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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, 1996 -- 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 requirement 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. [X]
Aggregate market value of the voting stock held by non-affiliates of
the registrant was $225,332,418 as of February 28, 1997.
(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, 1997, 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 1997 Annual
Meeting of Stockholders are incorporated by reference into Part III.
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AVATAR HOLDINGS INC.
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I Page
- ------ ----
Item 1. Business................................................ 3
Item 2. Properties.............................................. 7
Item 3. Legal Proceedings....................................... 8
Item 4. Submission of Matters to a Vote of Security Holders..... 8
Executive Officers of Registrant........................ 9
PART II
- -------
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters..................................... 11
Item 6. Selected Financial Data................................. 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results ofOperations...................... 13
Item 8. Financial Statements and Supplementary Data............. 19
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures.................... 43
PART III
- --------
Item 10. Directors and Executive Officers of the Registrant...... 44
Item 11. Executive Compensation.................................. 44
Item 12. Security Ownership of Certain Beneficial Owners and
Management.............................................. 44
Item 13. Certain Relationships and Related Transactions.......... 44
PART IV
- -------
Item 14. Exhibits, Financial Statement Schedules, and Reports 45
on Form 8-K.............................................
Exhibit Index.................................................... 50
2 <PAGE>
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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, California, and
Tennessee, include: development, construction and sale of single
family and multifamily housing communities; development, sale and
management of vacation ownership intervals; development and sale of
improved homesites and improved and unimproved commercial/industrial
land tracts; operations of amenities and resorts; cable television
operations and property management services. Avatar's utility
operations consist of water and wastewater treatment plants which serve
communities in Florida and Arizona, as well as contract management
services to various utility companies. During 1996, approximately 78%
and 22% of the total revenues were generated through real estate and
utility operations, respectively.
Avatar's business strategy emphasizes housing sales, sales of
vacation ownership intervals, retail and industrial real estate
development, and resort operations. Certain of Avatar's properties
are being developed and such developments are at various stages of
completion.
Information regarding revenues, results of operations and assets
of the 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, California and Tennessee. In its Florida communities
of Harbor Islands, Poinciana, Cape Coral, Golden Gate and Leisure
Lakes, as well as in its previously-owned Florida community of Barefoot
Bay and its Arizona community of Rio Rico and its property in
Tennessee, Avatar's activities include the construction and sale of
single family and multifamily housing, the construction, sale and
management of vacation ownership units and homesite and
industrial/commercial land sales, with the types of activities varying
from community to community. Avatar owns other sites including Banyan
Bay in Martin County, Florida; Ocala Springs in Marion County, Florida;
and Woodland Hills in Los Angeles County, California.
The Harbor Islands Project encompasses 192 acres, including 30
acres conveyed to the City of Hollywood for future parks, adjoining the
Intracoastal Waterway in Hollywood, Florida. The Company may build up
to 2,400 residential units, including single family homes, townhomes,
villas and mid and high-rise condominium units in this water-oriented
community. Additionally, this community will include a 196-boat slip
marina. In 1996, Avatar closed 70 single family homes and received
deposits on sales for another 41 single family homes. These sales have
a combined sales value of approximately $17,917,000.
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 16,000 of which
are owned by Avatar. This planned community development
includes subdivisions for single family, multifamily and
3<PAGE>
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Item 1. Business -- continued
manufactured housing, and commercial/industrial areas. Since 1971,
21,850 homesites have been sold and approximately 5,256 housing units,
primarily single family houses and townhouses, have been constructed by
Avatar and other non-affiliated builders. As of December 31, 1996,
approximately 14,200 developed and undeveloped single family homesites
remained in inventory at Poinciana. Additionally, approximately 4,800
acres of land zoned for industrial/commercial/institutional and
multifamily use also remained in inventory. Avatar's housing programs
in Poinciana include its communities of Regency Pointe, Crescent Lakes,
Cypress Woods and the Estates of Deerwood, as well as scattered lot
housing programs. Regency Pointe, a 96 home community, was virtually
sold out during 1996. The grand opening of Heatherstone, the first
phase of Crescent Lakes, a 904 home community, and The Oaks at
Cypress Woods occurred during 1995. Additionally, platting, design, and
engineering of 121 and 70 homes began for Orchid Edge and Astor Cove,
respectively; and sales and construction began for Laurel Run at
Crescent Lakes. Platting, design and engineering for 84 and 70 homes
also commenced at Peppertree and Pinehurst, respectively, at Cypress
Woods. At December 31, 1996, Avatar had contracts at Poinciana to
construct 175 single family units with a related sales value of
approximately $16,292,000. Avatar also owns and operates a 31,100
square foot shopping center at Poinciana that was 100% occupied at
December 31, 1996. 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 homesites. Since operations commenced in 1970,
approximately 96% of the 5,020 available homesites have been sold.
Avatar also owns 58 acres of land held for future development, sale or
other use, adjacent to Barefoot Bay. Avatar's goal of divesting non-
strategic assets resulted in the 1996 sale of an 18-hole executive
golf course, a community center, swimming pools, tennis courts, a
private beach, a fishing pier and a 13,420 square foot shopping center
in Barefoot Bay.
Cape Coral, located on Florida's west coast seven miles west of
Fort Myers, is a 60,700-acre community, of which approximately 3,600
acres are owned by Avatar. Its population has increased from 11,470 in
1970 to approximately 89,300 in 1996. Remaining inventory, at December
31, 1996, included approximately 7,700 developed and undeveloped single
family homesites and approximately 730 acres of land zoned for
commercial, industrial and multifamily use. Avatar's housing programs
in Cape Coral include Emerald Cove, a 101 home community; The
Hermitage, an upscale gated waterfront community consisting of 19
oversized homesites; Cape Harbour, a 232 home community, and scattered
lot programs. At December 31, 1996, Avatar had contracts at Cape Coral
to construct 72 single family units with a related sales value of
approximately $9,472,464. Avatar owns and operates the Camelot Isles
Shopping Center, a 70,000 square foot retail center. At December 31,
1996, the shopping center was 98% occupied. Avatar's Tarpon Point
Marina, which is 100% occupied, 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 will feature 3,500 feet of boardwalk upon
completion. Other amenities available to the residents of Cape Coral
include Avatar's recently renovated Cape Coral Golf and Tennis Resort
featuring a 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 at December 31, 1996 of 36 single family and duplex
homesites, 48 acres of land zoned for multifamily use and 12 acres
zoned for commercial use.
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Item 1. Business -- continued
Remaining inventory, at Golden Gate Estates as of December 31,
1996, includes 150 homesites of varying size, the majority of which are
approximately 1 and 1-1/4 acre homesites, and 7,500 acres of land held
for future use.
Avatar's land holdings in Leisure Lakes, located near the city of
Lake Placid in South Central Florida, consists of approximately 885
homesites in inventory at December 31, 1996. 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.
Avatar's real estate activities at Poinciana also include the
construction, sale and management of vacation ownership intervals. As
of December 31, 1996, 2,061 unit weeks had been sold and 851 unit weeks
remained in inventory.
In 1995, Avatar began the development, construction and sale of
vacation ownership intervals at its Sunrise Ridge property in Pigeon
Forge, Tennessee. As of December 31, 1996, 2,165 unit weeks had been
sold and 365 unit weeks remained in inventory, and 1,023 unit weeks
remained available for sale for the units currently under
construction.
During 1996, an Avatar subsidiary and Stanco Partners, Ltd.
entered into a joint venture agreement and acquired Casa Del Mar, an
Ormond Beach, Florida beachfront hotel. Avatar's plans include a
phased conversion of the 151-room hotel into a timesharing resort as
part of the Company's Vacation Club network.
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 3,500 residents, consists of single family homes and
townhouses and includes several areas zoned for commercial and
industrial development. Avatar owns and operates a 180-room hotel
complex, an 18-hole Robert Trent Jones designed championship golf
course and a 36,800 square foot shopping center, which was 92% occupied
as of December 31, 1996. Remaining inventory, at Rio Rico at December
31, 1996, included approximately 5,600 single family homesites,
approximately 1,000 acres of land zoned for commercial, industrial and
multifamily use, 7,300 acres of land held for future development, sale
or other use and 2,838 acres of undeveloped mountain range reserved for
open space.
Banyan Bay, located in Martin County, Florida, comprises 251 acres
of land. Future plans contemplate a bulk sale, or development of a
medium-density residential development of two and four story
condominiums.
Ocala Springs, located five miles northeast of Ocala in Marion
County, Florida, is comprised of approximately 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, 4,500 single family homesites
on 1/4 to 1/2 acre lots, 400 homesites for manufactured housing and
1,000 multifamily condominium units. The plan also provides for
construction of an 18-hole golf course, and development of more than
130 acres which will be used 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.
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Item 1. Business -- continued
Woodland Hills, located in northwest Los Angeles County,
California, consists of the Natoma tract that encompasses approximately
350 acres of land. Conceptual planning for this tract has been
completed for 59 luxury homesites. An environmental impact report has
been filed and has been accepted by the City of Los Angeles and
documents are pending for Tentative Tract Map approval with the City.
In addition to the real estate holdings described above, Avatar
owns approximately 3,500 acres of land in Florida that is being held
for future development or bulk sales.
Utilities
Avatar's water and wastewater treatment facilities include 17
water treatment facilities and 12 wastewater treatment facilities
serving 6 communities in Florida (including Poinciana, Barefoot Bay,
and Golden Gate) and Rio Rico in Arizona. These facilities provide for
the treatment, distribution and sale of water for public and private
use, and the treatment and disposal of wastewater. At December 31,
1996, Avatar's utility operations had approximately 41,000 water
customers and 32,000 wastewater customers.
An Avatar subsidiary provides consulting, data processing,
customer billing and other related services to all Avatar utility
operating subsidiaries. In addition, it provides these services and
others, including plant operations and maintenance, meter reading,
customer service, and payment remittance services, to 26 non-affiliated
utilities, both public and private. Notable contracts include a five
year contract for water/wastewater system operation and maintenance
for Celebration, the project under construction by Disney Development
Company, and contract meter reading for Fort Pierce Utilities Authority
and the City of Sunrise, Florida.
Employees
As of December 31, 1996, Avatar employed approximately 1,108
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.
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Item 1. Business -- continued
Regulation
Avatar's real estate operations, including matters such as
planning, zoning, design, construction of improvements, environmental
considerations and sales activities are regulated by various local,
regional, state and federal agencies, including the Federal Trade
Commission (FTC). For its community developments in Florida,
Tennessee 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 sales
contract. In addition to Florida, Tennessee 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 and timeshare 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 housing units, Avatar
competes, as to price and product, with several homebuilding 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 housing projects in the geographical
areas in which Avatar operates. The vacation ownership sales business
is also highly competitive with companies which are larger and better
capitalized throughout the United States and abroad selling vacation
ownership intervals on terms similar to those offered by Avatar.
Item 2. Properties
Avatar's real estate operations are described in Item 1 above.
Land developed and in the process of being developed, or held for
investment and/or future development, has an aggregate cost of
approximately $137,008,000 at December 31, 1996.
Avatar's utility operations include water and wastewater plants
and equipment located in Florida and Arizona. Such properties have a
net book value of $181,745,000 at December 31, 1996.
7<PAGE>
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Item 2. Properties -- continued
Avatar's corporate headquarters are located at 255 Alhambra
Circle, Coral Gables, Florida, in 27,915 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 matter cannot be determined, management
believes 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 Florida
Cities Water Company ("Florida Cities"), a utility subsidiary of Avatar
Holdings Inc. ("Avatar"), in the U.S. District Court for the Middle
District of Florida, United States v. Florida Cities Water Company,
Civil Action No. 93-281-CIV-FTM-21, alleging that Florida Cities'
Waterway Estates treatment plant, located in Lee County, Florida
operated in violation of the Federal Clean Water Act ("Act"), 33 U.S.C.
S1251 et seq. On May 5 and June 26, 1995, the United States amended
its complaint to include allegations against Florida Cities for
violations of the Act at two other Florida wastewater treatment
plants, Barefoot Bay, located in Brevard County, and
Carrollwood, located in Hillsborough County. In addition, the
government amended the complaint to include Avatar, the parent
corporation, as a defendant. A trial was held in March and April 1996.
On August 20, 1996, the Court issued its final judgment, incorporating
earlier rulings. The Court found Avatar not liable on any of the
government's claims and entered judgment in Avatar's favor. The Court
found Florida Cities not liable on certain of the government's claims,
but liable on other claims, and awarded the government $310,000 in
civil penalties against Florida Cities. On October 18, 1996, the
government filed a notice of appeal to the U.S. Court of Appeals for
the Eleventh Circuit. Avatar and Florida Cities believe that there are
strong arguments to support the affirmation of the judgment of the
District Court on appeal.
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 29, 1997.
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 29, 1997, when
they are reappointed or their successors are elected, or until their
earlier resignation or removal.
Name Age Office and Business Experience
- ---- --- ------------------------------
Leon Levy 71 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
S.G. Warburg & Co., Ltd. (Jersey Funds).
Edwin Jacobson 67 Chief Executive Officer since February 1994;
Chairman of the Executive Committee since June
1992; President from February 1994 to February
1997; 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.
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Executive Officers of the Registrant -- continued
Gerald D. Kelfer 51 President since February 1997, Vice Chairman
of the Board since December 1996, and a member
of the Board of Directors since October 1996.
Formerly a principal of Odyssey Partners,
L.P. from July 1994 to February 1997,
Executive Vice President, Senior General
Counsel and Director of Olympia & York
Companies (U.S.) from 1985 to 1994.
Dennis J. Getman 52 Executive Vice President since March 1984.
Senior Vice President from September 1981 to
March 1984 and General Counsel since September
1981.
Charles L. McNairy 50 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 50 Vice President and Secretary since September
1980.
G. Patrick Settles 48 Vice President since November 1986 and
Assistant General Counsel since September
1983.
Lawrence L. Colditz 32 Controller since September 1995. Assistant
Controller from October 1992 to September
1995. Director of Financial Accounting from
October 1991 to October 1992. Accounting
Manager from October 1990 to October 1991.
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.
There were 8,100 record holders of Common Stock at February 28, 1997.
High and low quotations, as reported, for the last two years were:
<TABLE>
<CAPTION>
Quotations
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Quarter Ended 1996 1995
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High Low High Low
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<S> <C> <C> <C> <C>
March 31 40 1/2 32 5/8 37 1/2 35 1/4
June 30 40 1/4 34 1/4 37 3/4 35 1/2
September 30 34 3/4 29 1/2 38 1/4 35
December 31 32 1/2 30 38 34 1/4
</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
----------------------------------------------------
1996 1995 1994 1993 1992
--------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
Statement of Income Data
- ------------------------
Revenues (1) $152,698 $102,165 $82,848 $126,048 $105,161
========= ======== ========= ========= ========
Income (loss) from
continuing operations
before extraordinary item
and changes in methods of
accounting $1,040 ($10,339) ($14,621) $5,474 ($4,342)
========= ======== ========= ========= ========
Extraordinary item - - - - ($2,402)
========= ======== ======== ========= ========
Cumulative effect of
changing 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 -
========= ======== ======== ========= ========
Per Share Data
- --------------
Income (loss) from continuing
operations before extraordinary item
and changes in methods of
accounting ($1.11) ($1.14) ($1.61) $0.56 ($0.59)
========= ======== ======== ========= =========
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 (net of income
taxes of $238) - - - $0.04 -
========= ======== ======== ========= =========
Balance Sheet Data December 31,
- ------------------ ----------------------------------------------------
1996 1995 1994 1993 1992
--------- -------- -------- -------- --------
Total assets $443,185 $470,632 $446,577 $457,747 $474,448
========= ======== ======== ========= =========
Notes, mortgage notes and
other debt $148,983 $172,596 $140,962 $135,557 $235,491
========= ======== ======== ========= =========
Less notes, mortgage notes and
other debt classified as
property held for sale - - - - 41,075
--------- -------- -------- --------- ---------
$148,983 $172,596 $140,962 $135,557 $194,416
========= ======== ======== ========= =========
Stockholders' equity $159,452 $158,412 $168,751 $183,372 $144,639
========= ======== ======== ========= =========
</TABLE>
(1) During 1993, the sale of the Midwest Water Utilities was completed.
12<PAGE>
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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
-------------------------------
1996 and 1995 1995 and 1994
------------- -------------
Increase (Decrease)
------------------------------
Change Change
------------------------------
<S> <C> <C>
Revenues
- --------
Real estate sales $47,540 $12,118
Deferred gross profit on homesite sales 3,352 997
Utility revenues 3,080 1,005
Interest income (835) (1,472)
Trading account profit, net (4,702) 6,570
Other 2,098 99
-------- --------
Total revenues 50,533 19,317
Expenses
- --------
Real estate expenses 37,723 15,319
Utility expenses 582 272
General and administrative expenses (464) (976)
Interest expense 1,310 420
Other 3 0
-------- --------
Total expenses 39,154 15,035
-------- --------
Net income $11,379 $4,282
======== ========
</TABLE>
Operations for the years ended December 31, 1996, 1995 and 1994
resulted in pre-tax income (loss) of $1,040, ($10,339), and ($14,621),
respectively. The improvement in pre-tax income for 1996 compared to
1995 is primarily attributable to an increase in real estate
contribution margin, recognition of deferred gross profit on homesite
sales, and improved utility contribution margins which was partially
mitigated by a decrease in net trading account profits. The decrease
in pre-tax loss during 1995 compared to 1994 is primarily attributable
to an increase in the pre-tax gain from net trading account profits
of $6,570 which was partially mitigated by increased selling expenses
and start up costs attributable to housing programs.
The financial statements for the year ended December 31, 1995
include the following amounts recorded in the fourth quarter: a decline
due to an adjustment to the market value of investments of $1,315 and a
provision of $1,250 due to an increase in the accrual relating to
pending litigation.
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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
The financial statements for the year ended December 31, 1994
include the following amounts recorded in the fourth quarter: a loss of
$1,402 due to the decline in market value of investments, a loss of
$1,500 due to the write down of a certain inventory tract to net
realizable value and a provision of $1,000 due to an increase in the
accrual related to pending litigation.
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.
The Company continued to develop a diversified mix of products
and services by introducing additional housing products, expanding
vacation ownership operations, developing amenities and support
facilities, expanding property contract management services and
converting land holdings into income producing operations.
Gross real estate revenues increased $47,540 or 84.9% during 1996
when compared to 1995 and $12,118 or 27.6% during 1995 when compared to
1994. The increase in real estate revenues for 1996 when compared to
1995 is primarily a result of increased homebuilding, vacation
ownership sales volume, the sale of the recreation facilities and
other assets at the company's former Barefoot Bay Community and a bulk
land sale at Leisure Lakes. Homebuilding revenues increased $36,787 or
277.4% in 1996 when compared to 1995, while vacation ownership revenues
increased $2,161 or 29.2.% in 1996 when compared to 1995. The
improvement in homebuilding revenues is primarily due to closings at
the company's Harbor Islands project, as well as the other sites.
Harbor Islands closed 70 units with a sales volume of $27,301 during
1996 compared to no closings in 1995. Housing units closed, excluding
Harbor Islands totaled 223 units with a sales volume of $22,593
compared to 150 units with a sales volume of $12,989 in 1995. The
improvement in vacation ownership revenues is due to increased sales at
the company's Sunrise Ridge Resort. Sales for 1996 at Sunrise Ridge
Resort totaled $9,031 compared to $5,742 for 1995. This increase was
mitigated in part by a decrease in sales at the company's Alhambra at
Poinciana Resort. The increase in real estate revenues for 1995 when
compared to 1994 is primarily a result of increased housing and
vacation ownership sales volume. Housing revenues increased $5,860 or
79% in 1995 when compared to 1994, while vacation ownership revenues
increased $6,069 or 401% in 1995 when compared to 1994. Real estate
expenses increased $37,723 or 57.2% in 1996 when compared to 1995 and
$15,319 or 30.3% in 1995 when compared to 1994. The increase in real
estate expenses for 1996 is primarily a result of increased real
estate revenues and an inventory write down of the company's Banyan Bay
property. The increase in real estate expenses for 1995 when compared
to 1994 is primarily a result of increased selling expenses and start
up costs attributable to increased housing programs. Margins for 1996
are comparable with those of 1995 for housing and vacation ownership.
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
The average selling price of housing units closed for 1996 was
$170, an increase of 95.0% when compared to 1995. This increase is due
to closings at Harbor Islands, which had an average selling price on
closed units of $390 for 1996 compared to no closings in 1995. The
1995 average selling prices of housing units closed were consistent
with 1994 levels. The average selling price of housing units in
backlog of $135 at December 31, 1996 decreased by 34.0% from 1995
prices due to the reduced number of sales in backlog at Harbor Islands.
The average selling price of housing units in backlog of $210 at
December 31, 1995 increased by 144% over 1994 prices due to sales at
Harbor Islands, which has an average sales price of $412.
Data from home-building operations for the years ended 1996, 1995
and 1994 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------
<S> <C> <C> <C>
Units closed
------------
Number of units 293 150 86
Aggregate dollar volume $49,894 $12,989 $7,354
Average price per unit $170 $87 $86
Units sold, net
---------------
Number of units 444 243 101
Aggregate dollar volume $59,078 $39,917 $7,919
Average price per unit $133 $164 $78
Backlog
------- December 31
1996 1995 1994
---------------------------------------
Number of units 306 152 59
Aggregate dollar volume $41,349 $31,978 $5,050
Average price per unit $135 $210 $86
</TABLE>
Utility revenues increased $3,080 or 10.4% during 1996 when
compared to 1995 and $1,005 or 3.5% during 1995 when compared to 1994.
Utility expenses increased $582 or 2.3% during 1996 when compared to
1995 and $272 or 1.1% during 1995 when compared to 1994. Utility
revenues increased as a result of rate increases, customer growth and
increased contract management operations. Utility expenses increased
correspondingly to the customer growth.
Interest income decreased $835 or 8.7% during 1996 when compared
to 1995 and $1,472 or 13.2% during 1995 when compared to 1994. The
declines in interest income are primarily attributable to lower average
aggregate balances of the Company's contract and mortgage notes
receivable portfolio, caused by collections, cancellations and
reductions in new land sales. The average balance of Avatar's
receivable portfolio was $81,673, $95,299, and $109,265 for 1996, 1995
and 1994, respectively.
15<PAGE>
<PAGE> 16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
RESULTS OF OPERATIONS -- continued
Trading account profit, net decreased $4,702 for 1996 when
compared to 1995 and increased $6,570 in 1995 when compared to 1994.
Trading account profit, net represents interest income and realized
and unrealized gains and losses related to the trading investment
portfolio, net of commissions payable to investment advisors.
Other revenues for 1996 includes a sale of water rights at Rio
Rico for $1,585.
General and administrative expenses decreased $464 or 5.0% in 1996
compared to 1995 and $976 or 9.5% in 1995 compared to 1994. The
decrease for 1996 compared to 1995 results primarily from a reduction
in the accrual for incentive compensation recorded for executive
officers. The decrease for 1995 compared to 1994 results from
reductions in the accrual for incentive compensation recorded for
executive officers and expenses related to a legal settlement in 1994.
Interest expense increased $1,310 or 11.3% in 1996 when compared
to 1995 and $420 or 3.7% in 1995 when compared to 1994. The increase
in 1996 when compared to 1995 is primarily due to an increase in
interest expense in the homebuilding and vacation ownership operations,
mitigated in part by a decrease in the outstanding balance of notes,
mortgage notes and other debt, as well as an increase in capitalization
of interest which totaled $4,003 in 1996. The increase in 1995 is
primarily due to the increase in the outstanding balance of notes,
mortgage notes and other debt, which was partially offset by
capitalization of interest associated with the development and
construction costs of approximately $3,234 for 1995 and $1,625 for
1994.
LIQUIDITY AND CAPITAL RESOURCES
Avatar's primary business activities, which include homebuilding,
vacation ownership, land development, resort operations 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, proceeds from the
sale of certain non-core assets and external borrowings. There is no
assurance that the sale of certain non-core assets will be achieved.
In 1996, net cash provided by operating activities amounted to
$40,246 as a result of withdrawals from the investment portfolio of
$45,554 and principal payments on contracts receivable of $17,550
partially offset by an increase in inventories, which included
expenditures from land development, housing, and vacation ownership
operations of $28,935. Net cash used in investing activities of
$11,537 in 1996 resulted primarily from investments in property, plant
and equipment. Net cash used in financing activities of $23,609
resulted primarily from principal payments on revolving lines of credit
and long-term borrowings of $115,147, less net proceeds from revolving
lines of credit and long-term borrowings of $91,538.
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
In 1995, net cash used in operating activities amounted to
$20,180 as a result of an increase in inventories, which included
expenditures from land development, housing, and vacation ownership
operations of $37,843, partially offset by principal payments on
contracts receivable of $19,475 and $11,000 in withdrawals from the
investment portfolio. Net cash used in investing activities of $13,753
in 1995 resulted primarily from investments in property, plant and
equipment. Net cash provided by financing activities of $31,635
resulted primarily from net proceeds from revolving lines of credit and
long-term borrowings of $76,035 less principal payments on revolving
lines of credit and long-term borrowings of $44,013.
Avatar's secured lines of credit were $60,374 and $57,513 at
December 31, 1996 and 1995, respectively. Avatar's unsecured credit
lines were $15,000 at December 31, 1996 and 1995, respectively.
The unused portions of the secured and unsecured credit lines were
$20,000 and $10,650, respectively, at December 31, 1996. Included in
these lines of credit is a line of credit secured by investments,
which had an outstanding balance at December 31, 1996 of $3,350 and
will mature May 31, 1998. Also included are three lines of credit with
balances outstanding at December 31, 1996 of $6,449, $7,840 and
$15,000 due May 31, 1998; and two additional lines of credit with
balances outstanding of $995 and $6,741 due October 31, 2002 and April
30, 2001, respectively. These lines are collateralized by certain
contracts receivable.
Avatar has planned utility construction for 1997 totaling
approximately $15,775. Additionally, the Company has planned
development expenditures of $17,753 during 1997, of which $13,904 is
related to housing, which will result in additional homesite inventory
and preservation of development permits. It is anticipated that land
development and utility construction expenditures for 1997 will be
funded by operating cash flow and borrowings from external sources.
As of December 31, 1996, Avatar has approximately $4,535 in
investments which are all 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. During 1996, the Company's cash requirements necessitated the
use of $45,554 from its portfolio proceeds, of which $32,650 was used
to reduce related debt. As of December 31, 1996, $3,964 of the
investments serve as collateral for a secured line of credit with an
outstanding balance of $3,350.
As of December 31, 1995, Avatar had approximately $48,258 in
investments which were classified as trading. During 1995, the
Company's cash requirements necessitated the use of $11,000 from its
portfolio proceeds. As of December 31, 1995, $46,729 of the
investments served as collateral for a secured line of credit with an
outstanding balance of $36,000.
17<PAGE>
<PAGE> 18
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 common stock and 8% and 9% senior debentures. As
of December 31, 1996, the remaining authorization for such expenditures
was $2,942.
Management does not anticipate a significant change in interest
rates for 1997, and accordingly, does not expect Avatar's primary
business activities to be adversely affected by interest rates.
Avatar's vacation ownership sales are not dependent upon the customer
obtaining third party financing. Vacation ownership sales are
substantially funded under credit facility agreements. A high
interest rate environment would be likely to adversely affect Avatar's
real estate results of operations and liquidity because of its
negative impact on the housing industry and 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 1997 will not be significant.
IMPACT OF TAX INSTALLMENT METHOD
In years 1988 through 1995, the Company elected the installment
method for recording a substantial amount of its homesite and vacation
ownership 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.
18<PAGE>
<PAGE> 19
Item 8. Financial Statements and Supplementary Data
Report of Independent Certified Public Accountants.................. 20
Consolidated Balance Sheets -- December 31, 1996 and 1995........... 21
Consolidated Statements of Operations -- For the years ended
December 31, 1996, 1995 and 1994.................................. 22
Consolidated Statements of Stockholders' Equity -- For the years
ended December 31, 1996, 1995 and 1994............................ 23
Consolidated Statements of Cash Flows -- For the years ended
December 31, 1996, 1995 and 1994.................................. 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, 1996 and 1995, and
the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1996. Our audits also included the financial statement
schedule listed in the index at Item 14. These financial statements and
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
and schedule 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 schedule 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, 1996
and 1995, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information set
forth therein.
ERNST & YOUNG LLP
Miami, Florida
February 28, 1997, except for Note H,
as to which the date is March 18, 1997.
20<PAGE>
<PAGE> 21
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31 December 31
1996 1995
------------ -----------
<S> <C> <C>
Assets
------
Cash $7,567 $2,467
Restricted cash 730 4,048
Investments - trading 4,535 48,258
Contracts, mortgage notes and other
receivables,net 56,544 64,515
Land and other inventories 168,211 149,270
Property, plant and equipment, net 186,615 182,844
Other assets 15,215 15,209
Regulatory assets 3,768 4,021
-------- --------
Total Assets $443,185 $470,632
======== ========
Liabilities and Stockholders' Equity
Liabilities
-----------
Notes, mortgage notes and other debt:
Real estate and corporate $75,143 $104,897
Development and construction loans 31,688 24,535
Utilities 42,152 43,164
Estimated development liability for sold land 8,459 13,033
Accounts payable 7,465 9,306
Accrued and other liabilities 32,087 32,886
Deferred customer betterment fees 18,430 18,997
Minority interest in consolidated subsidiaries 9,064 9,060
-------- --------
Total Liabilities 224,488 255,878
Commitments and contingent liabilities
Contributions in aid of construction 59,245 56,342
Stockholders' Equity
--------------------
Common Stock, par value $1 per share
Authorized: 15,500,000 shares
Issued: 12,715,448 shares 12,715 12,715
Additional paid-in capital 207,271 207,271
Retained earnings 1,439 399
-------- --------
221,425 220,385
Treasury stock, at cost, 3,620,346 shares 61,973 61,973
-------- --------
Total Stockholders' Equity 159,452 158,412
-------- --------
Total Liabilities and Stockholders' Equity $443,185 $470,632
======== ========
See notes to consolidated financial statements.
</TABLE>
21<PAGE>
<PAGE> 22
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in thousands except per-share amounts)
<TABLE>
<CAPTION>
For the year ended December 31
----------------------------------
1996 1995 1994
-------- --------- ---------
<S> <C> <C> <C>
Revenues
--------
Real estate sales $103,521 $55,981 $43,863
Deferred gross profit on homesite sales 2,639 (713) (1,710)
Utility revenues 32,749 29,669 28,664
Interest income 8,818 9,653 11,125
Trading account profit, net 2,210 6,912 342
Other 2,761 663 564
-------- --------- ---------
Total revenues 152,698 102,165 82,848
Expenses
--------
Real estate expenses 103,618 65,895 50,576
Utility expenses 25,505 24,923 24,651
General and administrative expenses 8,784 9,248 10,224
Interest expense 12,937 11,627 11,207
Other 814 811 811
-------- --------- ---------
Total expenses 151,658 112,504 97,469
-------- --------- ---------
Net income (loss) $1,040 ($10,339) ($14,621)
======== ========= =========
Per share amounts:
Net income (loss) $0.11 ($1.14) ($1.61)
======== ========= =========
</TABLE>
See notes to consolidated financial statements.
22<PAGE>
<PAGE> 23
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Dollars in thousands)
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Treasury
Stock Capital Earnings Stock
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Balance at January 1, 1994 $12,715 $207,271 $25,359 $61,973
Net (loss) - - (14,621) -
------- --------- -------- -------
Balance at December 31, 1994 12,715 207,271 10,738 61,973
Net (loss) - - (10,339) -
------- -------- -------- -------
Balance at December 31, 1995 12,715 207,271 399 61,973
Net income - - 1,040 -
------- -------- -------- -------
Balance at December 31, 1996 $12,715 $207,271 $1,439 $61,973
======= ======== ======== =======
</TABLE>
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
-----------------------------------
1996 1995 1994
-------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
- --------------------
Net income (loss) $1,040 ($10,339) ($14,621)
Adjustments to reconcile net income (loss) to
net cash provided by (used in)
operating activities:
Depreciation and amortization 10,669 9,934 8,453
Deferred gross profit (2,639) 713 1,710
Cost of homesite sales not
requiring cash 3,956 3,590 3,010
Inventory writedown 1,464 - -
Trading account profit, net (2,210) (6,912) (342)
Changes in operating assets and liabilities:
Restricted cash 3,318 (2,776) 170
Investments - trading 45,554 11,000 -
Principal payments on contracts
receivable 17,550 19,475 20,043
Receivables (6,445) (12,017) (9,655)
Other receivables (495) (1,262) (526)
Inventories (28,935) (37,843) (6,768)
Other assets (6) 626 (375)
Accounts payable and accrued and other
liabilities (2,575) 5,631 6,612
--------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 40,246 (20,180) 7,711
INVESTING ACTIVITIES
- --------------------
Investment in property,
plant and equipment (11,537) (13,753) (15,530)
--------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (11,537) (13,753) (15,530)
FINANCING ACTIVITIES
- --------------------
Net proceeds from revolving lines of credit
and long-term borrowings 91,538 76,035 26,584
Principal payments on revolving
lines of credit and long-term borrowings (115,147) (44,013) (21,178)
Purchase of 9% debentures - (387) -
--------- ---------- ----------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES ($23,609) $31,635 $5,406
INCREASE (DECREASE) IN CASH $5,100 ($2,298) ($2,413)
Cash at beginning of year 2,467 4,765 7,178
--------- ---------- ----------
CASH AT END OF YEAR $7,567 $2,467 $4,765
========= ========== ==========
</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,
-----------------------------------
1996 1995 1994
-------- ---------- ----------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES
- -----------------------------------------------
Contributions in aid of construction $5,584 $5,000 $1,344
========= ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
- -------------------------------------------------
Cash paid during the period for:
Interest (net of amount capitalized of
$4,003, $3,234 and $1,625 in 1996,
1995 and 1994, respectively) $8,175 $9,557 $10,921
======== ========== ==========
Income taxes paid $0 $0 $255
========= ========== ==========
</TABLE>
See notes to consolidated financial statements.
25 <PAGE>
<PAGE> 26
AVATAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
(Dollars in thousands except per-share data)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
----------------------------
The consolidated financia l 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 single and multifamily residential housing, vacation
ownership intervals, improved and unimproved real estate, and
providing water and wastewater utility services.
Restricted Cash:
----------------
Restricted cash represents housing deposits of $684 and
utility deposits of $46. The housing deposits will become
available to the Company when the housing contracts close.
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.
In March 1995, the FASB issued Statement No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of," which requires impairment losses to be recorded
on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to
be generated by those assets are less than the assets' carrying
amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted
Statement 121 in the first quarter of 1996, and there was no
material impact on the company's operations or financial position.
Revenues:
---------
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.
26 <PAGE>
<PAGE> 27
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- continued
Revenues -- continued:
----------------------
The Company uses the installment method of profit recognition
for sales of homesites, the accrual method of profit recognition for
sales of completed vacation ownership intervals, and the percentage
of completion method for sales of those vacation ownership intervals
which are under construction. 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, and deferred profit is included in the balance sheet, as
a reduction of contracts receivable, until recognized. Under
the percentage of completion method, the gross profit on recorded
sales is recognized based upon the percentage of construction
completed.
Utility revenues are recorded as the service is provided.
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.
Income Taxes:
-------------
Income taxes have been provided using the liability method in
accordance with Financial Accounting Standards Board 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 where 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.
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 lives of the utility systems and reflect probable future
revenue reductions or increases from ratepayers.
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:
------------
The Company classifies 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 $4,535 at December
31, 1996 and $48,258 at December 31, 1995.
Postretirement Benefits:
------------------------
The Company ac crues 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.
Advertising Costs:
------------------
Advertising costs are expensed as incurred. For the years
ended December 31, 1996, 1995 and 1994, advertising costs totaled
$3,758, $3,265 and $1,304, respectively.
Net Income/Loss Per Common Share:
---------------------------------
For 1996, 1995 and 1994, net income/loss per common share is
computed on the basis of the weighted average number of shares
outstanding of 9,095,102.
Use of Estimates:
-----------------
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results,
however, could differ from those estimates.
Reclassifications:
------------------
Certain 1995 and 1994 financial statement items have been
reclassified to conform with 1996 presentations.
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
----------------------------------
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Revenues from Homebuilding Activities $50,047 $13,260 $7,400
Resort revenues 16,087 14,320 13,222
Gross homesite sales * 12,387 12,561 12,271
Vacation ownership sales 9,568 7,407 1,338
Proceeds from sales of recreation facility 8,300 - -
Rental, leasing, cable and other
real estate operatins 5,430 5,809 5,631
Commercial/Industrial land sales 1,702 2,624 4,001
-------- ------- -------
Total real estate sales $103,521 $55,981 $43,863
======== ======= =======
</TABLE>
* 1996 includes $3,714 of land sales generated by the
Homebuilding Division and $4,276 for bulk land sales.
NOTE C - INVESTMENTS
The Company classifies 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 market value and both realized and
unrealized gains and losses are included in net trading account
profit. 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.
Avatar's investment portfolio at December 31, 1996 and 1995
included corporate bonds and other bonds rated B- or above by
Moody's and/or Standard and Poor's, non-rated bonds of companies
which are in bankruptcy and have defaulted as to payments of
principal and interest on such bonds, equity securities, money
market accounts and U.S. Government and Agency securities. The
portfolio at December 31, 1995, also included obligations for
securities which had been sold that the Company does not own and
was, therefore, obligated to purchase at a future date. Such
obligations were recorded at the fair market value of the
securities.
The following table sets forth the fair values of investments
(including securities sold short which are valued at the cost to
purchase as of December 31) :
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Corporate bonds $ - $21,985
Non-rated bonds 77 8,472
Equity securities 81 2,045
Other rated bonds 2,172 4,753
Money market accounts 2,205 11,519
Less: Securities sold short - (516)
--------- --------
Total market value $4,535 $48,258
========= ========
Aggregate cost $3,975 $44,116
========= ========
</TABLE>
29<PAGE>
<PAGE> 30
NOTE D - CONTRACTS, MORTGAGE NOTES AND OTHER RECEIVABLES
Contracts, mortgage notes and other receivables are summarized
as follows:
<TABLE>
<CAPTION>
December 31
---------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Contracts and mortgage notes receivable $74,029 $89,317
Notes and other receivables 7,928 7,268
------------ ------------
81,957 96,585
------------ ------------
Less:
Allowance for doubtful accounts 1,450 1,003
Market valuation reserve 140 704
Deferred gross profit 21,878 27,589
Other 1,945 2,774
------------ ------------
25,413 32,070
------------ ------------
$56,544 $64,515
============ ============
</TABLE>
Contracts and mortgage notes receivable were 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, 1996, 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%). The Company generally
requires that customers pledge the homesites as collateral for
contracts and mortgages receivable and such collateral can be
repossessed by the Company in the event of a default. 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, 1996 and 1995 were $7,099 or 9.6% and $11,619 or 13.0%,
respectively. Estimated maturities for the five years subsequent to
1996 are: 1997 - $17,142; 1998 - $14,862; 1999 - $10,822; 2000 -
$7,786 and 2001 - $6,501.
NOTE E - LAND AND OTHER INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31
-------------------------
1996 1995
--------- --------
<S> <C> <C>
Land developed and in process of development $103,394 $95,315
Land held for future development or sale 33,544 34,790
Dwelling units completed or under construction 30,500 18,044
Other 773 1,121
--------- --------
$168,211 $149,270
========= ========
</TABLE>
In 1996, the Company recorded an impairment loss of $1,464 on a
certain tract of land located at the Company's Banyan Bay site. Fair
value was determined based on a purchase offer received for the land.
30<PAGE>
<PAGE> 31
NOTE F - ESTIMATED DEVELOPMENT LIABILITY FOR SOLD LAND
The estimated cost to complete consists of required land and
utility improvements in all areas designated for homesite sales and
is summarized as follows:
<TABLE>
<CAPTION>
December 31
------------------------
1996 1995
--------- ---------
<S> <C> <C>
Gross unexpended costs (net of recoveries
of $11,941 in 1996 and $11,495 in 1995) $11,685 $19,022
Less costs relating to unsold homesites 3,226 5,989
--------- ---------
Estimated development liability for sold land $8,459 $13,033
========= =========
</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 therefore voiding the
portion of the existing agreement relating to water and wastewater
extensions, leaving only the electrical portion.
Avatar may be obligated to expend approximately $8,394 (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 $11,685 are estimated as follows: 1997-$3,849 and
thereafter-$7,836. Because the timing of the expenditures after
1997 is dependent upon certain future occurrences beyond Avatar's
control, projection by year after 1997 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
---------------------------
1996 1995
---------- ---------
<S> <C> <C>
Utility land, plant and equipment $230,600 $219,271
Land and improvements 12,395 12,844
Buildings and improvements 18,137 19,361
Machinery, equipment and fixtures 13,679 14,887
Other 639 418
---------- ---------
275,450 266,781
Less accumulated depreciation 88,835 83,937
---------- ---------
$186,615 $182,844
========== =========
</TABLE>
Depreciation charged to operations during 1996, 1995 and 1994
was $6,380, $5,883 and $5,655, respectively, net of amortization
of contributions and advances in aid of construction of $4,289,
$4,051 and $2,798 during 1996, 1995 and 1994, respectively.
32 <PAGE>
<PAGE> 33
NOTE H - NOTES, MORTGAGE NOTES AND OTHER DEBT
Notes, mortgage notes and other debt are summarized as
follows:
<TABLE>
<CAPTION>
December 31
----------------------
1996 1995
-------- --------
<S> <C> <C>
Real estate and corporate
Bank credit lines $40,376 $57,513
8% senior debentures, due 2000, net of
unamortized discount of $899 and $1,080,
respectively 6,728 6,547
9% senior debentures, due 2000, net of
unamortized discount of $2,274 and $2,725,
respectively 23,070 22,619
Mortgage note obligations, interest rates
ranging from 8.75% to 10%, due from
1997 - 2002 4,969 9,612
Avatar Homesite Mortgage Trust 1992 - 2002,
7% Notes - 8,606
-------- --------
$75,143 $104,897
======== ========
Development and construction loans,
interest rates ranging from 8% to 10.5% $31,688 $24,535
======== ========
Utilities
Bank credit lines $4,350 $2,975
Utility first mortgage bonds due serially from
1997 - 2007, interest rates ranging from
7.79% to 9.19% 15,608 16,820
Utility senior notes, 7.27%, due 2000 - 2010 18,000 18,000
Utility promissory notes, due 1997 - 2002 4,194 5,369
-------- --------
$42,152 $43,164
======== ========
</TABLE>
At December 31, 1996, Avatar had secured bank credit lines of
$60,374 and unsecured bank credit lines of $15,000. The unused
portions of secured and unsecured credit lines were $20,000 and
$10,650 respectively, at December 31, 1996. The weighted average
interest rate on short term borrowing at December 31, 1996 was 9.1%
Interest rates for borrowings under these lines range from 6.43% to
8.25% on the unsecured bank credit lines and from 8% to 10.5% on the
secured bank credit lines at December 31, 1996. 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 and is required to
maintain a minimum net worth as defined. The secured lines are
collateralized by certain real property, and contracts and
mortgage notes receivable of $57,436 and investments of $3,964 at
December 31, 1996.
33<PAGE>
<PAGE> 34
NOTE H - NOTES, MORTGAGE NOTES AND OTHER DEBT -- continued
In connection with the acquisition of Casa Del Mar, the Joint
Venture entered into a loan agreement with $5,674 outstanding at
December 31, 1996. The debt is guaranteed by a subsidiary of Avatar
as well as the Joint Venture Partners.
In 1992, Avatar issued $51,160 of 7% Mortgage Trust Notes,
rated "A" by Standard & Poor's Corporation, pursuant to the
securitization of a portion of its homesite receivables. These
notes were paid in full during the third quarter of 1996.
During 1996, an Avatar subsidiary and Stanco Partners, Ltd.
entered into a joint venture agreement (the Joint Venture) and
acquired Casa Del Mar (CDM), an Ormand Beach, Florida beachfront
hotel. In connection with the acquisition of Casa Del Mar, the Joint
Venture entered into a loan agreement with $5,674 outstanding at
31, 1996. The debt is guaranteed by a subsidiary of Avatar as well as
the Joint Venture Partner.
Maturities of notes, mortgage notes and other debt at December
31, 1996, are as follows:
<TABLE>
<CAPTION>
Development
and
Real estate Construction Utilities Total
---------- ------------ --------- ---------
<S> <C> <C> <C> <C>
1997 $176 $15,883 $7,618 $23,677
1998 32,813 12,774 2,184 47,771
1999 209 1,099 2,184 3,492
2000 29,951 1,140 3,821 34,912
2001 6,854 - 3,820 10,674
thereafter 5,140 792 22,525 28,457
----------- ------------ -------- ---------
$75,143 $31,688 $42,152 $148,983
=========== ============ ======== =========
</TABLE>
Maturities for 1997 include approximately $4,350 related to the
Company's bank credit lines.
Interest capitalized during 1996, 1995 and 1994 amounted to
$4,003, $3,234 and $1,625, respectively.
Property, plant and equipment and inventory pledged as
collateral for notes, mortgage notes and other indebtedness had a
net book value of approximately $159,000 at December 31, 1996.
NOTE I - MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES
As of December 31, 1996 and 1995, preferred stock outstanding
is as follows:
<TABLE>
<CAPTION>
December 31
------------------------
1996 1995
-------- -------
<S> <C> <S>
9% cumulative preferred stock $9,000 $9,000
Other 64 60
-------- -------
$9,064 $9,060
======== =======
</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.
Charges to operations recorded as "Other Expenses" relating to
preferred stock dividends of subsidiaries amounted to $814 in 1996,
$811 in 1995, and $811 in 1994.
34<PAGE>
<PAGE> 35
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 five highest years of earnings. 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.
The following table sets forth the defined benefit plan's
funded status as of December 31, 1996, 1995 and 1994 and the
retirement expense recognized in the consolidated statements of
income for the years then ended.
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- ------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vesting benefits of $3,288, $2,924,
and $2,382 respectively $3,367 $3,025 $2,526
======== ======== ======
Projected benefit obligation for services
rendered to date ($3,885) ($3,646) ($3,159)
Plan assets at fair value 4,060 3,642 3,036
-------- -------- ------
Projected benefit obligation less than
(in excess of) plan assets 175 (4) (123)
Unrecognized net gain (515) (413) (413)
Prior service cost not yet recognized in net
periodic pension cost 362 409 456
Unrecognized net assets at January 1, 1986,
net of amortization (58) (73) (87)
-------- ------- ------
Accrued pension cost included in accrued and
other liabilities ($36) ($81) ($167)
======== ======= ======
Net retirement cost included the following
components:
Defined Benefit Plan:
Service cost -- benefits earned
during the period $204 $190 $209
Interest cost on projected benefit obligation 284 250 229
Actual return on plan assets (406) (495) (362)
Net amortization and deferral 139 245 169
-------- -------- ------
Net pension cost 221 190 245
Defined contribution plan 122 117 102
-------- -------- ------
Total retirement expense $343 $307 $347
======== ======== ======
</TABLE>
The actuarial assumptions used in determining the present value
of the projected benefit obligation were: weighted average discount
rate of 7.5% in 1996, 1995 and 1994, rate of increase in future
compensation levels of 5% in 1996, 1995 and 1994, and expected
long-term rate of return on plan assets of 8% in 1996, 1995 and
1994.
35<PAGE>
<PAGE> 36
NOTE J - RETIREMENT PLANS -- continued
Plan assets are invested in the general asset fund of a major
insurance company, which is composed primarily of fixed income
securities, and a separate account, which is composed of equity
securities, public bonds or cash equivalents.
NOTE K - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
A utility subsidiary of Avatar sponsors a defined non-
contributory benefit postretirement plan that provides medical and
life insurance benefits to both salaried and nonsalaried employees
after retirement. Participants contribute a portion of such
benefits. The utility's funding policy for its postretirement plan
is to fund on a pay-as-you-go basis.
The following table sets forth the plan's status as of December
31, 1996 , 1995 and 1994:
<TABLE>
<CAPTION>
Accumulated postretirement benefit obligation:
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Retirees ($882) ($948) ($766)
Fully eligible active plan participants (496) (768) (865)
Other active plan participants (1,460) (2,299) (2,307)
-------- -------- --------
(2,838) (4,015) (3,938)
Plan assets at fair value 0 0 0
-------- -------- --------
Accumulated postretirement benefit obligation in excess
of plan assets (2,838) (4,015) (3,938)
Unrecognized net gain from past experience
different from that assumed and from
changes in assumptions (2,281) (715) (195)
Unrecognized transition obligation 2,645 2,798 2,793
-------- -------- --------
Accrued postretirement benefit cost ($2,474) ($1,932) ($1,340)
======== ======== ========
Net periodic postretirement benefit cost
included the following components:
Service cost
Interest cost on accumulated postretirement $244 $273 $315
benefit obligation 277 283 271
Amortization of transition obligation
over 20 years 155 155 155
Other (88) (35) (23)
-------- -------- --------
Net periodic postretirement benefit cost $588 $676 $718
======== ======== ========
</TABLE>
For measurement purposes', the annual rate of increase in the
per capita cost of covered health care benefits assumed for 1996,
1995 and 1994 was 10%, 11% and 12%, respectively; the rate of
increase was assumed to decrease gradually to 6% by the year 2000
and remain at that level thereafter; termination rates
calculations, except those at December 31, 1996, used the Crocker-
Sarason Straight T-6 tables less 51GAM deaths; the T-8 tables were
used for the December 31, 1996 calculation. This change in
termination rates will decrease the net periodic benefit cost in
future years. 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, 1996 by $516 and the aggregate of
the service and interest cost components of net periodic
postretirement benefit for the year then ended by $113.
The weighted average discount rate used in determining the
accumulated postretirement benefit obligation for 1996, 1995 and
1994 was 7.5%, 7.5% and 8.0%, respectively.
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
2001. Rental expenses for the years 1996, 1995 and 1994 were
$1,838, $1,562, and $1,235, respectively. Minimum rental
commitments under noncancelable operating leases as of December 31,
1996 were as follows: 1997 - $2,199; 1998 - $1,837; 1999-$1,478;
2000 - $575; 2001 -$280.
NOTE M - ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities are summarized as follows:
<TABLE>
<CAPTION>
December 31
----------------------
1996 1995
------- --------
<S> <C> <C>
Property taxes $5,788 $5,886
Customer deposits and advances 5,345 5,696
Interest 1,046 1,573
Other 19,908 19,731
------- -------
$32,087 $32,886
======= =======
</TABLE>
As of December 31, 1996, the Company had certain incentive
compensation agreements providing for a cash payment (to the extent
vested), within ten days following the respective fifth anniversary
date (payment terms are subject to renewal agreements) 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 eligible employee will vest
in the rights to this incentive compensation with respect to one-
fifth thereof in 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 years ended December 31, 1996, 1995 and 1994, the Company
recorded incentive compensation of ($213), $39 and $763,
respectively, associated with these agreements. The liability for
incentive compensation included in other liabilities at December 31,
1996 and 1995 is $822 and $1,035, respectively.
NOTE N - INCOME TAXES
Under the installment method of tax reporting for homesite and
vacation ownership sales, Avatar anticipates that its 1996
consolidated federal income tax return will reflect a net operating
loss carryforward of approximately $40,000, which expires in years
2003 through 2010. In addition, investment tax credits and
alternative minimum tax credit carryforwards of approximately $5,000
are available, a portion of which expires in years 1997 to 2001.
These carryforwards have not been examined by the Internal
Revenue Service.
The Company has recorded a valuation allowance of $41,000 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.
37<PAGE>
<PAGE> 38
NOTE N - INCOME TAXES -- continued
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, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred income tax assets
Net operating loss carryover $15,000 $16,000
Tax over book basis of land inventory 24,000 23,000
Unrecoverable land development costs 3,000 4,000
Tax over book basis of depreciable assets 7,000 7,000
Alternative minimum tax and investment tax
credit carryforward 5,000 5,000
Other 2,000 2,000
-------- --------
Total deferred income taxes 56,000 57,000
Valuation allowance for deferred income tax
assets (41,000) (42,000)
-------- --------
Deferred income tax assets 15,000 15,000
Deferred income tax liabilities
Book over tax income recognized on homesite
and vacation ownership sales (6,000) (5,000)
Deferred carrying charges on utility plant (2,000) (3,000)
Other (7,000) (7,000)
-------- --------
Total deferred income tax liabilities (15,000) (15,000)
-------- --------
Net deferred income taxes $0 $0
======== ========
</TABLE>
A reconciliation of income tax expense (credit) to the expected
income tax expense (credit) at the federal statutory rate of 34%
for the year ended December 31 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- --------
<S> <C> <C> <C>
Income tax expense (credit) computed
at statutory rate $354 ($3,515) ($4,971)
Income tax effect of non-deductible
dividends on preferred stock of subsidiary 277 276 275
State income tax (credit), net of federal effect 98 (358) (535)
Other 271 (403) 231
Change in valuation allowance on deferred
tax assets (1,000) 4,000 5,000
------- ------- --------
Provision for income taxes $- $- $-
======= ======= ========
</TABLE>
In years 1988 through 1995, the Company elected the installment
method for recording a substantial amount of its homesite and
vacation ownership 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.
38<PAGE>
<PAGE> 39
NOTE O - 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 matter cannot be determined,
management believes 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
Florida Cities Water Company ("Florida Cities"), a utility
subsidiary of Avatar Holdings Inc. ("Avatar"), in the U.S. District
Court for the Middle District of Florida, United States v. Florida
Cities Water Company, Civil Action No. 93-281-CIV-FTM-21, alleging
that Florida Cities' Waterway Estates treatment plant, located in
Lee County, Florida operated in violation of the Federal Clean
Water Act ("Act"), 33 U.S.C. S1251 et seq. On May 5 and June 26,
1995, the United States amended its complaint to include allegations
against Florida Cities for violations of the Act at two other
Florida wastewater treatment plants, Barefoot Bay, located in
Brevard County, and Carrollwood, located in Hillsborough County.
In addition, the government amended the complaint to include Avatar,
the parent corporation, as a defendant. A trial was held in March
and April 1996. On August 20, 1996, the Court issued its final
judgment, incorporating earlier rulings. The Court found Avatar not
liable on any of the government's claims and entered judgment in
Avatar's favor. The Court found Florida Cities not liable on
certain of the government's claims, but liable on other claims, and
awarded the government $310 in civil penalties against Florida
Cities. On October 18, 1996, the government filed a notice of
appeal to the U.S. Court of Appeals for the Eleventh Circuit.
Avatar and Florida Cities believe that there are strong arguments to
support the affirmance of the judgment of the District Court on
appeal.
39 <PAGE>
<PAGE> 40
NOTE P - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
For the year ended December 31
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Real estate
Unaffiliated customers $119,949 $72,496 $54,184
Intersegment 100 100 100
-------- -------- --------
120,049 72,596 54,284
Utility
Unaffiliated customers 32,749 29,669 28,664
-------- -------- --------
32,749 29,669 28,664
Elimination of intersegment revenues (100) (100) (100)
-------- -------- --------
Total Revenues $152,698 $102,165 $82,848
======== ======== ========
Operating profit:
Real estate $7,647 ($2,547) ($6,516)
Utility 6,330 3,835 3,102
-------- -------- --------
Total operating profit 13,977 1,288 (3,414)
Interest expense (12,937) (11,627) (11,207)
-------- -------- --------
Income (loss) before income taxes,
and effect of changes
in methods of accounting $1,040 ($10,339) ($14,621)
======== ======== ========
Depreciation and amortization:
Real estate $2,571 $2,397 $1,957
Utility 3,809 3,486 3,698
-------- -------- --------
Total $6,380 $5,883 $5,655
======== ======== ========
Capital expenditures:
Real estate $3,324 $2,138 $5,599
Utility 12,336 17,382 10,745
-------- -------- --------
$15,660 $19,520 $16,344
======== ======== ========
December 31
--------------------------------
1996 1995 1994
-------- -------- --------
Identifiable assets:
Real estate $252,273 $239,459 $221,384
Utility 186,020 182,661 173,357
-------- -------- --------
Total Identifiable Assets 438,293 422,120 394,741
General corporate assets 4,892 48,512 51,836
-------- -------- --------
Total Assets $443,185 $470,632 $446,577
======== ======== ========
</TABLE>
40 <PAGE>
<PAGE> 41
NOTE P - 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 Q- FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of the Company's financial
instruments, all of which are held for purposes other than trading
except for investments - trading at December 31, 1996 and 1995, are
as follows:
<TABLE>
<CAPTION>
1996 1996
---------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------- ------- ------- -------
<S> <C> <C> <C> <C>
Cash and restricted cash $8,297 $8,297 $6,515 $6,515
Investments - trading 4,535 4,535 48,258 48,254
Contracts, mortgage notes and
other receivables 56,544 57,643 64,515 65,493
Notes, mortgage notes and other debt:
Bank credit lines:
Short term bank credit lines - - 16,799 16,799
Long term bank credit lines 40,376 40,460 40,714 40,394
------- ------- ------- -------
Total bank credit lines 40,376 40,460 57,513 57,193
Mortgage obligations and promissory
notes 4,969 5,018 9,612 9,888
Senior debentures 29,798 30,936 29,166 30,936
Mortgage trust notes - - 8,606 7,107
------- ------- ------- -------
Total real estate and corporate $75,143 $76,414 $104,897 $105,124
======= ======= ======= =======
Development & construction loans:
Short term development and
construction loans $7,716 $7,716 $2,916 $2,916
Long term development and
construction loans 23,972 24,117 21,619 22,123
------- ------- ------- -------
Total development and
consturction loans $31,688 $31,833 $24,535 $25,039
======= ======= ======= =======
Avatar Utilities Inc.:
Short term bank credit lines $4,350 $4,350 $2,975 $2,975
Mortgage obligations, first
mortgage bonds and promissory notes 37,802 35,618 40,189 37,851
------- ------- ------- -------
Total Utilities $42,152 $39,968 $43,164 $40,826
======= ======= ======= =======
</TABLE>
41<PAGE>
<PAGE> 42
NOTE Q- FAIR VALUE OF FINANCIAL INSTRUMENTS - continued
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 - trading: The carrying amount in the balance sheet
for investments is at fair market value (See Note A).
Contracts, mortgage notes and other receivables: The fair value
amounts 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
and short term development and construction loans 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.
Senior and subordinated debentures: The fair values of the
Company's senior and subordinated debentures are estimated based
on quoted market prices.
Mortgage trust notes: The fair value amount of the Company's
mortgage trust notes are estimated using discounted cash flow
analysis based on the Company's current incremental borrowing
rate.
42<PAGE>
<PAGE> 43
NOTE R - QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1996 and 1995 is as
follows:
<TABLE>
<CAPTION>
1996 Quarter
------------------------------------------
First Second Third Fourth
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net revenues $28,899 $38,609 $35,998 $49,192
Expenses 29,975 38,516 36,355 46,812
-------- ------- ------- -------
(Loss) income before income taxes (1,076) 93 (357) 2,380
Provision for income taxes - - - -
-------- ------- ------- -------
Net (loss) income ($1,076) $93 ($357) $2,380
======== ======== ======= =======
Per share amounts:
Net (loss) income ($0.12) $0.01 ($0.04) $0.26
======== ======== ======= =======
1995 Quarter
------------------------------------------
First Second Third Fourth
-------- ------- ------- -------
Net revenues $26,221 $24,625 $24,996 $26,323
Expenses 26,607 26,219 28,460 31,218
-------- -------- ------- -------
Loss before income taxes (386) (1,594) (3,464) (4,895)
Provision for income taxes - - - -
-------- -------- ------- -------
Net loss ($386) ($1,594) ($3,464) ($4,895)
======== ======== ======= =======
Per share amounts:
Net loss ($0.04) ($0.18) ($0.38) ($0.54)
======== ======== ======= =======
</TABLE>
The financial statements for the year ended December 31, 1995
include the following amounts recorded in the fourth quarter:
(a) a decline due to an adjustment to the market value of
investments of $1,315 ( or $.14 per share).
(b) a provision of $1,250 (or $.14 per share) due to an
increase in the accrual related to pending litigation
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures.
Not applicable.
43<PAGE>
<PAGE> 44
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 1997 definitive proxy statement
(under "Election of Directors") to be filed with the
Securities and Exchange Commission on or before April 30,
1997.
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.
C. Compliance with Section 16(a) of the Exchange Act
The information required by this item is incorporated by
reference from Avatar's 1997 definitive proxy statement
(under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance"), to be filed with the Securities
and Exchange Commission on or before April 30, 1997.
Item 11. Executive Compensation
The information called for by this item is incorporated by
reference to Avatar's 1997 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,
1997.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information called for by this item is incorporated by
reference to Avatar's 1997 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, 1997.
Item 13. Certain Relationships and Related Transactions
None
44 <PAGE>
<PAGE> 45
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 19 of this report.
Schedules:
---------
II - Valuation and Qualifying Accounts
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 and reinstated February 13, 1997, (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).
10(a) *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
(previously filed as an exhibit to Form 10-K for the year ended
December 31, 1993)
45<PAGE>
<PAGE> 46
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K -- continued
10(b) *1 Incentive Compensation Agreement, dated as of January 18,
1993 by and between Avatar Holdings Inc. and Dennis Getman
(previously filed as an exhibit to Form 10-K for the year
ended December 31, 1993).
10(c) *1 Incentive Compensation Agreement, dated as of September 9,
1993 by and between Avatar Holdings Inc. and Charles
McNairy (previously filed as an exhibit to Form 10-K for the
year ended December 31, 1993).
10(d) * Revolving Credit Agreement between Avatar Properties Inc.
and BHF Bank dated November 30, 1993 (previously filed as
an exhibit to the Form 10-K for the year ended December 31,
1993).
10(e) *1 Employment Agreement, dated as of July 27, 1995, by and
between Avatar Holdings Inc. and Edwin Jacobson (previously
filed as an exhibit to Form 10-Q for the quarter ended
September 30, 1995).
10(f) 1 Amendment to Employment Agreement, dated as of February 13,
1997, to Employment Agreement, dated as of June 15, 1992
(as amended as of March 1, 1994) and Employment Agreement,
dated as of July 27, 1995, by and between Avatar Holdings
Inc. and Edwin Jacobson (filed herewith).
10(g) 1 Employment Agreement, dated as of February 13, 1997, by and
between Avatar Holdings Inc. and Gerald D. Kelfer (filed
herewith).
10(h) 1 Nonqualified Stock Option Agreement, dated as of February
13, 1997, by and between Avatar Holdings Inc. and Gerald D.
Kelfer (filed herewith).
11 Computations of earnings per share (filed herewith)
27 Financial Data Schedule (filed herewith)
* These exhibits are incorporated by reference and are on file with
the Securities and Exchange Commission.
1 Employment and Compensation agreements.
46<PAGE>
<PAGE> 47
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
AVATAR HOLDINGS INC. AND SUBSIDIARIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance Charged Balance
at to at
Beginning Costs and End of
of Period Expenses Deduction Period
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Deducted from asset accounts:
Deferred gross profit on
homesite sales $27,589 ($706)(1) $5,005(1) $21,878(2)
Allowance for doubtful
accounts 1,003 327 (120) 1,450(2)
Market valuation account 704 - 564(3) 140
Valuation allowance for
deferred tax assets 42,000(4) (1,000) - 41,000
-------- --------- --------- ---------
Total $71,296 ($1,379) $5,449 $64,468
======== ========= ========= =========
Year ended December 31, 1995:
Deducted from asset accounts:
Deferred gross profit on
homesite sales $30,221 $713(1) $3,345(2) $27,589(2
Allowance for doubtful
accounts 1,387 271 655(2) 1003
Market valuation account 1,184 - 480(3) 704
Valuation allowance for
deferred tax assets 38,000(4) 4,000 - 42,000
-------- --------- --------- ---------
Total $70,792 $4,984 $4,480 $71,296
======== ========= ========= =========
Year ended December 31, 1994
Deducted from asset accounts:
Deferred gross profit on
homesite sales $31,969 $1,710(1) $3,458(2) 30,221
Allowance for doubtful accounts 2,631 502 1,746(2) 1,387
Market valuation account 2,082 - 898(3) 1,184
Valuation allowance for
deferred tax assets 33,000(4) 5,000 - 38,000
-------- --------- --------- ---------
Total $69,682 $7,212 $6,102 $70,792
======== ========= ========= =========
</TABLE>
(1) (Credit) Charge to operations as an (increase) decrease to revenues.
(2) Uncollectible accounts written off.
(3) Credited principally to interest income or allowance for doubtful open
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.
47<PAGE>
<PAGE> 48
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 20, 1997 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 20, 1997 By: /s/ Lawrence L. Colditz
--------------------------------
Lawrence L. Colditz, Controller
Dated: March 20, 1997 By: /s/ Milton Dresner
--------------------------------
Milton Dresner, Director and
Audit Committee Member
Dated: March 20, 1997 By: /s/ Leon T. Kendall
--------------------------------
Leon T. Kendall, Director,
Chairman of the Audit Committee
and Executive Committee Member
Dated: March 20, 1997 By: /s/ Edwin Jacobson
--------------------------------
Edwin Jacobson, Director,
Chairman of the Executive Committee
and Chief Executive Officer
Dated March 20, 1997 By: /s/ Gerald D. Kelfer
--------------------------------
Gerald D. Kelfer, Director,
President, Vice Chairman of the
Board of Directors and Executive
Committee Member
Dated: March 20, 1997 By: /s/ Leon Levy
--------------------------------
Leon Levy, Chairman of the Board of
Directors and Executive Committee
Member
48<PAGE>
<PAGE> 49
Dated: March 20, 1997 By: /s/ Martin Meyerson
-------------------------------
Martin Meyerson, Director and
Audit Committee Member
Dated: March 20, 1997 By: /s/ Kenneth T. Rosen
--------------------------------
Kenneth T. Rosen, Director
Dated: March 20, 1997 By: /s/ Fred Stanton Smith
-------------------------------
Fred Stanton Smith, Director,
Executive Committee Member and
Audit Committee Member
Dated: March 20, 1997 By: /s/ Henry King Stanford
--------------------------------
Henry King Stanford, Director
49<PAGE>
<PAGE> 50
Exhibit Index
-------------
* These exhibits are incorporated by reference and are on file with the
Securities and Exchange Commission.
1 Employment and Compensation agreements.
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 and reinstated February 13, 1997,
(filed herewith.)......................................... 52
4(a) * Instruments defining the rights of security holders,
including indenture for 8% senior debentures (previously)
(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).
10(a) *1 Employment Agreement, dated as of June 15, 1992, by and
between Avatar Holdings Inc. and Edwin Jacobson
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 (previously filed as an exhibit to Form 10-K
for the year ended December 31, 1993)
10(b) *1 Incentive Compensation Agreement, dated as of January 18,
1993 by and between Avatar Holdings Inc. and Dennis Getman
(previously filed as an exhibit to Form 10-K for the year
ended December 31, 1993).
10(c) *1 Incentive Compensation Agreement, dated as of September 9,
1993 by and between Avatar Holdings Inc. and Charles
McNairy (previously filed as an exhibit to Form 10-K for
the year ended December 31, 1993).
10(d) * Revolving Credit Agreement between Avatar Properties Inc.
and BHF Bank dated November 30, 1993 (previously filed as
an exhibit to the Form 10-K for the year ended
December 31, 1993)
50 <PAGE>
<PAGE> 51
Exhibit Index -- continued
-------------
10(e) *1 Employment Agreement, dated as of July 27, 1995, by and
between Avatar Holdings Inc. and Edwin Jacobson
(previously filed as an exhibit to Form 10-Q for the
quarter ended September 30, 1995).
10(f) 1 Amendment to Employment Agreement, dated as of February
13, 1997, to Employment Agreement, dated as of June 15,
1992 (as amended as of March 1, 1994) and Employment
Agreement, dated as of July 27, 1995, by and between
Avatar Holdings Inc. and Edwin Jacobson (filed
herewith)............................................... 69
10(g) 1 Employment Agreement, dated as of February 13, 1997,
by and between Avatar Holdings Inc. and Gerald D. Kelfer
(filed herewith)........................................ 73
10(h) 1 Nonqualified Stock Option Agreement, dated as of February
1997, by and between Avatar Holdings Inc. and Gerald D.
Kelfer (filed herewith).................................. 85
11 Computations of earnings per share (filed herewith)...... 90
27 Financial Data Schedule (filed herewith)................. 93
51
<PAGE>
<PAGE> 52
Exhibit 3(b) By-Laws
As Amended and Restated - February 13, 1997
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
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.
52<PAGE>
<PAGE> 53
Exhibit 3(b) By-Laws -- continued
Article II Meeting of Stockholders -- continued
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 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.
53<PAGE>
<PAGE> 54
Exhibit 3(b) By-Laws -- continued
Article II Meeting of Stockholders -- continued
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 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
54<PAGE>
<PAGE> 55
Exhibit 3(b) By-Laws -- continued
Article II Meeting of Stockholders -- continued
SECTION 9. List of Stockholders -- continued
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
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 attorney-in-fact.
No proxy shall be valid after the expiration of three years
55<PAGE>
<PAGE> 56
Exhibit 3(b) By-Laws --continued
Article II Meeting of Stockholders -- continued
SECTION 12. Proxies -- continued
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.
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.
56<PAGE>
<PAGE> 57
Exhibit 3(b) By-Laws -- continued
ARTICLE III Board of Directors -- continued
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 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.
57<PAGE>
<PAGE> 58
Exhibit 3(b) By-Laws -- continued
ARTICLE III Board of Directors -- continued
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 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.
58<PAGE>
<PAGE> 59
Exhibit 3(b) By-Laws -- continued
ARTICLE III Board of Directors -- continued
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.
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 Directors, provided, however, that
third parties shall not be prejudiced by any such revision or
alteration.
59<PAGE>
<PAGE> 60
Exhibit 3(b) By-Laws -- continued
ARTICLE IV Committees of the Board -- continued
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 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.
60<PAGE>
<PAGE> 61
Exhibit 3(b) By-Laws -- continued
ARTICLE IV Committees of the Board -- continued
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, one or more Vice Chairmen of
the Board, a Chairman of the Executive Committee, a Chief
Executive Officer, a President, 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 a Treasurer. Any
two or more offices may be held by the same person. It shall not
be necessary for officers (except the Chairman of the Board, any
Vice Chairman of the Board, the Chairman of the Executive
Committee, and the Chief Executive Officer) 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 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.
61<PAGE>
<PAGE> 62
Exhibit 3(b) By-Laws -- continued
ARTICLE V Officers -- continued
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 (if then a member of the
Executive Committee) 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 the 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. In the absence of the Chairman of the Board, any Vice
Chairman of the Board may perform the functions of the Chairman
of the Board.
SECTION 7. 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 the 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 Chief Executive Officer. The Chief
Executive Officer shall be the senior executive officer of the
Corporation. He shall transmit or cause to be transmitted
necessary instructions and advice to all other officers and all
other proper persons and shall be the proper officer of the
Corporation to whom matters and issues concerning the Corporation
shall be transmitted for attention. The Chief Executive Officer
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 9. The President. 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.
62<PAGE>
<PAGE> 63
Exhibit 3(b) By-Laws -- continued
ARTICLE V Officers -- continued
SECTION 10. 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 11. 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.
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 12. 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
63<PAGE>
<PAGE> 64
Exhibit 3(b) By-Laws -- continued
ARTICLE V Officers -- continued
SECTION 12. The Treasurer -- continued
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 13. 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.
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.
64<PAGE>
<PAGE> 65
Exhibit 3(b) By-Laws -- continued
ARTICLE VI Certificates of Stock, Books and Records
-- continued
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 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.
65<PAGE>
<PAGE> 66
Exhibit 3(b) By-Laws -- continued
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 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.
66<PAGE>
<PAGE> 67
Exhibit 3(b) By-Laws -- continued
ARTICLE IX General Provisions -- continued
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.
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.
67<PAGE>
<PAGE> 68
Exhibit 3(b) By-Laws -- continued
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.
JIK\BY-LAWS.AHI
68
<PAGE>
<PAGE> 69
Exhibit 10(f) Amendment to Employment Agreement between
Avatar Holdings Inc. and Edwin Jacobson
AVATAR HOLDINGS INC.
255 Alhambra Circle
Coral Gables, Florida 33134
February 13, 1997
Mr. Edwin Jacobson
2575 South Bayshore Drive
Penthouse A
Coconut Grove, Florida 33133
Re: Amendment to Employment Agreements
Dear Mr. Jacobson:
Reference is hereby made to (i) that certain
employment agreement between Avatar Holdings Inc. (the "Company")
and you dated June 15, 1992, as amended (the "1992 Employment
Agreement") and (ii) that certain employment agreement between
the Company and you dated July 27, 1995 (the "1995 Employment
Agreement", collectively with the 1992 Employment Agreement, the
"Employment Agreements"). We each agree as follows:
1. Amendments to 1992 Employment Agreement. The
1992 Employment Agreement is hereby amended as follows:
(a) Paragraphs 2(a) and 2(b) of the 1992 Employment
Agreement are hereby amended and restated in their entirety as
follows:
(a) You shall continue to be nominated as a
director of the Company 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 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 Chief Executive Officer.
In the performance of your duties, you shall be
69<PAGE>
<PAGE> 70
Exhibit 10(f) Amendment to Employment Agreement between
Avatar Holdings Inc. and Edwin Jacobson
-- continued
subject to the supervision and direction of the Board of
Directors of the Company and the Executive Committee of
the Board of Directors.
(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
Chief Executive Officer. During the term of your employment
hereunder, you shall have the right to continue to be
employed as President and Chief Executive Officer of each of
Chicago Milwaukee Corporation, CMC Heartland Partners and
Milwaukee Land Company and each of their respective
subsidiaries. You hereby represent and warrant to the
Company that, except as described above, you have no
obligations under any existing employment or service
agreement and that your performance of the services required
of you hereunder will not conflict with your other existing
obligations described above.
(b) Paragraph 2 of the 1992 Employment Agreement
is hereby amended to add Paragraph 2(d) as follows:
(d) Notwithstanding the foregoing, you shall
have the right during the term of your employment hereunder
to resign as Chief Executive Officer and, subject to the
approval of the Board of Directors, to continue as Chairman
of the Executive Committee. Such action by you shall be on
not less than 30 days' prior written notice. In such event,
you shall have the right, but shall not be obligated, to
change the amount of time devoted to your duties and
responsibilities hereunder provided that you are reasonably
available to perform such functions and duties as are
incident to the office of Chairman of the Executive
Committee (but not the Chief Executive Officer) or such
other duties as reasonably may be requested of you by the
Board of Directors. Should you elect not to serve as Chief
Executive Officer as provided above but perform the other
functions contemplated by this paragraph 2, there shall be
no change in your compensation or benefits under this
Agreement.
2. Amendments to 1995 Employment Agreement. The
1995 Employment Agreement is hereby amended as follows:
(a) Paragraphs 2(a) and 2(b) of the 1995
Employment Agreement are hereby amended and restated in
their entirety as follows:
(a) You shall continue to be nominated as a
director of the Company 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 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
70<PAGE>
<PAGE> 71
Exhibit 10(f) Amendment to Employment Agreement between
Avatar Holdings Inc. and Edwin Jacobson
-- continued
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 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.
(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
Chief Executive Officer. During the term of your employment
hereunder, you shall have the right to continue to be
employed as President and Chief Executive Officer of each of
Chicago Milwaukee Corporation, CMC Heartland Partners and
Milwaukee Land Company and each of their respective
subsidiaries. You hereby represent and warrant to the
Company that, except as described above, you have no
obligations under any existing employment or service
agreement and that your performance of the services required
of you hereunder will not conflict with your other existing
obligations described above.
(b) Paragraph 2 of the 1995 Employment Agreement
is hereby amended to add Paragraph 2(d) as follows:
(d) Notwithstanding the foregoing, you shall
have the right during the term of your employment hereunder
to resign as Chief Executive Officer and, subject to the
approval of the Board of Directors, to continue as Chairman
of the Executive Committee. Such action by you shall be on
not less than 30 days' prior written notice. In such event,
you shall have the right, but shall not be obligated, to
change the amount of time devoted to your duties and
responsibilities hereunder provided that you are reasonably
available to perform such functions and duties as are
incident to the office of Chairman of the Executive
Committee (but not the Chief Executive Officer) or such
other duties as reasonably may be requested of you by the
Board of Directors. Should you elect not to serve as Chief
Executive Officer as provided above but perform the other
functions contemplated by this paragraph 2, there shall be
no change in your compensation or benefits under this
Agreement.
3. Except as expressly amended by this letter
agreement, your Employment Agreements remain in full force and
effect in accordance with their terms. 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.
71<PAGE>
<PAGE> 72
Exhibit 10(f) Amendment to Employment Agreement between
Avatar Holdings Inc. and Edwin Jacobson
-- continued
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
72
<PAGE>
<PAGE> 73
Exhibit 10(g) Employment Agreement between Avatar Holdings
Inc. and Gerald D. Kelfer
AVATAR HOLDINGS INC.
255 Alhambra Circle
Coral Gables, Florida 33134
February 13, 1997
Mr. Gerald D. Kelfer
Odyssey Partners, L.P.
31 West 52nd Street
New York, New York 10019
Dear Mr. Kelfer:
We are writing with respect to your employment by Avatar Holdings
Inc. (the "Company") as follows:
1. Employment. The Company agrees to employ you
and you agree to be employed by the Company commencing on
February 13, 1997 (the "Commencement Date") and ending on the
fifth anniversary thereof (unless sooner terminated as
hereinafter provided), on the terms and subject to the conditions
set forth in this agreement ("Agreement").
2. Duties.
(a) You shall continue to be nominated as a
director of the Company and, subject to your election thereto by
the Board of Directors or the stockholders of the Company, you
shall be employed as Vice Chairman of the Board of Directors of
the Company; and you shall also be employed as the President 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 a senior
executive officer. In the event that during the term of your
employment hereunder your duties and responsibilities are
expanded or your title is changed (without reduction in status),
then in either or both events the rights and obligations under
this Agreement shall not be affected. 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.
73<PAGE>
<PAGE> 74
Exhibit 10(g) Employment Agreement between Avatar Holdings
Inc. and Gerald D. Kelfer -- continued
(b) Subject to the term of your employment
hereunder, you shall devote your full working time and effort to
the proper performance of your duties and responsibilities as
Vice Chairman of the Board of Directors and President. You
hereby represent and warrant to the Company that you have no
obligations under any existing employment or service agreement
and that your performance of the services required of you
hereunder will not conflict with other existing obligations or
commitments. Nothing in this Agreement shall preclude you from
engaging, consistent with your duties and responsibilities
hereunder, in charitable and community affairs.
(c) You shall perform the services contemplated
hereunder at the principal executive office of the Company and at
such other locations as may be reasonably necessary to the
performance of such services, and you shall be required to
relocate your principal residence to the vicinity of the
principal executive offices of the Company as soon as practicable
after the Commencement Date.
3. Compensation.
(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 $450,000 per year during your first year of employment, which
rate of salary shall be increased (but not decreased) by $20,000
per year on each anniversary of the Commencement Date occurring
during the term of your employment hereunder ("Base Salary").
Such Base Salary shall be payable in accordance with the
Company's policy with respect to the compensation of executives.
(b) Annual Bonus. During the term of your
employment hereunder, the Company shall pay you, and you shall
accept from the Company for your services, in addition to your
Base Salary, an annual cash bonus of $500,000 ("Annual Bonus").
Such Annual Bonus shall be payable in accordance with the
Company's policy with respect to the compensation of executives,
but no later than 30 days after the applicable anniversary of the
Commencement Date.
(c) Deferred Compensation. You shall have the
right to defer receipt of some or all of the compensation which
you are entitled to receive hereunder by written notice to the
Company, which notice shall set forth the date to which you wish
to defer receipt of such compensation. If you elect to defer
receipt of all or any portion of the Base Salary and/or Annual
Bonus ("Deferred Compensation"), the amount due you shall be
adjusted periodically to reflect any interest that would be
realized with respect to the Deferred Compensation had it been
invested at the rate of interest announced publicly by Citibank,
N.A. in New York, New York, from time to time, as Citibank's base
rate. No specific assets of the Company shall be allocated or
segregated with respect to the Deferred Compensation and the
foregoing shall not be construed to create a trust of any kind or
a fiduciary relationship between the Company and you,
74<PAGE>
<PAGE> 75
Exhibit 10(g) Employment Agreement between Avatar Holdings
Inc. and Gerald D. Kelfer -- continued
the executor or administrator of your estate or any other person.
Your right, or the right of your estate, to receive the Deferred
Compensation, as adjusted in accordance with this paragraph 3(c),
shall be no greater than the right of an unsecured general
creditor of the Company.
(d) Stock Option Arrangements. In consideration
of your executing this Agreement, the Company will recommend to
the Committee (as defined in the Company's Incentive and Capital
Accumulation Plan) that you be granted on the Commencement Date
an option (the "Option") to purchase an aggregate of 225,000
shares of common stock, $1.00 par value, of the Company (the
"Option Shares"), at an exercise price of $34 per share, pursuant
to the terms of the Nonqualified Stock Option Agreement and the
Incentive and Capital Accumulation Plan (the "Incentive Plan")
attached hereto as Exhibit A which shall be subject to the
approval of the stockholders of the Company.
(e) Expenses. During your employment, you will
be reimbursement for all reasonable expenses incurred by you
in performing your services hereunder, provided that you properly
account therefor in accordance with Company policy.
(f) Relocation and Temporary Living Expenses.
The Company agrees to pay all expenses, in an amount not to
exceed $30,000 in the aggregate, reasonably incurred by you
in relocating yourself and your family to the vicinity of the
principal executive offices of the Company, such relocation
expenses to include, but not be limited to, actual moving company
expenses, airfares and hotels. Pending such relocation, the
Company shall provide you and your family with temporary living
quarters in the vicinity of the principal executive offices of
the Company, suitable to your position with the Company as
provided in this Agreement, and shall pay your and your family's
commutation costs, all of which expenses shall not exceed $30,000
in the aggregate. You agree to provide adequate documentation to
the Company for all expenses relating to relocation, temporary
living quarters and commutation.
4. Vacations. During your employment, you
shall be entitled to three weeks paid vacation per year to be
taken at times consistent with the proper performance of your
duties on behalf of the Company. You shall also be entitled to
all paid holidays given by the Company to its senior executives.
5. Participation in Benefit Plans. You shall
be entitled to participate in and to receive benefits under all
the Company's employee benefit plans and arrangements (other
than plans relating to stock options, restricted stock, stock
appreciation rights, "phantom stock" or similar plans) in effect
on the date hereof, and you shall also be entitled to participate
in or receive benefits under any pension or retirement plan,
savings plan, or health-and-accident plan made available by the
Company in the future to its senior executives and other key
management employees, subject to and on a basis
consistent with the terms, conditions and overall
75<PAGE>
<PAGE> 76
Exhibit 10(g) Employment Agreement between Avatar Holdings
Inc. and Gerald D. Kelfer -- continued
administration of such plans and arrangements and provided that
you meet the eligibility requirements thereof.
6. Other Offices. You further agree to serve
without additional compensation, if elected or appointed thereto,
as an officer or director of any of the Company's subsidiaries or
affiliates or as any other officer of the Company.
7. Termination.
(a) Death. Your employment hereunder shall
terminate upon your death.
(b) Disability. In the event of your permanent
disability (as hereinafter defined) during the term of your
employment hereunder, the Company shall have the right, upon
written notice to you, to terminate your employment hereunder,
effective upon the giving of such notice. For the purposes
hereof, "permanent disability" shall be defined as any physical
or mental disability or incapacity which renders you incapable of
fully performing the services required of you in accordance with
your obligations hereunder for a period of 120 consecutive days
or for shorter periods aggregating 120 days during any period of
twelve (12) consecutive months.
(c) Cause. The Company may terminate your
employment hereunder for "Cause". For the purposes hereof,
termination for "Cause" shall mean termination after:
(i) your commission of a material act
of fraud against the Company or its affiliates;
(ii) your conviction of (or pleading by
you of nolo contendere to) any crime which constitutes
a felony in the jurisdiction involved; or
(iii) the willful, repeated and
demonstrable failure by you substantially to perform
your duties over a period of not less than 30 days,
other than any such failure resulting from your
incapacity due to physical or mental illness, or
material breach of any of your obligations under this
Agreement, and your failure to cure such failure or
breach within 30 days after receipt of written notice
from the Chairman of the Board of Directors of the
Company.
(d) At End of Second Year. The Company shall have the
right to terminate your employment hereunder on the second
anniversary of the Commencement Date (without any reason
whatsoever) if communicated to you by a written Notice of
Termination (as hereinafter defined) at least 60 days prior to
the second anniversary of the Commencement Date, in
which event your compensation shall be paid in
accordance with paragraph 8 (f) hereof; provided,
76<PAGE>
<PAGE> 77
Exhibit 10(g) Employment Agreement between Avatar Holdings
Inc. and Gerald D. Kelfer -- continued
however, that upon and following a Change of Control (as
hereinafter defined) occurring at any time prior to the second
anniversary of the Commencement Date, the Company shall no
longer have the right to terminate your employment pursuant
to this paragraph 7(d). For purposes of this paragraph 7(d), a
"Change in Control" of the Company shall be deemed to have
occurred upon any of the following events:
(1) A person or entity or group of persons or
entities, acting in concert, shall become the direct or
indirect beneficial owner (within the meaning of Rule 13d-3
of the Securities Exchange Act of 1934) of securities of the
Company representing fifty-one percent (51%) or more of the
combined voting power of the issued and outstanding common
stock of the Company (a "Significant Owner"), unless such
shares are originally issued to such Significant Owner by
the Company; or
(2) The majority of the Company's Board of Directors
is no longer comprised of (x) the incumbent directors who
constitute the Board of Directors on the date hereof and (y)
any other individual(s) who becomes a director subsequent to
the date hereof whose initial election or nomination for
election as a director, as the case may be, was approved by
at least a majority of the directors who comprised the
incumbent directors as of the date of such election or
nomination; or
(3) A sale of all or substantially all of the assets
of the Company, or a dissolution or complete liquidation of
the Company; or
(4) The Board of Directors shall approve any merger,
consolidation, or like business combination or
reorganization of the Company, the consummation of which
would result in the occurrence of any event described in
clauses (1) through (3) above, and such transaction shall
have been consummated; or
(5) Odyssey Partners, L.P. (or its successors or
distributees in liquidation) and Leon Levy shall sell or
otherwise dispose of its or his beneficial interest in all
or substantially all of the common stock of the Company
beneficially owned by them on the date hereof.
(e) Termination by You. You may terminate your
employment hereunder for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean (A) the failure of the Board
of Directors to continue to recommend or elect, or the
stockholders of the Company to continue to elect, you as a
director of the Company throughout the term of your employment
hereunder, or the failure of the Board of Directors to elect you
or continue to elect you to the Executive Committee of the Board,
provided that if you are not so continued, the Company shall be
entitled to cure such failure within thirty (30) days after you
cease to serve as a director or a member of the Executive
Committee, as the case may be, (B) any assignment to you of any
material duties other than those contemplated by, or any
limitation of your powers or in any respect not contemplated by,
paragraph 2 hereof, provided that you first deliver written notice
77<PAGE>
<PAGE> 78
Exhibit 10(g) Employment Agreement between Avatar Holdings
Inc. and Gerald D. Kelfer -- continued
thereof to the Chairman of the Board of Directors of the
Company and the Company shall have failed to cure such non-
permitted assignment or limitation within thirty (30) days after
receipt of such written notice, or (C) a reduction in your rate
of compensation, or a material reduction in your fringe benefits
or any other material failure by the Company to perform any of
its material obligations hereunder, provided that you first
deliver written notice thereof to the Chairman of the Board of
the Company and the Company shall not have cured such reduction
or failure within thirty (30) days after receipt of such written
notice.
(f) Any termination by the Company pursuant
to paragraphs (b),(c) or (d) above or by you pursuant to paragraph
(e) above shall be communicated by written Notice of Termination
to the other party hereto. For the purposes hereof, a "Notice of
Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment
under the provision so indicated.
(g) "Date of Termination" shall mean (i) if
your employment is terminated by your death, the date of your
death, (ii) if your employment is terminated for any other reason
(other than pursuant to paragraph (d) above), the date on which a
Notice of Termination is given, and (iii) if your employment is
terminated pursuant to paragraph (d) above, the date of the
second anniversary of the Commencement Date.
8. Compensation Upon Termination or During
Disability.
(a) If your employment shall be terminated by
reason of your death, the Company shall pay, to such person as
you shall designate in a notice filed with the Company, or, if
no such person shall be designated, to your estate as a lump sum
death benefit, an amount equal to any accrued but unpaid Base
Salary and a prorated Annual Bonus at the time of your death.
This amount shall be exclusive of and in addition to any payments
your widow, beneficiaries or estate may be entitled to receive
pursuant to any pension or employee benefit plan maintained by
the Company. Your designated beneficiary or the executor of your
estate, as the case may be, shall accept the payment provided for
in this paragraph 8 in full discharge and release of the Company
of and from any further obligations under this Agreement.
(b) During any period that you fail to perform
your duties hereunder as a result of incapacity due to physical
or mental illness, you shall continue to receive your full Base
Salary and a prorated Annual Bonus until your employment is
terminated pursuant to paragraph 7(b) hereof. If your employment
is terminated by the Company pursuant to paragraph 7(b), the
Company shall be discharged and released of and from any further
obligations under this Agreement. During any such period and
thereafter you shall continue to bear the obligations provided
for in paragraph 9 below in accordance with the terms of such
paragraph 9.
78<PAGE>
<PAGE> 79
Exhibit 10(g) Employment Agreement between Avatar Holdings
Inc. and Gerald D. Kelfer -- continued
(c) If your employment shall be terminated for Cause
or you shall terminate your employment other than for Good
Reason, the Company shall pay you your full Base Salary through
the Date of Termination or the date on which you terminate your
employment at the rate in effect at the time Notice of
Termination is given or the date on which you terminate your
employment. The Company shall be discharged and released of and
from any further obligations under this Agreement. Thereafter,
you shall continue to have the obligations provided for in
paragraph 9 below. Nothing contained herein shall be deemed to
be a waiver by the Company of any rights that it may have against
you in respect of your actions which gave rise to the termination
of your employment for Cause.
(d) If the Company shall terminate your employment
other than pursuant to paragraphs 7(b), 7(c) or 7(d) hereof or if
you shall terminate your employment for Good Reason (whether or
not during the first two years of your employment hereunder, but
after the expiration of any applicable cure period), then
(i) The Company shall continue to pay
you your full Base Salary in accordance with normal
payroll practices and without interest through the
fifth anniversary of the Commencement Date at the rate
in effect at the time Notice of Termination is given in
accordance with paragraph 7(f) hereof;
(ii) The Company shall continue to pay
you your Annual Bonus in accordance with normal payroll
practices and without interest through the fifth
anniversary of the Commencement Date; and
(iii) The Company shall maintain in full
force and effect, for your continued benefit for the
full term of this Agreement, all employee benefit plans
and programs in which you were entitled to participate
immediately prior to the Date of Termination provided
that your continued participation is possible under the
general terms and provisions of such plans and
programs. In the event that your participation in any
such plan or program is barred, you shall be entitled
to receive an amount equal to the annual contributions,
payments, credits or allocations made by the Company to
you, to your account or on your behalf under such plans
and programs from which your continued participation is
barred.
(e) If the Company shall terminate your employment
hereunder other than pursuant to paragraphs 7(b), 7(c) or 7(d)
hereof, or if you shall terminate your employment pursuant to
paragraph 7(e) hereof, you agree, during the entire period of
time that you are entitled to receive any benefits pursuant to
paragraph 8(d) above, to make known your availability for
employment involving services of a nature substantially similar
and of a comparable stature to those performed by you on behalf
of the Company in a manner customary for executives holding
positions substantially similar and of a comparable stature to
your position with the Company. You agree to keep the Chairman of
the Board of the Company (or his designee) apprised
of your employment status during such period and ,
if requested, you will provide appropriate supporting
79<PAGE>
<PAGE> 80
Exhibit 10(g) Employment Agreement between Avatar Holdings
Inc. and Gerald D. Kelfer -- continued
documentation with respect to the salary, bonuses or other
compensation earned by and benefits made available to you in
respect of such employment. In the event you secure employment
as described in this paragraph (e), the Company shall be entitled
to (i) deduct from the amounts payable to you pursuant to
paragraphs 8(d)(i) and 8(d)(ii) above (excluding any accrued but
unpaid Annual Bonus through the date of termination) any salary,
bonuses or other compensation paid to you in connection
with such employment and (ii) terminate your participation
in (and shall not be required to pay you any sums in respect of)
any employee benefit plans and programs described in paragraph
8(d)(iii) that are substantially similar to any employee benefit
plans and programs in which you participate in connection with
such new or existing employment. You agree promptly to repay
to the Company any amounts paid to you by the Company pursuant
to paragraphs 8(d)(i) and 8(d)(ii) which the Company was entitled
to deduct from such amounts pursuant to this paragraph (e).
(f) If the Company shall terminate your employment
hereunder pursuant to paragraph 7(d) hereof, then
(i) The Company shall pay you your full Base
Salary and Annual Bonus through the Date of Termination
(it being understood that you shall receive a full
Annual Bonus for both the first and second years);
(ii) The Company shall pay you as severance, an
aggregate amount of $450,000, which is to be paid over
the twelve months following the Date of Termination in
equal installments at such times salaries are payable
in accordance with normal payroll practices of the
Company; and
(iii) the Company shall be discharged and released
of and from any other further obligations under this
Agreement.
9. Restrictive Covenants and Confidentiality;
Injunctive Relief.
(a) You agree, as a condition to the performance by
the Company of its obligations hereunder, particularly its
obligations under paragraph 3 hereof, that during the term of
your employment hereunder and during the further period of one
(1) year after the termination of such employment, you shall not,
without the prior written approval of the Board of Directors of
the Company, directly or indirectly through any other person,
firm or corporation:
(i) Solicit, raid, entice or induce any
person, firm or corporation that presently is or at any
time during the term of your employment hereunder shall
be a customer of the Company, or any of its subsidiary
companies, to become a customer of any other person,
firm or corporation, and you shall not approach
any such person, firm or corporation for such purpose
or authorize or knowingly approve the taking
of such actions by any other person; or
80<PAGE>
<PAGE> 81
Exhibit 10(g) Employment Agreement between Avatar Holdings
Inc. and Gerald D. Kelfer -- continued
(ii) Solicit, raid, entice or induce any
person that presently is or at any time during the term
of your employment hereunder shall be an employee of
the Company, or any of its subsidiary companies, to
become employed by any person, firm or corporation, and
you shall not approach any such employee for such
purpose or authorize or knowingly approve the taking of
such actions by any other person.
(b) Recognizing that the knowledge, information and
relationship with customers, suppliers, and agents, and the
knowledge of the Company's and its subsidiary companies' business
methods, systems, plans and policies which you shall hereafter
establish, receive or obtain as an employee of the Company or its
subsidiary companies, are valuable and unique assets of the
respective businesses of the Company and its subsidiary
companies, you agree that, during and after the term of your
employment hereunder, you shall not (otherwise than pursuant to
your duties hereunder) disclose, without the prior written
approval of the Board of Directors of the Company, any such
knowledge or information pertaining to the Company or any of its
subsidiary companies, their business, personnel or policies, to
any person, firm, corporation or other entity, for any reason or
purpose whatsoever. The provisions of this paragraph 9 shall not
apply to information which is or shall become generally known to
the public or the trade (except by reason of your breach of your
obligations hereunder), information which is or shall become
available in trade or other publications, information known to
you prior to entering the employ of the Company, and information
which you are required to disclose by order of a court of
competent jurisdiction (provided that prior to your disclosure of
any such information you shall provide the Company with
reasonable notice and a reasonable opportunity to seek a
protective order to prevent such disclosure).
(c) The provisions of this paragraph 9 shall survive
the termination of your employment hereunder, irrespective of the
reason therefor.
(d) You acknowledge that the services to be rendered
by you are of a special, unique and extraordinary character and,
in connection with such services, you will have access to
confidential information vital to the Company's and its
subsidiary companies' businesses. By reason of this, you consent
and agree that if you violate any of the provisions of this
Agreement with respect to diversion of the Company's or its
subsidiary companies' customers or employees, or confidentiality,
the Company and its subsidiary companies would sustain
irreparable harm and, therefore, in addition to any other
remedies which the Company may have under this Agreement or
otherwise, the Company shall be entitled to an injunction
restraining you from committing or continuing any such violation
of this Agreement.
10. Deductions and Withholdings. The Company shall be
entitled to withhold any amounts payable under this Agreement on
account of payroll taxes and similar matters as are required by
applicable law, rule or regulation of appropriate governmental
authorities.
81<PAGE>
<PAGE> 82
Exhibit 10(g) Employment Agreement between Avatar Holdings
Inc. and Gerald D. Kelfer -- continued
11. Successors; Binding Agreement.
(a) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company, by agreement in form and substance
reasonably satisfactory to you, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain
such agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same
terms as you would be entitled to hereunder if you terminated
your employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall include any successor to
the Company's business and/or assets as aforesaid which executes
and delivers the agreement provided for in this paragraph 11 or
which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law. Except as set forth above,
the Company may not assign this Agreement or any of its rights or
obligations hereunder, without your prior written consent.
(b). This Agreement and all your rights here under
shall inure to the benefit of and be enforceable by your personal
or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die
while any amounts would still be payable to you hereunder if you
had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of
this Agreement to your devisee, legatee, or other designee or, if
there be no such designee, to your estate. Your obligations
hereunder may not be delegated and except as otherwise provided
herein relating to the designation of a devisee, legatee or other
designee, you may not assign, transfer, pledge, encumber,
hypothecate or otherwise dispose of this Agreement or any of your
rights hereunder, and any such attempted delegation or
disposition shall be null and void and without effect.
(c). This Agreement has been duly authorized by the
Company, and constitutes the legal, valid and binding obligation
of the Company, enforceable against it in accordance with its
terms. You agree that this Agreement constitutes your legal,
valid and binding obligation and is enforceable against you in
accordance with its terms.
12. Notice. For the purposes of this Agreement,
notices and all other communications provided for shall be in
writing and shall be deemed to have been duly given when
delivered or mailed by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as
follows:
82<PAGE>
<PAGE> 83
Exhibit 10(g) Employment Agreement between Avatar Holdings
Inc. and Gerald D. Kelfer -- continued
If to you:
Mr. Gerald D. Kelfer
51 Carolyn Place
Chappaqua, NY 10514
If to the Company:
Avatar Holdings Inc.
255 Alhambra Circle
Coral Gables, Florida 33134
Attention: Chairman of the Board
or to such other address as any party may have furnished to the
other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
13. Miscellaneous. No provisions of this Agreement
may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by you
and by the Company. No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with,
any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior
or subsequent time. This Agreement constitutes the complete
understanding between the parties with respect to your employment
and no agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this
Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of
the State of Florida.
14. Validity; Stockholder Approval of Incentive Plan.
(a). The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the
validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
(b). The Company hereby undertakes to submit the
Incentive Plan for approval by stockholders at the Company's next
annual meeting or at a special meeting within nine months of the
date hereof. If the stockholders fail to approve the Incentive
Plan at such annual meeting (or any adjournment thereof), you may
terminate your employment hereunder by communicating a written
Notice of Termination to the Company within thirty (30) days
following such annual meeting (or any adjournment thereof) at
which stockholders failed to approve the Incentive Plan. If you
so terminate your employment, the Company shall pay you your full
Base Salary and a prorated Annual Bonus through the date on which
you terminate your employment, and you and the Company shall
be discharged and released of and from any further
83<PAGE>
<PAGE> 84
Exhibit 10(g) Employment Agreement between Avatar Holdings
Inc. and Gerald D. Kelfer -- continued
obligations under this Agreement. If you shall not provide a
written Notice of Termination on a timely basis, then this
Agreement shall remain in full force and effect, except that the
Company shall have be discharged and released of and from any
further obligation under paragraph 3(d) of this Agreement.
15. Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed to be
an original but all of which together will constitute one and the
same instrument.
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/ Gerald D. Kelfer
--------------------
Gerald D. Kelfer
84
<PAGE>
<PAGE> 85
Exhibit 10(h) Nonqualified Stock option Agreement between
Avatar Holdings Inc. and Gerald D. Kelfer
NONQUALIFIED STOCK OPTION AGREEMENT
GRANTED TO: Gerald D. Kelfer
DATE OF GRANT: February 13, 1997
GRANTED PURSUANT TO: Avatar Holdings Inc. 1997 Incentive
and Capital Accumulation Plan
NUMBER OF UNDERLYING: 225,000 shares
SHARES OF COMMON
STOCK:
EXERCISE PRICE: $34 per share
VESTING SCHEDULE: 20% each year
1. This Nonqualified Stock Option Agreement (the
"Agreement") is made and entered into as of February 13, 1997,
between Avatar Holdings Inc., a Delaware corporation (the
"Company"), and Gerald D. Kelfer ("Employee"). It is the intent
of the Company and Employee that the Option (as defined in
Paragraph 2 below) will not qualify as an "incentive stock
option" under Section 422 of the Internal Revenue Code of 1986,
as amended from time to time (the "Code").
2. Employee is granted an option by the Incentive Plan
Committee of the Company's Board of Directors (the "Committee")
to purchase 225,000 shares of Common Stock (the "Option")
pursuant to the Company's 1997 Incentive and Capital Accumulation
Plan (the "Plan") (subject to shareholder approval of the Plan).
Capitalized terms not defined herein shall have the meanings
ascribed thereto in the Plan.
3. The Option's exercise price is $34 per share, such
exercise price being in the judgment of the Committee not less
than one hundred percent (100%) of the Fair Market Value of the
Common Stock on the date of grant.
4. Subject to Paragraphs 5 and 6 below, the Option shall
be exercisable, on a cumulative basis, according to the vesting
schedule set forth below:
45,000 shares shall become exercisable and remain exercisable on
February 13, 1998.
45,000 shares shall become exercisable and remain exercisable on
February 13, 1999.
45,000 shares shall become exercisable and remain exercisable on
February 13, 2000.
45,000 shares shall become exercisable and remain exercisable on
February 13, 2001.
45,000 shares shall become exercisable and remain exercisable on
February 13, 2002.
85<PAGE>
<PAGE> 86
Exhibit 10(h) Nonqualified Stock option Agreement between
Avatar Holdings Inc. and Gerald D. Kelfer
-- continued
5. Subject to Paragraph 6 below, the unexercised portion
of the Option, unless sooner terminated, shall expire on February
13, 2007 (the "Expiration Date") and, notwithstanding anything
contained herein to the contrary, no portion of the Option may be
exercised after such date.
6. If prior to the Expiration Date, Employee's employment
with the Company or any subsidiary corporation terminates, the
Option will terminate on the applicable date as described below,
provided, however, that none of the events described below shall
extend the period of exercisability beyond the Expiration Date:
(a) If the employment of Employee is terminated by
reason of Employee's death either while in the employ of the
Company or any subsidiary corporation, or during the one (1) year
period specified in clause (b) below, the Option to the extent
not theretofore exercised shall remain exercisable only to the
extent that it would have been exercisable immediately prior to
Employee's death for one (1) year after Employee's death and
shall be exercisable by the executor or administrator of the
estate of the deceased Employee or the person or persons to whom
the deceased Employee's rights under the Option shall pass by
will or the laws of descent or distribution;
(b) If the employment of Employee is terminated by the
Company for reason of Employee's "permanent disability" (as
defined below), the Option to the extent not theretofore
exercised shall remain exercisable only to the extent that it
would have been exercisable immediately prior to Employee's
termination of employment for one (1) year after the date of
termination of employment;
(c) If the employment of Employee is terminated by the
Company on or prior to the second anniversary of the Commencement
Date (as defined in the Employment Agreement (as defined below))
pursuant to Paragraph 7(d) of the Employment Agreement, the
Option to the extent not theretofore exercised shall remain
exercisable until August 13, 1999, only to the extent that it
would have been exercisable on or prior to February 13, 1999
(i.e., for 90,000 shares of Common Stock to the extent not
theretofore exercised).
(d) If the employment of Employee is terminated by the
Company other than "for cause" (as defined below) following the
second anniversary of the Commencement Date pursuant to the
Employment Agreement, or is terminated by the Employee "for good
reason" (as defined below), the Option to the extent not
theretofore exercised shall remain exercisable in accordance with
the terms of this Agreement, including without limitation, the
provisions of Sections 4 and 5 hereof.
(e) If the employment of Employee is terminated (i) by
the Company for cause or (ii) by the Employee for other than good
reason, the Option shall, to the extent not theretofore
exercised, immediately become null and void.
86<PAGE>
<PAGE> 87
Exhibit 10(h) Nonqualified Stock option Agreement between
Avatar Holdings Inc. and Gerald D. Kelfer
-- continued
For purposes of this Agreement, the terms "permanent
disability", "for cause" and "for good reason" shall have the
meanings ascribed to such terms in the Employee's employment
agreement with the Company, dated February 13, 1997, as amended
from time to time (the "Employment Agreement").
7. Employee may exercise the Option regardless of whether
any other option that Employee has been granted by the Company
remains unexercised. In no event may Employee exercise the
Option for a fraction of a share or for less than 100 shares
unless the number purchased is the remaining balance for which
the Option is then exercisable.
8. The Option's exercise price shall be paid by Employee
on the date the option is exercised, in full in cash; provided,
however, that in lieu of cash, Employee may to the extent
permitted by applicable law, exercise the Option in part, by
delivering to the Company an executed non-recourse promissory
note, which shall bear interest at then applicable Federal rate
per annum (as determined pursuant to S1274 of the Code) payable
semi-annually and which shall be secured by the shares of Common
Stock then being purchased pursuant to the exercise of the
Option; provided, further however, that the principal amount of
such note shall not exceed 66-2/3% (or such lesser percentage as
would be permitted by applicable margin regulations) of the
aggregate exercise price of the shares of Common Stock then being
purchased pursuant to the exercise of the Option. Such
promissory note shall be payable, with accrued interest, upon the
earliest to occur of (i) the termination of Employee's employment
by the Company for cause or by the Employee other than for good
reason, (ii) the sale, transfer or disposition by the Employee of
any or all of the shares of Common Stock securing the promissory
note and (iii) the fifth anniversary of the date of exercise of
the Option; provided, however, in the case of clause (ii), if
Employee prepays the unpaid principal of, and accrued interest
on, such promissory note in the same proportion as the number of
shares of Common Stock that are sold bears to the number of
shares of Common Stock initially secured by such promissory note,
then such promissory note shall not then become due and payable.
9. The Company may withhold from sums due or to become due
to Employee from the Company an amount necessary to satisfy its
obligation to withhold taxes incurred by reason of the issuance
or disposition of shares pursuant to the Option, or may require
Employee to reimburse the Company in such amount.
10. Employee shall not have any of the rights of a
shareholder with respect to the shares of Common Stock underlying
the Option while the Option is unexercised.
11. Any exercise of this Option shall be in writing
addressed to the Corporate Secretary of the Company at the
principal place of business of the Company, specifying the Option
being exercised and the number of shares to be purchased,
accompanied by payment therefor.
87<PAGE>
<PAGE> 88
Exhibit 10(h) Nonqualified Stock option Agreement between
Avatar Holdings Inc. and Gerald D. Kelfer
-- continued
12. This Option shall not be transferable otherwise than by
will or the laws of descent and distribution, and shall be
exercisable, during Employee's lifetime, only by Employee.
Notwithstanding the foregoing, this Option may be transferred by
Employee solely to Employee's spouse, siblings, parents, children
and grandchildren or trusts for the benefit of such persons or
partnerships, corporations, limited liability companies or other
entities owned solely by such persons, including trusts for such
persons, subject to any restriction included in this Agreement.
13. If the Company, in its sole discretion, shall determine
that it is necessary, to comply with applicable securities laws,
the certificate or certificates representing the shares purchased
pursuant to the exercise of the Option shall bear an appropriate
legend in form and substance, as determined by the Company,
giving notice of applicable restrictions on transfer under or in
respect of such laws.
14. The Company agrees that at the time of exercise of the
Option it will use reasonable efforts in good faith to have an
effective Registration Statement on Form S-8 under the Securities
Act of 1933, as amended (the "Act"), which includes a prospectus
that is current with respect to the shares subject to the Option.
Employee covenants and agrees with the Company that if, at the
time of exercise of the Option, there does not exist a
Registration Statement on an appropriate form under the Act,
which Registration Statement shall have become effective and
shall include a prospectus that is current with respect to the
shares subject to the Option, (i) that he or she is purchasing
the shares for his or her own account and not with a view to the
resale or distribution thereof, (ii) that any subsequent offer
for sale or sale of any such shares shall be made either pursuant
to (x) a Registration Statement on an appropriate form under the
Act, which Registration Statement shall have become effective and
shall be current with respect to the shares being offered and
sold, or (y) a specific exemption from the registration
requirements of the Act, but in claiming such exemption, Employee
shall, prior to any offer for sale or sale of such shares, obtain
a favorable written opinion from counsel for or approved by the
Company as to the applicability of such exemption and (iii) that
Employee agrees that the certificates evidencing such shares
shall bear a legend to the effect of the foregoing.
15. This Agreement is subject to all terms, conditions,
limitations and restrictions contained in the Plan, which shall
be controlling in the event of any conflicting or inconsistent
provisions.
16. This Agreement is not a contract of employment and the
terms of Employee's employment shall not be affected hereby or by
any agreement referred to herein except to the extent
specifically so provided herein or therein. Nothing herein shall
be construed to impose any obligation on the Company to continue
Employee's employment, and it shall not impose any obligation on
Employee's part to remain in the employ of the Company.
17. Employee acknowledges and agrees that neither the
Company, its shareholders nor its directors and officers, has any
duty or obligation to disclose to the Employee
any material information regarding the business of
the Company or affecting the value of the Common Stock
88<PAGE>
<PAGE> 89
Exhibit 10(h) Nonqualified Stock option Agreement between
Avatar Holdings Inc. and Gerald D. Kelfer
-- continued
before or at the time of a termination of the employment
of Employee by the Company, including, without limitation,
any information concerning plans for the Company to make a public
offering of its securities or to be acquired by or merged with or
into another firm or entity.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
AVATAR HOLDINGS INC.
By: /s/ Leon Levy
---------------------
Leon Levy
Chairman of the Board
ACCEPTED:
/s/ Gerald D. Kelfer
--------------------
Gerald D. Kelfer
89
<PAGE>
<PAGE> 90
Exhbit 11 Computation of earnings per share
<TABLE>
<CAPTION>
Year ended December 31
PRIMARY 1996 1995 1994
------- ---------- --------- ---------
<S> <C> <C> <C>
Average common shares outstanding 9,095,102 9,095,102 9,095,102
---------- --------- ---------
Net income (loss) $1,040 ($10,339) ($14,621)
========== ========= =========
Per share amounts:
---------- --------- ---------
Net income (loss) $.11 ($1.14) ($1.61)
========== ========= =========
FULLY DILUTED
-------------
Average common shares outstanding 9,095,102 9,095,102 9,095,102
---------- --------- ---------
Net income (loss) $1,040 ($10,339) ($14,621)
========== ========= =========
Per share amounts:
---------- --------- ---------
Net income (loss) $.11 ($1.14) ($1.61)
========== ========= =========
</TABLE>
90
<PAGE>
<PAGE> 91
Exhibit 21 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.
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 Colombia
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 International Sales of U.S.A., Inc. Delaware
Avatar Properties Inc. Florida
Avatar Camelot Isles, Inc. Florida
Avatar Leisure Lakes, Inc. Florida
Avatar New Homes of Florida, Inc. Florida
Avatar Realty Inc. Delaware
Avatar Condominium Management Inc. Florida
Avatar Asset Management, Inc. Florida
Avatar Development Corporation Florida
Harbor Islands Clubs, Inc. Florida
Harbor Islands Community Management, Inc. Florida
Harbor Islands Community Services, Inc. Florida
Harbor Islands Realty, Inc. Florida
Avatar Georgetown Inc. Delaware
Avatar Realty of Arizona, Inc. Arizona
Dorten, Inc. Florida
GACL, Inc. of California California
Mulholland Hills Associates California
Optimum Environments Inc. California (1)
Avatar Resort Management, Inc. Florida
Avatar Vacation Realty, Inc. Florida
Avatar Vacation Realty of Tennessee, Inc. Tennessee
91<PAGE>
<PAGE> 92
Exhibit 21 Subsidiaries of Registrant -- continued
Avatar Vacation Resorts, Inc. Florida
Avatar Beach Resort, Inc. Florida
Poinciana Vacation Resort, Inc. Florida
Sunrise Ridge Resort, Inc. Tennessee
Avatar Vacation Resorts Club, 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. Florida
Avatar Homes of Arizona, Inc. Arizona
Rio Rico Golf and Country Club Arizona
Rio Rico Resort Hotel, Inc. Arizona
Rio Rico Realty, Inc. Arizona
Tarpon Point, Inc. Florida
USA Family Homes, Inc. Florida
Parkway Mortgage Company, Inc. Florida
Rio Rico Utilities Inc. Arizona
Avatar Utilities Inc. Delaware (2)
Avatar Utility Services, Inc. Florida
Utility Services Group Inc. Florida
Poinciana Utilities Inc. Florida
Barefoot Bay Propane Gas Company Florida
Consolidated Water Company Delaware (3)
FCWC Holdings, Inc. Delaware (4)
Florida Cities Water Company Florida
Notes to Exhibit 21 - Subsidiaries of Registrant:
(1) Partnership owned 99% by GACL, Inc. of California
and 1% by Lee Investment Company, Inc.
(2) 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.
(3) Consolidated Water Company owns all outstanding
common stock of FCWC Holdings, Inc.<PAGE>
(4) 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.
92
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,297
<SECURITIES> 4,535
<RECEIVABLES> 81,989
<ALLOWANCES> (25,445)
<INVENTORY> 168,211
<CURRENT-ASSETS> 0
<PP&E> 275,450
<DEPRECIATION> (88,835)
<TOTAL-ASSETS> 443,185
<CURRENT-LIABILITIES> 0
<BONDS> 148,983
<COMMON> 207,271
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> (207,271)
<SALES> 103,521
<TOTAL-REVENUES> 152,698
<CGS> 62,867
<TOTAL-COSTS> 88,372
<OTHER-EXPENSES> 21,164
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,937
<INCOME-PRETAX> 1,040
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,040
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,040
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
<FN>
NOTE: Total Current Assets and Total Current Liabilities are not
applicable because Registrant does not present a
classified balance sheet.
93
</TABLE>
