and other representatives of such Person.

“Revised Allocation Schedules” has the meaning set forth in Section 3.4.

“ROFO” has the meaning set forth in Section 7.6(a).

“SA” has the meaning set forth in the Preamble.

“SEC” has the meaning set forth in Section 6.5.

“Securities Act” means the Securities Act of 1933, as amended.

“Securities Laws Restrictions” has the meaning set forth in Section 2.1(b).

“Seller Documents” has the meaning set forth in Section 4.2.

“Seller Indemnified Parties” has the meaning set forth in Section 8.2(b).

“Sellers” has the meaning set forth in the Preamble.

“Sellers’ Representative” has the meaning set forth in Section 9.2(a).

“Shares” has the meaning set forth in Section 3.2(a).

“Sharpe Commitment” that certain First American Title Insurance Company Commitment with an effective date of October 16, 2010 at 8:00 a.m.

“Sharpe Credits” means (i) the right to receive the transportation impact fee credits in the amount of $158,850.00 to be issued by Orange County, Florida for the dedication of the Reams Road Right of Way; (ii) the right to receive the impact fee credits for the initial payment of $763,115.00 pursuant to the RR Operating Agreement as defined in Schedule 5.11(a); and (iii) the right to utilize $174,656.00 paid to the FWC Land Acquisition Trust Fund as mitigation for Permit No. ORA-255 for the incidental taking of gopher tortoises within the Sharpe Land.

“Sharpe Documents” means any licenses, approvals and other permits relating to the Sharpe Land, and any permits, licenses, soil tests, engineering and architectural plans, designs and specifications, insurance policies, reports, studies, surveys, contracts, warranties, guarantees, agreements and any and all other documents which Sellers or the Sharpe Entity may have or have the right to obtain, if reasonably available, pertaining to the Sharpe Land or any entitlement or development of the Sharpe Land.

“Sharpe Entity” has the meaning set forth in the Recitals.

“Sharpe Improvements” has the meaning set forth in Schedule 5.11(a).

“Sharpe Land” means the real property described in Exhibit A to the Sharpe Commitment, together with all easements, water rights, rights of way inuring to the benefit of the Sharpe Land and all right, title and interest, if any, of Sellers and the Sharpe Entity in and to any land lying in the bed of any street, road, avenue, open or proposed, in front of or adjoining the Sharpe Land to the centerline thereof, and all right, title and interest of Sellers or the Sharpe Entity in and to any awards made or to be made in lieu thereof, and in and to any unpaid awards for damage to the Sharpe Land.

“Sharpe Property” means the Sharpe Land and the Sharpe Documents.

“Software” means any and all computer programs, whether in source code or object code; databases and compilations, whether machine readable or otherwise; descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing; and all documentation including user manuals and other training documentation related to any of the foregoing.

“Straddle Period” has the meaning set forth in Section 8.5(a).

“Subsidiary” of any Person means (i) any Person of which a majority of the outstanding share capital, voting securities or other equity interests are owned, directly or indirectly, by such Person or (ii) another Person in respect of which such first Person is entitled, directly or indirectly, to appoint a majority of the board of directors, board of managers or comparable body.

“Subsequent Adverse Title Matters” means those adverse matters first appearing in the public records on a date subsequent to the effective date of the Commitments, as applicable to each corresponding Property.

“Sun Terra” has the meaning set forth in the Preamble.

“Survival Period” has the meaning set forth in Section 8.1.

“Tax Claim” has the meaning set forth in Section 8.5(b).

“Taxes” means (i) all federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments, including all income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and charges of any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any Taxing Authority in connection with any item described in clause (i) and (iii) any liability in respect of any items described in clauses (i) or (ii) payable by reason of Contract, assumption, transferee liability, operation of Law or otherwise.

“Taxing Authority” means the IRS and any other Governmental Body responsible for the administration of any Tax.

“Tax Return” means any return, report or statement filed or required to be filed with respect to any Tax (including any elections, declarations, schedules or attachments thereto, and any amendment thereof) including any information return, claim for refund, amended return or declaration of estimated Tax.

“Technology” means, collectively, designs, formulae, algorithms, procedures, methods, techniques, ideas, know-how, results of research and development, Software, tools, data, inventions, apparatus, creations, improvements, works of authorship and other similar materials, and all recordings, graphs, drawings, reports, analyses, and other writings, and any other embodiments of the above, in any form whether or not specifically listed herein, and all related technology, that are used, incorporated or embodied in or displayed by any of the foregoing or used in the design, development, reproduction, sale, marketing, maintenance or modification of any of the foregoing.

“Terra West” has the meaning set forth in the Preamble.

“Third Party Claim” has the meaning set forth in Section 8.3(b).

“Title Company” has the meaning set forth in Section 2.3(f)(i).

“Transactions” has the meaning set forth in Section 2.1(b).

“Treasury Regulations” means the U.S. Department of Treasury Regulations promulgated under the Code.

CONSTRUCTION; USAGE

The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”

The words “hereof,” “herein” and “hereunder” and words of similar import when used in any agreement or instrument shall refer to such agreement or instrument as a whole and not to any particular provision of such agreement or instrument.

Unless the context otherwise requires, references to all agreements or instruments include attachments thereto and instruments incorporated therein and references to any statute, proclamation or decree include all rules and regulations promulgated thereunder.

TABLE OF CONTENTS


		Page

ARTICLE I DEFINITIONS; CONSTRUCTION; USAGE			2
ARTICLE II TRANSACTIONS			2
2.1	Transactions		2
2.2	Operative Documents		2
2.3	Additional Sellers’ Closing Deliveries		3
2.4	Powers of Attorney; Bank Accounts		7
2.5	Other Seller Closing Deliveries		7
2.6	Additional Purchaser’s Closing Deliveries		7
2.7	Books and Records		8
ARTICLE III CLOSING; PURCHASE PRICE			8
3.1	Closing		8
3.2	Purchase Price		8
3.3	Adjustment Amount		9
3.4	Allocation of Purchase Price		9
3.5	Closing Costs		10
3.6	Closing Deliveries		10
ARTICLE IV REPRESENTATIONS AND WARRANTIES RELATING TO SELLERS			10
4.1	Organization and Good Standing		10
4.2	Authorization of Agreement		10
4.3	Conflicts; Consents of Third Parties		11
4.4	Ownership and Transfer of Interests		11
4.5	Litigation		11
4.6	Financial Advisors		12
ARTICLE V REPRESENTATIONS AND WARRANTIES RELATING TO THE PURCHASED ENTITIES			12
5.1	Organization and Good Standing		12
5.2	Authorization of Agreement		12
5.3	Conflicts; Consents of Third Parties		12
5.4	Capitalization		13
5.5	Subsidiaries		14

-i-

TABLE OF CONTENTS
(continued)


		Page
5.6	Corporate Records		14
5.7	Financial Statements		14
5.8	No Undisclosed Liabilities		15
5.9	Absence of Certain Developments		15
5.10	Taxes		15
5.11	Real Property		17
5.12	Tangible Personal Property		17
5.13	Technology and Intellectual Property		18
5.14	Material Contracts		19
5.15	Employee Benefits Plans		20
5.16	Labor		20
5.17	Litigation; Disputes		21
5.18	Compliance with Laws; Permits		21
5.19	Environmental Matters		21
5.20	Insurance		22
5.21	Accounts and Notes Receivable and Payable		22
5.22	Related Party Transactions		22
5.23	Banks; Power of Attorney		22
5.24	Financial Advisors		22
5.25	Recorded Restrictions		22
5.26	No Requested Funds		23
5.27	Parties-In-Possession		23
5.28	Ordinary Course Operations		23
5.29	No Other Representations or Warranties; Schedules		23
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER			23
6.1	Organization and Good Standing		23
6.2	Authorization of Agreement		23
6.3	Conflicts; Consents of Third Parties		24
6.4	Status of the Shares		24
6.5	SEC Filings		24

-ii-

TABLE OF CONTENTS
(continued)


		Page
6.6	Litigation		25
6.7	Financial Advisors		25
ARTICLE VII COVENANTS			25
7.1	Other Actions		25
7.2	No Solicitation		25
7.3	Preservation of Records		25
7.4	Publicity		26
7.5	Confidentiality		26
7.6	Right of First Offer		26
7.7	Use of Name		27
7.8	Benefits		27
7.9	Copyright Litigation		28
ARTICLE VIII INDEMNIFICATION			28
8.1	Survival of Representations and Warranties		28
8.2	Indemnification		28
8.3	Indemnification Procedures		30
8.4	Limitations on Indemnification for Breaches of Representations and Warranties		31
8.5	Tax Matters		32
8.6	Tax Treatment of Indemnity Payments		35
8.7	Exclusivity		35
ARTICLE IX OTHER AGREEMENTS			35
9.1	Board of Directors		35
9.2	Appointment of Sellers’ Representative		36
9.3	Fees and Expenses		37
ARTICLE X MISCELLANEOUS			37
10.1	Expenses		37
10.2	Specific Performance		37
10.3	Submission to Jurisdiction; Consent to Service of Process; Waiver of Jury Trial		38
10.4	Entire Agreement; Amendments and Waivers		38

-iii-

TABLE OF CONTENTS
(continued)


		Page
10.5	Governing Law		39
10.6	Notices		39
10.7	Severability		40
10.8	Binding Effect; Assignment		40
10.9	Non-Recourse		40
10.10	Counterparts		40
10.11	Electronic Delivery		40

-iv-

EX-99.3 4 g25091exv99w3.htm EX-99.3 exv99w3

Exhibit 99.3

EARNOUT AGREEMENT

THIS EARNOUT AGREEMENT (this “Agreement”) is entered into as of October 25, 2010, by and among Avatar Holdings Inc. (the “Issuer”), Avatar Properties Inc., a wholly owned subsidiary of the Issuer (the “Purchaser”), JEN I, L.P., a Delaware limited partnership and Jen Residential LP, a Delaware limited partnership (collectively, the “Recipients”, and collectively with the Issuer and the Purchaser, the “Parties”). Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Master Transaction Agreement.

WHEREAS, the Issuer, the Purchaser and certain other parties (including parties affiliated with the Recipients) are all parties to the Master Transaction Agreement, dated as of the date hereof (the “Master Transaction Agreement”).

WHEREAS, in furtherance of the transactions contemplated by the Master Transaction Agreement, the Parties desire to provide for the issuance to the Recipients, subject to the achievement of certain agreed performance metrics as further detailed herein relating to the CantaMia Property, of such number of shares of common stock of the Issuer (the “Issuer Stock”) as determined by the calculation method hereinafter set forth, it being acknowledged and agreed that no such issuance shall occur unless the Average Unit Contribution is greater than or equal to $87,603 and the Project Contribution is greater than the Minimum Project Contribution Threshold as of the Milestone Date, all as hereinafter defined.

NOW, THEREFORE, in consideration of the mutual promises set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as set forth in the foregoing recitals (which shall constitute in their entirety a part of this Agreement) and as follows:

Section 1. Definitions.

“Actual Phase I Expenses” has the meaning set forth in Section 2(c).

“Agreement” has the meaning set forth in the Preamble.

“Arizona Operations” means the operations of the CantaMia Property, Arboleda Ranch Property, Blossom Hills Property, PV-Sereno Property, PV-Golf Property and any other communities acquired by JCH AZ after the date of this Agreement but excluding Rio Rico and Estancia and other Arizona properties acquired by Purchaser, until such time as they are under the day to day management of Carl Mulac III and/or owned by JCH AZ or any successor by merger or otherwise and/or such properties are managed by Purchaser’s employees or representatives located in Arizona (e.g., such assets are no longer managed from Florida or another location outside of Arizona).

“Average Unit Contribution” has the meaning set forth in Section 2(d)(ii).

“Budgeted Expenses” has the meaning set forth in Section 2(c).

“Business Combination” has the meaning set forth in Section 4(b).

“CantaMia Property” means the CantaMia Land and CantaMia Phase 2 and Phase 3 as defined in the Master Transaction Agreement.

“Commencement Date” has the meaning set forth in Section 2(d)(i).

“Development Budget” means the budget relating to the development of the CantaMia Property attached hereto as Exhibit A.

“Earnout Amount” has the meaning set forth in Section 2(b).

“Earnout Report” has the meaning set forth in Section 3(a).

“Earnout Shares” has the meaning set forth in Section 2(a).

“Excess Expense” has the meaning set forth in Section 2(c).

“Exchange Cap” has the meaning set forth in Section 5.

“Exchangeable Property” has the meaning set forth in Section 4(b)(i).

“Final Earnout Report” has the meaning set forth in Section 3(a).

“Issue Price” means $19.04.

“Issuer” has the meaning set forth in the Preamble.

“Issuer Stock” has the meaning set forth in the Recitals.

“Land Development Expenditures” means the all costs and expenses associated with the land and land development contemplated by the Development Budget.

“Master Transaction Agreement” has the meaning set forth in the Recitals.

“Maximum Earnout” has the meaning set forth in Section 2(b).

“Maximum Issuable Shares” has the meaning set forth in Section 5.

“Maximum Project Contribution Threshold” has the meaning set forth in Section 2(b)(ii).

“Milestone Date” has the meaning set forth in Section 2(a).

“Minimum Average Unit Contribution Threshold” has the meaning set forth in Section 2(a).

“Minimum Project Contribution Threshold” has the meaning set forth in Section 2(a).

“Net Cash Flow” has the meaning set forth in Section 2(d)(i).

“Parties” has the meaning set forth in the Preamble.

“Project Contribution” has the meaning set forth in Section 2(d)(i).

“Purchaser” has the meaning set forth in the Preamble.

“Rate Change Threshold” has the meaning set forth in Section 2(b)(i).

“Recipients” has the meaning set forth in the Preamble.

“Registration Rights Agreement” has the meaning set forth in the Master Transaction Agreement.

“Special Accountant” has the meaning set forth in Section 3(b).

“SG&A” has the meaning set forth in Section 2(d)(i).

Section 2. The Earnout.

(a) In the event that the Average Unit Contribution relating to the CantaMia Property as of December 31, 2014 (the “Milestone Date”) equals to or is greater than $87,603 (the “Minimum Average Unit Contribution Threshold”) and the Project Contribution relating to the CantaMia Property as of the Milestone Date exceeds $59 million (subject to prior adjustment pursuant to Section 2(c), the “Minimum Project Contribution Threshold”), the Recipients shall be entitled to receive, and the Issuer shall issue to the Recipients, such number of shares of Issuer Stock equal to the Earnout Amount (as defined below), divided by the Issue Price (the “Earnout Shares”).

(b) The earnout amount (the “Earnout Amount”) shall be determined as follows, subject to a maximum Earnout Amount (the “Maximum Earnout”) of $8 million:

(i) In the event that the Project Contribution equals $64 million (subject to prior adjustment pursuant to Section 2(c), the “Rate Change Threshold”), the Earnout Amount shall be $2 million;

(ii) In the event that the Project Contribution equals or exceeds $72 million (subject to prior adjustment pursuant to Section 2(c), the “Maximum Project Contribution Threshold”), the Earnout Amount shall be $8 million; and

(iii) In the event that the Project Contribution exceeds the Minimum Project Contribution Threshold and is less than the Rate Change Threshold, the Earnout Amount shall be equal to the product of (a) $2 million multiplied by (b) a fraction, the numerator of which is the amount by which the Project Contribution exceeds the Minimum Project Contribution Threshold, and the denominator of which is $5 million.

(iv) In the event that the Project Contribution exceeds the Rate Change Threshold and is less than the Maximum Project Contribution Threshold, the Earnout Amount shall be equal to the sum of (a) $2 million plus (b) the product of (i) $6 million multiplied by (ii) a fraction, the numerator of which is the amount by which the Project Contribution exceeds the Rate Change Threshold (it being agreed that for this purpose, in no event shall the numerator be in excess of $8 million), and the denominator of which is $8 million.

For illustrative purposes only (assuming no adjustments have been made pursuant to Section 2(c)):

(i) In the event that the Project Contribution equals to $61 million, the Earnout Amount would be:


(A) $2 million X (B)	$(61 million — 59 million)	= $800,000

	$5 million

(ii) In the event that the Project Contribution equals to $71 million, the Earnout Amount would be:


(A) $2 million + (B) (i) $6 million X	$(71 million — 64 million)	= $7,250,000

	$8 million

(c) In the event that the actual expenses for the period commencing on the Commencement Date through the Milestone Date relating to the first phase of development of the CantaMia Property (the “Actual Phase I Expenses”) exceed the estimate for such amounts set forth in the Development Budget (the “Budgeted Expenses”) by more than $500,000 (other than as a result of any changes to the Development Budget by or on behalf of the Purchaser to the scope of work or the timing of any expenditures relating to the CantaMia Property, including modifications of any annual HOA assessments outlined in Exhibit A, and excluding any expenditures relating to the vertical construction of homes on the CantaMia Property) (the amount of such excess over $500,000, the “Excess Expense”), each of the Minimum Project Contribution Threshold, the Maximum Project Contribution Threshold and the Rate Change Threshold shall be deemed to be increased by the amount of such Excess Expense.

For illustrative purposes only, if the amount of Budgeted Expenses is $21.5 million and the amount of Actual Phase I Expenses is determined to be $22.5 million, then the Minimum Project Contribution Threshold, the Maximum Project Contribution Threshold and the Rate Change Threshold hereunder shall be adjusted to be $59.5 million, $72.5 million and $64.5 million, respectively.

(d) For the purposes of this Agreement:

(i) “Project Contribution” means the cumulative net cash flow in respect of the closing of home sales, construction and operating activities (including sales and marketing) relating to the CantaMia Property (“Net Cash Flow”), without taking into account any Land Development Expenditures, for the period commencing on October 1, 2010 (the “Commencement Date”) and ending on the Milestone Date.

For the purposes of this Agreement, Net Cash Flow will be determined in accordance with GAAP, subject to the following paragraph, and based on the general categories reflected on the model attached as Exhibit B hereto, it being acknowledged and agreed that the categories listed on Exhibit B are intended to

be an illustrative and not a comprehensive list of such general categories, subject to adjustments to: (1) exclude expenditures relating to the construction of homes on the CantaMia Property, the sale of which is not closed prior to the Milestone Date, (2) include any amounts paid or accrued after the Milestone Date and relating to closing of home sales on the CantaMia Property which closings occurred prior to the Milestone Date, and (3) be reduced by an additional amount equal to one percent of the gross revenue relating to closed home sales with unexpired warranties as of the Milestone Date (which amount shall include the amounts in respect of the base home price, and any premiums and options, less any incentives paid), as warranty and other reserves for home sales on the CantaMia Property closed prior to the Milestone Date.

For the purpose of calculating the cash outflows included in Net Cash Flow, selling, general and administrative expenses (“SG&A”) included in the calculation shall: (a) include the direct expenditures or costs, as set forth on Exhibit C-1, associated with the sales of homes on the CantaMia Property that are closed prior to the Milestone Date, (b) include all of the divisional SG&A directly allocable to the CantaMia Property as set forth in Exhibit C-2A, following the Commencement Date but prior to the Milestone Date, and (c) include an allocation of the other components of divisional SG&A, as set forth in Exhibit C-2B, from the homebuilding operations of the Arizona Operations following the Commencement Date but prior to the Milestone Date, multiplied (in the case of clause (c) only) by a fraction the numerator of which is the number of actual closings prior to the Milestone Date relating to the CantaMia Property and the denominator of which is the total number of closings of home sales by the Arizona Operations prior to the Milestone Date; provided that the aggregate amount allocated to the CantaMia Property pursuant to clauses (b) and (c) shall be no less than $2,000,000, and (d) exclude all other corporate overhead allocations other than costs incurred at the corporate level of the Purchaser for services that directly benefit the CantaMia Property and that replace, reduce or are otherwise in substitution for, services of the type provided or made available to the CantaMia Property prior to the Closing (including, without limitation, insurance that Purchaser can reasonably demonstrate to management are corporate level expenses directly allocable to the CantaMia Property).

Notwithstanding the foregoing in this Section 2(d)(i), the Project Contribution in respect of the CantaMia Property shall be deemed to be $0 if the Average Unit Contribution is less than Minimum Average Unit Contribution Threshold as of the Milestone Date.

(ii) “Average Unit Contribution,” means the result of (A) the Project Contribution divided by (B) the aggregate number of closed home sales on the CantaMia Property closed during the period commencing on the Commencement Date and ending on the Milestone Date.

Section 3. Determination of Earnout Amount and Issuance of Earnout Shares.

(a) Not later than 30 days following the filing by the Issuer with the Securities and Exchange Commission of its periodic report on Form 10-K beginning after its fiscal year ended December 31, 2010 and through the filing of its periodic report on Form 10-K for its fiscal year ended December 31,2014, the Purchaser shall cause to be prepared and delivered to the Recipients a report (the “Earnout Report”) setting forth (1) whether there is any Earnout Amount, (2) its computation of the Earnout Amount (if any), (3) its calculation of the Project Contribution, (4) its calculation of the Average Unit Contribution, (5) its calculation of the Excess Amount, if any, (6) its calculation of Net Cash Flow, and (7) all supporting calculations and documentation with respect thereto. Unless any of the Recipients notifies the Purchaser within 60 days after receipt of the Earnout Report relating to its fiscal year ended December 31, 2014 (the “Final Earnout Report”) that it objects to the computation relating to the determination of any of the foregoing items in the Final Earnout Report, the Final Earnout Report shall be binding and conclusive for the purposes of this Agreement. The Recipients shall have reasonable access to the books and records and any accountant’s work papers relating to any of the foregoing during regular business hours, to verify the computations set forth above and in the Final Earnout Report.

(b) If any of the Recipients notifies the Purchaser in writing within 60 days after the receipt of the Final Earnout Report that it objects to the computation or applicability of any of the items included in the Final Earnout Report, the Final Earnout Report shall be discussed in good faith by the Parties, with a view towards reaching agreement on the Earnout Amount. If the Parties are unable to reach agreement within 30 days after such notification, the determination of the Earnout Amount and the resolution of any disputed items in respect thereof shall be submitted to a mutually agreeable third party independent auditor (the “Special Accountant”) for determination, whose determination of the Earnout Amount shall be binding and conclusive on the Parties (provided that if the Parties are unable to agree upon third party auditors, the Parties to the dispute shall each select one third party independent auditor, and the independent auditors so selected shall choose the Special Accountant). The fees, costs and expenses of the Special Accountant’s review and report shall be shared equally among the Purchaser, on the one hand, and the Recipients, on the other hand.

(c) On such date as the Purchaser determines in its sole discretion, within 10 Business Days following the final determination of the Earnout Amount, the Issuer shall issue to the Recipients in the aggregate such number of Earnout Shares as determined in accordance with Section 2(a), subject to any decrease of the Earnout Amount in order to offset against any indemnification obligations then owed by Sellers (as defined in the Master Transaction Agreement) pursuant to Section 8.4(d) of the Master Transaction Agreement. Upon and following such issuance, the Earnout Shares shall be subject to the

terms and provisions of the Registration Rights Agreement and shall constitute “Registrable Securities” thereunder.

(d) The Issuer agrees that the Earnout Shares will, upon issuance in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable.

Section 4. Adjustment of Earnout Shares. The number of Earnout Shares issuable to the Recipients shall be subject to adjustment from time to time as follows:

(a) Subdivision or Combination of Issuer Stock. If the Issuer at any time following the Closing Date subdivides (by any split, dividend or otherwise) its outstanding Issuer Stock into a greater number of shares or pays a stock dividend or otherwise distributes shares of Issuer Stock to the holders of Issuer Stock, the Issue Price shall be proportionately decreased (and as a result the number of Earnout Shares issuable upon the determination of the Earnout Amount, if any, shall be proportionately increased). If the Issuer at any time combines (by reverse split, combination or otherwise) its outstanding Issuer Stock into a smaller number of shares, the Issue Price shall be proportionately increased (and as a result the number of Earnout Shares issuable upon the determination of the Earnout Amount, if any, shall be proportionately decreased) (any of the foregoing subdivisions or consolidations of Issuer Stock, together with any Business Combination (as defined below), an “Adjustment Event”).

(b) Consolidation, Merger or Sale. Any consolidation or merger of the Issuer with or into another person or entity, or any capital reorganization of the Issuer or any reclassification of the Issuer Stock pursuant to which, in each case, the holders of Issuer Stock are entitled to receive stock, securities, assets or other property (“Exchangeable Property”) with respect to or in exchange for Issuer Stock is referred to herein as “Business Combination.” Prior to the consummation of any Business Combination, the Issuer shall make appropriate provision to ensure that the Recipients shall have the right to receive (to the extent the Recipients are ultimately entitled to Earnout Shares hereunder), in substitution for such Earnout Shares, the same per share consideration in Exchangeable Property as may be issued or paid to other holders of Issuer Stock in connection with such Business Combination with respect to any Earnout Shares that the Recipients would be entitled to receive but for such Business Combination. The Issuer shall not effect any such Business Combination unless the successor entity (if other than the Issuer) resulting from the Business Combination assumes, by operation of law or otherwise, the obligations of the Issuer hereunder; it being assumed that neither the Issuer nor the successor entity, as the case may be, shall be required to deliver any Exchangeable Property to Recipients until after the Milestone Date (and then only to the extent Earnout Shares would otherwise be required to be distributed to the Recipients pursuant to Section 2(a)) as set forth in this Agreement.

(c) Notification to Recipients. Within 10 days after any Adjustment Event, the Issuer or the successor entity, as applicable, shall give written notice thereof to Recipients, which notice shall set forth the maximum number of shares of Issuer Stock

issuable in respect of the Maximum Earnout or the maximum amount of Exchangeable Property payable in respect of the Earnout Shares relating to the Maximum Earnout before and after such Adjustment Event, and the facts and figures upon which such calculations are based, it being agreed that no Earnout Shares or Exchangeable Property shall be issuable or payable to Recipients hereunder prior to the Milestone Date.

(d) Certain Other Actions. The Issuer (i) shall take all reasonable actions as may be necessary under the Delaware General Corporation Law in order that the Issuer may validly and legally issue fully paid and nonassessable shares of Issuer Stock to the Recipients at such time as required under this Agreement and (ii) shall at all times reserve and keep available out of its authorized but unissued shares, a sufficient number of shares of Issuer Stock to permit the issuance of Earnout Shares, as may be adjusted hereunder.

Section 5. Alternative Payment. In the event that the Earnout Shares are in the aggregate a number of shares of Issuer Stock that would exceed the number of shares that the Issuer may issue under the applicable rules and regulations of NASDAQ or such other securities exchange on which the Issuer Stock then trades (the “Exchange Cap”), then, upon determination of the Earnout Amount in accordance with Sections 2 and 3, the Issuer shall issue to Recipient such maximum number of shares as would not cause the aggregate number of Issuer’s issued and outstanding shares to exceed the Exchange Cap (the “Maximum Issuable Shares”) and pay Recipients an amount in cash equal to the product of (a) the average of the 20 prior trading day closing prices of the Issuer and (b) the difference between the Earnout Shares and the Maximum Issuable Shares; provided that the foregoing shall not apply if the Issuer obtains the approval of its shareholders as required by the applicable rules and regulations of the NASDAQ or other applicable exchange for issuances of shares of common stock in excess of the Exchange Cap.

Section 6. Operating Authority. Each of the Recipients acknowledges and agrees that immediately following the Closing under the Master Transaction Agreement, the Purchaser shall have the ultimate authority and control over the operation and administration of the CantaMia Property and shall have the sole discretion to take such actions as it deems necessary or appropriate, including, without limitation, directing the project managers of the CantaMia Property to approve or revise any applicable budgets (whether as a result of changes in the local, regional or national economic environment, the current or prospective operating performance of the CantaMia Property or otherwise). Each of the Recipients further acknowledges and agrees that the exercise of authority and control by the Purchaser pursuant to this Section 6 shall not create or increase any liability or obligation to the Recipients, notwithstanding that such exercise of authority and control may have an adverse impact on the Earnout Amount and the full or partial payment thereof; provided that to the extent reasonably practicable, the Purchaser advises the Recipients in advance of any material increase to the amount of any budgeted expenses or expenditures contemplated by any budgets relating to the CantaMia Property and gives due consideration to the bona fide concerns of the Recipients in advance of making any material revisions to any applicable budgets; provided, further, however, that

the Issuer will not take any action primarily for the purpose of avoiding any earnout payments required hereunder.

Section 7. General Provisions.

(a) Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may be amended, modified or waived only with the prior written consent of the Parties. The failure or delay of any Party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such Party thereafter to enforce each and every provision of this Agreement in accordance with its terms. A waiver or consent to or of any breach or default by any Party in the performance by that Party of his, her or its obligations under this Agreement shall not be deemed to be a consent or waiver to or of any other breach or default in the performance by that Party of the same or any other obligations of that Party under this Agreement.

(b) Remedies. The Parties shall be entitled to enforce their rights under this Agreement specifically (without posting a bond or other security), to recover damages caused by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The Parties agree and acknowledge that a breach of this Agreement would cause irreparable harm and money damages would not be an adequate remedy for any such breach and that, in addition to any other rights and remedies existing hereunder, any Party shall be entitled to specific performance and/or other injunctive relief from any court of law or equity of competent jurisdiction (without posting any bond or other security) in order to enforce or prevent violation of the provisions of this Agreement.

(c) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited, invalid, illegal or unenforceable in any respect under any applicable law or regulation in any jurisdiction, such prohibition, invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Agreement in such jurisdiction or in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such prohibited, invalid, illegal or unenforceable provision had never been contained herein.

(d) Entire Agreement. Except as otherwise provided herein, this Agreement and the Master Transaction Agreement contains the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties hereto, written or oral, which may have related to the subject matter hereof in any way. In the event there is a conflict with this Agreement and the Master Transaction Agreement, this Agreement shall control.

(e) Assignment; Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit and be enforceable by the Issuer and its successors and assigns and the other Parties and their successors and permitted assigns (whether so expressed or not). Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any person or entity that is not a party to this Agreement. There shall be no assignment of this Agreement or of any rights or obligations hereunder by any Party by operation of law or otherwise without the prior written consent of the other Parties hereto, and any attempted assignment without the required consents shall be void. Notwithstanding the foregoing, the Issuer and Purchaser shall be permitted, subject to compliance with Section 4(b), to assign this Agreement to any Person with which it engages in a Business Combination.

(f) Notices. All notices and other communications required or permitted under this Agreement shall be in writing and shall be deemed given when delivered personally, or shall be deemed given on the next Business Day after deposit with a guaranteed overnight delivery or courier service, to the parties at the following addresses (or such other addresses as shall be changed by a like notice), except as expressly provided in this Agreement:

If to the Issuer, to:

Avatar Holdings Inc.
201 Alhambra Circle, Suite 1200
Coral Gables, FL 33134
Attention: General Counsel

With a copy to:

Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Simeon Gold
Jon-Paul Bernard

and to:

Akerman Senterfitt LLP
One Southeast Third Avenue, 25th Floor
Miami, FL 33131
Attention: Stephen K. Roddenberry

If to any Recipient, to:

c/o JEN Partners, LLC
551 Madison Avenue
Suite 300

New York, NY 10022
Attention: Reuben Leibowitz

With a copy to:

Jones Day
222 E. 41st Street
New York, New York 10017
Attention: Steven C. Koppel

(g) Business Days. If any time period for giving notice or taking action hereunder expires on a day that is not a Business Day, the time period shall automatically be extended to the Business Day immediately following such Saturday, Sunday or legal holiday.

(h) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and performed in such state, without regard to the principles of conflict of laws thereof (other than Section 5-1401 of the New York General Obligations Law).

(i) Submission to Jurisdiction; Consent to Service of Process; Waiver of Jury Trial.

(i) The parties hereto hereby irrevocably submit to the exclusive jurisdiction of any federal or state court located within the State of New York over any dispute arising out of or relating to this Agreement and each party hereby irrevocably agrees that all claims in respect of such dispute or any suit, action or proceeding related thereto may be heard and determined in such courts. The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(ii) Each of the parties hereto hereby consents to process being served by any party to this Agreement in any suit, action or proceeding by delivery of a copy thereof in accordance with the provisions of Section 7(f).

EQUITY, OR OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

(j) Descriptive Headings; Interpretation. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. The use of the word “including” in this Agreement shall be by way of example rather than by limitation.

(k) No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.

(l) Counterparts. This Agreement may be executed in multiple counterparts, any one of which need not contain the signature of more than one party, but a complete set of which shall constitute one and the same agreement.

(m) Electronic Delivery. This Agreement, the agreements referred to herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent executed and delivered by means of a photographic, photostatic, facsimile, pdf or similar reproduction of such signed writing using a facsimile machine or electronic mail shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or electronic mail to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or electronic mail as a defense to the formation or enforceability of a contract and each such party forever waives any such defense.

(n) Further Assurances. In connection with this Agreement and the transactions contemplated hereby, the Parties shall execute and deliver any additional documents and instruments and perform any additional acts that may be necessary or appropriate to effectuate and perform the provisions of this Agreement and the transactions contemplated hereby.

[Signature Page Follows.]

IN WITNESS WHEREOF, the Parties have executed this Earnout Agreement as of the date first written above.


AVATAR HOLDINGS INC.
By:	/s/ Patricia Kimball Fletcher
	Name:	Patricia Kimball Fletcher
	Title:	Executive Vice President

AVATAR PROPERTIES INC.
By:	/s/ Patricia Kimball Fletcher
	Name:	Patricia Kimball Fletcher
	Title:	Executive Vice President

JEN I, L.P. By: JEN Partners, LLC, Its Manager
By:	/s/ Reuben S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member

JEN RESIDENTIAL LP By: JEN Partners, LLC, Its Manager
By:	/s/ Reuben S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member

[EARNOUT AGREEMENT]

EX-99.4 5 g25091exv99w4.htm EX-99.4 exv99w4

Exhibit 99.4

October 25, 2010


JEN I, L.P.				JEN Residential LP
c/o JEN Partners, LLC				c/o JEN Partners, LLC
551 Madison Avenue				551 Madison Avenue
Suite 300				Suite 300
New York, NY 10022				New York, NY 10022
Attn: Reuben Leibowitz				Attn: Reuben Leibowitz

Ladies and Gentlemen:

Reference is hereby made to that certain Master Transaction Agreement, dated as of October 25, 2010, by and among Avatar Holdings, Inc. (“Avatar”), Avatar Properties Inc. (“API”), JEN Partners LLC (“JEN”) and the seller parties thereto (the “Sellers”) (the “Master Agreement”). Capitalized terms used and not defined herein shall have the respective meaning ascribed to them in the Master Agreement.

JEN I, L.P. (“JEN I”) and JEN Residential LP (“JEN Res” and, together with JEN I, the “JEN Holders”) hereby acknowledge that, as a condition to Avatar’s and API’s willingness to enter into the Master Agreement, Avatar and API have required that the JEN Holders enter into this letter agreement (this “Agreement”).

As of the date hereof and after giving effect to the transactions contemplated by the Master Agreement, each JEN Holder is the record and beneficial owner of the shares of common stock, $1.00 par value, of Avatar (“Avatar Common Stock”) listed opposite its name on Exhibit A (such shares, together with any other shares of Avatar Common Stock acquired by JEN, a JEN Holder or any of their respective Affiliates (collectively, the “JEN Group”) after the date hereof, being collectively referred to herein as the “JEN Shares”).

1.1 Agreement to Vote.

(a) Voting. From the date hereof until the date (the “Vote Termination Date”) on which neither Reuben Leibowitz nor Allen Anderson serves on the board of directors of Avatar (the “Board”), at each meeting of the stockholders of Avatar pertaining to the election of directors however called (or any action by written consent in lieu of a meeting pertaining to the election of directors) or any adjournment thereof, each JEN Holder shall appear at such meeting of stockholders or otherwise cause all JEN Shares to be counted as present thereat for the purpose of establishing a quorum, and vote all JEN Shares (or cause them to be voted) or (as appropriate) execute written consents in respect thereof, in favor of all individuals nominated by Avatar to be elected to the Board. Any such vote shall be cast (or consent shall be given) by the JEN Holders in accordance with the procedures governing such meeting or consent so as to ensure that it is duly counted, including for purposes of determining that a quorum is present and for purposes of recording the results of such vote (or consent) pertaining to the election of directors.

(b) Proxy.

(i) In furtherance of the JEN Holders’ agreement in Section 1.1(a) above, but subject to the following sentence, each JEN Holder hereby irrevocably constitutes and appoints Avatar and any officer(s) of Avatar designated as proxy or proxies by Avatar as its attorney-in-fact and proxy in accordance with the Delaware General Corporation Law (the “DGCL”) (with full power of substitution and re-substitution), for and in the name, place and stead of such JEN Holder, to vote all JEN Shares at any meeting of stockholders of Avatar pertaining to the election of directors however called (or any adjournment or postponement thereof), or to execute one or more written consents in respect of JEN Shares, in each case, in favor of all individuals nominated by Avatar to be elected to the Board.

(ii) Such proxy shall be valid and irrevocable until the Vote Termination Date. Each JEN Holder represents that no other proxies have been given in respect of its JEN Shares. Each JEN Holder affirms that the foregoing proxy is (x) given to secure the performance of such JEN Holder’s obligations under this Agreement and (y) irrevocable until the Vote Termination Date and coupled with an interest in accordance with the provisions of Section 212(e) of the DGCL. If for any reason the proxy granted herein is not irrevocable or is for any reason unenforceable, then each JEN Holder irrevocably agrees to vote or to direct the voting or the execution of written consents in respect of its JEN Shares in accordance with, and to the extent set forth in, Section 1.1(a).

(iii) The inspector of elections at any meeting of the stockholders of Avatar shall have the sole authority to make any determinations with regard to the voting of the JEN Shares, and any other determinations required under this Section 1.1 and any determination by such inspector of elections shall be conclusive and binding, absent manifest error.

1.2 Standstill. Each JEN Holder agrees that, during the period commencing on the date hereof until the date on which the members of the JEN Group, in the aggregate, no longer beneficially own 5% or more of the outstanding shares of Avatar Common Stock or are required to file a Schedule 13D or Schedule 13G (or, in each case, any document that serves as a successor thereto) (in each case, a “5% Filing”) with the Securities and Exchange Commission (the “SEC”) pursuant to applicable law with respect to their beneficial ownership of shares of Avatar Common Stock, it will not, and will cause each of its Affiliates not to, do or agree to do any of the following without the prior written consent of Avatar:

(a) acquire, offer or propose to acquire, solicit an offer to sell or agree to acquire, directly or indirectly, alone or in concert with others, by purchase or otherwise, any direct or indirect beneficial interest in any voting securities of Avatar or direct or indirect rights, warrants or options to acquire, or securities convertible into or exchangeable for, any voting securities of Avatar; provided, that nothing herein shall prohibit the JEN Holders from acquiring shares of Avatar Common Stock in accordance with the terms and conditions of the Earnout Agreement;

(b) make, or in any way participate in, directly or indirectly, alone or in concert with others, any “solicitation” of “proxies” to vote (as such terms are used in the proxy

rules of the SEC promulgated pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), or seek to advise or influence in any manner whatsoever any Person with respect to the voting of, any voting securities of Avatar with respect to, in each case, any of the matters described in Section 1.2(d);

(c) form, join or in any way participate in a “group” within the meaning of Section 13(d)(3) of the Exchange Act with respect to any voting securities of Avatar in connection with any of the matters described in Section 1.2(d); provided, that nothing herein shall prohibit the JEN Holders from filing or amending any 5% Filing in respect of shares of Avatar Common Stock acquired pursuant to the Master Agreement or the Earnout Agreement or otherwise acquired in accordance with the Agreement;

(d) otherwise act, alone or in concert with others, to seek to propose to Avatar or any of its stockholders any merger, business combination, restructuring, recapitalization or other similar transaction to or with Avatar or otherwise seek, alone or in concert with others, to control, change or influence the management or Board or nominate any person as a director who is not nominated by the then incumbent directors, or propose any matter to be voted upon by the stockholders of Avatar; or

(e) subject to the other provisions of this Section 1.2, take any action that could reasonably be expected to compel Avatar to make a public announcement regarding any of the matters referred to in clauses (a) through (d) of this Section 1.2, or publicly announce an intention to do, or enter into any arrangement or understanding with others to do, any of the actions restricted or prohibited under clauses (a) through (d) of this Section 1.2.

Notwithstanding the foregoing, (1) the members of the JEN Group may take any of the actions otherwise prohibited by Section 1.2(a) so long as, after giving effect to any such actions and the acquisition of any shares of Avatar Common Stock by the JEN Holders pursuant to the Earnout Agreement, the members of the JEN Group would not beneficially own, in the aggregate, more than 15% of the outstanding shares of Avatar Common Stock, (2) in the event the Board approves a transaction of a type described in Section 1.2(d), the members of the JEN Group will not be prohibited from voting to approve such transaction or selling any Avatar Common Stock (including by participating in a tender offer) in connection with, and pursuant to the terms of, such transaction, and (3) nothing in this Agreement will limit or affect or be deemed to apply to Reuben Leibowitz’s or Allen Anderson’s actions taken in connection with his service as a member of the Board, including without limitation discussing any proposal concerning any extraordinary transaction involving Avatar or any of its Affiliates with the Board and representatives of Avatar and its advisors who are involved in the evaluation and execution of any such proposal on behalf of Avatar.

1.3 Restriction on Transfer. From the date hereof until the second anniversary of the date hereof (the “Lockup Period”), no JEN Holder shall directly or indirectly (i) sell, transfer (including by operation of law), give, pledge, encumber, assign or otherwise dispose of (including, without limitation, any Constructive Disposition (as hereinafter defined)), or enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, gift, pledge, encumbrance, assignment or other disposition of (each, a “Transfer”), any JEN Shares acquired pursuant to the Master Agreement (or any right, title or interest thereto or

therein), (ii) deposit any JEN Shares acquired pursuant to the Master Agreement into a voting trust or grant any proxies or enter into a voting agreement, power of attorney or voting trust with respect to any such JEN Shares, (iii) take any action that would make any representation or warranty of a JEN Holder set forth in this Agreement untrue or incorrect in any material respect or have the effect of preventing, disabling or delaying a JEN Holder from performing any of its obligations under this Agreement, or (iv) agree (whether or not in writing) to take any of the actions referred to in the foregoing clauses (i), (ii) or (iii) of this Section 1.3 to the extent that any such actions would be effective prior to the end of the Lockup Period. If requested by Avatar, the JEN Holders agree that all certificates representing JEN Shares acquired at the Closing pursuant to the Master Agreement may bear a prominent legend stating that such JEN Shares are subject to the transfer, voting and other restrictions described in this Agreement; provided, however, that in the event that such JEN Shares are no longer subject to the applicable restrictions pursuant to the terms of this Agreement, upon written request by the applicable JEN Holder, Avatar shall, as promptly as reasonably practicable, remove such legends from the certificates representing such JEN Shares. As used herein, the term “Constructive Disposition” means, with respect to any JEN Shares acquired pursuant to the Master Agreement, a short sale with respect to such security, entering into or acquiring an offsetting derivative contract with respect to such security, entering into or acquiring a futures or forward contract to deliver such security or entering into any other hedging or other derivative transaction that has the effect of materially changing the economic benefits and risks of ownership or any other transaction having a comparable effect. Notwithstanding the foregoing, nothing in this Agreement shall restrict the ability of a JEN Holder to (a) engage in any hedging, derivative or other transactions relating to, or to otherwise transfer, any securities of any Person other than Avatar, (b) take any of the actions described in clause (2) of the last paragraph of Section 1.2 to the extent permitted thereby, or (c) Transfer any JEN Shares acquired pursuant to the Master Agreement to the other JEN Holder or to another member of the JEN Group as long as the transferee delivers a written instrument to Avatar, in form and substance reasonably satisfactory to Avatar, confirming that such transferee is subject to and bound by all of the obligations of this Agreement (including, but not limited to, Section 1.5) as a “JEN Holder.”

1.4 Representations and Warranties of Sellers. Except for proxies and restrictions in favor of Avatar pursuant to this Agreement and except for such transfer restrictions of general applicability as may be provided under the Securities Act and the “blue sky” laws of the various states of the United States, each JEN Holder has sole voting power and sole power of disposition with respect to all of the JEN Shares listed on Exhibit A opposite its name, with no restrictions on such JEN Holder’s rights of voting or disposition pertaining thereto and no Person other than the JEN Holders has any right to direct or approve the voting or disposition of any JEN Shares. As of the date hereof, neither JEN Holder owns, beneficially or of record, any securities of Avatar other than the JEN Shares listed on Exhibit A opposite its name.

1.5 Pledge. (a) Subject to clause (c) of this Section 1.5, each of the JEN Holders hereby acknowledges and agrees that, from the date hereof until the end of the Lockup Period, the JEN Shares owned by it are and shall be collateral security for the indemnification obligations of the Sellers set forth in the Master Agreement. In furtherance of the foregoing, to secure the obligations and liabilities of the Sellers under Article VIII of the Master Agreement (collectively, the “Secured Obligations”), each JEN Holder hereby pledges and assigns to Avatar and API, and grants to Avatar and API a security interest in, all of such JEN Holder’s right, title

and interest, whether now existing or hereafter arising, in the JEN Shares (the “Pledged Collateral”). All certificates or instruments (if any) representing or evidencing any Pledged Collateral shall be delivered to and held by or on behalf of Avatar and API and shall either be in suitable form for transfer by delivery, or shall be accompanied by duly executed undated instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to Avatar and API. Each JEN Holder hereby authorizes Avatar and API to file one or more UCC financing or continuation statements, and amendments thereto (or similar documents required by any laws of any applicable jurisdiction), relating to all or any part of the Pledged Collateral without the signature of such JEN Holder, in each case in form and substance reasonably satisfactory to such JEN Holder.

(b) In the event that a Purchaser Indemnified Party is entitled to indemnification from the Sellers under the Master Agreement pursuant to a claim for indemnification against Sellers under Section 8.2(a) thereof that is resolved and not otherwise satisfied by offsetting any amounts payable under the Notes, Avatar and API shall be entitled to exercise all remedies in respect of the Pledged Collateral in accordance with the Uniform Commercial Code as in effect in the State of New York from time to time, to the extent of the value of such indemnification claim.

(c) Subject to Section 1.5(b), at 11:59 PM on the last day of the Lockup Period, notwithstanding whether any Secured Obligations remain outstanding, (i) all security interests and other liens granted to or held by Avatar and/or API pursuant to this Section 1.5 shall automatically terminate without further action with respect to the Released Shares, (ii) the pledge of the Released Shares under this Section 1.5 shall automatically terminate without further action and have no further force or effect, (iii) Avatar and API shall return to the JEN Holders within one Business Day, by overnight mail or hand delivery, all collateral in respect of the Released Shares consisting of original stock certificates and instruments in their possession, and, following which, each JEN Holder will be deemed to be fully authorized to file any applicable UCC termination statements, and (iv) Avatar and API will execute and deliver to the JEN Holders, at the JEN Holders’ request and expense, such additional documents, instruments or releases as either JEN Holder may reasonably request to further evidence the termination of all instruments of record in favor of Avatar and/or API with respect to the security interests and liens securing the Secured Obligations in respect of the Released Shares. In the event that there are any Holdback Shares on the last day of the Lockup Period, the actions described in clauses (i)-(iv) of this Section 1.5(c) shall be taken with respect to any portion of such Holdback Shares that remain outstanding to the extent that the claims in respect of which such Holdback Shares were not released on the last day of the Lockup Period have been finally resolved and, if applicable, satisfied from the Holdback Shares pursuant to Section 1.5(b).

(d) For purposes of this Section 1.5, (i) “Released Shares” means a number of JEN Shares determined by subtracting (A) the number of Holdback Shares from (B) the total number of JEN Shares outstanding at the applicable time, and (ii) “Holdback Shares” means a number of JEN Shares determined by dividing (A) the aggregate amount, if any, of outstanding claims for indemnification against Sellers under Section 8.2(a) of the Master Agreement properly asserted in a written notice within the required timing for asserting such claim in accordance with Article VIII of the Master Agreement (but not yet resolved as of the last day of the Lockup

Period) by (B) the per share price of Avatar Common Stock as of the last day of the Lockup Period based on the average of the 20 prior trading day closing prices thereof.

1.6 Definition of “Beneficial Ownership” and “Affiliates.” For purposes of this Agreement, (a) “beneficial ownership” with respect to (or to “own beneficially”) any securities shall mean “beneficial ownership” of such securities as determined pursuant to Rule 13d-3 under the Exchange Act and (b) “Affiliate” shall be deemed to have the meaning set forth in the Master Agreement; provided, however, that for the avoidance of doubt no limited partner of either JEN Holder shall be deemed to be a member of the JEN Group for purposes of this Agreement unless such limited partner is a controlled Affiliate of Reuben Leibowitz or Allen Anderson.

1.7 Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed given (i) when delivered personally by hand or (ii) one Business Day following the day sent by overnight courier, in each case at the following addresses (or to such other address as a party may have specified by notice given to the other party pursuant to this provision):

If to either JEN Holder, to:

JEN Partners, LLC
551 Madison Avenue
Suite 300
New York, NY 10022
Attn: Reuben Leibowitz

with a copy (which shall not constitute notice) to:

Jones Day
222 E. 41st Street
New York, New York 10017
Attention: Steven C. Koppel
Andrew M. Levine

If to Avatar or API, to:

Avatar Holdings Inc.
201 Alhambra Circle, Suite 1200
Coral Gables, FL 33134
Attention: General Counsel

with a copy (which shall not constitute notice) to:

Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Simeon Gold
Jon-Paul Bernard

and

Akerman Senterfitt LLP
One Southeast Third Avenue, 25th Floor
Miami, FL 33131
Attention: Stephen K. Roddenberry

1.8 Miscellaneous.

(a) Further Assurances. Each of the JEN Holders, Avatar and API shall use their commercially reasonable efforts to take, or cause to be taken, all actions necessary or appropriate to consummate the transactions contemplated by this Agreement

(b) Expenses. Except as otherwise provided in this Agreement, the JEN Holders, on the one hand, and Avatar and API, on the other hand, shall each bear their own expenses incurred in connection with the negotiation and execution of this Agreement and each other agreement, document and instrument contemplated by this Agreement and the consummation of the transactions contemplated hereby and thereby.

(c) Specific Performance. The parties acknowledge and agree that a breach of this Agreement would cause irreparable damage to the other parties hereto and that such other parties will not have an adequate remedy at law. Therefore, the obligations of the parties under this Agreement shall be enforceable by a decree of specific performance issued by any court of competent jurisdiction, and appropriate injunctive relief may be applied for and granted in connection therewith. Such remedies shall, however, be cumulative and not exclusive and shall be in addition to any other remedies which any party may have under this Agreement or otherwise.

(d) Submission to Jurisdiction; Consent to Service of Process; Waiver of Jury Trial.

(iii) THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

(e) Entire Agreement; Amendments and Waivers. This Agreement represents the entire understanding and agreement among the parties hereto with respect to the subject matter hereof and can be amended, supplemented or changed, and any provision hereof can be waived, only by written instrument making specific reference to this Agreement signed by the party against whom enforcement of any such amendment, supplement, modification or waiver is sought. No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.

(f) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and performed in such state, without regard to principles of conflict of laws thereof (other than Section 5-1401 of the New York General Obligations Law).

(g) Severability. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any law or public policy, all other terms or provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

(h) Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.

Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any person or entity not a party to this Agreement. Except as expressly permitted hereby, no assignment of this Agreement or of any rights or obligations hereunder may be made by either the JEN Holders, Avatar or API (by operation of law or otherwise) without the prior written consent of the other parties hereto and any attempted assignment without the required consents shall be void. Notwithstanding the foregoing, Avatar and API shall be permitted to assign this Agreement in connection with any consolidation or merger of Avatar and/or API, respectively, with or into another Person.

(i) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and a complete set of such counterparts shall constitute one Agreement.

[Remainder of this page left intentionally blank.]

Sincerely,


AVATAR HOLDINGS INC.		AVATAR PROPERTIES INC.

By:	/s/ Patricia Kimball Fletcher	By:	/s/ Patricia Kimball Fletcher

	Name: Patricia Kimball Fletcher Title: Executive Vice President		Name: Patricia Kimball Fletcher Title: Executive Vice President

ACKNOWLEDGED AND AGREED UPON AS OF THE DATE FIRST WRITTEN ABOVE:


JEN I, L.P.		JEN RESIDENTIAL LP

By:	/s/ Reuben S. Leibowitz	By:	/s/ Reuben S. Leibowitz

	Name: Reuben S. Leibowitz Title: Managing Member		Name: Reuben S. Leibowitz Title: Managing Member

[LOCK-UP LETTER AGREEMENT]

EX-99.5 6 g25091exv99w5.htm EX-99.5 exv99w5

Exhibit 99.5

AGREEMENT AMONG TRANSACTION PARTICIPANTS

THIS AGREEMENT AMONG TRANSACTION PARTICIPANTS (this “Agreement”), dated as of October 25, 2010, is by and among JEN Partners LLC, a Delaware limited liability company (“JEN Partners”), JEN I, L.P., a Delaware limited partnership (“JEN I”), Jen Residential LP, a Delaware limited partnership (“JEN Res”), Terra West Communities LLC, a Delaware limited liability company (“Terra West”), JEN JCH, LLC, a Delaware limited liability company (“JEN JCH”), Sun Terra Communities, LLC, a Delaware limited liability company (“Sun Terra”), Joseph Carl Mulac III (“JCM”), Stephen Adams (“SA”), Mike Jesberger (“MJ”), John Kraynick (“JK”), Richard Jerman (“RJ”), Riverside Ventures LLC, a Delaware limited liability company (“Riverside”), Peter Bay Investment LLC, a Delaware limited liability company (“Peter Bay”), and William and Ruth Bloom, individuals, as joint tenants (“Bloom”).

RECITALS

A. JEN Partners, Terra West, JEN JCH, Sun Terra, SA and JCM (collectively, the “Sellers”), Avatar Properties Inc. (the “Purchaser”) and Avatar Holdings Inc. (“Holdings”) are parties to the Master Transaction Agreement (the “Master Agreement”), dated as of the date hereof.

B. As contemplated in the Master Agreement, the Sellers wish to appoint a representative to act on their behalf in association with the transactions contemplated therein.

C. The Sellers may be subject to certain indemnification obligations under Article VIII of the Master Agreement.

D. MJ, JK, RJ, Riverside, Peter Bay and Bloom are not parties to the Master Agreement; however each will receive certain consideration as a result of the transactions set forth in the Master Agreement.

E. The Parties wish to document their understanding with respect to certain matters related to the Master Agreement and the transactions contemplated thereby.

F. Riverside, Peter Bay and Bloom are parties to this Agreement solely for purposes of Sections 3.1 and 3.5, and Article V hereof.

NOW, THEREFORE, in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree to the following:

ARTICLE I
DEFINITIONS

Section 1.1 Capitalized terms used and not otherwise defined herein have the meanings given to such terms in the Master Agreement.

Section 1.2 The following terms have the following meanings:

	(a)		“Parties” means, collectively, JEN Partners, JEN I, JEN Res, Terra West, JEN JCH, JCM, SA, MJ, JK, RJ, Riverside, Peter Bay and Bloom.

	(b)		“Responsible Parties” means the Parties identified as “Responsible Parties” on Annex B-1, Annex B-2, Annex B-3 or Annex B-4, as applicable.

ARTICLE II
SELLERS’ REPRESENTATIVE

Section 2.1 Without limiting Section 9.2 of the Master Agreement, each of the Parties hereby irrevocably appoints JEN Partners as the Sellers’ Representative under the Master Agreement from time to time as such Party’s true and lawful attorney-in-fact, to act as such Party’s representative (a “Sellers’ Representative”) and agrees to be bound by such Section 9.2 for all purposes, assuming for that purpose that references to “Seller” in such Section 9.2 include each of the Parties, regardless of whether they are parties to the Master Agreement.

ARTICLE III
DISTRIBUTION OF PROCEEDS

Section 3.1 Cash Consideration. Subject to Article IV hereof, as soon as reasonably practicable following the determination of the final Adjustment Amount in accordance with Section 3.3 of the Master Agreement, the Sellers’ Representative will deliver or cause to be delivered to each Party listed on Annex A-1 hereto (or its designee) the amount of the Cash Consideration set opposite such Party’s name on Annex A-1.

Section 3.2 Promissory Notes. Subject to Article IV hereof, as soon as reasonably practicable following the date upon which any payment is made under a Note by Purchaser or Holdings, the Sellers’ Representative will deliver or cause to be delivered to each Party listed on Annex A-2 hereto (or its designee) the percentage of any payment from such Note set opposite such Party’s name on Annex A-2.

Section 3.3 Shares. Subject to Article IV hereof, as soon as reasonably practicable following the later to occur of (a) the second anniversary of the Closing Date and (b) the time at which shares of Holdings are from time to time released to, or for the benefit of, Sellers pursuant to the terms of the Voting, Standstill and Lockup Agreement, dated as of the Closing Date, by and among Holdings, Purchaser, JEN I and JEN Res, Sellers’ Representative will deliver or cause to be delivered to each Party listed on Annex A-3 hereto (or its designee) the percentage of such shares of Holdings received by or for the benefit of Sellers set opposite such Party’s name on Annex A-3.

Section 3.4 Earnout Shares. Subject to Article IV hereof, as soon as reasonably practicable following the receipt of the Earnout Shares (if any) by JEN I and/or JEN Res pursuant to the Earnout Agreement, dated as of the Closing Date, by and among Holdings, JEN I and JEN Res (the “Earnout Agreement”), Sellers’ Representative will deliver or cause to be delivered to each Party listed on Annex A-4 hereto (or its designee) the percentage of the Earnout Shares set opposite such Party’s name on Annex A-4.

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Section 3.5 Consideration and Release. Each of the Parties acknowledges and agrees that the consideration received pursuant to this Article III (and in the case of Riverside, Peter Bay and Bloom, pursuant to Section 3.1 only) will constitute the payment in full, in full satisfaction and discharge, of any and all claims or rights such Party has with respect to the proceeds of the transactions contemplated under and by the Master Transaction Agreement. In consideration for such payment, each Party hereby releases, remises, acquits and forever discharges, irrevocably and unconditionally, JEN Partners and its Affiliates from, against and with respect to any and all claims that such Party has had or may have against JEN Partners or its Affiliates relating to or arising out of the Master Transaction Agreement, the transactions contemplated thereunder, the Purchased Entities and Purchased Entity Assets; provided, however, that nothing in this Section 3.5 shall be deemed to release JEN Partners or its Affiliates from (i) any of its obligations under this Agreement and (ii) JEN Partner or its Affiliate’s fraud or gross negligence.

ARTICLE IV
RESPONSIBILITY FOR INDEMNIFICATION

Section 4.1 Responsibility. If Sellers are required to indemnify any Purchaser Indemnified Party any amount pursuant to Section 8.2(a) of the Master Agreement, the Parties’ responsibility for such indemnification obligation shall be determined as follows:

	(a)		in the case of indemnification pursuant to (1) Section 8.2(a)(ii) of the Master Agreement as a result of a breach of a representation or warranty made by a Seller in Article IV of the Master Agreement or any other Seller Document or Company Document or (2) Section 8.2(a)(iii) as a result of a breach of a covenant or other agreement on the part of such Seller under the Master Agreement, such Seller shall be responsible for such indemnity obligation in its entirety, subject to Section 4.2;

	(b)		in the case of indemnification pursuant to Section 8.2(a)(i) of the Master Agreement as a result of a breach of a representation or warranty made with respect to a particular Purchased Entity in Article V of the Master Agreement or any other Seller Document or Company Document, the Responsible Parties identified on Annex B-1 shall be responsible for such indemnity obligation in accordance with the pro rata percentages set forth on Annex B-1 and with Section 4.2;

	(c)		in the case of indemnification pursuant to Section 8.2(a)(iv) of the Master Agreement as a result of the JCH AZ FLSA matter and to the extent provided for in the Labor Side Letter, the Responsible Parties identified on Annex B-2 shall be responsible for such indemnity obligation in accordance with the pro rata percentages set forth on Annex B-2 and with Section 4.2;

	(d)		in the case of indemnification pursuant to Section 8.2(a)(v) of the Master Agreement as a result of the copyright infringement claim referenced in Section 8.2(a)(v), the Responsible Parties identified on Annex B-3 shall be responsible for such indemnity obligation in its entirety in accordance with the pro rata percentages set forth on Annex B-3 and with Section 4.2; and

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(e)

in the case of indemnification pursuant to Section 8.2(a)(vi) or Section 8.2(a)(vii) of the Master Agreement regarding failure to timely pay Taxes pursuant to Section 8.5 of the Master Transaction Agreement, the Responsible Parties identified on Annex B-4 shall be responsible for such indemnity obligation in its entirety in accordance with the pro rata percentages set forth on Annex B-4 and with Section 4.2.

Section 4.2 Satisfaction. The indemnification obligations of the Responsible Parties pursuant to Section 4.1 will be satisfied first, by offsetting any amounts otherwise payable to the applicable Responsible Party (valued in the case of Shares or Earnout Shares at the per share price of Holdings’ common stock on the applicable distribution date, based on the average of the 20 prior trading day closing prices thereof), and, to the extent any such indemnification obligations are not so satisfied, any remaining indemnification obligations shall be satisfied by payment in the amount of the applicable indemnification obligation to the Sellers’ Representative; provided, however, that (a) in no event shall any Non-JEN Responsible Party be obligated to offset or pay any amount in respect of its indemnification obligations arising under Section 4.1(a) or 4.1(b) as a result of a breach of a Fundamental Rep (a “Fundamental Rep Obligation”) to the extent such amount would exceed the consideration that such Non-JEN Responsible Party has received (or is entitled to receive) pursuant to Article III and (b) all indemnification obligations of a Non-JEN Responsible Party arising under Section 4.1 (other than a Fundamental Rep Obligation) shall be satisfied only by offset against amounts such Non-JEN Responsible Party is at the applicable time (or thereafter becomes) entitled to receive pursuant to Article III. The amount of any proceeds payments by a Responsible Party to the Sellers’ Representative made pursuant to this Section 4.2 shall be reallocated by the Sellers’ Representatives to the Parties (other than the applicable Responsible Parties) in accordance with the percentages set forth in the applicable Section of Article III (as such percentages would be increased as a result of reducing the applicable Responsible Parties’ percentages to zero). For purposes of this Agreement, “Non-JEN Responsible Parties” means, collectively, any of SA, JCM, MJ, JK, and RJ.

Section 4.3 Equitable Adjustment. To the extent that any Seller or other Responsible Party becomes obligated to indemnify any Purchaser Indemnified Party directly pursuant to Article VIII of the Master Agreement, the Sellers’ Representative shall make such adjustments and/or reallocations under this Agreement, or direct the other Responsible Parties to make such payments, as may be necessary to ensure that arrangements relating to responsibility for indemnification obligations under the Master Agreement set forth in this Article IV are effected to the fullest extent practicable.

ARTICLE V
MISCELLANEOUS

Section 5.1 Counterparts. This Agreement may be executed in counterparts (each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement) and shall become effective when one or more counterparts have been signed by each of the Parties. Facsimile transmission of any signed original document shall be deemed the same as delivery of an original.

-4-

Section 5.2 Governing Law. This Agreement, and all matters arising out of or relating to this Agreement, shall be governed, construed and interpreted in accordance with the laws of the State of New York.

Section 5.3 Severability. If any provision of this Agreement, or the application thereof to any person or circumstance is held invalid or unenforceable, the remainder of this Agreement, and the application to other persons or circumstances, shall not be affected thereby, and to such end, the provisions of this Agreement are agreed to be severable.

Section 5.4 Notices. All notices and other communications required or permitted under this Agreement shall be in writing and shall be deemed given when delivered personally, or shall be deemed given on the next Business Day after deposit with a guaranteed overnight delivery or courier service, to the parties at the addresses (or such other addresses as shall be changed by a like notice) set forth on Annex C.

[Signature Page Follows]

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IN WITNESS WHEREOF, the following Parties have executed this Agreement as of the date first set forth above.

SELLERS


TERRA WEST COMMUNITIES LLC By: JEN Partners LLC, its Manager
By:	/s/ Reuben. S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member

SUN TERRA COMMUNITIES LLC By: JEN Partners LLC, its Manager
By:	/s/ Reuben. S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member

JEN JCH, LLC By: JEN I, L.P., its Manager By: JEN Partners LLC, its General Partner
By:	/s/ Reuben. S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member


/s/ Joseph Carl Mulac
JOSEPH CARL MULAC



/s/ Stephen Adams
STEPHEN ADAMS

[Agreement Among Transaction Participants]

OTHER PARTIES


JEN PARTNERS LLC
By:	/s/ Reuben. S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member

JEN I, L.P. By: JEN Partners LLC, its General Partner
By:	/s/ Reuben. S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member

JEN RESIDENTIAL LP By: JEN Partners LLC, its General Partner
By:	/s/ Reuben. S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member


/s/ Mike Jesberger
MIKE JESBERGER



/s/ Richard Jerman
RICHARD JERMAN



/s/ John Kraynick
JOHN KRAYNICK

[Agreement Among Transaction Participants]


RIVERSIDE VENTURES LLC (solely for purposes of Sections 3.1 and 3.5, and Article V hereof)
By:	/s/ Allen J. Anderson
	Name:	Allen J. Anderson
	Title:	Manager

PETER BAY INVESTMENT LLC (solely for purposes of Sections 3.1 and 3.5, and Article V hereof)
By:	/s/ David C. Bloom
	Name:	David C. Bloom
	Title:	Manager


/s/ William Bloom
WILLIAM BLOOM (solely for purposes of
Sections 3.1 and 3.5, and Article V hereof)


/s/ Ruth Bloom
RUTH BLOOM (solely for purposes of
Sections 3.1 and 3.5, and Article V hereof)

[Agreement Among Transaction Participants]

EX-99.6 7 g25091exv99w6.htm EX-99.6 exv99w6

Exhibit 99.6

REGISTRATION RIGHTS AGREEMENT

BY AND AMONG

AVATAR HOLDINGS INC.

JEN I, L.P.,

JEN RESIDENTIAL LP

AND

THE OTHER SHAREHOLDERS FROM TIME TO TIME PARTY HERETO

Dated as of October 25, 2010

TABLE OF CONTENTS


		Page

Section 1.	Definitions		1
Section 2.	Demand Registration		3
Section 3.	Piggyback Registrations		5
Section 4.	Holdback Agreements		6
Section 5.	Registration Procedures		7
Section 6.	Registration Expenses		11
Section 7.	Indemnification and Contribution		12
Section 8.	Underwritten Registrations		14
Section 9.	Current Public Information		15
Section 10.	Transfer of Registrable Securities		15
Section 11.	General Provisions		15

AVATAR HOLDINGS INC.

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of October 25, 2010, among Avatar Holdings Inc., a Delaware Corporation (the “Company”), JEN I, L.P. (“JEN I”) and JEN Residential LP (“JEN Res”).

The Company and certain of the Shareholders’ Affiliates are parties to a Master Transaction Agreement dated as of October 25, 2010 (the “Master Agreement”) and various other agreements entered into in connection therewith. In order to induce the Shareholders’ Affiliates to enter into the Master Agreement and the other Operative Documents (as defined in the Master Agreement), the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the consummation of the transactions under the Master Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:

Section 1. Definitions.

Unless otherwise set forth below or elsewhere in this Agreement, other capitalized terms contained herein have the meanings set forth in the Master Agreement.

“Agreement” has the meaning set forth in the preamble.

“Business Day” means any day that is not a Saturday, Sunday or other day on which banks are required or authorized by law to be closed in New York City.

“Commencement Date” means October 25, 2012.

“Company” has the meaning set forth in the preamble.

“Company-Paid Demand Registration” has the meaning set forth in Section 2(a).

“Demand Registration” has the meaning set forth in Section 2(a).

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor federal law then in force, together with all rules and regulations promulgated thereunder.

“FINRA” means the Financial Industry Regulatory Authority, Inc.

“Free Writing Prospectus” means a free-writing prospectus, as defined in Rule 405.

“Holdback Extension” has the meaning set forth in Section 4(a)(ii).

“Holdback Period” has the meaning set forth in Section 4(a)(i).

“Indemnified Parties” has the meaning set forth in Section 7(a).

“JEN I” has the meaning set forth in the preamble.

“JEN Res” has the meaning set forth in the preamble.

“Lockup Agreement” means the agreement attached as Exhibit E to the Master Agreement.

“Majority Holders” means, at any time, Shareholders holding a majority of the Registrable Securities at such time.

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

“Piggyback Registration” has the meaning set forth in Section 3(a).

“Public Offering” means any sale or distribution to the public of any capital stock of the Company pursuant to a public offering registered under the Securities Act.

“Master Agreement” has the meaning set forth in the recitals.

“Registrable Securities” means (i) any Common Stock received by the Shareholders pursuant to the Master Agreement, (ii) any Common Stock received by the Shareholders pursuant to the Earnout Agreement, dated as of October 25, 2010, among the Company and the Shareholders, and (iii) any common capital stock of the Company issued or issuable with respect to the securities referred to in clauses (i) or (ii) above by way of dividend, distribution, split or combination of securities, or any recapitalization, merger, consolidation or other reorganization. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities upon the earliest to occur of: (a) the date on which such Registrable Securities are sold or distributed pursuant to an effective registration statement under the Securities Act, (b) the date on which such Registrable Securities are sold in compliance with Rule 144, and (c) the date on which such Registrable Securities are repurchased by the Company or a Subsidiary of the Company.

“Registration Expenses” has the meaning set forth in Section 6(a).

“Rule 144,” “Rule 145,” “Rule 158,” and “Rule 405,” mean, in each case, such rule promulgated under the Securities Act (or any successor provision) by the Securities and Exchange Commission, as the same shall be amended from time to time, or any successor rule then in force.

“Sale Transaction” has the meaning set forth in Section 4(a)(i).

“Securities” has the meaning set forth in Section 4(a)(i).

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“Securities Act” means the Securities Act of 1933, as amended, or any successor federal law then in force, together with all rules and regulations promulgated thereunder.

“Shareholders” means (i) JEN I and JEN Res, and (ii) in connection with a transfer from JEN I or JEN Res pursuant to a pro rata distribution of all or a portion of their assets to their partners, Reuben Leibowitz and Allen Anderson and/or their controlled Affiliates; provided, however, that in the case of (ii), in order to become a Shareholder, such Person must (A) hold Registrable Securities, and (B) deliver a written instrument to the Company, in form and substance reasonably satisfactory to the Company, confirming that such Person is subject to and bound by the obligations of this Agreement as a Shareholder.

“Subsidiary” means, with respect to the Company, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by the Company or one or more of the other Subsidiaries of the Company or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity, a majority of the limited liability company, partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by the Company or one or more Subsidiaries of the Company or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control the managing director or general partner of such limited liability company, partnership, association or other business entity.

“Suspension Period” has the meaning set forth in Section 5(a)(vi).

“Violation” has the meaning set forth in Section 7(a).

Section 2. Demand Registration.

(a) Requests for Registration. Subject to the terms and conditions of this Agreement, at any time after the Commencement Date (or, if earlier, the date on which the Shareholders’ obligations under Section 1.3 of the Lockup Agreement are terminated) until such time as the Shareholders collectively hold less than 5% of the Common Stock of the Company, the Majority Holders may request registration under the Securities Act of all or any portion of their Registrable Securities on Form S-1, S-3 or any similar registration statement. Any registrations requested pursuant to this Section 2(a) shall be referred to herein as a “Demand Registration.” Each request for a Demand Registration shall specify the approximate number of Registrable Securities requested to be registered and the intended method of distribution. Subject to the terms of Section 2(d), the Company shall include in such Demand Registration (and in all related registrations and qualifications under state blue sky laws and in any related underwriting) all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after the receipt of such written requests.

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(b) Demand Registration. Following the Commencement Date, the Majority Holders shall be entitled to request one Demand Registration in which the Company shall pay all Registration Expenses (“Company-Paid Demand Registration”); provided that the aggregate offering value of the Registrable Securities requested to be registered in any Demand Registration must equal at least $5,000,000. A registration shall not count as a Demand Registration until it has become effective. No Company-Paid Demand Registration shall count as a Demand Registration unless the Shareholders are able to register and sell at least 75% of the Registrable Securities requested to be included in such registration; provided that in any event the Company shall pay all Registration Expenses in connection with any registration initiated as a Company-Paid Demand Registration whether or not it has become effective and whether or not such registration has counted as a Company-Paid Demand Registration.

(c) Shelf Registrations. The Company shall use its commercially reasonable efforts to maintain a shelf registration statement for the sale of Registrable Securities until the fourth anniversary of the Commencement Date.

(d) Priority on Demand Registration. If a Demand Registration is an underwritten offering and the managing underwriters advise the Company in writing that in their opinion the number of Registrable Securities and, if permitted hereunder, other securities requested to be included in such offering exceeds the number of Registrable Securities and other securities, if any, which can be sold therein without adversely affecting the marketability, proposed offering price, timing or method of distribution of the offering, the Company shall include in such registration prior to the inclusion of any securities which are not Registrable Securities the number of Registrable Securities requested to be included which, in the opinion of such underwriters, can be sold, without any such adverse effect.

(e) Restrictions on Demand Registration. The Company shall not be obligated to effect any Demand Registration within 180 days after the effective date of a previous registration in which Registrable Securities were included pursuant to Section 3. The Company may postpone, for up to 90 days from the date of the request, the filing or the effectiveness of a registration statement for a Demand Registration if the Company’s board of directors determines in its reasonable good faith judgment that such Demand Registration would reasonably be expected to have a material adverse effect on any proposal or plan by the Company or any Subsidiary to engage in any material acquisition of assets or stock (other than in the ordinary course of business) or any material merger, consolidation, tender offer, recapitalization, reorganization or similar transaction or would require the Company to disclose any material nonpublic information which would reasonably be likely to be materially detrimental to the Company and its Subsidiaries; provided that in such event, the Majority Holders shall be entitled to withdraw such request, and if such request is withdrawn, such Demand Registration shall not count as a Demand Registration hereunder and the Company shall pay all Registration Expenses in connection with such registration. The Company may delay a Demand Registration hereunder only once in any twelve-month period.

(f) Selection of Underwriters. The Company shall have the right to select the investment banker(s) and manager(s) to administer the offering, subject to consultation with and the approval of the Majority Holders, which approval shall not be unreasonably withheld or delayed.

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(g) Other Registration Rights. The Company represents and warrants that it is not a party to, or otherwise subject to, any other agreement granting registration rights to any other Person with respect to any securities of the Company.

Section 3. Piggyback Registrations.

(a) Right to Piggyback. Following the Commencement Date, whenever the Company proposes to register any of its securities under the Securities Act (other than (i) pursuant to a Demand Registration, (ii) in connection with registrations on Form S-4 or S-8 promulgated by the Securities and Exchange Commission or any successor or similar forms, (iii) in connection with a Rule 145 transaction, or (iv) in connection with registrations on any registration form that does not permit secondary sales or does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities) and the registration form to be used may be used for the registration of Registrable Securities (a “Piggyback Registration”), the Company shall give prompt written notice to the Shareholders of its intention to effect such Piggyback Registration and, subject to the terms of Section 3(c) and Section 3(d), shall include in such Piggyback Registration (and in all related registrations or qualifications under blue sky laws and in any related underwriting) all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 20 days after delivery of the Company’s notice; provided, that the Shareholders shall not be entitled to have Registrable Securities included in more than four Piggyback Registrations.

(b) Piggyback Expenses. The Registration Expenses of the Shareholders shall be paid by the Company in all Piggyback Registrations, whether or not any such registration became effective.

(c) Priority on Primary Registrations. If a Piggyback Registration is an underwritten primary registration on behalf of the Company, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability, proposed offering price, timing or method of distribution of the offering, the Company shall include in such registration (i) first, the securities the Company proposes to sell, (ii) second, the Registrable Securities requested to be included in such registration which, in the opinion of the underwriters, can be sold without any such adverse effect, and (iii) third, other securities requested to be included in such registration which, in the opinion of the underwriters, can be sold without any such adverse effect.

(d) Priority on Secondary Registrations. If a Piggyback Registration is an underwritten secondary registration on behalf of holders of the Company’s securities, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability, proposed offering price, timing or method of distribution of the offering, the Company shall include in such registration (i) first, the securities requested to be included therein by the holders requesting such registration, (ii) second, the number of Registrable Securities requested to be included in such registration which, in the opinion of the underwriters, can be sold without any such adverse effect, pro rata among

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the holders of such securities on the basis of the number of securities so requested to be included therein, and (iii) third, other securities requested to be included in such registration which, in the opinion of the underwriters, can be sold without any such adverse effect.

(e) Right to Terminate Registration. Subject to the terms of this Agreement, the Company shall have the right to terminate or withdraw any registration initiated by it under this Section 3 whether or not the Shareholders have elected to include securities in such registration. The Registration Expenses of such withdrawn registration shall be borne by the Company in accordance with Section 6.

Section 4. Holdback Agreements.

(a) The Shareholders. If requested by the Company, the Shareholders shall enter into lock-up agreements with the managing underwriter(s) of an underwritten Public Offering in such form as agreed to by the Shareholders. In the absence of any such lock-up agreement, the Shareholders agree as follows:

(i) in connection with all underwritten Public Offerings with respect to which the Company has complied with its obligations hereunder, each Shareholder agrees, if and to the extent (i) requested by the managing underwriter of such underwritten offering and (ii) notwithstanding Section 4(b), all of the Company’s named executive officers and directors execute agreements identical to those referred to in this Section 4(a), that they shall not (A) offer, sell, contract to sell, pledge or otherwise dispose of (including sales pursuant to Rule 144), directly or indirectly, any capital stock of the Company (including capital stock of the Company that may be deemed to be owned beneficially by the Shareholders in accordance with the rules and regulations of the Securities and Exchange Commission) (collectively, “Securities”), (B) enter into a transaction which would have the same effect as described in clause (A) above, (C) enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences or ownership of any Securities, whether such transaction is to be settled by delivery of such Securities, in cash or otherwise (each of (A), (B) and (C) above, a “Sale Transaction”), or (D) publicly disclose the intention to enter into any Sale Transaction, from the date on which the Company gives notice to the Shareholders of the circulation of a preliminary or final prospectus for such Public Offering (which date must be no earlier than 14 days prior to the date such Public Offering is expected to commence) to the date that is 90 days following the date of the final prospectus for such Public Offering (a “Holdback Period”), unless the underwriters managing such Public Offering otherwise agree in writing; and

(ii) in the event that (A) the Company issues an earnings release or discloses other material information or a material event relating to the Company and its Subsidiaries occurs during the last 17 days of the Holdback Period or (B) prior to the expiration of the Holdback Period, the Company announces that it will release earnings results during the 16-day period beginning upon the expiration of such period, then to the extent necessary for a managing or co-managing underwriter of a registered offering hereunder to comply with FINRA Rule 2711(f)(4), the Holdback Period shall be extended until 18 days after the earnings release or disclosure of other material

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information or the occurrence of the material event, as the case may be (a “Holdback Extension”).

The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the restrictions set forth in this Section 4 (a) until the end of such period, including any Holdback Extension.

(b) The Company. The Company (i) shall not file any registration statement for a Public Offering or cause any such registration statement to become effective during any Holdback Period, as extended during any Holdback Extension, and (ii) shall use its reasonable best efforts to cause each of its directors and executive officers, to agree not to effect any Sale Transaction during any Holdback Period (as extended by any Holdback Extension), except as part of such underwritten registration, if otherwise permitted, unless the underwriters managing the Public Offering otherwise agree in writing.

Section 5. Registration Procedures.

(a) Whenever the Shareholders have requested that any Registrable Securities be registered pursuant to this Agreement, the Company shall use its reasonable best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof, and pursuant thereto the Company shall as expeditiously as possible:

(i) in accordance with the Securities Act and all applicable rules and regulations promulgated thereunder, prepare and file with the Securities and Exchange Commission a registration statement, and all amendments and supplements thereto and related prospectuses, with respect to such Registrable Securities and use its reasonable best efforts to cause such registration statement to become effective (provided that before filing a registration statement or prospectus or any amendments or supplements thereto, the Company shall furnish to the counsel selected by the Majority Holders copies of all such documents proposed to be filed, which documents shall be subject to the review and comment of such counsel);

(ii) notify the Shareholders of (A) the issuance by the Securities and Exchange Commission of any stop order suspending the effectiveness of any registration statement or the initiation of any proceedings for that purpose, (B) the receipt by the Company or its counsel of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, and (C) the effectiveness of each registration statement filed hereunder;

(iii) prepare and file with the Securities and Exchange Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period ending when all of the securities covered by such registration statement have been disposed of in accordance with the intended methods of distribution by the sellers thereof set forth in such registration statement (but not in any event before the expiration

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of any longer period required under the Securities Act or, if such registration statement relates to an underwritten Public Offering, such longer period as in the opinion of counsel for the underwriters a prospectus is required by law to be delivered in connection with sale of Registrable Securities by an underwriter or dealer) and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement;

(iv) furnish to the Shareholders such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus), each Free Writing Prospectus and such other documents as the Shareholders may reasonably request in order to facilitate the disposition of the Registrable Securities;

(v) use its reasonable best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as the Shareholders reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities (provided that the Company shall not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph or (B) consent to general service of process in any such jurisdiction or (C) subject itself to taxation in any such jurisdiction);

(vi) notify the Shareholders (A) promptly after it receives notice thereof, of the date and time when such registration statement and each post-effective amendment thereto has become effective or a prospectus or supplement to any prospectus relating to a registration statement has been filed and when any registration or qualification has become effective under a state securities or blue sky law or any exemption thereunder has been obtained, (B) promptly after receipt thereof, of any request by the Securities and Exchange Commission for the amendment or supplementing of such registration statement or prospectus or for additional information, and (C) at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of the Majority Holders, the Company shall prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading; provided, that at any time, upon written notice to the Shareholders and for a period not to exceed 60 days thereafter (the “Suspension Period”), the Company may delay the filing or effectiveness of any registration statement or suspend the use or effectiveness of any registration statement (and the Shareholders hereby agree not to offer or sell any Registrable Securities pursuant to such registration statement during the Suspension Period) if the Company reasonably believes that there is or may be in existence material nonpublic information or events involving the Company, the failure of which to be

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disclosed in the prospectus included in the registration statement could result in a Violation;

(vii) use reasonable best efforts to cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed and, if not so listed, to be listed on a securities exchange;

(viii) use reasonable best efforts to provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement;

(ix) enter into and perform such customary agreements (including underwriting agreements in customary form) and take all such other actions as the Majority Holders or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (including, without limitation, effecting a stock split, combination of shares, recapitalization or reorganization);

(x) make available for inspection by the Shareholders, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such Shareholder or underwriter, all financial and other records, pertinent corporate and business documents and properties of the Company as shall be necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors, employees, agents, representatives and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement;

(xi) take all reasonable actions to ensure that any Free-Writing Prospectus utilized in connection with any Demand Registration or Piggyback Registration hereunder complies in all material respects with the Securities Act, is filed in accordance with the Securities Act to the extent required thereby, is retained in accordance with the Securities Act to the extent required thereby and, when taken together with the related prospectus, shall not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

(xii) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Securities and Exchange Commission, and make generally available to its security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 under the Securities Act (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Registrable Securities are sold to underwriters in a firm commitment or best efforts Public Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Company’s first fiscal quarter commencing after the effective date of the registration statement;

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(xiii) permit the Shareholders (to the extent the Shareholders might be deemed to be an underwriter or controlling persons of the Company), to consult in the preparation of such registration or comparable statement and to consider language provided by any of the Shareholders for insertion therein, which in the reasonable judgment of the Shareholders and their counsel should be included; provided that the Company shall be entitled to include or omit any such language from any registration or comparable statement (in its sole discretion);

(xiv) in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or the issuance of any order suspending or preventing the use of any related prospectus or suspending the qualification of any Common Stock included in such registration statement for sale in any jurisdiction use reasonable best efforts promptly to obtain the withdrawal of such order;

(xv) use its reasonable best efforts to cause such Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the sellers thereof to consummate the disposition of such Registrable Securities;

(xvi) cooperate with the Shareholders and the managing underwriter or agent, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing securities to be sold under the registration statement and enable such securities to be in such denominations and registered in such names as the managing underwriter, or agent, if any, or the Shareholders may request;

(xvii) cooperate with the Shareholders and each underwriter or agent participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA;

(xviii) use its reasonable best efforts to make available the executive officers of the Company to participate with the Shareholders and any underwriters in any “road shows” in connection with the methods of distribution for the Registrable Securities;

(xix) use its reasonable best efforts to obtain one or more cold comfort letters from the Company’s independent public accountants in customary form and covering such matters of the type customarily covered by cold comfort letters as the Majority Holders reasonably requests; and

(xx) use its reasonable best efforts to provide a legal opinion of the Company’s outside counsel, dated the effective date of such registration statement (and, if such registration includes an underwritten Public Offering, dated the date of the closing under the underwriting agreement), the registration statement, each amendment and supplement thereto, the prospectus included therein (including the preliminary prospectus) and such other documents relating thereto in customary form and covering such matters of the type customarily covered by legal opinions of such nature and

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reasonably satisfactory to the Shareholders, which opinion shall be addressed to the underwriters and the Shareholders.

(b) The Company shall not undertake any voluntary act that could be reasonably expected to cause a Violation or result in delay or suspension under Section 5(a)(vi). During any Suspension Period, and as may be extended hereunder, the Company shall use its reasonable best efforts to correct or update any disclosure causing the Company to provide notice of the Suspension Period and to file and cause to become effective or terminate the suspension of use or effectiveness, as the case may be, the subject registration statement. In the event that the Company shall exercise its right to delay or suspend the filing or effectiveness of a registration hereunder, the applicable time period during which the registration statement is to remain effective shall be extended by a period of time equal to the duration of the Suspension Period. The Company may extend the Suspension Period for an additional consecutive 60 days with the consent of the Majority Holders, which consent shall not be unreasonably withheld. If so directed by the Company, the Shareholders shall (i) not offer to sell any Registrable Securities pursuant to the registration statement during the period in which the delay or suspension is in effect after receiving notice of such delay or suspension and (ii) use its reasonable best efforts to deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in the Shareholders’ possession, of the prospectus relating to such Registrable Securities current at the time of receipt of such notice.

Section 6. Registration Expenses.

(a) The Company’s Obligation. All expenses incident to the Company’s performance of or compliance with this Agreement (including, without limitation, all registration, qualification and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, fees and disbursements of custodians, and fees and disbursements of counsel for the Company and all independent certified public accountants, underwriters (excluding underwriting discounts and commissions) and other Persons retained by the Company) (all such expenses being herein called “Registration Expenses”), shall be borne as provided in this Agreement, except that the Company shall, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed. Each Person that sells securities pursuant to a Demand Registration or Piggyback Registration hereunder shall bear and pay all underwriting discounts and commissions applicable to the securities sold for such Person’s account.

(b) Shareholders. To the extent Registration Expenses are not required to be paid by the Company, the Shareholders shall pay those Registration Expenses allocable to the registration of the Shareholders’ securities included in any registration statement pro rata, and any Registration Expenses not so allocable shall be borne by all sellers of securities included in such registration in proportion to the aggregate selling price of the securities to be so registered.

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Section 7. Indemnification and Contribution.

(a) By the Company. The Company shall indemnify, defend and hold harmless the Shareholders, the Shareholders’ officers, directors, employees, members, partners, agents and representatives, and each Person who controls any Shareholder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) (the “Indemnified Parties”) for, from and against all losses, claims, actions, damages, liabilities and expenses (including with respect to actions or proceedings, whether commenced or threatened, and including reasonable attorney fees and expenses) caused by, resulting from, arising out of, based upon or related to any of the following statements, omissions or violations (each a “Violation”) by the Company: (i) any untrue statement or alleged untrue statement of material fact contained in (A) any registration statement, prospectus, preliminary prospectus or Free-Writing Prospectus, or any amendment thereof or supplement thereto or (B) any application or other document or communication (in this Section 7, collectively called an “application”) executed by or on behalf of the Company or based upon written information furnished by or on behalf of the Company filed in any jurisdiction in order to qualify any securities covered by such registration under the securities laws thereof, (ii) any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any violation or alleged violation by the Company of the Securities Act or any other similar federal or state securities laws or any rule or regulation promulgated thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance. In addition, the Company will reimburse such Indemnified Party for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such losses. Notwithstanding the foregoing, the Company shall not be liable in any such case to the extent that any such losses result from, arise out of, are based upon, or relate to an untrue statement or alleged untrue statement, or omission or alleged omission, made in such registration statement, any such prospectus, preliminary prospectus or Free-Writing Prospectus or any amendment or supplement thereto, or in any application, in reliance upon, and in conformity with, written information prepared and furnished in writing to the Company by such Indemnified Party expressly for use therein or by such Indemnified Party’s failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Company has furnished such Indemnified Party with a sufficient number of copies of the same. In connection with an underwritten offering, the Company shall indemnify such underwriters, their officers and directors, and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Indemnified Parties.

(b) By Each Shareholder. In connection with any registration statement in which any Shareholder is participating, the Shareholders shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, shall indemnify and defend the Company, its officers, directors, employees, agents and representatives, and each Person who controls the Company (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) for, from and against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated

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therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by the Shareholders; provided that the obligation to indemnify shall be limited to the net amount of proceeds received by the Shareholders from the sale of Registrable Securities pursuant to such registration statement.

(c) Claim Procedure. Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall impair any Person’s right to indemnification hereunder only to the extent such failure has prejudiced the indemnifying party) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld, conditioned or delayed). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. In such instance, the conflicted indemnified parties shall have a right to retain one separate counsel, chosen by the holders of a majority of the Securities included in the registration if the Shareholders are the indemnified parties, at the expense of the indemnifying party.

(d) Contribution. If the indemnification provided for in this Section 7 is held by a court of competent jurisdiction to be unavailable to, or is insufficient to hold harmless, an indemnified party or is otherwise unenforceable with respect to any loss, claim, damage, liability or action referred to herein, then the indemnifying party shall contribute to the amounts paid or payable by such indemnified party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other hand in connection with the statements or omissions which resulted in such loss, claim, damage, liability or action as well as any other relevant equitable considerations; provided that the maximum amount of liability in respect of such contribution shall be limited, in the case of the Shareholders, to an amount equal to the net proceeds actually received by the Shareholders from the sale of Registrable Securities effected pursuant to such registration. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just or equitable if the contribution pursuant to this Section 7(d) were to be determined by pro rata allocation or by any other method of allocation that does not take into account such equitable considerations. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or expenses referred to herein shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending against any action or claim

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which is the subject hereof. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who is not guilty of such fraudulent misrepresentation.

(e) Release. No indemnifying party shall, except with the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement that does not include as an unconditional term thereof, the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

(f) Non-exclusive Remedy; Survival. The indemnification and contribution provided for under this Agreement shall be in addition to any other rights to indemnification or contribution that any indemnified party may have pursuant to law or contract and shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and shall survive the transfer of Registrable Securities and the termination or expiration of this Agreement.

Section 8. Underwritten Registrations.

(a) Participation. No Person may participate in any registration hereunder which is underwritten unless such Person (i) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements (including, without limitation, pursuant to any over-allotment or “green shoe” option requested by the underwriters; provided that the Shareholders shall not be required to sell more than the number of Registrable Securities the Shareholders have requested to include) and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements; provided that the Shareholders shall not be required to make any representations or warranties to the Company or the underwriters (other than representations and warranties regarding the Shareholders and the Shareholders’ intended method of distribution) or to undertake any indemnification obligations to the Company or the underwriters with respect thereto that are materially more burdensome than those provided in Section 7. The Shareholders shall execute and deliver such other agreements as may be reasonably requested by the Company and the lead managing underwriter(s) that are consistent with the Shareholders’ obligations under Section 4, Section 5 and this Section 8(a) or that are necessary to give further effect thereto. To the extent that any such agreement is entered into pursuant to, and consistent with, Section 4 and this Section 8(a), the respective rights and obligations created under such agreement shall supersede the respective rights and obligations of the Shareholders, the Company and the underwriters created pursuant to this Section 8(a).

(b) Suspended Distributions. Each Person that is participating in any registration under this Agreement, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 5(a)(vi), shall immediately discontinue the disposition of its Registrable Securities pursuant to the registration statement until such Person’s receipt of the copies of a supplemented or amended prospectus as contemplated by Section 5(a)(vi). In the event the Company has given any such notice, the applicable time period set forth in Section 5(a)(ii) during which a Registration Statement is to remain effective shall be extended by the number of days during the period from and including the date of the giving of

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such notice pursuant to this Section 8(b) to and including the date when each seller of Registrable Securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by Section 5(a)(vi).

Section 9. Current Public Information. At all times after the date hereof, during which Registrable Securities remain outstanding, the Company shall file all reports required to be filed by it under the Securities Act and the Exchange Act. During any period in which the Company is not subject to Section 13 or 15(d) of the Exchange Act, the Company shall make available to any Shareholder or beneficial owner of Registrable Securities in connection with any sale thereof and any prospective purchaser of such Registrable Securities from such Shareholder or beneficial owner, the information required by Rule 144 under the Securities Act in order to permit resales of such Registrable Securities pursuant to Rule 144 under the Securities Act.

Section 10. Transfer of Registrable Securities.

(a) Legend. Each certificate evidencing any Registrable Securities and each certificate issued in exchange for or upon the transfer of any Registrable Securities (unless such Registrable Securities would no longer be Registrable Securities after such transfer) shall be stamped or otherwise imprinted with a legend in substantially the following form:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER PROVISIONS SET FORTH IN A REGISTRATION RIGHTS AGREEMENT DATED AS OF OCTOBER 25, 2010 AMONG THE ISSUER OF SUCH SECURITIES (THE “COMPANY”), JEN I, L.P. AND JEN RESIDENTIAL LP. A COPY OF SUCH REGISTRATION RIGHTS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY FOREIGN OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH.”

The Company shall imprint such legend on certificates evidencing Registrable Securities outstanding prior to the date hereof. The legend set forth above shall be removed from the certificates evidencing any securities that have ceased to be Registrable Securities.

Section 11. General Provisions.

(a) Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may be amended, modified or waived only with the prior written consent of the Company and the Majority Holders. The failure or delay of any Person to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such Person thereafter to enforce each and every

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provision of this Agreement in accordance with its terms. A waiver or consent to or of any breach or default by any Person in the performance by that Person of his, her or its obligations under this Agreement shall not be deemed to be a consent or waiver to or of any other breach or default in the performance by that Person of the same or any other obligations of that Person under this Agreement.

(b) Remedies. The parties to this Agreement shall be entitled to enforce their rights under this Agreement specifically (without posting a bond or other security), to recover damages caused by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The parties hereto agree and acknowledge that a breach of this Agreement would cause irreparable harm and money damages would not be an adequate remedy for any such breach and that, in addition to any other rights and remedies existing hereunder, any party shall be entitled to specific performance and/or other injunctive relief from any court of law or equity of competent jurisdiction (without posting any bond or other security) in order to enforce or prevent violation of the provisions of this Agreement.

(d) Entire Agreement. Except as otherwise provided herein, this Agreement contains the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties hereto, written or oral, which may have related to the subject matter hereof in any way.

(e) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any person or entity not a party to this Agreement. Except as expressly permitted hereby, no assignment of this Agreement or of any rights or obligations hereunder may be made (by operation of law or otherwise) by (a) the Company without the prior written consent of the Majority Holders or (b) any Shareholder without the prior written consent of the Company, and any attempted assignment without the required consents shall be void. Notwithstanding the foregoing, the Company shall be permitted to assign this Agreement in connection with any consolidation or merger of the Company or Avatar Properties Inc. with or into another Person.

(f) Notices. All notices and other communications required or permitted under this Agreement shall be in writing and shall be deemed given when delivered personally or when telecopied, or five Business Days after deposit in the mail, if sent by registered mail, return receipt requested, or the next Business Day after deposit with a guaranteed overnight delivery or

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courier service, to the parties at the following addresses (or such other addresses as shall be changed by a like notice), except as expressly provided in this Agreement:

If to the Company, to:

Avatar Holdings Inc.
201 Alhambra Circle, Suite 1200
Coral Gables, FL 33134
Attention: General Counsel

With a copy to:

Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Simeon Gold
Jon-Paul Bernard

and to:

Akerman Senterfitt LLP
One Southeast Third Avenue, 25th Floor
Miami, FL 33131
Attention: Stephen K. Roddenberry

If to the Shareholders, to:

JEN I, L.P.
c/o JEN Partners, LLC
551 Madison Avenue, Suite 300
New York, NY 10022
and

JEN Residential LP
c/o JEN Partners, LLC
551 Madison Avenue, Suite 300
New York, NY 10022

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With a copy to:

Jones Day
222 East 41^st Street
New York, New York 10017
Attention: Steven C. Koppel
Andrew M. Levine

(h) Governing Law. This Agreement and any claim, demand, dispute, controversy, action or cause of action (i) arising out of or relating to this Agreement or any ancillary agreement (including the existence, validity, interpretation or breach hereof or thereof) or (ii) in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement, any ancillary agreement, or any of the transactions contemplated hereby and thereby, in each case whether now existing or hereafter arising, and whether in contract, tort, equity, statute or otherwise (each, a “Dispute”) shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and performed in such state, without regard to the principles of conflicts of laws thereof (other than Section 5-1401 of the New York General Obligations Law).

(i) WAIVER OF JURY TRIAL. THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

(j) Jurisdiction; Consent to Service of Process; Waiver. The parties hereto hereby irrevocably submit to the exclusive jurisdiction of any federal or state court located within the State of New York over any dispute arising out of or relating to this Agreement and each party hereby irrevocably agrees that all claims in respect of such dispute or any suit, action or proceeding related thereto may be heard and determined in such courts. The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties

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hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(k) Descriptive Headings; Interpretation. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. The use of the word “including” in this Agreement shall be by way of example rather than by limitation. Each of the parties hereto hereby consents to process being served by any party to this Agreement in any suit, action or proceeding by delivery of a copy thereof in accordance with the provisions of Section 11(f).

(l) No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.

(m) Counterparts. This Agreement may be executed in multiple counterparts, any one of which need not contain the signature of more than one party, but all such counterparts taken together shall constitute one and the same agreement.

(n) Electronic Delivery. This Agreement, the agreements referred to herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent executed and delivered by means of a photographic, photostatic, facsimile or similar reproduction of such signed writing using a facsimile machine or electronic mail shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or electronic mail to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or electronic mail as a defense to the formation or enforceability of a contract and each such party forever waives any such defense.

(o) Further Assurances. In connection with this Agreement and the transactions contemplated hereby, each party shall execute and deliver any additional documents and instruments reasonably requested by any other party and perform any additional acts that may be reasonably necessary or appropriate to effectuate and perform the provisions of this Agreement and the transactions contemplated hereby.

*****

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


AVATAR HOLDINGS INC.
By:	/s/ Patricia Kimball Fletcher
	Name:	Patricia Kimball Fletcher
	Title:	Executive Vice President

JEN I, L.P.
By:	/s/ Reuben S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member

JEN RESIDENTIAL LP
By:	/s/ Reuben S. Leibowitz
	Name:	Reuben S. Leibowitz
	Title:	Managing Member

[REGISTRATION RIGHTS AGREEMENT]

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