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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993 -- Commission File Number 0-7616
AVATAR HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware 23-1739078
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
255 Alhambra Circle, Coral Gables, Florida 33134
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (305) 442-7000
Securities registered pursuant to section 12(g) of the Act:
Common Stock, $1.00 Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of the Form 10-K or any amendment to this Form 10-K.
Aggregate market value of the voting stock held by non-affiliates of the
registrant was $329,054,208 as of February 28, 1994.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, $1.00 par value, issued and outstanding.
As of February 28, 1994, there were 9,095,102 shares of common
Stock, $1.00 par value, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for its 1994 Annual Meeting
of Stockholders are incorporated by reference into Part III.
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AVATAR HOLDINGS INC.
1993 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I Page
Item 1. Business.................................................. 3
Item 2. Properties................................................ 7
Item 3. Legal Proceedings......................................... 7
Item 4. Submission of Matters to a Vote of Security Holders....... 8
Executive Officers of the Registrant.................................. 9
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholders
Matters ................................................... 11
Item 6. Selected Financial Data................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 13
Item 8. Financial Statements and Supplementary Data............... 19
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures................................. 46
PART III
Item 10. Directors and Executive Officers of the Registrant........ 46
Item 11. Executive Compensation.................................... 46
Item 12. Security Ownership of Certain Beneficial Owners and
and Management............................................. 46
Item 13. Certain Relationships and Related Transactions............ 46
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K........................................ 47
Exhibit Index......................................................... 58
2
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PART I
Item 1. Business
Avatar Holdings Inc. (a Delaware corporation incorporated in 1970)
and its subsidiaries (collectively, "Avatar" or the "Company") are
engaged in two principal business activities: real estate and water
and wastewater utilities operations. Avatar's real estate operations,
which are located in the states of Florida, Arizona and California,
include the development and sale of homesites; the development and
sale of improved and unimproved homesites and commercial/industrial
land tracts; the construction and sale of single family and
multifamily housing; operations of amenities and resorts;
development, sale and management of vacation ownership units in
Avatar's Poinciana community; cable television operations and property
management services. Avatar provides financing for a large portion
of its homesite sales, mainly under a deed and mortgage arrangement.
Avatar's utility operations consist of water and wastewater treatment
plants which serve communities in Florida and Arizona. During 1993,
approximately 56% and 44% of the total revenues were generated through
real estate and utility operations, respectively, net of the gain on
the sale of the midwest water utilities discussed below.
On August 31, 1993, the Company sold its water and wastewater
utilities located in Indiana, Missouri, Ohio, and Michigan (the
"Midwest Water Utilities") for an aggregate selling price of
$62,000,000, resulting in a pre-tax gain of $21,822,000.
In the current year the Company has invested approximately
$51,000,000 cash in an investment trading portfolio.
(See Liquidity section)
Avatar's revised business strategy includes a shift away from
homesite sales and toward housing, retail and industrial real estate
development, sales of vacation ownership intervals and resort
operations. Certain of Avatar's properties are being developed and
such developments are at different stages of completion. In addition,
Avatar is examining each of its remaining principal properties in an
effort to determine the best long-term use or development.
Information regarding revenues, results of operations and assets
of the two business segments noted above are included in Item 8 under
the caption "Notes to Consolidated Financial Statements".
Real Estate
Avatar's assets include real estate inventory in the states of
Florida, Arizona and California. In its Florida communities of
Poinciana, Barefoot Bay, Cape Coral, Golden Gate and Leisure Lakes, as
well as in its Arizona community of Rio Rico, Avatar's activities
include homesite and industrial/commercial land sales, the construction
and sale of single family and multifamily housing, and the
construction, sale and management of vacation ownership units, with the
types of activities varying from community to community. Avatar owns
other sites including Harbor Islands in Hollywood, Florida;
Banyan Bay in Martin County, Florida; Ocala Springs in Marion County,
Florida; and Woodland Hills in Los Angeles County, California.
Poinciana, located in central Florida approximately 21 miles south
of Orlando and 10 miles from Walt Disney World, encompasses 47,000
acres of land, approximately 15,500 of which are owned by Avatar.
This planned community development includes subdivisions for single
family, multifamily and manufactured housing, and commercial/industrial
areas. Since 1971, 21,860 homesites have been sold and approximately
4,219 housing units, primarily single family houses and townhouses,
have been
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Item 1. Business -- Continued
constructed by Avatar and other non-affiliated builders. As of
December 31, 1993, approximately 12,965 developed and undeveloped
homesites remained in inventory at Poinciana. Additionally,
approximately 4,456 acres of land zoned for industrial/commercial
and multifamily use also remained in inventory. At
December 31, 1993, Avatar had firm contracts at Poinciana to construct
49 single family units with a total sales volume of $3,726,488.
Avatar's real estate activities at Poinciana also include the
construction, sale and management of vacation ownership units. As of
December 31, 1993, 1,606 unit weeks had been sold and 1,306 unit weeks
remained in inventory at Poinciana. Avatar also owns and operates a
31,100 square foot shopping center at Poinciana that was 100% occupied
at December 31, 1993. Recreational facilities owned and operated by
Avatar at the Poinciana development include an 18-hole Devlin Von-Hagge
championship golf course, tennis courts, a golf and racquet club with a
swimming pool, a community center and a series of nature walks and
trails.
Barefoot Bay is located on Florida's east coast, midway between
Vero Beach and Melbourne. Avatar's operations at Barefoot Bay include
the sale of manufactured homes and homesites. Since operations
commenced in 1970, approximately 94% of the 5,020 available homesites
have been sold. At December 31, 1993, Avatar had firm contracts to
construct 8 housing units at a total selling price of $683,000.
Recreational facilities owned and operated at Barefoot Bay by Avatar
include an 18-hole executive golf course, a community center, swimming
pools, tennis courts, a private beach and a fishing pier. Avatar also
owns and operates a 13,420 square foot shopping center in Barefoot Bay
that was 100% occupied at December 31, 1993.
Avatar also owns 268 acres adjacent to Barefoot Bay. Platting,
design and engineering for this proposed golf course community of 630
conventional single-family and zero-lot line homesites commenced in
1989 and is continuing through 1994.
Cape Coral is a 60,700-acre community, of which approximately
3,727 acres are owned by Avatar, located on Florida's west coast seven
miles west of Fort Myers. Its population has increased from 11,470
in 1970 to approximately 84,000 in 1993. To accommodate
this increase, Avatar constructed, during 1991, the Camelot Isles
Shopping Center, a 70,000 square foot retail center that opened in
February 1992. At December 31, 1993, the shopping center was 89%
occupied. Remaining inventory at December 31, 1993, included
approximately 3,734 single family homesites and 2,700 acres of land
zoned for commercial, industrial and multifamily use. Avatar's Tarpon
Point Marina, which is located in Cape Coral, accommodates 175
vessels and features dockmaster facilities, a ship's store and fueling
facilities. The Camelot Marina, for which the initial phase of
construction was completed in 1991, will accommodate 76 vessels and
feature 3,500 feet of boardwalk upon completion. Other amenities
available to the residents of Cape Coral include Avatar's Cape Coral
Golf and Tennis Resort that features an 18-hole championship golf
course, a 9-hole executive golf course, eight tennis courts and a 100-
room motel.
Golden Gate City, located east of Naples in southwest Florida, had
remaining inventory as of December 31, 1993 which included 32 single
family and duplex homesites, 43 acres of land zoned for multifamily use
and 10 acres zoned for commercial use.
Golden Gate Estates comprises 2,497 acres of land subdivided into
5,800 homesites. Remaining inventory as of December 31, 1993, includes
approximately 130 homesites of varying size, the majority of which are
approximately 1 and 1-1/4 acre homesites, and 7,400 acres of land held
for future use.
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Item 1. Business -- Continued
Avatar's land holdings in Leisure Lakes, located near the city of
Lake Placid in South Central Florida, consist of 3,244 homesites
remaining in inventory at December 31, 1993. Amenities at Leisure
Lakes include a 9-hole executive golf course, a small lakefront motel,
tennis courts, shuffleboard courts, a swimming pool, a club house with
pro shop, a coffee shop, a private beach, a boat ramp, a card room and
various lakes available for water sports.
Rio Rico, a 55,000-acre community development in southern Arizona,
is located 57 miles south of Tucson. This community, with a population
of approximately 4,700 residents, consists of single family homes and
townhouses and includes several areas zoned for commercial and
industrial development. Avatar owns and operates a 175-room hotel
complex, an 18-hole Robert Trent Jones designed championship golf
course and a 36,800 square foot shopping center, which was 98% occupied
as of December 31, 1993. Remaining inventory at Rio Rico at December
31, 1993 included approximately 3,575 single family homesites, 2,536
acres of land zoned for commercial, industrial and multifamily use,
4,762 acres of land held for future development, sale or other use, and
2,838 acres of undeveloped mountain range reserved for open space.
The Harbor Islands Project encompasses 191 acres, including 30
acres conveyed to the city of Hollywood for future parks, adjoining the
Intra-coastal Waterway in Hollywood, Florida. An approved plan for
this water-oriented community provides for 2,700 high-rise condominium
units, 447 townhouses and triplex dwelling units, 28 single family
homesites, 65,000 square feet of commercial space and a 150-room hotel.
Additionally, permits have been obtained and preliminary construction
completed on a 196-boat slip marina.
Banyan Bay, located in Martin County, Florida, comprises 251 acres
of land. Future plans contemplate a medium-density residential
development of two and four story condominiums.
Ocala Springs, located five miles northeast of Ocala in Marion
County, Florida, comprises 4,600 acres of land. The concept plan for
this project provides for 700 single family ranchettes on 1-1/4 to 1-
1/2 acre lots, 4,800 single family homesites on 1/4 to 1/2 acre lots,
400 homesites for manufactured housing and 1,000 multifamily
condominium units. Also planned are an 18-hole golf course and more
than 130 acres for commercial, industrial and service facilities.
These plans have been reviewed by all appropriate state, regional and
local governmental agencies and the plat for Phase I has been filed
with and accepted by Marion County.
Woodland Hills, located in northwest Los Angeles County,
California, consists of the Natoma tract that encompasses approximately
430 acres of land. Conceptual planning for this tract has been
completed for 108 luxury homesites. An environmental impact report has
been filed and is being reviewed by the City of Los Angeles.
In addition to the real estate holdings described above, Avatar
owns approximately 2,500 acres of land in Florida that is being held
for future development or bulk sales.
Utilities
Avatar's water and wastewater treatment facilities include 12
water treatment facilities and 10 wastewater treatment facilities
serving 6 communities in Florida (including Poinciana, Barefoot Bay and
Golden Gate). These facilities provide for the treatment, distribution
and sale of water for public and
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Item 1. Business -- Continued
private use, and the treatment and disposal of wastewater. At December
31, 1993, Avatar's utility operations had approximately 35,000 water
customers and 29,000 wastewater customers.
On January 30, 1993, the Company entered into stock purchase
agreements for the sale of its Midwest Water Utilities. The closing of
the sale of the Midwest Water Utilities took place on August 31, 1993,
for an aggregate selling price of $62,000,000, resulting in a pre-tax
gain of $21,822,000.
An Avatar subsidiary provides consulting, data processing and
other services to non-affiliated utility companies as well as to
various Avatar subsidiaries. This subsidiary is beginning to operate
water and wastewater systems under contracts with unaffiliated
companies.
Employees
As of December 31, 1993, Avatar employed approximately 950
individuals on a full-time or part-time basis. In addition, Avatar
utilizes on a daily basis such additional personnel as may be required
to perform various land development activities. Avatar's relations
with its employees are satisfactory and there have been no work
stoppages.
Regulation
Avatar's real estate operations are regulated by various local,
regional, state and federal agencies, including the Federal Trade
Commission (FTC). The extent and nature of these regulations include
matters such as planning, zoning, design, construction of improvements,
environmental considerations and sales activities. For its community
developments in Florida and Arizona, state laws and regulations may
require the filing of registration statements, copies of promotional
materials and numerous supporting documents, and the delivery of an
approved disclosure report to purchasers, prior to the execution of a
land sales contract. In addition to Florida and Arizona, certain
states impose requirements relating to the inspection of properties,
approval of sales literature, disclosures to purchasers of specified
information, assurances of future improvements, approval of terms of
sale and delivery to purchasers of a report describing the property.
Federal regulations adopted pursuant to the Interstate Land Sales Full
Disclosure Act provide for the filing or certification of a
registration statement with the Office of Interstate Land Sales
Regulation of the Department of Housing and Urban Development.
Avatar's homesite installment sales activities are required to comply
with the Federal Consumer Credit Protection ("Truth-in-Lending") Act.
Avatar's utility operations and rate structures are regulated by
various federal, state and county agencies and must comply with federal
and state treatment standards. All sources of water and wastewater
effluent are required to be tested on a regular basis and purified in
order to comply with governmental standards.
The Company believes it is in compliance with applicable laws and
regulations in all material respects.
Competition
Avatar's real estate operations, particularly in the state of
Florida, are highly competitive. In its sales of homesites and housing
units, Avatar competes, as to price and product, with several land
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Item 1. Business -- Continued
development companies for the discretionary income of individuals who
desire eventually to relocate or establish a second home in Florida or
Arizona. In recent years, there have been extensive land development
projects in the geographical areas in which Avatar operates. The
vacation ownership sales business is also highly competitive with
companies throughout the United States and abroad selling vacation
ownership unit weeks on terms similar to those offered by Avatar.
Item 2. Properties
Avatar's real estate operations are described in Item 1 above.
Land in the process of being developed, or held for investment and/or
future development, has an aggregate cost of approximately $113,623,000
as of December 31, 1993.
Avatar's utility operations include water and wastewater plants
and equipment located in Florida. Such properties have a net book
value of $150,812,206 at December 31, 1993.
Avatar's corporate headquarters are located at 255 Alhambra
Circle, Coral Gables, Florida, in approximately 26,595 square feet of
leased office space. For additional information concerning properties
leased by Avatar, see Item 8, "Notes to Consolidated Financial
Statements."
Item 3. Legal Proceedings
Avatar is involved in various pending litigation matters primarily
arising in the normal course of its business. Although the outcome of
these and the following matters can not be determined, it is the
opinion of management that the resolution of such matters will not have
a material effect on Avatar's business or financial position.
On October 1, 1993, the United States, on behalf of the U.S.
Environmental Protection Agency, filed a civil action against a
utility subsidiary of Avatar in the U.S. District Court for the Middle
District of Florida. (United States vs. Florida Cities Water Company,
Civil Action No. 93-281-C1) The complaint alleges that the
subsidiary's wastewater treatment plant in North Fort Myers, Florida,
committed various violations of the Clean Water Act, 33 U.S.C. S1251
et seq., including (1) discharge of pollutants without an operating
permit from October 1, 1988 to October 31, 1989; (2) discharging
from an unpermitted discharge location from November 1, 1989 until
July 14, 1992; and (3) discharging pollutants in excess of permit
limitations at various times from July 1991 to June of 1992. The
government is seeking the statutory maximum civil penalties of $25,000
per day, per violation based upon the allegations. The Subsidiary
strongly believes that there are mitigating facts as well as valid
legal defenses that could reduce or eliminate the imposition of
monetary sanctions.
On March 1, 1994, the Wisconsin Department of Natural Resources
(the "Department") sent Avatar notice that the Department had
recently issued a second Record of Decision ("ROD") in connection
with the Edgerton Sand & Gravel Landfill site (the "Site"). The ROD
calls for the City of Edgerton's public water supply system to be
extended to the owners of private wells in the vicinity of the Site.
The ROD also states that other work related to soil and groundwater
remedial action would be required at the Site. The Department demanded
that all potentially responsible parties ("PRPs") associated with
the Site organize into a PRP group to undertake the implementation of
the ROD. Avatar was previously identified as a PRP by the Department.
Avatar believes that it is not liable for any claims by any
governmental or private party in connection with the Site.
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Item 3. Legal Proceedings -- Continued
On February 25, 1994, Mr. Wilkov commenced a lawsuit against
Avatar, Mr. Jacobson and Odyssey Partners, L.P. ("Odyssey"), in
the Circuit Court of Eleventh Judicial Circuit in and for Dade
County Florida, claiming damages arising out of Mr. Wilkov's
termination of his employment purportedly for "Good Reason" (as
defined in his employment agreement). Mr. Wilkov also seeks to
recover damages from Avatar for libel and slander and from
Odyssey and Mr. Jacobson based on their alleged malicious
interference with his employment agreement. Avatar denies that
Mr. Wilkov had Good Reason to terminate his employment agreement.
Avatar, Odyssey and Mr. Jacobson do not believe there is any
valid basis for Mr. Wilkov's claims, and various affirmative
defenses have been asserted. Avatar also has asserted
counterclaims against Mr. Wilkov for breach of contract,
promissory estoppel and improper inducement in connection with
amendments to Mr. Wilkov's employment agreement.
Item 4. Submission of Matters to a Vote Security Holders
None
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Executive Officers of the Registrant
Pursuant to General Instruction G (3) to Form 10-K, the following
list is included as an unnumbered item in Part I of this report in lieu
of being included in the Proxy Statement for the Annual Meeting of
Stockholders to be held on May 26, 1994.
The following is a list of names and ages of all of the executive
officers of Avatar, indicating all positions and offices with Avatar
held by each such person and each such person's principal occupation(s)
or employment during the past five years unless otherwise indicated.
All such persons have been elected to serve until the next annual
election of officers (which is expected to occur on May 26, 1994) when
they are reappointed or their successors are elected, or until their
earlier resignation or removal.
Name Age Office and Business Experience
Leon Levy 68 Chairman of the Board since January
1981; General Partner, Odyssey
Partners, L.P., a private
partnership engaged in investment,
trading and related activities;
Chairman of the Board of
Oppenheimer Funds; former Chairman
of the Board (1974-1985) of
Oppenheimer Management Corp.;
Director of: Electra Investment
Trust PLC, Mercury Assets
Management, Ltd., and S.G.
Warburg & Co., Ltd. (Jersey
Funds).
Edwin Jacobson 64 President and Chief Executive
Officer since February 1994;
Chairman of the Executive Committee
since June 1992; President and
Chief Executive Officer of Chicago
Milwaukee Corporation since June
1985; President and Chief
Executive Officer of CMC Heartland
Partners since September 1990, and
President and Chief Executive
Officer, since June 1985, of
Milwaukee Land Company, a non-
diversified, closed-end management
investment company, publicly traded
since July 1993.
Dennis J. Getman 49 Executive Vice President since
March 1984. Senior Vice President
from September 1981 to March 1984
and General Counsel since September
1981.
Charles L. McNairy 47 Executive Vice President since
September 1993 and Treasurer and
Chief Financial Officer since
September 1992. Senior Vice
President from September 1992 to
September 1993. Vice President -
Finance from January 1985 to
September 1992, except from April
1987 to September 1988.
Juanita I. Kerrigan 47 Vice President and Secretary since
September 1980.
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Executive Officers of the Registrant -- continued
G. Patrick Settles 45 Vice President since November 1986
and Assistant General Counsel since
September 1983.
John J. Yanopoulos 37 Vice President -- Finance and
Controller since September 1992.
Assistant Vice President from May
1990 to September 1992 and
Corporate Controller since May
1989. Formerly Senior Audit
Manager, Kenneth Leventhal and
Company from 1986 to 1989.
The above executive officers have held their present positions
with Avatar for more than five years, except as otherwise noted.
No director or executive officer of Avatar has any family
relationship with any other director or executive officer of Avatar.
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PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters
The Common Stock of Avatar Holdings Inc. is traded through the
National Market System of the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") under the symbol AVTR.
The approximate number of record holders of Common Stock at February
28, 1994, was 9,100.
High and low quotations, as reported, for the last two years were:
<TABLE>
<CAPTION>
Quotations
Quarter Ended 1993 1992
------ ------
High Low High Low
------ ------ ------ ------
<S> <C> <C> <C> <C>
March 31 38 3/4 33 3/4 26 3/4 22 1/2
June 30 38 33 1/2 28 1/2 24 1/2
September 30 37 27 1/2 31 24 1/2
December 31 35 1/4 30 1/2 35 28 3/4
</TABLE>
Avatar has not declared any cash dividends on Common Stock since
its issuance and has no present intention to pay cash dividends.
Avatar is subject to certain restrictions on the payment of dividends
as set forth in Item 8, "Notes to Consolidated Financial Statements".
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Item 6. Selected Financial Data
FIVE YEAR COMPARISON OF SELECTED FINANCIAL DATA
Dollars in thousands (except per-share data)
<TABLE>
<CAPTION>
Year ended December 31
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Statement of Income Data
Revenues (1) $126,048 $105,161 $104,083 $147,449 $152,193
======== ======== ======== ======== ========
Income (loss) from
continuing operations
before extraodinary
item and changes in
methods of accounting $5,474 ($4,342) ($8,635) $11,132 $572
======== ======== ======== ======== ========
Extraordinary item - ($2,402) - - -
======== ======== ======== ======== ========
Cumulative effect of
change in method of
accounting for
income taxes ($964) - - - -
======== ======== ======== ======== ========
Cumulative effect of
change in method
of accounting for
investments (net of income
taxes of $238) $388 - - - -
======== ======== ======== ======== ========
Income (loss) from
continuing operations
before extraorinary item
and changes in methods of
accounting per share $0.56 ($0.59) ($1.17) $1.41 $0.08
======== ======== ======== ======== ========
Extraordinary item - ($0.32) - - -
======== ======== ======== ======== ========
Cumulative effect of
change in method of
accounting for income
taxes per share ($0.10) - - - -
======== ======== ======== ======== ========
Cumulative effect of
change in method of
accounting for
investments
per share (net of
income taxes of $238) $0.04 - - - -
======== ======== ======== ======== ========
Balance Sheet Data December 31
-------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
Total assets $461,482 $474,448 $572,890 $557,127 $525,566
======== ======== ======== ======== ========
Notes, mortgage notes
and other debt $135,557 $235,491 $239,414 $221,347 $203,886
Less notes, mortgage
notes and other debt
classified as property
held for sale - 41,075 - - -
-------- -------- -------- -------- --------
$135,557 $194,416 $239,414 $221,347 $203,886
======== ======== ======== ======== ========
Stockholders' equity $183,372 $144,639 $151,244 $159,879 $147,747
======== ======== ======== ======== ========
</TABLE>
(1) The Company adopted the installment method for homesite sales
effective January 1, 1989. Prior to 1989, Avatar used the
full accrual method of profit recognition for homesite sales.
During 1993, the sale of the Midwest Water Utilities was
completed. (See Results of Operations.)
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Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands)
RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors that have affected Avatar during the periods
included in the accompanying consolidated statements of operations.
A summary of the period to period changes in the items included in
the consolidated statements of income is shown below.
<TABLE>
<CAPTION>
Comparison of
Twelve months ended December 31
-------------------------------
1993 and 1992 1992 and 1991
------------- -------------
Increase (Decrease)
-------------------
$ % $ %
Revenues Change Change Change Change
------- ------- ------- --------
<S> <C> <C> <C> <C>
Real estate sales $5,203 15.0 % ($2,980) (7.9)%
Deferred gross profit on
homesite sales (1,044) (446.2) 2,668 91.9
Utility revenues (7,252) (13.6) 4,078 8.3
Interest income (2,411) (14.7) (2,686) (14.1)
Gain on sale of subsidiaries 21,822 - - -
Other 4,569 458.7 (2) (0.2)
------ ------ ------- ------
Total revenues 20,887 19.9 1,078 1.0
Expenses
Real estate expenses 2,594 5.8 (7,831) (14.9)
Utility expenses (1,991) (5.4) 1,173 3.3
General and administrative
expenses 811 10.4 196 2.6
Interest expense (2,822) (15.3) (738) (3.8)
Other (283) (18.3) 313 25.4
------ ------ ------- ------
Total expenses (1,691) (1.5) (6,887) (5.9)
------ ------ ------- ------
Income (loss) before
income taxes, changes
in methods of accounting
and extraordinary item 22,578 N/A 7,965 64.7
Income Taxes (12,762) - 3,672 100.0
Extraordinary item 2,402 100.0 (2,402) -
Changes in methods of
accounting (576) - - -
------- ------ ------- ------
Net Income $11,642 N/A $1,891 21.9
======= ======= ======= ======
</TABLE>
Operations for the years ended December 31, 1993, 1992 and 1991
resulted in a pre-tax gain (loss) before the changes in accounting
methods and extraordinary item of $18,236, ($4,342) and ($12,307),
respectively. The improvement in pre-tax income during 1993 compared
to 1992 is primarily attributable to the sale of the Midwest Water
Utilities for $62,000 which resulted in a pre-tax gain of $21,822 and
an adjustment to the estimated development liability for sold land as a
result of the purchase of Rio Rico Utilities of $4,532. The
improvement in pre-tax results of operations in 1992 compared to 1991
was primarily attributable to higher profit contributions from the
Company's utility operations and lower real estate selling expenses.
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Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
RESULTS OF OPERATIONS -- continued
Avatar uses the installment method of profit recognition for
homesite sales. Under the installment method the gross profit on
recorded homesite sales is deferred and recognized in income of future
periods, as principal payments on contracts are received. Fluctuations
in deferred gross profit result from deferred gross profit on current
homesite sales less recognized deferred gross profit on prior years'
homesite sales.
In accordance with the Company's business plan, the Company
continued its gradual transition from selling predominantly Avatar-
owned homesites to providing a diversified mix of products and
services including introducing additional housing products, developing
amenities and support facilities, expanding vacation ownership
operations, expanding property management services and converting
land holdings into income producing operations.
Avatar's business plan also established objectives of modifying the
Company's historic homesite sales program with the goal of maintaining
or slightly increasing homesite sales volume. A slight improvement in
consumer confidence and the economy combined to enable the Company to
achieve budgeted levels for homesite sales volume in 1993. The 1993
average selling prices of housing and homesites were comparable to
1992 levels.
Gross real estate revenues increased 15% during 1993 when compared
to 1992 and decreased 7.9% during 1992 when compared to 1991. The
increase in real estate revenues for 1993 when compared to 1992 is
primarily a result of increased housing and homesite sales volume.
Real estate expenses increased $2,594 or 5.8% in 1993
when compared to 1992 and decreased $7,831 or 14.9% in
1992 when compared to 1991. The increase in real estate expenses for
1993 when compared to 1992 is primarily a result of an increase in cost
of products sold due to the increase in real estate sales. Margins
have improved based on a reduction in related costs as a percentage of
real estate sales and a more profitable sales mix of increased homesite
and housing sales for 1993 when compared to 1992. The decline in real
estate revenues and expenses for 1992 when compared to 1991 resulted
primarily from decreased homesite and housing sales during 1992.
Utility revenues decreased $7,252 or 13.6% during 1993 when
compared to 1992 and increased $4,078 or 8.3% during 1992 when compared
to 1991. Utility expenses decreased $1,991 or 5.4% during 1993 when
compared to 1992 and increased $1,173 or 3.3% during 1992 when compared
to 1991. Utility revenues decreased in 1993 as a result of the sale of
the Midwest Water Utilities which closed on August 31, 1993. Utility
expenses did not decline correspondingly primarily due to increased
expenses relating to postretirement benefit costs. The increases for
1992 when compared to 1991 are due to increases in Avatar's customer
base and rate increases. In comparing the remaining utility
subsidiaries, revenues increased $1,565 or 6.4% in 1993 when compared
to 1992 and expenses increased $4,699 or 38.9% in 1993 when compared to
1992. The increase in expenses is primarily a result of
postretirement benefit costs, the amortization of rate
case costs, and the accrual of professional fees.
Interest income decreased $2,411 or 14.7% during 1993 when
compared to 1992 and $2,686 or 14.1% during 1992 when compared to 1991.
The declines in interest income are attributable to lower average
aggregate balances of the Company's contract and mortgage notes
receivable portfolio. The
14
<PAGE>
<PAGE> 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
RESULTS OF OPERATIONS -- continued
average balance of Avatar's receivable portfolio was $127,909, $153,053
and $181,550 for 1993, 1992 and 1991, respectively. This decrease in
interest income was partially offset by earnings from Avatar's
investment securities of $903, $479 and $927 for 1993,
1992 and 1991, respectively.
Pre-tax gain on sale of subsidiaries of $21,822 in 1993 is a
result of the sale of the Midwest Water Utilities which generated net
proceeds of approximately $59,371.
Other revenues for 1993 includes a reduction of the estimated
development liability for sold land of $4,532 as a result of the
purchase of Rio Rico Utilities.
General and administrative expenses increased $811 or 10.4% in
1993 compared to 1992 and $196 or 2.6% during 1992 when compared to
1991. The increases in 1993 and 1992 are primarily a result of
incentive compensation recorded for senior officers and an increase in
professional fees. Additionally, an increase in real estate revenue
contributed to the increase for 1993.
Interest expense decreased $2,822 or 15.3% in 1993 when compared
to 1992 and $738 or 3.8% during 1992 when compared to 1991. These
decreases are attributable to an overall decrease in notes, mortgage
notes and other debt outstanding during 1993 and lower interest rates
during 1992 than in 1991.
LIQUIDITY AND CAPITAL RESOURCES
Avatar's primary business activities, which include homesite
sales, land development and utility services, are capital intensive in
nature. Avatar expects to fund its operations and capital requirements
through a combination of cash and investment securities on hand,
operating cash flows and external borrowings.
In 1993, net cash provided by operating activities amounted to
$9,925 and resulted primarily from operations including principal
payments on contracts receivable of $21,249. Net cash provided by
investing activities of $14,823 in 1993 resulted from the proceeds from
the sale of subsidiaries of $59,371 and proceeds from the sale of
securities of $17,444 reduced by investments in property, plant
and equipment of $11,567 and investments in securities
of $50,425. Net cash used in financing activities of $20,214 resulted
primarily from the principal payment on revolving lines of credit and
long-term borrowings of $48,538 and the purchase of treasury stock of
$27,000 less net proceeds from revolving lines of credit and long-term
borrowings of $26,121 and proceeds from the issuance of common stock in
conjunction with the redemption/conversion of the 5-1/4% Debentures (as
defined below) of $30,340.
Avatar renegotiated certain of its existing bank credit lines and
established a new credit line, thereby increasing its secured lines of
credit from $36,200 at December 31, 1992, to $45,534 at December 31,
1993. Avatar's unsecured credit lines were decreased from $44,500 at
December 31, 1992, to $15,000 at December 31, 1993. The unused
portions of these credit lines were $17,000 and $10,325 for the secured
and unsecured lines, respectively, at December 31, 1993. Included in
these lines of credit is a new line of credit entered into during 1993,
secured by investments, which had
15
<PAGE>
<PAGE> 16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
LIQUIDITY AND CAPITAL RESOURCES -- continued
an outstanding balance at December 31, 1993 of $13,000 and will mature
during the fourth quarter of 1994. Also included is an amended and
restated line of credit with a balance outstanding at December 31, 1993
of $15,534 collateralized by certain contracts receivables and due May
31, 1995.
Avatar has planned utility construction for 1994 totaling
approximately $22,000. Additionally, the Company has planned land
development expenditures of $9,700 during 1994, which will result in
additional homesite inventory and preservation of development permits.
It is anticipated that land development and utility construction
expenditures for 1994 will be funded by operating cash flow and
borrowings from external sources.
On June 4, 1993 the Company called for the redemption of all its
outstanding 5-1/4% convertible-purchase subordinated debentures due May
1, 2007 (the ``5-1/4% Debentures ) at a redemption price of 100% of
the principal amount plus accrued and unpaid interest from January 15,
1993 through the redemption date of July 4, 1993. The principal
purpose of the redemption was to reduce the Company's annual interest
expense, improve its liquidity and increase its stockholders' equity.
Holders were entitled to convert their 5-1/4% Debentures into shares of
the Company's common stock at a conversion price of $23.00 per share
provided they paid in cash an amount equal to the principal amount of
the 5-1/4% Debentures being converted, for which they received
additional shares of common stock equal to the number issued on
conversion. A total of $30,917 principal amount of the 5-1/4%
Debentures were converted and 2,688,276 shares of common stock were
issued. The remaining $57 principal amount of 5-1/4% Debentures were
redeemed as of July 4, 1993. The net result of this transaction,
after expenses, was an increase in cash of $30,340, a decrease in
debt of $30,973 and an increase in stockholders' equity of $60,835.
The closing of the sale of the Midwest Water Utilities took place
on August 31, 1993, with an aggregate selling price of $62,000,
resulting in a pre-tax gain of $21,822.
The Company has invested approximately $51,000 in investment
securities which are classified as trading.
The Company intends to continue to actively trade such
securities in an effort to generate profits and will reinvest such
profits until such time as the Company 's cash requirements necessitate
the use or partial use of the portfolio proceeds. Avatar's investment
portfolio at December 31, 1993 includes $20,045 invested in
corporate bonds rated B- or above by Moody's and/or Standard and
Poor's and $12,775 invested in non-rated bonds of companies which are
in bankruptcy and have defaulted as to payments of principal and
interest on such bonds. These bonds are thinly traded and may require
sixty to ninety days to liquidate. The portfolio also includes an
unsecured claim on a company in bankruptcy of $5,689 which is not
readily marketable, $7,020 of equity securities, $1,661 of money
market accounts and $3,994 of U.S. Goverment and Agency
securities. As of December 31, 1993, $39,932 of the investments
serves as collateral for a secured line of credit with an outstanding
balance of $13,000.
On September 30, 1993 the Company purchased 1,000,000 shares of
the Company's common stock from the estate of Peter J. Sharp for $27.00
per share resulting in a decrease in cash of $27,000 and a
corresponding decrease in stockholders' equity. These shares are being
held in the Company's treasury for future corporate purposes.
16
<PAGE>
<PAGE> 17
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
LIQUIDITY AND CAPITAL RESOURCES -- continued
Avatar's Board of Directors has authorized expenditures for the
purchase of Avatar's 8% and 9% senior debentures. During 1993, Avatar
expended $31 for the purchase of its 8% senior debentures and $1,106
for the purchase of its 9% debentures. As of December 31, 1993, the
remaining authorization for such expenditures was $4,301.
As a result of the proceeds received from the sale of the Midwest
Water Utilities and the redemption/conversion of the 5-1/4% Debentures,
net of the funds expended for the stock repurchase, the Company
believes it has sufficient capital resources to satisfy anticipated
liquidity requirements.
Management does not anticipate a significant change in interest
rates for 1994, and accordingly, does not expect Avatar's primary
business activities to be adversely affected by interest rates.
Avatar's homesite sales are not dependent upon the customer obtaining
third party financing. A high interest rate environment would be
likely to adversely affect Avatar's real estate results of operations
and liquidity because certain of Avatar's debt obligations are tied to
prevailing interest rates. Increases in interest rates affecting the
Company's utility operations generally are passed on to the consumer
through the regulatory process.
EFFECTS OF INFLATION AND ECONOMIC CONDITIONS
Inflation has had a minimal impact on Avatar's operations over the
past several years, and management believes its effect has been neither
significant nor greater than its effect to the industry as a whole.
It is anticipated that the impact of inflation on Avatar's operations
for 1994 will not be significant.
IMPACT OF TAX INSTALLMENT METHOD
In 1992, 1991, 1989 and 1988, the Company elected the
installment method for recording a substantial amount of its homesite
sales in its federal income tax return, which deferred taxable income
into future fiscal periods. As a result of this election, the Company
may be required to pay compound interest on certain federal income
taxes in future fiscal periods attributable to the taxable income
deferred under the installment method. The Company believes that the
potential interest amount, if any, will not be material to its
financial position and results of operations of the affected future
periods.
RETIREMENT PLANS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In December 1990, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions". The
Company adopted this statement in 1993, as required. This statement
requires the accrual of postretirement benefits (such as health care
benefits) during the years an employee provides services. These
benefits for retirees are currently provided only to the employees of
the Company's utility subsidiaries. The costs of these benefits were
previously expensed on a pay-as-you-go basis. The accrual for
postretirement benefit costs at December 31, 1993 amounted to $712.
17
<PAGE>
<PAGE> 18
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
RETIREMENT PLANS AND POSTRETIREMENT BENEFITS OTHER THAN
PENSIONS--continued
As discussed in Notes J and K to the consolidated financial
statements, the weighted average discount rate used in determining
both the projected benefit obligation for the Company's defined benefit
pension plan and the accumulated postretirement benefit obligation for
its postretirement benefit plan is 8%. If the Company were to lower
the discount rate by 1/2% in 1994, it would result in an increase in
the obligation. To illustrate, a decrease in the discount rate from
8% to 7-1/2% in determining the projected benefit obligation for the
Company's defined benefit pension plan, would increase the obligation
by approximately $275 and pension expense by approximately $44. The
same change in discount rate in estimating the accumulated
postretirement benefit obligation for the Company's defined benefit
postretirement plan, would increase the obligation by approximately
$200. Because the Company has elected to record the transition
obligation for postretirement benefits over 20 years, as allowed by
Statement No. 106, the effect of reducing the discount rate from 8% to
7-1/2% in 1994 would be less than $30.
18
<PAGE>
<PAGE> 19
Item 8. Financial Statements and Supplementary Data
Report of Independent Certified Public Accountants.......... 20
Consolidated Balance Sheets -- December 31, 1993 and 1992... 21
Consolidated Statements of Operations -- For the years ended
December 31, 1993, 1992, 1991.............................. 22
Consolidated Statements of Stockholders' Equity -- For the
years ended December 31, 1993, 1992, 1991................. 23
Consolidated Statements of Cash Flows -- For the years ended
December 31, 1993, 1992, 1991............................... 24
Notes to Consolidated Financial Statements.................. 26
19
<PAGE>
<PAGE> 20
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholders and Board of Directors
Avatar Holdings Inc.
We have audited the accompanying consolidated balance sheets of Avatar
Holdings Inc. and subsidiaries as of December 31, 1993, and 1992, and
the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1993. Our audits also included the financial statement
schedules listed in the Index at Item 14. These financial statements
and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and related schedules are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Avatar Holdings Inc. and subsidiaries at December 31, 1993
and 1992, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended December 31,
1993, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedules, when
considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set
forth therein.
As discussed in Note A to the consolidated financial statements, in
1993 the Company changed its methods of accounting for income taxes,
investments and postretirement benefits other than pensions.
/s/ ERNST & YOUNG
Miami, Florida
February 23, 1994,
except for the third paragraph of Note R,
as to which the date is March 1, 1994
20
<PAGE>
<PAGE> 21
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1993 1992
------------ -----------
<S> <C> <C>
Assets
Cash $7,178 $2,433
Restricted cash 1,442 1,820
Investments 51,184 17,314
Contracts, mortgage notes and other
receivables, net 82,996 99,736
Land and other inventories 117,557 111,285
Property, plant and equipment, net 178,940 175,227
Property held for sale - 41,320
Other assets 15,460 25,313
Regulatory assets 6,725 -
-------- --------
Total Assets $461,482 $474,448
======== ========
Liabilities and Stockholders' Equity
Liabilities
Notes, mortgage notes and other debt:
Real estate and corporate $96,768 $144,864
Utilities 38,789 49,552
Estimated development liability for
sold land 19,331 24,139
Accrued and other liabilities 26,846 16,903
Deferred customer betterment fees 19,537 20,157
Deferred income taxes - 7,648
Minority interest in consolidated
subsidiaries 9,058 14,324
Regulatory liabilities 4,447 -
-------- --------
Total Liabilities 214,776 277,587
Commitments and contingent liabilities
Contributions in aid of construction 63,334 52,222
Stockholders' Equity
Common Stock 12,715 10,027
Additional paid-in capital 207,271 149,124
Retained earnings 25,359 20,461
-------- --------
245,345 179,612
-------- --------
Treasury stock, at cost 61,973 34,973
-------- --------
Total Stockholders' Equity 183,372 144,639
-------- --------
Total Liabilities and Stockholders'
Equity $461,482 $474,448
======== ========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE>
<PAGE> 22
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
For the year ended December 31
------------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Revenues:
Real estate sales $39,997 $34,794 $37,774
Deferred gross profit on homesite sales (1,278) (234) (2,902)
Utility revenues 45,957 53,209 49,131
Interest income 13,985 16,396 19,082
Gain on sale of subsidiaries 21,822 - -
Other 5,565 996 998
------- ------- -------
Total revenues 126,048 105,161 104,083
Expenses:
Real estate expenses 47,494 44,900 52,731
Utility expenses 34,781 36,772 35,599
General and administrative expenses 8,620 7,809 7,613
Interest expense 15,656 18,478 19,216
Other 1,261 1,544 1,231
------- ------- -------
Total expenses 107,812 109,503 116,390
------- ------- -------
Income (loss) before income taxes,
extraordinary item and cumulative
effect of changes in methods of
accounting 18,236 (4,342) (12,307)
Provision (credit) for income taxes 12,762 - (3,672)
------- ------- --------
Income (loss) before extraordinary
item and cumulative effect of
changes in methods of accounting 5,474 (4,342) (8,635)
Extraordinary item:
Loss on extinguishment of 8% debentures - (2,402) -
Cumulative effect of change in method of
accounting for income taxes (964) - -
Cumulative effect of change in method of
accounting for investments
(net of income taxes of $238) 388 - -
------- ------- --------
Net income (loss) $4,898 ($6,744) ($8,635)
======= ======= ========
Per share amounts:
Primary
Income (loss) before extraordinary
item and cumulative effect of
changes in methods of accounting $0.56 ($0.59) ($1.17)
Extraordinary item (0.32) -
Cumulative effect of change in method
of accounting for income taxes (0.10) - -
Cumulative effect of change in method
of accounting for
investments 0.04 - -
------- ------- --------
Net income (loss) $0.50 ($0.91) ($1.17)
======= ======= ========
Fully Diluted
Income (loss) before extraordinary
item and cumulative effect of
changes in methods of accounting $0.56 ($0.59) ($1.17)
Extraordinary item (0.32)
Cumulative effect of change in method
of accounting for income taxes (0.10) - -
Cumulative effect of change in method of
of accounting for
investments 0.04 - -
------- ------- --------
Net income (loss) $0.50 ($0.91) ($1.17)
======= ======= ========
</TABLE>
See notes to consolidated financial statements.
22
<PAGE>
<PAGE> 23
AVATAR HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands except per-share data)
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Treasury
Stock (a) Capital Earnings (b) Stock (c)
<S> <C> <C> <C> <C>
Balance January 1, 1991 $10,021 $148,991 $35,840 $34,973
Net (loss) - - (8,635) -
------- -------- ------- -------
Balance December 31, 1991 10,021 148,991 27,205 34,973
Net (loss) - - (6,744) -
Conversion of 5-1/4%
debentures 6 133 - -
------- -------- ------- -------
Balance December 31, 1992 10,027 149,124 20,461 34,973
Net income - - 4,898 -
Conversion of 5-1/4%
debtentures 2,688 58,147 - -
Purchase of treasury
stock - - - 27,000
------- -------- ------- -------
Balance December 31, 1993 $12,715 $207,271 $25,359 $61,973
======= ======== ======= =======
</TABLE>
(a) $1 par value per share; 15,500,000 shares authorized and
12,715,448, 10,026,956, and 10,020,827, shares issued at
December 31, 1993, 1992 and 1991, respectively, including
treasury stock.
(b) Retained earnings is subsequent to the October 1, 1980 Plan of
Reorganization.
(c) Treasury stock included 3,620,346 shares at December 31, 1993
and 2,620,346 shares at December 31, 1992 and 1991.
There are 5,000,000 authorized shares of preferred stock, none of
which are issued.
See notes to consolidated financial statements.
23
<PAGE>
<PAGE> 24
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the year ended December 31,
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $4,898 ($6,744) ($8,635)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Gain on sale of subsidiaries (21,822) - -
Depreciation and amortization 9,441 10,239 8,905
Deferred gross profit 1,278 234 2,902
Deferred income taxes 11,897 - (2,788)
Loss on extinguishment of 8% debentures
for 9% debentures - 2,402 -
Cost of sales not requiring cash 1,962 2,246 3,155
Cumulative effect of change in method of
accounting for income taxes 964 - -
Cumulative effect of change in method of
accounting for investments
(net of income taxes of $238) (388) - -
Changes in operating assets and liabilities:
Decrease (increase) in restricted cash 189 (1,820) -
Principal payments on contracts receivable 21,249 18,589 15,052
(Increase) decrease in receivables (9,934) (600) 2,008
Decrease (increase) in other receivables 4,386 592 (135)
Increase in inventories (13,033) (4,764) (5,008)
Increase in prepaid expenses and other
assets (4,636) (3,977) (2,736)
Increase (decrease) in accounts payable
and accrued and other liabilities 3,474 (626) (612)
------ ------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,925 15,771 12,108
------ ------ ------
INVESTING ACTIVITIES
Investment in property, plant, and equipment (11,567) (13,785) (29,445)
Net proceeds from sale of subsidiaries 59,371 - -
Investment in securities (50,425) (5,614) (9,890)
Proceeds from the sale of
securities 17,444 9,302 2,985
NET CASH PROVIDED BY (USED IN) INVESTING ------ ------ ------
ACTIVITIES 14,823 (10,097) (36,350)
------ ------ ------
FINANCING ACTIVITIES
Net proceeds from revolving lines of credit
and long-term borrowings 26,121 70,592 26,327
Principal payments on revolving lines of
credit and long-term borrowings (48,538) (76,023) (8,683)
Purchase of 8% debentures (31) (380) (203)
Purchase of 9% debentures (1,106) - -
Proceeds from sale of utility preferred stock - - 9,000
Net proceeds from issuance of common stock in
conjunction with the redemption/conversion
of 5 1/4% debentures 30,340 69 -
Purchase of treasury stock (27,000) - -
Reduction in bond discount on the
extinquishment of 8% debentures - (313) -
Costs of exchanging 8% debentures for 9%
debentures - (1,222) -
NET CASH (USED IN) PROVIDED BY FINANCING ------- ------- -------
ACTIVITIES ($20,214) ($7,277) $26,441
------- ------- -------
</TABLE>
24
<PAGE>
<PAGE> 25
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows -- continued
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the year ended December 31,
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH $4,534 ($1,603) $2,199
Cash at beginning of year 2,644 4,247 2,048
------- ------- -------
CASH AT END OF YEAR $7,178 $2,644 $4,247
======= ======= =======
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS
<TABLE>
<CAPTION>
Transfers of assets and liabilities to
property held for sale
(midwest water utilities):
<S> <C> <C> <C>
Cash - ($211) -
Other receivables - (3,457) -
Inventory - (456) -
Property, plant and equipment, net - (128,455) -
Other assets - (4,756) -
Mortgages and notes payable - 41,075 -
Intercompany debt - 6,149 -
Accounts payable and other accrued
liabilities - 9,390 -
Deferred income taxes - 3,166 -
Contributions in aid of construction - 35,153 -
Minority interest in consolidated
subsidiaries - 1,082 -
------ -------- ------
Total midwest water utilities - ($41,320) -
====== ======== ======
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
For the year ended December 31,
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Cash paid during the period for:
Interest $15,327 $18,253 $19,565
======= ======= =======
Income taxes $2,038 $1,752 $726
======= ======= =======
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Redemption/conversion of 5-1/4% debentures $30,917 - -
======= ======= =======
Contributions in aid of construction $5,046 $7,145 $6,394
======= ======= =======
Retirement of 8% debentures, net - $21,976 -
======= ======= =======
Issuance of 9% debentures, net - $22,843 -
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
<PAGE> 26
AVATAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993
(Dollars in thousands except per-share data)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include Avatar Holdings Inc.
and its subsidiaries ("Avatar"). All significant intercompany accounts
and transactions have been eliminated in consolidation.
General:
Avatar is principally engaged in the business of developing and
selling improved and unimproved real estate, single and multifamily
residential housing and providing water and wastewater utility
services.
Restricted Cash:
Restricted cash represents collections of monthly payments on
pledged mortgage notes receivable. These collections will be applied
to reduce the related mortgage trust notes (See Note H).
Land Inventories:
Land inventories are stated at the lower of cost or estimated net
realizable value. Cost includes expenditures for acquisition,
construction, development and carrying charges. Interest costs
incurred during the period of land development, when applicable, are
capitalized as part of the cost of such projects. Land acquisition
costs are allocated to individual land parcels based upon the
relationship that the estimated sales prices of specific parcels bear
to the total sales price of the entire community. Construction and
development costs are added to the value of the specific parcels for
which the costs are incurred.
Revenues:
The Company uses the installment method of profit recognition for
sales of homesites and vacation ownership units. Under the installment
method, the gross profit on recorded sales is deferred and recognized
in income of future periods as principal payments on related contracts
are received. Under the installment method, deferred profit is
included in the balance sheet, as a reduction of contracts receivable,
until recognized.
Sales of housing units are recognized in full upon the transfer of
title to a purchaser. Revenues from commercial land and bulk land
sales are recognized in full at closing, provided the purchaser's
initial investment is adequate, all financing is considered
collectible, and Avatar is not obligated to perform significant future
activities.
Utility revenues are recorded as the service is provided.
26
<PAGE>
<PAGE> 27
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- continued
Property, Plant and Equipment:
Property, plant and equipment are stated at cost and depreciation
is computed principally by the straight line method over the estimated
useful lives of the assets. Depreciation, maintenance and operating
expenses of equipment utilized in the development of land are
capitalized as land inventory cost.
Property Held for Sale:
Property held for sale consists principally of utility property,
plant and equipment related to certain water and wastewater utilities
which were held for sale at December 31, 1992, and which were sold
during 1993. Such assets are reflected at historical cost.
Income Taxes:
Effective January 1, 1993, the Company adopted Financial
Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Under Statement
No. 109, the liability method is used in accounting for income taxes.
Under this method, deferred income tax assets and liabilities are
determined based on differences between financial reporting and tax
basis of assets and liabilities and are measured using the enacted tax
rates and laws that are expected to be in effect when the differences
reverse. Prior to the adoption of Statement No. 109, income tax
expense was based on items of income and expense that were reported in
different years in the financial statements and tax returns and were
measured at the tax rates in effect in the year the difference
originated (deferred method).
As permitted by Statement No. 109, the Company has elected not to
restate the financial statements of any prior years. The cumulative
effect of adopting Statement No. 109 resulted in a charge to net income
during the first quarter of 1993 of $964. The cumulative effect of
adopting Statement No. 109 for Avatar's utility subsidiaries was not
credited or charged to net income, but was recorded as a regulatory
liability or regulatory asset in accordance with accounting procedures
applicable to regulated enterprises. The regulatory liabilities and
regulatory assets will generally be amortized to income or expense over
the useful life of the utility system and reflect probable future
revenue reductions or increases from ratepayers. The effect of the
change on income from continuing operations for the year ended December
31, 1993 was not material.
Deferred Customer Betterment Fees:
Amounts collected from customers for utility improvements are
classified as "Deferred Customer Betterment Fees". These fees will be
reclassified to "Contributions in Aid of Construction" when service to
the customer begins.
Contributions in Aid of Construction:
Advances from real estate developers and other direct
contributions to utility subsidiaries for plant construction are
recorded as "Contributions in Aid of Construction". To the extent
required by regulatory agencies, the account balance is amortized over
the depreciable life of the utility plant as an offset to depreciation
expense.
27
<PAGE>
<PAGE> 28
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- continued
Investments:
In May 1993, the FASB issued Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" which, among other things, requires companies to
classify certain debt and equity securities as "held to maturity",
"available for sale" or "trading."
The Company elected to adopt Statement No. 115 as of December 31,
1993, and has classified all of its investment portfolio as trading.
This category is defined as including debt and marketable equity
securities held for resale in anticipation of earning profits from
short-term movements in market prices. Trading account securities are
carried at fair value which was $51,184 at December 31, 1993.
Subsequent to the initial adoption of Statement No. 115, both realized
and unrealized gains and losses will be included in net trading account
profit. The cumulative effect as of December 31, 1993 of adopting
Statement No. 115 was an increase in net income of $388 (net of income
taxes of $238) or $.04 per share.
Postretirement Benefits:
In 1993, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions". This statement requires the accrual of
postretirement benefits (such as health care benefits) during the years
an employee provides services. These benefits for retirees currently
are provided only to the employees of the Company's utility
subsidiaries. The costs of these benefits were previously expensed on
a pay-as-you-go basis.
Net Income Per Common Share:
Net income per common share is computed on the basis of the
weighted average number of shares outstanding plus common stock
equivalents, if any, that would result from the dilutive effect of
the assumed conversion (and associated purchase) of the 5-1/4%
convertible-purchase subordinated Debentures. In 1993, $30,917
of the Company's 5-1/4% convertible-purchase subordinated Debentures
were converted into 2,688,276 shares of common stock.
The result of this redemption and conversion was dilutive for the year
ended December 31, 1993. The primary and fully diluted computations
assume the actual conversion occurred at the beginning of the year.
Reclassifications:
Certain 1992 and 1991 financial statement items have been
reclassified to conform with 1993 presentation.
28
<PAGE>
<PAGE> 29
NOTE B - REAL ESTATE SALES
The components of real estate sales are as follows:
<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------
1993 1992 1991
----- ------ -----
<S> <C> <C> <C>
Gross homesite sales $10,913 $8,913 $10,917
Housing and vacation
ownership sales 7,798 7,225 7,914
Resorts revenues 13,540 12,349 12,667
Commercial/Industrial
land sales 2,149 1,075 1,181
Rental, leasing, cable
and other real estate
operations 5,597 5,232 5,095
------- ------- -------
Total real estate sales $39,997 $34,794 $37,774
======= ======= =======
</TABLE>
NOTE C - INVESTMENTS
Avatar's investment portfolio at December 31, 1993 includes $20,045
invested in corporate bonds rated B- or above by Moody's and/or
Standard and Poor's and $12,775 invested in
non-rated bonds of companies which are in bankruptcy and have
defaulted as to payments of principal and interest on such bonds.
These bonds are thinly traded and may require sixty to ninety days
to liquidate. The portfolio also includes an unsecured claim on a
company in bankruptcy of $5,689 which is not readily marketable,
$7,020 of equity securities, $1,661 of money market accounts
and $3,994 of U.S. Government and Agency securities.
Fair values for actively traded debt securities and equity securities
are based on quoted market prices on national markets. Fair values
for thinly traded investment securities are generally based on prices
quoted by investment brokerage companies.
At December 31, 1992 investments securities consisted of U.S.
Treasury Notes and Bills. Investments securities at December 31, 1992
are carried at cost which approximates market value.
29
<PAGE>
<PAGE> 30
NOTE D - CONTRACTS, MORTGAGE NOTES AND OTHER RECEIVABLES
Contracts, mortgage notes and other receivables are summarized as
as follows:
<TABLE>
<CAPTION>
December 31,
------------
1993 1992
------ ------
<S> <C> <C>
Contracts and mortgage notes receivable $117,249 $138,569
Notes and other receivables 5,639 9,355
-------- --------
122,888 147,924
-------- --------
Less:
Allowance for doubtful accounts 2,631 3,051
Market valuation reserve 2,082 3,297
Deferred gross profit 31,969 34,950
Other 3,210 3,433
-------- --------
39,892 44,731
-------- --------
82,996 103,193
Reclassified to property held for sale - 3,457
-------- --------
$82,996 $99,736
======== ========
</TABLE>
Contracts and mortgage notes receivable are generated through the
sale of homesites at various sales offices located throughout the
northeast, midwest and west coast of the United States. A significant
portion of the contracts and mortgage notes receivable at December 31,
1993, resulted from sales made to customers in the northeast.
Contracts receivable are collectible primarily over a ten year period
and bear interest at rates primarily ranging from 7 1/2% to 12% per
annum (weighted average rate 9.9%). A contract receivable is
considered delinquent if the scheduled installment payment remains
unpaid 30 days after its due date. Delinquent principal amounts of
contracts and mortgage notes receivable at December 31, 1993, and 1992
were $13,442 or 11.5% and $18,365 or 13.3%, respectively. Scheduled
maturities for the five years subsequent to 1993 are: 1994 - $16,072;
1995 - $19,289; 1996 - $20,209; 1997 - $19,546 and 1998 - $16,285.
NOTE E - LAND AND OTHER INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31
-----------
1993 1992
------ ------
<S> <C> <C>
Land developed and in process of development $76,145 $70,474
Land held for future development or sale 37,478 37,014
Dwelling units completed or under construction 2,407 2,217
Other 1,527 2,036
------- -------
117,557 111,741
Reclassified to property held for sale - 456
------- -------
$117,557 $111,285
======= =======
</TABLE>
30
<PAGE>
<PAGE> 31
NOTE F - ESTIMATED DEVELOPMENT LIABILITY FOR SOLD LAND
The estimated cost to complete required land and utility
improvements in all areas designated for homesite sales is summarized
as follows:
<TABLE>
<CAPTION>
December 31
-----------
1993 1992
------ ------
<S> <C> <C>
Gross unexpended costs (net of recoveries
of $12,688 in 1993 and $18,950 in 1992) $29,933 $30,787
Less costs relating to unsold homesites 10,602 6,648
------- -------
Estimated development liability for sold land $19,331 $24,139
======= =======
</TABLE>
These estimates are based on engineering studies of quantities of
work to be performed based on current estimated costs. These estimates
are reevaluated annually and adjusted accordingly.
A major portion of the estimated development liability for sold
land relates to utility extensions for homesites at Avatar's Arizona
community (Rio Rico) which were sold prior to 1980. At Rio Rico,
Avatar entered into various service and construction agreements with
Citizens Utilities Company (Citizens), a non-related company, generally
providing for Avatar to construct certain utility facilities and deed
them to Citizens. Avatar's expenditures, related to the construction
of some of these facilities, are expected to be reimbursed from
Citizens' present and future customers. Some of these reimbursable
amounts are determined by specific formulas. The recovery of these
expenditures is dependent upon the community attaining an occupancy
and/or usage level sufficient to allow reimbursement prior to the
expiration of the agreements. During 1993, Avatar purchased Citizens
Utilities' water and wastewater treatment division thereby eliminating
the portion of the existing agreement relating to water and wastewater
extensions, leaving only the electrical portion.
Avatar may be obligated to advance to its utility subsidiary
approximately $9,200 (current costs) to complete water and wastewater
utility facilities at its Poinciana subdivision. These possible future
obligations are based on internal engineering studies and are not
included in the estimated development liability discussed above. As
such, past and future expenditures are expected to be recovered from
customers' fees and future revenues.
Expenditures, net of recoveries, for homesite improvement costs
totaling $29,933 are estimated as follows: 1994-$8,967, 1995-$8,381
and $12,585 thereafter. Because the timing of the expenditures after
1995 is dependent upon certain future occurrences beyond Avatar's
control, projection by year after 1995 is not presently practicable.
31
<PAGE>
<PAGE> 32
NOTE G - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and accumulated depreciation consist
of the following:
<TABLE>
<CAPTION>
December 31
-----------
1993 1992
------ ------
<S> <C> <C>
Utility land, plant and equipment $193,745 $330,870
Land and improvements 12,126 12,577
Buildings and improvements 20,296 20,022
Machinery, equipment and fixtures 13,661 13,702
Other 396 267
-------- --------
240,224 377,438
Less accumulated depreciation 61,284 73,756
-------- --------
$178,940 $303,682
Reclassified to property held for sale, net - 128,455
-------- --------
$178,940 $175,227
======== ========
</TABLE>
Depreciation charged to operations during 1993, 1992 and 1991
was $6,524, $7,607 and $6,373, respectively, net of amortization
of contributions in aid of construction of $2,917, $2,632 and $2,532,
during 1993, 1992 and 1991, respectively.
NOTE H - NOTES, MORTGAGE NOTES AND OTHER DEBT
Notes, mortgage notes and other debt are summarized as follows:
<TABLE>
<CAPTION>
December 31
-----------
1993 1992
------ ------
<S> <C> <C>
Real estate and corporate
Bank credit lines $28,534 $27,794
8% senior debentures, due 2000, net of
unamortized discount of $1,384 and $1,514,
respectively 6,243 6,145
9% senior debentures, due 2000, net of
unamortized discount of $3,502 and $3995,
respectively 22,229 22,842
5-1/4% convertible-purchase subordinated
debentures, due 2007 - 30,977
Mortgage note obligations, interest rates
from 9 1/4% to 10%, due from 1994 - 1997 7,323 11,311
Avatar Homesite Mortgage Trust 1992- 1,
7% Notes 32,439 45,795
------- --------
$96,768 $144,864
======= ========
Utilities
Bank credit lines $4,675 $24,665
Utility first mortgage bonds due serially
from 1996 - 2007, interest rates from 7 3/4%
to 11 1/2% 26,433 56,851
Utility promissory notes, due 1994 - 2002 7,681 9,111
Other - -
------- -------
38,789 90,627
Reclassified to property held for sale - 41,075
------- -------
$38,789 $49,552
======= =======
</TABLE>
32
<PAGE>
<PAGE> 33
NOTE H - NOTES, MORTGAGE NOTES AND OTHER DEBT - continued
At December 31, 1993, Avatar had unsecured bank credit lines of
$15,000 and secured bank credit lines of $45,534. The unused portions
of the unsecured and secured lines were $10,325 and $17,000,
respectively. Interest rates for borrowings under these lines range from
4 1/2% to 6% on the unsecured bank credit lines and from 4 3/4% to
6 1/4% on the secured bank credit lines at December 31, 1993.
Additionally, certain credit lines provide for fixed rate
borrowing pursuant to Eurodollar interest rates.
Under the terms of these agreements Avatar is
restricted from paying dividends with certain exceptions and is
required to maintain a minimum net worth as defined. The secured lines
are collateralized by certain contracts and mortgage notes receivable
of $20,712 and investment securities of $39,932 at
December 31, 1993.
In July 1992, Avatar issued $51,160 of 7% Mortgage
Trust Notes, pursuant to the securitization of a
portion of its homesite receivables. The notes
mature on December 15, 2002, however, the Company expects the notes to<PAGE>
be repaid in approximately 36 months through the collection of
principal payments, including principal prepayments and late
collections and all interest payments, net of servicing fee and other
adjustments on the mortgage loans. Additionally, all liquidation
proceeds with respect to the mortgage loans, proceeds from the sale of
property acquired through foreclosure or deed-in-lieu of foreclosure
proceedings and proceeds from the purchase of mortgage loans by the
issuer are required to be applied to these notes. The balance of these
notes at December 31, 1993 was $32,439.
Maturities of notes, mortgage notes and other debt at December 31,
1993, are as follows:
<TABLE>
<CAPTION>
Real estate Utilities Total
----------- --------- -------
<S> <C> <C> <C>
1994 $18,664 $7,163 $25,827
1995 17,386 2,380 19,766
1996 2,817 4,780 7,597
1997 2,938 4,159 7,097
1998 3,115 3,470 6,585
thereafter 51,848 16,837 68,685
------- ------- --------
$96,768 $38,789 $135,557
======= ======= ========
</TABLE>
Maturities for 1994 include approximately $15,633 related to the
Company's bank credit lines. There is no assurance that Avatar will be
able to obtain satisfactory extensions or refinancing of these or other
credit lines.
Interest capitalized during 1993, 1992 and 1991 amounted to $381,
$772, and $746, respectively.
Property, plant and equipment and inventory pledged as collateral
for notes, mortgage notes and other indebtedness had a net book value
of approximately $151,000 at December 31, 1993.
33
<PAGE>
<PAGE> 34
NOTE I - MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES
As of December 31, 1993 and 1992, preferred stock outstanding is
as follows:
<TABLE>
<CAPTION>
December 31
-----------
1993 1992
------ ------
<S> <C> <C>
9% Cumulative preferred stock $9,000 $9,000
11% Cumulative preferred stock - 4,920
5 1/2% to 6% cumulative preferred stock 1,342
Other 58 144
------ ------
9,058 15,406
Reclassified to property held for sale - 1,082
------ -------
$9,058 $14,324
====== =======
</TABLE>
Avatar's utility subsidiary's 9% cumulative preferred stock issue
provides for redemption to occur no earlier than March 1, 1997, in
whole or in part; however, a minimum of $1,800 of the preferred stock
must be redeemed per annum beginning in 1997. A redemption of all
outstanding shares shall occur no later than March 1, 2001.
Maturities of preferred stock are as follows: 1997-$1,800, 1998
- $1,800 and $5,458 thereafter.
Charges to operations recorded as "Other Expenses" relating to
preferred stock dividends of subsidiaries amounted to $1,261 in 1993,
$1,544 in 1992, and $1,231 in 1991.
NOTE J - RETIREMENT PLANS
Avatar has two defined contribution savings plans that cover
substantially all employees. Under one of the savings plans, Avatar
contributes to the plan based upon specified percentages of employees'
voluntary contributions. The other savings plan does not provide for
contributions by Avatar.
Avatar's non-contributory defined benefit pension plan covers
substantially all employees of its subsidiary, Avatar Utilities Inc.
The benefits are based on years of service and the employees'
compensation during the highest 5 out of the last 10 years of
employment. Avatar's funding policy is to contribute amounts to the
plan sufficient to meet the minimum funding requirements set forth in
the Employee Retirement Income Security Act of 1974.
34
<PAGE>
<PAGE> 35
NOTE J - RETIREMENT PLANS - continued
The following table sets forth the defined benefit plan's funded
status as of December 31, 1993, 1992 and 1991 and the retirement
expense recognized in the consolidated statements of income for the
years then ended.
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation,
including vested benefits of $3,316,
$4,969, and $4,418, respectively $3,382 $5,060 $4,478
======= ======= =======
Projected benefit obligation for services
rendered to date ($4,201) ($7,520) ($6,826)
Plan assets at fair value 4,800 7,132 6,594
------- ------- -------
Projected benefit obligation less than
(in excess of) plan assets 599 (388) (232)
Unrecognized net gain (788) (733) (817)
Prior service cost not yet recognized
in net periodic pension cost 192 571 636
Unrecognized net assets at January 1, 1986,
net of amortization (102) (73) (81)
------- ------- -------
Accrued pension cost included in accrued
and other liabilities ($99) ($623) ($494)
======= ======= =======
Net retirement cost included the following components:
Defined benefit plan:
Service cost -- benefits earned
during the period $220 $434 $398
Interest cost on projected benefit obligation 190 537 488
Actual return on plan assets (241) (489) (726)
Net amortization and deferral 51 (1) 308
------- ------- -------
Net pension cost 220 481 468
Defined contribution plan 89 90 204
------- ------- -------
Total retirement expense $309 $571 $672
======= ======= =======
</TABLE>
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of
the projected benefit obligation were 8% and 6%, respectively, at
December 31, 1993, 1992 and 1991. The expected long-term rate of return
on plan assets for 1993, 1992 and 1991 was 8%.
At December 31, 1993, and 1992, the plan assets are invested in a
group annuity contract with a major insurance company. Approximately
70% and 80%, respectively, of the plan assets at December 31, 1993
and 1992, are invested in a general asset fund of the insurance
company that is comprised primarily of fixed income securities. The
remaining assets are invested in equity securities, public bonds and
cash equivalents in the insurance company's separate accounts.
35
<PAGE>
<PAGE> 36
NOTE K - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Avatar's utility subsidiary sponsors a defined benefit
postretirement plan that provides medical and life insurance benefits
to both salaried and nonsalaried employees after retirement. The
postretirement medical and life insurance plan is non-contributory.
Avatar's utility subsidiary's funding policy for its
postretirement plan is to fund on a pay-as-you-go basis. Prior to
1993, the expense was also measured on this basis. In 1993, the
Company adopted FASB Statement No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", which requires
accounting for postretirement benefits on an accrual basis. The effect
of adopting Statement No. 106 increased net periodic postretirement
benefit expense by $712 for 1993. Postretirement expense for 1992 and
1991 has not been restated.
The following table sets forth the plan's status as of December
31, 1993:
<TABLE>
<CAPTION>
Accumulated postretirement benefit obligation:
<S> <C>
Retirees ($594)
Fully eligible active plan participants (778)
Other active plan participants (2,264)
------
(3,636)
Plan assets at fair value 0
------
Accumulated postretirement benefit
obligation in excess of plan assets (3,636)
Unrecognized net gain from past experience
different from that assumed and from
changes in assumptions (24)
Unrecognized transition obligation 2,948
------
Accrued postretirement benefit cost ($712)
======
Net periodic postretirement benefit cost
for the year ended December 31, 1993 included
the following components:
Service cost $342
Interest cost on accumulated postretirement
benefit obligation 246
Amortization of transition obligation
over 20 years 155
------
Net periodic postretirement benefit cost 743
======
</TABLE>
For measurement purposes, a 13% annual rate of increase in the
per capita cost of covered health care benefits was assumed for 1993;
the rate of increase was assumed to decrease gradually to 6% for the
year 2000 and remain at that level thereafter. The health care cost
trend rate assumption has a significant effect on the amounts reported.
To illustrate, increasing the assumed health care cost trend rates by
1 percentage point each year would increase the accumulated
postretirement benefit obligation as of December 31, 1993 by $626 and
the aggregate of the service and interest cost components of net
periodic postretirement benefit for the year then ended by $122.
The weighted average discount rate used in determining the
accumulated postretirement benefit obligation is 8%.
36
<PAGE>
<PAGE> 37
NOTE L - LEASE COMMITMENTS
Avatar leases the majority of its administration and sales offices
under operating leases that expire at varying times through 1999.
Rental expenses for the years 1993, 1992 and 1991 were $1,186, $1,513,
and $2,037, respectively. Minimum rental commitments under
noncancelable operating leases as of December 31, 1993 were as follows:
1994 - $954; 1995 - $929; 1996 - $923; 1997-$746; 1998 - $618; and
thereafter - $1,512.
NOTE M - ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities are summarized as follows:
<TABLE>
<CAPTION>
December 31
-----------
1993 1992
------ ------
<S> <C> <C>
Customer deposits and advances $2,380 $7,263
Accounts payable 4,501 4,893
Property taxes 1,427 3,006
Interest 1,576 2,299
Other 16,962 8,832
------- -------
26,846 26,293
Reclassified to property held for sale - 9,390
------- -------
$26,846 $16,903
======= =======
</TABLE>
As of December 31, 1993, the Company had agreements with four executive
officers providing as incentive compensation a cash payment to each
officer (to the extent vested), within ten days following the respective
fifth anniversary date of the respective agreement (or the termination
date, if earlier), in an amount equal to the excess of a formula amount
based upon the closing prices of Avatar common stock during a specified
period prior to the respective fifth anniversary date (or termination
date, if earlier) over the closing price of Avatar common stock on
the date of the respective agreement. Each of these executive officers
will vest in the rights to this incentive compensation with respect to
one-fifth thereof on each of the first through fifth anniversaries,
subject to certain terms and conditions of the contracts should their
employment status change prior to the fifth anniversary. For the year
ended December 31, 1993, the Company recorded incentive compensation
of $469 associated with these agreements. The liability for incentive
compensation included in other liabilities at December 31, 1993 and
1992 is $754 and $285, respectively. (See Note R - Contingencies)
NOTE N - INCOME TAXES
Avatar Holdings Inc. is the successor in interest to GAC
Corporation. GAC, together with certain of its subsidiaries, was
reorganized pursuant to Chapter X of the Federal Bankruptcy Act of
1898. The Bankruptcy Court confirmed the Trustees' Plan of
Reorganization and issued a final decree on October 16, 1981,
discharging the Trustees from their duties.
Under the installment method of tax reporting for homesite sales,
Avatar anticipates that its 1993 consolidated federal income tax return
will reflect a net operating loss carryforward of approximately
$18,000, which expires in years 2003 through 2004. The net operating
loss carryforward was generated after the reorganization as a result of
electing the installment method of reporting homesite sales for tax
purposes. In addition, investment tax credits and alternative minimum
tax credit carryforwards of approximately $5,000 are available, a
portion of which expires in years 1994 to 2001. These
37
<PAGE>
<PAGE> 38
NOTE N - INCOME TAXES - continued
carryforwards have not been examined by the Internal Revenue Service.
The Company has recorded a valuation allowance of $33,000 with
respect to the deferred income tax assets which remain after offset by
the deferred income tax liabilities. Included in the valuation
allowance for deferred income tax assets is approximately $9,000 which,
if utilized, will be credited to additional paid-in capital.
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred income tax
assets and liabilities as of December 31, 1993 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred income tax assets
Net operating loss carryover $7,000
Tax over book basis of land inventory 20,000
Unrecoverable land development costs 5,000
Tax over book basis of depreciable assets 6,000
Alternative minimum tax and investment tax
credit carryforward 5,000
Other 2,000
-------
Total deferred income taxes 45,000
Valuation allowance for deferred income tax
assets (33,000)
--------
Deferred income tax assets after
valuation allowance 12,000
Deferred income tax liabilities
Book over tax income recognized on land sales (3,000)
Deferred carrying charges on utility plant (3,000)
Other (6,000)
--------
Total deferred income tax liabilities (12,000)
--------
Net deferred income taxes $0
========
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Liability Deferred
Method Method
1993 1992 1991
--------- -------- --------
<S> <C> <C> <C>
Federal:
Current $321 $ - ($1,288)
Deferred 10,884 - (1,798)
State:
Current 544 - 404
Deferred 1,013 - (990)
--------- -------- --------
Total $12,762 $ - ($3,672)
========= ======== ========
</TABLE>
Deferred income tax credits result from timing differences in the
recognition of certain expenses for tax and financial reporting
purposes. For the years ended December 31, 1992 and 1991, the
principal components of deferred income tax credits are the theoretical
income tax related to the interest discount
38
<PAGE>
<PAGE> 39
NOTE N - INCOME TAXES - continued
on debentures issued as part of the reorganization and the deferred
income tax attributable to the difference between book and income tax
depreciation on certain utility assets with long useful lives.
A reconciliation of income tax expense (credit) to the expected
income tax expense (credit) at the federal statutory rate of 35% for
the twelve months ended December 31 is as follows:
<TABLE>
<CAPTION>
Liability Deferred
Method Method
--------- ---------
1993 1992 1991
--------- -------- --------
<S> <C> <C> <C>
Income tax expense (credit) computed
at statutory rate $6,382 ($2,293) ($4,184)
Income tax effect of non-deductible
dividends on preferred stock
of subsidiary 441 525 419
Depreciation on assets contributed to
utility companies - (665) (615)
FTC settlement - - 230
State income tax (credit), net of
federal effect 1,012 - (387)
Loss not available for carryback - 2,433 865
Difference between book and tax basis
of midwest water utilities 2,051 - -
Gross up tax received on contributions
in aid of construction 206 - -
Change in valuation allowance on
deferred tax assets 2,670 - -
--------- -------- ---------
Provision for income taxes $12,762 $ - ($3,672)
========= ======== =========
</TABLE>
In 1992, 1991, 1989 and 1988, the Company elected the installment
method for recording a substantial amount of its homesite sales in its
federal income tax return, which deferred taxable income into future
fiscal periods. As a result of such election, the Company may be
required to pay compound interest on certain federal income taxes in
future fiscal periods attributable to the taxable income deferred under
the installment method. The Company believes that the potential
interest amount, if any, will not be material to its financial position
and results of operations of the affected future periods.
NOTE O - SALE OF SUBSIDIARIES
On January 30, 1993, the Company entered into stock purchase
agreements for the sale of its Midwest Water Utilities located in
Indiana, Missouri, Ohio, and Michigan. The closing of the sale of
the midwest water utilities took place on August 31, 1993, with an
aggregate selling price of $62,000, resulting in a pre-tax gain of
$21,822, subject to post-closing adjustments.
NOTE P - REDEMPTION/CONVERSION OF 5-1/4% CONVERTIBLE-PURCHASE
SUBORDINATED DEBENTURES
On June 4, 1993 the Company called for the redemption of all its
outstanding 5-1/4% convertible-purchase subordinated Debentures due May
1, 2007 at a redemption price of 100% of the principal amount plus
accrued and unpaid interest from January 15, 1993 through the redemption
date, July 4, 1993. Holders were entitled to convert their 5-1/4%
Debentures into shares of the Company's common stock at a conversion
price of $23.00 per share provided they paid in cash an amount equal to
the principal amount of the 5-1/4% Debentures being converted, for
which they received additional shares of common stock equal to the
number issued on conversion. A total of $30,917 principal amount of
the 5-1/4% Debentures were converted and 2,688,276 shares of common
stock were
39
<PAGE>
<PAGE> 40
NOTE P - REDEMPTION/CONVERSION OF 5-1/4% CONVERTIBLE-PURCHASE
SUBORDINATED DEBENTURES - continued
issued. The remaining $57 principal amount of 5-1/4% Debentures were
redeemed as of July 4, 1993. The net result of this transaction,
after expenses, was an increase in cash of $30,340, a decrease in
debt of $30,973 and an increase in stockholders' equity of $60,835.
NOTE Q - TREASURY STOCK PURCHASE
On September 30, 1993 the Company purchased 1,000,000 shares of
the Company's common stock from the estate of Peter J. Sharp at a
purchase price of $27.00 per share. These shares are being held in the
Company's treasury for future corporate purposes.
NOTE R - CONTINGENCIES
Avatar is involved in various pending litigation matters primarily
arising in the normal course of its business. Although the outcome of
these and the following matters can not be determined, it is the
opinion of management that the resolution of these matters will not
have a material effect on Avatar's business or financial position.
On October 1, 1993, the United States, on behalf of the U.S.
Environmental Protection Agency, filed a civil action against a
utility subsidiary of Avatar in the U.S. District Court for the Middle
District of Florida. (United States vs. Florida Cities Water Company,
Civil Action No. 93-281-C1) The complaint alleges that the
subsidiary's wastewater treatment plant in North Fort Myers, Florida,
committed various violations of the Clean Water Act, 33 U.S.C. S1251
et seq., including (1) discharge of pollutants without an operating
permit from October 1, 1988 to October 31, 1989; (2) discharging
from an unpermitted discharge location from November 1, 1989 until
July 14, 1992; and (3) discharging pollutants in excess of permit
limitations at various times from July 1991 to June of 1992. The
government is seeking the statutory maximum civil penalties of $25,000
per day, per violation based upon the allegations. The Subsidiary
strongly believes that there are mitigating factors as well as valid
legal defenses that could reduce or eliminate the imposition of
monetary sanctions.
On March 1, 1994, the Wisconsin Department of Natural Resources
(the "Department") sent Avatar notice that the Department had
recently issued a second Record of Decision ("ROD") in connection
with the Edgerton Sand & Gravel Landfill site (the "Site"). The ROD
calls for the City of Edgerton's public water supply system to be
extended to the owners of private wells in the vicinity of the Site.
The ROD also states that other work related to soil and groundwater
remedial action would be required at the Site. The Department demanded
that all potentially responsible parties ("PRP's") associated with
the Site organize into a PRP group to undertake the implementation of
the ROD. Avatar was previously identified as a PRP by the Department.
Avatar believes that it is not liable for any claims by any
governmental or private party in connection with the Site.
40
<PAGE>
<PAGE> 41
On February 25, 1994, the Company's former President and Chief
Executive Officer commenced a lawsuit against Avatar and others
claiming damages arising out of his termination of his employment
purportedly for "Good Reason" (as defined in his employment
agreement.) He also seeks to recover damages from Avatar for libel
and slander and from the other defendants based on their alleged
malicious interference with his employment agreement. Avatar denies
that he had Good Reason to terminate his employment agreement.
Avatar does not believe there is any valid basis for his claims,
and various affirmative defenses have been asserted. Avatar also
has asserted counterclaims against him for breach of contract,
promissory estoppel and improper inducement in connection with
amendments to his employment agreement.
<PAGE>
<PAGE> 42
NOTE S - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
For the year ended December 31
1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Revenues:
Real estate
Unaffiliated customers $58,206 $51,561 $54,689
Intersegment 343 324 309
-------- ------- -------
58,549 51,885 54,998
Utility
Unaffiliated customers 67,842 53,600 49,394
Intersegment - - -
-------- ------- -------
67,842 53,600 49,394
Elimination of
intersegment revenues (343) (324) (309)
-------- -------- --------
Total Revenues $126,048 $105,161 $104,083
======== ======== ========
Operating profit:
Real estate $2,435 ($824) ($5,346)
Utility 31,457 14,960 12,255
-------- -------- --------
Total operating profit 33,892 14,136 6,909
Interest expense (15,656) (18,478) (19,216)
-------- -------- --------
Income (loss) before income taxes,
extraordinary item and effect of
changes in methods of accounting $18,236 ($4,342) ($12,307)
======== ======== ========
Depreciation and amortization:
Real estate $2,030 $2,747 $1,961
Utility 4,494 4,860 4,412
-------- -------- --------
Total $6,524 $7,607 $6,373
======== ======== ========
Capital expenditures:
Real estate $1,857 $2,834 $7,403
Utility 15,226 18,788 24,410
-------- -------- --------
$17,083 $21,622 $31,813
======== ======== ========
December 31
1993 1992 1991
-------- ------- -------
Identifiable assets:
Real estate $228,708 $232,016 $249,065
Utility 181,172 233,486 310,372
-------- -------- --------
Total Identifiable assets 409,880 465,502 559,437
General corporate assets 51,602 8,946 13,453
-------- -------- --------
Total Assets $461,482 $474,448 $572,890
======== ======== ========
</TABLE>
42
<PAGE>
<PAGE> 43
NOTE S - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS --
continued
(a) Avatar's businesses are primarily conducted in the United
States.
(b) In computing operating profit, interest has been reflected
separately.
(c) Intersegment revenues contain primarily intercompany interest
and management fees charged to affiliates.
(d) Identifiable assets by segment are those assets that are used in
the operations of each segment. General corporate assets are
principally cash, receivables and investments.
(e) No significant part of the business is dependent upon a single
customer or group of customers.
(f) Cable TV, mortgage and hotel and recreational operations which
primarily serve Avatar communities do not qualify individually
as separate reportable segments and are included in the real
estate segment.
(g) General corporate expenses are included in the real estate
segment.
NOTE T- FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of the Company's financial
instruments at December 31, 1993, are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
-------- -------
<S> <C> <C>
Cash and restricted cash $8,620 $8,620
Investments 51,184 51,184
Contract, mortgage notes
and other receivables 82,996 85,048
Notes, mortgage notes, and other debt:
Short term bank credit lines 33,209 33,209
Mortgage obligations, first mortgage bonds
and promissory notes 41,437 45,079
Senior debentures 28,472 31,643
Mortgage trust notes 32,439 32,439
</TABLE>
The following methods and assumptions were used by the Company in
estimating the fair value of financial instruments:
Cash and restricted cash: The carrying amount reported in the
balance sheet for cash approximates its fair value.
Investments: The carrying amount in the balance sheet for
investments is at fair market value which is generally
determined by quoted market prices.
Contracts, mortgage notes and other receivables: The fair value
amount of the Company's contracts, mortgage notes, and other
receivables are estimated based on a discounted cash flow analysis.
Notes, mortgage notes and other debt: The carrying amounts of the
Company's borrowings under its short-term bank credit lines
approximate their fair value. The fair values of the Company's
mortgage obligations, mortgage bonds, and promissory notes are
estimated using discounted cash flow analysis, based on the
Company's current incremental borrowing rates for similar types of
borrowing arrangements.
43
<PAGE>
<PAGE> 44
NOTE T- FAIR VALUE OF FINANCIAL INSTRUMENTS - continued
Senior debentures: The fair values of the Company's Senior and
Subordinated debentures are estimated based on quoted market prices.
Mortgage trust notes: The carrying amount in the balance sheet for
mortgage trust notes approximates its fair value. The current
market rate for similar types of borrowing arrangements approximates
the rate of the mortgage trust notes.
44
<PAGE>
<PAGE> 45
NOTE U - QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1993 and 1992 is as
follows:
<TABLE>
<CAPTION>
1993 Quarter
------------
First Second Third Fourth
----- ------ ----- ------
<S> <C> <C> <C> <C>
Net revenues (1) $27,993 $27,153 $46,335 $24,567
Expenses 27,673 27,330 25,872 26,937
------- ------- ------- -------
Income (loss) before income
taxes and changes in methods
of accounting 320 (177) 20,463 (2,370)
Provision for income taxes (396) (278) (10,118) (1,970)
Changes in methods of
accounting (964) - - 388
------- ------- ------- -------
Net income (loss) ($1,040) ($455) $10,345 ($3,952)
======= ======= ======= =======
Per share amounts:
Primary
Income (loss) before
cumulative effect of
changes in methods
of accounting ($0.01) ($0.06) $1.03 ($0.48)
Cumulative effect of
change in method of
accounting for income
taxes (0.13) - - -
Cumulative effect of
change in method of
accounting for
investments - - - 0.04
------- ------- ------- -------
Net (loss) ($0.14) ($0.06) $1.03 ($0.44)
======= ======= ======= =======
Fully Diluted
Income (loss) before
cumulative effect of
changes in methods
of accounting ($0.01) ($0.06) $1.03 ($0.48)
Cumulative effect of
change in method of
accounting for income
taxes (0.13) - - -
Cumulative effect of
change in method of
accounting for
investments - - - 0.04
------- ------- ------- -------
Net (loss) ($0.14) ($0.06) $1.03 ($0.44)
======= ======= ======= =======
1992 Quarter
------------
First Second Third Fourth
----- ------ ----- ------
Net revenues (1) $26,251 $25,889 $25,834 $27,187
Expenses 27,011 25,968 26,894 29,630
------- ------- ------- -------
Loss before extraordinary item (760) (79) (1,060) (2,443)
Loss on extinguishment of debt - - - (2,402)
------- ------- ------- -------
Net Loss ($760) ($79) ($1,060) ($4,845)
======= ======= ======= =======
Per share amounts:
Primary
Net Income (loss) before
extraordinary item ($0.10) ($0.01) ($0.14) ($0.34)
Extraordinary item - - - (0.32)
------- ------- ------- -------
Net (loss) ($0.10) ($0.01) ($0.14) ($0.66)
======= ======= ======= =======
Fully Diluted
Net Income (loss) before
extraordinary item ($0.10) ($0.01) ($0.14) ($0.34)
Extraordinary item - - (0.32)
------- ------- ------- -------
Net (loss) ($0.10) ($0.01) ($0.14) ($0.66)
======= ======= ======= =======
</TABLE>
(1) Net revenues include homesite sales which are recorded on the
installment method of profit recognition.
45
<PAGE>
<PAGE> 46
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
A. Identification of Directors
The information called for in this item is incorporated by
reference to Avatar's 1994 definitive proxy statement (under
"Election of Directors") to be filed with the Securities and
Exchange Commission on or before April 30, 1994.
B. Identification of Executive Officers
For information with respect to the executive officers of
Avatar, see "Executive Officers of the Registrant" at the end
of Part I of this report.
Item 11. Executive Compensation
The information called for by this item is incorporated by
reference to Avatar's 1994 definitive proxy statement (under the
caption "Executive Compensation and Other Information") to be filed
with the Securities and Exchange Commission on or before April 30,
1994.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information called for by this item is incorporated by
reference to Avatar's 1994 definitive proxy statement (under the
captions "Principal Stockholders" and "Security Ownership of
Management") to be filed with the Securities and Exchange Commission on
or before April 30, 1994.
Item 13. Certain Relationships and Related Transactions
None
46
<PAGE>
<PAGE> 47
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
Financial Statements and Schedules:
See Item 8 "Financial Statements and Supplementary Data" on Page
17 of this report.
Schedules:
I - Marketable Securities and Other Investments
V - Property, Plant and Equipment
VI - Accumulated Depreciation, Depletion and Amortization
of Property, Plant and Equipment
VIII - Valuation and Qualifying Accounts
IX - Short-Term Borrowings
X - Supplementary Income Statement Information
Schedules other than those listed above are omitted, since the
information required is not applicable or is included in the
financial statements or notes thereto.
Exhibits:
3(a) * Certificate of Incorporation, as amended (previously
filed as an exhibit to the Form 10-K for the year ended
December 31, 1986).
3(b) By-laws, as amended through March 24, 1994 (filed
herewith).
4(a) * Instruments defining the rights of security holders,
including indenture for 8% senior debentures
(previously filed as an exhibit to the Form 8-K dated
as of September 12, 1980).
4(b) * Supplemental Indenture for 8% senior debentures dated
as of December 19, 1992 (previously filed as an exhibit
to Form 10-K for the year ended December 31, 1992).
4(c) * Indenture for 9% senior debentures dated as of December
19, 1992 (previously filed as an exhibit to Form 10-K
for the year ended December 31, 1992).
4(d) * Indenture for 5-1/4% convertible-purchase subordinated
debentures dated May 1, 1987 (previously filed as an
exhibit to Form 10-Q for the period ended March 31,
1987).
47
<PAGE>
<PAGE> 48
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K -- continued
10(a) * Consulting Agreement, dated as of December 31, 1990,
by and between Avatar Properties Inc. and John Sladkus
(previously filed as an exhibit to Form 10-K for the
year ended December 31, 1990).
Consulting Agreement, dated as of December 31, 1990,
by and between Avatar Utilities Inc. and John Sladkus
(previously filed as an exhibit to Form 10-K for the
year ended December 31, 1990).
10(b) * 1 Employment Agreement, dated as of June 15, 1992, by
and between Avatar Holdings Inc. and Lawrence Wilkov
(previously filed as an exhibit to Form 10-K for the
year ended December 31, 1992).
10(c) * 1 Employment Agreement, dated as of June 15, 1992, by
and between Avatar Holdings Inc. and Edwin Jacobson
(previously filed as an exhibit to Form 10-K for the
year ended December 31, 1992).
10(d) 1 Amendment to Employment Agreement, dated as of March
1, 1994, by and between Avatar Holdings Inc. and
Edwin Jacobson (filed herewith).
10(e) * Four separate Stock Purchase Agreements dated January
30, 1993, with respect to the sale of the Registrant's
utilities located in Indiana, Missouri, Ohio and
Michigan, respectively (previously filed as an exhibit
to Form 8-K dated as of February 3, 1993).
10(f) * Agreement dated January 30, 1993, with respect to the
transactions contemplated by the Stock Purchase
Agreements (previously filed as an exhibit to Form 8-K
dated as of February 3, 1993).
10(g) * Guarantee by the Registrant (previously filed as an
exhibit to Form 8-K dated as of February 3, 1993).
10(h) * Guarantee by American Water Works Company, Inc.
(previously filed as an exhibit to Form 8-K dated as of
February 3, 1993).
10(i) 1 Incentive Compensation Agreement, dated as of January
18, 1993 by and between Avatar Holdings Inc. and
Dennis Getman (filed herewith).
10(j) 1 Incentive Compensation Agreement, dated as of
September 9, 1993 by and between Avatar Holdings Inc.
and Charles McNairy (filed herewith).
10(k) Revolving Credit Agreement between Avatar Properties
Inc. and BHF Bank dated November 30, 1993 (filed
herewith).
11 Statement Re: Computation of per share earnings (filed
herewith).
48
<PAGE>
<PAGE> 49
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K -- continued
22 Subsidiaries of the Registrant (filed herewith).
Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
December 31, 1993.
* These exhibits are incorporated by reference and are on file
with the Securities and Exchange Commission.
1 Employment and compensation agreements.
49
<PAGE>
<PAGE> 50
SCHEDULE I - MARKETABLE SECURITIES AND OTHER INVESTMENTS
AVATAR HOLDINGS INC. AND SUBSIDIARIES
(Dollars in thousands, except number of shares)
<TABLE>
<CAPTION>
12/31/93 12/31/93
Principal Market Carrying
Amount Cost Value Value
--------- ------- -------- ---------
<S> <C> <C> <C> <C>
DEBT SECURITIES
U.S. GOVERNMENT AND AGENCIES 3,903 $3,983 $3,994 $3,994
CORPORATE BONDS AND OTHER INVESTMENTS
AIM MGMT GROUP 9.000 11/15/03 700 700 718 718
AMERICAN ANNUITY GRP INC. 9.500 8/15/01 1,000 1,028 1,056 1,056
ARMCO INC. 9.375 11/01/00 700 700 711 711
CLARK OIL & REF CORP DEB 10.500 12/01/01 1,000 1,087 1,084 1,084
CMI INDUSTRIES INC. 9.5000 10/01/03 700 695 707 707
CTC MANSFIELD FDG CORP 10.250 03/30/03 750 800 796 796
DOMINION TEXTILE USA INC 8.875 11/01/03 700 697 702 702
ENVIROSOURCE INC. 9.750 06/15/03 1,000 990 975 975
INDORAYON SR NTS 9.125 10/15/00 750 750 765 765
INLAND STEEL CO. FMB 12.000 12/01/98 1,000 1,129 1,141 1,141
KEARNY ST REAL ESTATE CO 9.560 07/15/03 750 777 774 774
LEVITZ FURNITURE CORP 9.625 07/15/03 1,000 1,027 1,076 1,076
MAXUS ENERGY CORP 9.375 11/01/03 750 750 752 752
PATHMARK STORES INC. 9.625 05/01/03 750 744 759 759
PIEDMONT AVIATION SER F 10.150 03/28/03 1,000 995 1,012 1,012
PRESIDENTIAL LIFE CORP 9.500 12/15/00 700 700 709 709
RALPHS GROCERY CO. 9.000 04/01/03 700 707 713 713
RELIANCE GRP HLDGS INC 9.00 11/15/00 700 700 714 714
REVLON CONSUMER PRODUCTS 9.500 06/01/99 1,000 1,014 996 996
RIVERWOOD INTL CORP 10.750 06/15/00 1,000 1,096 1,090 1,090
SEQUA CORP 8.75 12/15/01 750 750 752 752
USG CORP 10.250 12/15/02 1,000 1,078 1,028 1,028
RJR NABISCO INC 8.00 01/15/00 1,000 984 1,015 1,015
(1) BANK OF NEW ENGLAND 9.5% 2/15/96 1,000 331 290 290
(1) FIRST EXEC CIG NEBRASKA 8.34% 11/93 300 237 243 243
(1) FIRST EXEC TENNESSE 8.68% 9/15/96 3,340 2,542 2,639 2,639
(1) INTEGRATED RESOURCES 10% 1990 4,000 2,486 2,486 2,486
(1) IRE UNSECURED CLAIM 15,694 5,689 5,689 5,689
(1) JIM WALTER 13.75% 2/1/03 3,800 2,679 3,173 3,173
(1) MAXWELL COMMUNICATIONS 5% 1995 CHF 9,315 2,643 2,546 2,546
(1) MAXWELL COMMUNICATIONS 6% 1993 145 36 34 34
(1) MAXWELL COMMUNICATIONS 8.375% 1993 ECU 2,600 1,162 1,130 1,130
(1) SOUTHEAST BANK EURO FLOAT 6,600 990 1,056 1,056
------- ------ ------ ------
Sub-total 70,097 42,676 43,325 43,325
Number of Market Carrying
Shares Cost Value Value
--------- ------- -------- --------
EQUITY SECURITIES 127,600 7,043 7,020 7,020
MONEY MARKET ACCOUNTS 1,661,371 1,661 1,661 1,661
------ ------ ------
Sub-total 8,704 8,681 8,681
Payable to Broker (822) (822) (822)
------- ------- -------
Marketable securities and
other investments at December 31, 1993 $50,558 $51,184 $51,184
======= ======= =======
</TABLE>
(1) Corporation in Bankruptcy/Principal and Interest in Default
50
<PAGE>
<PAGE> 51
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
AVATAR HOLDINGS INC. AND SUBSIDIARIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance at Balance
Beginning Additions Transfers at End of
Classification of Period at Cost Retirements in (out) Period
--------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Utility land, plant and equipment $175,386 $15,226 ($2,174) $5,307 $193,745
Land and improvements 12,577 164 (220) (395) 12,126
Buildings and improvements 20,022 463 (225) 36 20,296
Machinery, equipment and fixtures 13,702 1,058 (1,079) (20) 13,661
Other 267 172 - (43) 396
-------- ------- -------- ------ --------
Total $221,954 $17,083 ($3,698) $4,885 $240,224
======== ======= ======== ====== ========
Year ended December 31, 1992
Utility land, plant and equipment $316,262 $18,788 ($4,180) ($155,484) $175,386
Land and improvements 10,926 433 (3) 1,221 12,577
Buildings and improvements 21,223 57 (329) (929) 20,022
Machinery, equipment and fixtures 12,575 737 (2) 392 13,702
Other 956 (5) - (684) 267
-------- ------- -------- -------- --------
Total $361,942 $20,010 ($4,514) ($155,484) $221,954
======== ======= ======== ======== ========
Year ended December 31, 1991
Utility land, plant and equipment $293,503 $24,410 ($1,651) $ - $316,262
Land and improvements 9,742 74 (67) 1,177 10,926
Buildings and improvements 14,404 6,420 (27) 426 21,223
Machinery, equipment and fixtures 12,242 629 (332) 36 12,575
Other 887 280 - (211) 956
-------- ------- -------- -------- --------
Total $330,778 $31,813 ($2,077) $1,428 $361,942
======== ======= ======== ======== ========
</TABLE>
51
<PAGE>
<PAGE> 52
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPEMNT
AVATAR HOLDINGS INC. AND SUBSIDIARIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Other
Balance at Charges- Balance
Beginning Additions Transfers Add (deduct) at End of
Classification of Period at Cost Retirements in (out) Describe (a) Period
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Utility land, plant and equipment $24,686 $4,494 ($1,628) $8,160 $2,917 $38,629
Land and improvements 3,481 385 (103) (28) - 3,735
Buildings and improvements 7,626 754 (225) 30 - 8,185
Machinery, equipment and fixtures 10,934 891 (1,088) (2) - 10,735
------- ------ -------- ------ -------- -------
Total $46,727 $6,524 ($3,044) $8,160 $2,917 $61,284
======= ====== ======== ====== ======== =======
Year ended December 31, 1992
Utility land, plant and equipment $46,225 $4,860 ($2,002) ($27,029) $2,632 $24,686
Land and improvements 3,137 337 - 7 - 3,481
Building and improvements 6,786 894 (54) - - 7,626
Machinery, equipment and fixtures 10,166 1,516 (741) (7) - 10,934
------- ------ -------- -------- -------- ------
Total $66,314 $7,607 ($2,797) ($27,029) $2,632 $46,727
======= ====== ======== ======== ======== =======
Year ended December 31, 1991
Utility land, plant and equipment $41,049 $4,412 ($1,768) - $2,532 $46,225
Land and improvements 2,933 257 (53) - - 3,137
Buildings and improvements 6,163 633 (10) - - 6,786
Machinery, equipment and fixtures 9,407 1,071 (312) - - 10,166
------- ------- -------- ------ -------- -------
Total $59,552 $6,373 ($2,143) - $2,532 $66,314
======= ======= ======== ====== ======== =======
</TABLE>
(1) The annual provisions for depreciation have been computed
principally in accordance with the following ranges of rates:
Utility, plant and equipment 1.5% to 10%
Other property, plant and equipment 5% to 20%
(a) Charged principally to estimated cost of development of
land sold and amortization of contributions in aid of
construction.
52
<PAGE>
<PAGE> 53
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
AVATAR HOLDINGS INC. AND SUBSIDIARIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance Charged to Balance
at Beginning Costs and at End
of Period Expenses Deduction of Period
<S> <C> <C> <C> <C>
Year ended December 31, 1993:
Deducted from asset accounts:
Deferred gross profit on
homesite sales $34,950 $1,278 (1) $4,259 (2) $31,969
Allowance for doubtful accounts 3,051 2,342 2,762 (2) 2,631
Market valuation account 3,297 - 1,215 (3) 2,082
Valuation allowance for deferred
tax assets 30,330 (4) 2,670 - 33,000
------- ------ ------ -------
Total $71,628 $6,290 $8,236 $69,682
======= ====== ====== =======
Year ended December 31, 1992:
Deducted from asset accounts:
Deferred gross profit on
homesite sales $40,507 $234 (1) $5,791 (2) $34,950
Allowance for doubtful accounts 5,457 2,068 4,474 (2) 3,051
Market valuation account 4,899 - 1,602 (3) 3,297
------- ------ ------ -------
Total $50,863 $2,302 $11,867 $41,298
======= ====== ====== =======
Year ended December 31, 1991:
Deducted from asset accounts:
Deferred gross profit on
homesite sales $45,149 $2,902 (1) $7,544 (2) $40,507
Allowance for doubtful accounts 5,991 4,783 5,317 (2) 5,457
Market valuation account 6,559 - 1,660 (3) 4,899
------- ------ ------ -------
Total $57,699 $7,685 $14,521 $50,863
======= ====== ====== =======
</TABLE>
(1) Charged to operations as a reduction of revenues.
(2) Uncollectible accounts written off
(3) Credited principally to interest income or allowance for
doubtful accounts upon write-off of uncollectible accounts.
(4) Valuation allowance for deferred tax assets recorded in
conjunction with the adoption of FASB Statement No. 109.
53
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<PAGE> 54
SCHEDULE IX - SHORT-TERM BORROWINGS
AVATAR HOLDINGS INC. AND SUBSIDIARIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Weighted
Maximum Average Average
Weighted Amount Amount Interest
Balance Average Outstanding Outstanding Rate
at End Interest During the During the During the
Period Rate (3) Period Period (4) Period (5)
-------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Notes payable to bank $13,000 4.91% $46,143 $28,918 6.85%
Year ended December 31, 1992
Notes payable to bank (1) (6) 50,559 6.13% 98,375 74,101 6.16%
Year ended December 31, 1991
Notes payable (1) 98,472 6.67% 99,989 91,613 8.95%
Construction loans and loan
from broker (2) 9,169 5.81% 9,169 1,731 3.93%
(1) The notes payable to banks represents borrowings under unsecured lines of
credit and secured mortgage warehouse lines and lines of credit.
(2) The construction loans represent outstanding borrowings under construction
loan committments. The loan from broker represents borrowings under reverse
repurchase agreements.
(3) Represents weighted average interest rate at December 31.
(4) The average amount outstanding during the period was computed by dividing
the total of month-end outstanding principal balances by 12.
(5) The weighted average interest rate during the period was computed by
dividing the actual interest expense by the average short-term debt outstanding.
(6) Included in these amounts are property held for sale with notes payable to
banks of $11,860 at December 31, 1992, weighted average interest rate at
December 31, 1992 of 6%, maximum and average amounts outstanding of $12,871
and $11,248 and 6% weighted average interest rate during the period.
</TABLE>
54
<PAGE>
<PAGE> 55
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
AVATAR HOLDINGS INC. AND SUBSIDIARIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Item Charged to Costs and Expenses
---------------- -----------------------------
Year Ended December 31
----------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Maintenance and repairs $5,896 $6,270 $6,603
====== ====== ======
Taxes, other than payroll and
income taxes
Real estate $7,587 $7,558 $7,629
Other 1,266 1,182 1,071
------ ------ ------
$8,853 $8,740 $8,700
====== ====== ======
Advertising costs $848 $817 $1,031
====== ====== ======
</TABLE>
Amounts for royalties not presented as such amounts are
less than one percent of total revenue.
55
<PAGE>
<PAGE> 56
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AVATAR HOLDINGS INC.
Dated: March 24, 1994 By: /s/Charles L. McNairy
Charles L. McNairy, Executive
Vice President, Treasurer and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant in the capacities and on the dates indicated.
Dated: March 24, 1994 By: /s/Geoffrey C. Hazard, Jr.
Geoffrey C. Hazard, Jr., Director
and Audit Committee Member
Dated: March 24, 1994 By: /s/J. Edward Houston
J. Edward Houston, Director,
Chairman of the Audit Committee
and Executive Committee Member
Dated: March 24, 1994 By: /s/Edwin Jacobson
Edwin Jacobson, Director,
Chairman of the Executive
Committee, President and
Chief Executive Officer
Dated: March 24, 1994 By: /s/Leon T. Kendall
Leon T. Kendall, Director
and Audit Committee Member
Dated: March 24, 1994 By: /s/Leon Levy
Leon Levy, Chairman of the
Board of Directors and Executive
Committee Member
Dated: March 24, 1994 By: /s/Martin Meyerson
Martin Meyerson, Director
and Audit Committee Member
Dated: March 24, 1994 By: /s/William Porter
William Porter, Director
and Audit Committee Member
56
<PAGE>
<PAGE> 57
Dated: March 24, 1994 By: /s/Fred Stanton Smith
Fred Stanton Smith, Director and
Executive Committee Member
Dated: March 24, 1994 By: /s/Henry King Stanford
Henry King Stanford, Director
Dated: March 24, 1994: By:
Lawrence Wilkov, Director
Dated: March 24, 1994 By: /s/John J. Yanopoulos
John J. Yanopoulos,
Vice-President - Finance and
Controller
57
<PAGE>
<PAGE> 58
Exhibit Index
3(a) * Certificate of Incorporation, as amended (previously
filed as an exhibit to the Form 10-K for the year
ended December 31, 1986).
3(b) By-laws, as amended through March 24, 1994 (filed
herewith)........................................60
4(a) * Instruments defining the rights of security holders,
including indenture for 8% senior debentures
(previously filed as an exhibit to the Form 8-K dated
as of September 12, 1980).
4(b) * Supplemental Indenture for 8% senior debentures dated
as of December 19, 1992 (previously filed as an
exhibit to Form 10-K for the year ended December 31,
1992).
4(c) * Indenture for 9% senior debentures dated as of
December 19, 1992 (previously filed as an exhibit to
Form 10-K for the year ended December 31, 1992).
4(d) * Indenture for 5-1/4% convertible-purchase
subordinated debentures dated May 1, 1987
(previously filed as an exhibit to Form 10-Q for the
period ended March 31, 1987).
10(a) * Consulting Agreement, dated as of December 31, 1990,
by and between Avatar Properties Inc. and John
Sladkus (previously filed as an exhibit to Form 10-K
for the year ended December 31, 1990).
Consulting Agreement, dated as of December 31, 1990,
by and between Avatar Utilities Inc. and John Sladkus
(previously filed as an exhibit to Form 10-K for the
year ended December 31, 1990).
10(b) * Employment Agreement, dated as of June 15, 1992, by
1 and between Avatar Holdings Inc. and Lawrence Wilkov
(previously filed as an exhibit to Form 10-K for the
year ended December 31, 1992).
10(c) * Employment Agreement, dated June 15, 1992, by
1 and between Avatar Holdings Inc. and Edwin Jacobson
(previously filed as an exhibit to Form 10-K for the
year ended December 31, 1992).
10(d) Amendment to Employment Agreement, dated as of March
1, 1994, by and between Avatar Holdings Inc. and
Edwin Jacobson (filed herewith).................80
10(e) * Four separate Stock Purchase Agreements dated January
30, 1993, with respect to the sale of the
Registrant's utilities located in Indiana, Missouri,
Ohio and Michigan, respectively (previously filed as
an exhibit to Form 8-K dated as of February 3,
1993).
10(f) * Agreement dated January 30, 1993, with respect to
the transactions contemplated by the Stock Purchase
Agreements (previously filed as an exhibit to Form 8-
K dated as of February 3, 1993).
58
<PAGE>
<PAGE> 59
Exhibit Index -- continued
10(g) * Guarantee by the Registrant (previously filed as an
exhibit to Form 8-K dated as of February 3, 1993).
10(h) * Guarantee by American Water Works Company, Inc.
(previously filed as an exhibit to Form 8-K dated as
of February 3, 1993).
10(i) 1 Incentive Compensation Agreement, dated as of January
18, 1993 by and between Avatar Holdings Inc. and
Dennis Getman (filed herewith)......................82
10(j) 1 Incentive Compensation Agreement, dated as of
September 9, 1993 by and between Avatar Holdings Inc.
and Charles McNairy (filed herewith)............... 93
10(k) Revolving Credit Agreement between Avatar Properties
Inc. and BHF Bank dated November 30, 1993 (filed
herewith)..........................................102
11 Statement Re: Computation of per share earnings
(filed herewith)...................................138
22 Subsidiaries of the Registrant (filed
herewith)..........................................139
* These exhibits are incorporated by reference and are on file with
the Securities and Exchange Commission.
1 Employment and Compensation agreements.
59
<PAGE>
<PAGE> 1
Exhibit 3(b) - By-Laws, as amended through March 24, 1994
As Amended and Restated - March 24, 1994
BY-LAWS
OF
AVATAR HOLDINGS INC.
(a Delaware corporation)
________________________
ARTICLE I
Offices
SECTION 1. Registered Office. The registered
office shall be established and maintained at the office of
the United States Corporation Company, in the City of Dover,
in the County of Kent, in the State of Delaware, and said
corporation shall be the registered agent of this
Corporation in charge thereof.
SECTION 2. other offices. The Corporation may
have other offices, either within or without the State of
Delaware, at such place or places as the Board of Directors
may from time to time appoint or the business of the
Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 1. Annual Meeting. The annual meeting of
stockholders of the Corporation for the election of
Directors and for the transaction of such other business as
may come before the meeting shall be held in each year on
such business day and at such hour as shall be fixed by the
Board of Directors. If the annual meeting is not held at
the time so fixed, the Board of Directors shall cause the
meeting to be held as soon thereafter as convenient.
SECTION 2. Special Meetings. Special Meetings of
stockholders for any purpose or purposes, unless otherwise
prescribed by law or by the Certificate of Incorporation,
may be called at any time by the Chairman of the Board or by
60
<PAGE>
<PAGE> 2
order of the Board of Directors or the Executive Committee
of the Board of Directors, and shall be called by the
Chairman of the Board, the President or the Secretary at the
request in writing of a stockholder or stockholders holding
of record at least twenty percent of all the Common Stock of
the Corporation then outstanding and entitled to vote.
Special meeting shall be called by means of a notice as
provided for in Section 4 of this Article II.
SECTION 3. Place of Meeting. Each meeting of
stockholders shall be held at such place, within or without
the State of Delaware, as shall be fixed by the Board of
Directors and specified in the notice or waiver of notice of
said meeting. If no designation is made, the place of the
meeting shall be the principal office of the Corporation in
the State of Florida.
SECTION 4. Notice of Meetings. Except as
otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws, written notice of every
meeting of stockholders shall be given to each stockholder
of record entitled to vote at the meeting, not less than ten
nor more than sixty days prior to the date named for the
meeting (unless a greater period of notice is required by
law in a particular case), by delivering a written or
printed notice thereof to him personally, or by sending a
copy thereof, charges prepaid, through the mail or
transmitted by telex, telegraph or cable to his address
appearing on the books of the Corporation, or supplied by
him to the Corporation for the purpose of notice. If notice
is sent through the mail or transmitted by telex, telegraph
or cable, it shall be deemed to have been given to the
person entitled thereto when deposited in the United States
mail or with the appropriate office for transmission to such
person. Such notice shall specify the place, date and hour
of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called. Notice
of any adjourned meeting of stockholders shall not be
required to be given, except when expressly required by law,
by the Certificate of Incorporation or by these By-Laws. As
provided in Article VIII of these By-Laws, any stockholder
may waive the requirements of notice provided for herein.
SECTION 5. Quorum. The holders of shares
entitling them to exercise a majority of the voting power of
the Corporation, present in person or by proxy at any
meeting of stockholders, shall constitute a quorum. Once a
quorum shall have been established, the stockholders present
at a duly organized meeting may continue to do business
until adjournment, notwithstanding the withdrawal of
sufficient stockholders to leave less than a quorum. If a
meeting cannot be organized because a quorum has not
61
<PAGE>
<PAGE> 3
attended, those present may, except as otherwise provided by
law, adjourn the meeting to such time and place as they may
determine. If a meeting must be adjourned twice because of
the lack of a quorum, at the third such meeting of
stockholders and at all subsequent adjournments, if any, of
such meeting, the holders of shares entitling them to
exercise thirty-three and one-third percent of the voting
power of the Corporation, present in person or by proxy,
shall constitute a quorum for the transaction of all
business except as otherwise prohibited by law, by the
Certificate of Incorporation or by these By-Laws.
SECTION 6. Adjournments. At any annual or
special meeting, the holders of shares entitling them to
exercise a majority of the voting power which is present in
person or by proxy at such meeting, although less than a
quorum, may adjourn the meeting from time to time without
further notice (except as is otherwise required by law)
other than by announcement at the meeting at which such
adjournment is taken of the time and place of the adjourned
meeting. At any such adjourned meeting at which a quorum
shall be present, any business may be transacted which might
have been transacted at the original meeting.
SECTION 7. Voting. Each stockholder of record of
Common Stock shall be entitled at each meeting of
stockholders to one vote for each share of Common Stock
registered in his name on the books of the Corporation,
except as hereinafter stated for the election of Directors.
For all elections of Directors, each stockholder of record
of Common Stock shall be entitled to cast as many votes as
equals the number of Directors to be elected at such
election multiplied by the number of shares of Common Stock
owned by such stockholder on the record date. All such
votes may be cast for a single candidate or distributed in
any number among any two or more candidates. Directors
shall be elected by a plurality of the votes cast by the
stockholders present in person or by proxy. Except as
otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws, all other matters shall
be determined by vote of at least a majority of the votes
which all stockholders present in person or by proxy at such
meeting are entitled to cast on such matter. Voting by
ballot shall not be required for the election of Directors
or for the transaction of any other corporate business
except as otherwise provided by law.
Notwithstanding the foregoing, pursuant to the
confirmed Trustees' Restated Amended Joint Plan of
Reorganization of the Corporation and certain of its
subsidiaries and orders of the Bankruptcy Court entered
thereunder and in furtherance thereof, the Exchange Agent
62
<PAGE>
<PAGE> 4
for distributions of Common Stock of the Corporation and
other securities and cash pursuant to such Plan shall
exercise all voting rights and rights of consent, waiver and
election (but not dissenters' rights under applicable law)
in respect of all shares of Common Stock then held in escrow
by such Exchange Agent relating to certain disputed claims
under such Plan and all shares of Common Stock allocable to
the holders of old securities issued by the Corporation or
such subsidiaries who have not yet tendered such old
securities to the Exchange Agent through the date of
exercise of such rights. Such rights shall be exercised by
the Exchange Agent in the same proportions as the voting of
all other outstanding shares of Common Stock of the
Corporation which are voted on any matter presented to the
stockholders of the Corporation. All shares of Common Stock
held in escrow by such Exchange Agent in respect of disputed
claims under such Plan and all shares of Common Stock
allocable to the holders of old securities who have not yet
tendered such old securities shall be included for purposes
of determining a quorum of stockholders of the Corporation.
SECTION 8. Organization. At every meeting of
stockholders, the Chairman of the Board or, in his absence,
the President or, in the absence of either of such officers,
a chairman chosen by a majority vote of stockholders present
in person or by proxy and entitled to vote thereat, shall
act as chairman of the meeting. The Secretary, or in his
absence an Assistant Secretary, shall act as secretary at
all meetings of stockholders. In the absence of the
Secretary or an Assistant Secretary, the chairman of the
meeting may appoint any person to act as secretary of the
meeting.
SECTION 9. List of Stockholders. It shall be the
duty of the Secretary or other officer of the Corporation
who shall have charge of its stock ledger, either directly
or through another officer of the Corporation designated by
him or through a transfer agent or transfer clerk appointed
by the Board of Directors, to prepare, at least ten days
before every meeting of stockholders for the election of
Directors of the Corporation, a complete list of
stockholders entitled to vote thereat, arranged in
alphabetical order and showing the address of each
stockholder and number of shares registered in the name of
each stockholder. For said ten days such list shall be
open, at the place where said meeting is to be held or at
another place within the city where the meeting is to be
held if such other place is specified in the notice of the
meeting, to the examination of any stockholder for any
purpose germane to the meeting, and shall be produced and
kept at the time and place of said meeting during the whole
time thereof and subject to the inspection of any
63
<PAGE>
<PAGE> 5
stockholder who shall be present thereat. The original or
duplicate stock ledger shall be the only evidence as to who
are the stockholders entitled to examine such list or the
books of the Corporation, or to vote in person or by proxy
at any meeting of stockholders.
SECTION 10. Business and Order of Business. At
each meeting of stockholders such business may be transacted
as may properly be brought before such meeting, whether or
not such business is stated in the notice of such meeting or
in a waiver of notice thereof, except as otherwise expressly
provided by law, by the Certificate of Incorporation or by
these By-Laws. The order of business at all meetings of
stockholders shall be as determined by the chairman of the
meeting.
SECTION 11. Inspectors of Election. In advance
of any meeting of stockholders, the Board of Directors may
appoint one or more Inspector(s) of Election, who need not
be stockholders, to act at such meeting or any adjournment
or adjournments thereof. If Inspector(s) of Election are
not so appointed, the chairman of any such meeting may make
such appointment at the meeting. No person who is a
candidate for office shall act as an Inspector. In case any
person appointed as an Inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment
made by the Board of Directors in advance of the convening
of the meeting, or at the meeting by the person acting as
chairman. Each Inspector of Election so appointed shall
first subscribe an oath or affirmation faithfully to perform
the duties of an Inspector of Election at such meeting
impartially, in good faith, to the best of his ability, and
as expeditiously as is practical. The Inspector(s) of
Election shall determine the number of shares outstanding
and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity,
validity and effect of proxies, receive votes or ballots,
hear and determine all challenges and questions in any way
arising in connection with the right to vote, count and
tabulate all votes, determine the result, and do such acts
as may be proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of
the meeting, the Inspector(s) of Election shall make a
report in writing of any challenge or question or matter
determined by them, and execute a certificate of any fact
found by them.
SECTION 12. Proxies. Every stockholder entitled
to vote at a meeting of stockholders or to express consent
or dissent without a meeting may authorize another person or
persons (who need not be a stockholder) to act for him by
proxy. Every proxy must be signed by the stockholder or his
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<PAGE>
<PAGE> 6
attorney-in-fact. No proxy shall be valid after the
expiration of three years from the date thereof unless
otherwise provided in the proxy. The authority of the
holder of a proxy to act shall not be revoked by the
incompetence or death of the stockholder who executed the
proxy unless, before the authority is exercised, written
notice of an adjudication of such incompetence or of such
death is received by the corporate officer responsible for
maintaining the list of stockholders.
SECTION 13. Consent of Stockholders in Lieu of
Meeting. Whenever the vote of stockholders at a meeting
thereof is required or permitted to be taken for or in
connection with any corporate action, the meeting and vote
of stockholders may be dispensed with and the action may be
taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present
and voting. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not
consented in writing.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business and
affairs of the Corporation shall be managed by the Board of
Directors.
SECTION 2. Number, Qualification and Term of
Office. The Board of Directors shall consist of no less
than eight nor more than fifteen members as may be fixed
from time to time by resolution of the Board. As used in
these By-Laws, "whole Board of Directors" means the total
number of Directors which the Corporation would have if
there were no vacancies. Directors need not be stockholders
of the Corporation. Except as provided in Section 3 of this
Article III, Directors shall be elected by the stockholders.
Each Director shall hold office until the annual meeting of
stockholders next following his election and until his
successor shall be elected and shall qualify, or until such
Director's earlier death, resignation or removal in the
manner hereinafter provided.
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<PAGE>
<PAGE> 7
SECTION 3. Vacancies. Vacancies in the Board of
Directors, including vacancies resulting from an increase in
the number of Directors, shall be filled by a majority of
the remaining members of the Board (although less than a
quorum), and each person so elected shall hold office until
the next election of Directors by stockholders and until his
successor shall be elected and shall qualify, or until such
Director's earlier death, resignation or removal in the
manner hereinafter provided.
SECTION 4. Place of Meeting. The Board of
Directors may hold its meetings at such place or places
within or without the State of Delaware as a majority of the
Directors may from time to time appoint, or as may be
designated in the notice calling the meeting.
SECTION 5. Organization Meeting. As soon as
practicable after each annual election of Directors by the
stockholders, the Board of Directors shall meet for the
purpose of organization, the election of the Audit Committee
of the Board of Directors, the Executive Committee of the
Board of Directors, the Chairman of the Board and the
Chairman of the Executive Committee and the transaction of
other business. If held on the same day as the annual
meeting of stockholders, notice of such organization meeting
of the Board of Directors need not be given. If the
organization meeting is held on any other day, notice of
such meeting shall be given as hereinafter provided for
regular and special meetings of the Board of Directors.
SECTION 6. Regular and Special Meetings. Regular
meetings of the Board of Directors shall be held at such
times as the Board of Directors shall from time to time by
resolution determine. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of
the Board, the President or any four Directors.
SECTION 7. Notice. Written notice of each
regular or special meeting of the Board of Directors shall
be given by the Secretary to each Director at least three
days prior to the day named for the meeting. Notice of each
such meeting may be given to a Director, either personally
or by sending a copy thereof, charges prepaid, through the
mail, or transmitted by telex, telegraph or cable to his
address appearing on the books of the Corporation or
supplied by him to the Corporation for the purpose of
notice. If notice is sent by mail or transmitted by telex,
telegraph or cable, it shall be deemed to have been given
when deposited in the United States mail or with the
appropriate office for transmission to such person. Such
notice shall specify the place, day and hour of the meeting,
and notice of a special meeting shall include a general
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<PAGE>
<PAGE> 8
statement of the purpose for which the meeting is called.
When a meeting is adjourned, it shall not be necessary to
give any notice of the adjourned meeting or of the business
to be transacted at such adjourned meeting, other than by
announcement at the meeting at which such adjournment is
taken. As provided in Article VIII of these By-Laws, any
Director may waive the notice requirements provided for
herein.
SECTION 8. Quorum and Manner of Acting. A
majority of the whole Board of Directors shall be necessary
to constitute a quorum for the transaction of business and
the vote of a majority of the Directors participating in a
meeting at which a quorum is present or participating shall
be the act of the Board of Directors.
SECTION 9. Organization. At each meeting of the
Board of Directors, the Chairman of the Board, or in his
absence, a Director chosen by a majority of the Directors
present, shall act as chairman of the meeting. The
Secretary, or in his absence any person appointed by the
chairman of the meeting, shall act as secretary of the
meeting.
SECTION 10. Business and Order of Business. At
each meeting of the Board of Directors such business may be
transacted as may properly be brought before the meeting,
whether or not such business is stated in the notice of such
meeting or in a waiver of notice thereof, except as
otherwise expressly provided by law, by the Certificate of
Incorporation or by these By-Laws. At all meetings of the
Board of Directors business shall be transacted in the order
determined by the chairman of the meeting subject to the
approval of the Board.
SECTION 11. Action by Consent. Any action which
may be taken by the Board of Directors or by any Committee
thereof may be taken without a meeting, if a consent or
consents in writing setting forth the action so taken shall
be signed by all of the Directors or members of a Committee,
respectively, and shall be filed with the Secretary of the
Corporation.
SECTION 12. Constructive Presence at a Meeting.
Any member of the Board of Directors or of any Committee
thereof shall be deemed present at a meeting of such Board
or Committee if a conference telephone or similar
communication equipment is used, by means of which all
persons participating in the meeting can hear each other.
SECTION 13. Interested Directors; Quorum. No
contract or transaction between the Corporation and one or
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<PAGE>
<PAGE> 9
more of the Directors or officers of the Corporation, or
between the Corporation and any other Corporation,
partnership, association, or other organization in which one
or more of the Directors or officers of the Corporation are
directors or officers, or have a financial interest, shall
be void or voidable solely for such reason, or solely
because such Director or officer is present at or
participates in the meeting of the Board of Directors or
Committee thereof which authorizes the contract or
transaction, or solely because his or their votes are
counted for such purpose, if (i) the material facts as to
his relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of
Directors or the Committee and the Board of Directors or
Committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the
disinterested Directors, even though the disinterested
Directors be less than a quorum; or (ii) the material facts
as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair
as to the Corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a Committee
thereof, or the stockholders.
Common or interested Directors may be counted in
determining the presence of a quorum at a meeting of the
Board of Directors or of a Committee which authorizes a
contract or transaction specified in this section.
SECTION 14. Resignations. Any Director may
resign at any time upon written notice to the Secretary of
the Corporation. Such resignation shall take effect at the
time specified therein, or, if no time be so specified, upon
receipt by the Secretary. The acceptance of a resignation
shall not be necessary to make it effective.
SECTION 15. Removal of Directors. Any Director
or the entire Board of Directors may be removed, with or
without cause, by the vote of a majority of the outstanding
shares then entitled to vote at an election of Directors,
except if less than the entire Board of Directors is to be
removed, no Director may be removed without cause if the
votes cast against his removal would be sufficient to elect
him if then cumulatively voted at an election of the entire
Board of Directors.
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ARTICLE IV
Committees of the Board
SECTION 1. Executive Committee. At the
organization meeting following the annual meeting of
stockholders, the Board of Directors shall, by resolution
adopted by a majority of the whole Board of Directors,
designate an Executive Committee consisting of the Chairman
of the Board, the Chairman of the Executive Committee and
not less than two other directors. Except as hereinafter
set forth, the Executive Committee shall have and may
exercise all the authority of the Board of Directors in the
management of the business and affairs of the Corporation
and may authorize the seal of the Corporation to be affixed
to all papers which may require it. All acts done and power
conferred by the Executive Committee shall be deemed to be,
and may be certified as being, done or conferred under
authority of the Board of Directors. Notwithstanding the
foregoing, the Executive Committee shall not have the power
or authority of the Board of Directors in reference to
amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, amending these
By-Laws, declaring a dividend or authorizing the issuance of
stock. Any member of the Executive Committee may be removed
at any time, and any vacancy on the Executive Committee may
be filled, by the vote of a majority of the whole Board of
Directors.
SECTION 2. Meetings of Executive Committee.
Meetings of the Executive Committee shall be held whenever
called by the Chairman of the Board or the Chairman of the
Executive Committee. Notice of each meeting of the
Executive Committee shall be given personally, in writing or
by telephone to each member of the Executive Committee at
his residence or usual place of business at least
twenty-four hours in advance of the meeting. Such notice
shall state the time and place of the meeting, but need not
state the purpose or purposes thereof. As provided in
Article VIII of these By-Laws, any member of the Executive
Committee may waive the notice requirements provided for
herein. The Executive Committee shall adopt its own rules
of procedure not inconsistent with any rules for committees
set forth in these By-Laws, and it shall keep a record of
its proceedings and report them to the Board of Directors at
the next meeting thereof after each meeting of the Executive
Committee. All actions taken by the Executive Committee
shall be subject to revision or alteration by the Board of
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Directors, provided, however, that third parties shall not
be prejudiced by any such revision or alteration.
SECTION 3. Quorum of and Manner of Acting by
Executive Committee. A majority of the Executive Committee
shall constitute a quorum for the transaction of business,
and the vote of a majority of those participating at a
meeting thereof at which a quorum is present or
participating shall be the act of the Executive Committee.
SECTION 4. Audit Committee. The Board of
Directors shall by resolution designate an Audit Committee
consisting of a Chairman and not less than two other
Directors. No member of the Audit Committee shall be an
officer or employee of the Corporation. The Audit Committee
shall by majority vote of its members adopt its own rules of
procedure not inconsistent with any rules for committees set
forth in these By-Laws and fix the time and place of its
meetings, unless the Board of Directors shall otherwise
provide. The Audit Committee shall recommend to the Board
of Directors, subject to approval by the stockholders of the
Corporation, the appointment of the independent auditors of
the Corporation; review with the independent auditors their
report and any management letter and reports to the Board of
Directors with respect thereto; review with the independent
auditors the Corporation's accounting policies and
procedures as well as its internal controls and internal
auditing procedures; determine whether there are any
conflicts of interest in financial or business matters
between the Corporation and any of its officers or
employees; review the recommendations of the independent
auditors; review the aggregate fee for audit and non-audit
services of the independent auditors and consider the
possible effect of such services on the independence of the
auditors; and perform such other tasks as are assigned to it
from time to time by the Board of Directors. The Board of
Directors shall have power to change the number of members
or the personnel of the Audit Committee at any time and to
fill vacancies. The Audit Committee shall keep minutes of
its acts and proceedings.
SECTION 5. Other Committees. The Board of
Directors may from time to time by resolution create such
other committee or committees of Directors, officers,
employees or other persons designated by it for the purpose
of advising the Board, the Executive Committee and the
officers and employees of the Corporation with respect to
such matters as the Board shall deem appropriate and with
such functions, powers and authority as the Board shall by
resolution prescribe; provided, however,that no such other
committee shall exercise any of the powers or authority of
the Board of Directors in the management of the business and
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affairs of the Corporation or have power to authorize the
seal of the Corporation to be affixed to papers which may
require it, unless such other committee shall be created by
resolution passed by a majority of the whole Board of
Directors and shall be so authorized by such resolution, and
provided further, that no committee shall exercise any of
the powers or authority of the Board of Directors that are
not permitted by law. A majority of all the members of any
such other committee may adopt its own rules of procedure
not inconsistent with any rules for committees set forth in
these By-Laws and fix the time and place of its meetings,
unless the Board of Directors shall otherwise provide. The
Board of Directors shall have power to change the number of
members or the personnel of any such other committee at any
time, to fill vacancies, and to discharge any such other
committee, either with or without cause, at any time. Each
such committee shall keep minutes of its acts and
proceedings.
SECTION 6. Compensation. Members of any
committee contemplated by these By-Laws shall receive such
compensation, fees and allowances, if any, for their
services as shall be fixed by resolution of the Board of
Directors. Nothing herein contained shall be construed so
as to preclude any member of any such committee from serving
the Corporation in any other capacity and receiving
compensation therefor.
ARTICLE V
Officers
SECTION 1. Number. The officers of the
Corporation shall be a Chairman of the Board, a President, a
Chairman of the Executive Committee, one or more Vice
Presidents (any one or more of whom the Board of Directors
or the Executive Committee may designate Executive Vice
President or Senior Vice President or similar title), a
Secretary and Treasurer. Any two or more offices may be
held by the same person. It shall not be necessary for
officers (except for the Chairman of the Board and the
Chairman of the Executive Committee) to be Directors.
SECTION 2. Election, Term of Office and
Qualification. Except in the case of officers appointed in
accordance with the provisions of Section 3 of this Article
V, officers shall be elected annually by the Board of
Directors and each officer shall hold office until his
successor shall be elected and shall qualify, or until the
officer's earlier death, resignation or removal in the
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manner hereinafter provided.
SECTION 3. Other Officers. The Corporation may
have such other officers and agents as may be deemed
necessary by the Board of Directors or the Executive
Committee. Such other officers and agents shall be
appointed in such manner, have such duties and hold their
offices for such terms as may be determined by the Board of
Directors or the Executive Committee. The Board of
Directors or the Executive Committee may delegate to any
principal officer the power to appoint or remove any such
other officers or agents.
SECTION 4. Removal. Any officer or agent elected
or appointed by the Board of Directors or the Executive
Committee may be removed by the Board of Directors or the
Executive Committee whenever in its judgment the best
interests of the Corporation will be served thereby, but
such removal shall be without prejudice to the contract
rights, if any, of the person so removed.
SECTION 5. Vacancies. A vacancy in any office
because of death, resignation, removal or any other cause
shall be filled for the unexpired portion of the term in the
manner prescribed in these By-Laws for election or
appointment to such office.
SECTION 6. The Chairman of the Board. The
Chairman of the Board shall preside at all meetings of the
Board of Directors and of stockholders. In the absence of
the Chairman of the Executive Committee, or if there be no
Chairman of the Executive Committee, the Chairman of the
Board shall preside at meetings of the Executive Committee
and shall exercise all of the powers and discharge all of
the duties of the Chairman of the Executive Committee. The
Chairman of the Board shall have power to sign all
certificates, contracts, obligations and other instruments
of whatever character on behalf of the Corporation. The
Chairman of the Board shall have and perform such other
duties and may exercise such other powers as from time to
time may be assigned to him by these By-Laws, the Board of
Directors or the Executive Committee.
SECTION 7. The President. Subject to the control
of the Board of Directors, the Executive Committee and the
Chairman of the Board, the President shall be the chief
executive officer of the Corporation and, unless and until
the Board of Directors shall determine otherwise, the
President also shall be the chief operating officer of the
Corporation. He shall transmit or cause to be transmitted
necessary instructions and advice to all officers and all
other proper persons and shall be the proper officer of the
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Corporation to whom problems shall be transmitted for
attention. The President shall have power to sign all
certificates, contracts, obligations and other instruments
of whatever character on behalf of the Corporation. He
shall perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these
By-Laws, the Board of Directors, the Executive Committee or
the Chairman of the Board.
SECTION 8. The Chairman of the Executive
Committee. The Chairman of the Executive Committee shall
preside at all meetings of the Executive Committee. The
Chairman of the Executive Committee shall have power to sign
all certificates, contracts, obligations and other
instruments of whatever character on behalf of the
Corporation. He shall perform such other duties and may
exercise such other powers as may from time to time be
assigned to him by these By-Laws, the Board of Directors, or
the Executive Committee.
SECTION 9. The Vice Presidents. Each Vice
President shall perform such duties and may exercise such
powers as from time to time may be assigned to him by these
By-Laws, the Board of Directors, the Executive Committee,
the Chairman of the Board, or the President. Each Vice
President shall have power to sign all certificates,
contracts, obligations and other instruments of whatever
character on behalf of the Corporation.
SECTION 10. The Secretary. The Secretary shall
record or cause to be recorded in books provided for that
purpose the minutes of the meetings of the stockholders, the
Board of Directors and the Executive Committee; shall see
that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law; shall be
custodian of such corporate records as the Board of
Directors may direct and of the seal of the Corporation and
may affix the same to any instrument requiring it and, when
so affixed, it shall be attested by his signature or by the
signature of an Assistant Secretary; may sign with the
Chairman of the Board, the President or any Vice President
all authorized contracts, obligations or instruments; shall
see that the books, reports, statements, certificates and
all other documents and records required by law, by the
Certificate of Incorporation or by these By-Laws to be kept
by him are available for examination at reasonable times by
any Director at the principal office of the Corporation
during business hours; and, in general, shall perform all
duties incident to the office of Secretary and such other
duties as may, from time to time, be assigned to him by the
Board of Directors, the Executive Committee, the Chairman of
the Board or the President.
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At the request of the Secretary, or in his absence
or disability, any Assistant Secretary shall perform any of
the duties of the Secretary and, when so acting, shall have
all the powers of, and be subject to all of the restrictions
upon, the Secretary. Except where by law the signature of
the Secretary is required, each of the Assistant Secretaries
shall possess the same power as the Secretary to sign
certificates, contracts, obligations and other instruments
of the Corporation, and to affix the seal of the Corporation
to such instruments, and attest the same.
SECTION 11. The Treasurer. The Treasurer shall
have charge and custody of all funds and securities of the
Corporation and shall deposit all such funds in the name of
the Corporation in such depositories as may be designated by
the Board of Directors or pursuant to Section 3 of Article
IX; shall disburse the funds of the Corporation, taking
proper vouchers for such disbursements, and shall render to
the Chairman of the Board or the Directors, at the regular
meetings of the Board, or whenever they may require it, an
account of all his transactions as Treasurer and of the
financial condition of the Corporation, and, in general,
shall perform all duties incident to the office of Treasurer
and such other duties as may, from time to time, be assigned
to him by the Board of Directors, the Executive Committee,
the Chairman of the Board or the President. If required by
the Board of Directors, he shall give a bond for the
faithful discharge of his duties in such sum and with such
surety or sureties as the Board of Directors shall
determine.
At the request of the Treasurer, or in his absence
or disability, any Assistant Treasurer may perform any of
the duties of the Treasurer and, when so acting, shall have
all the powers of, and be subject to all the restrictions
upon, the Treasurer. Except where by law the signature of
the Treasurer is required, each of the Assistant Treasurers
shall possess the same power as the Treasurer to sign all
certificates, contracts, obligations and other instruments
of the Corporation.
SECTION 12. Salaries. The salaries of the
officers shall be fixed from time to time by the Board of
Directors. No officer shall be prevented from receiving
such salary by reason of the fact that he is also a Director
of the Corporation.
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ARTICLE VI
Certificates of Stock, Books and Records
SECTION 1. Form; Signature. A certificate of
stock, signed by the Chairman of the Board, the President or
any Vice President, and the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, shall
be issued to each stockholder certifying the number of
shares owned by him in the Corporation. Any or all of the
signatures on the certificates may be a facsimile. In case
any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were
such an officer, transfer agent or registrar at the date of
issue.
If the Corporation shall be authorized to issue
more than one class of stock or more than one series of any
class, there shall be set forth on the back of the
certificate which the Corporation shall issue to represent
such class or series of stock a statement that the
Corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of
each class of stock or series thereof and the
qualifications, limitations or restrictions of such
preferences and/or rights.
SECTION 2. Lost Certificates. The Board of
Directors may determine the conditions under which a new
share certificate is to be issued in place of any
certificate theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed. When authorizing the
issuance of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or
his legal representative, to give the Corporation a bond
sufficient to indemnify it against any claim that may be
made against the Corporation on account of the alleged loss,
theft or destruction of any such certificate or the issuance
of such new certificate.
SECTION 3. Transfer of Shares. The shares of
stock of the Corporation shall be transferable only upon its
books by the holders thereof in person or by their duly
authorized attorneys or legal representatives, and upon such
transfer the old certificates shall be surrendered to the
corporation by the delivery thereof to the person in charge
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of the stock and transfer books and ledgers, or to such
other person as the Board of Directors may designate, by
whom they shall be cancelled, and new certificates shall
thereupon be issued. A record shall be made of each
transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so
expressed in the entry of the transfer.
SECTION 4. Registered Stockholders. The
Corporation shall be entitled to treat the holder of record
of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize
any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as
otherwise provided by law.
SECTION 5. Determining Stockholders of Record.
In order that the Corporation may determine the stockholders
entitled to notice of, or to vote at, any meeting of
stockholders or any adjournment thereof or to express
consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other
distribution, or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful
activity, the Board of Directors may fix (or authorize the
Secretary to fix), in advance, a record date, which shall
not be more than sixty days nor less than ten days before
the date of such meeting, nor more than sixty days prior to
any other action. In such case, only such stockholders as
shall be stockholders of record on the date so fixed shall
be entitled to notice of, or to vote at, such meeting or to
receive payment of such dividend, or to receive such
allotment of rights, or to exercise such rights, as the case
may be, notwithstanding any transfer of any shares on the
books of the Corporation after any record date fixed as
aforesaid. A determination of stockholders or record
entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
ARTICLE VII
Fiscal Year
The fiscal year of the Corporation shall be as
determined by the Board of Directors or by the Executive
Committee from time to time.
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ARTICLE VIII
Waiver of Notice
Whenever any notice whatever is required to be
given by law, by the Certificate of Incorporation or by
these By-Laws, the person entitled thereto may, in person or
by attorney thereunto authorized, in writing or by
telegraph, telex or cable, waive such notice whether before
or after the meeting or other matter in respect of which
such notice is to be given, and in such event such notice
need not be given to such person and such waiver shall be
deemed equivalent to such notice. Neither the purpose of
nor the business to be transacted at such meeting need be
specified in any written waiver of notice. Attendance of a
person at a meeting shall constitute a waiver of such
meeting, except when the person attends a meeting for the
express purpose of objecting, at the beginning of a meeting,
to the transaction of any business because the meeting is
not lawfully called or convened.
ARTICLE IX
General Provisions
SECTION 1. Contract, etc., How Executed. The
Board of Directors or the Executive Committee may authorize
any officer or officers, agent or agents, or employee or
employees of the Corporation to enter into any contract or
execute and deliver any instrument in the name and on behalf
of the Corporation, and such authority may be general or
confined to specific instance.
SECTION 2. Checks, etc. All checks, drafts,
bills of exchange or other orders for the payment of money,
notes or other evidences of indebtedness issued in the name
of the Corporation, shall be signed, either manually or in
facsimile, by such officer or officers, or agent or agents,
as may from time to time be designated by these By-Laws, or
by the Board of Directors or the Executive Committee, or who
shall have been designated in writing by any two officers of
the Corporation, acting jointly, who shall have been
authorized and empowered by the Board of Directors or the
Executive Committee to make such designation. A designation
by the Board of Directors, the Executive Committee or by
officers thereunto duly authorized and empowered may be
general or confined to specific instances.
SECTION 3. Depositories. Funds or securities of
the Corporation shall be deposited in such depositories as
shall be appointed by the Board of Directors, the Executive
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Committee or as shall be appointed by any two officers of
the Corporation, acting jointly, who shall have been
authorized and empowered by the Board of Directors or the
Executive Committee to make such appointment.
SECTION 4. Proxies. Unless otherwise provided by
resolutions of the Board of Directors, the Board of
Directors or the Executive Committee may from time to time
appoint any attorney or attorneys or agent or agents of the
Corporation, in the name and on behalf of the Corporation,
to cast the votes which the Corporation may be entitled to
cast as a stockholder or otherwise in any other corporation
any of whose shares or other securities may be held by the
Corporation, at meetings of holders of the shares or other
securities of such other corporation, or to consent or
dissent in writing to any action by such other corporation,
and may instruct the person or persons so appointed as to
the manner of casting such votes or giving such consent or
dissent, and may execute or cause to be executed in the name
and on behalf of the Corporation and under its corporate
seal, or otherwise, all such written proxies or other
instruments he or they may deem necessary and proper.
SECTION 5. Seal. The corporate seal shall be in
the form of a circle, shall bear the name of the
Corporation, the year 1970 and the words "Corporate Seal -
Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any
manner reproduced. Except as otherwise required by law, the
affixation of the corporate seal shall not be necessary to
the valid execution, assignment or endorsement of any
instrument in writing.
ARTICLE X
Amendments
These By-Laws, or any of them, may be altered,
amended or repealed, or new By-Laws may be adopted, at any
time by the affirmative vote of at least a majority of the
votes which all stockholders present in person or by proxy
at such meeting are entitled to cast, or by the Board of
Directors at any regular or special meeting of the Board.
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ARTICLE XI
By-Laws Subject to Provisions
of Certificate of Incorporation
In case of any conflict between the provisions of
these By-Laws and the Certificate of Incorporation, the
provisions of the Certificate of Incorporation shall
control.
ARTICLE XII
Election Not to be Governed by the
Florida Control-Share Acquisition Statute
To the extent, if any, that the provisions of
Section 607.109 of the Florida General Corporation Act (the
"Florida Act") apply to any "control-share acquisition" (as
defined in Section 607.109 of the Florida Act) of shares of
the Common Stock, the Corporation hereby expressly elects
that the provisions of Section 607.109 of the Florida Act
shall not apply to any control-share acquisition of shares
of Common Stock, and that shares of Common Stock acquired in
any such control-share acquisition shall have ascribed
thereto the full voting rights, powers and privileges
provided by the Corporation's Certificate of Incorporation,
as amended, and these By-Laws.
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Exhibit 10 (d) - Amendment to Employment Agreement, Edwin Jacobson
AVATAR HOLDINGS, INC.
255 Alhambra Circle
Coral Gables, Florida 33134
As of March 1, 1994
Mr. Edwin Jacobson
c/o Avatar Holdings, Inc.
255 Alhambra Circle
Coral Gables, Florida 33134
Dear Mr. Jacobson:
Reference hereby is made to that certain employment
agreement with you dated June 15, 1992 (the "Employment Agreement").
We each hereby agree that as of the date hereof:
1. Paragraph 2(a) of the Employment Agreement hereby is
amended and restated in its entirety as follows:
(a) You shall be nominated as a director of the Corporation
and, subject to your election thereto by the Board of
Directors or the stockholders of the Company, you shall be
employed as Chairman of the Executive Committee of the
Company; and you shall also be employed as the President and
Chief Executive Officer of the Company. In such capacities,
you shall serve as a senior executive officer of the Company
and shall have the duties and responsibilities prescribed
for such positions by the By-Laws of the Company, and shall
have such other duties and responsibilities as may from time
to time be prescribed by the Board of Directors of the
Company or the Executive Committee of the Board of
Directors, provided that such duties and responsibilities
are consistent with your positions as Chairman of the
Executive Committee and President and Chief Executive
Officer. In the performance of your duties, you shall be
subject to the supervision and direction of the Board of
Directors of the Company and the Executive Committee of the
Board of Directors.
2. The first sentence of paragraph 2(b) of the Employment
Agreement hereby is amended and restated in its entirety as follows:
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(b) Subject to the term of your employment hereunder, you
shall devote such time as is reasonably necessary to the
proper performance of your duties and responsibilities as
Chairman of the Executive Committee and President and Chief
Executive Officer.
3. The first sentence of paragraph 3(a) of the Employment
Agreement hereby is amended and restated in its entirety as follows:
(a) Base Salary. During the term of your employment
hereunder, the Company shall pay you, and you shall accept
from the Company for your services, a salary at the rate of
not less than $325,000 per year ("Base Salary"), payable in
accordance with the Company's policy with respect to the
compensation of executives.
4. Except as expressly amended by this letter agreement,
your Employment Agreement shall remain in full force and effect in
accordance with the terms thereof. This letter agreement may be
executed in one or more counterparts, each of which shall be deemed to
be an original but all of which together will constitute one and the
same instrument.
If the foregoing is satisfactory, would you please so
indicate by signing and returning to the Company the enclosed copy of
this letter whereupon this will constitute our agreement on the
subject.
AVATAR HOLDINGS INC.
By: /s/ Leon Levy
-------------------------
Leon Levy
Chairman of the Board
ACCEPTED AND AGREED TO:
/s/ Edwin Jacobson
-----------------------
Edwin Jacobson
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Exhibit 10 (i) - Incentive Compensation Agreement, Dennis J. Getman
AVATAR HOLDINGS INC.
255 Alhambra Circle
Coral Gables, Florida 33134
As of January 18, 1993
Mr. Dennis J. Getman
c/o Avatar Holdings Inc.
255 Alhambra Circle
Coral Gables, Florida 33134
Dear Mr. Getman:
We are writing with respect to the following incentive
compensation hereby granted to you as an employee of Avatar
Holdings Inc. (the "Company"):
1. Incentive Compensation. (a) Within 10 days
following the fifth anniversary hereof or, if earlier, the Date
of Termination (as hereinafter defined), the Company shall pay
you, as incentive compensation ("Incentive Compensation"), a cash
amount equal to the product of (x) the number of shares of the
Company's common stock, par value $1.00 per share ("Common
Stock"), in which you are vested (as the same may be adjusted
pursuant to paragraph 3(x) below), times (y) the excess, if any,
of the Final Value per share of Common Stock over $33.75 (the
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"Strike Price") (as the same may be adjusted pursuant to
paragraph 3(y) below), payable on the fifth anniversary of the
date hereof or, if earlier, on the Date of Termination (in either
case, the "Determination Date"). "Final Value" shall mean, as of
any Determination Date, the average Market Value (as defined in
paragraph 2 below) per share of Common Stock during the twenty
(20) business days immediately preceding such Determination Date.
(b) For the purposes of this paragraph 1, you
will vest in 3,000 shares of Common Stock on each of the first
through fifth anniversaries hereof provided that you are still
employed by the Company on such anniversary. In the event that
there is a Date of Termination prior to the fifth anniversary
hereof as a result of (i) your death, (ii) your "permanent
disability," (iii) the Company's termination of your employment
without "cause" or (iv) your termination of your employment with
the Company for "good reason" (each as defined in paragraph 2
below), you shall immediately vest on the Date of Termination in
50% of the remaining unvested shares and you shall forfeit any
unvested shares. In the event that there is a Date of
Termination prior to the fifth anniversary hereof as a result of
the Company's termination of your employment for "cause," you
shall forfeit the remaining unvested shares.
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2. Certain Definitions. (a) For the purposes
hereof, "permanent disability" shall be defined as any physical
or mental disability or incapacity which renders you incapable of
fully performing the services required of you in your employment
with the Company for a period of 120 consecutive days or for
shorter periods aggregating 120 days during any period of twelve
(12) consecutive months.
(b) For the purposes hereof, termination for
"cause" shall mean termination after:
(i) your commission of a material act
of fraud against the Company or its affiliates;
(ii) your conviction of (or
pleading by you of nolo contendere to) any crime which
constitutes a felony in the jurisdiction involved; or
(iii) the willful, repeated and
demonstrable failure by you substantially to perform your
duties over a period of not less than 30 days, other than
any such failure resulting from your incapacity due to
physical or mental illness, or material breach of any of
your obligations under this Agreement, and your failure to
cure such failure or breach within 30 days after receipt of
written notice from the Chairman of the Executive Committee
of the Board of Directors of the Company.
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(c) For the purposes hereof, "Date of
Termination" shall mean (i) if your employment is terminated by
your death, the date of your death, and (ii) if your employment
is terminated for any other reason, the date on which a notice
thereof is given.
(d) For the purposes hereof, "good reason" shall
mean the substantial reduction by the Company of any material
duties currently performed by you as Executive Vice President and
General Counsel of the Company without cause, provided that you
first deliver written notice thereof to the Chairman of the
Executive Committee of the Board of Directors of the Company and
the Company shall have failed to restore such duties within
thirty (30) days after receipt of such written notice.
(e) For the purposes hereof, "Market Value" as of
any date shall mean the closing price (or, if there is no closing
price on such date, then the mean between the closing bid and
asked prices) per share of Common Stock on such date as reported
in the trading reports of the principal securities exchange in
the United States on which such stock is listed, or, if such
stock is not listed on a securities exchange in the United
States, as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or NASDAQ's
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<PAGE> 5
successor, or if not reported on NASDAQ, the fair market value
per share of such stock as determined by the Board of Directors
in good faith.
3. Adjustments. In the event the Company shall at
any time after the date hereof (A) declare or pay any dividend on
the Common Stock payable in shares of Common Stock, (B) subdivide
or split the outstanding shares of Common Stock into a greater
number of shares or (C) combine or consolidate the outstanding
shares of Common Stock into a smaller number of shares or effect
a reverse split of the outstanding shares of Common Stock, then
and in each such event (x) the number of shares of Common Stock
on the basis of which the Incentive Compensation is to be
calculated shall be adjusted by multiplying (a) such number of
shares as determined immediately prior to such event by (b) a
fraction (the "Adjustment Fraction"), the numerator of which is
the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of
shares of Common Stock outstanding immediately prior to such
event and (y) the Strike Price shall be adjusted by multiplying
(a) the Strike Price as determined immediately prior to such
event by (b) the reciprocal of the Adjustment Fraction.
In addition, in the event the Company shall at any time
after the date hereof make any distribution on the shares of
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<PAGE> 6
Common Stock, whether by way of a dividend or a reclassification
of stock, a recapitalization, a spin-off of interests in an
affiliated entity, a reorganization of the Company or otherwise,
in cash or any debt security, debt instrument, real or personal
property or any other property (other than any shares of Common
Stock or other capital stock of the Company), then for the
purpose of calculating the Incentive Compensation to be paid to
you, the Final Value of the Common Stock of the Company on the
Determination Date shall be increased in accordance with the
remaining provisions of this paragraph 3. In the case of a cash
dividend, the Final Value per share of the Common Stock on the
Determination Date shall be increased by an amount equal to the
per share cash amount of such dividend. In all other cases, the
Final Value per share of the Common Stock on the Determination
Date shall be increased by an amount equal to the excess of (A)
the average Market Value per share of the Common Stock for the
five (5) business days immediately preceding the ex-dividend date
for a dividend or distribution on such stock or the five (5)
business days immediately preceding the effective date of a
reclassification, recapitalization or other transaction involving
such stock over (B) the average Market Value per share of the
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<PAGE> 7
Common Stock of the Company for the five (5) business days next
succeeding such ex-dividend date or effective date, as the case
may be; provided, however, that if the Company's Board of
Directors, in good faith, believes that the adjustment, as
determined by the preceding formula, is insufficient to reflect
the per share reduction in value of the Company as a result of
such transaction, in addition to the adjustment determined by
such formula the Board of Directors may increase the Final Value
per share of the Common Stock on the Determination Date by such
amount as the Board of Directors determines, in good faith, to be
appropriate to reflect such per share reduction in value of the
Company. In addition to the adjustments specifically provided
for in this paragraph 3, the manner of determining the Incentive
Compensation due to you shall be further modified or amended as
mutually determined by you and the Board of Directors of the
Company (acting in its good faith judgment) to equitably account
for any extraordinary transaction or occurrence not specifically
described in this paragraph 3 and which would by itself adversely
affect the value of the Common Stock or the computation of the
Incentive Compensation due and owing to you.
4. No Obligation as to Employment. Nothing contained
herein shall be deemed to obligate the Company to continue your
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<PAGE> 8
employment or to obligate you to remain within the Company's
employment for any period of time hereafter.
5. Deductions and Withholdings. The Company shall be
entitled to withhold any amounts payable under this Agreement on
account of payroll taxes and similar matters as are required by
applicable law, rule or regulation of appropriate governmental
authorities.
6. Successors; Binding Agreement. (a) The Company
will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company,
by agreement in form and substance reasonably satisfactory to
you, to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to Incentive Compensation from
the Company in the same amount and on the same terms as you would
be entitled to hereunder if your employment was terminated other
than for cause or as the result of a permanent disability, except
that for purposes of implementing the foregoing, the date on
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<PAGE> 9
which any such succession becomes effective shall be deemed the
Date of Termination. As used in this Agreement, "Company" shall
include any successor to the Company's business and/or assets as
aforesaid which executes and delivers the agreement provided for
in this paragraph 6 or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.
(b) This Agreement and all your rights hereunder shall
inure to the benefit of and be enforceable by your personal or
legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. Your obligations
hereunder may not be delegated and except as otherwise provided
herein relating to the designation of a devisee, legatee or other
designee, you may not assign, transfer, pledge, encumber,
hypothecate or otherwise dispose of this Agreement or any of your
rights hereunder, and any such attempted delegation or
disposition shall be null and void and without effect.
7. Notice. For the purposes of this Agreement,
notices and all other communications provided for shall be in
writing and shall be deemed to have been duly given when
delivered or mailed by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as
follows:
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<PAGE> 10
If to you:
Mr. Dennis J. Getman
c/o Avatar Holdings Inc.
255 Alhambra Circle
Coral Gables, Florida 33134
If to the Company:
Avatar Holdings Inc.
255 Alhambra Circle
Coral Gables, Florida 33134
Attention: Chairman of the Executive Committee
or to such other address as any party may have furnished to the
other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
8. Miscellaneous. No provisions of this Agreement
may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by you
and by the Company. No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with,
any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior
or subsequent time. This Agreement constitutes the complete
understanding between the parties with respect to your employment
and no agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been
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<PAGE> 11
made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of
the State of Florida.
9. Validity. The invalidity or unenforceability of
any provision or provisions of this Agreement shall not affect
the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the
same instrument.
If the foregoing is satisfactory, would you please so
indicate by signing and returning to the Company the enclosed
copy of this letter whereupon this will constitute our agreement
on the subject.
AVATAR HOLDINGS INC.
By:/s/ Edwin Jacobson
Edwin Jacobson
Chairman of the Executive
Committee
ACCEPTED AND AGREED TO:
/s/ Dennis J. Getman
Dennis J. Getman
February 22, 1993
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Exhibit 10 (j) - Incentive Compensation Agreement, Charles McNairy
AVATAR HOLDINGS INC.
255 Alhambra Circle
Coral Gables, Florida 33134
As of September 9, 1993
Mr. Charles L. McNairy
c/o Avatar Holdings Inc.
255 Alhambra Circle
Coral Gables, FL 33134
Dear Charles:
We are writing with respect to the following incentive
compensation hereby granted to you as an employee of Avatar
Holdings Inc. (the "Company"):
1. Incentive Compensation.
(a) Within 10 days following the fifth anniversary
hereof or, if earlier, the Date of Termination (as hereinafter
defined), the Company shall pay you, as incentive compensation
("Incentive Compensation"), a cash amount equal to the product of
(x) the number of shares of the Company's common stock, par value
$1.00 per share ("Common Stock"), in which you are vested (as the
same may be adjusted pursuant to paragraph 3(x) below), times (y)
the excess, if any, of the Final Value per share of Common Stock
over $36.00 (the "Strike Price") (as the same may be adjusted
pursuant to paragraph 3(y) below), payable on the fifth
anniversary of the date hereof or, if earlier, on the Date of
Termination (in either case, the "Determination Date"). "Final
Value" shall mean, as of any Determination Date, the average
Market Value (as defined in paragraph 2 below) per share of
Common Stock during the twenty (20) business days immediately
preceding such Determination Date.
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<PAGE> 2
(b) For the purposes of this paragraph 1, you will
vest in 3,000 shares of Common Stock on each of the first through
fifth anniversaries hereof provided that you are still employed
by the Company on such anniversary. In the event that there is a
Date of Termination prior to the fifth anniversary hereof as a
result of
(i) your death,
(ii) your "permanent disability",
(iii) the Company's termination of your
employment without "cause", or
(iv) your termination of your employment with the
Company for "good reason" (each as defined
in paragraph 2 below),
you shall immediately vest on the Date of Termination in 50% of
the remaining unvested shares and you shall forfeit any unvested
shares. In the event that there is a Date of Termination prior
to the fifth anniversary hereof as a result of the Company's
termination of your employment for "cause", you shall forfeit the
remaining unvested shares.
2. Certain Definitions.
(a) For the purposes hereof, "permanent disability"
shall be defined as any physical or mental disability or
incapacity which renders you incapable of fully performing the
services required of you in your employment with the Company for
a period of 120 consecutive days or for shorter periods
aggregating 120 days during any period of twelve (12) consecutive
months.
(b) For the purposes hereof, termination for "cause"
shall mean termination after:
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<PAGE> 3
(i) your commission of a material act of fraud
against the Company or its affiliates;
(ii) your conviction of (or pleading by you of
nolo contendere to) any crime which
constitutes a felony in the jurisdiction
involved; or
(iii) the willful, repeated and demonstrable
failure by you substantially to perform your
duties over a period of not less than 30
days, other than any such failure resulting
from your incapacity due to physical or
mental illness, or material breach of any of
your obligations under this Agreement, and
your failure to cure such failure or breach
within 30 days after receipt of written
notice from the Chairman of the Executive
Committee of the Board of Directors of the
Company.
(c) For the purposes hereof, "Date of Termination"
shall mean
(i) if your employment is terminated by your
death, the date of your death, and
(ii) if your employment is terminated for any
other reason, the date on which a notice
thereof is given.
(d) For the purposes hereof, "good reason" shall mean
the substantial reduction by the Company of any material duties
currently performed by you as Executive Vice President, Treasurer
and Chief Financial Officer of the Company without cause,
provided that you first deliver written notice thereof to the
Chairman of the Executive Committee of the Board
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<PAGE> 4
of Directors of the Company and the Company shall have failed to
restore such duties within thirty (30) days after receipt of such
written notice.
(e) For the purpose hereof, "Market Value" as of any
date shall mean the closing price (or, if there is no closing
price on such date, then the mean between the closing bid and
asked prices) per share of Common Stock on such date as reported
in the trading reports of the principal securities exchange in
the United States on which such stock is listed, or, if such
stock is not listed on a securities exchange in the United
States, as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or NASDAQ's
successor, or if not reported on NASDAQ, the fair market value
per share of such stock as determined by the Board of Directors
in good faith.
3. Adjustments. In the event the Company shall at any
time after the date hereof (A) declare or pay any dividend on the
Common Stock payable in shares of Common Stock, (B) subdivide or
split the outstanding shares of Common Stock into a greater
number of shares or (C) combine or consolidate the outstanding
shares of Common Stock into a smaller number of shares or effect
a reverse split of the outstanding shares of Common Stock, then
and in each such event (x) the number of shares of Common Stock
on the basis of which the Incentive Compensation is to be
calculated shall be adjusted by multiplying (a) such number of
shares as determined immediately prior to such event by (b) a
fraction (the "Adjustment Fraction"), the numerator of which is
the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of
shares of Common Stock outstanding immediately prior to such
event and (y) the Strike Price shall be adjusted by multiplying
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<PAGE> 5
(a) the Strike Price as determined immediately prior to such
event by (b) the reciprocal of the Adjustment Fraction.
In addition, in the event the Company shall at any time
after the date hereof make any distribution on the shares of
Common Stock, whether by way of a dividend or a reclassification
of stock, a recapitalization, a spin-off of interests in an
affiliated entity, a reorganization of the Company or otherwise,
in cash or any debt security, debt instrument, real or personal
property or any other property (other than any shares of Common
Stock or other capital stock of the Company), then for the
purpose of calculating the Incentive Compensation to be paid to
you, the Final Value of the Common Stock of the Company on the
Determination Date shall be increased in accordance with the
remaining provisions of this paragraph 3. In the case of a cash
dividend, the Final Value per share of the Common Stock on the
Determination Date shall be increased by an amount equal to the
per share cash amount of such dividend. In all other cases, the
Final Value per share of the Common Stock on the Determination
Date shall be increased by an amount equal to the excess of (A)
the average Market Value per share of the Common Stock for the
five (5) business days immediately preceding the ex-dividend date
for a dividend or distribution on such stock or the five (5)
business days immediately preceding the effective date of a
reclassification, recapitalization or other transaction involving
such stock over (B) the average Market Value per share of the
Common Stock of the Company for the five (5) business days next
succeeding such ex-dividend date or effective date, as the case
may be; provided, however, that if the Company's Board of
Directors, in good faith, believes that the adjustment, as
determined by the preceding formula, is insufficient to reflect
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<PAGE> 6
the per share reduction in value of the Company as a result of
such transaction, in addition to the adjustment determined by
such formula the Board of Directors may increase the Final Value
per share of the Common Stock on the Determination Date by such
amount as the Board of Directors determines, in good faith, to be
appropriate to reflect such per share reduction in value of the
Company. In addition to the adjustments specifically provided
for in this paragraph 3, the manner of determining the Incentive
Compensation due to you shall be further modified or amended as
mutually determined by you and the Board of Directors of the
Company (acting in its good faith judgment) to equitably account
for any extraordinary transaction or occurrence not specifically
described in this paragraph 3 and which would by itself adversely
affect the value of the Common Stock or the computation of the
Incentive Compensation due and owing to you.
4. No Obligation as to Employment. Nothing contained
herein shall be deemed to obligate the Company to continue your
employment or to obligate you to remain within the Company's
employment for any period of time hereafter.
5. Deductions and Withholdings. The Company shall be
entitled to withhold any amounts payable under this Agreement on
account of payroll taxes and similar matters as are required by
applicable law, rule or regulation of appropriate governmental
authorities.
6. Successors; Binding Agreement. (a) The Company will
require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to you, to expressly
assume and agree to perform this Agreement in the same manner and
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<PAGE> 7
to the same extent that the Company would be required to perform
it if no such succession had taken place. Failure of the Company
to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle
you to Incentive Compensation from the Company in the same amount
and on the same terms as you would be entitled to hereunder if
your employment was terminated other than for cause or as the
result of a permanent disability, except that for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall include any successor to
the Company's business and/or assets as aforesaid which executes
and delivers the agreement provided for in this paragraph 6 or
which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(b) This Agreement and all your rights hereunder shall
inure to the benefit of and be enforceable by your personal or
legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. Your obligations
hereunder may not be delegated and except as otherwise provided
herein relating to the designation of a devisee, legatee or other
designee, you may not assign, transfer, pledge, encumber,
hypothecate or otherwise dispose of this Agreement or any of your
rights hereunder, and any such attempted delegation or
disposition shall be null and void and without effect.
7. Notice. For the purposes of this Agreement, notices
and all other communications provided for shall be in writing and
shall be deemed to have been duly given when delivered or mailed
by United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
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<PAGE> 8
If to you:
Mr. Charles L. McNairy
c/o Avatar Holdings Inc.
255 Alhambra Circle
Coral Gables, Florida 33134
If to the Company:
Avatar Holdings Inc.
255 Alhambra Circle
Coral Gables, Florida 33134
Attention: Chairman of the Executive Committee
or to such other address as any party may have furnished to the
other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
8. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing signed by you and by the
Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or
subsequent time. This Agreement constitutes the complete
understanding between the parties with respect to your employment
and no agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of
the State of Florida.
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<PAGE> 9
9. Validity. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the
validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the
same instrument.
If the foregoing is satisfactory, would you please so
indicate by signing and returning to the Company the enclosed
copy of this letter whereupon this will constitute our agreement
on the subject.
AVATAR HOLDINGS INC.
By: /s/ Edwin Jacobson
Edwin Jacobson
Chairman of the Executive
Committee
ACCEPTED AND AGREED TO:
/s/ Charles L. McNairy
Charles L. McNairy
Sept. 24, 1993
Date
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Exhibit 10 (k) - Revolving Credit Agreement
EXECUTION COPY
REVOLVING CREDIT AGREEMENT
between
AVATAR PROPERTIES INC.,
a Florida corporation
and
BERLINER HANDELS- UND FRANKFURTER BANK,
Acting Through Its Grand Cayman Branch
November 30, 1993
102
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<PAGE> 2
CREDIT AGREEMENT
Table of Contents
SECTION I. INTERPRETATION . . . . . . . . . . . . . . . . . . 1
1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . 1
1.02. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.03. Headings . . . . . . . . . . . . . . . . . . . . . . . . 10
1.04. Plural Terms . . . . . . . . . . . . . . . . . . . . . . 10
1.05. Time . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.06. Calculation of Interest and Fees . . . . . . . . . . . . 10
1.07. Other Interpretive Provisions . . . . . . . . . . . . . 10
SECTION II. CREDIT FACILITY . . . . . . . . . . . . . . . . . . 11
2.01. Revolving Loan Facility . . . . . . . . . . . . . . . . 11
2.02. Commitment . . . . . . . . . . . . . . . . . . . . . . . 12
2.03. Commitment Fee . . . . . . . . . . . . . . . . . . . . . 13
2.04. Upfront Fee . . . . . . . . . . . . . . . . . . . . . . 13
2.05. Prepayments . . . . . . . . . . . . . . . . . . . . . . 13
2.06. Other Payment Terms . . . . . . . . . . . . . . . . . . 14
2.07. Notes and Interest Account . . . . . . . . . . . . . . . 14
2.08 Loan Funding . . . . . . . . . . . . . . . . . . . . . . 15
2.09. Change of Circumstances . . . . . . . . . . . . . . . . 15
2.10. Taxes on Payments . . . . . . . . . . . . . . . . . . . 16
2.11. Funding Loss Indemnification . . . . . . . . . . . . . . 18
2.12. Renewal or Termination of Commitment . . . . . . . . . . 18
2.13. Pledge Agreement; Further Assurances . . . . . . . . . . 18
SECTION III. CONDITIONS PRECEDENT . . . . . . . . . . . . . . 19
3.01. Conditions to Initial Loan . . . . . . . . . . . . . . . 19
3.02. Conditions to Each Loan . . . . . . . . . . . . . . . . 20
SECTION IV. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 20
4.01 Due Incorporation, Qualification, etc. . . . . . . . . . 20
4.02 Authority . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION V. COVENANTS . . . . . . . . . . . . . . . . . . . . . 23
5.01. Affirmative Covenants . . . . . . . . . . . . . . . . . 23
5.02. Negative Covenants . . . . . . . . . . . . . . . . . . . 26
SECTION VI. DEFAULT . . . . . . . . . . . . . . . . . . . . . 26
6.01. Events of Default . . . . . . . . . . . . . . . . . . . 26
6.02. Remedies . . . . . . . . . . . . . . . . . . . . . . . . 28
6.03. Defaults . . . . . . . . . . . . . . . . . . . . . . . . 28
103
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SECTION VII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . 29
7.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . 29
7.02. Expenses . . . . . . . . . . . . . . . . . . . . . . . . 29
7.03. Indemnification . . . . . . . . . . . . . . . . . . . . 30
7.04. Waivers; Amendments . . . . . . . . . . . . . . . . . . 30
7.05. Successors and Assigns . . . . . . . . . . . . . . . . . 30
7.06. Setoff. . . . . . . . . . . . . . . . . . . . . . . . . 31
7.07. No Third Party Rights . . . . . . . . . . . . . . . . . 31
7.08. Partial Invalidity . . . . . . . . . . . . . . . . . . . 32
7.09. Governing Law . . . . . . . . . . . . . . . . . . . . . 32
7.10. Entire Agreement . . . . . . . . . . . . . . . . . . . . 32
7.11. Jury Trial . . . . . . . . . . . . . . . . . . . . . . . 32
7.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . 32
EXHIBITS
A Notice of Borrowing (2.01(b))
B Loan Note (2.07(a))
C Form of Revolver Extension Request (2.12)
D Form of Pledge Agreement (2.13(a))
E Form of Opinion of Borrower's Counsel (3.01)
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REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT, dated as of November
30, 1993, is entered into by and between AVATAR PROPERTIES INC.,
a Florida corporation ("Borrower") and BERLINER HANDELS- UND
FRANKFURTER BANK, acting through its Grand Cayman Branch,
("Bank").
RECITALS
A. Borrower has requested Bank to provide certain
credit facilities to Borrower secured by a portion of Borrower's
Fixed Income Securities (as defined herein) for general corporate
purposes.
B. Bank is willing to provide such credit facilities
upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the above Recitals
and the mutual covenants herein contained, the parties hereto
hereby agree as follows:
SECTION I. INTERPRETATION.
1.01. Definitions. Each of the following terms set forth
below, when used in this Agreement, shall have the respective
meaning set forth below:
"Affiliate" shall mean, with respect to any Person, (a)
each Person that, directly or indirectly, owns or controls,
whether beneficially or as a trustee, guardian or other
fiduciary, five percent (5%) or more of any class of Equity
Securities of such Person, (b) each Person that controls, is
controlled by or is under common control with such Person or any
Affiliate of such Person or (c) each of such Person's officers,
directors, joint venturers and partners; provided, however, that
in no case shall Bank be deemed to be an Affiliate of Debtors for
purposes of this Agreement. For the purpose of this definition,
"control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" shall mean this Credit Agreement.
"Available Commitment" shall mean, at any time, the
remainder of (a) the Commitment at such time, minus (b) the
aggregate principal amount of all Loans outstanding at such time.
"Bank" shall have the meaning given to that term in the
introductory paragraph hereof.
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"Base Rate" means the rate per annum announced by the
Bank from time to time at its New York office as its "base rate".
The Base Rate is determined by the Bank from time to time as a
means of pricing credit extensions to some customers and is
neither directly tied to any external rate of interest or index
nor necessarily the lowest rate of interest charged by the Bank
at any given time for any particular class of customers or credit
extensions.
"Borrowing Base" shall mean, as at any date of
determination thereof an amount equal to the sum of:
(a) seventy-five percent (75%) of the Market
Value of the Investment Collateral which is rated B3
or above by Moody's and B- or above by S&P;
(b) fifty percent (50%) of the Market Value of
the Investment Collateral rated below B3 by Moody's or
below B- by S&P; and
(c) fifty percent (50%) of the Market Value of
Investment Collateral which is not rated by either
Moody's or S&P.
"Borrower" shall have the meaning given to that term in
the introductory paragraph hereof.
"Business Day" shall mean any day on which (a)
commercial banks are not authorized or required to close in New
York, New York and (b) dealings in Dollar deposits are carried
out in the London interbank market.
"Capital Adequacy Requirement" shall have the meaning
given to that term in Section 2.09(d).
"Capital Asset" shall mean, with respect to any Person,
tangible property owned or leased (in the case of a Capital
Lease) by such Person, or any expense incurred by any Person that
is required by GAAP to be reported as an asset on such Person's
balance sheet.
"Capital Expenditures" shall mean, with respect to any
Person and any period, all amounts expended and Indebtedness
incurred or assumed by such Person during such period for the
acquisition of real property and other Capital Assets (including
amounts expended and Indebtedness incurred or assumed in
connection with Capital Leases).
"Capital Leases" shall mean any and all lease
obligations that, in accordance with generally accepted
accounting principles, are required to be capitalized on the
books of a lessee.
"Change of Law" shall have the meaning given to that
term in Section 2.09(b).
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"Closing Date" shall mean November 30, 1993.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall mean the property defined as
Collateral in the Pledge Agreement.
"Commitment" shall have the meaning given to that term
in Section 2.02(a).
"Commitment Fee" shall have the meaning given to that
term in Section 2.03.
"Contractual Obligation" of any Person shall mean, any
indenture, note, security, deed of trust, mortgage, security
agreement, lease, guaranty, instrument, contract, agreement or
other form of obligation or undertaking to which such Person is a
party or by which such Person or any of its property is bound.
"Credit Documents" shall mean and include this
Agreement, the Notes, the Pledge Agreement and all other
documents, instruments and agreements delivered to Bank in
connection with this Agreement.
"Default" shall mean any event or circumstance not yet
constituting an Event of Default but which, with the giving of
any notice or the lapse of any period of time or both, would
become an Event of Default.
"Dollars" and "$" shall mean the lawful currency of the
United States of America and, in relation to any payment under
this Agreement, same day or immediately available funds.
"Employee Benefit Plan" shall mean any employee benefit
plan within the meaning of section 3(3) of ERISA maintained or
contributed to by Borrower.
"Environmental Laws" means all Requirements of Law
relating to the protection of human health or the environment,
including: (a) all Requirements of Law, pertaining to reporting,
licensing, permitting, investigation, and remediation of
emissions, discharges, releases, or threatened releases of
hazardous materials, chemical substances, pollutants,
contaminants, or hazardous or toxic substances, materials or
wastes whether solid, liquid, or gaseous in nature, into the air,
surface water, groundwater, or land, or relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of chemical substances,
pollutants, contaminants, or hazardous or toxic substances,
materials, or wastes, whether solid, liquid, or gaseous in
nature; and (b) all Requirements of Law pertaining to the
protection of the health and safety of employees or the public.
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"Equity Securities" of any Person shall mean (a) all
common stock, preferred stock, participations, shares,
partnership interests or other equity interests in and of such
Person (regardless of how designated and whether or not voting or
non-voting) and (b) all warrants, options and other rights to
acquire any of the foregoing.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as the same may from time to time be
amended or supplemented, including any rules or regulations
issued in connection therewith.
"ERISA Affiliate" shall mean any Person which is
treated as a single employer with Borrower under Section 414 of
the Code.
"ERISA Plan" means any employee pension plan, as
defined in Section 3(2) of ERISA, which (i) is not an individual
account plan, as defined in Section 3(34) of ERISA or a
multiemployer plan, as defined in Section 3(37) of ERISA, (ii) is
subject to Title IV of ERISA, and (iii) Borrower or any ERISA
Affiliate maintains, contributes to, or has an obligation to
contribute to, on behalf of participants who are or were employed
by any of them.
"Event of Default" shall have the meaning given to that
term in Section 6.01.
"Federal Reserve Board" shall mean the Board of
Governors of the Federal Reserve System.
"Financial Statements" shall mean, with respect to any
accounting period for any Person, statements of income and of
changes in cash flow of such Person for such period, and balance
sheets of such Person as of the end of such period, setting forth
in each case in comparative form figures for the corresponding
period in the preceding fiscal year if such period is less than a
full fiscal year or, if such period is a full fiscal year,
corresponding figures from the preceding annual audit, all
prepared in reasonable detail and in accordance with GAAP.
"Fixed-Income Securities" means any securities that
entitle the holder to receive:
(a) a stated principal amount; or
(b) interest on a principal amount (which may be a
notional principal amount) calculated by reference to a fixed
rate or to a standard or formula which does not reference any
change in the market value or fair value of securities or assets;
or
(c) interest on a principal amount (which may be a
notional principal amount) calculated by reference to auctions
among holders and prospective holders, or through remarketing of
the security; or
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(d) an amount equal to specified fixed or variable
portions of the interest received on the assets held by the
issuer; or
(e) any combination of amounts described in paragraphs
(a), (b), (c), and (d) of this section;
provided, that (i) substantially all of the payments to which the
holders of such securities are entitled in respect thereof
consist of the foregoing amounts and (ii) in no event shall the
term Fixed-Income Securities include any Margin Stock.
"GAAP" shall mean generally accepted accounting
principles and practices as in effect in the United States of
America from time to time, consistently applied.
"Governmental Authority" shall mean any domestic or
foreign national, state or local government, any political
subdivision thereof, any department, agency, authority or bureau
of any of the foregoing, or any other entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without
limitation, the Federal Deposit Insurance Corporation, the
Federal Reserve Board, the Comptroller of the Currency, any
central bank or any comparable authority.
"Governmental Charges" shall mean all levies,
assessments, fees, claims or other charges imposed by any
Governmental Authority upon or relating to (i) Borrower or
Borrower's Subsidiaries, (ii) the Loans, (iii) employees,
payroll, income or gross receipts of Borrower or Borrower's
Subsidiaries, (iv) the ownership or use of any of its assets by
Borrower or Borrower's Subsidiaries or (v) any other aspect of
the business of Borrower or Borrower's Subsidiaries.
"Governmental Rule" shall mean any law, rule,
regulation, ordinance, order, code interpretation, judgment,
decree, directive, guidelines, policy or similar form of decision
of any Governmental Authority.
"Holdings" means Avatar Holdings Inc., a Delaware
Corporation.
"Indebtedness" of any Person shall mean (i)
indebtedness for borrowed money or for the deferred purchase
price of property or services, (ii) obligations of the Borrower
as lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles,
recorded as capital leases, (iii) obligations under direct or
indirect guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clause (i) or
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(ii) above, and (iv) liabilities in respect of unfunded vested
benefits under plans covered by Title IV of ERISA.
"Interest Account" shall have the meaning given to that
term in Section 2.07(b).
"Interest Period" shall mean, with respect to any Loan,
the time period selected by Borrower pursuant to Section 2.01(b),
which commences on the first day of such Loan and ends on the
last day of such time period, and thereafter, each subsequent
time period selected by Borrower pursuant to Section 2.01(d),
which commences on the last day of the immediately preceding time
period and ends on the last day of that time period; provided,
however, that "Interest Period" shall also mean, in respect of
any amounts in default, such periods as Bank elects pursuant to
Section 2.06(c).
"Investment" of any Person shall mean any loan or
advance of funds by such Person to any other Person (other than
advances to employees of such Person for moving and travel
expense, drawing accounts and similar expenditures in the
ordinary course of business), any purchase or other acquisition
of any Equity Securities or Indebtedness of any other Person, any
capital contribution by such Person to or any other investment by
such Person in any other Person (including, without limitation,
any Indebtedness incurred by such Person of the type described in
clauses (b) and (c) of the definition of "Indebtedness" on behalf
of any other Person); provided, however, Investments shall not
include indebtedness and accounts receivable from any Person
which are current assets arising from sales in the ordinary
course of business.
"Investment Collateral" shall mean the Borrower's
interest in Fixed-income Securities held in the Investment
Collateral-Accounts.
"Investment Collateral-Accounts" shall mean the account
no. 38-23013 maintained by the Borrower at Morgan Stanley & Co.,
and account no. 40153742 maintained by Borrower at Offit Bank and
any other brokerage or investment account maintained by Borrower
with a commercial bank or nationally recognized brokerage firm
that Borrower, with the consent of Bank, from time to time
includes as an Investment Collateral-Account; provided, however,
that:
(i) No account may constitute an Investment
Collateral-Account unless Borrower is the sole owner of the
securities deposited therein;
(ii) No account shall constitute an Investment
Collateral-Account unless and until Bank has received an
appropriately completed and executed acknowledgment from
such bank or brokerage firm of Bank's security interest in
the Borrower's interest therein in form and substance
satisfactory to Bank; and
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(iii) No account shall constitute an Investment
Collateral-Account unless and until Bank shall have
satisfied itself as to the enforceability and perfection of
Bank's security interest therein and shall have received
such opinions and other assurances in that regard as Bank
may require.
"LIBOR Rate" shall mean, with respect to any Interest
Period for a Loan, the rate per annum at which Dollar deposits
are offered to Bank in the London interbank eurodollar currency
market on the second Business Day prior to the commencement of
such Interest Period at or about 11:00 A.M. (London time) (for
delivery on the first day of such Interest Period) for a term
comparable to such Interest Period and in an amount approximately
equal to the amount of such Loan (or the overdue amount, in the
case of Interest Periods determined by Bank pursuant to Section
2.06(c)).
"Lien" shall mean, with respect to any property, any
security interest, mortgage, pledge, lien, claim, charge or other
encumbrance in, of, or on such property or the income therefrom,
including, without limitation, the interest of a vendor or lessor
under a conditional sale agreement, Capital Lease or other title
retention agreement, or any agreement to provide any of the
foregoing, and the filing of any financing statement or similar
instrument under the Uniform Commercial Code or comparable law of
any jurisdiction.
"Loan" shall have the meaning specified in Section
2.01(a).
"Loan Maturity Date" shall mean the date specified in
Section 2.01(a), as such date may be extended in accordance with
Section 2.12.
"Loan Note" shall have the meaning given to that term
in Section 2.07(a).
"Margin Stock" shall have the meaning given to that
term in Regulation U issued by the Federal Reserve Board, as
amended from time to time, and any successor regulation thereto.
"Market Value" shall mean with respect to the
Investment Collateral, at any time of determination thereof, the
daily closing prices for such date, excluding any trades which
are not bona fide arm's-length transactions. The closing price
for each such trading day shall be (i) if the Investment
Collateral is then listed or admitted for trading on any national
securities exchange or, if not so listed or admitted for trading,
is listed or admitted for trading on the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
National Market System, the last sale price of the Investment
Collateral, regular way, or the mean of the bid and asked prices
thereof (for any trading day on which no such sale occurred), in
each case as officially reported on the principal securities
exchange on which the Investment Collateral is listed or admitted
for trading or on the NASDAQ National Market System, as the case
may be, or (ii) if not so listed or admitted for trading on a
national securities exchange or the NASDAQ National Market
System, the mean between the closing high bid and low asked
quotations for the Investment Collateral in the over-the-counter
market as reported by NASDAQ, or any similar system for the
automated dissemination of securities prices then in common use,
if so quoted, as reported by any member firm of the New York
Stock Exchange selected by Borrower. If the Investment
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Collateral is quoted on a national securities or central market
system in lieu of a market or quotation system described above,
the closing price shall be determined in the manner set forth in
clause (i) of the preceding sentence if actual transactions are
reported, and in the manner set forth in clause (ii) of the
preceding sentence if bid and asked quotations are reported but
actual transactions are not. If there is no exchange or
over-the-counter market for the Investment Collateral during the
date as of which Market Value is to be determined, the Market
Value shall be deemed to be zero.
"Material Adverse Effect" shall mean a material adverse
effect on (a) the business, assets, operations or financial or
other condition of Borrower; (b) the ability of Borrower to pay
or perform the Obligations in accordance with the terms of this
Agreement and the other Credit Documents; or (c) the rights and
remedies of Bank under this Agreement, the other Credit Documents
or any related document, instrument or agreement.
"Maturity" shall mean, with respect to any Loan,
interest, fees or other amount payable by Borrower under this
Agreement or the other Credit Documents, the date such Loan,
interest, fee or other amount becomes due, whether upon the
stated maturity or due date, upon acceleration or otherwise.
"Moody's" shall mean Moody's Investors Service, Inc.
"Note" shall mean a Loan Note.
"Notice of Borrowing" shall have the meaning given to
that term in Section 2.01(b).
"Notice of Interest Period Selection" shall have the
meaning given to that term in Section 2.01(d).
"Obligations" shall mean and include all loans,
advances, debts, liabilities, and obligations, howsoever
arising, owed by Borrower to Bank of every kind and description
(whether or not evidenced by any note or instrument and whether
or not for the payment of money), direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter
arising pursuant to the terms of this Agreement or any of the
other Credit Documents, including without limitation all
interest, fees, charges, expenses, attorneys' fees and
accountants' fees chargeable to Borrower or payable by Borrower
hereunder or thereunder.
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"Other Credit Facility" shall mean the Amended and
Restated Credit Agreement dated as of November 30, 1993 among
Avatar Finance, Inc., as borrower; Holdings and Borrower, as
guarantors; Bank and Sun Bank/Miami, National Association, as
lenders; and Bank, acting as agent for such lenders (the
"Restated Credit Agreement"), all other Loan Documents (as such
term is defined in the Restated Credit Agreement) and all
documents, financing statements, instruments and agreements
executed and delivered in connection therewith.
"Participant" shall have the meaning given to that term
in Section 7.05(b).
"Person" shall mean and include an individual, a
partnership, a corporation (including a business trust), a joint
stock company, an unincorporated association, a joint venture or
other entity or a Governmental Authority.
"Pledge Agreement" shall have the meaning given to that
term in Section 2.13(a).
"Requirement of Law" applicable to any Person shall
mean (a) the Articles or Certificate of Incorporation and
By-laws, Partnership Agreement or other organizational or
governing documents of such Person, (b) any material Governmental
Rule applicable to such Person, (c) any material license, permit,
approval or other authorization granted by any Governmental
Authority to or for the benefit of such Person and (d) any
material judgment, decision or determination of any Governmental
Authority or arbitrator, in each case applicable to or binding
upon such Person or any of its property or to which such Person
or any of its property is subject.
"Revolver Extension Request" shall have the meaning
given to that term in Section 2.12.
"S&P" shall mean Standard & Poor's Corporation.
"Solvent" shall mean, with respect to any Person on any
date, that on such date (a) the fair value of the property of
such Person is greater than the fair value of the liabilities
(including, without limitation, contingent liabilities) of such
Person, (b) the present fair saleable value of the assets of such
Person is not less than the amount that will be required to pay
the probable liability of such Person on its debts as they become
absolute and matured, (c) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond
such Person's ability to pay as such debts and liabilities mature
and (d) such Person is not engaged in business or a transaction,
and is not about to be engaged in any business or a transaction,
for which such Person's property would constitute unreasonably
small capital.
"Subsidiary" of any Person shall mean (a) any
corporation of which more than 50% of the issued and outstanding
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Equity Securities having ordinary voting power to elect a
majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting
power upon the occurrence of any contingency) is at the time
directly or indirectly owned or controlled by such Person, by
such Person and one or more of its other Subsidiaries or by one
or more of such Person's other Subsidiaries, (b) any partnership,
joint venture, or other association of which more than 50% of the
equity interest having the power to vote, direct or control the
management of such partnership, joint venture or other
association is at the time owned and controlled by such Person,
by such Person and one or more of the other Subsidiaries or by
one or more of such Person's other subsidiaries and (c) any other
Person included in the Financial Statements of such Person on a
consolidated basis.
"Taxes" shall have the meaning given to such term in
Section 2.10.
"Upfront Fee" shall have the meaning given to that term
in Section 2.04.
1.02. GAAP. Unless otherwise indicated in this Agreement
or any other Credit Document, all accounting terms used in this
Agreement or any other Credit Document shall be construed, and
all accounting and financial computations hereunder or thereunder
shall be computed, in accordance with GAAP.
1.03. Headings. Headings in this Agreement and each of the
other Credit Documents are for convenience of reference only and
are not part of the substance hereof or thereof.
1.04. Plural Terms. All terms defined in this Agreement or
any other Credit Document in the singular form shall have
comparable meanings when used in the plural form and vice versa.
1.05. Time. All references in this Agreement and each of
the other Credit Documents to a time of day shall mean New York
City time, unless otherwise indicated.
1.06. Calculation of Interest and Fees. All calculations
of interest and fees under this Agreement and the other Credit
Documents for any period shall include the first day of such
period and exclude the last day of such period.
1.07. Other Interpretive Provisions. References in this
Agreement to "Recitals," "Sections," "Exhibits" and "Schedules"
are to recitals, sections, paragraphs, subparagraphs, exhibits
and schedules herein and hereto unless otherwise indicated.
References in this Agreement and each of the other Credit
Documents to any document, instrument or agreement (a) shall
include all exhibits, schedules and other attachments thereto,
(b) shall include all documents, instruments or agreements issued
or executed in replacement thereof, and (c) shall mean such
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document, instrument or agreement, or replacement or predecessor
thereto, as amended, modified and supplemented from time to time
and in effect at any given time. The words "hereof," "herein"
and "hereunder" and words of similar import when used in this
Agreement or any other Credit Document shall refer to this
Agreement or such other Credit Document, as the case may be, as a
whole and not to any particular provision of this Agreement or
such other Credit Document, as the case may be. The words
"include" and "including" and words of similar import when used
in this Agreement or any other Credit Document shall not be
construed to be limiting or exclusive.
SECTION II. CREDIT FACILITY.
2.01. Revolving Loan Facility.
(a) Revolving Loan Availability. Subject to the terms and
conditions of this Agreement, Bank agrees to advance to Borrower
from time to time during the period beginning on the Closing Date
and ending on November 29, 1994 (the "Loan Maturity Date") such
loans as Borrower may request under this Section 2.01
(individually, a "Loan"); provided, however, that the aggregate
principal amount of all Loans outstanding at any time shall not
exceed the lesser of (i) the amount of the Commitment or (ii) the
Borrowing Base. Except as otherwise provided herein, Borrower
may borrow, repay and reborrow Loans until the Loan Maturity
Date.
(b) Notice of Borrowing. Borrower shall request each Loan
by delivering to Bank an irrevocable written notice in the form
of Exhibit A, appropriately completed (a "Notice of Borrowing"),
which specifies, among other things:
(i) The principal amount of the requested Loan, which
shall be in the minimum amount of $1,000,000 or an integral
multiple of $10,000 in excess thereof;
(ii) The date on which Bank is requested to make the
Loan, which shall be a Business Day; and
(iii) The initial Interest Period selected by Borrower
for such Loan in accordance with Section 2.01(d).
Borrower shall give each Notice of Borrowing to Bank at least
three (3) Business Days before the date of the requested Loan.
Each Notice of Borrowing shall be delivered by first-class mail
or telecopy to Bank at the office or telecopy number and during
the hours specified in Section 7.01; provided, however, that
Borrower shall promptly deliver to Bank the original of any
Notice of Borrowing initially delivered by telecopy.
(c) Loan Interest Rates. Except as otherwise specified in
Section 2.06(c) or Section 2.09(a) or (b), Borrower shall pay
interest on the unpaid principal amount of each Loan from the
date of such Loan until the maturity thereof, at a rate per annum
equal at all times during each Interest Period for such Loan to
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the LIBOR Rate for such Interest Period plus one and one-half
percent (1.5%). All computations of interest on Loans shall be
based on a year of 360 days for actual days elapsed.
(d) Loan Interest Periods.
(i) The initial and each subsequent Interest Period
selected by Borrower for a Loan shall be one, three or six
months; provided, however, that (A) any Interest Period
which would otherwise end on a day which is not a Business
Day shall be extended to the next succeeding Business Day
unless such next Business Day falls in another calendar
month, in which case such Interest Period shall end on the
immediately preceding Business Day; (B) any Interest Period
for a Loan which begins on the last Business Day of a
calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the
end of such Interest Period) shall end on the last Business
Day of a calendar month; and (C) no such Interest Period
shall end after the Loan Maturity Date.
(ii) Borrower shall notify Bank by an irrevocable
written notice at least three (3) Business Days prior to
the last day of each Interest Period for a Loan of the
Interest Period selected by Borrower for the next
succeeding Interest Period for such Loan. Such notice (a
"Notice of Interest Period Selection") shall be given by
first-class mail or telecopy to the office or the telecopy
number and during the hours specified in Section 7.01;
provided, however, that Borrower shall promptly deliver to
Bank the original of any Notice of Interest Period
Selection initially delivered by telecopy. If Borrower
fails to notify Bank of the next Interest Period for a Loan
in accordance with this Section 2.01(d), such Loan shall
automatically convert to a Loan for an Interest Period of
one (1) month on the last day of the current Interest
Period therefor, unless the relevant Loan is paid in full
on the last day of the then applicable Interest Period.
(e) Scheduled Loan Payments. Unless sooner repaid,
Borrower shall repay to Bank on the Loan Maturity Date the unpaid
principal amount of each Loan made by Bank. Borrower shall pay
accrued interest on the unpaid principal amount of each Loan on
the last day of each Interest Period therefor (and, if any such
Interest Period is longer than three (3) months, every three (3)
months), and in the case of all Loans, upon prepayment (to the
extent thereof) and at maturity.
(f) Purpose. Borrower shall use the proceeds of the Loans
to finance a portion of Borrower's Investment Collateral and for
Borrower's general corporate needs.
2.02. Commitment. The aggregate principal amount of all
Loans outstanding at any time shall not exceed Thirty Million
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Dollars ($30,000,000) (such amount to be referred to herein as
the "Commitment").
2.03. Commitment Fee. Borrower shall pay to Bank a
commitment fee (the "Commitment Fee") of one-eighth of one
percent (0.125%) per annum on the Available Commitment for the
period beginning on the Closing Date and ending on the Loan
Maturity Date. Borrower shall pay the Commitment Fee quarterly
in arrears on the first Business Day of February, May, August and
November in each year (commencing February 1, 1994) and on the
Loan Maturity Date. All computations of the Commitment Fee shall
be based on a year of 360 days for actual days elapsed.
2.04. Upfront Fee. Borrower shall pay to Bank an upfront
fee (the "Upfront Fee") of $112,500, payable on January 2, 1994.
2.05. Prepayments.
(a) Terms of all Prepayments. Upon the prepayment of any
Loan (whether such prepayment is an optional prepayment under
Section 2.05(b), a mandatory prepayment required by Section
2.05(c) or a mandatory prepayment required by any other provision
of this Agreement or the other Credit Documents, including,
without limitation, a prepayment upon acceleration), Borrower
shall pay to Bank (i) all accrued interest to the date of such
prepayment on the amount prepaid, and (ii) all amounts payable to
Bank pursuant to Section 2.11.
(b) Optional Prepayments. At its option, Borrower may,
upon three (3) Business Days notice to Bank, prepay the Loans in
part, in an aggregate principal amount of $100,000 or any greater
integral multiple of $10,000 in excess thereof, or in whole.
(c) Mandatory Payments. Borrower covenants and agrees that
if at any time the then unpaid aggregate principal balance of all
of the Loans shall be in excess of the Borrowing Base, the
Borrower shall, within five (5) Business Days, pay over to Bank
as and for a prepayment on the Loans, such amount as shall be
necessary to cause the aggregate unpaid principal balance of all
of the Loans to be equal to or less than the Borrowing Base,
without regard to the limitations set forth in Section 2.05(b).
Each mandatory prepayment shall be accompanied by accrued
interest on the amount prepaid to the date of prepayment.
(d) Effect of Prepayment. Any amount prepaid may, subject
to the terms and conditions hereof, be borrowed, repaid and
borrowed again at the option of Borrower, subject to all the
terms and conditions hereof.
(e) Application of Prepayments. All prepayments hereunder
shall be applied first to unpaid fees, costs and expenses then
due and payable under this Agreement or the other Credit
Documents, second to accrued interest then due and payable under
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this Agreement or the other Credit Documents and finally to
reduce the principal amount of outstanding Loans.
(f) No Prepayment Penalties. All payments pursuant to this
Section 2.05 shall be without premium or penalty.
2.06. Other Payment Terms.
(a) Place and Manner. Borrower shall make all payments due
to Bank hereunder in lawful money of the United States and in
same day or immediately available funds without setoff or
counterclaim not later than 12:00 noon on the date due to the
account of Bank (Account No. 802-301-4646) at the Bank of New
York, One Wall Street, New York, New York (ABA No. 0210078) or
to such other place as Bank may have theretofore designated by
notice to Borrower.
(b) Payment Date Adjustments. Whenever any payment due
hereunder shall fall due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day, and
such extension of time shall be included in the computation of
interest or fees, as the case may be.
(c) Late Payments. If any amounts required to be paid by
Borrower under this Agreement or the other Credit Documents
(including, without limitation, principal or interest payable on
any Loan, any fees or other amounts) remain unpaid after such
amounts are due, Borrower shall pay interest on the aggregate,
outstanding balance of such amounts from the date due until those
amounts are paid in full at a per annum rate equal at all times
to the sum of three and one-half percent (3.5%) and the LIBOR
Rate for Interest Periods of one day, one week, one month or
three months (as the Bank shall elect in its sole discretion).
All computations of such interest shall be based on a year of 360
days for actual days elapsed. Interest accruing pursuant to this
Section 2.06 shall be payable from time to time on demand of
Bank.
2.07. Notes and Interest Account.
(a) Loan Note. The obligation of Borrower to repay the
Loans and to pay interest thereon at the rates provided herein
shall be evidenced by a promissory note in the form of Exhibit B
(individually, a "Loan Note") which note shall be (i) in the
amount of the Commitment, (ii) dated the Closing Date and (iii)
otherwise appropriately completed. Borrower authorizes Bank to
record on the schedule annexed to the Loan Note the date and
amount of each Loan and of each payment or prepayment of
principal thereon made by Borrower, and agrees that all such
notations shall constitute prima facie evidence of the matters
noted. Borrower further authorizes Bank to attach to and make a
part of the Loan Note continuations of the schedule attached
thereto as necessary.
(b) Interest Account. Borrower authorizes Bank to record
in an account or accounts maintained by Bank on its books (the
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"Interest Account") (i) the interest rates applicable to all
Loans and the effective dates of all changes thereto, (ii) the
Interest Period for each Loan, (iii) the date and amount of each
principal and interest payment on each Loan and (iv) such other
information as Bank may determine is necessary for the
computation of interest payable by Borrower hereunder.
2.08 Loan Funding. Unless otherwise directed by Borrower,
Bank shall disburse the proceeds of each Loan to Borrower by
disbursement to the account or accounts specified in the
applicable Notice of Borrowing.
2.09. Change of Circumstances.
(a) Inability to Determine Rates. If, on or before the
first day of any Interest Period for any Loan, Bank shall advise
Borrower that the LIBOR Rate for such Interest Period cannot be
adequately and reasonably determined due to the unavailability of
funds in or other circumstances affecting the London interbank
market, then after the giving of any such notice and until Bank
shall otherwise notify Borrower that the circumstances giving
rise to such condition no longer exist, Borrower's right to
request the making of and Bank's obligations to make Loans shall
be suspended. Any Loans affected by such condition outstanding
at the commencement of any such suspension shall bear interest
from the commencement of the next succeeding Interest Period for
each such Loan at the Base Rate until such suspension has ended.
(b) Illegality. If, after the date of this Agreement, the
adoption of any Governmental Rule, any change in any Governmental
Rule or the application or requirements thereof (whether such
change occurs in accordance with the terms of such Governmental
Rule as enacted, as a result of amendment or otherwise), any
change in the interpretation or administration of any
Governmental Rule by any Governmental Authority, or compliance by
Bank with any request or directive (whether or not having the
force of law) of any Governmental Authority (a "Change of Law")
shall make it unlawful or impossible for Bank to make or maintain
any Loan that bears interest based upon LIBOR, Bank shall
immediately notify Borrower of such Change of Law. Upon receipt
of such notice, (i) Borrower's right to request the making of and
Bank's obligations to make any Loans that bear interest based
upon LIBOR shall be terminated, and (ii) if Bank shall notify
Borrower that Bank may not lawfully continue to fund and maintain
the Loans outstanding with interest based upon LIBOR such Loans
shall immediately be converted into Loans bearing interest at the
Base Rate, but otherwise upon the same terms and conditions
specified herein; and (iii) thereafter so long as such Change of
Law remains applicable, Borrower may borrow Loans bearing
interest at the Base Rate upon the terms and conditions specified
herein. Any prepayment of Loans made pursuant to the preceding
sentence prior to the last day of an Interest Period for such
Loans shall be deemed a prepayment thereof for purposes of
Section 2.11.
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(c) Increased Costs. If, after the date of this Agreement,
any Change of Law:
(i) Shall subject Bank to any tax, duty or other
charge with respect to any Loan or the Commitment, or shall
change the basis of taxation of payments by Borrower to
Bank on such Loan or the Commitment or in respect to such
Loan or the Commitment (except for changes in the rate of
taxation on the overall net income of Bank); or
(ii) Shall impose, modify or hold applicable any
reserve, special deposit or similar requirement against
assets held by, deposits or other liabilities in or for the
account of, advances or loans by, or any other acquisition
of funds by Bank for any Loan; or
(iii) Shall impose on Bank any other condition related
to any Loan or the Commitment;
And the effect of any of the foregoing is to increase the cost to
Bank of making, renewing, or maintaining any such Loan or the
Commitment or to reduce any amount receivable by Bank hereunder;
then Borrower shall from time to time, upon demand by Bank, pay
to Bank additional amounts sufficient to reimburse Bank for such
increased costs or to compensate Bank for such reduced amounts.
A certificate as to the amount of such increased costs or reduced
amounts, submitted by Bank to Borrower shall, in the absence of
manifest error, be conclusive and binding on Borrower for all
purposes.
(d) Capital Requirements. If, after the date of this
Agreement, Bank determines that (i) any Change of Law affects the
amount of capital required or expected to be maintained by Bank
or any Person controlling Bank (a "Capital Adequacy Requirement")
and (ii) the amount of capital maintained by Bank or such Person
which is attributable to or based upon the Loans, the Commitment
or this Agreement must be increased as a result of such Capital
Adequacy Requirement (taking into account Bank's or such Person's
policies with respect to capital adequacy), Borrower shall pay to
Bank or such Person, upon demand of Bank, such amounts as Bank or
such Person shall determine are necessary to compensate Bank or
such Person for the increased costs to Bank or such Person of
such increased capital. A certificate of Bank setting forth in
reasonable detail the computation of any such increased costs,
delivered by Bank to Borrower shall, in the absence of manifest
error, be conclusive and binding on Borrower for all purposes.
2.10. Taxes on Payments.
(a) All payments made by Borrower under this Agreement and
the other Credit Documents shall be made free and clear of, and
without deduction or withholding for or on account of, any
present or future income, stamp or other taxes, levies, imposts,
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duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority (except net income taxes and franchise
taxes in lieu of net income taxes imposed on Bank as a result of
a present or former connection between the jurisdiction of the
Governmental Authority imposing such tax and Bank, excluding a
connection arising solely from Bank having executed, delivered or
performed its obligations or received a payment under, or
enforced, this Agreement or the other Credit Documents) (all such
non-excluded taxes, levies, imposts, duties, charges, fees,
deductions and withholdings being hereinafter called "Taxes").
If any Taxes are required to be withheld from any amounts payable
to Bank hereunder or under the other Credit Documents, the
amounts so payable to Bank shall be increased to the extent
necessary to yield to Bank (after payment of all Taxes) interest
or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement and the other Credit
Documents. Whenever any Taxes are payable by Borrower, as
promptly as possible thereafter, Borrower shall send to Bank a
certified copy of an original official receipt received by
Borrower showing payment thereof. If Borrower fails to pay any
Taxes when due to the appropriate taxing authority or fails to
remit to Bank the required receipts or other required documentary
evidence, Borrower shall indemnify Bank for any incremental
taxes, interest or penalties that may become payable by Bank as a
result of any such failure. The agreements in this Section 2.10
shall survive the termination of this Agreement.
(b) Bank agrees that it will deliver to the Borrower (i)
two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224 or successor applicable forms, as the
case may be, and (ii) an Internal Revenue Service Form W-8 or W-9
or successor applicable forms, as the case may be. Bank also
agrees to deliver to the Borrower two further copies of the said
Form 1001 and 4224 and Form W-8 or W-9, or successor applicable
forms or other manner of certification, as the case may be, (i)
upon notification by the Borrower on or before the date that any
such form expires or becomes obsolete or (ii) after the
occurrence of any event requiring a change in the most recent
form previously delivered by the Bank to the Borrower, and such
extensions or renewals thereof as may reasonably be requested by
the Borrower, unless in any such case a change in law (including,
without limitation, any change in treaty, statute, regulation or
any official interpretation thereof) has occurred after the date
of this Agreement and prior to the date on which any such
delivery would otherwise be required which renders all such forms
inapplicable or which would prevent the Bank from duly completing
and delivering any such form with respect to it and the Bank so
advised the Borrower. The Bank shall certify (i) in the case of
a Form 1001 or 4224, or successor applicable form, that it is
entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income
taxes (or, to the extent required by any change in treaty,
statute, regulation or any official interpretation thereof,
certifying the extent to which it is entitled to receive payments
under this Agreement without deduction or withholding of any
United States federal income taxes) and (ii) in the case of a
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Form W-8 or W-9, or successor applicable form, that it is
entitled to a full exemption from United States backup
withholding tax.
2.11. Funding Loss Indemnification. If Borrower shall (a)
repay or prepay any Loan on any day other than the last day of an
Interest Period therefor (whether an optional prepayment, a
mandatory prepayment, a payment upon acceleration or otherwise)
or (b) fail to borrow any Loan for which a Notice of Borrowing
has been delivered to Bank (whether as a result of the failure to
satisfy any applicable conditions or otherwise) Borrower shall,
upon demand by Bank, reimburse Bank and hold Bank harmless for
all costs and losses incurred by Bank as a result of such
repayment, prepayment or failure. Borrower understands that such
costs and losses may include, without limitation, losses incurred
by Bank as a result of funding and other contracts entered into
by Bank to fund a Loan. Bank shall deliver to Borrower a
certificate setting forth the amount of costs and losses for
which demand is made. Such a certificate so delivered to
Borrower shall, in the absence of manifest error, be conclusive
and binding on Borrower as to the amount of such loss for all
purposes.
2.12. Renewal or Termination of Commitment. Bank's
Commitment shall be effective until the Loan Maturity Date, at
which time it shall expire. Not later than 60 days prior to the
Loan Maturity Date, Borrower may notify Bank in writing that it
requests extension of the Commitment for an additional period of
364 days (or, if the last of such period is not a Business Day,
such period ending on the next preceding Business Day). Such
written notice (a "Revolver Extension Request") shall be made in
the form of Exhibit C hereto. Bank shall have the sole and
absolute discretion to agree to or decline any such Revolver
Extension Request. If Bank so agrees to the Revolver Extension
Request, Bank shall so notify Borrower in writing not later than
the date which is 30 days prior to the Loan Maturity Date, and i)
Bank's Commitment shall be so extended for such additional period
and (ii) the Loan Maturity Date shall be extended to the last day
of such period. Failure by Bank to respond timely to any such
Revolver Extension Request in writing shall be deemed to be a
rejection by the Bank of such Revolver Extension Request.
2.13. Pledge Agreement; Further Assurances.
(a) Pledge Agreement. The Obligations shall be secured by
a pledge agreement in the form of Exhibit D (the "Pledge
Agreement") of Borrower.
(b) Further Assurances. Borrower shall deliver to Bank the
Pledge Agreement and such other instruments, agreements,
certificates, opinions and documents as Bank may reasonably
request to evidence and maintain the Pledge Agreement and the
rights of Bank thereunder. Borrower shall fully cooperate with
Bank and perform all additional acts reasonably requested by Bank
to effect the purposes of the foregoing.
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SECTION III. CONDITIONS PRECEDENT.
3.01. Conditions to Initial Loan. The obligation of Bank
to make the initial Loan is subject to receipt by Bank, on or
prior to the Closing Date, of each of the following items, each
in form and substance satisfactory to Bank:
(a) Principal Credit Documents.
(1) The Credit Agreement, duly executed by Borrower;
(2) The Loan Note payable to Bank, duly executed by
Borrower; and
(3) The Pledge Agreement, duly executed by Borrower.
(b) Corporate Documents.
(1) The Certificate of Incorporation of Borrower
certified as of a recent date prior to the Closing Date by the
Secretary of State of Florida;
(2) A Certificate of Good Standing for Borrower
certified as of a recent date prior to the Closing Date by the
Secretary of State of Florida;
(3) A certificate of the Secretary of Borrower, dated
the Closing Date, certifying (a) that the Certificate of
Incorporation of Borrower, in the form certified by the Secretary
of State of Florida and delivered to Bank pursuant to item B(1)
hereof, is in full force and effect and has not been amended,
supplemented, revoked or repealed since the date of such
certification; (b) that attached thereto is a true and correct
copy of the Bylaws of Borrower as in effect on the Closing Date;
(c) that attached thereto are true and correct copies of
resolutions duly adopted by the Board of Directors of Borrower
and continuing in effect, which authorize the execution, delivery
and performance by Borrower of this Agreement and the other
Credit Documents executed or to be executed by Borrower and the
consummation of the transactions contemplated hereby and thereby;
and (d) that there are no proceedings for the dissolution or
liquidation of Borrower (commenced or threatened); and
(4) A certificate of the Secretary of Borrower, dated
the Closing Date, certifying the incumbency, signatures and
authority of the officers of Borrower authorized to execute,
deliver and perform this Agreement and the other applicable
Credit Documents on behalf of Borrower.
(c) Opinion. A written opinion of Weil, Gotshal & Manges
and/or Dennis Getman, Esq., counsel for Borrower, dated the
Closing Date and addressed to Bank, in the form of Exhibit E.
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(d) Perfection.
(1) An acknowledgement and undertaking from each of
the brokers with whom the Investment Collateral-Accounts are
maintained, in form and substance satisfactory to Lender, and
duly prepared and executed UCC-1 financing statements suitable
for filing with the relevant jurisdictions; and
(2) Such other evidence as Bank may reasonably request
to establish the accuracy and completeness of the representations
and warranties and the compliance with the terms and conditions
contained in this Agreement and the other Credit Documents.
3.02. Conditions to Each Loan . The occurrence of each
Credit Event, including the making of the initial Revolving Loan,
is subject to the further conditions that Bank shall have
received the appropriate notice requesting such Credit Event in
accordance with this Agreement and that on the date such Credit
Event is to occur and after giving effect to such Credit Event,
the following shall be true and correct:
(a) The representations and warranties set forth in Section
4.01 are true and correct in all material respects as if made on
such date, except that any representation or warranty made on, or
as of, any particular date need be true and correct only as of
such date;
(b) No Default or Event of Default has occurred and is
continuing;
(c) each of the Credit Documents remains in full force and
effect; and
(d) the aggregate amount of Loans outstanding hereunder,
after giving effect to such Loan, shall not exceed the Borrowing
Base as then determined and computed, and such Loan shall not
otherwise violate Regulation U or Regulation X.
The submission by Borrower to Bank of each Notice of Borrowing
and each Notice of Interest Period Selection shall be deemed to
be a representation and warranty by Borrower as of the date
thereof as to Sections 3.02(a), (b), (c) and (d) above.
SECTION IV. REPRESENTATIONS AND WARRANTIES.
To induce Bank to enter into this Agreement and to make
Loans hereunder, Borrower represents and warrants to Bank that:
4.01 Due Incorporation, Qualification, etc. Each of
Borrower and Borrower's material Subsidiaries (i) is a
corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation; (ii) has the power
and authority to own, lease and operate its properties and carry
on its business as now conducted; and (iii) is duly qualified,
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licensed to do business and in good standing as a foreign
corporation in each jurisdiction where the failure to be so
qualified or licensed has a Material Adverse Effect.
4.02 Authority. The execution, delivery and performance by
Borrower of each Credit Document to be executed by Borrower and
the consummation of the transactions contemplated thereby (i)
are within the corporate power of Borrower and (ii) have been
duly authorized by all necessary actions on the part of Borrower.
4.03 Enforceability. Each Credit Document executed, or to
be executed, by Borrower has been, or will be, duly executed and
delivered by Borrower and constitutes, or will constitute, a
legal, valid and binding obligation of Borrower, enforceable
against Borrower in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability,
to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at
law or in equity).
4.04 Non-Contravention. The execution and delivery by
Borrower of the Credit Documents executed by Borrower and the
performance and consummation of the transactions contemplated
thereby do not (i) violate any Requirement of Law applicable to
Borrower; (ii) violate any provision of, or result in the breach
or the acceleration of, or entitle any other Person to accelerate
(whether after the giving of notice or lapse of time or both),
any material Contractual Obligation of Borrower; or (iii) result
in the creation or imposition of any material Lien upon any
property, asset or revenue of Borrower (except such Liens as may
be created in favor of Bank pursuant to this Agreement or the
other Credit Documents).
4.05 Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with,
any Governmental Authority or other Person (including, without
limitation, the shareholders of any Person) is required in
connection with the execution and delivery of the Credit
Documents executed by Borrower and the performance and
consummation of the transactions contemplated thereby other than
those which will have been obtained at or prior to the Closing
Date.
4.06 No Violation or Default. None of Borrower or
Borrower's Subsidiaries is in violation of or in default with
respect to (i) any Requirement of Law applicable to such Person;
(ii) any Contractual Obligation of such Person where, in each
case, such violation or default could have a Material Adverse
Effect. Without limiting the generality of the foregoing, none
of Borrower or Borrower's Subsidiaries (A) has violated any
Environmental Laws, (B) has any liability under any Environmental
Laws or (C) has received notice or other communication of an
investigation or is under investigation by any Governmental
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Authority having authority to enforce Environmental Laws, where
such violation, liability or investigation could have a Material
Adverse Effect. No Event of Default or Default has occurred and
is continuing.
4.07 Litigation. No actions (including, without limitation,
derivative actions), suits, proceedings or investigations are
pending or, to the knowledge of Borrower, threatened against
Borrower or Borrower's Subsidiaries at law or in equity in any
court or before any other Governmental Authority which (i) if
adversely determined would (alone or in the aggregate) have a
Material Adverse Effect, except as disclosed on Schedule 4.07 or
as disclosed on the most recent annual report on Form 10-K of
Holdings or in the most recent quarterly report on Form 10-Q of
Holdings or (ii) seek to enjoin, either directly or indirectly,
the execution, delivery or performance by Borrower of the Credit
Documents or the transactions contemplated thereby.
4.08 Title. Borrower and Borrower's Subsidiaries have good
and marketable title in fee simple absolute to, or a valid
leasehold interest in, their respective real properties and good
title to their other respective assets and properties as
reflected in the most recent Financial Statements delivered to
Bank (except those assets and properties disposed of in the
ordinary course of business or otherwise in compliance with this
Agreement since the date of such Financial Statements) and all
respective assets and properties acquired by Borrower and
Borrower's Subsidiaries since such date (except those disposed of
in the ordinary course of business or otherwise in compliance
with this Agreement), except, in each case, the failure of which
may have a Material Adverse Effect.
4.09 Financial Statements. The Financial Statements of
Borrower which have been delivered to Bank (i) are in accordance
with the books and records of Borrower, which have been
maintained in accordance with good business practice; (ii) have
been prepared in conformity with GAAP; and (iii) fairly present
the financial position of Borrower at such date. None of
Borrower or any of Borrower's Subsidiaries has any contingent
obligations, liability for taxes or other outstanding obligations
which are material in the aggregate, except as disclosed in the
unaudited Financial Statements dated December 31, 1992, furnished
by Borrower to Bank prior to the date hereof, or in the Financial
Statements delivered to Bank pursuant to Section 5.01(a)(i) or
(ii).
4.10 No Agreements to Sell Assets. As of the date hereof,
none of Borrower or Borrower's Subsidiaries has any legal
obligation, absolute or contingent, to any Person to sell the
assets of Borrower or Borrower's Subsidiaries (other than sales
in the ordinary course of business), or to effect any merger,
consolidation or other reorganization of Borrower or Borrower's
Subsidiaries or to enter into any agreement with respect thereto.
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4.11 Employee Benefit Plans. Each Employee Benefit Plan and
ERISA Plan is in substantial compliance in all material respects
with the presently applicable provisions of ERISA and the Code.
4.12 Other Regulations. Borrower is not an "investment
company," "promotor" or "principal underwriter" for, or
controlled by, an "investment company" as such terms are defined
under the Investment Company Act of 1940. The Borrower is not a
regulated entity under the Public Utility Holding Company Act of
1935, the Federal Power Act, the Interstate Commerce Act, any
state public utilities code or any federal or state statute or
regulation limiting its ability to incur Indebtedness.
4.13 Governmental Charges and Other Indebtedness. Borrower
and Borrower's Subsidiaries have filed or caused to be filed all
federal tax returns which are required to be filed by them.
Borrower and Borrower's Subsidiaries have paid, or made provision
for the payment of, all taxes and other Governmental Charges
which have or may have become due pursuant to said returns or
otherwise and all other Indebtedness, except such Governmental
Charges or Indebtedness, if any, which are being contested in
good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided or which could not have
a Material Adverse Effect if unpaid.
4.14 Margin Stock. No proceeds of any Loan will be used to
purchase or carry, directly or indirectly, any Margin Stock or to
extend credit, directly or indirectly, to any Person for the
purpose of purchasing or carrying any Margin Stock.
4.15 Solvency, Etc. Borrower is Solvent and, after the
execution and delivery of the Credit Documents and the
consummation of the transactions contemplated thereby, will be
Solvent.
4.16 Accuracy of Information Furnished. None of the Credit
Documents and none of the other certificates, statements or
information furnished to Bank by or on behalf of Borrower or
Borrower's Subsidiaries in connection with the Credit Documents
or the transactions contemplated thereby contains or will contain
any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading.
SECTION V. COVENANTS.
5.01. Affirmative Covenants. Until the termination of this
Agreement and the satisfaction in full by Borrower of all
Obligations, Borrower will comply, and will cause compliance,
with the following affirmative covenants unless Bank shall
otherwise consent in writing:
(a) Financial Statements, Reports, etc. Borrower will
furnish to Bank the following, each in such form and such detail
as Bank shall reasonably request:
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(i) As soon as available but not later than one
hundred twenty (120) days after the close of each fiscal
year of Borrower, copies of the unaudited Financial
Statements of Borrower (including, without limitation,
consolidated Financial Statements for Borrower and its
Subsidiaries) for such year, certified by the president,
chief financial officer, or such other responsible officer
of Borrower acceptable to Bank, to present fairly the
financial condition, results of operations and other
information reflected therein and to have been prepared in
accordance with GAAP;
(ii) As soon as available but not later than sixty
(60) days after the last day of each fiscal quarter of
Borrower (other than the fourth fiscal quarter), a copy of
the Financial Statements of Borrower for such quarter and
for the fiscal year to date, certified by the president or
chief financial officer, or such other responsible officer
of Borrower acceptable to Bank, to present fairly the
financial condition, results of operations and other
information reflected therein and to have been prepared in
accordance with GAAP (subject to year-end audit
adjustments);
(iii) Contemporaneously with the quarterly and year-end
financial statements required by the foregoing clauses (i)
and (ii), a certificate of the president or chief financial
officer, or such other responsible officer of Borrower
acceptable to Bank, stating that no Event of Default and no
Default has occurred and is continuing, or, if any such
Event of Default or Default has occurred and is continuing,
a statement as to the nature thereof and what action
Borrower proposes to take with respect thereto;
(iv) Promptly after the same are filed, copies of all
regular, periodic and special reports which Borrower or
Holdings may file with the Securities and Exchange
Commission or any successor or analogous governmental
authority.
(v) As soon as possible and in no event later than
five (5) Business Days after any officer of Borrower knows
of the occurrence of any Event of Default or Default, the
statement of the president or chief financial officer or
other responsible officer of Borrower setting forth details
of such event, condition, Event of Default or Default and
the action which Borrower proposes to take with respect
thereto;
(vi) As soon as available but not later than Thursday
of each calendar week, a computation of the Borrowing Base
as of the last day of the preceding calendar week, prepared
by Borrower and certified to by the president or chief
financial officer or other responsible officer of Borrower;
and
(vii) Borrower will cause the investment manager for
each Investment Collateral-Account to furnish Bank within
five Business Days after the end of each calendar month, a
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certificate signed by an appropriate officer of such entity
as to the existence and value of the Borrower's interest in
such entity as of the date of such request.
(viii) Such other instruments, agreements, certificates,
opinions, statements, documents and information relating to
the operations or condition (financial or otherwise) of
Borrower or Borrower's Subsidiaries, and compliance by
Borrower with the terms of this Agreement and the other
Credit Documents as Bank may from time to time reasonably
request.
(b) Books and Records. Borrower and Borrower's
Subsidiaries will at all times keep proper books of record and
account in which full, true and correct entries will be made of
its transactions in accordance with GAAP.
(c) Insurance. Borrower and Borrower's Subsidiaries shall
maintain and keep in force insurance of the types and in amounts
as in effect on the date hereof, such insurance to be carried
with reputable companies with such changes in types and amounts
of such insurance coverage as are commercially reasonable.
(d) Borrowing Base Covenants. Borrower shall ensure that
at all times (i) 40% or more of the Investment Collateral is
rated B3 or above by Moody's and rated B- or above by S&P; and
(ii) not more than ten percent (10%) of the Investment Collateral
is invested in any one issuer (or an Affiliate of such issuer).
(e) Governmental Charges and Other Indebtedness. Borrower
and Borrower's Subsidiaries will promptly pay and discharge when
due all taxes and other Governmental Charges prior to the date
upon which penalties accrue thereon and all Indebtedness of
Borrower or Borrower's Subsidiaries; provided, however, that
Borrower shall not be deemed in breach of this Section 5.01(f) if
such failures to so pay and discharge do not have a Material
Adverse Effect, except such as may in good faith be contested or
disputed, or for which arrangements for deferred payment have
been made, provided that in each such case adequate reserves are
maintained in accordance with GAAP.
(f) Use of Proceeds. No part of the proceeds of any Loan
will be used, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock or for the purpose of
purchasing or carrying or trading in any securities under such
circumstances as to involve Borrower or Bank in a violation of
Regulations G, T, U or X issued by the Federal Reserve Board.
(g) Compliance with Laws, Etc. Borrower shall comply in
all material respects with all applicable material laws, rules,
regulations and orders, such compliance to include, without
limitation, obtaining and maintaining all material permits and
licenses necessary for the conduct of its business and paying
before the same become delinquent all taxes, assessments and
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<PAGE>
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governmental charges imposed upon it or upon its property except
to the extent contested in good faith.
(h) Other Credit Facility. Borrower shall punctually
perform all of its obligations under the Other Credit Facility.
5.02. Negative Covenants. Until the termination of this
Agreement and the satisfaction in full by Borrower of all
Obligations, Borrower will comply, and will cause compliance,
with the following negative covenants unless Bank shall otherwise
consent in writing:
(a) Liens. Borrower will not create, incur, assume or
permit to exist any Lien on or with respect to any Collateral,
whether now owned or hereafter acquired.
(b) Asset Dispositions. Neither Borrower nor any of its
Subsidiaries will sell, lease, transfer or otherwise dispose of
any substantial part of its assets, including, without
limitation, substantially all assets constituting the business of
a division or branch, or permit any of its Subsidiaries to do so,
provided, that the foregoing shall not be deemed to prohibit (i)
the sale by the Borrower or any of its Subsidiaries of assets
with a then book value of less than $10,000,000 in any one
transaction or any sale made in the ordinary course of business
or (ii) subject to Section 5.02(d) hereof and to the Pledge
Agreement, the purchase or sale by the Borrower of securities
constituting Collateral.
(c) Mergers, Etc. Neither Borrower nor any of its
Subsidiaries will consolidate with or merge into any other Person
or permit any other Person to merge into it, or acquire all or
substantially all of the assets of any other Person; provided,
however, any wholly-owned Subsidiary of Borrower may merge into
another wholly-owned Subsidiary of Borrower, or Borrower or any
wholly-owned Subsidiary of Borrower may merge with any other
wholly-owned Subsidiary of Borrower, or Borrower or any
Subsidiary may acquire all or substantially all of the assets of
any other Person if the purchase price of all such acquisitions
is not in excess of $10,000,000 in any 12 month period.
(d) Distributions from Investment Accounts-Collateral.
Borrower will not make or permit any distribution of any of the
Collateral (except as instructed by Bank) if, immediately
following such distribution, the aggregate principal balance of
all Loans outstanding would exceed the Borrowing Base.
SECTION VI. DEFAULT.
6.01. Events of Default. The occurrence or existence of
any one or more of the following shall constitute an "Event of
Default" hereunder:
(a) Borrower shall fail to pay when due any principal,
interest or other payment required under the terms of this
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<PAGE>
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Agreement or any of the other Credit Documents and such failure
continues unremedied for five Business Days; or
(b) Borrower shall fail to observe or perform any other
covenant, obligation, condition or agreement contained in this
Agreement or the other Credit Documents and such failure shall
continue for thirty (30) days; or
(c) Any representation, warranty, certificate, or other
statement (financial or otherwise) made or furnished by or on
behalf of Borrower to Bank in or in connection with this
Agreement or any of the other Credit Documents, or as an
inducement to Bank to enter into this Agreement, shall be false,
incorrect, incomplete or misleading in any material respect when
made or furnished; or
(d) Borrower or any of Borrower's Subsidiaries shall fail
to make any payment when due under the terms of any bond,
debenture, note or other evidence of Indebtedness to be paid by
such Person (excluding this Agreement and the other Credit
Documents but including any other evidence of Indebtedness of
Borrower or any of Borrower's Subsidiaries to Bank and except to
the extent such bond, debenture, note or other Indebtedness is
being contested in good faith) and such failure shall continue
beyond any period of grace provided with respect thereto, or
shall default in the observance or performance of any other
agreement, term or condition contained in any such bond,
debenture, note or other evidence of Indebtedness and such
default shall continue beyond any period of grace provided with
respect thereto, and the effect of such failure or default is to
cause, or permit the holder or holders thereof to cause
Indebtedness in an aggregate amount of $1,000,000 or more to
become due prior to its stated date of maturity; or
(e) Borrower or any of Borrower's Subsidiaries shall (i)
apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part
of its property, (ii) be unable, or admit in writing its
inability, to pay its debts generally as they mature, (iii) make
a general assignment for the benefit of its or any of its
creditors, (iv) be dissolved or liquidated in full or in part or
(v) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or consent to any such
relief or to the appointment of or taking possession of its
property by any official in an involuntary case or other
proceeding commenced against it; or
(f) Proceedings for the appointment of a receiver, trustee,
liquidator or custodian of Borrower or any of Borrower's
Subsidiaries or of all or a substantial part of the property
thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to
Borrower or any of Borrower's Subsidiaries or the debts thereof
under any bankruptcy, insolvency or other similar law now or
hereafter in effect shall be commenced and an order for relief
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<PAGE>
<PAGE> 31
entered or such proceeding shall not be dismissed or discharged
within sixty (60) days of commencement; or
(g) A final judgment or order for the payment of money in
excess of $1,000,000 (exclusive of amounts covered by insurance)
shall be rendered against Borrower or any of Borrower's
Subsidiaries and the same shall remain undischarged for a period
of thirty (30) days during which execution shall not be
effectively stayed, or any judgment, writ, assessment, warrant of
attachment, or execution or similar process shall be issued or
levied against a substantial part of the property of Borrower or
any of Borrower's Subsidiaries and such judgment, writ, or
similar process shall not be released, stayed, vacated or
otherwise dismissed within thirty (30) days after issue or levy;
or
(h) Any Credit Document executed by Borrower shall cease to
be, or be asserted by Borrower not to be, a legal, valid and
binding obligation of Borrower enforceable in accordance with its
terms, (other than by reason of the action or inaction by Bank);
or
(i) Any "Event of Default," as such term is defined in the
Other Credit Facility, shall occur.
6.02. Remedies. Upon the occurrence or existence of any
Event of Default (other than an Event of Default referred to in
Section 6.01(e) or 6.01(f)) and at any time thereafter during the
continuance of such Event of Default, Bank may, by written notice
to Borrower, (a) terminate the Commitment and the obligation of
Bank to make Loans and/or (b) declare all outstanding Obligations
payable by Borrower hereunder to be immediately due and payable
without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived, anything
contained herein or in the Notes to the contrary notwithstanding.
Upon the occurrence or existence of any Event of Default
described in Section 6.01(e) or 6.01(f), immediately and without
notice, (1) the Commitment and the obligations of Bank to make
Loans shall automatically terminate and (2) all outstanding
Obligations payable by Borrower hereunder shall automatically
become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby
expressly waived, anything contained herein or in the Notes to
the contrary notwithstanding. In addition to the foregoing
remedies, upon the occurrence or existence of any Event of
Default, Bank may exercise any right, power or remedy permitted
to it by law, either by suit in equity or by action at law, or
both.
6.03. Defaults. Upon the occurrence of any Default, the
obligation of Bank to make Loans shall be suspended until such
event is either waived by Bank or, to the extent allowed
hereunder, cured by Borrower.
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SECTION VII. MISCELLANEOUS.
7.01. Notices. Except as otherwise provided herein, all
notices, requests, demands, consents, instructions or other
communications to or upon Bank or Borrower under this Agreement
or the other Credit Documents shall be by telecopy or in writing
and telecopied, mailed, telexed or delivered to each party at
telecopier number or its address set forth below. All such
notices and communications: when sent by Federal Express or
other overnight service, shall be effective on the Business Day
following the deposit with such service; when mailed, first class
postage prepaid and addressed as aforesaid in the mails, shall be
effective upon receipt; when telexed, shall be effective upon
receipt of answerback; when delivered by hand, shall be effective
upon delivery; and when telecopied, shall be effective upon
confirmation of receipt; provided, however, that any notice
delivered to Bank under Section II shall not be effective until
received by Bank.
Bank: BERLINER HANDELS- UND FRANKFURTER BANK
55 East 59th Street
New York, New York 10022
Attn: Paul Travers, Vice President
Telephone: (212) 756-5570
Telecopier: (212) 756-5911
Borrower: AVATAR PROPERTIES INC.
255 Alhambra Circle
Coral Gables, Florida 33134
Attn: Charles McNairy
Telephone: (305) 442-7000
Telecopier: (305) 441-7876
Each Notice of Borrowing shall be given by Borrower to Bank's
office located at the address referred to above during Bank's
normal business hours; provided, however, that any such notice
received by Bank after 12:00 p.m. on any Business Day shall be
deemed received by Bank on the next Business Day. In any case
where this Agreement authorizes notices, requests, demands or
other communications by Borrower to Bank to be made by telephone
or telecopy, Bank may conclusively presume that anyone purporting
to be a person designated in the certificate received by Bank
pursuant to any such document delivered by Borrower to Bank, is
such a person.
7.02. Expenses. Borrower shall pay on demand, whether or
not any Loan is made hereunder, (a) all reasonable out-of-pocket
fees and expenses, including out-of-pocket reasonable attorneys'
fees and expenses, incurred by Bank in connection with the
preparation, execution and delivery of, and the exercise of its
duties under, this Agreement and the other Credit Documents, and
the preparation of amendments and waivers hereunder and
thereunder; and (b) all reasonable out-of-pocket fees and
expenses, including reasonable out-of-pocket attorneys' fees and
expenses, incurred by Bank in the enforcement or attempt to
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<PAGE> 33
enforce any of the Obligations which is not performed as and when
required by this Agreement or the other Credit Documents.
7.03. Indemnification. To the fullest extent permitted by
law, Borrower agrees to protect, indemnify, defend and hold
harmless Bank and its respective directors, officers, employees,
agents and any affiliate thereof ("Indemnitees") from and against
any and all liabilities, losses, damages or expenses of any kind
or nature and from any and all suits, claims or demands
(including, without limitation, in respect of or for reasonable
out-of-pocket attorneys' fees and other out-of-pocket expenses)
arising on account of or in connection with any matter or thing
or action or failure to act by Indemnitees, or any of them,
arising out of or relating to the Credit Documents, including
without limitation any use by Borrower of any proceeds of the
Loans and any brokerage or custodian fees payable with respect to
the Collateral in the Investment Collateral-Accounts, except to
the extent such liability arises from the willful misconduct or
gross negligence of the Indemnities. Upon receiving knowledge of
any suit, claim or demand asserted by a third party that Bank
believes is covered by this indemnity, Bank shall give Borrower
notice of the matter and an opportunity to defend it, at
Borrower's sole cost and expense, with legal counsel reasonably
satisfactory to Bank. Any failure or delay of Bank to notify
Borrower of any such suit, claim or demand shall not relieve
Borrower of its obligations under this Section 7.03 but shall
reduce such obligations to the extent of any increase in those
obligations caused solely by an unreasonable failure or delay.
The Bank agrees that it will not settle any such matter for which
indemnification is sought hereunder without the prior written
consent of the Borrower (which shall not be unreasonably
withheld). The obligations of Borrower under this Section 7.03
shall survive the payment and performance of the Obligations.
7.04. Waivers; Amendments. Any term, covenant, agreement
or condition of this Agreement or any other Credit Document may
be amended or waived if such amendment or waiver is in writing
and is signed by Borrower and Bank. No failure or delay by Bank
in exercising any right hereunder shall operate as a waiver
thereof or of any other right nor shall any single or partial
exercise of any such right preclude any other further exercise
thereof or of any other right. Unless otherwise specified in
such waiver or consent, a waiver or consent given hereunder shall
be effective only in the specific instance and for the specific
purpose for which given.
7.05. Successors and Assigns.
(a) Binding Effect. This Agreement and the other Credit
Documents shall be binding upon and inure to the benefit of
Borrower, Bank, all future holders of the Notes and their
respective successors and permitted assigns, except that Borrower
may not assign or transfer any of its rights or obligations under
any Credit Document without the prior written consent of Bank.
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<PAGE> 34
All references in this Agreement to any Person shall be deemed to
include all successors and assigns of such Person.
(b) Assignments/Participations. Bank may at any time sell,
assign, grant participations in, or otherwise transfer to any
other Person (a "Participant") all or part of the obligations of
Borrower under this Agreement with the prior written consent of
Borrower (which consent shall not be unreasonably withheld).
Borrower agrees that each such disposition that is made will give
rise to a direct obligation of Borrower to the Participant.
(c) Confidentiality. Bank agrees to keep information
obtained by it pursuant hereto confidential in accordance with
Bank's customary practices and agrees that it will only use such
information in connection with the transactions contemplated by
this Agreement and not disclose any of such information other
than (i) to Bank's employees, representatives and agents who are
or are expected to be involved in the evaluation of such
information in connection with the transactions contemplated by
this Agreement and who are advised of the confidential nature of
such information, (ii) to the extent such information presently
is or hereafter becomes available to the Bank on a
non-confidential basis from a source other than Borrower, (iii)
to the extent disclosure is required by law, regulation or
judicial order or requested or required by bank regulations or
auditors, or (iv) to assignees or participants or potential
assignees or participants who agree to be bound by the provisions
of this sentence.
7.06. Setoff.
Setoff. In addition to any rights and remedies of Bank
provided by law, Bank shall have the right, without prior notice
to Borrower, any such notice being expressly waived by Borrower
to the extent permitted by applicable law, upon the occurrence
and during the continuance of an Event of Default, to set-off and
apply against any indebtedness, whether matured or unmatured, of
Borrower to Bank, any amount owing from Bank to Borrower, at or
at any time after, the happening of any of the above mentioned
events. The aforesaid right of set-off may be exercised by Bank
against Borrower or against any trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, receiver or
execution, judgment or attachment creditor of Borrower or against
anyone else claiming through or against Borrower or such trustee
in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment
creditor, notwithstanding the fact that such right of set-off
shall not have been exercised by Bank prior to the occurrence of
a Default or an Event of Default. Bank agrees promptly to notify
Borrower after any such set-off and application made by Bank,
provided that the failure to give such notice shall not affect
the validity of such set-off and application.
7.07. No Third Party Rights. Nothing expressed in or to be
implied from this Agreement is intended to give, or shall be
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<PAGE> 35
construed to give, any Person, other than the parties hereto and
their permitted successors and assigns hereunder, any benefit or
legal or equitable right, remedy or claim under or by virtue of
this Agreement or under or by virtue of any provision herein.
7.08. Partial Invalidity. If at any time any provision of
this Agreement is or becomes illegal, invalid or unenforceable in
any respect under the law or any jurisdiction, neither the
legality, validity or enforceability of the remaining provisions
of this Agreement nor the legality, validity or enforceability of
such provision under the law of any other jurisdiction shall in
any way be affected or impaired thereby.
7.09. Governing Law. This Agreement and each of the other
Credit Documents shall be governed by and construed in accordance
with the laws of the State of New York without reference to
conflicts of law rules.
7.10. Entire Agreement. This Agreement and each of the
other Credit Documents dated as of the date hereof, taken
together, constitute and contain the entire agreement of Borrower
and Bank and supersede any and all prior agreements,
negotiations, correspondence, understandings and communications
among the parties, whether written or oral, respecting the
subject matter hereof.
7.11. Jury Trial. EACH OF BORROWER AND BANK, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO
IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT.
7.12. Counterparts. This Agreement may be executed in any
number of identical counterparts, any set of which signed by all
the parties hereto shall be deemed to constitute a complete,
executed original for all purposes.
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<PAGE> 36
IN WITNESS WHEREOF, Borrower and Bank have caused this
Agreement to be executed as of the day and year first above
written.
AVATAR PROPERTIES INC.
By: /s/ Charles L. McNairy
Name: Charles L. McNairy
Title: Executive Vice President
BERLINER HANDELS- UND FRANKFURTER
BANK, GRAND CAYMAN BRANCH
By: /s/ Evan Contos
Name: Evan Contos
Title: V.P.
By: /s/ Paul Travers
Name: Paul Travers
Title: V.P.
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Exhibit 11 - Computation of per share earnings
<TABLE>
<CAPTION>
Year ended December 31
PRIMARY 1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Average common shares outstanding
assuming conversion of 5-1/4% convertible-
subordinated debentures at the beginning
of the period the conversion occurred 9,840,251 7,403,848 7,400,481
Income (loss) before cumulative effect of
changes in methods of accounting $5,474 ($4,342) ($8,635)
Add 5-1/4% convertible-purchase subordinated
debenture interest, net of federal income tax 32 - -
--------- --------- ---------
Total 5,506 (4,342) (8,635)
Extraordinary item - (2,402) -
Cumulative effect of change in method-
of accounting for income taxes (964) - -
Cumulative effect of change in method - - -
of accounting for investments
(net of income taxes of $238) 388 - -
--------- --------- ---------
Net income (loss) $4,930 ($6,744) ($8,635)
========= ========= =========
Per share amounts:
Income (loss) before cumulative effect of
accounting changes and extraordinary item $.56 ($.59) ($1.17)
Extraordinary item - (.32) -
Cumulative effect of change in method
of accounting for income taxes (.10) - -
Cumulative effect of change in method
of accounting for investments .04 - -
--------- --------- ---------
Net income (loss) $.50 ($.91) ($1.17)
========= ========= =========
FULLY DILUTED
Average common shares outstanding
assuming conversion of 5-1/4% convertible-
subordinated debentures at the beginning
of the period the conversion occurred 9,840,251 7,403,848 7,400,481
Income (loss) before cumulative effect of
changes in methods of accounting $5,474 ($4,342) ($8,635)
Add 5-1/4% convertible-purchase subordinated
debenture interest, net of federal income tax 32 - -
--------- --------- ---------
Total 5,506 (4,342) (8,635)
Extraordinary item - (2,402) -
Cumulative effect of change in method-
of accounting for income taxes (964) - -
Cumulative effect of change in method - - -
of accounting for investments
(net of income taxes of $238) 388 - -
--------- --------- ---------
Net income (loss) $4,930 ($6,744) ($8,635)
========= ========= =========
Per share amounts:
Income (loss) before cumulative effect of
accounting changes and extraordinary item $.56 ($.59) ($1.17)
Extraordinary item - (.32) -
Cumulative effect of change in method
of accounting for income taxes (.10) - -
Cumulative effect of change in method
of accounting for investments .04 - -
--------- --------- ---------
Net income (loss) $.50 ($.91) ($1.17)
========= ========= =========
</TABLE>
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<PAGE> 1
Exhibit 22 - Subsidiaries of Registrant
Unless otherwise indicated, Avatar owns, directly or through a
subsidiary, all of the outstanding capital stock of each of the below
listed active subsidiaries.
<TABLE>
<CAPTION>
<S> <C>
Name State of Incorporation
American Cablevision Services, Inc. Florida
Avatar Communities, Inc. Florida
Avatar Communities of Arizona, Inc. Arizona
Avatar Communities of California, Inc. California
Avatar Communities of Connecticut, Inc. Connecticut
Avatar Communities of District of Columbia, Inc. District of Columbia, Inc.
Avatar Communities of Georgia, Inc. Georgia
Avatar Communities of Illinois, Inc. Illinois
Avatar Communities of Indiana, Inc. Indiana
Avatar Communities of Massachusetts, Inc. Massachusetts
Avatar Communities of Michigan, Inc. Michigan
Avatar Communities of Nevada, Inc. Nevada
Avatar Communities of New Jersey, Inc. New Jersey
Avatar Communities of New York, Inc. New York
Avatar Communities of Ohio, Inc. Ohio
Avatar Communities of Pennsylvania, Inc. Pennsylvania
Avatar Communities of Wisconsin, Inc. Wisconsin
Avatar Finance, Inc. Delaware
Avatar Mortgage Funding, Inc. Delaware
Avatar Homesite Mortgage Trust New York (1)
Avatar International Sales of U.S.A., Delaware
Avatar Properties Inc. Florida
Avatar Camelot Isles, Inc. Florida
Avatar Leisure Lakes, Inc. Florida
Banyan Bay Development Corporation Florida
Barefoot Bay Corporation Florida
Barefoot Bay Development Corporation Florida
Cape Coral Development Corporation Florida
Cape Coral Realty, Inc. Florida
Country Club Inn, Inc. Florida
Fort Myers Construction Co., Inc. Florida
Golden Gate Realty, Inc. Florida
Kissimmee Construction Corporation Florida
Lee Investment Company, Inc. Florida
Poinciana Golf and Racquet Club, Inc. Florida
Poinciana New Township, Inc. Florida
Rio Rico Properties Inc. Arizona
Rio Rico Construction Company, Inc. Arizona
Rio Rico Golf and Country Club Arizona
Rio Rico Realty, Inc. Arizona
Tarpon Point, Inc. Florida
Avatar Realty Inc. Delaware
Avatar Condominium Management Inc. Florida
Avatar Asset Management, Inc. Florida
Avatar Development Corporation Florida
Avatar Georgetown Inc. Delaware
Dorten, Inc. Florida
GACL, Inc. of California California
Mulholland Hills Associates California (2)
Optimum Environments Inc. California
</TABLE>
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<PAGE> 2
Exhibit 22 - Subsidiaries of Registrant (continued)
<TABLE>
<CAPTION>
<S> <C>
Parkway Mortgage Company, Inc. Florida
Rio Rico Utilities Inc. Arizona
Avatar Utilities Inc. Delaware (3)
Avatar Utility Services, Inc. Florida
Poinciana Utilities Inc. Florida
Barefoot Bay Propane Gas Company Florida
Consolidated Water Company Delaware (4)
Consolidated Water Services, Inc. Indiana
FCWC Holdings, Inc. Delaware (5)
Florida Cities Water Company Florida
</TABLE>
Notes to Exhibit 22 - Subsidiaries of Registrant:
(1) Partnership owned 95% by Avatar Mortgage Funding Inc. and 5%
by Avatar Properties Inc.
(2) Partnership owned 99% by GACL, Inc. of California and 1% by
Lee Investment Company, Inc.
(3) Avatar Utilities Inc. owns over 99% of the outstanding shares
of common stock of Consolidated Water Company. All of the
outstanding shares of preferred stock of Consolidated Water
Company are owned by other interests.
(4) Consolidated Water Company owns all of the outstanding common
stock of Consolidated Water Services, Inc. and FCWC Holdings,
Inc.
(5) FCWC Holdings, Inc. owns all of the common and preferred
stock of Florida Cities Water Company. FCWC Holdings, Inc. has
one class of preferred stock owned by outside interests.
140
