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UNITED STATES
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, 1997 -- Commission File Number
0-7616
AVATAR HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware 23-1739078
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
255 Alhambra Circle, Coral Gables, Florida 33134
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area codes (305) 442-7000
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Securities registered pursuant to section 12(g) of the Act:
Convertible Subordinated Notes Due 2005,
Convertible into Common Stock, $1.00 Par Value
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 and non-voting common equity held
by non-affiliates of the registrant was $236,660,333 as of February 27,
1998.
(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 27, 1998, there were 9,170,102 shares of common
stock, $1.00 par value, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the registrant's Proxy Statement for its 1998 Annual
Meeting of Stockholders are incorporated by reference into Part III.
1 of 195
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AVATAR HOLDINGS INC.
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
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Forward Looking Statements...................................... 3
PART I
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Item 1. Business............................................... 3
Item 2. Properties............................................. 8
Item 3. Legal Proceedings...................................... 8
Item 4. Submission of Matters to a Vote of Security Holders.... 8
Executive Officers of Registrant....................... 9
PART II
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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 of Operations.................... 13
Item 8. Financial Statements and Supplementary Data............ 28
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures................... 57
PART III
--------
Item 10. Directors and Executive Officers of the Registrant..... 57
Item 11. Executive Compensation................................. 57
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................. 57
Item 13. Certain Relationships and Related Transactions......... 57
PART IV
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Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K............................................ 58
Exhibit Index................................................... 63
2
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FORWARD-LOOKING STATEMENTS
Certain statements discussed in Item 1 (Business), Item 3 (Legal
Proceedings), Item 7 (Management's Discussion and Analysis of Financial
Condition and Results of Operations), and elsewhere in this Form 10-K
constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other
important factors that could cause the actual results, performance or
achievements of results to differ materially from any future results,
performance or achievements expressed or implied by such forward-
looking statements. Such risks, uncertainties and other important
factors include, among others: the successful implementation of the
Company's new business strategy; shifts in demographic trends affecting
active adult communities and other real estate development; the level
of immigration and in-migration to the Company's regional market areas;
national and local economic conditions and events, including employment
levels, interest rates, consumer confidence, the availability of
mortgage financing and demand for new and existing housing; the
Company's access to future financing; competition; changes in, or the
failure or inability to comply with, government regulations; and other
risk factors described at the end of Item 7 (Management's Discussion
and Analysis of Financial Condition and Results of Operations) of this
Form 10-K.
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. The Company owns and develops
land, primarily in various locations in Florida and Arizona. Current
and planned real estate operations include: the development, sale and
management of active adult communities; the development and sale of
upscale custom and semi-custom homes and communities as well as the
construction and sale of mid-priced single- and multi-family homes; the
development, leasing and management of improved commercial and
industrial properties; operations of amenities and resorts; cable
television operations and property management services. The Company's
utilities operations include the purification and distribution of water
and the treatment and disposal of wastewater through plants in Florida
and Arizona, as well as contract management services for affiliated and
unaffiliated water and wastewater utilities. During 1997,
approximately 74% and 26% of the total revenues were generated through
real estate and utilities operations, respectively.
During 1997, the Company began implementing a new real estate
business strategy designed to capitalize on its competitive advantages
and emphasize higher profit margin businesses. Under its new strategy,
the Company intends to concentrate on the development and management of
active adult communities, upscale custom and semi-custom homes and
communities, and commercial and industrial properties. Certain of
Avatar's properties are under development and such developments are at
various stages of completion.
Prior to the third quarter of 1997, the Company's business plan
emphasized the construction and sale of mid-priced single-family homes.
In 1997, the Company sold 436 homes, the majority of which were mid-
priced single-family homes. Sales of mid-priced homes represented
approximately 56% of homebuilding revenues in 1997. Although the new
real estate business strategy is intended to shift
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Item 1. Business -- continued
Avatar's future capital expenditures and sources of revenue to
potentially higher profit-margin businesses, Avatar will continue the
construction and sale of mid-priced homes, both on scattered lots and
on contiguous parcels as part of planned communities.
Information regarding revenues, results of operations and assets
of the business segments noted above are included in Item 7
(Management's Discussion and Analysis of Financial Condition and
Results of Operations) and Item 8 under the caption "Notes to
Consolidated Financial Statements."
Real Estate
The Company adopted the new real estate business strategy in order
to capitalize on Avatar's competitive strengths and current and
projected demographic trends in Florida and Arizona. To assist in the
development of its active adult communities, on October 3, 1997, the
Company acquired systems and software from Hilcoast Development Corp.,
the developer of Century Village communities, and acquired the option
to purchase the rights to the Century Village name. At the same time
the Company hired the entire executive management team. In order to
expand its homebuilding operations into upscale custom and semi-custom
homes and communities, the Company acquired, on December 4, 1997,
certain assets of Brookman-Fels, Jeff Ian, Inc. ("Brookman-Fels"), and
hired its three principals. Brookman-Fels is a well-known developer of
custom and semi-custom homes and single-family residential communities
in south Florida.
Avatar's assets include real estate inventory in the states of
Florida, Arizona, California and Tennessee. In its Florida communities
of Harbor Islands, Poinciana, Golden Gate, Leisure Lakes, its Arizona
community of Rio Rico and its properties in Cape Coral and Ocala
Springs, Florida, the extent of Avatar's land holdings may include the
development, construction and sale of over 43,000 single-family homes
and over 38,200 multi-family units on land holdings of over 32,600
developed, partially developed or developable acres, of which 26,400
acres have been platted and/or zoned and approximately 6,200 acres
have not been platted on which the Company anticipates developing
more than 20,800 additional residential units. Included within the
land holdings of over 32,600 acres are more than 10,700 acres in
several contiguous parcels for which the Company is planning the
development, sale and management of active adult communities of
up to an estimated 36,200 units. The Company is also considering the
development, leasing and management of over 3,000 acres on which
approximately 42.7 million square feet of improved commercial and
industrial property may be built. The types of activities conducted
by the Company vary from community to community. Avatar owns other
sites including Banyan Bay in Martin 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. When completed, Harbor
Islands will consist of distinctive, separate Mediterranean-style
villages on three connected islands. The Company has approval to 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 1997, Avatar closed 36 single-family homes
and received deposits on sales for another 28 single-family homes.
These sales have a combined sales value of approximately $15,783,000.
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Item 1. Business -- continued
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 18,300 of which are owned by Avatar. This
planned community development includes subdivisions for single- and
multi-family housing and commercial/industrial areas, and the Company
has commenced the planning stages of active adult communities. 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, 1997, approximately 8,100 developed and developable single
family acres remained in inventory at Poinciana, approximately 1,900
acres of which are zoned and/or planned for the development of up to
28.9 million square feet of industrial and commercial property.
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. At December 31,
1997, Avatar had contracts at Poinciana to construct 198 single-family
units with a related sales value of approximately $18,903,000. Included
within the 8,100 acres are approximately 4,300 acres of large,
contiguous, entirely debt-free parcels planned for active adult
community development of up to 15,000 units. 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 and a community center. The
Company also owns and operates a cable television subsidiary and water
and wastewater facilities at Poinciana.
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. Avatar also owns 58 acres of land held for
future development, sale or other use, adjacent to Barefoot Bay.
During 1996, the Company sold 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 3,900
acres are owned by Avatar. Its population has increased from 11,470 in
1970 to approximately 91,560 in 1997. Remaining inventory, at December
31, 1997, included approximately 5,300 developed and undeveloped
single-family homesites, approximately 700 acres planned for an active
adult community development of up to 3,000 units and approximately 400
acres suitable for the development of up to 6.2 million square feet of
commercial and industrial space. Avatar's housing programs in Cape
Coral include Emerald Cove, The Hermitage, Cape Harbour, Rose Garden
and scattered lot programs. At December 31, 1997, Avatar had contracts
at Cape Coral to construct 107 single-family units with a related sales
value of approximately $15,383,000. Avatar owns and operates the
Camelot Isles Shopping Center, a 70,000 square foot retail center. At
December 31, 1997, the shopping center was 98% occupied. Avatar's
Tarpon Point Marina, which is 100% occupied accommodates 175
vessels and features dockmaster facilities, a ship's store and fueling
facilities. The Camelot Marina will accommodate 76 vessels and will
feature 3,500 feet of boardwalk. Other amenities available to the
residents of Cape Coral include Avatar's Cape Coral Golf and
Tennis Resort featuring an 18-hole championship golf course, a
9-hole executive golf course, eight tennis courts and a 100-room motel.
Golden Gate City, located east of Naples in southwest Florida, had
remaining inventory at December 31, 1997 of 42 homesites, 48 acres of
land zoned for multi-family use and 12 acres zoned for commercial use.
This remaining inventory is being held for bulk sale.
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Item 1. Business -- continued
Remaining inventory at Golden Gate Estates and Golden Gate Acres
as of December 31, 1997 includes 144 homesites of varying size, the
majority of which are approximately 1 and 1-1/4-acre homesites, and
9,000 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, 1997.
Rio Rico, located 57 miles south of Tucson, is a 55,000-acre
community development in southern Arizona, of which approximately
16,000 acres is owned by Avatar. This community development consists of
single-family housing and townhouses, areas planned for the development
of active adult communities, and commercial/industrial areas. Avatar
owns and operates a 180-room hotel complex, which is rated a Four-
Diamond resort, an 18-hole Robert Trent Jones designed championship
golf course and a 36,800 square foot shopping center, which was
completely occupied as of December 31, 1997. At December 31, 1997,
Avatar had contracts at Rio Rico to construct 40 single-family units
with a related sales value of approximately $3,950,000. Remaining
inventory, as of December 31, 1997, included approximately 1,500 acres
considered suitable for an active adult community, approximately 300
acres suitable for the development of up to 4.7 million square feet of
commercial and industrial space, and approximately 7,100 acres of land
held for future development, sale or other use.
Banyan Bay, located in Martin County, Florida, consists of 250
acres suitable for the development of a water-oriented planned
community.
Ocala Springs, located five miles northeast of Ocala in Marion
County, Florida, is comprised of approximately 4,600 acres of land, of
which approximately 4,200 acres would accommodate an active adult
community of at least 14,700 units. The remaining 400 acres would be
available for the development of a golf course, recreational facilities
and up to 2.9 million square feet of commercial and industrial
facilities.
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. Currently, this property is being held for sale.
During 1997, the Company developed a formal plan for the
disposition of its timeshare business. A letter of intent for the sale
of the business was executed during the third quarter of 1997; however,
negotiations were discontinued during the first quarter of 1998.
Management is currently in discussion with various parties to market
the sale of this operation. See Note T in Item 8 under the caption
"Notes to Consolidated Financial Statements".
In addition to the real estate holdings described above, Avatar
owns approximately 2,500 acres of land in Florida that is being held
for future development or bulk sale.
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Item 1. Business -- continued
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,
1997, Avatar's utilities operations had approximately 43,000 water
customers and 33,000 wastewater customers.
An Avatar subsidiary provides consulting, data processing,
customer billing and other related services to all Avatar utilities
operating subsidiaries. In addition, it provides these services and
others, including plant operations and maintenance, meter reading,
customer service, and payment remittance services, to 28 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, 1997, Avatar employed approximately 1,030
individuals on a full-time or part-time basis. In addition, Avatar
utilizes on a daily basis such additional personnel as may be required
in connection with various land development activities. Avatar's
relations with its employees are satisfactory and there have been no
work stoppages.
Regulation
Avatar's real estate operations, 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 utilities 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.
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Item 1. Business -- continued
The Company believes it is in compliance with applicable laws and
regulations in all material respects.
Competition
Avatar's homebuilding, planned community development and other
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 national homebuilding companies that
are entering or expanding their presence in planned community
development 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.
Business Information Systems
The Company believes that high levels of automation and technology
are essential to its operations and has invested considerable resources
in computer hardware, system applications and networking capabilities.
These systems integrate all major aspects of the Company's business,
including inventory control, planning, labor utilization and financial
reporting. During 1997, the Company assessed the ability of the
information systems to handle the "Year 2000 Issue" and does not expect
this issue to be material to the Company's business.
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 $129,959,000 at December 31, 1997.
Avatar's utilities operations include water and wastewater plants
and equipment located in Florida and Arizona. Such properties have a
net book value of $186,046,000 at December 31, 1997.
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
The information, which is set forth in Note P (Contingencies) of
the Notes to Consolidated Financial Statements included in Item 8 of
Part II of this Report, relating to the October 31, 1993 civil action
against Avatar, is incorporated herein by reference.
Avatar is involved in various pending litigation matters primarily
arising in the normal course of its business. Although the outcome of
these matters cannot be determined, management believes that the
resolution of these matters will not have a material effect on Avatar's
business or financial position.
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 28, 1998.
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 28, 1998, when
they are re-appointed or their successors are elected or until their
earlier resignation or removal.
Name Age Office and Business Experience
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Leon Levy 72 Chairman of the Board since January
1981; General Partner, Odyssey
Partners, L.P., a private
investment partnership; Chairman of
the Board of Oppenheimer Funds;
Chairman of the Board of Oppenheimer
Management Corp. from 1974 to 1985.
Gerald D. Kelfer 52 President since February 1997,
Chief Executive Officer since July
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.
Edwin Jacobson 68 Chairman of the Executive Committee
since June 1992; Chief Executive
Officer from February 1994 to July
1997 and President from February
1994 to February 1997; President
and Chief Executive Officer of CMC
Heartland Partners, a partnership
engaged in the real estate
industry, since September 1990;
President and Chief Executive
Officer of Heartland Technology,
Inc. (formerly known as Milwaukee
Land Company), a manufacturer of
electronic products, since June
1985; and President and Chief
Executive Officer of Chicago
Milwaukee Corporation from June
1985 to September 1996.
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Executive Officers of the Registrant - continued
Dennis J. Getman 53 Executive Vice President since
March 1984. Senior Vice President
from September 1981 to March 1984
and General Counsel since September
1981.
Charles L. McNairy 51 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 51 Vice President and Secretary since
September 1980.
G. Patrick Settles 49 Vice President since November 1986
and Assistant General Counsel since
September 1983.
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
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Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters
The Common Stock of Avatar Holdings Inc. is traded through The
Nasdaq Stock Market under the symbol AVTR. There were 7,818 record
holders of Common Stock at February 27, 1998.
High and low quotations, as reported, for the last two years were:
<TABLE>
<CAPTION>
Quotations
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Quarter Ended 1997 1996
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High Low High Low
------ ----- ------ ------
<S> <C> <C> <C> <C>
March 31 38 32 40 1/2 32 5/8
June 30 34 3/8 30 3/8 40 1/4 34 1/4
September 30 36 3/4 29 1/2 34 3/4 29 1/2
December 31 35 26 7/8 32 1/2 30
</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."
On October 3, 1997, the Company acquired systems and software from
Hilcoast Development Corp. in exchange for 75,000 shares of Avatar
Common Stock. In issuing these shares, the Company relied on the
exemption from registration provided by Section 4(2) of the Securities
Act of 1933, as amended.
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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
-----------------------------------------------------
1997 1996 1995 1994 1993
--------- -------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Statement of Income Data
- ------------------------
Revenues (1) $129,084 $141,359 $94,168 $81,327 $126,048
========= ======== ========= ========== =========
(Loss) income from
continuing operations
before discontinued
operations and changes
in methods of accounting ($26,874) $2,264 ($10,920) ($14,473) $5,474
========= ======== ========= ========== =========
Discontinued operations ($115) ($1,224) $581 ($148) -
========= ======== ========= ========== =========
Cumulative effect of change
in method of accounting for
income taxes - - - - ($964)
========= ======== ========= ========== =========
Cumulative effect of change
in method of accounting for
investments (net of income
taxes of $238) - - - - $388
========= ======== ========= ========== =========
Net (loss) income ($26,989) $1,040 ($10,339) ($14,621) $4,898
========= ======== ========= ========== =========
Per Share Data
- --------------
(Loss) income from continuing
operations before discontinued
operations and changes in
methods of accounting ($2.95) $0.25 ($1.20) ($1.59) $0.56
========= ======== ========= ========== =========
Discontinued operations ($0.01) ($0.14) $0.06 ($0.02) -
========= ======== ========= ========== =========
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
========= ======== ========= ========== =========
Net (loss) income ($2.96) $0.11 ($1.14) ($1.61) $0.50
========= ======== ========= ========== =========
Balance Sheet Data December 31
- ------------------ -----------------------------------------------------
1997 1996 1995 1994 1993
--------- -------- --------- ---------- ---------
Total assets $439,368 $443,185 $470,632 $446,577 $457,747
========= ======== ========= ========== =========
Notes, mortgage notes and
other debt $146,451 $138,792 $165,665 $139,827 $135,557
========= ======== ========= ========== =========
Stockholders' equity $135,042 $159,452 $158,412 $168,751 $183,372
========= ======== ========= ========== =========
</TABLE>
(1) During 1993, the sale of the Midwest Water Utilities was completed.
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Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands)
The following discussion should be read in conjunction with the
Consolidated Financial Statements, including the notes thereto,
included elsewhere in this Form 10-K.
OVERVIEW
The Company is engaged in a number of real estate related
businesses and in the ownership and operation of water and wastewater
utilities.
Since 1980 the Company has expended more than $150,000 to improve
its land holdings by installing infrastructure, such as roads, sewers,
landscaping, utility lines and drainage. In addition, the Company has
expended substantial funds to build or improve golf courses, hotels,
tennis courts, shopping centers and other amenities on its properties.
Until 1994, through its national and international retail
installment land sales program, the Company was primarily engaged in
the business of selling lots. In 1993 the Company expanded into the
homebuilding business, and, until the third quarter of 1997, the
Company's real estate business plan emphasized the sale of individual
homesites and the construction and sale of mid-priced single family
homes. This strategy increased annual closings of home sales from 150
in 1995 to 436 in 1997 and increased home sales revenues from $13,260
in 1995 to $57,912 in 1997. In 1996 the Company decided to terminate
its national and international retail installment land sales program.
The Company is still in the process of winding down this program and
collecting related receivables which, as of December 31, 1997, were
approximately $40,478 and which collateralize debt of approximately
$23,566.
While the Company intends to remain in the mid-priced homebuilding
business, the Company's new management has implemented a new real
estate business strategy to capitalize on its distinct competitive
advantages and emphasize higher profit margin businesses. Under its new
strategy, the Company intends to concentrate on development and
management of active adult and other planned communities, construction
of custom and semi-custom homes and development and acquisition of
commercial and industrial properties. As a consequence of implementing
its new real estate business strategy, the Company believes that its
operations and the financial results thereof will change significantly
over the next several years. Accordingly, the results of operations
reflected in the historical financial statements may not be indicative
of the future results of operations of the Company.
Residential Development. In 1993, the Company commenced
residential development activities at its properties in Poinciana and
Cape Coral, Florida, commenced planning for development of Harbor
Islands in Hollywood, Florida, and began preliminary plans for
homebuilding programs in Rio Rico, Arizona.
13
<PAGE>
<PAGE> 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
Growth of the Company's homebuilding business is demonstrated by
the following operating results:
<TABLE>
<CAPTION>
Year ended December 31
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues $57,912 $49,672 $13,260
Other data:
Number of units sold 509 444 243
Number of units closed 436 293 150
Number of units in
backlog 376 303 152
</TABLE>
Commercial and Industrial Land Sales. Prior to the third quarter
of 1997, the Company's policy was to sell commercial and industrial
land at market prices whenever possible. Under the new real estate
business strategy, the Company intends to develop land and lease and
operate such developed properties rather than to sell them. Revenues
from commercial and industrial land sales were $5,441, $1,702 and
$2,624 in 1997, 1996 and 1995, respectively. Future demand for
commercial and industrial land and facilities at the Company's
properties is expected to increase as the result of the development by
both the Company and other developers of homes and planned communities.
Water and Wastewater Utilities. The Company's utilities
subsidiaries provide water and wastewater treatment to customers in
Florida and Arizona. From 1995 to 1997, annual revenues have increased
by approximately $4,624 or 15.6%. The Company also provides data
processing, customer billing and related services to affiliated and
non-affiliated companies and public entities.
Growth of the Company's utilities is anticipated to come from
increases in the number of customers as its service area becomes more
fully developed and from third-party management contracts in the
Company's meter reading and billing service business.
The following table sets forth revenues and income derived from
water and wastewater utilities for the years ended December 31, 1997,
1996, and 1995:
<TABLE>
<CAPTION>
Year ended December 31
-----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues $34,293 $32,749 $29,669
Approximate number of water customers 43,000 41,000 39,000
Approximate number of wastewater customers 33,000 32,000 31,000
Income (loss) before income taxes $4,389 $3,042 $804
Income before income taxes and non-recurring expense $4,389 $3,892 $2,054
</TABLE>
14
<PAGE>
<PAGE> 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
Resort Operations. Resort operations are intended to enhance the
value of the Company's land in the communities in which they are
located. Such operations, which include the Cape Coral Golf and
Country Club, the Poinciana Golf and Racquet Club and the Rio Rico
Resort and Country Club, have generated revenues on an annual basis of
$13,787, $16,027 and $14,151 in 1997, 1996 and 1995, respectively.
Vacation Ownership. While revenues from vacation ownership
operation increased from $7,997 in 1995 to $14,600 in 1997, these
operations are not considered by management to be a complementary
component of the Company's new business strategy. The Company intends
to sell the vacation ownership business; in such sale it is anticipated
that the purchaser will assume approximately $17,520 of associated
debt. During the third quarter of 1997, when a formal plan of
disposition was developed, the Company began to account for the
vacation ownership as a discontinued operation. Reference is made to
Note T in Item 8 under the caption "Notes to Consolidated Financial
Statements."
Retail Installment Land Sales. Prior to 1997, the Company sold
homesites under retail land sales programs, which were terminated in
the second quarter of 1996. Receivables, which collateralize debt of
approximately $23,566, due from such sales aggregated approximately
$40,478 as of December 31, 1997 and are payable over the next nine
years. Revenues from these programs decreased from $11,424 in 1995 to
$3,998 in 1996.
Other Real Estate Revenues. The Company's rental, leasing and
other real estate revenues, which are primarily generated through the
lease of the Company's community shopping centers and commercial
operations in Cape Coral, Poinciana and Rio Rico, the Tarpon Point
Marina in Cape Coral, cable television operation at Poinciana and
property management services, were $5,163, $5,362 and $5,621 in 1997,
1996 and 1995, respectively.
Trading Account Profit. From 1995 to the fourth quarter of 1997,
the Company invested unused funds in fixed-income and other debt
securities. From 1995 to 1997, trading profit declined due to the
Company's use of principal of its trading account to fund operations
and maintain and enhance its land holdings. The Company has liquidated
its trading account and used such funds, net of related debt, as
working capital.
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
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
---------------------------------
1997 and 1996 1996 and 1995
------------- -------------
Increase (Decrease)
---------------------------------
Change Change
---------------------------------
<S> <C> <C>
Revenues
--------
Real estate sales ($8,655) $45,293
Deferred gross profit on
homesite sales 1,359 3,359
Utilities revenues 1,544 3,080
Interest income (2,646) (1,581)
Trading account profit, net (2,139) (4,702)
Other (1,738) 1,742
------------- -------------
Total revenue (12,275) 47,191
Expenses
--------
Real estate expenses 3,084 31,849
Real estate inventory write-down 13,203 1,464
Utilities expenses 122 582
General and administrative (28) (426)
Interest expense 615 535
Other (133) 3
------------- -------------
Total expenses 16,863 34,007
------------- -------------
Income from continuing
operations (29,138) 13,184
------------- -------------
Income (loss) from
discontinued operations 1,109 (1,805)
------------- -------------
Net (loss) income ($28,029) $11,379
============= =============
</TABLE>
The Company 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.
16
<PAGE>
<PAGE> 17
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
RESULTS OF OPERATIONS - continued
Data from homebuilding operations for the years ended December 31,
1997, 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
December 31
1997 1996 1995
----------------------------
<S> <C> <C> <C>
Units closed
------------
Number of units 436 293 150
Aggregate dollar volume $58,656 $49,894 $12,989
Average price per unit $135 $170 $87
Units sold, net
---------------
Number of units 509 444 243
Aggregate dollar volume $73,571 $59,078 $39,917
Average price per unit $145 $133 $164
Backlog
------- December 31
1997 1996 1995
----------------------------
Number of units 376 303 152
Aggregate dollar volume $56,077 $41,162 $31,978
Average price per unit $149 $136 $210
</TABLE>
Data from the national and international retail land sales
programs, terminated in the second quarter of 1996, is set forth below:
<TABLE>
<CAPTION>
Year ended December 31
------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Retail Land Sales Operations Data
---------------------------------
Sales volume $ - $3,998 $11,424
Cost of sales - 705 1,923
Selling expense - 3,773 6,697
Deferred gross profit 3,998 2,639 (720)
Interest income 5,200 7,846 9,427
Loss on contract cancellations 1,046 1,035 1,257
Contract servicing expense 568 785 768
Interest expense 2,756 2,865 2,781
Year ended December 31
------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Principal amount of contracts and
mortgage notes receivable $40,478 $61,534 $82,521
Debt collateralized by contracts
and mortagages receivable 23,566 36,030 28,630
</TABLE>
17
<PAGE>
<PAGE> 18
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
RESULTS OF OPERATIONS - continued
Operations for the years ended December 31, 1997, 1996 and
1995 resulted in (loss) income of ($26,989), $1,040, and ($10,339),
respectively. The decrease in income for 1997 compared to 1996 is
primarily attributable to a decrease in real estate contribution
margin, an impairment loss during 1997 to the carrying amount of Harbor
Islands, an increase in net interest expense, and a decrease in net
trading account profits partially mitigated by an increase in the
recognition of deferred gross profit on homesite sales and improved
utilities contribution margins. The improvement in 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 utilities contribution margins which was
partially mitigated by a decrease in net trading account profits.
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.
The Company continued to develop a diversified mix of products and
services by introducing additional housing products, planning for
active adult communities, developing amenities and support facilities,
expanding property contract management services and converting land
holdings into income producing operations.
Gross real estate revenues decreased $8,655 or 9.3% during 1997
when compared to 1996 and increased $45,293 or 93.9% during 1996 when
compared to 1995. The decrease in real estate revenues for 1997 when
compared to 1996 is generally a result of reduced closings at the
Company's Harbor Islands community, the termination of the retail land
sales program, reduced resort revenues, the 1996 sales of the Barefoot
Bay recreation facilities and bulk land sale at Leisure Lakes. The
decrease in real estate revenues was partially mitigated by increased
homebuilding revenues at the Company's Poinciana, Cape Coral and Rio
Rico communities as well as the increase in commercial and industrial
revenues. Homebuilding revenues increased $8,240 or 16.6% in 1997 when
compared to 1996. The improvement in homebuilding revenues is
primarily due to an increase in closings in 1997 when compared to 1996.
Housing units closed, excluding Harbor Islands, totaled 400 units with
sales volume of $44,181 compared to 223 units with sales volume of
$22,593 in 1996. The increase in homebuilding revenues was partially
offset by the decrease in closings at Harbor Islands. Harbor Islands
closed 36 units with sales volume of $14,475 during 1997 compared to 70
units with sales volume of $27,301 in 1996. The increase in real estate
revenues for 1996 when compared to 1995 is primarily a result of
increased homebuilding, 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 $36,412 or
274.6% 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 sales volume of $27,301 during 1996 compared to no closings in
1995. Housing units closed, excluding Harbor Islands, totaled 223
units with sales volume of $22,593 compared to 150 units with a sales
volume of $12,989 in 1995.
18
<PAGE>
<PAGE> 19
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
RESULTS OF OPERATIONS - continued
Real estate expenses increased $3,084 or 3.4% during 1997 when
compared to 1996 and increased $31,849 or 54.3% during 1996 when
compared to 1995. The increase in real estate expenses for 1997 and
1996 is a result of increased homebuilding expenses associated with an
increase in homebuilding revenues. The real estate inventory write-
downs for 1997 and 1996 resulted from impairment losses of $14,667 and
$1,464, respectively, to the carrying value of the Harbor Islands
community and on a certain tract of land located at the Company's
Banyan Bay property, respectively. The Harbor Islands impairment loss
was due to the revision of the development plans in connection with the
Company's new business strategy. Homebuilding margins (excluding the
Harbor Islands and Banyan Bay write-downs) decreased for 1997 when
compared to 1996 due to the decreased closings of higher-margin product
at Harbor Islands. Homebuilding margins for 1996 were comparable to
those of 1995.
The average selling price (excluding Harbor Islands) of housing
units closed for 1997 was $110, an increase of 8.9% when compared to
1996. This increase is primarily attributable to the increase in sales
price at the Company's Poinciana, Cape Coral and Rio Rico communities.
The average selling price at Harbor Islands of housing units closed for
1997 was $402, an increase of 3.1% when compared to 1996. This increase
is primarily due to the initial closings during 1997 of the Harbor
Islands' Parcel 10 project. The average selling price (excluding Harbor
Islands) of housing units closed for 1996 was $101, an increase of
16.1% when compared to 1995. This increase is primarily attributable to
the increase in sales price at the Company's Poinciana community. The
average sales price at Harbor Islands of housing units closed for 1996
was $390, which represents the entire increase due to no closings at
Harbor Islands during 1995. The average selling price (including Harbor
Islands) of housing units in backlog of $145 at December 31, 1997
increased by 6.6% over 1996 due to the increased number of sales in
backlog at Harbor Islands. The average selling price of housing units
in backlog of $136 at December 31, 1996 decreased by 35.2% over1995 due
to the reduced number of sales in backlog at Harbor Islands.
Utilities revenues increased $1,544 or 4.7% during 1997 when
compared to 1996 and $3,080 or 10.4% during 1996 when compared to
1995. Utilities expenses increased $122 or 0.5% during 1997 when
compared to 1996 and $582 or 2.3% during 1996 when compared to 1995.
Utilities revenues increased as a result of rate increases, customer
growth and increased contract management operations. Utilities expenses
increased correspondingly to the customer growth.
Interest income decreased $2,646 or 33.7% during 1997 when
compared to 1996 and $1,581 or 16.8% during 1996 when compared to 1995.
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 $51,006, $72,367, and $90,599 for 1997, 1996
and 1995, respectively.
Trading account profit, net decreased $2,139 for 1997 when
compared to 1996 and $4,702 in 1996 when compared to 1995. 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. The
trading investment portfolio account was liquidated as of December 31,
1997.
19
<PAGE>
<PAGE> 20
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
RESULTS OF OPERATIONS - continued
Other revenues for 1996 include a sale of water rights at Rio Rico
for $1,585.
General and administrative expenses decreased $28 or 0.3% in 1997
compared to 1996 and $426 or 4.6% in 1996 compared to 1995. The
decrease for 1996 compared to 1995 results primarily from a reduction
in the accrual for incentive compensation recorded for executive
officers.
Interest expense increased $615 or 5.1% in 1997 when compared to
1996 and $535 or 4.6% in 1996 when compared to 1995. The increase in
1997 when compared to 1996 is primarily due to an increase in the
outstanding balance of notes, mortgage notes and other debt during 1997
compared to 1996 as well as a reduction in capitalized interest which
totaled $2,927 in 1997. The increase in 1996 when compared to 1995 is
primarily due to an increase in interest expense in the homebuilding
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 $3,573 in 1996.
Net results from discontinued operations (vacation ownership)
increased $1,109 in 1997 when compared to 1996 and decreased $1,805 in
1996 when compared to 1995. The increase in 1997 and the decrease in
1996 were primarily attributable to initial start up costs incurred in
1996 on new projects.
LIQUIDITY AND CAPITAL RESOURCES
The Company's new management implemented a new real estate
business strategy to capitalize on the Company's distinct competitive
advantages and emphasize higher profit margin businesses. Under its
new strategy, the Company intends to concentrate on development and
management of active adult and other planned communities, construction
of custom and semi-custom homes, and development and acquisition of
commercial and industrial properties. The Company's primary business
activities are capital intensive in nature. Significant capital
resources are required to finance homebuilding construction in process,
infrastructure for roads, water and wastewater utilities, selling
expenses and working capital needs, including funding of debt service
requirements, operating deficits and the carrying cost of land. The
Company expects to fund its operations and capital requirements through
a combination of cash, 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. However, the
Company believes that the Notes (described below) will enhance the
Company's liquidity resources.
On February 2, 1998 the Company issued $115,000 principal amount
of 7% Convertible Subordinated Notes due 2005 (the "Notes"). The Notes
are convertible into common stock of Avatar at the option of the holder
at any time at or before maturity, unless previously redeemed, at a
conversion price of $31.80 per share. These Notes are designed to
enhance the Company's liquidity resources and to give it increased
operating and financial flexibility. The Notes are subordinated to all
present and future senior indebtedness of Avatar and are effectively
subordinated to all indebtedness and other liabilities of subsidiaries
of Avatar. The net proceeds of $111,550 after deducting expenses were
used to repay $33,000 aggregate amount of 8% Senior Debentures due 2000
and 9% Senior Debentures due 2000. The remaining
20
<PAGE>
<PAGE> 21
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
LIQUIDITY AND CAPITAL RESOURCES - continued
proceeds will be used to implement the development of the Company's new
active adult communities, to expand its homebuilding operations, to
reduce higher interest rate borrowings, to provide additional working
capital and for other corporate purposes.
The Company anticipates capital expenditures totaling
approximately $36,000 for 1998. Of this amount, approximately $16,000
of the Company's total capital expenditures relates to the Company's
real estate business, primarily for infrastructure and amenities.
Approximately $20,000 relates to the Company's utilities businesses and
will be funded by cash flow provided by the utilities business and
additional borrowings by the Company's utilities subsidiaries. The
Company intends to develop and manage several active adult communities
that are likely to require significant capital resources. In addition
the Company anticipates that it will need to expand its utilities
operations to accommodate the population increases in the communities
they serve.
Historically, the Company has funded operating deficits and
liquidity requirements through the sale of non-strategic assets,
homebuilding project borrowings, utilities borrowings and general
corporate borrowings. The Company does not anticipate that its new real
estate business strategy will achieve or sustain profitability or
positive cash flow until the year 2000 or later. Accordingly, the
Company will use the net proceeds of the Notes, the proceeds of the
sale of non-strategic assets, and real estate project borrowings to
fund the Company's operating deficits, the carrying cost of land and
development and construction of real estate projects.
In 1997, net cash provided by operating activities amounted to
$3,166 as a result of withdrawals from the investment portfolio of
$4,606 and principal payments collected on contracts receivable of
$14,435 partially offset by an increase in inventories, which included
expenditures from land development and housing operations of $16,390.
Net cash used in investing activities of $11,407 in 1997 resulted
primarily from investments in property, plant and equipment. Net cash
provided by financing activities of $5,863 resulted primarily from
principal payments on revolving lines of credit and long-term
borrowings of $54,520, less net proceeds from revolving lines of credit
and long-term borrowings of $62,179.
In 1996, net cash provided by operating activities amounted to
$42,361 as a result of withdrawals from the investment portfolio of
$45,554 and principal payments collected on contracts receivable of
$14,391 partially offset by an increase in inventories, which included
expenditures from land development and housing operations of $27,291.
Net cash used in investing activities of $11,465 in 1996 resulted
primarily from investments in property, plant and equipment. Net cash
used in financing activities of $26,869 resulted primarily from
principal payments on revolving lines of credit and long-term
borrowings of $100,800, less net proceeds from revolving lines of
credit and long-term borrowings of $73,931.
In 1995, net cash used in operating activities amounted to $14,695
as a result of an increase in inventories, which included expenditures
from land development and housing operations of $34,711, partially
offset by principal payments collected on contracts receivable of
$17,571 and $11,000 in withdrawals from the investment portfolio. Net
cash used in investing activities of $13,473 in 1995 resulted primarily
from investments in property, plant and equipment. Net cash provided
by financing
21
<PAGE>
<PAGE> 22
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
LIQUIDITY AND CAPITAL RESOURCES - continued
activities of $25,839 resulted primarily from net proceeds from
revolving lines of credit and long-term borrowings of $68,348 less
principal payments on revolving lines of credit and long-term
borrowings of $42,122.
At December 31, 1997, the Company's secured real estate lines of
credit, exclusive of timeshare credit facilities, amounted to $23,566,
all of which were fully utilized. These real estate lines are secured
by contracts and mortgage receivables aggregating $40,478. During the
first quarter of 1998, the Company repaid one of these lines in the
amount of $5,226 and the remaining lines of $18,340 mature in the
second quarter of 1999. Corporate secured lines of credit were
$20,000 at December 31, 1997 and the unused and available portion was
$6,000, which matures in the second quarter of 1999.
At December 31, 1997, utilities unsecured lines of credit were
$15,000 and the unused and available portion was $13,568. The utilities
lines mature in the second quarter of 2000.
From 1995 to 1997, trading account profit declined due to the
Company's use of principal of its trading account to fund operations
and maintain and enhance its land holdings. As of December 31, 1997,
the Company liquidated its trading account and used such funds, net of
related debt, as working capital.
As of December 31, 1996, Avatar had approximately $4,535 in
investments, which were all classified as trading. During 1996, the
Company actively traded such securities in an effort to generate
profits and reinvested such profits until the Company's cash
requirements necessitated 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 served 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 that 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.
Avatar's Board of Directors authorized the use of a portion
proceeds from the Notes for the redemption of $33,000 aggregate amount
of 8% and 9% senior debentures during the first quarter of 1998.
Management does not anticipate a significant change in interest
rates for 1998, and accordingly, does not expect the Company's primary
business activities to be adversely affected by interest rates. 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 the Company's
debt obligations are tied to prevailing interest rates. Increases in
interest rates affecting the Company's utilities operations generally
are passed on to the consumer through the regulatory process.
22
<PAGE>
<PAGE> 23
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
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 on the industry as a whole. It
is anticipated that the impact of inflation on Avatar's operations for
1998 will not be significant.
IMPACT OF TAX INSTALLMENT METHOD
In years 1988 through 1996, 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.
FORWARD-LOOKING STATEMENTS
Certain statements discussed under the caption "Business," "Legal
Proceedings," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this Form 10-K
constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other
important factors that could cause the actual results, performance or
achievements of results to differ materially from any future results,
performance or achievements expressed or implied by such forward-
looking statements. Such risks, uncertainties and other important
factors include, among others:
History of Losses; Negative Cash Flow
The Company has had negative cash flows and negative ratios of
earnings to fixed charges and has incurred significant operating and
net losses. Net losses for 1997, 1995, and 1994 were approximately
$26,989, $10,339 and $14,621 respectively. The Company historically
has sold non-strategic assets to fund its operating deficits and has
utilized short-term borrowings to provide working capital.
Real estate development requires investment of substantial
capital, a significant portion of which is expended before any revenues
may be realized. The Company does not anticipate that it will achieve
or sustain operating profitability or positive cash flows from
operating activities until the year 2000. If the Company cannot achieve
operating profitability or positive cash flow from operating
activities, it may not be able to service or meet its other debt
service or working capital requirements.
23
<PAGE>
<PAGE> 24
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
FORWARD-LOOKING STATEMENTS - continued
New Real Estate Business Strategy
The Company's recently adopted real estate business strategy
is unproven, with little or no operating history to serve as the basis
for a prediction of its probable success or failure. Implementation of
the business strategy has required, and will continue to require, among
other things, the addition of new management personnel and employees,
as well as the development of additional expertise by existing
management personnel and employees and the expenditure of significant
amounts of capital. The loss of the services of certain members of the
Company's senior management team could have a material adverse effect
on the Company and, in particular, on the success of the new real
estate business strategy. In addition, the Company's ability to manage
growth and to redeploy its resources effectively will require it to
continue to implement and improve its operational, financial and sales
systems. There can be no assurance that the Company will be able to
compete successfully with its current or potential competitors or that
the implementation of the new business strategy will be successful.
Real Estate, Economic, and Other Conditions Generally
The real estate industry is highly cyclical and is affected by
changes in national, global and local economic conditions and events,
such as employment levels, availability of financing, interest rates,
consumer confidence and the demand for housing and other types of
construction. Real estate developers are subject to various risks,
many of which are outside the control of the developer, including real
estate market conditions (both where its communities and homebuilding
operations are located and in areas where its potential customers
reside), and changing demographic conditions, adverse weather
conditions and natural disasters, such as hurricanes, tornadoes,
wildfires, delays in construction schedules, cost overruns, changes in
government regulations or requirements, increases in real estate taxes
and other local government fees and availability and cost of land,
materials and labor. The occurrence of any of the foregoing could have
a material adverse effect on the financial conditions of the Company.
Interest Rates; Mortgage Financing
Certain purchasers of the Company's homes finance their purchases
through third-party lenders providing mortgage financing. In general,
housing demand is dependent on home equity, consumer savings and third-
party financing and will be adversely affected by increases in interest
rates, unavailability of mortgage financing, increasing housing costs
and unemployment levels. The amount or value of discretionary income
and savings, including retirement assets, available to home purchasers
can be affected by a decline in the capital markets. If mortgage
interest rates increase or the capital markets decline or undergo a
major correction, the ability of prospective buyers to finance home
purchasers will be adversely affected, which may have an adverse effect
on the financial condition of the Company.
24
<PAGE>
<PAGE> 25
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
FORWARD-LOOKING STATEMENTS - continued
Geographic Concentration
The Company's development activities are primarily focused on
locations in Florida and therefore depend to a significant degree on
the levels of immigration to Florida from outside the United States and
in-migration to Florida from within the United States in addition to
other local market conditions. The Company's geographic concentration
and limited number of projects may create increased vulnerability to
regional economic downturns or other adverse project-specific matters.
A decline in the economy in Florida could have an adverse effect on the
financial condition of the Company.
Development of Communities
The Company's communities will be developed over time. Therefore,
the medium- and long-term future of the Company will be dependent on
the Company's ability to develop and market future communities
successfully. Committing the financial and managerial resources to
develop a community involves significant risks. Before a community
generates any revenues, material expenditures are required, among other
things, to obtain development approvals to construct project
infrastructure, recreation centers, model homes and sales facilities
and, where opportunities are suitable and appropriate, to acquire land.
It generally takes several years for a community development to achieve
cumulative positive cash flow. No assurance can be given that the
Company will successfully develop and market communities in the future.
The inability of the Company to develop and market its communities
successfully and to generate positive cash flows from such operations
in a timely manner would have an adverse effect on the ability of the
Company to service its debt and to meet its working capital
requirements.
Access to Financing
The Company's business is capital intensive and requires
expenditures for land and infrastructure development, housing
construction and working capital. Accordingly, the Company anticipates
incurring additional indebtedness to fund its real estate development
activities. As of December 31, 1997, the Company's total consolidated
indebtedness was $166,437, of which $33,000 of senior debentures was
retired with proceeds from the February 2, 1998 issuance of Notes.
There can be no assurance that the amounts available from internally
generated funds, cash on hand, the Company's existing credit
facilities, sale of non-strategic assets and the net proceeds from the
Notes will be sufficient to fund the Company's anticipated operations.
The Company may be required to seek additional capital in the form of
equity or debt financing from a variety of potential sources, including
additional bank financing and sales of debt or equity securities. No
assurance can be given that such financing will be available or, if
available, will be on terms favorable to the Company. If the Company is
not successful in obtaining sufficient capital to fund the
implementation of its business strategy and other expenditures,
development projects may be delayed or abandoned. Any such delay or
abandonment could result in a reduction in sales and would adversely
affect the Company's future results of operations.
25
<PAGE>
<PAGE> 26
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
FORWARD-LOOKING STATEMENTS - continued
Debt Covenants
Under its credit facilities the Company is subject to certain
covenants that restrict its operational and financial flexibility,
including covenants requiring the maintenance of certain financial
ratios and restrictions on distributions, indebtedness, liens,
acquisitions and other significant actions. Failure to comply with
certain covenants would, among other things, permit the Company's
lenders to accelerate the maturity of the obligations thereunder and
could result in cross-defaults permitting the acceleration of debt
under other Company credit facilities.
Joint Venture Risks
In connection with its new business strategy, the Company has
entered into, and in the future will continue to seek, joint venture
arrangements with entities whose complementary resources or other
business strengths will contribute to the competitive position of the
Company. A joint venture may involve special risks associated with the
possibility that a venture partner (i) at any time may have economic or
business interests or goals that are inconsistent with those of the
Company, (ii) may take actions contrary to the instructions or requests
of the Company or contrary to the Company's policies or objectives with
respect to its real estate investments or (iii) could experience
financial difficulties. Actions by a venture partner of the Company may
have the result of subjecting property owned by the joint venture to
liabilities in excess of those contemplated by the terms of the joint
venture agreement or have other adverse consequences. As a participant
in certain joint ventures, the Company may be jointly and severally
liable for the debts and liabilities of the joint venture. No assurance
can be given that any joint venture arrangements entered into by the
Company will achieve the results anticipated or otherwise prove
successful.
Period-to-Period Fluctuations
The Company's real estate projects are long-term in nature. Sales
activity at the Company's newly planned retirement communities and
other real estate developments varies from period to period, and the
ultimate success of any community cannot be determined from results in
any particular period or periods. A community may generate
significantly higher sales levels at inception (whether because of
local pent-up demand or other reasons) than it does during later
periods over the life of the community. Revenues and earnings of the
Company will also be affected by period-to-period fluctuations in the
mix of product, subdivisions and home closings among the Company's
communities and conventional homebuilding operations. Thus, the timing
and amount of revenues arising from capital expenditures are subject to
considerable uncertainty. The inability of the Company to manage
effectively its cash flows from operations would have an adverse effect
on its ability to service its debt and to meet its working capital
requirements.
26
<PAGE>
<PAGE> 27
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (dollars in thousands) -- continued
FORWARD-LOOKING STATEMENTS - continued
Competition
The Company's homebuilding, planned community development and
other real estate operations are subject to substantial existing and
potential competition (including increased competition from a number of
national homebuilders that are entering or expanding their presence in
planned community development). Some of the Company's current and
potential competitors have longer operating histories and greater
financial, sales, marketing, technical and other competitive resources.
Existing and future competition may have an adverse effect on the
financial condition of the Company.
Governmental Regulation and Environmental Considerations
The Company's business is subject to extensive federal, state and
local regulatory requirements, the broad discretion that governmental
agencies have in administering those requirements and "no growth" or
"slow growth" policies, all of which can prevent, delay, make
uneconomic or significantly increase the costs of its developments.
Various governmental approvals and permits are required throughout the
development process (to the extent they have not already been
obtained), and no assurance can be given as to the receipt (or timing
of receipt) of these approvals or permits. The incurrence of
substantial compliance costs and the imposition of delays and other
regulatory burdens on the Company could have a material adverse effect
on the operations of the Company.
Furthermore, various federal, state and local laws subject
property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property.
Such laws often impose liability without regard to whether the owner
knew of, or was responsible for, the release of the hazardous
substances. The presence of such hazardous substance at one or more of
the Company's properties, and the requirement to remove or remediate
such substances, may result in significant cost to the Company.
27
<PAGE>
<PAGE> 28
Item 8. Financial Statements and Supplementary Data
Report of Independent Certified Public Accountants..............29
Consolidated Balance Sheets -- December 31, 1997 and 1996......30
Consolidated Statements of Operations -- For the years ended
December 31, 1997, 1996 and 1995..............................31
Consolidated Statements of Stockholders' Equity -- For the
years ended December 31, 1997, 1996 and 1995..................32
Consolidated Statements of Cash Flows -- For the years ended
December 31, 1997, 1996 and 1995..............................33
Notes to Consolidated Financial Statements......................35
28
<PAGE>
<PAGE> 29
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, 1997 and 1996, and
the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1997. 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, 1997
and 1996, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended December 31,
1997, 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
March 13, 1998
29
<PAGE>
<PAGE> 30
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31 December 31
1997 1996
----------- -----------
<S> <C> <C>
Assets
- ------
Cash and cash equivalents $4,085 $6,463
Restricted cash 4,690 1,583
Investments _ trading - 4,535
Contracts and mortgage notes receivables, net 24,319 38,200
Other receivables, net 6,186 7,066
Land and other inventories 161,161 162,204
Property, plant and equipment, net 188,602 186,378
Other assets 19,448 12,916
Regulatory assets 3,318 3,768
Assets of discontinued operations 27,559 20,072
-------- --------
Total Assets $439,368 $443,185
======== ========
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities
- -----------
Notes, mortgage notes and other debt:
Corporate $44,506 $33,148
Notes, collateralized by contracts and
mortgage notes receivable 23,566 36,030
Real estate 39,163 27,462
Utilities 39,216 42,152
Estimated development liability for sold land 8,697 8,459
Accounts payable 6,081 7,116
Accrued and other liabilities 36,918 30,842
Deferred customer betterment fees 18,667 18,430
Minority interest in consolidated subsidiaries 7,268 9,064
Liabilities of discontinued operations 18,662 11,785
------- -------
Total Liabilities 242,744 224,488
Commitments and contingent liabilities
Contributions in aid of construction 61,582 59,245
Stockholders' Equity
- --------------------
Common Stock, par value $1 per share
Authorized: 15,500,000 shares
Issued: 9,170,102 shares in 1997;
12,715,448 shares in 1996 9,170 12,715
Additional paid-in capital 151,422 207,271
(Deficit) retained earnings (25,550) 1,439
-------- --------
135,042 221,425
Treasury stock, at cost: 0 shares in 1997;
3,620,346 shares in 1996 - 61,973
-------- --------
Total Stockholders' Equity 135,042 159,452
-------- --------
Total Liabilities and Stockholders' Equity $439,368 $443,185
======== ========
</TABLE>
See notes to consolidated financial statements.
30
<PAGE>
<PAGE> 31
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in thousands except per-share amounts)
<TABLE>
<CAPTION>
For the year ended December 31
------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Revenues
- --------
Real estate sales $84,855 $93,510 $48,217
Deferred gross profit on homesite sales 3,998 2,639 (720)
Utilities revenues 34,293 32,749 29,669
Interest income 5,200 7,846 9,427
Trading account profit, net 71 2,210 6,912
Other 667 2,405 663
------- ------ ------
Total revenues 129,084 141,359 94,168
Expenses
- --------
Real estate expenses 93,559 90,475 58,626
Real estate inventory write-down 14,667 1,464 -
Utilities expenses 25,627 25,505 24,923
General and administrative expenses 8,756 8,784 9,210
Interest expense 12,668 12,053 11,518
Other 681 814 811
------- ------ ------
Total expenses 155,958 139,095 105,088
------- ------ ------
(Loss) income from continuing
operations (26,874) 2,264 (10,920)
Discontinued operations:
(Loss) income from operations, less
income tax expense of $0 (115) (1,224) 581
-------- ------- -------
Net (loss) income ($26,989) $1,040 ($10,339)
======== ======= ========
Basic and Diluted EPS:
(Loss) income from continuing
operations ($2.95) $0.25 ($1.20)
(Loss) income from discontinued
operations ($0.01) ($0.14) $0.06
Net (loss) income ($2.96) $0.11 ($1.14)
</TABLE>
See notes to consolidated financial statements.
31
<PAGE>
<PAGE> 32
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Dollars in thousands)
<TABLE>
<CAPTION>
Additional (Deficit)
Common Paid-in Retained Treasury
Stock Capital Earnings Stock
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance at January 1, 1995 $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
Issuance of common stock 75 2,503 - -
Retirement of treasury stock (3,620) (58,352) - (61,973)
Net loss - - (26,989) -
-------- -------- -------- --------
Balance at December 31, 1997 $9,170 $151,422 ($25,550) $ -
======== ======== ======== ========
</TABLE>
There are 5,000,000 authorized shares of preferred stock, none of which
are issued.
See notes to consolidated financial statements.
32
<PAGE>
<PAGE> 33
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
For the year ended December 31
-------------------------------
1997 1996 1995
-------- -------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
- --------------------
Net (loss) income ($26,989) $1,040 ($10,339)
Adjustments to reconcile net (loss) income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 11,520 10,278 9,654
Deferred gross profit (3,998) (2,639) 720
Cost of homesite sales not requiring cash 3,004 3,956 3,590
Inventory writedown 14,667 1,464 -
Trading account profit, net (71) (2,210) (6,912)
Changes in operating assets and liablities:
Restricted cash (3,107) 420 (731)
Investments _ trading 4,606 45,554 11,000
Principal payments on contracts receivable 14,435 14,391 17,571
Receivables 3,444 1,616 (6,560)
Other receivables 880 (362) (1,174)
Inventories (16,390) (27,291) (34,711)
Other assets (6,532) 884 2,591
Accounts payable and accrued and other
liabilities 8,307 (2,766) 4,228
Assets/liabilities of discontinued
operations (610) (1,974) (3,622)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 3,166 42,361 (14,695)
INVESTING ACTIVITIES
- --------------------
Investment in property, plant and equipment (11,407) (11,465) (13,473)
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES (11,407) (11,465) (13,473)
FINANCING ACTIVITIES
- --------------------
Net proceeds from revolving lines of credit and
long-term borrowings 62,183 73,931 68,348
Principal payments on revolving lines of credit
and long-term borrowings (54,520) (100,800) (42,122)
Redemption of preferred stock of subsidiary (1,800) - -
Purchase of 9% debentures - - (387)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 5,863 (26,869) 25,839
-------- -------- --------
(DECREASE) INCREASE IN CASH (2,378) 4,027 (2,329)
Cash and cash equivalents at beginning of year 6,463 2,436 4,765
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $4,085 $6,463 $2,436
======== ======== ========
</TABLE>
33
<PAGE>
<PAGE> 34
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows -- continued
(Dollars in thousands)
<TABLE>
<CAPTION>
For the year ended December 31
------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES
- -----------------------------------------------
Contributions in aid of construction $5,250 $5,584 $5,000
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
- -------------------------------------------------
Cash paid during the period for:
Interest - Continuing operations (net of amount
capitalized of $2,927, $3,573 and $3,234
in 1997, 1996 and 1995, respectively) $9,756 $9,336 $10,899
======== ======== ========
Interest - Discontinued operations (net of amount
capitalized of $272, $430 and $0 in 1997,
1996 and 1995, respectively) $1,041 $473 $221
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
34
<PAGE>
<PAGE> 35
AVATAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
(Dollars in thousands except per-share data)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
----------------------------
The consolidated financial statements include Avatar Holdings Inc.
and its subsidiaries ("Avatar"). All significant intercompany accounts
and transactions have been eliminated in consolidation.
General:
--------
Avatar is principally engaged in the business of developing and
selling single and multifamily residential housing, active adult
communities, improved and unimproved real estate, and providing water
and wastewater utilities services.
Cash and Cash Equivalents and Restricted Cash:
----------------------------------------------
The Company considers all highly liquid investments purchased with
a maturity of three months or less to be cash equivalents. Due to the
short maturity period of the cash equivalents, the carrying amount of
these instruments approximates their fair values. Restricted cash
includes deposits of $4,690 and $1,583 as of December 31, 1997 and
1996, respectively. These balances are comprised of housing deposits
that will become available to the Company when the housing contracts
close and utilities deposits from water utilities customers.
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 Financial Accounting Standards Board (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. Reference is made to Note E for a discussion regarding
impairment of real estate inventory.
35
<PAGE>
<PAGE> 36
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- continued
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.
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 that
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.
Utilities 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 FASB Statement 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
utilities 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 utilities systems and reflect probable future revenue reductions or
increases from ratepayers.
Deferred Customer Betterment Fees:
----------------------------------
Amounts collected from customers for utilities 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.
36
<PAGE>
<PAGE> 37
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- continued
Contributions in Aid of Construction:
-------------------------------------
Advances from real estate developers and other direct
contributions to utilities 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 utilities plant as an offset to
depreciation expense.
Investments:
------------
The Company classified its entire 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
were carried at fair value that was $0 at December 31, 1997 and $4,535
at December 31, 1996.
Stock Options:
--------------
In October 1995, the FASB issued Statement No. 123, "Accounting
for Stock-Based Compensation." Statement No. 123 allows companies to
measure compensation cost in connection with employee stock
compensation plans using a fair value based method or to use an
intrinsic value based method in accordance with Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25). The Company has elected to follow APB 25 and related
interpretations in accounting for its employee stock options and has
added the expanded disclosure in Note N to comply with Statement No.
123.
Postretirement Benefits:
------------------------
The Company accrues 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 utilities subsidiaries.
Advertising Costs:
------------------
Advertising costs are expensed as incurred. For the years ended
December 31, 1997, 1996 and 1995, advertising costs totaled $3,749,
$3,758 and $3,265, respectively.
Earnings Per Share:
-------------------
Earnings per share is computed based on the weighted average
number of shares outstanding of 9,113,595 for 1997 and 9,095,102 for
both 1996 and 1995. In computing earnings per share for 1997, the
conversion of the employee stock options was not assumed, as the effect
would be antidilutive. There is no difference between basic and diluted
earnings per share for 1997, 1996 and 1995.
37
<PAGE>
<PAGE> 38
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- continued
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.
Impact of Recently Issued Accounting Standards:
-----------------------------------------------
In June 1997, the FASB issued Statement No. 130, "Reporting
Comprehensive Income." Statement No. 130 establishes standards for
reporting and display of comprehensive income and its components
(revenues, expenses, gains, and losses) in a full set of general-
purpose financial statements. Statement No. 130 requires that all items
that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement
that is displayed with the same prominence as other financial
statements. Statement No. 130 requires that an enterprise (a) classify
items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of a statement of financial
position. Statement No. 130, which is effective for fiscal years
beginning after December 15, 1997, will have no impact on the Company's
consolidated results of operations, financial position or cash flows.
In June 1997, the FASB issued Statement No. 131, "Disclosure about
Segments of an Enterprise and Related Information." Statement No. 131
establishes standards for the reporting of financial information from
the operating segments in annual and interim financial statements
issued to shareholders. Statement No. 131 also establishes standards
for related disclosures with respect to products and services,
geographic areas of operations, and major customers. Statement No. 131,
which is effective for fiscal years beginning after December 15, 1997,
will have no impact on the Company's consolidated results of
operations, financial position or cash flows. However, Statement No.
131 may affect reported segments and the Company is reviewing this
matter.
Acquisitions:
-------------
In accordance with the Company's plan to develop active adult
communities at various properties, the Company acquired, on October 3,
1997, key executives, systems and software from Hilcoast Development
Corp. (Hilcoast), the developers of Century Village, in exchange for
75,000 shares of Avatar common stock. This acquisition was accounted
for as a purchase. Additionally, Avatar acquired an option to purchase
from a direct wholly owned subsidiary of Hilcoast, all rights to use
the name "Century Village", together with any trademarks or other
intellectual property rights. The option is exercisable by the Company
until October 3, 1998, and upon closing the purchase, the Company would
be obligated to issue a number of shares of Avatar common stock having
a fair market value on the day immediately preceding the closing equal
to $1,719. The excess purchase price over the estimated fair value of
the acquired assets is being amortized using the straight-line method
over 10 years.
In order to expand its upscale homebuilding business, the Company,
on December 4, 1997, entered into an asset purchase agreement to
acquire certain assets of Brookman-Fels, Jeff Ian, Inc. (Brookman-
38
<PAGE>
<PAGE> 39
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- continued
Fels), for an aggregate of $3,899 payable in installments commencing
February 1, 1998 and ending November 1, 2002. This acquisition was
accounted for as a purchase. The excess purchase price over the
estimated fair value of the acquired assets is being amortized using
the straight-line method over 5 years. Brookman-Fels is a well-known
regional developer of custom and semi-custom homes and single-family
residential communities in South Florida.
Reclassifications:
------------------
Certain 1996 and 1995 financial statement items have been
reclassified to conform to the 1997 presentations.
NOTE B - REAL ESTATE SALES
The components of real estate sales are as follows:
<TABLE>
<CAPTION>
For the year ended December 31
------------------------------
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Revenues from homebuilding activities $57,912 $49,672 $13,260
Resort revenues 13,787 16,087 14,151
Gross homesite sales * 2,552 12,387 12,561
Proceeds from sale of recreation facility - 8,300 -
Rental, leasing, cable and other
real estate operations 5,163 5,362 5,621
Commercial/industrial land sales 5,441 1,702 2,624
-------- ------- -------
Total real estate sales $84,855 $93,510 $48,217
======== ======= =======
</TABLE>
* 1996 includes $3,714 of land sales generated by the
Homebuilding Division and $4,276 for bulk land sales.
NOTE C - INVESTMENTS
As of December 31, 1996, the Company classified its entire
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. As of December 31,
1997, the Company had liquidated its trading account and used such
funds, net of related debt, as working capital.
Avatar's investment portfolio at December 31, 1996 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.
39
<PAGE>
<PAGE> 40
NOTE C _ INVESTMENTS - continued
The following table sets forth the fair values of investments
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Non-rated bonds $ - $77
Equity securities - 81
Other rated bonds - 2,172
Money market accounts - 2,205
--------- --------
Total market value $ - $4,535
========= ========
Aggregate cost $ - $3,975
========= ========
</TABLE>
NOTE D - CONTRACTS AND MORTGAGE NOTES RECEIVABLES
Contracts and mortgage notes receivables are summarized as
follows:
<TABLE>
<CAPTION>
December 31
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Contracts and mortgage notes receivable $40,478 $61,534
---------- ----------
Less:
Allowance for doubtful accounts - 179
Market valuation reserve 43 133
Deferred gross profit 15,659 21,878
Other 457 1,144
---------- ----------
16,159 23,334
---------- ----------
$24,319 $38,200
========== ==========
</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,
1997 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 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, 1997 and 1996 were $5,286 or
13.1% and $7,099 or 9.6%, respectively. Estimated maturities for the
five years subsequent to 1997 are 1998 - $12,038; 1999 - $8,318; 2000 -
$5,326; 2001 - $3,945; and 2002 - $3,173.
40
<PAGE>
<PAGE> 41
NOTE E - LAND AND OTHER INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31
---------------------
1997 1996
-------- --------
<S> <C> <C>
Land developed and in process of development $98,407 $105,617
Land held for future development or sale 31,552 33,544
Dwelling units completed or under construction 30,334 22,270
Other 868 773
-------- -------
$161,161 $162,204
======== ========
</TABLE>
During 1997, there were indicators of impairment present in
accordance with Statement 121 and the Company recorded an impairment
loss of $14,667 to the carrying value of its Harbor Islands community.
This impairment loss was due to a revision to the existing development
plan in connection with the Company's new business strategy during
1997. The portion of the Harbor Islands community that the Company does
not plan to develop has been valued based on an independent appraisal
less the estimated cost of sale. Certain land held for future
development by the Company has been valued at the estimated discounted
cash flows in accordance with Statement 121 as the undiscounted cash
flows were less than the carrying amount of the assets.
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.
NOTE F - ESTIMATED DEVELOPMENT LIABILITY FOR SOLD LAND
The estimated cost to complete consists of required land and
utilities improvements in all areas designated for homesite sales and
are summarized as follows:
<TABLE>
<CAPTION>
December 31
---------------
1997 1996
------- ------
<S> <C> <C>
Gross unexpended costs (net of recoveries
of $11,359 in 1997 and $11,941 in 1996) $12,030 $11,685
Less costs relating to unsold homesites 3,333 3,226
------- ------
Estimated development liability for sold land $8,697 $8,459
======= ======
</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 utilities 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 utilities
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
41
<PAGE>
<PAGE> 42
NOTE F - ESTIMATED DEVELOPMENT LIABILITY FOR SOLD LAND _ continued
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' water and
wastewater treatment division, thereby 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 $7,357 (current
costs) to complete water and wastewater utilities 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 $12,030 are estimated as follows: 1998-$2,000 and thereafter-
$10,030. Because the timing of the expenditures after 1998 is
dependent upon certain future occurrences beyond Avatar's control,
projection by year after 1998 is not presently practicable.
NOTE G - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and accumulated depreciation consist
of the following:
<TABLE>
<CAPTION>
December 31
-------------------
1997 1996
--------- --------
<S> <C> <C>
Utilities land, plant and equipment $242,428 $230,600
Land and improvements 12,160 12,395
Buildings and improvements 17,821 17,941
Machinery, equipment and fixtures 13,695 13,513
Other 386 639
--------- --------
286,490 275,088
Less accumulated depreciation 97,888 88,710
--------- --------
$188,602 $186,378
========= ========
</TABLE>
Depreciation charged to operations during 1997, 1996 and 1995 was
$6,961, $5,989 and $5,603, respectively, net of amortization of
contributions and advances in aid of construction of $4,559, $4,289
and $4,051 during 1997, 1996 and 1995, respectively.
42
<PAGE>
<PAGE> 43
NOTE H - NOTES, MORTGAGE NOTES AND OTHER DEBT
Notes, mortgage notes and other debt are summarized as follows:
<TABLE>
<CAPTION>
December 31
---------------
1997 1996
------- ------
<S> <C> <C>
Corporate:
Bank credit lines $14,000 $3,350
8% senior debentures, due 2000, net of unamortized
discount of $697 and $899, respectively 6,930 6,728
9% senior debentures, due 2000, net of unamortized
discount of $1,769 and $2,275, respectively 23,576 23,070
------- -------
$44,506 $33,148
======= =======
Notes, collateralized by contracts and mortgage
notes receivable:
Bank credit lines $23,566 $36,030
======= =======
Real estate:
Mortgage note obligations, interest rates ranging from
8.875% to 9.25%, due from 1999 - 2002 $5,865 $4,969
Note payable, non-interest bearing, due 1998-2002 3,899 -
Development and construction loans, due 1998-2002
interest rates ranging from 8.75% to 10.0% 29,399 22,493
------- -------
$39,163 $27,462
======= =======
Utilities:
Bank credit lines $1,432 $4,350
Utilities first mortgage bonds due serially from
1998-2007, interest rates ranging from 7.79% to
9.19% 13,942 15,608
Utilities senior notes, 7.27%, due 2000 - 2010 18,000 18,000
Utilities promissory notes, due 1998 - 2002 5,842 4,194
------- -------
$39,216 $42,152
======= =======
</TABLE>
At December 31, 1997, Avatar had secured bank credit lines of
$43,566 and unsecured bank credit lines of $15,000. The unused
portions of secured and unsecured credit lines were $6,000 and $13,568,
respectively, at December 31, 1997. The weighted average interest rate
on short term borrowing at December 31, 1997 was 9.8%. Interest rates
for borrowings range from 6.97% to 9.19% on the unsecured bank credit
lines and from 8.75% to 10.0% on the secured bank credit lines at
December 31, 1997. Additionally, certain credit lines provide for fixed
rate borrowings 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. Certain real
property and contracts and mortgage notes receivable of $32,565 at
December 31, 1997 collateralize the secured lines.
43
<PAGE>
<PAGE> 44
NOTE H - NOTES, MORTGAGE NOTES AND OTHER DEBT _ continued
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 Ormond Beach, Florida beachfront hotel. In connection
with the acquisition of Casa Del Mar, the Joint Venture entered into
a loan agreement with $5,439 and $5,674 outstanding at December 31,
1997 and 1996, respectively. The debt is guaranteed by a subsidiary
of Avatar as well as the Joint Venture Partners. This Joint Venture
is included in the time share operations which has been classified as a
discontinued operation as discussed in Note T.
Maturities of notes, mortgage notes and other debt at December 31,
1997, are as follows:
<TABLE>
<CAPTION>
Notes,collateralized
by contracts
mortgage notes
Corporate receivable Real Estate Utilities Total
-------- ----------- ----------- --------- -------
<S> <C> <C> <C> <C> <C>
1998 $ - $ - $13,509 $2,334 $15,843
1999 14,000 18,340 2,255 2,484 37,079
2000 30,506 - 14,503 5,553 50,562
2001 - 5,226 2,825 4,121 12,172
2002 - - 5,033 4,127 9,160
Thereafter - - 1,038 20,597 21,635
-------- ---------- ------------ --------- -------
$44,506 $23,566 $39,163 $39,216 $146,451
======== ========== ============ ========= =======
</TABLE>
During the first quarter of 1998, the Company repaid $33,000
aggregate amount of 8% Senior Debentures due 2000 and 9% Senior
Debentures due 2000 from the net proceeds from the issuance on February
2, 1998 of $115,000 principal amount of 7% Convertible Subordinated
Notes due 2005 (reference is made to Note U).
During the first quarter of 1998, the Company repaid $5,226 from a
real estate line secured by contracts and mortgage receivables.
Interest capitalized during 1997, 1996 and 1995 amounted to
$3,199, $4,003 and $3,234, respectively.
Property, plant and equipment and inventory pledged as collateral
for notes, mortgage notes and other indebtedness had a net book value
of approximately $163,000 at December 31, 1997.
Included in notes, mortgage notes and other debt at December 31,
1997 is a related party $3,899 note payable to Brookman-Fels in
installments commencing February 1, 1998 and ending November 1, 2002.
In connection with the acquisition of Brookman-Fels (as discussed in
Note A), the Company entered into employment contracts with its three
principals. In addition, pursuant to a Joint Venture Agreement in place
at the time of the aquisition the Company paid Brookman-Fels
approximately $440 and $240 in fees and reimbursed expenses,respectively,
during 1997.
NOTE I - MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES
As of December 31, 1997 and 1996, preferred stock outstanding is
as follows:
<TABLE>
<CAPTION>
December 31
----------------
1997 1996
------ ------
<S> <C> <C>
9%cumulative preferred stock $7,200 $9,000
Other 68 64
------ ------
$7,268 $9,064
====== ======
</TABLE>
44
<PAGE>
<PAGE> 45
NOTE I - MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES - continued
Avatar's utilities subsidiary's 9% cumulative preferred stock issue
provides for redemption of a minimum of $1,800 of the preferred
stock to be redeemed each year beginning in 1997. During 1997 $1,800
of preferred stock was redeemed. 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 $681 in 1997, $814 in 1996, and $811 in 1995.
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, 1997, 1996 and 1995 and the retirement
expense recognized in the consolidated statements of operations for the
years then ended.
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation,including
vested benefits of $3,832, $3,288, and $2,924,
respectively $3,942 $3,367 $3,025
======= ======= =======
Projected benefit obligation for services
rendered to date ($4,574) ($3,885) ($3,646)
Plan assets at fair value 4,604 4,060 3,642
------- ------- -------
Projected benefit obligation less than
(in excess of) plan assets 30 175 (4)
Unrecognized net gain (271) (515) (413)
Prior service cost not yet recognized in net
periodic pension cost 315 362 409
Unrecognized net assets at January 1,1986,
net of amortization (43) (58) (73)
------- ------- -------
Accrued pension cost included in accrued and other
liabilities $31 ($36) ($81)
======= ======= =======
Net retirement cost included the following components:
Defined benefit plan:
Service cost - benefits earned during the
period $204 $204 $190
Interest cost on projected benefit
obligation 307 284 250
Actual return on plan assets (423) (406) (495)
Net amortization and deferral 122 139 245
------- ------- -------
Net Pension Cost 210 221 190
Defined contribution plan 125 122 117
------- ------- -------
Total retirement expense $335 $343 $307
======= ======= =======
</TABLE>
45
<PAGE>
<PAGE> 46
NOTE J - RETIREMENT PLANS -- continued
The actuarial assumptions used in determining the present value of
the projected benefit obligation were: weighted average discount rate
of 7.5% in 1997, 1996 and 1995, rate of increase in future compensation
levels of 5% in 1997, 1996 and 1995, and expected long-term rate of
return on plan assets of 8% in 1997, 1996 and 1995.
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 utilities 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
utilities' 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, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
Accumulated postretirement benefit
obligation 1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Retirees ($729) ($882) ($948)
Fully eligible active plan participants (593) (496) (768)
Other active plan participants (1,586) (1,460) (2,299)
-------- -------- --------
(2,908) (2,838) (4,015)
Plan assets at fair value 0 0 0
-------- -------- --------
Accumulated postretirement benefit obligation
in excess of plan assets (2,908) (2,838) (4,015)
Unrecognized net gain from past experience
different from that assumed and from
changes in assumptions (2,320) (2,281) (715)
Unrecognized transition obligation 2,489 2,645 2,798
-------- -------- --------
Accrued postretirement benefit cost inluded
in the accrued and other liabilities ($2,739) ($2,474) ($1,932)
======== ======== ========
Net periodic postretirement benefit cost
included the following components:
Service cost $170 $244 $273
Interest cost on accumulated
postretirement benefit obligation 205 277 283
Amortization of transition obligation
over 20 years 155 155 155
Other (217) (88) (35)
-------- -------- --------
Net periodic postretirement benefit $313 $588 $676
======== ======== ========
</TABLE>
For measurement purposes, the annual rate of increase in the per
capita cost of covered health care benefits assumed for 1997, 1996 and
1995 was 10%, 10% and 11%, respectively; the rate of increase was
assumed to decrease to 6% by the year 2000 and remain at that level
thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported. To illustrate, increasing
the assumed health care cost trend rates by one percentage point each
year would increase the accumulated postretirement benefit obligation
as of December 31, 1997 by $484 and the aggregate of the service and
interest cost components of net periodic postretirement benefit for the
year then ended by $74.
46
<PAGE>
<PAGE> 47
NOTE K - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - continued
The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7.5% for 1997, 1996
and 1995.
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 1997, 1996 and 1995 were $2,089, $1,769,
and $1,469, respectively. Minimum rental commitments under
noncancelable operating leases as of December 31, 1997 were as follows:
1998 - $2,169; 1999 - $1,750; 2000-$772; 2001 - $107; 2002 -$5.
NOTE M - ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities are summarized as follows:
<TABLE>
<CAPTION>
December 31
-----------------
1997 1996
------- -------
<S> <C> <C>
Property taxes $4,658 $5,788
Customer deposits and advances 10,595 5,225
Interest 1,048 1,027
Other 20,617 18,802
------- -------
$36,918 $30,842
======= =======
</TABLE>
As of December 31, 1997, 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, 1997,
1996 and 1995, the Company recorded incentive compensation of ($471),
($213) and $39, respectively, associated with these agreements. The
liability for incentive compensation included in other liabilities at
December 31, 1997 and 1996 is $351 and $822, respectively.
NOTE N - STOCK OPTIONS
The Company's 1997 Incentive and Capital Accumulation Plan (the
'Incentive Plan') was adopted by the Incentive Plan Committee, ratified
by the Board of Directors on February 13, 1997 and approved by the
stockholders at the Annual Meeting on May 29, 1997. The Incentive Plan
makes available 425,000 shares of Avatar common stock subject to
certain adjustments. On February 13, 1997 Avatar entered into a
Nonqualified Stock Option Agreement (the Options) with the Company's
President and granted him an option to purchase 225,000 shares of
Avatar common stock at $34 per share (such price being in the judgment
of the Incentive Plan Committee not less than 100% of the Fair Market
Value as defined in the Incentive Plan). The Options will become
exercisable with respect to 45,000 shares on February 13, 1998 and on
each February 13 thereafter through 2002, and any unexercised portion
of the Options will expire on February 13, 2007.
47
<PAGE>
<PAGE> 48
NOTE N - STOCK OPTIONS - continued
A summary of the status of the Company's Incentive Plan as of
December 31, 1997 and changes during the year ending is presented
below:
<TABLE>
<CAPTION>
Options Weighted-Average
(000's) Exercise Price
--------- ------------------
<S> <C> <C>
Outstanding at begining
of year - $ -
Granted 225 34
Exercised - -
Forfeited - -
---------
Outstanding at end of
year 225 34
=========
Exercisable at end of
year - -
Weighted-average per
share fair value of
options granted during
the year $16.59
=========
</TABLE>
The Company applies APB 25 and related interpretations in
accounting for the Incentive Plan. No compensation expense was
recognized in 1997 because all stock options granted have an exercise
price greater than the average market value of the Company's stock on
the date of grant. If the Company elected to account for the Incentive
Plan under Statement No. 123, compensation cost for the Incentive Plan
would be determined based on the fair value at the grant dates. The
weighted average fair value of options granted during 1997 was $16.59.
The fair value of each option granted in 1997 was estimated on the date
of grant using the Black-Scholes option pricing model with the
following assumptions: risk-free interest rate of 6.38%; expected
volatility of 17.6%; dividend yields of 0.0% and expected life of 10
years.
The following table summarizes the Company's pro forma income from
continuing operations, net (loss) income and earnings per share in
accordance with Statement No. 123 for the year ended December 31, 1997:
<TABLE>
<CAPTION>
As Reported Pro forma
------------- -----------
<S> <C> <C>
Loss from continuing operations ($26,874) ($27,534)
Net loss ($26,989) ($27,649)
Basic and Diluted Per Share Data:
Loss from continuing operations ($2.95) ($3.02)
Net loss ($2.96) ($3.03)
</TABLE>
48
<PAGE>
<PAGE> 49
NOTE O - INCOME TAXES
Under the installment method of tax reporting for homesite and
vacation ownership sales, Avatar anticipates that its 1997 consolidated
federal income tax return will reflect a net operating loss
carryforward of approximately $52,000, which expires in years 2003
through 2012. In addition, investment tax credits and alternative
minimum tax credit carryforwards of approximately $5,000 are available,
a portion of which expires in years 1998 to 2001. The Internal Revenue
Service has not examined these carryforwards.
The Company has recorded a valuation allowance of $51,000 with
respect to the deferred income tax assets that remain after offset by
the deferred income tax liabilities. Included in the valuation
allowance for deferred income tax assets is approximately $9,000 which,
if utilized, will be credited to additional paid-in capital.
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred income tax
assets and liabilities as of December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Deferred income tax assets
Net operating loss carryover $20,000 $15,000
Tax over book basis of land inventory 31,000 24,000
Unrecoverable land development costs 3,000 3,000
Tax over book basis of depreciable assets 5,000 7,000
Alternative minimum tax and investment tax
credit carry forward 5,000 5,000
Other 2,000 2,000
-------- --------
Total deferred income taxes 66,000 56,000
Valuation allowance for deferred income
tax assets (51,000) (41,000)
-------- --------
Deferred income tax assets after
valuation allowance 15,000 15,000
Deferred income tax liabilities
Book over tax income recognized on homesite
sales (2,000) (3,000)
Book over tax income recognized on vacation
ownership (4,000) (3,000)
Deferred carrying charges on utilities
plants (2,000) (2,000)
Other (7,000) (7,000)
-------- --------
Total deferred income tax liabilities (15,000) (15,000)
-------- --------
Net deferred income taxes $0 $0
======== ========
</TABLE>
49
<PAGE>
<PAGE> 50
NOTE O - INCOME TAXES -- continued
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>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Income tax expense (credit) computed
at statutory rate ($9,137) $770 ($3,713)
Income tax effect of non-deductible
dividends on preferred stock of
subsidiary 232 277 276
State income tax expense(credit),
net of federal effect (1,032) 147 (381)
Other (63) (194) (182)
Change in valuation allowance on
deferred tax assets 10,000 (1,000) 4,000
-------- -------- --------
Provision for income taxes $ - $ - $ -
======== ======== ========
</TABLE>
In years 1988 through 1996, 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.
NOTE P - CONTINGENCIES
Avatar is involved in various pending litigation matters primarily
arising in the normal course of its business. Although the outcome of
these matters 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 utilities 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. During June 1997, the parties filed
a joint motion to dismiss all related appeals with prejudice. The U.S.
Court of Appeals dismissed all appeals with prejudice on August 6,
1997, and the civil penalties have been paid by Florida Cities.
50
<PAGE>
<PAGE> 51
NOTE Q - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
For the year ended December 31
------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
- ----------
Real estate
Unaffiliated customers $94,791 $108,610 $64,499
Intersegment 100 100 100
--------- --------- ---------
94,891 108,710 64,599
Utilities
Unaffiliated customers 34,293 32,749 29,669
--------- --------- ---------
34,293 32,749 29,669
Elimination of intersegment
revenues (100) (100) (100)
--------- --------- ---------
Total Revenues $129,084 $141,359 $94,168
========= ========= =========
Operating profit:
- -----------------
Real estate ($22,091) $7,987 ($3,237)
Utilities 7,885 6,330 3,835
--------- --------- ---------
Total operating profit (14,206) 14,317 598
Interest expense (12,668) (12,053) (11,518)
--------- --------- ---------
(Loss) income from continuing
operations ($26,874) $2,264 ($10,920)
(Loss) income from discontinued
operations (115) (1,224) 581
--------- --------- ---------
Net (loss) income ($26,989) $1,040 ($10,339)
========= ========= =========
Depreciation:
- -------------
Real estate $2,955 $2,180 $2,117
Utilities 4,006 3,809 3,486
--------- --------- ---------
Total $6,961 $5,989 $5,603
========= ========= =========
Capital expenditures:
- ---------------------
Real estate $2,019 $3,324 $2,138
Utilities 13,947 12,336 17,382
--------- --------- ---------
Total $15,966 $15,660 $19,520
========= ========= =========
December 31
------------------------------------
1997 1996 1995
--------- --------- ---------
Identifiable assets:
Real estate $275,485 $252,273 $239,459
Utilities 163,562 186,020 182,661
--------- --------- ---------
Total identifiable assets 439,047 438,293 422,120
General corporate assets 321 4,892 48,512
--------- --------- ---------
Total Assets $439,368 $443,185 $470,632
========= ========= =========
</TABLE>
51
<PAGE>
<PAGE> 52
NOTE Q - 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 R - 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, 1997 and 1996, are as
follows:
<TABLE>
<CAPTION>
1997 1996
----------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents $4,085 $4,085 $6,463 $6,463
Restricted cash 4,690 4,690 1,583 1,583
Investments - trading - - 4,535 4,535
Contracts and mortgage notes receivables 24,319 23,789 38,200 39,299
Other receivables 6,186 6,186 7,066 7,066
Notes, mortgage notes and other debt:
Corporate:
Bank credit lines:
Long term bank credit lines 14,000 13,837 3,350 3,350
Senior debentures 30,506 30,506 29,798 30,936
-------- -------- -------- --------
Total corporate $44,506 $44,343 $33,148 $34,286
-------- -------- -------- --------
Notes, collateralized by contracts
and mortgage notes receivable $23,566 $23,447 $36,030 $36,115
-------- -------- -------- --------
Real estate:
Note payable $3,899 $3,118 $ - $ -
Short term development and
construction loans 12,344 12,344 12,323 12,371
Long term development and
construction loans 22,920 23,346 15,139 24,117
-------- -------- -------- --------
Total real estate $39,163 $38,808 $27,462 $36,488
-------- -------- -------- --------
Avatar Utilities Inc.:
Short term bank credit lines $1,432 $1,432 $4,350 $4,350
Mortgage obligations, first mortgage
bonds, and promissory notes 37,784 35,561 37,802 35,618
-------- -------- -------- --------
Total Utilities $39,216 $36,993 $42,152 $39,968
-------- -------- -------- --------
Discontinued Operations:
Cash and cash equivalents $371 $371 $251 $251
Contracts and mortgage notes
receivables $15,197 $14,787 $11,057 $10,806
Other receivables $691 $691 $221 $221
Notes, collateralized by contracts
and mortgage notes receivable $12,952 $13,683 $7,998 $8,229
Real estate $4,568 $4,771 $2,193 $2,239
</TABLE>
52
<PAGE>
<PAGE> 53
NOTE R- FAIR VALUE OF FINANCIAL INSTRUMENTS - continued
The Company in estimating the fair value of financial instruments
used the following methods and assumptions:
Cash and cash equivalents 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 receivables: The fair value amounts of
the Company's contracts, mortgage notes and other receivables are
estimated based on a discounted cash flow analysis.
Other receivables: The carrying amount reported in the balance sheet
for other receivables approximates its fair value.
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 debentures: At December 31, 1997, the carrying amount in the
balance sheet for the Company's Senior debentures approximates its
fair values. At December 31, 1996, the fair values are estimated
based on quoted market prices.
53
<PAGE>
<PAGE> 54
NOTE S - QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1997 and 1996 is as
follows:
<TABLE>
<CAPTION>
1997 Quarter
---------------------------------------
First Second Third Fourth
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenues $32,019 $34,226 $28,167 $34,672
Expenses 33,876 34,689 33,132 54,261
-------- -------- -------- --------
(Loss) income from
continuing operations (1,857) (463) (4,965) (19,589)
(Loss) income from
discontinued operations (130) 882 (48) (819)
-------- -------- -------- --------
Net (loss) income ($1,987) $419 ($5,013) ($20,408)
======== ======== ======== ========
Basic and Diluted EPS:
Net (loss) income ($0.22) $0.05 ($0.55) ($2.24)
======== ======== ======== ========
1996 Quarter
---------------------------------------
First Second Third Fourth
-------- -------- -------- --------
Net revenues $27,315 $36,065 $31,378 $46,601
Expenses 27,975 36,027 32,169 42,924
-------- -------- -------- --------
Loss (income) from continuing
operations (660) 38 (791) 3,677
(Loss) income from
discontinued operations (416) 55 434 (1,297)
-------- -------- -------- --------
Net (loss) income ($1,076) $93 ($357) $2,380
======== ======== ======== ========
Basic and Diluted EPS:
Net loss ($0.12) $0.01 ($0.04) $0.26
======== ======== ======== ========
</TABLE>
1) During December 1997, the Company recorded an impairment loss of
$14,667 to the carrying value of the Harbor Islands community.
2) During the fourth quarter of 1997, the Company recorded $2,000 of
construction costs for houses which closed prior to the fourth
quarter of 1997.
54
<PAGE>
<PAGE> 55
NOTE T - DISCONTINUED OPERATIONS
During 1997, the Company developed a formal plan for the
disposition of its timeshare business. A letter of intent for the sale
of the business was executed during the third quarter of 1997; however,
negotiations were discontinued during the first quarter of 1998.
Management is currently in discussion with various parties to market
the sale of this operation. Accordingly, net assets and liabilities of
the timeshare business have been segregated from the continuing
operations in the accompanying balance sheets, and operating results
are segregated and reported as discontinued operations in the
accompanying consolidated statements of operations and cash flows.
Information relating to the discontinued operations for the years
ended December 31, 1997, 1996 and 1995 are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
For the year ended December 31,
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues
--------
Real estate sales $12,094 $10,011 $7,771
Interest income 1,799 972 226
Other 707 356 -
-------- -------- --------
Total revenues 14,600 11,339 7,997
Expenses
--------
Real estate expenses 13,464 11,679 7,269
General and administrative
expenses - - 38
Interest expense 1,251 884 109
-------- -------- --------
Total expenses 14,715 12,563 7,416
Net (loss) income from
discontinued operations (115) (1,224) 581
-------- -------- --------
Net (loss) income ($115) ($1,224) $581
</TABLE>
55
<PAGE>
<PAGE> 56
NOTE T - DISCONTINUED OPERATIONS - continued
The net assets and liabilities of the discontinued operations
included in the accompanying balance sheets as of December 31, 1997 and
1996 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------- -------------
<S> <C> <C>
Assets
------
Cash and cash equivalents $371 $251
Contracts and mortgage notes receivables, net 15,197 11,057
Other receivables, net 691 221
Land and other inventories 8,903 6,007
Property, plant and equipment, net 238 237
Other assets 2,159 2,299
------------- --------------
Total Assets $27,559 $20,072
============= =============
Liabilities
-----------
Notes, mortgage notes and other debt:
Notes, collateralized by contracts and
mortgage notes receivable $12,952 $7,998
Real estate 4,568 2,193
Accounts payable 694 349
Accrued and other liabilities 448 1,245
------------- -------------
Total Liabilities $18,662 $11,785
============= =============
</TABLE>
NOTE U - SUBSEQUENT EVENT
On February 2, 1998 the Company issued $115,000 principal amount
of 7% Convertible Subordinated Notes due 2005 (the "Notes"). The Notes
are convertible into common stock of Avatar at the option of the holder
at any time at or before maturity, unless previously redeemed, at a
conversion price of $31.80 per share. These Notes are designed to
enhance the Company's liquidity resources and to give it increased
operating and financial flexibility. The Notes are subordinated to all
present and future senior indebtedness of Avatar and are effectively
subordinated to all indebtedness and other liabilities of subsidiaries
of Avatar. The net proceeds of $111,550 after deducting expenses were
used to repay $33,000 aggregate amount of 8% Senior Debentures due 2000
and 9% Senior Debentures due 2000. The remaining proceeds will be used
to implement the development of the Company's new active adult
communities, to expand its homebuilding operations, to reduce higher
interest rate borrowings, to provide additional working capital and for
other corporate purposes.
56
<PAGE>
<PAGE> 57
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures.
Not applicable.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
A. Identification of Directors
The information called for in this item is incorporated by
reference to Avatar's 1998 definitive proxy statement (under
"Election of Directors") to be filed with the Securities and
Exchange Commission on or before April 30, 1998.
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 1998 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, 1998.
Item 11. Executive Compensation
The information called for by this item is incorporated by
reference to Avatar's 1998 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,
1998.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information called for by this item is incorporated by
reference to Avatar's 1998 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, 1998.
Item 13. Certain Relationships and Related Transactions
The information called for by this item is incorporated by
reference to Avatar's 1998 definitive proxy statement (under the
captions "Certain Relationships and Related Transactions") to be filed
with the Securities and Exchange Commission on or before April 30,
1998.
57
<PAGE>
<PAGE> 58
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
28 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 Exhibit 3(a) to the Form 10-K for the year
ended December 31, 1986).
3(b) * By-laws, as amended and restated February 13, 1997,
(previously filed as Exhibit 3(b) to the Form 10-K for
the year ended December 31, 1996).
4(a) * Instruments defining the rights of security holders,
including indenture for 8% senior debentures
(previously filed as Exhibit i 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 Exhibit
4(b) 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 Exhibit 4(c)
to Form 10-K for the year ended December 31, 1992).
4(d) Indenture, dated as of February 2, 1998, between
Avatar Holdings Inc. and The Chase Manhattan Bank, as
Trustee, in respect of 7% Convertible Subordinated
Notes due 2005 (filed herewith).
10(a) *1 Employment Agreement, dated as of June 15, 1992, by
and between Avatar Holdings Inc. and Edwin Jacobson
(previously filed as Exhibit 10(c) to Form 10-K for
the year ended December 31, 1992).
10(b) *1 Amendment to Employment Agreement, dated as of March
1, 1994, by and between Avatar Holdings Inc. and
Edwin Jacobson (previously filed as Exhibit 10(d)
on Form 10-K for the year ended December 31, 1993).
10(c) *1 Incentive Compensation Agreement, dated as of January
18, 1993 by and between Avatar Holdings Inc. and
Dennis Getman (previously filed as Exhibit 10(i) to
Form 10-K for the year ended December 31, 1993).
58
<PAGE>
<PAGE> 59
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K - continued
10(d) *1 Incentive Compensation Agreement, dated as of
September 9, 1993 by and between Avatar Holdings Inc.
and Charles McNairy (previously filed as Exhibit
10(j) to Form 10-K for the year ended December 31,
1993).
10(e) * Revolving Credit Agreement between Avatar Properties
Inc. and BHF Bank dated November 30, 1993 (previously
filed as Exhibit 10(k) to the Form 10-K for the year
ended December 31, 1993).
10(f) *1 Employment Agreement, dated as of July 27, 1995, by
and between Avatar Holdings Inc. and Edwin Jacobson
(previously filed as Exhibit 10(m) to Form 10-Q for
the quarter ended September 30, 1995).
10(g) *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
(previously filed as Exhibit 10(f) to the Form 10-K
for the year ended December 31, 1996).
10(h) *1 Employment Agreement, dated as of February 13, 1997,
by and between Avatar Holdings Inc. and Gerald D.
Kelfer (previously filed as Exhibit 10(g) to the Form
10-K for the year ended December 31, 1996).
10(i) *1 Nonqualified Stock Option Agreement, dated as of
February 13, 1997, by and between Avatar Holdings Inc.
and Gerald D. Kelfer (previously filed as Exhibit
10(h) to the Form 10-K for the year ended December 31,
1996).
10(j) *1 Amendment to Employment Agreement, dated as of June
13, 1997, to Employment Agreement, dated as of July
27, 1995, by and between Avatar Holdings Inc. and
Edwin Jacobson (previously filed as Exhibit 10(i) to
the Form 10-Q for the quarter ended June 30, 1997).
10(k) 1 Avatar Holdings Inc. 1997 Incentive and Capital
Accumulation Plan (filed herewith).
10(l) Registration Rights Agreement dated as of February 2,
1998, between Avatar Holdings Inc. and Leon Levy
(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.
59
<PAGE>
<PAGE> 60
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
AVATAR HOLDINGS INC. AND SUBSIDIARIES
(Dollars in thousands)
<TABLE>
Balance at Charged to Balance at
Beginning Costs and End of
of Period Expenses Deduction Period
---------- ---------- ---------- ----------
<S><C><C><C><C>
Year ended December 31, 1997:
Deducted from asset accounts:
Deferred gross profit on
homesite sales $21,878 ($3,998)(1) $2,221(2) $15,659
Allowance for doubtful accounts 179 160 339(2) - )
Market valuation account 133 - 90(3) 43
Valuation allowance for deferred
tax assets 41,000(4) 10,000 - 51,000
---------- ---------- ---------- ----------
Total $63,190 $6,162 $2,650 $66,702
========== ========== ========== ==========
Year ended December 31, 1996:
Deducted from asset accounts:
Deferred gross profit on
homesite sales $27,589 ($2,639)(1) $3,072(2) $21,878
Allowance for doubtful accounts 146 134 101(2) 179 )
Market valuation account 696 - 563(3) 133
Valuation allowance for deferred
tax assets 42,000(4) (1,000) - 41,000
---------- ---------- ---------- ----------
Total $70,431 ($3,505) $3,736 $63,190
========== ========== ========== ==========
Year ended December 31, 1995:
Deducted from asset accounts:
Deferred gross profit on
homesite sales $30,221 $720(1) $3,352(2) $27,589
Allowance for doubtful accounts 750 29 633(2) 146
Market valuation accounts 1,175 - 479(3) 696
Valuation allowance for deferred
tax assets 38,000(4) 4,000 - 42,000
---------- ---------- ---------- ----------
Total $70,146 $4,749 $4,464 $70,431
========== ========== ========== ==========
</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
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.
60
<PAGE>
<PAGE> 61
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 19, 1998 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 19, 1998 By: /s/ Gerald D. Kelfer
--------------------- ----------------------
Gerald D. Kelfer,
Director, President,
Vice Chairman of the
Board of directors, Chief
Executive Officer and
Executive Committee Member
Dated: March 19, 1998 By: /s/ Milton Dresner
--------------------- --------------------
Milton Dresner, Director
and Audit Committee Member
Dated: March 19, 1998 By: /s/ Edwin Jacobson
---------------------- --------------------
Edwin Jacobson, Director
and Chairman of the Executive
Committee
Dated: March 19, 1998 By: /s/ Leon T. Kendall
--------------------- --------------------
Leon T. Kendall, Director,
Chairman of the Audit
Committee and Executive
Committee Member
Dated: March 19, 1998 By: /s/ Leon Levy
--------------------- ---------------
Leon Levy, Chairman of the
Board of Directors and
Executive Committee Member
61
<PAGE>
<PAGE> 62
Dated: March 19, 1998 By: /s/ Martin Meyerson
--------------------- ---------------------
Martin Meyerson, Director
and Audit Committee Member
Dated: March 19, 1998 By: /s/ Gernot H. Reiners
--------------------- -----------------------
Gernot H. Reiners, Director
Dated: March 19, 1998 By: /s/ Kenneth T. Rosen
--------------------- ----------------------
Kenneth T. Rosen, Director
Dated: March 19, 1998 By: /s/ Fred Stanton Smith
--------------------- ------------------------
Fred Stanton Smith,Director,
Executive Committee Member
and Audit Committee Member
Dated: March 19, 1998 By: /s/ Henry King Stanford
--------------------- -------------------------
Henry King Stanford, Director
62
<PAGE>
<PAGE> 63
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 Exhibit 3(a) to the Form
10-K for the year ended December 31, 1986).
3(b) * By-laws, as amended and restated February 13,
1997, (previously filed as Exhibit 3(b) to the
Form 10-K for the year ended December 31,
1996).
4(a) * Instruments defining the rights of security
holders, including indenture for 8% senior
debentures (previously filed as Exhibit i 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 Exhibit 4(b) 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 Exhibit
4(c) to Form 10-K for the year ended December
31, 1992).
4(d) Indenture, dated as of February 2, 1998,
between Avatar Holdings Inc. and The Chase
Manhattan Bank, as Trustee, in respect of 7%
Convertible Subordinated Notes due 2005 (filed
herewith).
10(a) *1 Employment Agreement, dated as of June 15,
1992, by and between Avatar Holdings Inc. and
Edwin Jacobson (previously filed as Exhibit
10(c) to Form 10-K for the year ended December
31, 1992).
10(b) *1 Amendment to Employment Agreement, dated as of
March 1, 1994, by and between Avatar Holdings
Inc. and Edwin Jacobson (previously filed as
Exhibit 10(d) to Form 10-K for the year ended
December 31, 1993).
10(c) *1 Incentive Compensation Agreement, dated as of
January 18, 1993 by and between Avatar Holdings
Inc. and Dennis Getman (previously filed as
Exhibit 10(i) to Form 10-K for the year ended
December 31, 1993).
10(d) *1 Incentive Compensation Agreement, dated as of
September 9, 1993 by and between Avatar
Holdings Inc. and Charles McNairy (previously
filed as Exhibit 10(j) to Form 10-K for the
year ended December 31, 1993).
63
<PAGE>
<PAGE> 64
Exhibit Index - continued
-------------------------
10(e) * Revolving Credit Agreement between Avatar
Properties Inc. and BHF Bank dated November 30,
1993 (previously filed as Exhibit 10(k) to the
Form 10-K for the year ended December 31,
1993).
10(f) *1 Employment Agreement, dated as of July 27,
1995, by and between Avatar Holdings Inc. and
Edwin Jacobson (previously filed as Exhibit
10(m) to Form 10-Q for the quarter ended
September 30, 1995).
10(g) *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 (previously
filed as Exhibit 10f) to the Form 10-K for the
year ended December 31, 1996).
10(h) *1 Employment Agreement, dated as of February 13,
1997, by and between Avatar Holdings Inc. and
Gerald D. Kelfer (previously filed as Exhibit
10(g) to the Form 10-K for the year ended
December 31, 1996).
10(i) *1 Nonqualified Stock Option Agreement, dated as
of February 13, 1997, by and between Avatar
Holdings Inc. and Gerald D. Kelfer (previously
filed as Exhibit 10(h) to the Form 10-K for the
year ended December 31, 1996).
10(j) *1 Amendment to Employment Agreement, dated as of
June 13, 1997, to Employment Agreement, dated
as of July 27, 1995, by and between Avatar
Holdings Inc. and Edwin Jacobson (previously
filed as Exhibit 10(i) to the Form 10-Q for the
quarter ended June 30, 1997).
10(k) 1 Avatar Holdings Inc. 1997 Incentive and Capital
Accumulation Plan (filed herewith).
10(l) Registration Rights Agreement dated as of
February 2, 1998, between Avatar Holdings Inc.
and Leon Levy (filed herewith).
11 Computations of earnings per share (filed
herewith).
27 Financial Data Schedule (filed herewith).
64
<PAGE>
<PAGE> 65
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc.
and The Chase Manhattan Bank
AVATAR HOLDINGS INC.
and
THE CHASE MANHATTAN BANK,
as Indenture Trustee
___________________
INDENTURE
Dated as of February 2, 1998
___________________
$115,000,000
7% Convertible Subordinated Notes due 2005<PAGE>
1
65
<PAGE>
<PAGE> 66
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
INDENTURE, dated as of February 2, 1998 between AVATAR
HOLDINGS INC., a corporation duly organized and existing under
the laws of the State of Delaware (herein called the `Company'),
having its principal executive offices at 255 Alhambra Circle,
Coral Gables, Florida 33134, and THE CHASE MANHATTAN BANK, a New
York banking corporation, as Indenture Trustee (herein called the
`Trustee').
Whereas, the Company has duly authorized the creation of an
issue of its 7% Convertible Subordinated Notes due 2005 (herein
called the `Securities') of substantially the tenor and amount
hereinafter set forth, and to provide therefor the Company has
duly authorized the execution and delivery of this Indenture.
Whereas, all things necessary to make the Securities, when
executed by the Company and authenticated and delivered hereunder
and duly issued by the Company, the valid obligations of the
Company, and to make this Indenture a valid agreement of the
Company, in accordance with their and its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH: for and in
consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE I.
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01 Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well
as the singular;
(2) all other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference therein,
have the meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally
accepted accounting principles, and, except as otherwise herein
expressly provided, the term `generally accepted accounting
principles' with respect to any computation required and
permitted hereunder shall mean United States accounting
principles as are generally accepted at the date of this
Indenture; and
(4) the words `herein', `hereof' and `hereunder' and other
words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or other subdivision.
Certain terms used in Articles XII, XIII and XIV are defined
in such Articles.
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
`Act', when used with respect to any Holder, has the meaning
specified in Section 1.04.
`Affiliate' of any specified Person means any other Person
directly or indirectly controlling, controlled by or under direct
or indirect common control with such specified Person. For the
purposes of this definition, `control' when used with respect to
any specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and
the terms `controlling' and `controlled' have meanings
correlative to the foregoing.
`Agent Member' means any member of, or participant in, the
Depositary.
`Applicable Procedures' means, with respect to any transfer
or transaction involving a Global Security or beneficial interest
therein, the rules and procedures of the Depositary for such
Global Security to the extent applicable to such transaction and
as in effect from time to time.
`Authenticating Agent' means any Person authorized by the
Trustee pursuant to Section 6.14 to act on behalf of the Trustee
to authenticate Securities.
The terms `Beneficial Owner' and `beneficially owns' are
determined in accordance with Rule 13d-3, promulgated by the
Commission under the Exchange Act.
`Board of Directors' means either the board of directors of
the Company or any duly authorized committee of that board.
`Board Resolution' means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have
been duly adopted by the Board of Directors and to be in full
force and effect on the date of such certification and delivered
to the Trustee.
`Business Day' means each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking
institutions in New York, New York are authorized or obligated to
close by law or executive order.
`Change in Control' has the meaning specified in Section
14.07.
`Closing Date' means February 2, 1998.
`Commission' means the Securities and Exchange Commission as
from time to time constituted, created under the Exchange Act,
or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned
to it under the Trust Indenture Act, then the body performing
such duties at such time.
`Common Stock' includes any stock of any class of the
Company which has no preference in respect of dividends or of
amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Company and which
is not subject to redemption by the Company. However, subject to
the provisions of Section 13.11, shares
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
issuable on conversion of Securities shall include only shares of
the class designated as Common Stock of the Company at the date of
this Indenture or shares of any class or classes resulting from any
reclassification or reclassifications thereof and which have no
preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or
winding-up of the Company and which are not subject to redemption
by the Company; provided, that if at any time there shall be more
than one such resulting class, the shares of each such class then
so issuable shall be substantially in the proportion which the
total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such
classes resulting from all such reclassifications.
`Company' means the Person named as the `Company' in the
first paragraph of this instrument until a successor Person shall
have become such pursuant to the applicable provisions of this
Indenture, and thereafter `Company' shall mean such successor
Person.
`Company Request' or `Company Order' means a written request
or order signed in the name of the Company by its Chairman of the
Board, its President or a Vice President, and by its Chief
Financial Officer, Controller, its Treasurer or an Assistant
Treasurer, or its Secretary or an Assistant Secretary, and
delivered to the Trustee.
`Consolidated Subsidiary' means a Subsidiary of the Company
whose financial statements are included in the most recent annual
consolidated financial statements of the Company and its
Subsidiaries.
`Corporate Trust Office' means the office of the Trustee at
which at any particular time its corporate trust business shall
principally be administered, which office at the date hereof is
located at 450 West 33rd Street, New York, New York 10001.
`Credit Facility' means, in each case as amended, restated,
modified, renewed, increased, refunded, replaced or refinanced in
whole or in part from time to time, the Revolving Credit
Agreement dated August 27, 1996 between the Company and BHF Bank,
Grand Cayman Branch, as Lender.
`Current Market Price' has the meaning specified in Section
13.04.
`DTC' means The Depository Trust Company, a New York limited
purpose trust company.
`Defaulted Interest' has the meaning specified in Section
3.07.
`Depositary' means, with respect to any Global Securities, a
clearing agency that is registered as such under the Exchange Act
and is designated by the Company to act as a Depositary for such
Global Securities (or any successor securities clearing agency so
registered).
`Designated Senior Indebtedness' means Senior Indebtedness
(a) under any debt facility with banks or other lenders which
provides for revolving credit loans, term loans, receivables
financing (including through the sale of receivables) or letters
of credit to the Company or (b) the
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
principal amount of which is $25.0 million or more and that has been
designated by the Company as `Designated Senior Indebtedness.'
`Event of Default' has the meaning specified in Section
5.01.
`Exchange Act' means the Securities Exchange Act of 1934, as
amended.
`Global Security' means a Security that is registered in the
Security Register in the name of a Depositary or nominee thereof.
`Holder' means a Person in whose name a Security is
registered in the Security Register.
`Indenture' means this instrument as originally executed or
as it may from time to time be supplemented or amended by one or
more indentures supplemental hereto entered into pursuant to the
applicable provisions hereof, including, for all purposes of this
instrument and any such supplemental indenture, the provisions of
the Trust Indenture Act that are deemed to be a part of and to
govern this instrument and any such supplemental indenture,
respectively.
`Interest Payment Date' means the Stated Maturity of an
installment of interest on the Securities.
`Maturity,' when used with respect to any Security, means
the date on which the principal of such Security becomes due and
payable as therein or herein provided, whether at the Stated
Maturity thereof or by declaration of acceleration, redemption or
otherwise.
`Obligations' in respect of Senior Indebtedness means any
principal, interest, premiums, fees, indemnifications,
reimbursements, damages and other liabilities payable under the
documentation governing any such indebtedness.
`Officers' Certificate' means a certificate, in form
reasonably satisfactory to the Trustee, signed by the Chairman of
the Board, the Chief Executive Officer, the President or a Vice
President, and by the Chief Financial Officer, Controller, the
Treasurer or an Assistant Treasurer, the Secretary or an
Assistant Secretary, of the Company, and delivered to the
Trustee. One of the officers signing an Officers' Certificate
given pursuant to Section 10.04 shall be the principal executive,
financial or accounting officer of the Company.
`Opinion of Counsel' means a written opinion, in form
reasonably satisfactory to the Trustee, of counsel, who may be
counsel for or an employee of the Company, and who shall be
reasonably acceptable to the Trustee.
`Outstanding', when used with respect to Securities, means,
as of the date of determination, all Securities theretofore
authenticated and delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
(ii) Securities, or portions thereof, for the payment
or redemption of which moneys in the necessary amount have
been theretofore deposited with the Trustee or any Paying
Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act
as its own Paying Agent) for the Holders of such Securities;
provided, that if such Securities, or portions thereof, are
to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made; and
(iii) Securities which have been paid pursuant to
Section 3.06 or in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to
this Indenture, other than any such Securities in respect of
which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have
given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Securities owned by the Company or
any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the
Company or any other obligor upon the Securities or any Affiliate
of the Company or of such other obligor.
`Paying Agent' means any Person authorized by the Company to
pay the principal of and premium, if any, or interest on any
Securities on behalf of the Company.
`Person' means any individual, corporation, limited
liability company, partnership, joint venture, trust,
unincorporated organization or government or any agency or
political subdivision thereof.
`Predecessor Security' of any particular Security means
every previous Security evidencing all or a portion of the same
debt as that evidenced by such particular Security; and, for the
purposes of this definition, any Security authenticated and
delivered under Section 3.06 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or
stolen Security.
`Record Date' means either a Regular Record Date or a
Special Record Date, as applicable.
`Redemption Date', when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or
pursuant to this Indenture.
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
`Redemption Price', when used with respect to any Security
to be redeemed, means the price at which it is to be redeemed
pursuant to this Indenture on the applicable Redemption Date.
`Regular Record Date', for the interest payable on any
Interest Payment Date means March 15 or September 15 (whether or
not a Business Day), as the case may be, next preceding such
Interest Payment Date.
`Representative' means the indenture trustee or other
trustee, agent or representative for any Senior Indebtedness.
`Repurchase Date' has the meaning specified in Section
14.01.
`Repurchase Notice' has the meaning specified in Section
14.02.
`Repurchase Price' has the meaning specified in Section
14.01.
`Responsible Officer' means, when used with respect to the
Trustee, the chairman of the Board of Directors, any vice
chairman of the Board of Directors, the chairman of the trust
committee, the chairman of the executive committee, any vice
chairman of the executive committee, the president, any vice
president (whether or not designated by numbers or words added
before or after the title `vice president'), the cashier, the
secretary, the treasurer, any senior trust officer, any trust
officer, any assistant trust officer, any assistant cashier, any
assistant secretary, any assistant treasurer, or any other
officer or assistant officer of the Trustee customarily
performing functions similar to those performed by the Persons
who at the time shall be such officers, respectively, or to whom
any corporate trust matter is referred because of his or her
knowledge of and familiarity with the particular subject.
`Security Register' and `Security Registrar' have the
respective meanings specified in Section 3.05.
`Senior Indebtedness' means the principal of and premium, if
any, and interest on (a) all indebtedness of the Company for
money borrowed, whether outstanding on the date of execution of
this Indenture or hereafter created, incurred or assumed, except
any such other indebtedness that by the terms of the instrument
or instruments by which such indebtedness was created or incurred
expressly provides that it (i) is junior in right of payment to
the Securities or (ii) ranks pari passu in right of payment with
the Securities, and (b) any amendments, renewals, extensions,
modifications, refinancings and refundings of the foregoing. For
the purposes of this definition, `indebtedness for money
borrowed' when used with respect to the Company means (i) any
obligation of, or any obligation guaranteed by, the Company for
the repayment of borrowed money (including without limitation
fees, penalties or other obligations in respect thereof), whether
or not evidenced by bonds, debentures, notes or other written
instruments, (ii) any deferred payment obligation of, or any such
obligation guaranteed by, the Company for the payment of the
purchase price of property or assets evidenced by a note or
similar instrument, and (iii) any obligation of, or any such
obligation guaranteed by, the Company for the payment of rent or
other amounts under a lease of property or assets which
obligation is required to be
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
classified and accounted for as a capitalized lease on the balance
sheet of the Company under generally accepted accounting principles.
`Significant Subsidiary' means at any time a Subsidiary that
is at that time a `significant subsidiary' of the Company within
the meaning of Rule 1-02(w) of Regulation S-X under the
Securities Act as in effect on the date of this Indenture.
`Special Record Date' for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section
3.07.
`Stated Maturity', when used with respect to any Security or
any installment of interest thereon, means the date specified in
such Security as the fixed date on which the principal of such
Security or such installment of interest is due and payable.
`Subsidiary' means a corporation more than 50% of the
outstanding voting stock of which is owned, directly or
indirectly, by the Company or by one or more other Subsidiaries
or by the Company and one or more other Subsidiaries. For the
purposes of this definition, `voting stock' means stock which
ordinarily has voting power for the election of directors,
whether at all times or only so long as no senior class of stock
has such voting power by reason of any contingency.
`Trust Indenture Act' means the Trust Indenture Act of 1939
as in force at the date as of which this instrument was executed;
provided, however, that in the event the Trust Indenture Act of
1939 is amended after such date, `Trust Indenture Act' means, to
the extent required by any such amendment, the Trust Indenture
Act of 1939 as so amended.
`Trustee' means the Person named as the `Trustee' in the
first paragraph of this instrument until a successor Trustee
shall have become such pursuant to the applicable provisions of
this Indenture, and thereafter `Trustee' shall mean such
successor Trustee.
SECTION 1.02 Compliance Certificates and Opinions.
Upon any application or request by the Company to the
Trustee to take any action under any provision of this Indenture,
the Company shall furnish to the Trustee such certificates and
opinions as may be required under the Trust Indenture Act. Each
such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the
Company, or an Opinion of Counsel, if to be given by counsel, and
shall comply with the requirements of the Trust Indenture Act and
any other requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with
a condition or covenant provided for in this Indenture shall
include:
(1) a statement that each individual or firm signing such
certificate or opinion has read such covenant or condition and
the definitions herein relating thereto;
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such
individual or such firm, he has or they have made such
examination or investigation as is necessary to enable him or
them to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual or such firm, such condition or covenant has been
complied with.
SECTION 1.03 Form of Documents Delivered to Trustee.
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or
covered by the opinion of, only one such Person, or that they be
so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any
Person may certify to give an opinion as to such matters in one
or several documents.
Any certificate or opinion of an officer of the Company may
be based, insofar as it relates to legal matters, upon a
certification or Opinion of Counsel, unless such officer knows,
or in the exercise of reasonable care should know, that the
certificate or opinion with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such
certificate or Opinion of Counsel may be based, insofar as it
relates to factual matters, upon a certificate of public
officials or upon a certificate or opinion of, or representations
by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the
possession of the Company, unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or
opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements,
opinions or other instruments under this Indenture, they may, but
need not, be consolidated and form one instrument.
SECTION 1.04 Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be
given or taken by Holders may be embodied in and evidenced by one
or more instruments of substantially similar tenor signed by such
Holders in person or by agents duly appointed in writing; and,
except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are
delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein
sometimes referred to as the `Act' of the Holders signing such
instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be
sufficient for
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
any purpose of this Indenture and (subject to Section 6.01)
conclusive in favor of the Trustee and the Company, if made in
the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a
witness of such execution or by a certificate of a notary public
or other officer authorized by law to take acknowledgments of
deeds, certifying that the individual signing such instrument or
writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also
constitute sufficient proof of his authority. The fact and date
of the execution of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in
any other manner which the Trustee deems sufficient.
(c) The Company may fix any day as the record date for the
purpose of determining the Holders entitled to give or take any
request, demand, authorization, direction, notice, consent,
waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders. If not set by the
Company prior to the first solicitation of a Holder made by any
Person in respect of any such action, or, in the case of any such
vote, prior to such vote, the record date for any such action or
vote shall be the 30th day (or, if later, the date of the most
recent list of Holders required to be provided pursuant to
Section 7.01) prior to such first solicitation or vote, as the
case may be. With regard to any record date, only the Holders on
such date (or their duly designated proxies) shall be entitled to
give or take, or vote on, the relevant action. Notwithstanding
the foregoing, the Company shall not set a record date for, and
the provisions of this paragraph shall not apply with respect to,
any Act by the Holders pursuant to Section 5.01, 5.02 or 5.12.
(d) The ownership of Securities shall be proved by the
Security Register.
(e) Any Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every
Security issued upon the registration of transfer therefor or in
exchange therefor or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made
upon such Security.
(f) Without limiting the foregoing, a Holder entitled
hereunder to give or take any action hereunder with regard to any
particular Security may do so with regard to all or any part of
the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such
appointment with regard to all or any different part of such
principal amount.
SECTION 1.05 Notices, Etc., to Trustee and Company.
Any Act of Holders or other documents provided or permitted
by this Indenture to be made upon, given or furnished to, or
filed with,
(1) the Trustee by any Holder or by the Company shall
be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
Corporate Trust Office, Attention: Corporate Trustee
Administration, or at any other address previously furnished
in writing to the Holders and the Company by the Trustee; or
(2) the Company by the Trustee or by any Holder shall
be sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if in writing and mailed, first-
class postage prepaid, to the Company, addressed to it at
the address of its principal executive offices specified in
the first paragraph of this instrument or at any other
address previously furnished in writing to the Trustee by
the Company.
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally
delivered; three Business Days after being deposited in the mail,
first class, registered or certified with postage prepaid, if
mailed; when answered back if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to
the courier, if sent by nationally recognized overnight air
courier guaranteeing next day delivery.
SECTION 1.06 Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise
herein expressly provided) if made, given, furnished or filed in
writing to each Holder affected by such event, at his address as
it appears in the Security Register, not later than the latest
date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. Where this Indenture
provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be
filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon
such waiver. All such notices and communications shall be deemed
to have been duly given: at the time delivered by hand, if
personally delivered; three Business Days after being deposited
in the mail, first class, registered or certified with postage
prepaid, if mailed; when answered back if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after
timely delivery to the courier, if sent by nationally recognized
overnight air courier guaranteeing next day delivery.
In the case of any notice this Indenture provides shall be
given by mail, if, by reason of the suspension of regular mail
service or by reason of any other cause it shall be impracticable
to give such notice by mail, then such notification as shall be
made with the approval of the Trustee shall constitute a
sufficient notification for every purpose hereunder.
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
SECTION 1.07 Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with
a provision of the Trust Indenture Act which is required under
such Act to be a part of and govern this Indenture if this
Indenture were subject thereto, the latter provision shall
control. If any provision of this Indenture modifies or excludes
any provision of the Trust Indenture Act that may be so modified
or excluded, the latter provision shall be deemed to apply to
this Indenture as so modified or to be excluded, as the case may
be.
SECTION 1.08 Effect of Headings and Table of Contents.
The Article and Section headings herein and in the Table of
Contents are for convenience only and shall not affect the
construction hereof.
SECTION 1.09 Successors and Assigns.
All covenants and agreements in this Indenture by the
Company and the Trustee shall bind each of their respective
successors and assigns, whether so expressed or not.
SECTION 1.10 Separability Clause.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
SECTION 1.11 Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto
and their successors hereunder, the Holders of Securities and,
with respect to Article XII, the holders of Senior Indebtedness,
any benefit or any legal or equitable right, remedy or claim
under this Indenture.
SECTION 1.12 GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
BUT WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS
THEREOF.
SECTION 1.13 Legal Holidays.
In any case where any Interest Payment Date, Redemption
Date, Repurchase Date or Stated Maturity of any Security or the
last date on which a Holder has the right to convert his
Securities shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment
of interest or principal and premium if any, or conversion of the
Securities need not be made on such date, but may be made on the
next succeeding Business Day with the same force and effect as if
made on the Interest Payment Date
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
or Redemption Date, Repurchase Date or at the Stated Maturity, or on
such last day for conversion; provided, that no interest shall accrue
for the period from and after such Interest Payment Date, Redemption
Date, Repurchase Date or Stated Maturity, as the case may be, to
the next succeeding Business Day.
SECTION 1.14 No Security Interest Created.
Nothing in this Indenture or in the Securities, express or
implied, shall be construed to constitute a security interest
under the Uniform Commercial Code or similar legislation, as now
or hereafter enacted and in effect in any jurisdiction where
property of the Company or its Subsidiaries is or may be located.
SECTION 1.15 Limitation on Individual Liability.
No recourse under or upon any obligation, covenant or
agreement contained in this Indenture or in any Security, or for
any claim based thereon or otherwise in respect thereof, shall be
had against any incorporator, stockholder, officer, director or
employee, as such, past, present or future, of the Company or any
successor Person, either directly or through the Company, whether
by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being
expressly understood that this Indenture and the obligations
issued hereunder are solely corporate obligations, and that no
such personal liability whatever shall attach to, or is or shall
be incurred by, the incorporators, stockholders, officers,
directors or employees, as such, of the Company or any successor
Person, or any of them, because of the creation of the
indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture
or in any Security or implied therefrom; and that any and all
such personal liability of every name and nature, either at
common law or in equity or by constitution or statute, of, and
any and all such rights and claims against, every such
incorporator, stockholder, officer, director or employee, as
such, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants
or agreements contained in this Indenture or in any Security or
implied therefrom, are hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this
Indenture and the issuance of such Security. Each and every
Holder of the Securities, by receiving and holding the same,
agrees to the provisions of this Section and waives and releases
any and all such recourse, claim and liability.
ARTICLE II.
SECURITY FORMS
SECTION 2.01 Forms Generally.
The Securities (including the Conversion Notice and the
Option of Holder to Elect Purchase upon a Change of Control) and
the Trustee's certificate of authentication shall be in
substantially the forms set forth in this Article, with such
appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and
may have such letters, numbers or other marks of identification
and such legends or endorsements placed
13
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<PAGE>
<PAGE> 78
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
thereon as may be required to comply with any organizational document,
any applicable law or with the rules of any securities exchange on
which the Securities are listed or as may, consistently herewith,
be determined by the officers executing such Securities, as
evidenced by their execution of the Securities.
The definitive Securities (other than a Global Security) may
be printed, lithographed or engraved or produced by any
combination of these methods on steel engraved borders or may be
produced in any other manner permitted by the rules of any
securities exchange on which the Securities may be listed, all as
determined by the officers executing the Securities, as evidenced
by their execution of such Securities.
SECTION 2.02 Form of Face of Security.
A legend in substantially the following form shall appear on
the face of each Global Security:
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET,
NEW YORK, NEW YORK) (`DTC'), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE REGISTERED FORM, THIS SECURITY MAY NOT
BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE
OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
14
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<PAGE>
<PAGE> 79
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
AVATAR HOLDINGS INC.
7% Convertible Subordinated Note due 2005
Cusip No.
No. ________
$__________
Avatar Holdings Inc., a corporation duly organized and
existing under the laws of the State of Delaware (herein called
the `Company', which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby
promises to pay to __________________________, or registered
assigns, the principal sum of $___________ Dollars on April 1,
2005, and to pay interest thereon from and including the date of
original issuance of Securities pursuant to the Indenture or from
and including the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually on
April 1 and October 1 in each year, commencing April 1, 1998 at
the rate of 7% per annum, until the principal hereof is paid or
made available for payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment
Date will, as provided in such Indenture, be paid to the Person
in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be March 15 or
September 15 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date. Any such interest not
so punctually paid or duly provided for will forthwith cease to
be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Security (or one
or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Trustee or be paid at any
time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities
may be listed and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture. Notice
of a Special Record Date shall be given to Holders of Securities
not less than 10 days prior to such Special Record Date. Payment
of the principal of and premium, if any, and interest on this
Security will be made (i) in respect of Securities held of record
by the Depositary or its nominee in same day funds on or prior to
the respective payment dates and (ii) in respect of Securities
held of record by Holders other than the Depositary or its
nominee at the offices of the Trustee in New York, New York (or
such other office maintained for that purpose pursuant to Section
10.02 of the Indenture), in each case in such coin or currency of
the United States of America as of the time of payment is legal
tender for payment of public and private debts; provided,
however, that at the option of the Company payment of interest in
respect of Securities held of record by Holders other than the
Depositary or its nominee may be made by check mailed to the
address of the Person entitled thereto as such address shall
appear in the Security Register.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by
manual signature, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any
purpose.
15
79
<PAGE>
<PAGE> 80
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
IN WITNESS WHEREOF, the Company has caused this instrument
to be duly executed under its corporate seal.
Dated: AVATAR HOLDINGS INC.
By:___________________________________
Name:
Title:
Attest:
____________________________
Name:
Title:
16
80
<PAGE>
<PAGE> 81
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
SECTION 2.03 Form of Reverse of Security.
This Security is one of a duly authorized issue of
Securities of the Company designated as its 7% Convertible
Subordinated Notes due 2005 (herein called the `Securities'),
limited in aggregate principal amount to $115,000,000 (including
$15,000,000 principal amount of the Securities issuable upon
exercise of an underwriters' over-allotment option), issued and
to be issued under an Indenture, dated as of February 2, 1998
(herein called the `Indenture'), between the Company and The
Chase Manhattan Bank, as Indenture Trustee (herein called the
`Trustee', which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Trustee, the holders of Senior
Indebtedness and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and
delivered.
Subject to and upon compliance with the provisions of the
Indenture, the Holder of this Security is entitled, at his
option, at any time after 60 days following the date of original
issuance of Securities pursuant to the Indenture and on or before
the close of business on April 1, 2005 or in case this Security
or a portion hereof is called for redemption, then in respect of
this Security or such portion hereof until and including, but
(unless the Company defaults in making the payment due upon
redemption) not after, the close of business on the second
Business Day immediately preceding the Redemption Date, to
convert this Security (or any portion of the principal amount
hereof which is $1,000 or an integral multiple thereof), at the
principal amount hereof, or of such portion, into fully paid and
non-assessable shares (calculated as to each conversion to the
nearest 1/100th of a share) of Common Stock at a conversion price
equal to $31.80 principal amount for each share of Common Stock
(or at the current adjusted conversion price if an adjustment has
been made as provided in Article XIII of the Indenture) by
surrender of this Security, duly endorsed or assigned to the
Company or in blank, to the Company at its office or agency
maintained for that purpose pursuant to Section 10.02 of the
Indenture, accompanied by written notice to the Company in the
form provided in this Security (or such other notice as is
acceptable to the Company) that the Holder hereof elects to
convert this Security, or if less than the entire principal
amount hereof is to be converted, the portion hereof to be
converted, and, in case such surrender shall be made during the
period from the close of business on any Regular Record Date next
preceding any Interest Payment Date to the opening of business on
such Interest Payment Date (unless this Security or portion
thereof being converted has been called for redemption on a
Redemption Date occurring within such period), also accompanied
by payment in New York Clearing House funds, or other funds
acceptable to the Company of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of
this Security then being converted. Subject to the aforesaid
requirement for payment and, in the case of a conversion after
the Regular Record Date next preceding any Interest Payment Date
and on or before such Interest Payment Date, to the right of the
Holder of this Security (or any Predecessor Security) of record
at such Regular Record Date to receive an installment of interest
(with certain exceptions provided in the Indenture), no payment
or adjustment is to be made upon conversion on account of any
interest accrued hereon or on account of any dividends on the
Common Stock issued upon conversion. No fractional shares or
scrip representing fractions of shares will be issued on
conversion, but instead of any fractional share the Company shall
pay a cash adjustment as provided in the Indenture. The
conversion price is subject to adjustment as
17
81
<PAGE>
<PAGE> 82
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
provided in Article XIII of the Indenture. In addition, the Indenture
provides that in case of certain consolidations or mergers to which the
Company is a party or the sale or transfer of the properties and assets
substantially as an entirety of the Company in one transaction or
a series of related transactions, the Indenture shall be amended,
without the consent of any Holders of Securities, so that this
Security, if then outstanding, will be convertible thereafter,
during the period this Security shall be convertible as specified
above, only into the kind and amount of securities, cash and
other property receivable upon the consolidation, merger, sale or
transfer by a holder of the number of shares of Common Stock into
which this Security might have been converted immediately prior
to such consolidation, merger, sale or transfer (assuming such
holder of Common Stock failed to exercise any rights of election
and received per share the kind and amount received per share by
a plurality of non-electing shares).
The Securities are subject to redemption upon not less than
30 and not more than 60 days' notice by mail, at any time on or
after April 6, 2001, as a whole or in part, at the election of
the Company, at the Redemption Prices set forth below (expressed
as percentages of the principal amount), plus accrued and unpaid
interest to the Redemption Date (subject to the right of Holders
of record on the relevant Regular Record Date to receive interest
due on an Interest Payment Date that is on or prior to the
Redemption Date).
If redeemed during the 12-month period beginning April 1, in
the year indicated (April 6, in the case of 2001), the redemption
price shall be:
Redemption
Year Price
---- ----------
2001 .................................... 104%
2002 .................................... 103%
2003 .................................... 102%
2004 .................................... 101%
2005 .................................... 100%
If all accrued interest on the Securities has not been paid,
the Securities may not be redeemed in part and the Company may
not purchase or acquire any Security otherwise than pursuant to a
purchase or exchange offer made on the same terms to all holders
of the Securities.
In certain circumstances involving the occurrence of a
Change in Control (as defined in the Indenture), the Holder
hereof shall have the right to require the Company to repurchase
this Security at 100% of the principal amount hereof, together
with accrued and unpaid interest to the Repurchase Date, but
interest installments whose Stated Maturity is on or prior to
such Repurchase Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at
the close of business on the relevant Record Dates referred to on
the face hereof, all as provided in the Indenture. The Holder
shall have the right to withdraw its election to exercise the
repurchase right by delivering a written notice of withdrawal in
accordance with the terms of the Indenture.
18
82
<PAGE>
<PAGE> 83
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
In the event of redemption, conversion or repurchase of this
Security in part only, a new Security or Securities for the
unredeemed, unconverted or unrepurchased portion hereof will be
issued in the name of the Holder hereof upon the cancellation
hereof.
Any Securities called for redemption, unless surrendered for
conversion by the close of business on the second Business Day
immediately preceding the date fixed for redemption, are subject
to being purchased from the Holder of such Securities at the
redemption price by one or more investment banking firms or other
purchasers who may agree with the Company to purchase such
Securities and convert them into Common Stock.
The indebtedness evidenced by this Security is, to the
extent provided in the Indenture, subordinate and subject in
right of payment to the prior payment in full of all Senior
Indebtedness, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of
this Security, by accepting the same, (a) agrees to and shall be
bound by such provisions, (b) authorizes and directs the Trustee
on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided, and (c)
appoints the Trustee his attorney-in-fact for any and all such
purposes.
If an Event of Default shall occur and be continuing, the
principal of all the Securities may be declared due and payable
in the manner and with the effect provided in Article V of the
Indenture.
The Indenture provides that no Holder of any Securities may
enforce any remedy under the Indenture except in the case of
failure of the Trustee to act after notice of default and after
request of the Holders of 25% in principal amount of Outstanding
Securities and the offer to the Trustee of indemnity satisfactory
to it; provided, however, that such provision shall not prevent
the Holder hereof from enforcing payment of the principal of and
premium, if any, and interest on this Security after the same
shall have become due.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Holders of the Securities under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of not
less than a majority in aggregate principal amount of the
Securities at the time Outstanding, and, under certain limited
circumstances, by the Company and the Trustee without the consent
of the Holders. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate
principal amount of the Securities at the time Outstanding, on
behalf of the Holders of all the Securities, to waive compliance
by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Security shall
be conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of
this Security or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of and premium, if any, and interest on this
Security at the times, place and rate, and
19
83
<PAGE>
<PAGE> 84
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
in the coin or currency, herein prescribed or to convert this Security
as provided in Article XIII of the Indenture.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is
registrable in the Security Register, upon surrender of this
Security for registration of transfer at the office or agency of
the Company in any place where the principal of and any premium
and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly
executed by the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will
be issued to the designated transferee or transferees.
The Securities are issuable only in fully registered form
without coupons in denominations of $1,000 and any integral
multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities
of a different authorized denomination, as requested by the
Holder surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange except as provided in the Indenture, and the
Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration
of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes,
except as provided in this Security, whether or not this Security
be overdue, and neither the Company, the Trustee nor any such
agent shall be affected by notice to the contrary.
Interest on this Security shall be computed on the basis of
a 360-day year of twelve 30-day months.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the
Indenture. The Indenture and this Security shall be governed by
and construed in accordance with the laws of the State of New
York without regard to the conflicts of laws principles thereof.
To the extent this Security conflicts with a provision of the
Indenture, the Indenture governs.
20
84
<PAGE>
<PAGE> 85
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
FORM OF CONVERSION NOTICE
TO: AVATAR HOLDINGS INC.
The undersigned registered owner of this Security
hereby irrevocably exercises the option to convert this
Security, or the portion hereof (which is $1,000
principal amount or an integral multiple thereof)
designated below, into shares of Common Stock of Avatar
Holdings Inc. in accordance with the terms of the
Indenture referred to in this Security, and directs
that the shares issuable and deliverable upon the
conversion, together with any check in payment for a
fractional share and any Security representing any
unconverted principal amount hereof, be issued and
delivered to the registered owner hereof unless a
different name has been indicated below. If this Notice
is being delivered on a date after the close of
business on a Regular Record Date and prior to the
close of business on the related Interest Payment Date,
this Notice is accompanied by payment in New York
Clearing House funds, or other funds acceptable to the
Company, of an amount equal to the interest payable on
such Interest Payment Date on the principal of this
Security to be converted (unless this Security has been
called for redemption within such period). If shares or
any portion of this Security not converted are to be
issued in the name of a person other than the
undersigned, the undersigned will pay all transfer
taxes payable with respect thereto. Any amount required
to be paid by the undersigned on account of interest
accompanies this Security.
Dated: _________________________
_________________________
Signature(s)
(Sign exactly as your name appears on
the face of this Security)
Signature(s) must be guaranteed by a
commercial bank or trust company or a
member firm of a national stock
exchange if shares of Common Stock
are to be delivered, or Securities to be
issued, other than to and in the name of
the registered owner.
_________________________________
Signature Guarantee
21
85
<PAGE>
<PAGE> 86
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
Fill in for registration of shares of
Common Stock if they are to be delivered,
or Securities if they are to be issued,
other than to and in the name of the
registered owner:
______________________________
(Name)
______________________________
(Street Address)
______________________________
(City, State and zip code)
(Please print name and address)
Register: _____ Common Stock
_____ Securities
(Check appropriate line(s)).
Principal amount to be
converted (if less than
all):
$__________,000
_____________________________
Social Security or other Taxpayer
Identification Number of owner
22
86
<PAGE>
<PAGE> 87
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
FORM OF OPTION OF HOLDER TO ELECT PURCHASE
UPON A CHANGE IN CONTROL
TO: AVATAR HOLDINGS INC.
The undersigned registered owner of this Security
hereby irrevocably acknowledges receipt of a notice from Avatar
Holdings Inc. (the `Company') as to the occurrence of a Change in
Control with respect to the Company and requests and instructs
the Company to repay the entire principal amount of this
Security, or the portion thereof designated below (which is
$1,000 principal amount or an integral multiple thereof), in
accordance with the terms of the Indenture referred to in this
Security at the Repurchase Price.
Principal amount to be repurchased
(if less than all):
$______________________________
Signature(s): ______________________
Date: ___________________
______________________
(Sign exactly as your name
appears on the face of this
Security)
Tax Identification No.: ___________________________
Signature Guarantee: ____________________________________
(commercial bank, trust company or
member firm of a national securities
exchange)
23
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<PAGE>
<PAGE> 88
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
SECTION 2.04 Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in
substantially the following form:
This is one of the Securities referred to in the within-
mentioned Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
By ____________________________
Authorized Officer
ARTICLE III.
THE SECURITIES
SECTION 3.01 Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to
$115,000,000 (including $15,000,000 aggregate principal amount of
Securities that may be sold by the Company pursuant to the over-
allotment option granted pursuant to the Underwriting Agreement,
dated January 27, 1998, among the Company, CIBC Oppenheimer Corp.
and SBC Warburg Dillon Read Inc.), except for Securities
authenticated and delivered upon registration of transfer of, or
in exchange for, or in lieu of, other Securities pursuant to
Section 3.04, 3.05, 3.06, 9.06, 11.08, 13.02 or 14.05.
The Securities shall be known and designated as the `7%
Convertible Subordinated Notes due 2005' of the Company. Their
Stated Maturity shall be April 1, 2005 and they shall bear
interest at the rate of 7% per annum, from the date of original
issuance of Securities pursuant to this Indenture or from the
most recent Interest Payment Date to which interest has been paid
or duly provided for, as the case may be, payable semi-annually
on April 1 and October 1 commencing April 1, 1998, until the
principal thereof is paid or made available for payment.
The principal of and premium, if any, and interest on the
Securities shall be payable (i) in respect of Securities held of
record by the Depositary or its nominee in same day funds on or
prior to the respective payment dates and (ii) in respect of
Securities held of record by Holders other than the Depositary or
its nominee at the offices of the Trustee in New York, New York
(or at such other office or agency of the Company maintained for
such purpose pursuant to Section 10.02); provided, however, that
at the option of the Company payment of interest to Holders of
record other than the Depositary may be made by check mailed to
the address of the Person entitled thereto as such address shall
appear in the Security Register.
The Securities shall be redeemable as provided in Article
XI.
The Securities shall be subordinated in right of payment to
Senior Indebtedness as provided in Article XII.
24
88
<PAGE>
<PAGE> 89
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
The Securities shall be convertible as provided in Article
XIII.
The Securities shall be subject to repurchase at the option
of the Holder as provided in Article XIV.
SECTION 3.02 Denominations.
The Securities shall be issuable only in fully registered
form without coupons and only in denominations of $1,000 and any
integral multiple thereof.
SECTION 3.03 Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by
its Chairman of the Board, its Chief Executive Officer, its
President, its Chief Financial Officer or one of its Vice
Presidents, under its corporate seal or a facsimile thereof
reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on
the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior
to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities
executed by the Company to the Trustee for authentication,
together with a Company Order for the authentication and delivery
of such Securities; and the Trustee in accordance with such
Company Order shall either at one time or from time to time
pursuant to such instructions as may be described therein
authenticate and deliver such Securities as in this Indenture
provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there
appears on such Security a certificate of authentication
substantially in the form provided for herein duly executed by
the Trustee by manual signature of an authorized officer, and
such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly
authenticated and delivered hereunder and is entitled to the
benefits of the Indenture. The Trustee may appoint an
Authenticating Agent pursuant to the terms of Section 6.14.
SECTION 3.04 Temporary Securities.
Pending the preparation of definitive Securities, the
Company may execute, and upon Company Order the Trustee shall
authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in
any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are
25
89
<PAGE>
<PAGE> 90
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
issued and with such appropriate insertions, omissions, substitutions
and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
Every such temporary Security shall be executed by the Company
and shall be authenticated and delivered by the Trustee upon the
same conditions and in substantially the same manner, and with
the same effect, as the definitive Security or Securities in lieu
of which it is issued.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay.
After the preparation of Definitive Securities, the temporary
Securities shall be exchangeable for definitive Securities upon
surrender of the temporary Securities at any office or agency of
the Company designated pursuant to Section 10.02, without charge
to the Holder. Upon surrender for cancellation of any one or
more temporary Securities the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor one
or more definitive Securities of a like principal amount of
authorized denominations. Until so exchanged the temporary
Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 3.05 Registration, Registration of Transfer and
Exchange.
(a) The Company shall cause to be kept at the Corporate
Trust Office of the Trustee a register (the register maintained
in such office or in any other office or agency designated
pursuant to Section 10.02 being herein sometimes referred to as
the `Security Register') in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for
the registration of Securities and of transfers of Securities.
The Trustee is hereby appointed `Security Registrar' for the
purpose of registering Securities and transfers of Securities as
herein provided. At all reasonable times the Security Register
shall be open for inspection by the Company.
Upon surrender for registration of transfer of any Security
at an office or agency of the Company designated pursuant to
Section 10.02 for such purpose, the Company shall execute, and
the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities
of any authorized denomination and of a like aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denominations and of a like
aggregate principal amount, upon surrender of the Securities to
be exchanged at the office or agency maintained for that purpose.
Whenever Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver,
the Securities which the Holder making the exchange is entitled
to receive.
(b) All Securities issued upon any registration of transfer
or exchange of Securities shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities surrendered
upon such registration of transfer or exchange. Every Security
presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
written instrument of transfer in form satisfactory to the Company
and the Security Registrar duly executed by the Holder thereof or
its attorney duly authorized in writing, and, in the case of a transfer,
with an appropriate guarantee of signature.
No service charge shall be made for any registration or
transfer or exchange of Securities except as provided in Section
3.06. The Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Sections 3.04, 9.06,
11.08, 13.02 or 14.05 not involving any transfer.
The Company shall not be required to (i) issue, register the
transfer of or exchange any Security during a period beginning at
the opening of business 15 days before the day of the mailing of
a notice of redemption of Securities selected for redemption
under Section 11.04 and ending at the close of business on the
day of such mailing, (ii) register the transfer of or exchange of
any Security so selected for redemption in whole or in part,
except the unredeemed portion of any Security being redeemed in
part, or (iii) to register the transfer or exchange of any
Securities surrendered for conversion or repurchase upon the
occurrence of a Change in Control.
The provisions of clauses (1), (2), (3), (4) and (5) below
shall apply only to Global Securities:
(1) Each Global Security authenticated under this Indenture
shall be registered in the name of the Depositary designated for
such Global Security or a nominee thereof and delivered to such
Depositary or a nominee thereof or custodian therefor, and each
such Global Security shall constitute a single Security for all
purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture,
no Global Security may be exchanged in whole or in part for
Securities registered, and no transfer of a Global Security in
whole or in part may be registered, in the name of any Person
other than the Depositary for such Global Security or a nominee
thereof unless (A) such Depositary (i) has notified the Company
that it is unwilling or unable to continue as Depositary for such
Global Security or (ii) has ceased to be a clearing agency
registered under the Exchange Act at a time when the Depositary
is required to be so registered to act as depositary, in each
case unless the Company has approved a successor Depositary
within 90 days, (B) there shall have occurred and be continuing
an Event of Default with respect to such Global Security or (C)
the Company in its sole discretion determines that such Global
Security will be so exchangeable or transferable.
(3) Subject to clause (2) above, any exchange of a Global
Security for other Securities may be made in whole or in part,
and all Securities issued in exchange for a Global Security or
any portion thereof shall be registered in such names as the
Depositary for such Global Security shall direct.
(4) Every Security authenticated and delivered upon
registration of transfer of , or in exchange for or in lieu of, a
Global Security or any portion thereof, whether pursuant to this
Article III or otherwise, shall be authenticated and delivered in
the form of, and shall be, a Global
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
Security, unless such Security is registered in the name of a Person
other than the Depositary for such Global Security or a nominee thereof.
(5) The Depositary or its nominee, as registered owner of a
Global Security, shall be the Holder of such Global Security for
all purposes under this Indenture and the Securities, and owners
of beneficial interests in a Global Security shall hold such
interests pursuant to the Applicable Procedures. Accordingly,
any such owner's beneficial interest in a Global Security will be
shown only on, and the transfer of such interest shall be
effected only through records maintained by the Depositary or its
nominee or its Agent Members and such owners of beneficial
interests in a Global Security will not be considered the owners
or holders thereof. Neither the Company nor the Trustee will
have any responsibility or obligation to the Depositary or any of
its Agent Members with respect to (i) the accuracy of any records
maintained by the Depositary, (ii) the payment by the Depositary
or any Agent Members of any amount due to any owner of beneficial
interests in a Global Security in respect of any Securities,
(iii) the delivery of any notice by the Depositary or any Agent
Member, or (iv) any other action taken by the Depositary or any
Agent Members.
SECTION 3.06 Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a replacement Security of like tenor
and principal amount and bearing a number not contemporaneously
outstanding.
If there shall be delivered to the Company and the Trustee
(i) evidence to their satisfaction of the destruction, loss or
theft of any Security and (ii) such security or indemnity as may
be required by them to save each of them and any agent of either
of them harmless, then, in the absence of notice to the Company
or the Trustee that such Security has been acquired by a bona
fide purchaser, the Company shall execute and the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or
stolen Security, a replacement Security of like tenor and
principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen
Security has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a replacement
Security, pay such Security.
Upon the issuance of any replacement Security under this
Section, the Company may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees
and expenses of the Trustee) connected therewith.
Every replacement Security issued pursuant to this Section
in lieu of any destroyed, lost or stolen Security shall
constitute an original additional contractual obligation of the
Company, whether or not the destroyed, lost or stolen Security
shall be at any time enforceable by anyone, and shall be entitled
to all the benefits of this Indenture equally and proportionately
with any and all other Securities duly issued hereunder.
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities.
SECTION 3.07 Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be
paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest. Payment of interest
will be made (i) in respect of Securities held by the Depositary
or its nominee, in same day funds on or prior to the respective
Interest Payment Dates and (ii) in respect of Securities held of
record by Holders other than the Depositary or its nominee, at
the office of the Trustee in New York, New York or at such other
office or agency of the Company as it shall maintain for that
purpose pursuant to Section 10.02, provided, however, that, at
the option of the Company, interest on any Security held of
record by Holders other than the Depositary or its nominee may be
paid by mailing checks to the addresses of the Holders thereof as
such addresses appear in the Securities Register.
If the Company shall be required by law to deduct any taxes
from any sum of interest payable hereunder to a Holder, (i) the
Company shall make such deductions and shall pay the full amount
deducted to the relevant taxing authority in accordance with
applicable law and (ii) the amount of such deduction shall be
treated for purposes hereof as a payment of interest.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment
Date (herein called `Defaulted Interest') shall forthwith cease
to be payable to the Holder on the relevant Regular Record Date
by virtue of having been such Holder, and such Defaulted Interest
may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such
Defaulted Interest which shall be fixed in the following manner.
The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security and the
date of the proposed payment, and at the same time the Company
shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this Clause
provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not
more than 15 days and not less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt
by the Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record Date
and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed, first-class postage
prepaid, to each Holder at his address as it appears in the
Security Register, not less than 10 days prior to such Special
Record Date. Notice of the
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in
whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to
the following Clause (2).
(2) The Company may make payment of any Defaulted Interest
in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Securities may be listed,
and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this Clause, such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Security
shall carry the rights to interest accrued, and to accrue, which
were carried by such other Security.
In the case of any Security which is converted after any
Regular Record Date and on or prior to the next succeeding
Interest Payment Date (other than any Security whose Maturity is
prior to such Interest Payment Date), interest whose Stated
Maturity is on such Interest Payment Date shall be payable on
such Interest Payment Date notwithstanding such conversion, and
such interest (whether or not punctually paid or duly provided
for) shall be paid to the Person in whose name that Security (or
one or more Predecessor Securities) is registered at the close of
business on such Regular Record Date, provided, however, that
Securities so surrendered for conversion (except in the case of
Securities or portions thereof called for redemption on a
Redemption Date occurring within such period) shall be
accompanied by payment in New York Clearing House funds or other
funds acceptable to the Company of an amount equal to the
interest payable on such Interest Payment Date on the principal
amount being surrendered for conversion. Except as otherwise
expressly provided in the immediately preceding sentence, in the
case of any Security which is converted, interest whose Stated
Maturity is after the date of conversion of such Security shall
not be payable.
SECTION 3.08 Persons Deemed Owners.
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name such Security
is registered as the owner of such Security for the purpose of
receiving payment of principal of and premium, if any, and
(subject to Section 3.07) interest on such Security and for all
other purposes whatsoever, whether or not such Security be
overdue, and neither the Company, the Trustee nor any agent of
the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 3.09 Cancellation.
All Securities surrendered for payment, redemption,
repurchase, registration of transfer, exchange or conversion
shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly canceled by it.
The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and
delivered hereunder which
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
the Company may have acquired in any manner whatsoever, and all
Securities so delivered shall be promptly canceled by the Trustee.
No Securities shall be authenticated in lieu of or in exchange for
any Securities canceled as provided in this Section, except as
expressly permitted by this Indenture. All canceled Securities
held by the Trustee shall be disposed of as directed by a Company
Order.
SECTION 3.10 Computation of Interest.
Interest on the Securities shall be computed on the basis
of a 360-day year of twelve 30-day months.
ARTICLE IV.
SATISFACTION AND DISCHARGE
SECTION 4.01. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of
further effect (except as expressly provided for in this Article
IV), and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore
authenticated and delivered (other than (i)
Securities which have been destroyed, lost or
stolen and which have been replaced or paid
as provided in Section 3.06 and (ii)
Securities for whose payment money has
theretofore been deposited in trust or
segregated and held in trust by the Company
and thereafter repaid to the Company or
discharged from such trust, as provided in
Section 10.03) have been delivered to the
Trustee for cancellation; or
(B) all such Securities not theretofore
delivered to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at
their Stated Maturity within one year, or
(iii) are to be called for
redemption within one year under arrangements
satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the
name, and at the expense, of the Company, or
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
(iv) are delivered to the Trustee for
conversion in accordance with Article XIII,
and the Company, in the case of (B)(i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the Trustee
as trust funds in trust for the purpose an amount in cash
sufficient (without consideration of any investment of such cash)
to pay and discharge the entire indebtedness on such Securities
not theretofore delivered to the Trustee for cancellation for
principal and premium, if any, and interest to the date of such
deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the
case may be; provided that the Trustee is irrevocably instructed
to apply such amount to said payments with respect to the
Securities;
(2) the Company has paid or caused to be paid all other
sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied
with.
Notwithstanding the satisfaction and discharge of this
Indenture, the following rights or obligations under the
Securities and this Indenture shall survive until otherwise
terminated or discharged hereunder: (a) Article XIII, Article
XIV and the Company's obligations under Sections 3.04, 3.05,
3.06, 10.02 and 10.03, in each case with respect to any
Securities described in subclause (B) of Clause (1) of this
Section, (b) this Article IV, (c) the rights, powers, trusts,
duties and immunities of the Trustee hereunder, including the
obligations of the Company to the Trustee under Section 6.07, and
the obligations of the Company to any Authenticating Agent under
Section 6.14 and (d) if money shall have been deposited with the
Trustee pursuant to subclause (B) of Clause (1) of this Section,
the rights of Holders of any Securities described in subclause
(B) of Clause (1) of this Section to receive, solely from the
trust fund described in such subclause (B), payments in respect
of the principal of, and premium (if any) and interest on, such
Securities when such payment are due.
SECTION 4.02 Application of Trust Money.
Subject to the provisions of the last paragraph of Section
10.03, all money deposited with the Trustee pursuant to Section
4.01 shall be held in trust and applied by it, in accordance with
the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including
the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and
premium, if any, and interest for whose payment such money has
been deposited with the Trustee. All moneys deposited with the
Trustee pursuant to Section 4.01 (and held by it or any Paying
Agent) for the payment of Securities subsequently converted shall
be returned to the Company upon Company Request.
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
SECTION 4.03 Reinstatement.
If the Trustee or the Paying Agent is unable to apply any
money in accordance with this Article IV by reason of any order
or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, then the
Company's obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had occurred
pursuant to this Article IV until such time as the Trustee or
Paying Agent is permitted to apply all money held in trust with
respect to the Securities; provided, however, that if the Company
makes any payment of principal of or any premium or interest on
any Security following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of the
Securities to receive such payment from the money so held in
trust.
ARTICLE V.
REMEDIES
SECTION 5.01 Events of Default.
`Event of Default', wherever used herein, means any one of
the following events (whatever the reason for such Event of
Default and whether it shall be occasioned by the provisions of
Article XII or be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative
or governmental body);
(1) default in the payment of the principal of or
premium, if any, on any Security at its Maturity,
whether or not such payment is prohibited by the
provisions of Article XII; or
(2) default in the payment of any interest upon
any Security when it becomes due and payable, whether
or not such payment is prohibited by the provisions of
Article XII, and continuance of such default for a
period of 30 days; or
(3) failure to provide timely notice of a Change
in Control as required in accordance with the
provisions of Article XIV; or
(4) default in the payment of the Repurchase
Price in respect of any Security on the Repurchase Date
therefor in accordance with the provisions of Article
XIV, whether or not such payment is prohibited by the
provisions of Article XII; or
(5) default in the performance, or breach, of any
covenant or warranty of the Company in this Indenture
(other than a covenant or warranty a default in whose
performance or whose breach is elsewhere in this
Section specifically dealt with), and continuance of
such default or breach for a period of 30 days after
there has been given, by registered or certified mail,
to the Company by the Trustee or
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
to the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities a written notice
specifying such default or breach and requiring it to
be remedied and stating that such notice is a `Notice
of Default' hereunder; or
(6) default under one or more bonds, notes,
debentures or other evidences of indebtedness for money
borrowed by the Company or any Consolidated Subsidiary
or under one or more mortgages, indentures or
instruments under which there may be issued or by which
there may be secured or evidenced any indebtedness for
money borrowed by the Company or any Consolidated
Subsidiary, whether such indebtedness now exists or
shall hereafter be created, which default individually
or in the aggregate shall constitute a failure to pay
the principal of indebtedness in excess of $10 million
when due and payable after the expiration of any
applicable grace period with respect thereto or shall
have resulted in indebtedness in excess of $10 million
becoming or being declared due and payable prior to the
date on which it would otherwise have become due and
payable, without such indebtedness having been
discharged, or such acceleration having been rescinded
or annulled, within a period of 30 days after there
shall have been given, by registered or certified mail,
to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in principal
amount of the Outstanding Securities a written notice
specifying such default and requiring the Company to
cause such indebtedness to be discharged or cause such
acceleration to be rescinded or annulled and stating
that such notice is a `Notice of Default' hereunder; or
(7) a final judgment or final judgments for the
payment of money against the Company or any Consolidated
Subsidiary the entry by a court or courts of competent
jurisdiction of which remain undischarged for a period
(during which execution shall not be effectively stayed, the
posting of any required bond not being deemed an execution
for purposes hereof) of 30 days, provided that the aggregate
amount of all such judgments exceeds $10 million (net of
amounts to which the Company or such Subsidiary is entitled
pursuant to insurance policies which can reasonably be
expected to be paid in the ordinary course); or
(8) the filing or commencement of an involuntary case
or other proceeding against the Company or any Significant
Subsidiary of the Company seeking liquidation,
reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law
now or thereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 90 days; or an
order for relief shall be entered against the Company or any
Significant Subsidiary of the Company under the federal
bankruptcy laws as now or hereafter in effect; or
(9) the filing or commencement by the Company or any
Significant Subsidiary of the Company of a voluntary case or
other proceeding seeking liquidation,
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
reorganization or other similar relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect, or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or
the Company or any Significant Subsidiary of the Company
shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary
case or other proceeding commenced against it, or shall make
a general assignment for the benefit of creditors.
Upon receipt by the Trustee of any Notice of Default
pursuant to this Section 5.01, a record date shall automatically
and without any other action by any Person be set for the purpose
of determining the Holders of Outstanding Securities entitled to
join in such Notice of Default, which record date shall be the
close of business on the day the Trustee receives such Notice of
Default. The Holders of Outstanding Securities on such record
date (or their duly appointed agents), and only such Persons,
shall be entitled to join in such Notice of Default, whether or
not such holders remain Holders after such record date; provided
that unless such Notice of Default shall have become effective by
virtue of the Holders of the requisite principal amount of
Outstanding Securities on such record date (or their duly
appointed agents) having joined therein on or prior to the 90th
day after such record date, such Notice of Default shall
automatically and without any action by any Person be canceled
and of no further force or effect.
SECTION 5.02 Acceleration of Maturity; Rescission and
Annulment.
If an Event of Default (other than as specified in
subparagraph (8) or (9) of Section 5.01) occurs and is
continuing, then and in every such case the Trustee or the
Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the principal of all the
Securities to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders),
and upon any such declaration such principal plus any interest
accrued on the Securities to the date of declaration shall become
immediately due and payable. If an Event of Default specified in
subparagraph (8) or (9) of Section 5.01 occurs and is continuing,
then the principal of, premium, if any, and accrued and unpaid
interest, if any, on all of the Securities shall ipso facto
become and be immediately due and payable without any declaration
or other act on the part of the Trustee or any Holder of
Securities.
At any time after such a declaration of acceleration has
been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount
of the Outstanding Securities, by written notice to the Company
and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the
Trustee a sum sufficient to pay
(A) all overdue interest on all
Securities,
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
(B) the principal of and premium, if
any, on any Securities which have become due
otherwise than by such declaration of
acceleration and interest thereon at the rate
borne by the Securities,
(C) to the extent that payment of such
interest is lawful, interest upon overdue
interest at the rate borne by the Securities,
and
(D) all sums paid or advanced by the
Trustee and each predecessor Trustee, their
respective agents and counsel hereunder and
the reasonable compensation, expenses,
disbursements and advances of the Trustee and
each predecessor Trustee, their respective
agents and counsel;
and
(2) all Events of Default, other than the
nonpayment of the principal of, premium, if any, and
interest on the Securities that has become due solely
by such declaration of acceleration, have been cured or
waived as provided in Section 5.13.
No such rescission and waiver shall affect any subsequent default
or impair any right consequent thereon.
Upon receipt by the Trustee of any declaration of
acceleration, or any rescission and annulment of any such
declaration, pursuant to this Section 5.02, a record date shall
automatically and without any other action by any Person be set
for the purpose of determining the Holders of Outstanding
Securities entitled to join in such declaration or rescission and
annulment, as the case may be, which record date shall be the
close of business on the day the Trustee receives such
declaration, or rescission and annulment, as the case may be.
The Holders of Outstanding Securities on such record date (or
their duly appointed agents), and only such persons, shall be
entitled to join in such declaration, or rescission and
annulment, as the case may be, whether or not such Holders remain
Holders after such record date; provided that unless such
declaration, or rescission and annulment, as the case may be,
shall have become effective by virtue of Holders of the requisite
principal amount of Outstanding Securities on such record date
(or their duly appointed agents) having joined therein on or
prior to the 90th day after such record date, such declaration,
or rescission and annulment, as the case may be, shall
automatically and without any action by any Person be canceled
and of no further force or effect.
36
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<PAGE> 101
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
SECTION 5.03 Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any
interest on any Security when such interest becomes due
and payable and such default continues for a period of
30 days, or
(2) default is made in the payment of the
principal of or premium, if any, on any Security at the
Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the
benefit of the Holders of such Securities, the whole amount then
due and payable on such Securities for principal and premium, if
any, and interest, and, to the extent that payment of such
interest shall be legally enforceable, interest on any overdue
principal and premium, if any, and on any overdue interest, at
the rate borne by the Securities, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee and each
predecessor Trustee, their respective agents and counsel, and any
other amounts due the Trustee or any predecessor Trustee under
Section 6.07.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express
trust, may institute a judicial proceeding for the collection of
the sums so due and unpaid and may prosecute any such proceeding
to judgment or final decree, and may enforce the same against the
Company (or any other obligor upon the Securities) and collect
the moneys adjudged or decreed to be payable in the manner
provided by law out of the property of the Company (or any other
obligor upon the Securities), wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights
and the rights of the Holders by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect
and enforce any such rights, whether for the specific enforcement
of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other
proper remedy.
SECTION 5.04 Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company
(or any other obligor upon the Securities), its property or its
creditors, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise, to take any and all
actions authorized under the Trust Indenture Act in order to have
the claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to
collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and
any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders,
to pay to the Trustee any amount due it and each predecessor
Trustee for the reasonable
37
101
<PAGE>
<PAGE> 102
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
compensation, expenses, disbursements and advances of the Trustee and
each predecessor Trustee and their respective agents and counsel, and
any other amounts due the Trustee under Section 6.07.
No provision of this Indenture shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights
of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding;
provided, however, that the Trustee may, on behalf of the
Holders, vote for the election of a trustee in bankruptcy or
similar official and may be a member of the Creditors' Committee.
SECTION 5.05 Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without
the possession of any of the Securities or the production thereof
in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee and each
predecessor Trustee and their respective agents and counsel, be
for the ratable benefit of the Holders of the Securities in
respect of which such judgment has been recovered.
SECTION 5.06 Application of Money Collected.
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such
money on account of principal or premium, if any, or interest,
upon presentation of the Securities and the notation thereon of
the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To payment of all amounts due the Trustee
under Section 6.07;
SECOND: Subject to Article XII, to the payment of the
amounts then due and unpaid for principal of and premium, if
any, and interest on the Securities in respect of which or
for the benefit of which such money has been collected,
ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities
for principal and premium, if any, and interest,
respectively; and
THIRD: The balance, if any, to the Company or any
other Person or Persons determined to be entitled thereto.
38
102
<PAGE>
<PAGE> 103
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
SECTION 5.07 Limitation on Suits.
No Holder of any Security shall have any right to institute
any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or
for any other remedy hereunder, unless
(1) such Holder has previously given written
notice to the Trustee of a continuing Event of
Default;
(2) the Holders of not less than 25% in principal
amount of the Outstanding Securities shall have made
written request to the Trustee to institute proceedings
in respect of such Event of Default in its own name as
Trustee hereunder;
(3) such Holder or Holders have offered to the
Trustee reasonable indemnity satisfactory to it against
the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed
to institute any such proceeding; and
(5) no direction inconsistent with such written
request has been given to the Trustee during such 60-
day period by the Holders of a majority in principal
amount of the Outstanding Securities;
it being understood and intended that no one or more Holders
shall have any right in any manner whatever by virtue of, or by
availing of, any provision of this Indenture to affect, disturb
or prejudice the rights of any other Holders, or to obtain or to
seek to obtain priority or preference over any other Holders or
to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all the
Holders.
SECTION 5.08 Unconditional Right of Holders to Receive
Principal, Premium and
Interest and to Convert.
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute
and unconditional, to receive payment of the principal of and
premium, if any, and (subject to Section 3.07) interest on such
Security on the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on the Redemption Date
or, in the case of a repurchase pursuant to Article XIV, on the
Repurchase Date) and to convert such Security in accordance with
Article XIII and to institute suit for the enforcement of any
such payment and right to convert, and such rights shall not be
impaired without the consent of such Holder.
SECTION 5.09 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding
to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, or
has been determined adversely to the Trustee or to such Holder,
then and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be
restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee
and the Holders shall continue as though no such proceeding had
been instituted.
39
103
<PAGE>
<PAGE> 104
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
SECTION 5.10 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in
Section 3.06, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event
of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the
Trustee or to the Holders may be exercised from time to time, and
as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
SECTION 5.12 Control by Holders.
The Holders of a majority in principal amount of the
Outstanding Securities shall have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power
conferred on the Trustee; provided, that
(1) such direction shall not be in conflict with
any rule of law or with this Indenture; and
(2) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with
such direction; and
(3) subject to the provisions of Section 6.01,
the Trustee shall have the right to decline to follow
any such direction if the Trustee in good faith shall
determine that the action so directed would involve the
Trustee in personal liability or would be unduly
prejudicial to Holders not joining in such direction.
40
104
<PAGE>
<PAGE> 105
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
Upon receipt by the Trustee of any direction, a record date
shall automatically and without any other action by any Person be
set for the purpose of determining the Holders of Outstanding
Securities entitled to join in such direction, which record date
shall be the close of business on the day the Trustee receives
such direction. The Holders of Outstanding Securities on such
record date (or their duly appointed agents), and only such
Persons, shall be entitled to join in such direction, whether or
not such holders remain Holders after such record date; provided
that unless such direction shall have become effective by virtue
of the Holders of the requisite principal amount of Outstanding
Securities on such record date (or their duly appointed agents)
having joined therein on or prior to the 90th day after such
record date, such direction shall automatically and without any
action by any Person be canceled and of no further force or
effect.
SECTION 5.13 Waiver of Past Defaults.
The Holders of not less than a majority in principal amount
of the Outstanding Securities may on behalf of the Holders of all
the Securities waive any past default hereunder and its
consequences, except a default
(1) in the payment of the principal of or
premium, if any, or interest on any Security
(including, without limitation, pursuant to any
optional redemption or repurchase obligation
hereunder); or
(2) in respect of a covenant or provision hereof
which under Article IX cannot be modified or amended
without the consent of the Holder of each Outstanding
Security affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have
been cured, for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other default or impair
any right consequent thereon.
SECTION 5.14 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, a court may require
any party litigant in such suit to file an undertaking to pay the
costs of such suit, and may assess costs against any such party
litigant, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; provided, that
this Section shall not be deemed to authorize any court to
require such an undertaking or to make such an assessment in any
suit instituted by the Company, in any suit instituted by the
Trustee, a suit by a Holder pursuant to Section 5.08, or a suit
by a Holder or Holders of more than 10% in the principal amount
of the Outstanding Securities.
41
105
<PAGE>
<PAGE> 106
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
ARTICLE VI.
THE TRUSTEE
SECTION 6.01 Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties
and only such duties as are specifically set forth in
this Indenture, and no implied covenants or obligations
shall be read into this Indenture against the Trustee;
and
(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of any
such certificates or opinions which by any provision
hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to
the requirements of this Indenture.
(b) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or
her own affairs.
(c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action,
its own negligent failure to act, or its own willful misconduct,
except that
(1) this paragraph (c) shall not be construed to
limit the effect of paragraph (a) of this Section;
(2) the Trustee shall not be liable for any error
of judgment made in good faith by a Responsible
Officer, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in
good faith in accordance with the direction of the
Holders of a majority in principal amount of the
Outstanding Securities relating to the time, method and
place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Indenture;
and
(4) no provision of this Indenture shall require
the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that repayment of
such funds or
42
106
<PAGE>
<PAGE> 107
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
adequate indemnity satisfactory to it against such risk
or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 6.02 Notice of Defaults.
If a default or Event or Default occurs and is continuing
and if it is known to the Trustee, the Trustee shall mail to each
Holder a notice of the default or Event of Default within 60 days
after it occurs; provided, however, that, except in the case of a
default in payment of principal of, premium, if any, or interest
on any Securities, the Trustee may withhold notice if and so long
as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of the
Holders of Securities. For the purpose of this Section, the term
`default' means any event which is, or after notice or lapse of
time or both would become, an Event of Default.
SECTION 6.03 Certain Rights of Trustee.
Subject to the provisions of Section 6.01:
(a) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence
of indebtedness or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party
or parties;
(b) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or
Company Order and any resolution of the Board of Directors may be
sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders pursuant to this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity satisfactory to it against the
costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction;
43
107
<PAGE>
<PAGE> 108
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and,
if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records
and premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by
or through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder; and
(h) the Trustee shall not be deemed to have knowledge or
notice of any default or Event of Default hereunder unless a
Responsible Officer of the Trustee assigned to and working in its
Corporate Trustee Administration Department shall have actual
knowledge thereof or the Trustee shall have received written
notice thereof in accordance with Section 1.05 from the Company,
any Holder, any holder of Senior Indebtedness or any
Representative.
SECTION 6.04 Not Responsible for Recitals or Issuance of
Securities.
The statements and recitals contained herein and in the
Securities and in any other document in connection with the sale
of the Securities, except the Trustee's certificate of
authentication, shall be taken as the statements of the Company,
and the Trustee and any Authenticating Agent assume no
responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee and any
Authenticating Agent shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
SECTION 6.05 May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company, in its
individual or any other capacity, may become the owner or pledgee
of Securities and, subject to Sections 6.08 and 6.13, may
otherwise deal with the Company or any Affiliate of the Company
with the same rights it would have if it were not Trustee,
Authenticating Agent, Paying Agent, Security Registrar or such
other agent.
SECTION 6.06 Money Held in Trust.
Money held by the Trustee or any Paying Agent in trust
hereunder need not be segregated from other funds except to the
extent required by law. The Trustee or any Paying Agent shall be
under no liability for interest on any money received by it
hereunder except as otherwise agreed with the Company.
44
108
<PAGE>
<PAGE> 109
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
SECTION 6.07 Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder
(including its services as Security Registrar or Paying
Agent, if so appointed by the Company) as may be mutually
agreed upon in writing by the Company and the Trustee (which
compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express
trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee and each predecessor Trustee promptly
upon its request for all reasonable expenses, disbursements
and advances incurred or made by or on behalf of it in
connection with the performance of its duties under any
provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its
agents and counsel and all other persons not regularly in
its employ and its duties as Security Registrar or Paying
Agent, if so appointed by the Company) except to the extent
any such expense, disbursement or advance may be
attributable to its negligence or bad faith; and
(3) to indemnify the Trustee and each predecessor
Trustee (each, an `indemnitee') for, and to hold it harmless
against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this
Indenture or the trusts hereunder and its duties hereunder
(including its services as Security Registrar or Paying
Agent, if so appointed by the Company). The Trustee shall
notify the Company promptly of any claim asserted against it
for which it may seek indemnity. The Company need not pay
for any settlement made without its written consent.
As security for the performance of the obligations of the
Company under this Section 6.07, the Trustee shall have a lien
prior to the Securities upon all property and funds held or
collected by the Trustee as such, except funds held in trust for
the benefit of the Holders of particular Securities, and the
Securities are hereby subordinated to such prior lien. The
obligations of the Company under this Section to compensate and
indemnify the Trustee and any predecessor Trustee and to pay or
reimburse the Trustee and any predecessor Trustee for expenses,
disbursements and advances, and any other amounts due the Trustee
or any predecessor Trustee under Section 6.07, shall constitute
an additional obligation hereunder and shall survive the
satisfaction and discharge of this Indenture.
SECTION 6.08 Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Trustee shall
either eliminate such interest or resign, to the extent and in
the manner provided by, and subject to the provisions of, the
Trust Indenture Act and this Indenture.
45
109
<PAGE>
<PAGE> 110
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
SECTION 6.09 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall
be a Person that (i) is eligible pursuant to the Trust Indenture
Act to act as such and (ii) has (or, in the case of a corporation
included in a bank holding company system, whose related bank
holding company has) a combined capital and surplus of at least
$50,000,000. If such Person publishes reports of conditions at
least annually, pursuant to law or to the requirements of a
Federal or state supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of
such Person shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect hereinafter
specified in this Article.
SECTION 6.10 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the
successor Trustee in accordance with the applicable requirements
of Section 6.11.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by
a successor Trustee required by Section 6.11 shall not have been
delivered to the resigning Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment
of a successor Trustee.
(c) The Trustee may be removed at any time by an Act of the
Holders of a majority in principal amount of the Outstanding
Securities delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.08
after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for the
last six months, or
(2) the Trustee shall cease to be eligible under
Section 6.09 and shall fail to resign after written request
therefor by the Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of
the Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Trustee
or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may
remove the Trustee, or (ii) subject to Section 5.14, any Holder
who has been a bona fide Holder of a Security for at least six
months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor
Trustee.
46
110
<PAGE>
<PAGE> 111
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
(3) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of
Trustee for any cause, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee and such successor Trustee
shall comply with the requirements of Section 6.11. If, within
one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount
of the Outstanding Securities delivered to the Company and the
retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 6.11 become the
successor Trustee and supersede the successor Trustee appointed
by the Company. If no successor Trustee shall have been so
appointed by the Company or the Holders and accepted appointment
in the manner required by Section 6.11, any Holder who has been a
bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a
successor Trustee.
(f) The Company shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor
Trustee to all Holders in the manner provided in Section 1.06.
Each notice shall include the name of the successor Trustee and
the address of its Corporate Trust Office.
SECTION 6.11 Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring
Trustee an instrument accepting such appointment, and thereupon
the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on
request of the Company or the successor Trustee, such retiring
Trustee shall, upon payment of its charges, execute and deliver
an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder. Upon
request of any such successor Trustee,
the Company shall execute any and all instruments for more fully
and certainly vesting in and confirming to such successor Trustee
all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be
qualified and eligible under this Article.
47
111
<PAGE>
<PAGE> 112
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
SECTION 6.12 Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be otherwise
qualified and eligible under this Article, without the execution
or filing of any paper or any further act on the part of any of
the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office,
any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver
the Securities so authenticated with the same effect as if such
successor Trustee had itself authenticated such Securities.
SECTION 6.13 Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Securities), the Trustee
shall be subject to the provisions of the Trust Indenture Act
regarding the collection of claims against the Company (or any
such other obligor).
SECTION 6.14 Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents
acceptable to and at the expense of the Company which shall be
authorized to act on behalf of the Trustee to authenticate
Securities issued upon exchange, registration of transfer,
partial conversion or partial redemption or pursuant to Section
3.06, and Securities so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the
Trustee by an Authenticating Agent and a certificate of
authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a Person
organized and doing business under the laws of the United States
of America, any State thereof or the District of Columbia,
authorized under such laws to act as Authenticating Agent, having
a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State
authority. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of
such Authenticating Agent shall be deemed to be its combined
capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent
shall cease to be eligible in accordance with the provisions of
this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any Person into which an Authenticating Agent may be merged
or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which
such Authenticating Agent shall be a party, or any Person
succeeding to the corporate agency or corporate trust business of
an Authenticating Agent, shall continue to be
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<PAGE> 113
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
an Authenticating Agent, provided such Person shall be otherwise
eligible under this Section, without the execution or filing of
any paper or any further act on the part of the Trustee or the
Authenticating Agent.
An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and to the Company. The
Trustee may at any time terminate the agency of an Authenticating
Agent by giving written notice thereof to such Authenticating
Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time
such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee may
appoint a successor Authenticating Agent which shall be
acceptable to the Company and shall mail notice of such
appointment by first-class mail, postage prepaid, to all Holders
as their names and addresses appear in the Security Register.
Any successor Authenticating Agent upon acceptance of its
appointment under this Section shall become vested with all the
rights, powers and duties of its predecessor hereunder, with like
effect as if originally named as an Authenticating Agent. No
successor Authenticating Agent shall be appointed unless eligible
to act as such under the provisions of this Section.
Any Authenticating Agent by the acceptance of its
appointment shall be deemed to have represented to the Trustee
that it is eligible for appointment as Authenticating Agent under
this Section and to have agreed with the Trustee that: it will
perform and carry out the duties of an Authenticating Agent as
herein set forth, including, among other duties, the duties to
authenticate Securities when presented to it in connection with
exchanges, registrations of transfer or redemptions or
conversions thereof or pursuant to Section 3.06; it will keep and
maintain, and furnish to the Trustee from time to time as
requested by the Trustee, appropriate records of all transactions
carried out by it as Authenticating Agent and will furnish the
Trustee such other information and reports as the Trustee may
reasonably require; and it will notify the Trustee promptly if it
shall cease to be eligible to act as Authenticating Agent in
accordance with the provisions of this Section. Any
Authenticating Agent by the acceptance of its appointment shall
be deemed to have agreed with the Trustee to indemnify the
Trustee against any loss, liability or expense incurred by the
Trustee and to defend any claim asserted against the Trustee by
reason of any acts or failures to act of such Authenticating
Agent, but such Authenticating Agent shall have no liability for
any action taken by it in accordance with the specific written
direction of the Trustee.
The Company agrees to pay to each Authenticating Agent from
time to time reasonable compensation for its services under this
Section.
If an appointment is made pursuant to this Section, the
Securities may have endorsed thereon, in addition to the
Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
This is one of the Securities referred to in the within-
mentioned Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
By : __________________________
as Authenticating Agent
By : __________________________
Authorized Officer
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
ARTICLE VII.
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.01 Company to Furnish Trustee Names and Addresses of
Holders.
The Company will furnish or cause to be furnished to the
Trustee:
(a) semi-annually, not more than 15 days after each
Regular Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as
of such Regular Record Date, and
(b) at such other times as the Trustee may request in
writing, within 30 days after the receipt by the Company of any
such request, a list of similar form and content as of a date not
more than 15 days prior to the time such list is furnished.
Notwithstanding the foregoing, so long as the Trustee is the
Security Registrar, no such list shall be required to be
furnished.
SECTION 7.02 Preservation of Information; Communication to
Holders.
(a) The Trustee shall preserve, in as current a form
as is reasonably practicable, the names and addresses of Holders
contained in the most recent list furnished to the Trustee as
provided in Section 7.01 and the names and addresses of Holders
received by the Trustee in its capacity as Security Registrar.
The Trustee may destroy any list furnished to it as provided in
Section 7.01 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other
Holders with respect to their rights under this Indenture or
under the Securities, and the corresponding rights and duties of
the Trustee, shall be as provided by the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and
holding the same, agrees with the Company and the Trustee that
neither the Company nor the Trustee nor any agent of either of
them shall be held accountable by reason of any disclosure of
information as to names and addresses of Holders made pursuant to
the Trust Indenture Act or otherwise in accordance with this
Indenture.
SECTION 7.03 Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as
may be required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant thereto.
Reports so required to be transmitted at stated
intervals of not more than 12 months shall be transmitted no
later than 60 days following May 15 in each calendar year,
commencing in 1998 and shall be dated as of such May 15.
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
(b) A copy of each such report shall, at the time of
such transmission to Holders, be filed by the Trustee with each
stock exchange upon which the Securities are listed, with the
Commission and with the Company. The Company will notify the
Trustee when the Securities are listed on any stock exchange.
SECTION 7.04 Reports by Company.
The Company shall file with the Trustee and the Commission,
and transmit to Holders, such information, documents and other
reports, and such summaries thereof, as may be required pursuant
to the Trust Indenture Act at the times and in the manner
provided pursuant to such Act; provided, that any such
information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act
shall be filed with the Trustee within 15 days after the same is
so required to be filed with the Commission.
ARTICLE VIII.
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.01 Company May Consolidate, Etc., Only on Certain
Terms.
The Company shall not consolidate with or merge into any
other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person in one
transaction or a series of related transactions, and the Company
shall not permit any Person to consolidate with or merge into the
Company, unless:
(1) in case the Company shall consolidate with or merge
into another Person or convey, transfer or lease its properties
and assets substantially as an entirety to any Person in one
transaction or a series of related transactions, the Person
formed by such consolidation or into which the Company is merged
or the Person which acquires by conveyance or transfer, or which
leases, the properties and assets of the Company substantially as
an entirety shall be a corporation, partnership, limited
liability company or trust, shall be organized and validly
existing under the laws of the United States of America, any
State thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee,
the due and punctual payment of the principal of and premium, if
any, and interest on all the Securities and the performance or
observance of every covenant of this Indenture on the part of the
Company to be performed or observed and shall have provided for
conversion rights in accordance with Section 13.11 to the extent
applicable;
(2) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have
occurred and be continuing;
(3) such consolidation, merger, conveyance, transfer or
lease does not adversely affect the validity or enforceability of
the Securities; and
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<PAGE> 117
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
(4) the Company or the successor Person has delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, conveyance,
transfer or lease and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture
comply with this Article and that all conditions precedent herein
provided for relating to such transaction have been complied
with.
SECTION 8.02 Successor Substituted.
Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any conveyance, transfer or
lease of the properties and assets of the Company substantially
as an entirety to any Person in one transaction or a series of
related transactions in accordance with Section 8.01, the
successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease
is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this
Indenture with the same effect as if such successor Person had
been named as the Company herein, and thereafter, except in the
case of a transfer by lease, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture
and the Securities.
ARTICLE IX.
SUPPLEMENTAL INDENTURES
SECTION 9.01 Supplemental Indentures Without Consent of
Holders.
Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time
and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any
of the following purposes:
(1) to cause this Indenture to be qualified under the
Trust Indenture Act; or
(2) to evidence the succession of another Person to
the Company and the assumption by any such successor of the
covenants of the Company herein and in the Securities; or
(3) to add to the covenants of the Company for the
benefit of the Holders or an additional Event of Default, or
to surrender any right or power conferred herein or in the
Securities upon the Company; or
(4) to provide collateral for or guarantors of
Securities; or
(5) to make provision with respect to the conversion
rights of Holders pursuant to the requirements of Article
XIII; or
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<PAGE> 118
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
(6) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to
the Securities; or
(7) to cure any ambiguity or omission, to correct or
supplement any provision herein or in the Securities which
may be defective or inconsistent with any other provision
herein or in the Securities, or to make any other provisions
with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the
provisions of this Indenture; provided, that such action
pursuant to this Clause (7) shall not adversely affect the
interests of the Holders in any material respect and the
Trustee may rely upon an Opinion of Counsel to that effect.
SECTION 9.02 Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority
in principal amount of the Outstanding Securities, by Act of said
Holders delivered to the Company and the Trustee, the Company,
when authorized by a Board Resolution, and the Trustee may enter
into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this
Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding
Security affected thereby,
(1) change the Stated Maturity of the principal of, or
any installment of interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or
any premium payable upon the redemption thereof, or change
the place of payment where, or the coin or currency in
which, any Security or any premium or interest thereon is
payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated
Maturity thereof (or, in the case of redemption, on or after
the Redemption Date), or adversely affect the right to
convert any Security as provided in Article XIII (except as
permitted by Section 9.01(5) or to require repurchase of
Securities pursuant to the provisions of Article XIV, or to
modify, directly or indirectly, the provisions of this
Indenture with respect to the subordination of the
Securities, in a manner adverse to the Holders, or
(2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is
required for any such supplemental indenture, or the consent
of whose Holders is required for any waiver of compliance
with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in
this Indenture, or
(3) modify any of the provisions of this Section 9.02,
Section 5.13 or Section 10.06, except to increase any such
percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected
thereby.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.
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<PAGE> 119
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
SECTION 9.03 Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the
modifications thereby of the trusts created by this Indenture,
the Trustee shall be entitled to receive, and (subject to Section
6.01) shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that the execution
of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter
into any such supplemental indenture which adversely affects the
Trustee's own rights, duties or immunities under this Indenture
or otherwise.
SECTION 9.04 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance
therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.05 Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this
Article shall conform to the requirements of the Trust Indenture
Act.
SECTION 9.06 Reference in Securities to Supplemental
Indentures.
Securities authenticated and delivered after the execution
of any supplemental indenture pursuant to this Article may, and
shall if required by the Trustee, bear a notation in form
approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Company shall so determine, new
Securities so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and (at the specific
direction of the Company) authenticated and delivered by the
Trustee in exchange for Outstanding Securities.
SECTION 9.07 Notice of Supplemental Indenture.
Promptly after the execution by the Company and the Trustee
of any supplemental indenture pursuant to Section 9.02, the
Company shall transmit to the Holders a notice setting forth the
substance of such supplemental indenture or, in lieu thereof, a
copy of such supplemental indenture.
55
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<PAGE> 120
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
ARTICLE X.
COVENANTS
SECTION 10.01 Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of
and premium, if any, and interest on the Securities in accordance
with the terms of the Securities and this Indenture.
SECTION 10.02 Maintenance of Office or Agency.
The Company will maintain in New York, New York an office or
agency where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of
transfer, where Securities may be surrendered for exchange or
conversion and where notices and demands to or upon the Company
in respect of the Securities and this Indenture may be served.
The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of any such office or
agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented
or surrendered for any or all such purposes and may from time to
time rescind such designations; provided, however, that no such
designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in New York,
New York for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
SECTION 10.03 Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying
Agent, it will, on or before each due date of the principal of
and premium, if any, or interest on any of the Securities,
segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal and
premium, if any, or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or
failure so to act.
Whenever the Company shall have one or more Paying Agents,
it will, on or prior to 11:00 a.m. (New York City time) on each
due date of the principal of and premium, if any, or interest on
any Securities, deposit with a Paying Agent a sum in same day
funds sufficient to pay the principal and any premium and
interest so becoming due, such sum to be held as provided by the
Trust Indenture Act, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
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120
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<PAGE> 121
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
The Company will cause each Paying Agent other than the
Trustee or the Company to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of this Section, that such
Paying Agent will (i) comply with the provisions of the Trust
Indenture Act and this Indenture applicable to it as a Paying
Agent and hold all sums held by it for the payment of principal
of or any premium or interest on the Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided;
(ii) give the Trustee notice of any default by the Company (or
any other obligor upon the Securities) in the making of any
payment in respect of the Securities; and (iii) at any time
during the continuance of any default by the Company (or any
other obligor upon the Securities) in the making of any payment
in respect of the Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by
such Paying Agent for payment in respect of the Securities, and
account for any funds disbursed.
The Company may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other
purpose, pay, or by Company Order direct any Paying Agent to pay,
to the Trustee all sums held in trust by the Company or such
Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to
the Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the
principal of and premium, if any, or interest on any Security and
remaining unclaimed for two years after such principal and
premium, if any, or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of
such Security shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof, and all liability
of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in
a newspaper published in the English language, customarily
published on each Business Day and of general circulation in New
York, New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less
than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the
Company.
SECTION 10.04 Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days
after the end of each fiscal year of the Company ending after the
date hereof, an Officers' Certificate stating whether or not to
the best knowledge of the signers thereof the Company is in
default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to
any period of grace or requirement of notice provided hereunder)
and, if the Company shall be in default, specifying all such
defaults and the nature and status thereof of which they may have
knowledge.
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
SECTION 10.05 Existence.
Subject to Article VIII, the Company will do or cause to be
done all things necessary to preserve and keep in full force and
effect its existence, rights (charter and statutory) and
franchises and the existence, rights (charter and statutory) and
franchises of each Significant Subsidiary; provided, however,
that the Company shall not be required to preserve any such right
or franchise if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the
business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Holders.
SECTION 10.06 Waiver of Certain Covenants.
Subject to Article VIII, the Company may omit in any
particular instance to comply with any covenant or condition set
forth in Section 10.05, if before the time for such compliance
the Holders of at least a majority in principal amount of the
Outstanding Securities shall, by Act of such Holders, either
waive such compliance in such instance or generally waive
compliance with such covenant or condition, but no such waiver
shall extend to or affect such covenant or condition except to
the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties
of the Trustee in respect of any such covenant or condition shall
remain in full force and effect.
ARTICLE XI.
REDEMPTION OF SECURITIES
SECTION 11.01 Right of Redemption.
The Securities may be redeemed at the election of the
Company, in whole or from time to time in part, upon not less
than 30 and not more than 60 days' notice to each Holder by mail,
at any time on or after April 6, 2001, at the Redemption Prices
specified in the form of Security hereinbefore set forth,
together with accrued and unpaid interest, to the Redemption
Date; provided, however, that if all accrued interest on the
Securities has not been paid, (i) the Securities may not be
redeemed in part and (ii) the Company may not purchase or acquire
any Security other than pursuant to a purchase or exchange offer
to all holders of the Securities.
SECTION 11.02 Applicability of Article.
Redemption of Securities at the election of the Company as
permitted by any provision of this Indenture shall be made in
accordance with such provision and this Article.
SECTION 11.03 Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities
pursuant to Section 11.01 shall be evidenced by a Board
Resolution. In case of any redemption at the election of the
Company of
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
less than all the Securities, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter
period shall be satisfactory to the Trustee), notify the Trustee of
such Redemption Date and of the principal amount of Securities to be
redeemed. In case of any redemption at the election of the Company
of all the Securities, the Company shall, at least 45 days prior to
the Redemption Date fixed by the Company (unless a shorter period
shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date.
SECTION 11.04 Selection by Trustee of Securities to be Redeemed.
If less than all the Securities are to be redeemed, the
particular Securities to be redeemed shall be selected not more
than 65 days prior to the Redemption Date by the Trustee, from
the Outstanding Securities not previously called for redemption,
by lot or pro rata or by such other method as the Trustee shall
deem fair and appropriate and which may provide for the selection
for redemption of portions (equal to $1,000 or any integral
multiple thereof) of the principal amount of Securities of a
denomination larger than $1,000.
If any Security selected for partial redemption is converted
in part before termination of the conversion right with respect
to the portion of the Security so selected, the converted portion
of such Security shall be deemed (so far as may be) to be the
portion selected for redemption. Securities which have been
converted during a selection of Securities to be redeemed shall
be treated by the Trustee as Outstanding for the purpose of such
selection. In any case where more than one Security is
registered in the same name, the Trustee in its discretion may
treat the aggregate principal amount so registered as if it were
represented by one Security.
The Trustee shall promptly notify the Company and each
Security Registrar in writing of the Securities selected for
redemption and, in the case of any Securities selected for
partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of
Securities shall relate, in the case of any Securities redeemed
or to be redeemed only in part, to the portion of the principal
amount of such Securities which has been or is to be redeemed.
SECTION 11.05 Notice of Redemption.
Notice of redemption shall be given by first-class mail,
postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date, to the Trustee and to each Holder
of Securities to be redeemed, at his address appearing in the
Security Register.
All notices of redemption shall state:
(a) the Redemption Date,
(b) the Redemption Price,
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
(c) if less than all the Outstanding Securities are
to be redeemed, the identification (and, in the case of
partial redemption of any Securities, the principal amounts)
of the particular Securities to be redeemed,
(d) that on the Redemption Date the Redemption Price
will become due and payable upon each such Security to be
redeemed and that (unless the Company shall default in
payment of the Redemption Price) interest thereon will cease
to accrue on and after said date,
(e) the conversion price, the date on which the right
to convert the Securities to be redeemed will terminate and
the place or places where such Securities may be surrendered
for conversion, and
(f) the place or places where such Securities are to
be surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the
Company's request, by the Trustee in the name and at the expense
of the Company.
SECTION 11.06 Deposit of Redemption Price.
At or prior to 11:00 a.m. (New York City time) on any
Redemption Date, the Company shall deposit with the Trustee or
with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section
10.03) an amount of money in same day funds sufficient to pay the
Redemption Price of, and (except if the Redemption Date shall be
an Interest Payment Date) accrued interest on, all the Securities
or portions thereof which are to be redeemed on that date other
than any Securities called for redemption on that date which have
been converted prior to the Redemption Date.
If any Security called for redemption is converted, any
money deposited with the Trustee or with any Paying Agent or so
segregated and held in trust for the redemption of such Security
shall (subject to any right of the Holder of such Security or any
Predecessor Security to receive interest as provided in the last
paragraph of Section 3.07) be paid to the Company upon Company
Request or, if then held by the Company, shall be discharged from
such trust.
SECTION 11.07 Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date,
become due and payable at the Redemption Price therein specified,
and from and after such date (unless the Company shall default in
the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price,
together with accrued and unpaid interest to the Redemption Date;
provided, however, that installments of interest whose Stated
Maturity is on or prior to the Redemption Date shall be payable
to the Holders of such Securities, or one or more Predecessor
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions
of Section 3.07.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal and premium,
if any, shall, until paid, bear interest from the Redemption Date
at the rate borne by the Security.
SECTION 11.08 Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be
surrendered at an office or agency of the Company maintained for
that purpose pursuant to Section 10.02 (with, if the Company or
the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities, of
any authorized denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so
surrendered.
SECTION 11.09 Conversion Arrangements on Call for Redemption.
In connection with any redemption of Securities, the Company
may arrange for the purchase and conversion of any Securities
surrendered for redemption by an agreement with one or more
investment banking firms or other purchasers to purchase such
Securities by paying to the Holders thereof, or to the Trustee or
Paying Agent in trust for such Holders, at or before 11:00 a.m.
on the Redemption Date, an amount not less than the Redemption
Price, together with interest accrued to the Redemption Date,
payable by the Company on redemption of such Securities.
Notwithstanding anything to the contrary contained in this
Article XI, the obligation of the Company to pay the Redemption
Price of such Securities, together with interest accrued to the
Redemption Date, shall be satisfied and discharged to the extent
such amount is so paid by such purchasers. Pursuant to such an
agreement, any Securities surrendered by the Holder thereof for
redemption or not duly surrendered for conversion by such Holder
shall be deemed acquired by such purchasers from such Holders and
surrendered by such purchasers for conversion, all as of
immediately prior to the close of business of the Redemption
Date, subject to payment of the above amount as aforesaid.
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<PAGE> 126
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
ARTICLE XII.
SUBORDINATION OF SECURITIES
SECTION 12.01 Securities Subordinated to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a
Security, by his acceptance thereof, likewise covenants and
agrees, that, to the extent and in the manner hereinafter set
forth in this Article, the indebtedness represented by the
Securities and the payment of the principal of and premium, if
any, and interest on each and all of the Securities are hereby
expressly made subordinate and subject in right of payment to the
prior payment in full of all Senior Indebtedness.
SECTION 12.02 Payment Over of Proceeds Upon Dissolution, Etc.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or
other similar case or proceeding, relative to the Company or to
its creditors, as such, or to a substantial part of its assets,
or (b) any proceeding for the liquidation, dissolution or other
winding up of the Company, whether voluntary or involuntary and
whether or not involving insolvency or bankruptcy, or (c) any
general assignment for the benefits of creditors or any other
marshaling of assets and liabilities of the Company, then and in
any such event the holders of Senior Indebtedness shall be
entitled to receive payment in full of all Obligations due or to
become due on or in respect of all Senior Indebtedness before the
Holders of the Securities are entitled to receive any payment or
distribution of any kind or character, whether in cash, property
or securities, on account of principal of or premium, if any, or
interest on the Securities, and to that end the holders of Senior
Indebtedness shall be entitled to receive, for application to the
payment thereof, any payment or distribution of any kind or
character, including any such payment or distribution which may
be payable or deliverable by reason of the payment of any other
indebtedness of the Company being subordinated to the payment of
the Securities, which may be payable or deliverable in respect of
the Securities in any such case, proceeding, dissolution,
liquidation or other winding up or event.
In the event that, notwithstanding the foregoing provisions
of this Section, the Trustee or the Holder of any Security shall
have received any payment or distribution of any kind or
character in respect of the Securities, whether in cash, property
or securities, including any such payment or distribution which
may be payable or deliverable by reason of the payment of any
other indebtedness of the Company being subordinated to the
payment of the Securities, before all Senior Indebtedness is paid
in full, such payment or distribution shall be held by the
Trustee (if the Trustee has knowledge that such payment or
distribution is prohibited by this Section) or by such Holder in
trust for the holders of Senior Indebtedness, and shall be paid
forthwith over and delivered to, the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee, agent or
other Person making payment or distribution of assets of the
Company for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior
Indebtedness in full, after giving effect to any concurrent
payment or distribution to or for the holders of Senior
Indebtedness.
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<PAGE> 127
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
For purposes of this Article only, the words `cash, property
or securities' shall not be deemed to include securities of the
Company as reorganized or readjusted or securities of the Company
or any other corporation provided for by a plan of reorganization
or readjustment, which securities are subordinated in right of
payment to all Senior Indebtedness which may at the time be
outstanding to substantially the same extent as, or to a greater
extent than, the Securities are so subordinated as provided in
this Article. The consolidation of the Company with, or the
merger of the Company into, another Person or the liquidation or
dissolution of the Company following the conveyance or transfer
of its properties and assets substantially as an entirety to
another Person upon the terms and conditions set forth in Article
VIII shall not be deemed a dissolution, winding up, liquidation,
reorganization, general assignment for the benefit of creditors
or marshaling of assets and liabilities of the Company for the
purposes of this Section if the Person formed by such
consolidation or into which the Company is merged or which
acquires by conveyance or transfer such properties and assets
substantially as an entirety, as the case may be, shall, as a
part of such consolidation, merger, conveyance or transfer,
comply with the conditions set forth in Article VIII.
SECTION 12.03 Acceleration of Securities.
Notwithstanding anything in this Indenture to the contrary,
neither the Trustee nor any Holder shall exercise any right
either may have to accelerate the maturity of the Securities at
any time when payment of any amount owing on the Securities is
prohibited; provided, however, that such right may nevertheless
be exercised upon the earliest of (i) the acceleration of the
maturity of any Senior Indebtedness, (ii) the exercise by any
holder of Senior Indebtedness of any remedies available to it
upon a default with respect to the Senior Indebtedness, or (iii)
the occurrence of an Event of Default described in Section
5.01(8) or (9).
SECTION 12.04 No Payment When Senior Indebtedness in Default.
(a) The Company may not make any payment (whether by
redemption, purchase, retirement, defeasance or otherwise) to the
Trustee or any Holder on account of the principal of or premium,
if any, or interest on the Securities (other than payments and
other distributions made from any defeasance trust created
pursuant to Section 4.01 if the applicable deposit does not
violate Article IV of this Indenture) until all principal and
other Obligations with respect to the Senior Indebtedness of the
Company have been paid in full if:
(i) a default in the payment of any principal of,
premium, if any, or interest on Senior Indebtedness occurs
and is continuing beyond any applicable grace period (a
`Payment Default'); or
(ii) a default, other than a payment default, on
Designated Senior Indebtedness occurs and is continuing
beyond any applicable grace period (a `Nonpayment Default')
that then permits holders of the Designated Senior
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
Indebtedness as to which such default relates to accelerate
its maturity, and the Trustee receives a notice of the
default (a `Payment Blockage Notice') from (1) the Company,
(2) the lender under the Credit Facility if such default
relates to the Credit Facility or (3) the holders, or a
Representative of the holders, of at least 25% in principal
amount of such other Designated Senior Indebtedness if such
default relates to any other issue of Designated Senior
Indebtedness; provided, that if such Designated Senior
Indebtedness is of the type referred to in clause (b) of the
definition thereof, the Payment Blockage Notice shall be
given by a Representative of the holders of at least 25% of
such Designated Senior Indebtedness. If the Trustee
receives any such Payment Blockage Notice, no subsequent
Payment Blockage Notice shall be effective for purposes of
this Section unless and until 365 days shall have elapsed
since the date of commencement of the payment blockage
period resulting from the immediately prior Payment Blockage
Notice and all scheduled payments of principal, premium, if
any, and interest on the Securities that have come due have
been paid in full in cash. No nonpayment default in respect
of any Designated Senior Indebtedness that existed or was
continuing on the date of delivery of any Payment Blockage
Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice whether or not within a
period of 365 days, unless such default shall have been
cured or waived for a period of not less than 90 consecutive
days (it being acknowledged that any subsequent action, or
any breach of any financial covenants for a period
commencing after receipt by the Trustee of a Payment
Blockage Notice, which, in either case, would give rise to
an event of default pursuant to any provisions under which
an event of default previously existed or was continuing
shall constitute a new event of default for this purpose).
(b) The Company shall resume payments on and
distributions in respect of the Securities upon:
(1) in the case of a Payment Default, the date on
which the default is cured or waived, or
(2) in the case of a Nonpayment Default, the earliest
of (x) the date on which such Nonpayment Default is cured or
waived, (y) the date the applicable Payment Blockage Notice
is retracted by written notice to the Trustee from the
Representative of the holders of the relevant Designated
Senior Indebtedness which have given that Payment Blockage
Notice and (z) 179 days after the date on which the
applicable Payment Blockage Notice is received by the
Trustee, if the maturity of such Designated Senior
Indebtedness has not been accelerated,
if this Article otherwise permits the payment, distribution or
acquisition at the time of such payment or acquisition.
(c) In the event that, notwithstanding the foregoing,
the Company shall make any payment to the Trustee or the Holder
of any Security prohibited by the foregoing provisions of this
Section, then and in such event such payment shall be paid over
and delivered forthwith to the Company; provided, however, that
the Trustee shall only be required to return to the Company such
payment or any portion thereof that is held by the Trustee.
The provisions of this Section shall not apply to any
payment with respect to which Section 12.02 would be applicable.
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<PAGE> 129
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
SECTION 12.05 Subrogation to Rights of Holders of Senior
Indebtedness.
Subject to the payment in full of all Obligations in respect
of Senior Indebtedness, the Holders of the Securities shall be
subrogated to the extent of the payments or distributions made to
the holders of Senior Indebtedness pursuant to the provisions of
this Article (equally and ratably with the holders of all
indebtedness of the Company which by its express terms is
subordinated to other indebtedness of the Company to
substantially the same extent as the Securities are subordinated
and is entitled to like rights of subrogation) to the rights of
the holders of Senior Indebtedness to receive payments and
distributions applicable to the Senior Indebtedness until the
principal of and premium, if any, and interest on the Securities
shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of the Senior
Indebtedness to which the Holders of the Securities or the
Trustee would be entitled except for the provisions of this
Article, and no payments over pursuant to the provisions of this
Article to the holders of Senior Indebtedness by Holders of the
Securities or the Trustee, shall, as among the Company, its
creditors other than holders of Senior Indebtedness and the
Holders of the Securities, be deemed to be a payment or
distribution by the Company to or on account of the Senior
Indebtedness.
SECTION 12.06 Obligations of the Company Unconditional.
The provisions of this Article are and are intended solely
for the purpose of defining the relative rights of the Holders of
the Securities on the one hand and the holders of Senior
Indebtedness on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Securities is
intended to or shall (a) impair, as among the Company, its
creditors other than holders of Senior Indebtedness and the
Holders of the Securities, the obligation of the Company, which
is absolute and unconditional, to pay to the Holders of the
Securities the principal of and premium, if any, and interest on
the Securities as and when the same shall become due and payable
in accordance with their terms; or (b) affect the relative rights
against the Company or the Holders of the Securities and
creditors of the Company other than the holders of Senior
Indebtedness; or (c) prevent the Trustee or the Holder of any
Security from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the
rights, if any, under this Article of the holders of Senior
Indebtedness to receive distributions otherwise payable or
deliverable to the Trustee or such Holder.
SECTION 12.07 Trustee to Effectuate Subordination.
Each holder of a Security by his acceptance thereof
authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the
subordination provided in this Article and appoints the Trustee
his attorney-in-fact for any and all such purposes.
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<PAGE> 130
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
SECTION 12.08 No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at
any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or
failure to act by any such holder, or by any noncompliance by the
Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder
may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time
and from time to time, without the consent of or notice to the
Trustee or the Holders of the Securities, without incurring
responsibility to the Trustee or the Holders of the Securities
and without impairing or releasing the subordination provided in
this Article or the obligations hereunder of the Trustee or the
Holders of the Securities to the holders of Senior Indebtedness,
do any one or more of the following: (i) change the manner,
place or terms of payment or extend the time of payment of, or
renew or alter, Senior Indebtedness, or otherwise amend or
supplement in any manner Senior Indebtedness or any instrument
evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness; (iii) release any Person liable in
any manner for the collection of Senior Indebtedness; (iv)
exercise or refrain from exercising any rights against the
Company and any other Person; and (v) apply any and all sums
received from time to time to the Senior Indebtedness.
SECTION 12.09 Notice to Trustee.
The Company shall give prompt written notice to the Trustee
of any fact known to the Company which would prohibit the making
of any payment to or by the Trustee in respect of the Securities.
Notwithstanding the provisions of this Article or any other
provision of this Indenture, the Trustee shall not be charged
with knowledge of the existence of any facts which would prohibit
the making of any payment to or by the Trustee in respect of the
Securities, unless and until the Trustee shall have received
written notice thereof from the Company or a holder of Senior
Indebtedness or from any Representative therefor; and, prior to
the receipt of any such written notice, the Trustee, subject to
the provisions of Section 6.01, shall be entitled in all respects
to assume that no such facts exist; provided that, if prior to
the second Business Day preceding the date upon which by the
terms hereof any monies become payable hereunder, or in the event
of the execution of an instrument pursuant to Section 4.01
acknowledging satisfaction and discharge of this Indenture, then
if prior to the second Business Day preceding the date of such
execution, the Trustee or any Paying Agent shall not have
received with respect to such monies the notice provided for in
this Section, then, anything herein contained to the contrary
notwithstanding, the Trustee or such Paying Agent shall have full
power and authority to receive such monies and apply the same to
the purpose for which they were received and shall not be
affected by any notice to the contrary which may be received by
it on or after such date.
Subject to the provisions of Section 6.01, the Trustee shall
be entitled to rely on the delivery to it of a written notice by
a Person representing himself to be a holder of Senior
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130
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<PAGE> 131
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
Indebtedness (or a Representative therefor) to establish that
such notice has been given by a holder of Senior Indebtedness (or
a Representative therefor). In the event that the Trustee
determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution
pursuant to this Article, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Indebtedness held by such Person, the
extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the
rights of such Person under this Article, and if such evidence is
not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to
receive such payment.
SECTION 12.10 Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution in respect of the
Securities or Senior Indebtedness referred to in this Article,
the Trustee, subject to the provisions of Section 6.01, and the
Holders of the Securities shall be entitled to rely upon any
order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding up or similar case or
proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee
for the benefit of creditors, agent or other Person making such
payment or distribution, delivered to the Trustee or to the
Holders of Securities, for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution,
the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article.
SECTION 12.11 Trustee Not Fiduciary for Holders of
Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Indebtedness and shall not be liable to any
such holders if it shall, in good faith, mistakenly pay over or
distribute to Holders of Securities or to the Company or to any
other Person cash, property or securities to which holders of
Senior Indebtedness shall be entitled by virtue of this Article
or otherwise. With respect to the holders of Senior
Indebtedness, the Trustee undertakes to perform or to observe
only such of its covenants and obligations as are specifically
set forth in this Article, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness
shall be read into this Article against the Trustee.
SECTION 12.12 Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article with respect to any
Senior Indebtedness which may at any time be held by it, to the
same extent as any other holder of Senior Indebtedness, and
nothing in this Indenture shall deprive the Trustee of any of its
rights as such holder.
Nothing in this Article shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 6.07.
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<PAGE> 132
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
SECTION 12.13 Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting
hereunder, the term `Trustee' as used in this Article shall in
such case (unless the context otherwise requires) be construed as
extending to and including such Paying Agent within its meaning
as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the
Trustee; provided, however, that Section 12.12 shall not apply to
the Company or any Affiliate of the Company if it or such
Affiliate acts as Paying Agent.
SECTION 12.14 Rights with Respect to Conversion and Certain
Payments.
Nothing contained in this Article or elsewhere in this
Indenture, or in any of the Securities, shall prevent (x) the
application by the Trustee or any Paying Agent (including the
Company if it shall then be acting as Paying Agent) of any moneys
deposited with it hereunder to the payment of or on account of
the principal of and premium, if any, or interest on Securities,
including without limitation, redemptions or repurchases pursuant
to Articles XI or XIV if, at the time of such deposit (which
deposit was not more than 10 days prior to the time of such
payment), such payment would not have been prohibited by the
foregoing provisions of this Article or (y) conversion of the
Securities.
SECTION 12.15 Certain Conversions Deemed Payment.
For purposes of this Article only, (1) the issuance and
delivery of junior securities upon conversion of Securities in
accordance with Article XII shall not be deemed to constitute a
payment or distribution on account of the principal of, or
premium, if any, or interest on Securities or on account of the
purchase or other acquisition of Securities, and (2) the payment,
issuance or delivery of cash, property or securities (other than
junior securities) upon conversion of a Security shall be deemed
to constitute payment on account of principal of such Security.
For purposes of this Section, the term `junior securities' means
(a) shares of any stock of any class of the Company and (b)
securities of the Company which are subordinated in right of
payment to the prior payment in full of all Senior Indebtedness
which may be outstanding at the time of issuance or delivery of
such securities to substantially the same extent as, or to a
greater extent than, the Securities are so subordinated as
provided in this Article. Nothing contained in this Article or
elsewhere in this Indenture or in the Securities is intended to
or shall impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders of the Securities,
the right, which is absolute and unconditional, of the Holder of
any Security to convert such Security in accordance with Article
XIII.
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<PAGE> 133
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
SECTION 12.16 No Suspension of Remedies.
Except as provided in Section 12.03, nothing contained in
this Article shall limit the right of the Trustee or the Holders
of the Securities to take any action to accelerate the maturity
of the Securities pursuant to the provisions described under
Article V and as set forth in this Indenture or to pursue any
rights or remedies hereunder or under applicable law, subject to
the rights, if any, under this Article of the holders, from time
to time, of Senior Indebtedness to receive the cash, property or
securities receivable upon the exercise of such rights or
remedies.
ARTICLE XIII.
CONVERSION OF SECURITIES
SECTION 13.01 Conversion Privilege and Conversion Price.
Subject to and upon compliance with the provisions of this
Article, at the option of the Holder thereof, any Security or any
portion of the principal amount thereof which equals $1,000 or
any integral multiple thereof may be converted at any time after
60 days following the date of original issuance of Securities
under this Indenture at the principal amount thereof, or of such
portion thereof, into fully paid and nonassessable shares
(calculated as to each conversion to the nearest 1/100 of a
share) of Common Stock, at the conversion price, determined as
hereinafter provided, in effect at the time of conversion. Such
conversion right shall expire at the close of business on April
1, 2005. In case a Security or portion thereof is called for
redemption, such conversion right in respect of the Security or
portion so called shall expire at the close of business on the
second Business Day immediately preceding the applicable
Redemption Date, unless the Company defaults in making the
payment due upon redemption.
The price at which shares of Common Stock shall be delivered
upon conversion (herein called the `conversion price') shall be
initially $31.80 per share of Common Stock. The conversion price
shall be adjusted in certain instances as provided in Section
13.04.
SECTION 13.02 Exercise of Conversion Privilege.
In order to exercise the conversion privilege, the Holder of
any Security shall surrender such Security, duly endorsed or
assigned to the Company or in blank, at any office or agency of
the Company maintained pursuant to Section 10.02, accompanied by
written notice to the Company in the form provided in the
Security (or such other notice as is acceptable to the Company)
at such office or agency that the Holder elects to convert such
Security or, if less than the entire principal amount thereof is
to be converted, the portion thereof to be converted. Securities
surrendered for conversion during the period from the close of
business on any Regular Record Date next preceding any Interest
Payment Date to the opening of business on such Interest Payment
Date (except in the case of Securities or portions thereof which
have been called for redemption on a Redemption Date occurring
within such period) must be accompanied by payment in New York
Clearing House funds or other funds acceptable to the Company of
an amount equal to the interest payable on such Interest Payment
Date on the principal amount of Securities being surrendered for
conversion. Except as provided in the immediately preceding
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
sentence and subject to the last paragraph of Section 3.07, no
payment or adjustment shall be made upon any conversion on
account of any interest accrued on the Securities surrendered for
conversion or on account of any dividends on the Common Stock
issued upon conversion.
Securities shall be deemed to have been converted
immediately prior to the close of business on the day of
surrender of such Securities for conversion in accordance with
the foregoing provisions, and at such time the rights of the
Holders of such Securities as Holders shall cease, and the Person
or Persons entitled to receive the Common Stock issuable upon
conversion shall be treated for all purposes as the record holder
or holders of such Common Stock as and after such time. As
promptly as practicable on or after the conversion date, the
Company shall issue and shall deliver at such office or agency a
certificate or certificates for the number of full shares of
Common Stock issuable upon conversion, together with payment in
lieu of any fraction of a share, as provided in Section 13.03.
A Security in respect of which a Holder has delivered a
Repurchase Notice pursuant to Section 14.02(b) exercising the
option of such Holder to require the Company to repurchase such
Security may be converted only if such Repurchase Notice is
withdrawn by a written notice of withdrawal delivered in
accordance with Section 14.03.
In the case of any Security which is converted in part only,
upon such conversion the Company shall execute and the Trustee
shall authenticate and deliver to the Holder thereof, at the
expense of the Company, a new Security or Securities of
authorized denominations in aggregate principal amount equal to
the unconverted portion of the principal amount of such Security.
SECTION 13.03 Fractions of Shares.
No fractional share of Common Stock shall be issued upon
conversion of Securities. If more than one Security shall be
surrendered for conversion at one time by the same Holder, the
number of full shares which shall be issuable upon conversion
thereof shall be computed on the basis of the aggregate principal
amount of the Securities (or specified portions thereof) so
surrendered. Instead of any fractional share of Common Stock
which would otherwise be issuable upon conversion of any Security
or Securities (or specified portions thereof), the Company shall
pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction of the Closing Price (as hereinafter
defined) at the close of business on the day of conversion (or,
if such day is not a Trading Day (as hereafter defined), on the
Trading Day immediately preceding such day).
For purposes of this Indenture, `Closing Price' shall mean
the closing price per share of Common Stock as quoted on the
composite tape of the principal national securities exchange upon
which the Common Stock is listed or on the Nasdaq National Market
or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way,
in either case on such principal national securities exchange or
on the Nasdaq National Market or, if the Common Stock is not
listed or admitted to trading on any national securities exchange
or quoted on the Nasdaq National Market, the average of the
closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected
from time to time by the Company for that purpose, or, if such
prices are
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<PAGE> 135
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
not available, the fair market value set by, or in a
manner established by, the Board of Directors of the Company in
good faith. For purposes of this Indenture, `Trading Day' shall
mean any day on which (i) trading in the Common Stock is not
suspended on any national securities exchange or association or
over-the-counter market at the close of business and (ii) the
Common Stock has traded at least once on the national securities
exchange or association or over-the-counter market that is the
primary market for trading of the Common Stock.
SECTION 13.04 Adjustment of Conversion Price.
(a) In case the Company shall (i) issue Common Stock as a
dividend or distribution on its capital stock, including the
Common Stock, (ii) combine its outstanding shares of Common Stock
into a smaller number of shares, (iii) subdivide its outstanding
shares of Common Stock into a greater number of shares, or (iv)
issue by reclassification of its Common Stock any shares of
capital stock of the Company, the conversion price in effect
immediately prior to such action shall be adjusted so that the
holder of any Security thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock
or other capital stock of the Company that it would have owned or
been entitled to receive immediately following such action had
such Security been converted immediately prior to the occurrence
of such action. An adjustment made pursuant to this subsection
(a) shall become effective immediately after the record date, in
the case of a dividend or distribution, or immediately after the
effective date, in the case of a subdivision, combination or
reclassification. If as a result of an adjustment made pursuant
to this subsection (a), the holder of any Securities thereafter
surrendered for conversion shall become entitled to receive
shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be
described in a statement filed by the Company with the Trustee
and with any conversion agent as soon as practicable) shall
determine the allocation of the adjusted conversion price between
or among shares of such classes of capital stock or shares of
Common Stock and other capital stock.
(b) Subject to paragraph (f) of this Section, in case the
Company shall issue to all holders of the Common Stock, rights,
warrants or options entitling them to subscribe for or purchase
shares of Common Stock (or securities convertible into Common
Stock) at a price per share less than the Current Market Price
(determined as provided in paragraph (g) of this Section) on the
date fixed for the determination of stockholders entitled to
receive such rights or warrants, the conversion price in effect
at the opening of business on the day following the date fixed
for such determination shall be reduced by multiplying such
conversion price by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number
of shares of Common Stock which the aggregate of the offering
price of the total number of shares of Common Stock so offered
for subscription or purchase would purchase at such Current
Market Price and the denominator shall be the number of shares of
Common Stock outstanding at the close of business on the date
fixed for such determination plus the number of shares of Common
Stock so offered for subscription or purchase, such reduction to
become effective immediately after the opening of business on the
day following the date fixed for such determination. For the
purposes of this paragraph (b), the number of shares of Common
Stock at any time outstanding shall not include
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
shares held in the treasury of the Company. The Company shall not
issue any rights or warrants in respect of shares of Common Stock
held in the treasury of the Company.
(c) Subject to the last sentence of this paragraph (c) and
to paragraph (f) of this Section, in case the Company shall, by
dividend or otherwise, distribute to all holders of the Common
Stock shares of any class of its capital stock (other than Common
Stock), evidences of indebtedness, cash or other assets
(including securities, but excluding (i) any dividend or
distribution paid exclusively in cash, (ii) any dividend or
distribution referred to in paragraph (a) of this Section, and
(iii) any rights or warrants referred to in paragraph (b) of this
Section), the conversion price shall be reduced by multiplying
the conversion price in effect immediately prior to the close of
business on the date fixed for the determination of stockholders
entitled to such distribution by a fraction of which the
numerator shall be the Current Market Price (determined as
provided in paragraph (g) of this Section) on such date less the
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board
Resolution) on such date of the portion of the evidences of
indebtedness, shares of capital stock, cash and other assets to
be distributed applicable to one share of Common Stock and the
denominator shall be such Current Market Price, such reduction to
become effective immediately prior to the opening of business on
the day following such date. If the Board of Directors
determines the fair market value of any distribution for purposes
of this paragraph (c) by reference to the actual or when-issued
trading market for any securities comprising part or all of such
distribution, it must in doing so consider the prices in such
market over the same period used in computing the Current Market
Price pursuant to paragraph (g) of this Section, to the extent
possible. For purposes of this paragraph (c), any dividend or
distribution that includes shares of Common Stock, rights or
warrants to subscribe for or purchase shares of Common Stock or
securities convertible into or exchangeable for shares of Common
Stock shall be deemed to be (x) a dividend or distribution of the
evidences of indebtedness, cash, assets or shares of capital
stock other than such shares of Common Stock, such rights or
warrants or such convertible or exchangeable securities (making
any conversion price reduction required by this paragraph (c))
immediately followed by (y) in the case of such shares of Common
Stock or such rights or warrants, a dividend or distribution
thereof (making any further conversion price reduction required
by paragraph (a) and (b) of this Section, except any shares of
Common Stock included in such dividend or distribution shall not
be deemed `outstanding at the close of business on the date fixed
for such determination' within the meaning of paragraph (a) of
this Section), or (z) in the case of such convertible or
exchangeable securities, a dividend or distribution of the number
of shares of Common Stock as would then be issuable upon the
conversion or exchange thereof, whether or not the conversion or
exchange of such securities is subject to any conditions (making
any further conversion price reduction required by paragraph (a)
of this Section, except the shares deemed to constitute such
dividend or distribution shall not be deemed `outstanding at the
close of business on the date fixed for such determination'
within the meaning of paragraph (a) of this Section).
(d) In case the Company shall, by dividend or otherwise, at
any time distribute to all holders of the Common Stock cash
(excluding any cash that is distributed as part of a distribution
referred to in paragraph (c) of this Section or in connection
with a transaction to which Section 13.11 applies) in an
aggregate amount that, together with (A) the aggregate amount of
any other distributions to all holders of the Common Stock made
exclusively in cash within the 12 months
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
preceding the date fixed for the determination of stockholders entitled
to such distribution and in respect of which no conversion price
adjustment pursuant to this paragraph (d) has been made
previously and (B) the aggregate of any cash plus the fair market
value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board
Resolution) as of such date of determination of any other
consideration payable in respect of any tender offer by the
Company or a Subsidiary for all or any portion of the Common
Stock consummated within the 12 months preceding such date of
determination and in respect of which no conversion price
adjustment pursuant to paragraph (e) of this Section has been
made previously, exceeds 10% of the product of the Current Market
Price (determined as provided in paragraph (g) of this Section)
on such date of determination times the number of shares of
Common Stock outstanding on such date, the conversion price shall
be reduced by multiplying the conversion price in effect
immediately prior to the close of business on such date of
determination by a fraction of which the numerator shall be the
Current Market Price (determined as provided in paragraph (g) of
this Section) on such date less the amount of such cash
previously distributed or to be distributed at such time
applicable to one share of Common Stock and the denominator shall
be such Current Market Price, such reduction to become effective
immediately prior to the opening of business on the day after
such date.
(e) In case a tender offer made by the Company or any
Subsidiary for all or any portion of the Common Stock shall be
consummated and such tender offer shall involve an aggregate
consideration having a fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and
described in a Board Resolution) as of the last time (the
`Expiration Time') that tenders may be made pursuant to such
tender offer (as it shall have been amended) that, together with
(A) the aggregate of the cash plus the fair market value (as
determined by the Board of Directors, whose determination shall
be conclusive and described in a Board Resolution) as of the
Expiration Time of the other consideration paid in respect of any
other tender offer by the Company or a Subsidiary for all or any
portion of the Common Stock consummated within the 12 months
preceding the Expiration Time and in respect of which no
conversion price adjustment pursuant to this paragraph (e) has
been made previously and (B) the aggregate amount of any
distributions to all holders of the Common Stock made exclusively
in cash within the 12 months preceding the Expiration Time and in
respect of which no conversion price adjustment pursuant to
paragraph (d) of this Section has been made previously, exceeds
10% of the product of the Current Market Price (determined as
provided in paragraph (g) of this Section) immediately prior to
the Expiration Time times the number of shares of Common Stock
outstanding (including any tendered shares) at the Expiration
Time, the conversion price shall be reduced by multiplying the
conversion price in effect immediately prior to the Expiration
Time by a fraction of which the numerator shall be (x) the
product of the Current Market Price (determined as provided in
paragraph (g) of this Section) immediately prior to the
Expiration Time times the number of shares of Common Stock
outstanding (including any tendered shares at the Expiration
Time) minus (y) the fair market value (determined as aforesaid)
of the aggregate consideration payable to stockholders upon
consummation of such tender offer and the denominator shall be
the product of (A) such Current Market Price times (B) such
number of outstanding shares at the Expiration Time minus the
number of shares accepted for payment in such tender offer (the
`Purchased Shares'), such reduction to become effective
immediately prior to the opening of business on the day following
the Expiration Time; provided, that if the number of Purchased
Shares or the aggregate consideration payable therefor have not
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
been finally determined by such opening of business, the
adjustment required by this paragraph (e) shall, pending such
final determination, be made based upon the preliminarily
announced results of such tender offer, and, after such final
determination shall have been made, the adjustment required by
this paragraph (e) shall be made based upon the number of
Purchased Shares and the aggregate consideration payable therefor
as so finally determined.
(f) Rights, warrants or options issued by the Company to
all holders of the Common Stock entitling the holders thereof to
subscribe for or purchase shares of Common Stock (either
initially or under certain circumstances), which rights, warrants
or options (i) are deemed to be transferred with such shares of
Common Stock, (ii) are not exercisable and (iii) are also issued
in respect of future issuances of Common Stock, in each case in
clauses (i) through (iii) until the occurrence of a specified
event or events (`Trigger Event'), shall for purposes of this
Section 13.04 not be deemed issued until the occurrence of the
earliest Trigger Event. If any such rights, warrants or options,
including any such existing rights, warrants or options
distributed prior to the date of this Indenture, are subject to
subsequent events, upon the occurrence of each of which such
rights, warrants or options shall become exercisable to purchase
different securities, evidences of indebtedness or other assets,
then the occurrence of each such event shall be deemed to be such
date of issuance and record date with respect to new rights,
warrants or options (and a termination or expiration of the
existing rights, warrants or options without exercise by the
holder thereof). In addition, in the event of any distribution
(or deemed distribution) of such rights, warrants or options, or
any Trigger Event with respect thereto, that was counted for
purposes of calculating a distribution amount for which an
adjustment to the conversion price under this Section 13.04 was
made, (1) in the case of any such right, warrant or option which
shall all have been redeemed or repurchased without exercise by
any holders thereof, the conversion price shall be readjusted
upon such final redemption or repurchase to give effect to such
distribution or Trigger Event, as the case may be, as though it
were a cash distribution, equal to the per share redemption or
repurchase price received by a holder or holders of Common Stock
with respect to such rights or warrants (assuming such holder had
retained such rights or warrants), made to all holders of Common
Stock as of the date of such redemption or repurchase, and (2) in
the case of such rights, warrants or options which shall have
expired or been terminated without exercise by any holders
thereof, the conversion price shall be readjusted as if such
rights, warrants and options had not been issued.
Notwithstanding any other provision of this Section 13.04 to
the contrary, rights, warrants, evidences of indebtedness, other
securities, cash or other assets (including, without limitation,
any rights distributed pursuant to any stockholder rights plan)
shall be deemed not to have been distributed for purposes of this
Section 13.04 if the Company makes proper provision so that each
holder of Securities who converts a Security (or any portion
thereof) after the date fixed for determination of stockholders
entitled to receive such distribution shall be entitled to
receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversions, the amount and kind of such
distributions that such holder would have been entitled to
receive if such holder had, immediately prior to such
determination date, converted such Security into Common Stock.
(g) For the purpose of any computation under this paragraph
and paragraphs (b), (c), (d) and (e) of this Section, the current
market price per share of Common Stock (the `Current
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
Market Price') on any date shall be deemed to be the average of the
daily Closing Prices for the shorter of (i) 30 consecutive
Business Days ending on the last full Trading Day on the exchange
or market referred to in determining such daily Closing Prices
prior to the time of determination or (ii) the period commencing
on the date next succeeding the first public announcement of the
issuance of such rights or warrants, such distribution or such
tender offer, as the case may be, through such last full Trading
Day prior to the time of determination.
(h) The Company may make such reductions in the conversion
price, in addition to those required by the foregoing paragraphs
of this Section, as it considers to be advisable (as evidenced by
a Board Resolution) in order that any event treated for federal
income tax purposes as a dividend of stock or stock rights shall
not be taxable to the recipients or, if that is not possible, to
diminish any income taxes that are otherwise payable because of
such event.
(i) No adjustment in the conversion price shall be required
unless such adjustment (plus any other adjustments not previously
made by reason of this paragraph (i)) would require an increase
or decrease of at least 1% in the conversion price; provided,
however, that any adjustments which by reason of this paragraph
(i) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All
calculations under this Section 13.04 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case
may be.
(j) In the event that at any time as a result of an
adjustment made pursuant to subsection (a) of this Section 13.04,
the holder of any Security thereafter surrendered for conversion
shall become entitled to receive any shares of the Company other
than Common Stock, thereafter the conversion price of such other
shares so receivable upon conversion of any Security shall be
subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with
respect to Common Stock contained in this Article XIII.
(k) Notwithstanding any other provision of this Section
13.04, no adjustment to the conversion price shall reduce the
conversion price below the then par value per share of the Common
Stock, and any such purported adjustment shall instead reduce the
conversion price to such par value. The Company hereby covenants
not to take any action to increase the par value per share of the
Common Stock.
SECTION 13.05 Notice of Adjustments of Conversion Price.
Whenever the conversion price is adjusted as herein
provided:
(a) the Company shall compute the adjusted conversion
price in accordance with Section 13.04 or 13.11, as
applicable, and shall prepare an Officers' Certificate
signed by the Treasurer of the Company setting forth the
adjusted conversion price and showing in reasonable detail
the facts upon which such adjustment is based, and such
certificate shall forthwith be filed (with a copy to the
Trustee) at each office or agency maintained for the purpose
of conversion of Securities pursuant to Section 10.02; and
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
(b) a notice stating that the conversion price has
been adjusted and setting forth the adjusted conversion
price shall forthwith be prepared, and as soon as
practicable after it is prepared, such notice shall be
mailed by the Company to all Holders at their last addresses
as they shall appear in the Security Register.
SECTION 13.06 Notice of Certain Corporate Action.
In case:
(a) the Company shall take an action that would
require a conversion price adjustment pursuant to Section
13.04(b), (c), (d) or (e); or
(b) the Company shall authorize the granting to the
holders of its Common Stock of rights or warrants to
subscribe for or purchase any shares of capital stock of any
class or of any other rights (excluding shares of capital
stock or options for capital stock issued pursuant to a
benefit plan for employees, officers or directors of the
Company); or
(c) of any reclassification of the Common Stock (other
than a subdivision or combination of the outstanding shares
of Common Stock), or of any consolidation, merger or share
exchange to which the Company is a party and for which
approval of any stockholders of the Company is required, or
of the sale or transfer of all or substantially all of the
assets of the Company; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) the Company or any Subsidiary shall commence a
tender offer for all or a portion of the outstanding shares
of Common Stock (or shall amend any such tender offer to
change the maximum number of shares being sought or the
amount or type of consideration being offered therefor);
then the Company shall cause to be filed at each office or agency
maintained pursuant to Section 10.02, and shall cause to be
mailed to all Holders at their last addresses as they shall
appear in the Security Register, at least 21 days (or 10 days in
any case specified in clause (a), (b) or (e) above) prior to the
applicable record, effective or expiration date hereinafter
specified, a notice stating (x) the date on which a record is to
be taken for the purpose of such dividend, distribution or
granting of rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record
who will be entitled to such dividend, distribution, rights or
warrants are to be determined, (y) the date on which such
reclassification, consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation,
merger, share exchange, sale, transfer, dissolution, liquidation
or winding up, or (z) the date on which such tender offer
commenced, the date on which such tender offer is scheduled to
expire unless extended, the consideration offered and the other
material terms thereof (or the material terms of any amendment
thereto). Neither the failure
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
to give any such notice nor any defect therein shall affect the
legality or validity of any action described in clauses (a) through
(e) of this Section 13.06.
SECTION 13.07 Company to Reserve Common Stock.
The Company shall at all times reserve and keep available,
free from preemptive and other rights, out of the authorized but
unissued Common Stock or out of the Common Stock held in
treasury, for the purpose of effecting the conversion of
Securities, the full number of shares of Common Stock then
issuable upon the conversion of all outstanding Securities.
Shares of Common Stock issuable upon conversion of outstanding
Securities shall be issued out of the Common Stock held in
Treasury to the extent available.
SECTION 13.08 Taxes on Conversions.
The Company will pay any and all taxes that may be payable
in respect of the issue or delivery of shares of Common Stock on
conversion of Securities pursuant hereto. The Company shall not,
however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of
shares of Common Stock in a name other than that of the Holder of
the Security or Securities to be converted, and no such issue or
delivery shall be made unless and until the Person requesting
such issue has paid to the Company the amount of any such tax, or
has established to the satisfaction of the Company that such tax
has been paid.
SECTION 13.09 Covenant as to Common Stock.
The Company covenants that all shares of Common Stock which
may be issued upon conversion of Securities will upon issue be
fully paid and nonassessable and, except as provided in Section
13.08, the Company will pay all taxes, liens and charges with
respect to the issue thereof.
SECTION 13.10 Cancellation of Converted Securities.
All Securities delivered for conversion shall be delivered
to the Trustee to be canceled by or at the direction of the
Trustee, which shall dispose of the same as provided in Section
3.09.
SECTION 13.11 Provisions of Consolidation, Merger or Sale of
Assets.
In case of any consolidation of the Company with, or merger
of the Company into, any other Person, any merger of another
Person into the Company (other than a merger which does not
result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock) or any sale
or transfer of all or substantially all of the assets of the
Company (other than to a wholly-owned subsidiary), the Person
formed by such consolidation or resulting from such merger or
which acquires such assets, as the case may be, shall execute and
deliver to the Trustee a supplemental indenture providing that
the Holder of each Security then Outstanding shall have the right
thereafter, during the period such Security shall be convertible
as specified in Section 13.01, to convert such Security only into
the kind and amount of securities, cash and other property, if
any, receivable upon such consolidation, merger, sale or transfer
by a holder of
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
the number of shares of Common Stock into which such Security might
have been converted immediately prior to such consolidation, merger,
sale or transfer, assuming such holder of Common Stock (i) is not a
Person with which the Company consolidated or into which the Company
merged or which merged into the Company or to which such sale or
transfer was made, as the case may be (a `Constituent Person'), or an
Affiliate of a Constituent Person and (ii) failed to exercise his
rights of election, if any, as to the kind or amount of securities,
cash and other property receivable upon such consolidation, merger,
sale or transfer (provided that if the kind or amount of
securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each
share of Common Stock held immediately prior to such
consolidation, merger, sale or transfer by other than a
Constituent Person or an Affiliate thereof and in respect of
which such rights of election shall not have been exercised
(`nonelecting share'), then for the purpose of this Section the
kind and amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer by each
nonelecting share shall be deemed to be the kind and amount so
receivable per share by a plurality of the nonelecting shares).
Such supplemental indenture shall provide for adjustments which,
for events subsequent to the effective date of such supplemental
indenture, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Article. The above
provisions of this Section shall similarly apply to successive
consolidations, mergers, sales or transfers.
SECTION 13.12 Trustee's Disclaimer.
The Trustee has no duty to determine when an adjustment
under this Article XIII should be made, how it should be made or
what such adjustment should be, but may accept as conclusive
evidence of the correctness of any such adjustment, and shall be
protected in relying upon, the Officers' Certificate with respect
thereto which the Company is obligated to file with the Trustee
pursuant to Section 13.05. The Trustee makes no representation
as to the validity or value of any securities or assets issued
upon conversion of Securities, and the Trustee shall not be
responsible for the Company's failure to comply with any
provisions of this Article XIII.
The Trustee shall not be under any responsibility to
determine the correctness of any provisions contained in any
supplemental indenture executed pursuant to Section 13.11, but
may accept as conclusive evidence of the correctness thereof, and
shall be protected in relying upon, the Officers' Certificate
with respect thereto which the Company is obligated to file with
the Trustee pursuant to Section 13.11.
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
ARTICLE XIV.
RIGHT TO REQUIRE REPURCHASE
SECTION 14.01 Right to Require Repurchase.
In the event that there shall occur a Change in Control (as
defined in Section 14.07), then each Holder shall have the right,
at such Holder's option, to require the Company to purchase, and
upon the exercise of such right, the Company shall, subject to
the provisions of Section 12.04, purchase, all or any part of
such Holder's Securities on the date (the `Repurchase Date') that
is 30 days after the date the Company gives notice of the Change
in Control as contemplated in Section 14.02(a) at a price (the
`Repurchase Price') equal to 100% of the principal amount
thereof, together with accrued and unpaid interest to the
Repurchase Date.
SECTION 14.02 Notice; Method of Exercising Repurchase Right.
(a) On or before the 15th day after the occurrence of a
Change in Control, the Company, or at the request of the Company,
the Trustee (in the name and at the expense of the Company),
shall give notice of the occurrence of the Change in Control and
of the repurchase right set forth herein arising as a result
thereof by first-class mail, postage prepaid, to the Trustee and
to each Holder of the Securities at such Holder's address
appearing in the Security Register. The Company shall also
deliver a copy of such notice of a repurchase right to the
Trustee.
Each notice of a repurchase right shall state:
(1) the event constituting the Change in Control and the
date thereof,
(2) the Repurchase Date,
(3) the date by which the repurchase right must be
exercised,
(4) the Repurchase Price,
(5) that Securities surrendered for repurchase pursuant to
this Article may be converted into Common Stock only to
the extent that the Repurchase Notice has been
withdrawn in accordance with the terms of this
Indenture, and
(6) the instructions a Holder must follow to exercise a
repurchase right and to withdraw a Repurchase Notice.
No failure of the Company to give the foregoing notice shall
limit any Holder's right to exercise a repurchase right. The
Trustee shall have no affirmative obligation to determine if
there shall have occurred a Change in Control.
(b) To exercise a repurchase right, a Holder shall deliver
to the Company (or an agent designated by the Company for such
purpose in the notice referred to in (a) above) or to the Trustee
on or before the close of business on the Repurchase Date (i)
written notice (a `Repurchase Notice')
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Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
of the Holder's exercise of such right, which Repurchase Notice shall
set forth the name of the Holder,the principal amount of the Security
or Securities (or portion of a Security) to be repurchased, and a
statement that an election to exercise the repurchase right is being
made thereby, and (ii) the Security or Securities with respect to
which the repurchase right is being exercised, duly endorsed for
transfer to the Company.
(c) Upon receipt by the Company, its agent or the Trustee
of a Repurchase Notice specified in Section 14.02(b), the Holder
of any Security in respect of which such Repurchase Notice was
given shall (unless such Repurchase Notice is withdrawn as
specified in Section 14.03) thereafter be entitled to receive
solely the Repurchase Price with respect to such Security or
portion thereof as to which the repurchase right has been
exercised. In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall on the
Repurchase Date pay or cause to be paid in cash to the Holder
thereof the Repurchase Price of the Security or Securities as to
which the repurchase right had been exercised; provided, however,
that installments of interest whose Stated Maturity is on or
prior to the Repurchase Date shall be payable to the Holders of
such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant
Record Date according to their terms and the provisions of
Section 3.07. Securities in respect of which a Repurchase Notice
has been given by the Holder thereof may not be converted into
shares of Common Stock on or after the date of the delivery of
such Repurchase Notice unless such notice has first been validly
withdrawn.
SECTION 14.03 Withdrawal of Repurchase Notice.
A Repurchase Notice may be withdrawn by means of a written
notice of withdrawal delivered by the Holder to the Company (or
an agent designated by the Company for such purpose in the notice
referred to in Section 14.02(a)) or to the Trustee at any time
prior to the close of business on the Repurchase Date,
specifying:
(i) the certificate number of each Security in respect
of which such notice of withdrawal is being submitted;
(ii) the principal amount of the Security or portion
thereof with respect to which such notice of withdrawal is
being submitted; and
(iii) the principal amount, if any, of such
Security that remains subject to the original Repurchase
notice and that has been or will be delivered for purchase
by the Company.
SECTION 14.05 Deposit of Repurchase Price.
On or prior to the Repurchase Date, the Company shall
deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in
trust as provided in Section 10.03) an amount of money in same
day funds sufficient to pay the Repurchase Price of the
Securities which are to be repaid on the Repurchase Date.
80
144
<PAGE>
<PAGE> 145
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
If and to the extent that the aggregate amount of money so
deposited with the Trustee or with any Paying Agent or so
segregated and held in trust for the purchase of Securities
exceeds the aggregate Repurchase Price of the Securities or
portion thereof that the Company is obligated to purchase, any
such excess funds shall be paid to the Company upon Company
Request or, if then held by the Company, shall be discharged from
such trust.
SECTION 14.05 Securities Not Repurchased on Repurchase Date.
If any Security surrendered for repurchase shall not be so
paid on the Repurchase Date, the principal shall, until paid,
bear interest to the extent permitted by applicable law from the
Repurchase Date at the rate per annum borne by such Security.
SECTION 14.06 Securities Repurchased in Part.
Any Security which is to be repurchased only in part shall
be surrendered at any office or agency of the Company designated
for that purpose pursuant to Section 10.02 (with, if the Company
or the Trustee so requires, due endorsement by, or written
instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities of
any authorized denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the
unrepurchased portion of the principal of the Security so
surrendered.
SECTION 14.07 Certain Definitions.
For purposes of this Article: a `Change in Control' shall
occur when :
(i) all or substantially all of the assets of the
Company or of the Company and its Subsidiaries, taken as a
whole, are sold in one transaction or any series of related
transactions as an entirety to any Person or related group
of Persons;
(ii) there shall be consummated any consolidation or
merger of the Company (A) in which the Company is not the
continuing or surviving corporation (other than a
consolidation or merger with a wholly owned subsidiary of
the Company in which all shares of Common Stock outstanding
immediately prior to the effectiveness thereof are changed
into or exchanged for the same consideration) or (B)
pursuant to which the Common Stock would be converted into
cash, securities or other property, in each case, other than
a consolidation or merger of the Company in which the
holders of the Common Stock immediately prior to the
consolidation or merger have, directly or indirectly, at
least a majority of the total voting power of all classes of
capital stock entitled to vote generally in the election of
directors of the continuing or surviving corporation
immediately after such consolidation or merger in
substantially the same proportion as their ownership of
Common Stock immediately before such transaction;
81
145
<PAGE>
<PAGE> 146
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
(iii) any Person (other than a director, officer or
beneficial owner currently known by the Company to own more
than 5% of the outstanding shares of Common Stock), or any
such Persons acting together which would constitute a
`group' for purposes of Section 13(d) of the Exchange Act (a
`Group'), together with any Affiliates thereof, shall
beneficially own (as defined in Rule 13d-3 under the
Exchange Act) at least 50% of the total voting power of all
classes of capital stock of the Company entitled to vote
generally in the election of directors of the Company;
(iv) at any time during any consecutive two-year
period, individuals who at the beginning of such period
constituted the Board of Directors (together with any new
directors whose election by the Board of Directors or whose
nomination for election by the stockholders of the Company
was approved by a vote of 50% of the directors then still in
office who were either directors at the beginning of such
period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office; or
(v) the Company is liquidated or dissolved.
82
146
<PAGE>
<PAGE> 147
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
_________________________
This instrument may be executed in any number of
counterparts, each of which when so executed shall be deemed to
be an original, but all such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed and attested, all as of the day and
year first above written.
AVATAR HOLDINGS INC.
By: /s/ Charles L. McNairy
--------------------------
Name: Charles L. McNairy
Title: Executive Vice President,Treasurer
and Chief Financial Officer
Attest:
/s/ Juanita I. Kerrigan
---------------------------
Name: Juanita I. Kerrigan
Title: Vice President and Secretary
THE CHASE MANHATTAN BANK,
as Indenture Trustee
By: /s/ Gregory Shea
---------------------
Name: Gregory P. Shea
Title: Senior Trust Officer
Attest:
/s/ J Adams
----------------------
Name: JoAnne Adams
Title: Second Vice President<PAGE>
147
<PAGE>
<PAGE> 148
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On the 2nd day of February 1998, before me personally came
Charles L. McNairy, to me known, who, being by me duly sworn, did
depose and say that he is Executive Vice President, Treasurer and
Chief Financial Officer of Avatar Holdings Inc., one of the
corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the
seal affixed to said instrument is such corporate seal; that it
was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like
authority.
/s/ Lucita J.Krahn
---------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 2nd day of February 1998, before me personally came
Gregory P. Shea to me known, who, being by me duly sworn, did
depose and say that (s)he is a Senior Trust Officer of The Chase
Manhattan Bank, a New York banking corporation, described in and
which executed the foregoing instrument; that (s)he knows the
seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation; and that
(s)he signed his (her) name thereto by like authority.
/s/ Emily Fayan
-------------------
Notary Public
148
<PAGE>
<PAGE> 149
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
TABLE OF CONTENTS
PAGE
ARTICLE I.
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION....3
-------------------------------------------------------
SECTION 1.01 Definitions.................................3
SECTION 1.02 Compliance Certificates and Opinions.......10
SECTION 1.03 Form of Documents Delivered to Trustee.....10
SECTION 1.04 Acts of Holders; Record Dates..............11
SECTION 1.05 Notices, Etc., to Trustee and Company......12
SECTION 1.06 Notice to Holders; Waiver..................13
SECTION 1.07 Conflict with Trust Indenture Act..........13
SECTION 1.08 Effect of Headings and Table of Contents...13
SECTION 1.09 Successors and Assigns.....................13
SECTION 1.10 Separability Clause........................14
SECTION 1.11 Benefits of Indenture......................14
SECTION 1.12 GOVERNING LAW..............................14
SECTION 1.13 Legal Holidays.............................14
SECTION 1.15 Limitation on Individual Liability.........14
ARTICLE II.
SECURITY FORMS ...........................................15
--------------
SECTION 2.01 Forms Generally............................15
SECTION 2.03 Form of Reverse of Security................18
SECTION 2.04 Form of Trustee's Certificate of
Authentication.............................25
ARTICLE III.
THE SECURITIES ...........................................25
--------------
SECTION 3.01 Title and Terms............................25
SECTION 3.02 Denominations..............................26
SECTION 3.03 Execution, Authentication, Delivery and
Dating.....................................26
SECTION 3.04 Temporary Securities.......................27
SECTION 3.05 Registration, Registration of Transfer and
Exchange...................................27
SECTION 3.06 Mutilated, Destroyed, Lost and Stolen
Securities.................................28
SECTION 3.07 Payment of Interest; Interest Rights
Preserved..................................30
SECTION 3.08 Persons Deemed Owners......................32
SECTION 3.09 Cancellation...............................32
SECTION 3.10 Computation of Interest....................32
ARTICLE IV.
SATISFACTION AND DISCHARGE................................32
--------------------------
SECTION 4.01 Satisfaction and Discharge of Indenture....32
SECTION 4.02 Application of Trust Money.................34
SECTION 4.03 Reinstatement..............................34
150
<PAGE>
<PAGE> 151
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
ARTICLE V.
REMEDIES ...........................................35
--------
SECTION 5.01 Events of Default..........................35
SECTION 5.02 Acceleration of Maturity; Rescission and
Annulment..................................37
SECTION 5.03 Collection of Indebtedness and Suits for
Enforcement by Trustee.....................38
SECTION 5.04 Trustee May File Proofs of Claim...........39
SECTION 5.05 Trustee May Enforce Claims Without Possession
of Securities..............................40
SECTION 5.06 Application of Money Collected.............40
SECTION 5.07 Limitation on Suits........................40
SECTION 5.08 Unconditional Right of Holders to Receive
Principal, Premium and Interest and to
Convert....................................41
SECTION 5.09 Restoration of Rights and Remedies.........41
SECTION 5.10 Rights and Remedies Cumulative.............42
SECTION 5.11 Delay or Omission Not Waiver...............42
SECTION 5.12 Control by Holders.........................42
SECTION 5.13 Waiver of Past Defaults....................43
SECTION 5.14 Undertaking for Costs......................43
ARTICLE VI.
THE TRUSTEE ...........................................43
-----------
SECTION 6.01 Certain Duties and Responsibilities........44
SECTION 6.02 Notice of Defaults.........................45
SECTION 6.03 Certain Rights of Trustee..................45
SECTION 6.04 Not Responsible for Recitals or Issuance of
Securities.................................46
SECTION 6.05 May Hold Securities........................46
SECTION 6.06 Money Held in Trust........................47
SECTION 6.07 Compensation and Reimbursement.............47
SECTION 6.08 Disqualification; Conflicting Interests....48
SECTION 6.09 Corporate Trustee Required; Eligibility....48
SECTION 6.10 Resignation and Removal; Appointment of
Successor..................................48
SECTION 6.11 Acceptance of Appointment by Successor.....49
SECTION 6.12 Merger, Conversion, Consolidation or
Succession to Business.....................50
SECTION 6.13 Preferential Collection of Claims Against
Company....................................50
SECTION 6.14 Appointment of Authenticating Agent........50
ARTICLE VII.
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY.........53
-------------------------------------------------
SECTION 7.01 Company to Furnish Trustee Names and
Addresses of Holders.......................53
SECTION 7.02 Preservation of Information; Communication
to Holders.................................53
SECTION 7.03 Reports by Trustee.........................53
SECTION 7.04 Reports by Company.........................54
151
<PAGE>
<PAGE> 152
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
ARTICLE VIII.
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE......54
----------------------------------------------------
SECTION 8.01 Company May Consolidate, Etc., Only on
Certain Terms..............................54
SECTION 8.02 Successor Substituted......................55
ARTICLE IX.
SUPPLEMENTAL INDENTURES...................................55
-----------------------
SECTION 9.01 Supplemental Indentures Without Consent of
Holders....................................55
SECTION 9.02 Supplemental Indentures with Consent of
Holders....................................56
SECTION 9.03 Execution of Supplemental Indentures.......57
SECTION 9.04 Effect of Supplemental Indentures..........57
SECTION 9.05 Conformity with Trust Indenture Act........57
SECTION 9.06 Reference in Securities to Supplemental
Indentures.................................57
ARTICLE X.
COVENANTS ...........................................58
---------
SECTION 10.01 Payment of Principal, Premium and Interest.58
SECTION 10.02 Maintenance of Office or Agency............58
SECTION 10.03 Money for Security Payments to Be Held in
Trust......................................58
SECTION 10.04 Statement by Officers as to Default........60
SECTION 10.05 Existence..................................60
SECTION 10.06 Waiver of Certain Covenants................60
ARTICLE XI.
REDEMPTION OF SECURITIES..................................60
------------------------
SECTION 11.01 Right of Redemption........................61
SECTION 11.02 Applicability of Article...................61
SECTION 11.03 Election to Redeem; Notice to Trustee......61
SECTION 11.04 Selection by Trustee of Securities to be
Redeemed...................................61
SECTION 11.05 Notice of Redemption.......................62
SECTION 11.06 Deposit of Redemption Price................62
SECTION 11.07 Securities Payable on Redemption Date......63
SECTION 11.08 Securities Redeemed in Part................63
SECTION 11.09 Conversion Arrangements on Call for
Redemption.................................64
ARTICLE XII.
SUBORDINATION OF SECURITIES...............................64
---------------------------
SECTION 12.01 Securities Subordinated to Senior
Indebtedness...............................64
SECTION 12.02 Payment Over of Proceeds Upon Dissolution,
Etc........................................64
SECTION 12.03 Acceleration of Securities.................65
SECTION 12.04 No Payment When Senior Indebtedness in
Default....................................66
SECTION 12.05 Subrogation to Rights of Holders of Senior
Indebtedness...............................67
SECTION 12.06 Obligations of the Company Unconditional...68
SECTION 12.07 Trustee to Effectuate Subordination........68
SECTION 12.08 No Waiver of Subordination Provisions......68
152
<PAGE>
<PAGE> 153
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
SECTION 12.09 Notice to Trustee..........................69
SECTION 12.10 Reliance on Judicial Order or Certificate of
Liquidating Agent..........................69
SECTION 12.11 Trustee Not Fiduciary for Holders of Senior
Indebtedness...............................70
SECTION 12.12 Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's
Rights.....................................70
SECTION 12.13 Article Applicable to Paying Agents........70
SECTION 12.14 Rights with Respect to Conversion and Certain
Payments...................................71
SECTION 12.15 Certain Conversions Deemed Payment.........71
ARTICLE XIII.
CONVERSION OF SECURITIES..................................72
------------------------
SECTION 13.01 Conversion Privilege and Conversion Price..72
SECTION 13.02 Exercise of Conversion Privilege...........72
SECTION 13.03 Fractions of Shares........................73
SECTION 13.04 Adjustment of Conversion Price.............74
SECTION 13.05 Notice of Adjustments of Conversion Price..78
SECTION 13.06 Notice of Certain Corporate Action.........79
SECTION 13.07 Company to Reserve Common Stock............80
SECTION 13.08 Taxes on Conversions.......................80
SECTION 13.09 Covenant as to Common Stock................80
SECTION 13.10 Cancellation of Converted Securities.......81
SECTION 13.11 Provisions of Consolidation, Merger or Sale
of Assets..................................81
SECTION 13.12 Trustee's Disclaimer.......................81
ARTICLE XIV.
RIGHT TO REQUIRE REPURCHASE...............................82
---------------------------
SECTION 14.01 Right to Require Repurchase................82
SECTION 14.02 Notice; Method of Exercising Repurchase
Right......................................82
SECTION 14.03 Withdrawal of Repurchase Notice............83
SECTION 14.04 Deposit of Repurchase Price................84
SECTION 14.05 Securities Not Repurchased on Repurchase
Date.......................................84
SECTION 14.06 Securities Repurchased in Part.............84
SECTION 14.07 Certain Definitions........................85
153
<PAGE>
<PAGE> 154
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
Certain Sections of this Indenture relating to
Sections 310 through 318 of the Trust Indenture Act of 1939:
------------------------------------------------------------
Section 310(a)(1) 6.09
(a)(2) 6.09
(a)(3) Not Applicable
(a)(4) Not Applicable
(a)(5) 6.09
(b) 6.08
Section 311(a) 6.13
(b) 6.13
Section 312(a) 7.01
7.02(a)
(b) 7.02(b)
(c) 7.02(c)
Section 313(a) 7.03(a)
(b) 7.03(a)
(c) 7.03(a)
(d) 7.03(b)
Section 314(a) 7.04
(a)(4) 10.04
(b) Not Applicable
(c)(1) 1.02
(c)(2) 1.02
(c)(3) Not Applicable
(d) Not Applicable
(e) 1.02
Section 315(a) 6.01
(b) 6.02
(c) 6.01
(d) 6.01
(e) 5.14
Section 316(a)(1)(A) 5.02
5.12
(a)(1)(B) 5.13
(a)(2) Not Applicable
(b) 5.08
(c) 1.04(c)
i
154
<PAGE>
<PAGE> 155
Exhibit 4 (d) - 7% Indenture between Avatar Holdings Inc. and The Chase
Manhattan Bank - continued
Section 317(a)(1) 5.03
(a)(2) 5.04
(b) 10.03
Section 318(a) 1.07
________________________
Note: This reconciliation and tie shall not, for any
purpose, be deemed to be a part of the Indenture.
155
<PAGE>
<PAGE> 156
Exhibit 10 (K) - Avatar Holdings Inc. 1997
Incentive and Capital Accumulation Plan
AVATAR HOLDINGS INC.
1997 INCENTIVE AND CAPITAL ACCUMULATION PLAN
1. Purpose. The Avatar Holdings Inc. 1997 Incentive and Capital
Accumulation Plan (the "Plan") is intended to provide incentives which will
attract, retain and motivate highly competent persons as key employees of
Avatar Holdings Inc. (the "Company") and of any subsidiary corporation now
existing or hereafter formed or acquired, by providing them opportunities
to acquire shares of the common stock, par value $1.00 per share, of the
Company ("Common Stock") or to receive monetary payments based on the value
of such shares pursuant to the Benefits (as defined below) described
herein. Furthermore, the Plan is intended to assist in aligning the
interests of the Company's key employees to those of its stockholders.
2. Administration. (a) The Plan will be administered by a committee of the
Board of Directors of the Company (the "Board") or a subcommittee of a
committee of the Board (which may be the Company's Compensation Committee),
appointed by the Board from among its members (the "Committee"), and shall
be comprised solely of not less than two members who shall be (i) "Non-
Employee Directors" within the meaning of Rule 16b-3(b)(3) (or any
successor rule) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and (ii) unless otherwise determined by the
Board of Directors, "outside directors" within the meaning of Treasury
Regulation Section 1.162-27(e)(3) under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Committee is authorized,
subject to the provisions of the Plan, to establish such rules and
regulations as it deems necessary for the proper administration of the Plan
and to make such determinations and interpretations and to take such action
in connection with the Plan and any Benefits (as defined below) granted
hereunder as it deems necessary or advisable. All determinations and
interpretations made by the Committee shall be binding and conclusive on
all participants and their legal representatives. No member of the Board of
Directors, no member of the Committee and no employee of the Company shall
be liable for any act or failure to act hereunder, except in circumstances
involving his or her bad faith, gross negligence or willful misconduct, or
for any act or failure to act hereunder by any other member or employee or
by any agent to whom duties in connection with the administration of this
Plan have been delegated. The Company shall indemnify members of the
Committee and any agent of the Committee who is an employee of the Company,
against any and all liabilities or expenses to which they may be subjected
by reason of any act or failure to act with respect to their duties on
behalf of the Plan, except in circumstances involving such person's bad
faith, gross negligence or willful misconduct.
(b) The Committee may delegate to one or more of its members, or to one or
more agents, such administrative duties as it may deem advisable, and the
Committee, or any person to whom it has delegated duties as aforesaid, may
employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the Plan. The
Committee may employ such legal or other counsel, consultants and agents as
it may deem desirable for the administration of the Plan and may rely upon
156
<PAGE>
<PAGE> 157
Exhibit 10 (K) - Avatar Holdings Inc. 1997
Incentive and Capital Accumulation Plan - continued
any opinion or computation received from any such counsel, consultant or
agent. Expenses incurred by the Committee in the engagement of such
counsel, consultant or agent shall be paid by the Company, or the
subsidiary or affiliate whose employees have benefitted from the Plan, as
determined by the Committee.
3. Participants. Participants will consist of such key employees of the
Company and any subsidiary corporation of the Company as the Committee in
its sole discretion determines to be in a position to impact the success
and future growth and profitability of the Company and whom the Committee
may designate from time to time to receive Benefits under the Plan.
Designation of a participant in any year shall not require the Committee to
designate such person to receive a Benefit in any other year or, once
designated, to receive the same type or amount of Benefit as granted to the
participant in any other year. The Committee shall consider such factors as
it deems pertinent in selecting participants and in determining the type
and amount of their respective Benefits.
4. Type of Benefits. Benefits under the Plan may be granted in any one or
a combination of (a) Stock Options, (b) Stock Appreciation Rights, (c)
Stock Awards, (d) Performance Awards, and (e) Stock Units (each as
described below, and collectively, the "Benefits"). Stock Awards,
Performance Awards, and Stock Units may, as determined by the Committee in
its discretion, constitute Performance-Based Awards, as described in
Section 11 below. Benefits shall be evidenced by agreements (which need not
be identical) in such forms as the Committee may from time to time approve;
provided, however, that in the event of any conflict between the provisions
of the Plan and any such agreements, the provisions of the Plan shall
prevail.
5. Common Stock Available Under the Plan. The aggregate number of shares
of Common Stock that may be subject to Benefits, including Stock Options,
granted under this Plan shall be 425,000 shares of Common Stock, which may
be authorized and unissued or treasury shares, subject to any adjustments
made in accordance with Section 12 hereof. The maximum number of shares of
Common Stock with respect to which Benefits may be granted or measured to
any individual participant under the Plan during the term of the Plan shall
not exceed 425,000, provided, however, that the maximum number of shares of
Common Stock with respect to which Stock Options and Stock Appreciation
Rights may be granted to an individual participant under the Plan during
the term of the Plan shall not exceed 225,000 (in each case, subject to
adjustments made in accordance with Section 12 hereof). Other than those
shares of Common Stock subject to Benefits that are cancelled or terminated
as a result of the Committee's exercise of its discretion with respect to
Performance-Based Awards as provided for in Section 11, any shares of
Common Stock subject to a Stock Option or Stock Appreciation Right which
for any reason is cancelled or terminated without having been exercised,
any shares subject to Stock Awards, Performance Awards or Stock Units which
are forfeited, any shares subject to Performance Awards settled in cash or
any shares delivered to the Company as part or full payment for the
exercise of a Stock Option or Stock Appreciation Right shall again be
available for Benefits under the Plan. The preceding sentence shall apply
157
<PAGE>
<PAGE> 158
Exhibit 10 (K) - Avatar Holdings Inc. 1997
Incentive and Capital Accumulation Plan - continued
only for purposes of determining the aggregate number of shares of Common
Stock subject to Benefits but shall not apply for purposes of determining
the maximum number of shares of Common Stock with respect to which Benefits
(including the maximum number of shares of Common Stock subject to Stock
Options and Stock Appreciation Rights) that may be granted to any
individual participant under the Plan.
6. Stock Options. Stock Options will consist of awards from the Company
that will enable the holder to purchase a specific number of shares of
Common Stock, at set terms and at a fixed purchase price. Stock Options may
be "incentive stock options" ("Incentive Stock Options"), within the
meaning of Section 422 of the Code, or Stock Options which do not
constitute Incentive Stock Options ("Nonqualified Stock Options"). The
Committee will have the authority to grant to any participant one or more
Incentive Stock Options, Nonqualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights). Each
Stock Option shall be subject to such terms and conditions consistent with
the Plan as the Committee may impose from time to time, subject to the
following limitations:
(a) Exercise Price. Each Stock Option granted hereunder shall have such
per-share exercise price as the Committee may determine at the date of
grant; provided, however, subject to subsection (d) below, that the per
share exercise price shall not be less than 100% of the Fair Market Value
(as defined below) of the Common Stock on the date the option is granted.
(b) Payment of Exercise Price. The option exercise price may be paid in
cash or, in the discretion of the Committee determined at the date of
grant, by the delivery of shares of Common Stock of the Company then owned
by the participant, by the withholding of shares of Common Stock for which
a Stock Option is exercisable, by delivering to the Company an executed
prommissory note (or such other form of indebtedness) on such terms and
conditions as the Committee shall determine in its sole discretion at the
date of grant, or by a combination of these methods. In the discretion of
the Committee determined at the date of grant, payment may also be made by
delivering a properly executed exercise notice to the Company together with
a copy of irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds to pay the exercise price. To
facilitate the foregoing, the Company may enter into agreements for
coordinated procedures with one or more brokerage firms. The Committee may
prescribe any other method of paying the exercise price that it determines
to be consistent with applicable law and the purpose of the Plan,
including, without limitation, in lieu of the exercise of a Stock Option by
delivery of shares of Common Stock of the Company then owned by a
participant, providing the Company with a notarized statement attesting to
the number of shares owned, where, upon verification by the Company, the
Company would issue to the participant only the number of incremental
shares to which the participant is entitled upon exercise of the Stock
Option. In determining which methods a participant may utilize to pay the
exercise price, the Committee may consider such factors as it determines
are appropriate.
158
<PAGE>
<PAGE> 159
Exhibit 10 (K) - Avatar Holdings Inc. 1997
Incentive and Capital Accumulation Plan - continued
(c) Exercise Period. Stock Options granted under the Plan shall be
exercisable at such time or times and subject to such terms and conditions
as shall be determined by the Committee; provided, however, that no Stock
Option shall be exercisable later than ten years after the date it is
granted. All Stock Options shall terminate at such earlier times and upon
such conditions or circumstances as the Committee shall in its discretion
set forth in such option agreement at the date of grant.
(d) Limitations on Incentive Stock Options. Incentive Stock Options may be
granted only to participants who are employees of the Company or subsidiary
corporation of the Company at the date of grant. The aggregate market value
(determined as of the time the option is granted) of the Common Stock with
respect to which Incentive Stock Options are exercisable for the first time
by a participant during any calendar year (under all option plans of the
Company) shall not exceed $100,000. For purposes of the preceding sentence,
Incentive Stock Options will be taken into account in the order in which
they are granted. Incentive Stock Options may not be granted to any
participant who, at the time of grant, owns stock possessing (after the
application of the attribution rules of Section 424(d) of the Code) more
than 10% of the total combined voting power of all outstanding classes of
stock of the Company or any subsidiary corporation of the Company, unless
the option price is fixed at not less than 110% of the Fair Market Value of
the Common Stock on the date of grant and the exercise of such option is
prohibited by its terms after the expiration of five years from the date of
grant of such option. Notwithstanding anything to the contrary contained
herein, no Incentive Stock Option may be exercised later than ten years
after the date it is granted. In addition, no Incentive Stock Option shall
be issued to a participant in tandem with a Nonqualified Stock Option.
7. Stock Appreciation Rights. The Committee may, in its discretion, grant
Stock Appreciation Rights to the holders of any Stock Options granted
hereunder. In addition, Stock Appreciation Rights may be granted
independently of, and without relation to, options. A Stock Appreciation
Right means a right to receive a payment, in cash, Common Stock or a
combination thereof, in an amount equal to the excess of (x) the Fair
Market Value, or other specified valuation, of a specified number of shares
of Common Stock on the date the right is exercised over (y) the Fair Market
Value, or other specified valuation (which shall be no less than the Fair
Market Value), of such shares of Common Stock on the date the right is
granted, all as determined by the Committee; provided, however, that if a
Stock Appreciation Right is granted retroactively in tandem with or in
substitution for a Stock Option, the designated Fair Market Value in the
award agreement may be the Fair Market Value on the date such Stock Option
was granted. Each Stock Appreciation Right shall be subject to such terms
and conditions as the Committee shall impose from time to time.
8. Stock Awards. The Committee may, in its discretion, grant Stock Awards
(which may include mandatory payment of bonus incentive compensation in
stock) consisting of Common Stock issued or transferred to participants
with or without other payments therefor as additional compensation for
services to the Company. Stock Awards may be subject to such terms and
conditions as the Committee determines appropriate, including, without
159
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<PAGE> 160
Exhibit 10 (K) - Avatar Holdings Inc. 1997
Incentive and Capital Accumulation Plan - continued
limitation, restrictions on the sale or other disposition of such shares,
the right of the Company to reacquire such shares for no consideration upon
termination of the participant's employment within specified periods, and
may constitute Performance-Based Awards, as described below. The Committee
may require the participant to deliver a duly signed stock power, endorsed
in blank, relating to the Common Stock covered by such an Award. The
Committee may also require that the stock certificates evidencing such
shares be held in custody or bear restrictive legends until the
restrictions thereon shall have lapsed. The Stock Award shall specify
whether the participant shall have, with respect to the shares of Common
Stock subject to a Stock Award, all of the rights of a holder of shares of
Common Stock of the Company, including the right to receive dividends and
to vote the shares.
9. Performance Awards. (a) Performance Awards may be granted to
participants at any time and from time to time, as shall be determined by
the Committee. Performance Awards may, as determined by the Committee in
its sole discretion, constitute Performance-Based Awards. The Committee
shall have complete discretion in determining the number, amount and timing
of awards granted to each participant. Such Performance Awards may be in
the form of shares of Common Stock or Stock Units. Performance Awards may
be awarded as short-term or long-term incentives. With respect to those
Performance Awards that are intended to constitute Performance-Based
Awards, the Committee shall set performance targets at its discretion
which, depending on the extent to which they are met, will determine the
number and/or value of Performance Awards that will be paid out to the
participants, and may attach to such Performance Awards one or more
restrictions. Performance targets may be based upon, without limitation,
Company-wide, divisional and/or individual performance.
(b) With respect to those Performance Awards that are not intended to
constitute Performance-Based Awards, the Committee shall have the authority
at any time to make adjustments to performance targets for any outstanding
Performance Awards which the Committee deems necessary or desirable unless
at the time of establishment of goals the Committee shall have precluded
its authority to make such adjustments.
(c) Payment of earned Performance Awards shall be made in accordance with
terms and conditions prescribed or authorized by the Committee. The
participant may elect to defer, or the Committee may require or permit the
deferral of, the receipt of Performance Awards upon such terms as the
Committee deems appropriate.
10. Stock Units. (a) The Committee may, in its discretion, grant Stock
Units to participants hereunder. Stock Units may, as determined by the
Committee in its sole discretion, constitute Performance-Based Awards. The
Committee shall determine the criteria for the vesting of Stock Units. A
Stock Unit granted by the Committee shall provide payment in shares of
Common Stock at such time as the award agreement shall specify. Shares of
Common Stock issued pursuant to this Section 10 may be issued with or
without other payments therefor as may be required by applicable law or
such other consideration as may be determined by the Committee. The
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Exhibit 10 (K) - Avatar Holdings Inc. 1997
Incentive and Capital Accumulation Plan - continued
Committee shall determine whether a participant granted a Stock Unit shall
be entitled to a Dividend Equivalent Right (as defined below).
(b) Upon vesting of a Stock Unit, unless the Committee has determined to
defer payment with respect to such unit or a Participant has elected to
defer payment under subsection (c) below, shares of Common Stock
representing the Stock Units shall be distributed to the participant unless
the Committee, with the consent of the participant, provides for the
payment of the Stock Units in cash or partly in cash and partly in shares
of Common Stock equal to the value of the shares of Common Stock which
would otherwise be distributed to the participant.
(c) Prior to the year with respect to which a Stock Unit may vest, the
participant may elect not to receive Common Stock upon the vesting of such
Stock Unit and for the Company to continue to maintain the Stock Unit on
its books of account. In such event, the value of a Stock Unit shall be
payable in shares of Common Stock pursuant to the agreement of deferral.
(d) A "Stock Unit" means a notational account representing one share of
Common Stock. A "Dividend Equivalent Right" means the right to receive the
amount of any dividend paid on the share of Common Stock underlying a Stock
Unit, which shall be payable in cash or in the form of additional Stock
Units.
11. Performance-Based Awards. Certain Benefits granted under the Plan may
be granted in a manner such that the Benefits qualify for the performance-
based compensation exemption of Section 162(m) of the Code ("Performance-
Based Awards"). As determined by the Committee in its sole discretion,
either the granting or vesting of such Performance-Based Awards is to be
based upon one or more of the following factors: net sales, pretax income
before allocation of corporate overhead and bonus, budget, earnings per
share, net income, division, group or corporate financial goals, return on
stockholders' equity, return on assets, attainment of strategic and
operational initiatives, appreciation in and/or maintenance of the price of
the Common Stock or any other publicly-traded securities of the Company,
market share, gross profits, earnings before interest and taxes, earnings
before interest, taxes, dividends and amortization, economic value-added
models and comparisons with various stock market indices, reductions in
costs or any combination of the foregoing. With respect to Performance-
Based Awards, (i) the Committee shall establish in writing (x) the
objective performance-based goals applicable to a given period and (y) the
individual employees or class of employees to which such performance-based
goals apply no later than 90 days after the commencement of such period
(but in no event after 25% of such period has elapsed) and (ii) no
Performance-Based Awards shall be payable to or vest with respect to, as
the case may be, any participant for a given period until the Committee
certifies in writing that the objective performance goals (and any other
material terms) applicable to such period have been satisfied. With respect
to any Benefits intended to qualify as Performance-Based Awards, after
establishment of a performance goal, the Committee shall not revise such
performance goal or increase the amount of compensation payable thereunder
(as determined in accordance with Section 162(m) of the Code) upon the
161
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<PAGE> 162
Exhibit 10 (K) - Avatar Holdings Inc. 1997
Incentive and Capital Accumulation Plan - continued
attainment of such performance goal. Notwithstanding the preceding
sentence, the Committee may reduce or eliminate the number of shares of
Common Stock or cash granted or the number of shares of Common Stock vested
upon the attainment of such performance goal.
12. Adjustment Provisions; Change in Control. (a) If there shall be any
change in the Common Stock of the Company, through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, reverse
stock split, split up, spinoff, combination of shares, exchange of shares,
dividend in kind or other like change in capital structure or distribution
(other than normal cash dividends) to stockholders of the Company, an
adjustment shall be made to each outstanding Stock Option and Stock
Appreciation Right such that each such Stock Option and Stock Appreciation
Right shall thereafter be exercisable for such securities, cash and/or
other property as would have been received in respect of the Common Stock
subject to such Stock Option or Stock Appreciation Right had such Stock
Option or Stock Appreciation Right been exercised in full immediately prior
to such change or distribution, and such an adjustment shall be made
successively each time any such change shall occur. In addition, in the
event of any such change or distribution, in order to prevent dilution or
enlargement of participants' rights under the Plan, the Committee will have
authority to adjust, in an equitable manner, the number and kind of shares
that may be issued under the Plan, the exercisability and vesting pensions
of such Benefits, the number and kind of shares subject to outstanding
Benefits, the exercise price applicable to outstanding Benefits, and the
Fair Market Value of the Common Stock and other value determinations
applicable to outstanding Benefits. Appropriate adjustments may also be
made by the Committee in the terms of any Benefits under the Plan to
reflect such changes or distributions and to modify any other terms of
outstanding Benefits on an equitable basis, including modifications of
performance targets and changes in the length of performance periods. In
addition, other than with respect to Stock Options, Stock Appreciation
Rights and other awards intended to constitute Performance-Based Awards,
the Committee is authorized to make adjustments to the terms and conditions
of, and the criteria included in, Benefits in recognition of unusual or
nonrecurring events affecting the Company or the financial statements of
the Company, or in response to changes in applicable laws, regulations, or
accounting principles. Notwithstanding the foregoing, (i) any adjustment
with respect to an Incentive Stock Option shall comply with the rules of
Section 424(a) of the Code, and (ii) in no event shall any adjustment be
made which would render any Incentive Stock Option granted hereunder other
than an incentive stock option for purposes of Section 422 of the Code.
(b) In the event of a Change in Control (as defined below), the Committee,
in its discretion, may take such actions as it deems appropriate with
respect to outstanding Benefits, including, without limitation,
accelerating the exercisability or vesting of such Benefits.
The Committee, in its discretion, may determine that, upon the occurrence
of a Change in Control of the Company, each Stock Option and Stock
Appreciation Right outstanding hereunder shall terminate within a specified
number of days after notice to the holder, and such holder shall receive,
162
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<PAGE> 163
Exhibit 10 (K) - Avatar Holdings Inc. 1997
Incentive and Capital Accumulation Plan - continued
with respect to each share of Common Stock subject to such Stock Option or
Stock Appreciation Right, an amount equal to the excess of the Fair Market
Value of such shares of Common Stock immediately prior to the occurrence of
such Change in Control over the exercise price per share of such Stock
Option or Stock Appreciation Right; such amount to be payable in cash, in
one or more kinds of property (including the property, if any, payable in
the transaction) or in a combination thereof, as the Committee, in its
discretion, shall determine.
For purposes of this Section 12(b), a "Change in Control" of the Company
shall be deemed to have occurred upon any of the following events:
(A) 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 Exchange Act) 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
(B) The majority of the Company's Board of Directors is no longer comprised
of the incumbent directors who constitute the Board of Directors on the
Effective Date (as hereinafter defined) and any other individual(s) who
becomes a director subsequent to the Effective Date 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
(C) A sale of all or substantially all of the assets of the Company; or
(D) 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 clause (C)
above, and such transaction shall have been consummated.
13. Transferability. Each Benefit granted under the Plan to a participant
shall not be
transferable otherwise than by will or the laws of descent and
distribution, and shall be exercisable, during the participant's lifetime,
only by the participant. In the event of the death of a participant, each
Stock Option or Stock Appreciation Right theretofore granted to him or her
shall be exercisable during such period after his or her death as the
Committee shall in its discretion set forth in such option or right at the
date of grant and then only by the executor or administrator of the estate
of the deceased participant or the person or persons to whom the deceased
participant's rights under the Stock Option or Stock Appreciation Right
shall pass by will or the laws of descent and distribution. Notwithstanding
the foregoing, at the discretion of the Committee, an award of a Benefit
other than an Incentive Stock Option may permit the transferability of a
Benefit by a participant solely to the participant's spouse, siblings,
parents, children and grandchildren or trusts for the benefit of such
persons or partnerships, corporations, limited liability companies or other
162
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<PAGE> 163
Exhibit 10 (K) - Avatar Holdings Inc. 1997
Incentive and Capital Accumulation Plan - continued
entities owned solely by such persons, including trusts for such persons,
subject to any restriction included in the award of the Benefit.
14. Other Provisions. The award of any Benefit under the Plan may also be
subject to such other provisions (whether or not applicable to the Benefit
awarded to any other participant) as the Committee determines, at the date
of grant, appropriate, including, without limitation, for the installment
purchase of Common Stock under Stock Options, for the installment exercise
of Stock Appreciation Rights, to assist the participant in financing the
acquisition of Common Stock, for the forfeiture of, or restrictions on
resale or other disposition of, Common Stock acquired under any form of
Benefit, for the acceleration of exercisability or vesting of Benefits in
the event of a change in control of the Company, for the payment of the
value of Benefits to participants in the event of a change in control of
the Company, or to comply with federal and state securities laws, or
understandings or conditions as to the participant's employment in addition
to those specifically provided for under the Plan.
15. Fair Market Value. For purposes of this Plan and any Benefits awarded
hereunder, Fair Market Value shall be the closing price of the Company's
Common Stock on the date of calculation (or on the last preceding trading
date if Common Stock was not traded on such date) if the Company's Common
Stock is readily tradeable on a national securities exchange or other
market system, and if the Company's Common Stock is not readily tradeable,
Fair Market Value shall mean the amount determined in good faith by the
Committee as the fair market value of the Common Stock of the Company.
16. Withholding. All payments or distributions of Benefits made pursuant
to the Plan shall be net of any amounts required to be withheld pursuant to
applicable federal, state and local tax withholding requirements. If the
Company proposes or is required to distribute Common Stock pursuant to the
Plan, it may require the recipient to remit to it or to the corporation
that employs such recipient an amount sufficient to satisfy such tax
withholding requirements prior to the delivery of any certificates for such
Common Stock. In lieu thereof, the Company or the employing corporation
shall have the right to withhold the amount of such taxes from any other
sums due or to become due from such corporation to the recipient as the
Committee shall prescribe. The Committee may, in its discretion and subject
to such rules as it may adopt (including any as may be required to satisfy
applicable tax and/or non-tax regulatory requirements), permit an optionee
or award or right holder to pay all or a portion of the federal, state and
local withholding taxes arising in connection with any Benefit consisting
of shares of Common Stock by electing to have the Company withhold shares
of Common Stock having a Fair Market Value equal to the amount of tax to be
withheld, such tax calculated at rates required by statute or regulation.
17. Tenure. A participant's right, if any, to continue to serve the
Company as a director, officer, employee, or otherwise, shall not be
enlarged or otherwise affected by his or her designation as a participant
under the Plan.
18. Unfunded Plan. Participants shall have no right, title, or interest
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<PAGE> 164
Exhibit 10 (K) - Avatar Holdings Inc. 1997
Incentive and Capital Accumulation Plan - continued
whatsoever in or to any investments which the Company may make to aid it in
meeting its obligations under the Plan. Nothing contained in the Plan, and
no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship between the Company
and any participant, beneficiary, legal representative or any other person.
To the extent that any person acquires a right to receive payments from the
Company under the Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company. All payments to be made
hereunder shall be paid from the general funds of the Company and no
special or separate fund shall be established and no segregation of assets
shall be made to assure payment of such amounts except as expressly set
forth in the Plan. The Plan is not intended to be subject to the Employee
Retirement Income Security Act of 1974, as amended.
19. No Fractional Shares. No fractional shares of Common Stock shall be
issued or delivered pursuant to the Plan or any Benefit. The Committee
shall determine whether cash, or Benefits, or other property shall be
issued or paid in lieu of fractional shares or whether such fractional
shares or any rights thereto shall be forfeited or otherwise eliminated.
20. Duration, Amendment and Termination. No Benefit shall be granted more
than ten years after the Effective Date; provided, however, that the terms
and conditions applicable to any Benefit granted prior to such date may
thereafter be amended or modified by mutual agreement between the Company
and the participant or such other persons as may then have an interest
therein. The Committee may amend the Plan from time to time or suspend or
terminate the Plan at any time. However, no action authorized by this
Section 20 shall reduce the amount of any existing Benefit or change the
terms and conditions thereof without the participant's consent. No
amendment of the Plan shall, without approval of the stockholders of the
Company, (i) increase the total number of shares which may be issued under
the Plan or the maximum number of shares with respect to Stock Options,
Stock Appreciation Rights and other Benefits that may be granted to any
individual under the Plan or (ii) modify the requirements as to eligibility
for Benefits under the Plan; provided, however, that no amendment may be
made without approval of the stockholders of the Company if the amendment
will disqualify any Incentive Stock Options granted hereunder.
21. Governing Law. This Plan, Benefits granted hereunder and actions taken
in connection herewith shall be governed and construed in accordance with
the laws of the State of Delaware (regardless of the law that might
otherwise govern under applicable Delaware principles of conflict of laws).
22. Effective Date. (a) The Plan shall be effective as of February 13,
1997, the date on which the Plan was adopted by the Committee (the
"Effective Date"), provided that the Plan is approved by the stockholders
of the Company at an annual meeting or any special meeting of stockholders
of the Company within 12 months of the Effective Date, and such approval of
stockholders shall be a condition to the right of each participant to
receive any Benefits hereunder. Any Benefits granted under the Plan prior
to such approval of stockholders shall be effective as of the date of grant
(unless, with respect to any Benefit, the Committee specifies otherwise at
164
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Exhibit 10 (K) - Avatar Holdings Inc. 1997
Incentive and Capital Accumulation Plan - continued
the time of grant), but no such Benefit may be exercised or settled and no
restrictions relating to any Benefit may lapse prior to such stockholder
approval, and if stockholders fail to approve the Plan as specified
hereunder, any such Benefit shall be cancelled.
(b) This Plan shall terminate on February 13, 2007 (unless sooner
terminated by the Committee).
165
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<PAGE> 166
Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy
REGISTRATION RIGHTS AGREEMENT, dated as of
February 2, 1998, between AVATAR HOLDINGS INC., a Delaware
corporation (the "Company"), and Leon Levy (the "Initial
Holder").
This Agreement is made in connection with the
offering (the "Offering") by the Company of up to
$115,000,000 aggregate principal amount (inclusive of the
underwriters' over-allotment option) of 7% Convertible
Subordinated Notes due 2005 (the "Notes"). In order to
induce the Initial Holder to purchase $20,000,000 aggregate
principal amount of Notes pursuant to the Offering, the
Company has agreed to provide the registration rights set
forth in this Agreement for the benefit of Holders (as
hereinafter defined).
Accordingly, the parties hereto agree as follows:
1. Definitions.
As used herein, unless the context otherwise
requires, the following capitalized terms (in their singular
and plural forms, as applicable) have the following
respective meanings:
"Aggregate Value" of Registrable Securities shall
mean an aggregate dollar amount determined on the basis of
the principal amount of the Notes and the average of the
closing prices of the Common Stock on the national
securities exchange on which such stock is then listed (or,
if the Common Stock is not listed or admitted to trading on
a national securities exchange, the last quoted price or, if
not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use) during the ten (10)
consecutive trading days preceding the applicable date of
determination.
"Commission" means the Securities and Exchange
Commission or any other federal agency at the time
administering the Securities Act.
"Common Stock" means any shares of Common Stock,
par value $1.00 per share, of the Company now or hereafter
authorized to be issued, and any and all securities of any
kind whatsoever of the Company which may be issued on or
after the date hereof in respect of, or in exchange for,
shares of Common Stock pursuant to a merger, consolidation,
166
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<PAGE> 167
Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy
stock split, stock dividend, recapitalization of the Company
or otherwise.
"Exchange Act" means the Securities Exchange Act
of 1934, as amended, or any similar federal statute, and the
rules and regulations of the Commission thereunder, all as
the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include a
reference to the comparable section, if any, of any such
similar federal statute.
"Holder" or "Holders" means one or more registered
holders of Registrable Securities, as applicable.
"Initial Holder" has the meaning assigned to it in
the preamble hereof.
"Notes" has the meaning assigned to it in the
preamble hereof.
"Odyssey" means Odyssey Partners, L.P., a Delaware
limited partnership.
"Offering" has the meaning assigned to it in the
preamble hereof.
"Other Holder" means any person or entity to whom
the Company has granted or does grant registration rights,
except, to the extent applicable, in such person's or
entity's capacity as a Holder.
"Other Holder Registrable Securities" means any
securities of the Company, whether now or hereafter issued,
including Notes and shares of Common Stock, held by any
Other Holder.
"Person" means a corporation, an association, a
partnership, an organization, a business, a trust, an
individual, or any other entity or organization, including a
government or political subdivision or an instrumentality or
agency thereof.
"Registrable Common Stock" means the Registrable
Securities other than the Registrable Notes (as hereinafter
defined).
"Registrable Notes" means the Notes issued to the
Initial Holder pursuant to the Offering.
167
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Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
"Registrable Securities" means (i) the Registrable
Notes, (ii) the shares of Common Stock owned by the Initial
Holder as of the date hereof, excluding any such shares
held, directly or indirectly, through a limited or general
partnership or other interest in Odyssey or received or
receivable upon liquidation of or distribution by Odyssey,
(iii) any shares of Common Stock issued upon conversion of
the Registrable Notes, or (iv) any securities issued with
respect to the Common Stock referred to in clauses (ii) and
(iii) hereof by way of a stock dividend, stock split or
reverse stock split or in connection with a combination of
shares, reclassification, recapitalization, merger,
consolidation, spin-off, reorganization or otherwise.
"Registration Expenses" means all expenses
incident to the registration and disposition of the
Registrable Securities pursuant to Section 2 hereof,
including, without limitation, all registration, filing and
applicable fees associated with filings to be made with the
National Association of Securities Dealers, Inc. (the
"NASD") or any national securities exchange; all fees and
expenses of compliance with state securities or blue sky
laws (including fees and disbursements of counsel to the
underwriters or the Holders in connection with "blue sky"
qualification of the Registrable Securities and
determination of their eligibility for investment under the
laws of the various jurisdictions); all duplicating and
printing expenses; all messenger and delivery expenses; the
fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of
"cold comfort" letters or, in connection with a registration
pursuant to Section 2.2 only, any special audits required
by, or incident to, such registration; all fees and
disbursements of underwriters (other than underwriting
discounts and commissions and fees or disbursements of
counsel for any underwriter); and all transfer taxes;
provided, however, that Registration Expenses shall exclude,
and the Holders shall pay, underwriting discounts and
commissions attributable to the sale of Registrable
Securities by such Holders.
"Securities Act" means the Securities Act of 1933,
as amended, or any similar federal statute, and the rules
and regulations of the Commission thereunder, all as the
same shall be in effect at the time. References to a
particular section of the Securities Act shall include a
reference to the comparable section, if any, of any such
similar federal statute.
168
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<PAGE> 169
Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
2. Registration Under Securities Act, Etc.
2.1 Registration on Request. (a) Request.
Subject to the provisions of Section 2.1(h) below, at any
time or from time to time after the date which is 180 days
from the date hereof and until the date that is 180 days
following the seventh anniversary hereof, the Holders (the
"Initiating Holders") shall have the right to require the
Company to effect the registration under the Securities Act
of all or part of the Registrable Securities (having an
Aggregate Value of not less than $5,000,000) held by such
Initiating Holders, by delivering a written request therefor
to the Company specifying the aggregate principal amount and
the number of shares of Registrable Securities, as
applicable, and the intended method of distribution.
The Company shall promptly give written notice of
such requested registration to all other Holders, if any,
and thereupon the Company shall, as expeditiously as
possible, use its best efforts to (A) effect the
registration under the Securities Act (including by means of
a shelf registration pursuant to Rule 415 under the
Securities Act if so requested in such request and if the
Company is then eligible to use such a registration) of the
Registrable Securities which the Company has been so
requested to register by the Initiating Holders, and all
other Registrable Securities which the Company has been
requested to register by any other Holder (together with the
Initiating Holders, the "Selling Holders") by written
request given to the Company within 10 days after the giving
of written notice by the Company, all to the extent
necessary to permit distribution in accordance with the
intended method of distribution set forth in the written
request or requests delivered by the Selling Holders, and
(B) if requested by the Selling Holders, obtain acceleration
of the effective date of the registration statement relating
to such registration.
(b) Registration Statement Form. Registrations
under this Section 2.1 shall be on such appropriate
registration form of the Commission as shall be selected by
the Company and as shall be reasonably acceptable to the
Selling Holders. The Company agrees to include in any such
registration statement all information which, in the opinion
of counsel to the Selling Holders and counsel to the
Company, is required to be included.
(c) Expenses. The Company shall pay all
Registration Expenses in connection with any registration
169
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<PAGE> 170
Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
requested pursuant to this Section 2.1.
(d) Effective Registration Statement. A
registration requested pursuant to this Section 2.1 shall
not be deemed to have been effected (including for purposes
of paragraph (h) of this Section 2.1) (i) unless a
registration statement with respect thereto has become
effective and has been kept continuously effective for a
period of at least 120 days (or such shorter period which
shall terminate when all the Registrable Securities covered
by such registration statement have been sold pursuant
thereto), (ii) if after it has become effective, such
registration is subject to any stop order, injunction or
other order or requirement of the Commission or other
governmental agency or court for any reason not attributable
to the Selling Holders and has not thereafter become
effective, or (iii) if the conditions to closing specified
in the underwriting agreement, if any, entered into in
connection with such registration are not satisfied for any
reason not attributable to the Selling Holders or waived.
(e) Selection of Managing Underwriters. The
managing underwriters of each underwritten offering of the
Registrable Securities to be registered shall be selected
jointly by the Company and the Selling Holders and, if they
are unable to jointly agree on such selection, such managing
underwriter shall be selected by the Company and shall be
reasonably satisfactory to the Selling Holders.
(f) Priority in Requested Registration. If the
managing underwriter of any underwritten offering shall
advise the Company in writing (with a copy to each Selling
Holder) that, in its opinion, the aggregate principal amount
or the number of shares of Registrable Securities requested
to be included in such registration exceeds the aggregate
principal amount or number of securities which can be sold
in such offering within a price range acceptable to the
Selling Holders of Registrable Securities, the Company will
include in such registration the aggregate principal amount
of Registrable Notes and the number of shares of Registrable
Common Stock, as applicable, which the Company is so advised
can be sold in such offering. The Registrable Securities
requested to be included in such registration shall be
reduced pro rata among the Selling Holders requesting such
registration of Registrable Securities on the basis of the
Aggregate Value of Registrable Securities of such Selling
Holders requesting such registration. In connection with any
such registration to which this Section 2.1(g) is
applicable, no securities other than Registrable Securities
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Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
shall be covered by such registration.
(g) Limitations on Registration on Request.
Notwithstanding anything to the contrary contained herein,
the registration rights granted to the Holders in Section
2.1(a) are subject to the following limitations: (i) the
Holders shall be entitled to require the Company, and the
Company shall be required, to effect no more than three
registrations pursuant to Section 2.1(a) hereof, (ii) the
Company shall not be required to effect a registration
pursuant to Section 2.1(a) if, with respect thereto, the
managing underwriter, the Commission, the Securities Act or
the rules and regulations thereunder, or the form on which
the registration statement is to be filed, would require the
conduct of an audit other than the regular audit conducted
by the Company at the end of its fiscal year, but rather the
filing may be delayed until the completion of such regular
audit (unless the Holders agree to pay the expenses of the
Company in connection with such an audit other than the
regular audit) and (iii) the Holders shall not be entitled
to require the Company, and the Company shall not be
required, to effect a registration pursuant to Section
2.1(a) within six (6) months following the termination date
of any other registration statement which was filed pursuant
to Section 2.1(a).
(h) Postponement. The Company shall be entitled
once in any 12-month period to postpone for a reasonable
period of time (but not exceeding 90 days) (the
"Postponement Period") the filing or the effectiveness of
any registration statement required to be prepared and filed
by it pursuant to this Section 2.1 if the Company
determines, in its reasonable judgment, that such
registration and offering would materially interfere with
any material financing, corporate reorganization or other
material transaction involving the Company or any
subsidiary, or would require premature disclosure thereof,
and promptly gives the Selling Holders written notice of
such determination, containing a general statement of the
reasons for such postponement and an approximation of the
anticipated delay. If the Company shall so postpone the
filing or the effectiveness of a registration statement, the
Selling Holders of not less than 50.1% of the Aggregate
Value of Registrable Securities to be registered thereby
shall have the right to withdraw the request for
registration in respect of the Registrable Securities by
giving written notice to the Company at any time and, in the
event of any such withdrawal, such request shall not be
counted for purposes of the requests for registration to
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Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
which the Holders are entitled pursuant to this Section 2.1.
2.2 Incidental Registration. (a) Right to
Include Registrable Securities. If the Company at any time
prior to the expiration of the Holders' right to request the
registration of Registrable Securities pursuant to Section
2.1(a) hereof proposes to register any of its securities
under the Securities Act by registration on Form S-1, S-2 or
S-3 or any successor or similar form(s) (except
registrations on such Form or similar form(s) solely for
registration of securities in connection with an employee
stock option, stock purchase, stock bonus or similar plan,
pursuant to a dividend reinvestment plan, pursuant to a
merger, exchange, offer or transaction of the type specified
in Rule 145(a) under the Securities Act), whether or not for
sale for its own account, it will each such time give prompt
written notice to the Holders of its intention to do so and
of the Holders' rights under this Section 2.3 and the
Holders shall be entitled to include, subject to the
provisions of this Agreement, Registrable Securities on the
same terms and conditions (if any) as apply to other
comparable securities of the Company sold in connection with
such registration. Upon the written request of any Holder (a
"Requesting Holder"), specifying the maximum principal
amount or number of shares of Registrable Securities
intended to be disposed of by such Requesting Holder, made
as promptly as practicable and in any event within 15 days
after the receipt of any such notice, the Company shall use
its best efforts to effect the registration under the
Securities Act of all Registrable Securities which the
Company has been so requested to register by the Requesting
Holders; provided, however, that if, at any time after
giving written notice of its intention to register any
securities and prior to the effective date of the
registration statement filed in connection with such
registration, the Company shall determine for any reason not
to register or to delay registration of such securities, the
Company shall give written notice of such determination and
its reasons therefor to the Holders and (i) in the case of a
determination not to register, shall be relieved of its
obligation under this Section 2.2 to register any
Registrable Securities in connection with such registration,
without prejudice, however, to the rights of the Holders to
request that such registration be effected as a registration
under Section 2.1, and (ii) in the case of a determination
to delay registration, shall be permitted to delay
registering any Registrable Securities, for the same period
as the delay in registering such other securities. No
registration effected under this Section 2.2 shall relieve
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Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
the Company of its obligation to effect any registration
upon request under Section 2.1. The Company will pay all
Registration Expenses in connection with any registration of
Registrable Securities requested pursuant to this Section
2.2.
(b) Right to Withdraw. Any Requesting Holder
shall have the right to withdraw its request for inclusion
of Registrable Securities in any registration statement
pursuant to this Section 2.2 at any time by giving written
notice to the Company of its request to withdraw.
(c) Priority in Incidental Registrations. If the
managing underwriter of any underwritten offering shall
inform the Company in writing of its opinion that the
Aggregate Value of the Registrable Securities when added to
the aggregate amount of other securities to be offered in
such registration, would materially adversely affect such
offering, then the Company shall include in such
registration such amount of each type of Registrable
Securities proposed to be included in such offering which
the Company is so advised by the managing underwriter can be
sold in (or during the time of) such offering without
materially adversely affecting such offering in the
following order of priority:
First: the holder or holders of securities
(including the Company in the case of a primary offering)
originally requesting or initiating such registration shall
be entitled to participate in accordance with the relative
priorities, if any, that shall exist among them; and then
Second: the Holders and all Other Holders of
securities having the right to include securities in such
registration shall be entitled to participate pro rata based
upon the amount of the securities proposed to be registered
by them.
(d) Plan of Distribution. Any participation by
the Holders in a registration by the Company shall be in
accordance with the Company's plan of distribution.
2.3 Registration Procedures. If and whenever
the Company is required to use its best efforts to effect
the registration of any Registrable Securities under the
Securities Act as provided in Sections 2.1 and 2.2 hereof,
the Company shall as expeditiously as possible:
(a) prepare and file with the Commission as soon
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Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
as practicable the requisite registration statement to
effect such registration (and shall include all financial
statements required by the Commission to be filed therewith)
and thereafter use its best efforts to cause such
registration statement to become effective; provided,
however, that before filing such registration statement
(including all exhibits) or any amendment or supplement
thereto or comparable statements under securities or blue
sky laws of any jurisdiction, the Company shall furnish such
documents to each Holder selling Registrable Securities
covered by such registration statement and each underwriter,
if any, participating in the offering of the Registrable
Securities and their respective counsel, which documents
will be subject to the review and comments of each such
Holder, each underwriter and their respective counsel; and
provided further, that (i) as to registration pursuant to
Section 2.1 hereof, the Company may discontinue any
registration of its securities which are not Registrable
Securities and (ii) as to registration pursuant to Section
2.2 hereof, the Company may discontinue any registration of
its securities, in each case, at any time prior to the
effective date of the registration statement relating
thereto;
(b) notify each Holder selling Registrable
Securities covered by such registration statement of the
Commission's requests for amending or supplementing the
registration statement and the prospectus, and prepare and
file with the Commission such amendments and supplements to
such registration statement and the prospectus used in
connection therewith as may be necessary to keep such
registration statement effective and to comply with the
provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such
registration statement for such period as shall be required
for the disposition of all of such Registrable Securities in
accordance with the intended method of distribution thereof;
provided, however, that such period need not exceed 120
days;
(c) furnish, without charge, to each Holder
selling Registrable Securities covered by such registration
statement and each underwriter such number of conformed
copies of such registration statement and of each such
amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus contained
in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in
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Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
conformity with the requirements of the Securities Act, and
such other documents, as such Holders and such underwriters
may reasonably request;
(d) use its best efforts (i) to register or
qualify all Registrable Securities and other securities
covered by such registration statement under such securities
or blue sky laws of such States of the United States of
America where an exemption is not available and as any
Holder or Holders selling Registrable Securities covered by
such registration statement or any managing underwriter
shall reasonably request, (ii) to keep such registration or
qualification in effect for so long as such registration
statement remains in effect, and (iii) to take any other
action which may be reasonably necessary or advisable to
enable the Holders to consummate the disposition in such
jurisdictions of the securities to be sold by such Holder or
Holders; provided, however, that the Company shall not for
any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign
corporation in any jurisdiction where it is not so
qualified;
(e) use its best efforts to cause all Registrable
Securities covered by such registration statement to be
registered with or approved by such other federal or state
governmental agencies or authorities as may be necessary in
the opinion of counsel to the Company and counsel to any
Holder or Holders selling Registrable Securities covered by
such registration statement to consummate the disposition of
such Registrable Securities;
(f) furnish to each Holder selling Registrable
Securities covered by such registration statement and each
underwriter, if any, participating in the offering of the
securities covered by such registration statement, a signed
counterpart of (i) an opinion of counsel for the Company,
and (ii) a "comfort" letter signed by the independent public
accountants who have certified the Company's financial
statements included or incorporated by reference in such
registration statement, covering substantially the same
matters with respect to such registration statement (and the
prospectus included therein) and, in the case of the
accountants' comfort letter, with respect to events
subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountants' comfort letters delivered to the underwriters
in underwritten public offerings of securities (and dated
the dates such opinions and comfort letters are customarily
175
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Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
dated) and, in the case of the legal opinion, such other
legal matters, and, in the case of the accountants' comfort
letter, such other financial matters, as such Holder or
Holders, or the underwriters, may reasonably request;
(g) promptly notify the Holders selling
Registrable Securities covered by such registration
statement and each managing underwriter, if any,
participating in the offering of the securities covered by
such registration statement (i) when such registration
statement, any pre-effective amendment, the prospectus or
any prospectus supplement related thereto or post-effective
amendment to such registration statement has been filed,
and, with respect to such registration statement or any
post-effective amendment, when the same has become
effective; (ii) of any request by the Commission for
amendments or supplements to such registration statement or
the prospectus related thereto or for additional
information; (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of such registration
statement or the initiation of any proceedings for that
purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale
under the securities or blue sky laws of any jurisdiction or
the initiation of any proceeding for such purpose; and (v)
at any time when a prospectus relating thereto is required
to be delivered under the Securities Act upon discovery
that, or upon the happening of any event as a result of
which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading, in the light of the
circumstances under which they were made, and in the case of
this clause (v), at the request of any Holder or Holders
selling Registrable Securities covered by such registration
statement promptly prepare and furnish to such Holder or
Holders and each managing underwriter, if any, participating
in the offering of the Registrable Securities, a reasonable
number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances
under which they were made.
176
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Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
(h) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve
months beginning with the first full calendar month after
the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 promulgated
thereunder, and promptly furnish to the Holders a copy of
any amendment or supplement to such registration statement
or prospectus;
(i) cause to be maintained a transfer agent and
registrar (which, in each case, may be the Company) for each
of the Notes and Common Stock from and after the date of
such registration;
(j) use its commercially reasonable efforts to
cause all Registrable Common Stock covered by such
registration statement to be (i)(x) listed on a national
securities exchange, if the Common Stock is then so listed,
or (y) quoted on the National Market System ("National
Market System") of the NASD Automated Quotation System
("NASDAQ") within the meaning of Rule 11Aa2-1 of the
Commission if the quotation of such Registrable Common Stock
is then permitted under NASDAQ rules; or (ii) if no similar
securities of the Company are then so listed or quoted, use
its best efforts to (x) secure designation of all such
Registrable Common Stock as a NASDAQ National Market System
security or (y) failing that, cause all such Registrable
Common Stock to be listed on a national securities exchange
or (z) failing that, to secure NASDAQ authorization for such
shares;
(k) deliver promptly to counsel to the Holders
selling Registrable Securities covered by such registration
statement and each underwriter, if any, participating in the
offering of the Registrable Securities, copies of all
correspondence between the Commission and the Company, its
counsel or auditors;
(l) use its best efforts to obtain the withdrawal
of any order suspending the effectiveness of the
registration statement;
(m) provide a CUSIP number for all Registrable
Securities no later than the effective date of the
registration statement;
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Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
(n) make available its employees and personnel and
otherwise provide reasonable assistance to the underwriters
(taking into account the needs of the Company's businesses)
in their marketing of Registrable Securities.
(o) in the case of a Registration Statement filed
pursuant to Rule 415, upon the occurrence of any event or
the discovery of any facts, each as contemplated by Section
2.3(g)(v) hereof, use its best efforts to prepare a
supplement or post-effective amendment to the registration
statement or the related prospectus or any document
incorporated therein by reference or file any other required
documents so that, thereafter, such prospectus will not
contain at the time of such delivery any untrue statement of
a material fact or omit to state a material fact necessary
to make the statements therein, in light of the
circumstances under which they were made, not misleading.
The Company may require the Holders selling
Registrable Securities covered by such registration
statement to furnish the Company such information regarding
the Holders and the distribution of the Registrable
Securities as the Company may from time to time reasonably
request in writing. In the event of a registration effected
pursuant to Section 2.1 or 2.2(a) hereof, if a Holder fails
to provide such information and the failure by such Holder
to furnish such information would prevent or unreasonably
delay the registration statement relating to such
registration from being declared effective by the
Commission, the Company may exclude such Holder's
Registrable Securities from such registration, which right
of the Company shall, in the case of a registration effected
pursuant to Section 2.1(a) hereof, be subject to the consent
of the Holders (if any) of not less than 50.1% of the
Aggregate Value of the Registrable Securities to be included
in such registration (other than such Holder's Registrable
Securities).
The Holders agree that upon receipt of any notice
from the Company of the happening of any event of the kind
described in paragraph (g)(iii) or (v) of this Section 2.3,
each of the Holders will discontinue its disposition of
Registrable Securities pursuant to the registration
statement relating to such Registrable Securities until, in
the case of paragraph (g)(v) of this Section 2.3, its
receipt of the copies of the supplemented or amended
prospectus contemplated by paragraph (g)(v) of this Section
2.3 and, if so directed by the Company, will deliver to the
Company (at the Company's expense) all copies, other than
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Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
permanent file copies, then in its possession, of the
prospectus relating to such Registrable Securities current
at the time of receipt of such notice. If the disposition by
the Holders of their securities is discontinued pursuant to
the foregoing sentence, the Company shall extend the period
of effectiveness of the registration statement by the number
of days during the period from and including the date of the
giving of notice to and including the date when the Holders
shall have received copies of the supplemented or amended
prospectus contemplated by paragraph (g)(v) of this Section
2.3; and, if the Company shall not so extend such period,
the Holders' request pursuant to which such registration
statement was filed shall not be counted for purposes of the
requests for registration to which the Holders are entitled
pursuant to Section 2.1 hereof.
2.4 Underwritten Offerings. (a) Requested
Underwritten Offerings. If requested by the underwriters
for any underwritten offering by the Selling Holders
pursuant to a registration requested under Section 2.1, the
Company shall enter into a customary underwriting agreement
with such underwriter or underwriters. Such underwriting
agreement shall be reasonably satisfactory in form and
substance to the Holders of not less than 50.1% of the
Aggregate Value of the Registrable Securities to be included
in such registration and shall contain such representations
and warranties by, and such other agreements on the part of,
the Company and such other terms as are generally prevailing
in agreements of that type, including, without limitation,
such customary provisions relating to indemnification and
contribution by the Company. The Selling Holders shall be
parties to such underwriting agreement and may, at their
option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall
also be made to and for the benefit of the Selling Holders
and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of the
Selling Holders. No Selling Holder shall be required to make
any representations or warranties to or agreements with the
Company or the underwriters other than representations,
warranties or agreements regarding such Selling Holder, its
ownership of and title to the Registrable Securities, and
its intended method of distribution; and any liability of
any Selling Holder to any underwriter or other Person under
such underwriting agreement shall be limited to liability
arising from misstatements in or omissions from its
representations and warranties and shall be limited to an
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<PAGE> 180
Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
amount equal to the net proceeds that it derives from such
registration.
(b) Incidental Underwritten Offerings. In the
case of a registration pursuant to Section 2.2 hereof, if
the Company shall have determined to enter into any
underwriting agreements in connection therewith, all of the
Requesting Holders' Registrable Securities to be included in
such registration shall be subject to such underwriting
agreements. The Requesting Holders may, at their option,
require that any or all of the representations and
warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall
also be made to and for the benefit of the Requesting
Holders and that any or all of the conditions precedent to
the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of the
Requesting Holders. No Requesting Holder shall be required
to make any representations or warranties to or agreements
with the Company or the underwriters other than
representations, warranties or agreements regarding such
Requesting Holder, its ownership of and title to the
Registrable Securities, and its intended method of
distribution; and any liability of any Requesting Holder to
any underwriter or other Person under such underwriting
agreement shall be limited to liability arising from
misstatements in or omissions from its representations and
warranties and shall be limited to an amount equal to the
net proceeds that it derives from such registration.
2.5 Preparation; Reasonable Investigation. In
connection with the preparation and filing of each
registration statement under the Securities Act pursuant to
this Agreement, the Company will give the participating
Holders, their underwriters, if any, and their respective
counsel, accountants and other representatives and agents
the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or
filed with the Commission, and, to the extent practicable,
each amendment thereof or supplement thereto, and give each
of them such access to its books and records and such
opportunities to discuss the business of the Company with
its officers and employees and the independent public
accountants who have certified its financial statements, and
supply all other information reasonably requested by each of
them, as shall be necessary or appropriate, in the opinion
of the participating Holders' and such underwriters'
respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
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Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
2.6 Indemnification. (a) Indemnification by the
Company. The Company agrees that in the event of any
registration of any securities of the Company under the
Securities Act, the Company shall, and hereby does,
indemnify and hold harmless each Holder, its respective
directors, officers, partners, agents and affiliates and
each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person,
if any, who controls such Holder or any such underwriter
within the meaning of the Securities Act, against any
losses, claims, damages, or liabilities, joint or several,
to which such Holder or any such director, officer, partner,
agent or affiliate or underwriter or controlling Person may
become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities,
joint or several (or actions or proceedings, whether
commenced or threatened, in respect thereof), arise out of
or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any registration
statement under which such securities were registered under
the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, (ii) any omission or
alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were
made not misleading, or (iii) any violation by the Company
of any federal, state or common law rule or regulation
applicable to the Company and relating to action required of
or inaction by the Company in connection with any such
registration, and the Company shall reimburse such Holder
and each such director, officer, partner, agent or
affiliate, underwriter and controlling Person for any legal
or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss,
claim, liability, action or proceeding; provided, however,
that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in
such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with
written information furnished to the Company through an
instrument duly executed by or on behalf of the Holders or
underwriter, as the case may be, specifically stating that
it is for use in the preparation thereof; and provided,
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Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
further, that the Company shall not be liable to any Person
who participates as an underwriter in the offering or sale
of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the
Securities Act, in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's
failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such
final prospectus. Such indemnity shall remain in full force
regardless of any investigation made by or on behalf of
either Holder or any such director, officer, partner, agent
or affiliate or controlling Person and shall survive the
transfer of such securities by such Holder.
(b) Indemnification by the Holders. As a
condition to including any Registrable Securities in any
registration statement, the Company shall have received an
undertaking reasonably satisfactory to it from each Holder
so including any Registrable Securities to indemnify and
hold harmless (in the same manner and to the same extent as
set forth in paragraph (a) of this Section 2.6) the Company,
and each director of the Company, each officer of the
Company and each other Person, if any, who controls the
Company within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission
or alleged omission from such registration statement, any
preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement
thereto, but only to the extent such statement or alleged
statement or omission or alleged omission was made in
reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed
by such Holder specifically stating that it is for use in
the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment
or supplement; provided, however, that the liability of such
indemnifying party under this Section 2.6(b) shall be
limited to the amount of net proceeds received by such
indemnifying party in the offering giving rise to such
liability. Such indemnity shall remain in full force and
effect, regardless of any investigation made by or on behalf
of the Company or any such director, officer or controlling
Person and shall survive the transfer of such securities by
such Holder.
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Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
(c) Notices of Claims, Etc. Promptly after
receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim
referred to in the preceding subsections of this Section
2.6, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such
action or proceeding; provided, however, that the failure of
any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations
under the preceding subsections of this Section 2.6, except
to the extent that the indemnifying party is actually
prejudiced by such failure to give notice, and shall not
relieve the indemnifying party from any liability which it
may have to the indemnified party otherwise than under this
Section 2.6. In case any such action or proceeding is
brought against an indemnified party, the indemnifying party
shall be entitled to participate therein and, unless in the
opinion of outside counsel to the indemnified party a
conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, to
assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it
may wish, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants
in any such action or proceeding include both the
indemnified party and the indemnifying party and if in the
opinion of outside counsel to the indemnified party there
may be legal defenses available to such indemnified party
and/or other indemnified parties which are different from or
in addition to those available to the indemnifying party,
the indemnified party or parties shall have the right to
select separate counsel to defend such action or proceeding
on behalf of such indemnified party or parties and the
indemnifying party shall be obligated to pay the fees and
expenses of such separate counsel or counsels. After notice
from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and approval by
the indemnified party of such counsel, the indemnifying
party shall not be liable to such indemnified party for any
legal expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable
costs of investigation (unless the proviso in the preceding
sentence shall be applicable). No indemnifying party shall
be liable for any settlement of any action or proceeding
effected without its written consent which shall not be
unreasonably withheld. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of
183
<PAGE>
<PAGE> 184
Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release
from all liability in respect to such claim or litigation.
(d) Contribution. If the indemnification provided
for in this Section 2.6 shall for any reason be held by a
court to be unavailable to an indemnified party under
subsection (a) or (b) hereof in respect of any loss, claim,
damage or liability, or any action in respect thereof, then,
in lieu of the amount paid or payable under subsection (a)
or (b) hereof, the indemnified party and the indemnifying
party under subsection (a) or (b) hereof shall contribute to
the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in
connection with investigating the same), (i) in such
proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand, and the
indemnified party on the other, which resulted in such loss,
claim, damage or liability, or action in respect thereof,
with respect to the statements or omissions which resulted
in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable
considerations, or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law or if the
allocation provided in this clause (ii) provides a greater
amount to the indemnified party than clause (i) above, in
such proportion as shall be appropriate to reflect not only
the relative fault but also the relative benefits received
by the indemnifying party and the indemnified party from the
offering of the securities covered by such registration
statement as well as any other relevant equitable
considerations. The parties hereto agree that it would not
be just and equitable if contributions pursuant to this
Section 2.6(d) were to be determined by pro rata allocation
or by any other method of allocation which does not take
into account the equitable considerations referred to in the
preceding sentence of this Section 2.6(d). No Person guilty
of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person's fraudulent misrepresentation.
The Holders' obligations to contribute as provided in this
subsection (d) are several and not joint and shall be in
proportion to the relative value of their respective
Registrable Securities covered by such registration
statement. In addition, no Person shall be obligated to
contribute hereunder any amounts in payment for any
settlement of any action or claim effected without such
Person's consent, which consent shall not be unreasonably
184
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<PAGE> 185
Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
withheld. Notwithstanding anything in this subsection (d) to
the contrary, no indemnifying party (other than the Company)
shall be required to contribute any amount in excess of the
net proceeds received by such party from the sale of the
Registrable Securities in the offering to which the losses,
claims, damages or liabilities of the indemnified parties
relate.
(e) Other Indemnification. Indemnification and
contribution similar to that specified in the preceding
subsections of this Section 2.6 (with appropriate
modifications) shall be given by the Company and the Holders
with respect to any required registration or other
qualification of securities under any federal, state or blue
sky law or regulation of any governmental authority other
than the Securities Act. The indemnification agreements
contained in this Section 2.6 shall be in addition to any
other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract and
shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any
indemnified party and shall survive the transfer of any of
the Registrable Securities by any of the Holders.
(f) Indemnification Payments. The indemnification
and contribution required by this Section 2.6 shall be made
by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred;
provided, however, that such periodic payments shall only be
made upon delivery to the indemnifying party of an agreement
by the indemnified party to repay the amounts advanced to
the extent it is ultimately determined that the indemnified
party is not entitled to indemnification pursuant to this
Section 2.6 or otherwise. The parties hereto agree that for
each of them such agreement shall be deemed to be contained
herein.
2.7 Limitation on Sale of Securities. (a) If any
registration of Registrable Securities or Other Holder
Registrable Securities shall be in connection with an
underwritten public offering, each of the Holders or the
Other Holders, as the case may be, and the Company agrees
(x) not to effect any public sale or distribution of any
issue of the same class or series as the Registrable
Securities or Other Holder Registrable Securities being
registered in an underwritten public offering (other than
pursuant to an employee stock option, stock purchase or
similar plan, pursuant to a dividend reinvestment plan,
pursuant to a merger, exchange offer or a transaction of the
185
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<PAGE> 186
Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
type specified in Rule 145(a) under the Securities Act), any
securities of the Company similar to any such issue or any
securities of the Company or of any security convertible
into or exchangeable or exercisable for any such issue of
the Company during the 15 days prior to, and during the 45
day period (or such longer period, not in excess of 90 days,
as may be reasonably requested by the underwriter of such
offering) beginning on the effective date of such
registration statement (except as part of such registration)
and (y) that any agreement entered into after the date of
this Agreement pursuant to which the Company issues or
agrees to issue any privately placed securities shall
contain a provision under which holders of such securities
agree not to effect any public sale or distribution of any
such securities during the period referred to in the
foregoing clause (x), including any sale pursuant to Rule
144 under the Securities Act (except as part of such
registration, if permitted).
(b) Notwithstanding the other provisions of this
Agreement, the Company shall not be obligated to register
the Registrable Securities of any Holder if, in the opinion
of counsel to Company reasonably satisfactory to the Holder
and its counsel (or, if the Holder has engaged an investment
banking firm, to such investment banking firm and its
counsel reasonably satisfactory to the Company and its
counsel), the sale or other disposition of such Holder's
Registrable Securities, in the manner proposed by such
Holder (or by such investment banking firm), may be effected
without registering such Registrable Securities under the
Securities Act.
2.8 No Required Sale. Nothing in this Agreement
shall be deemed to create an independent obligation on the
part of any of the Holders to sell any Registrable
Securities pursuant to any effective registration statement.
3. Amendments and Waivers.
This Agreement may not be modified or amended, or
any of the provisions hereof waived, temporarily or
permanently, except pursuant to the written consent of the
Company and the Holders of not less than 50.1% of the
Aggregate Value of Registrable Securities.
4. Adjustments.
In the event of any change in the capitalization
of the Company as a result of any stock split, stock
186
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<PAGE> 187
Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
dividend, reverse split, combination, recapitalization,
merger, consolidation, or otherwise, the provisions of this
Agreement shall be appropriately adjusted.
5. Notice.
Any notice or other communication required or
which may be given hereunder shall be in writing and shall
be delivered personally, telecopied, sent by certified,
registered or express mail, postage prepaid or sent by next-
day delivery service and shall be deemed given when so
delivered personally or telecopied, or if mailed, two days
after the date of mailing, or if by next-day delivery
service, on the business day following delivery thereto, as
follows or to such other location as any party notifies any
other party:
(a) if to the Initial Holder to:
Mr. Leon Levy
31 West 52nd Street
New York, New York 10019
Telecopier: (212) 265-0305
(b) if to the Company to:
Avatar Holdings Inc.
255 Alhambra Circle
Coral Gables, Florida 33134
Attention: Secretary
Telecopier: (305) 441-7876
(c) in case of either (a) or (b) above, with a
copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Robert Todd Lang, Esq.
Telecopier: (212) 310-8007
6. Assignment.
This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties
hereto and their respective successors and permitted
assigns; provided, however, that successors and permitted
187
<PAGE>
<PAGE> 188
Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
assigns shall have no rights under this Agreement unless
such successors and permitted assigns shall furnish written
notice to the Company containing (A) the name and address to
which notices shall be delivered in accordance with Section
5 and (B) the written agreement of such successor or
permitted assign to be bound by all the provisions of this
Agreement. This Agreement may not be assigned by the
Company. Any Holder may, at its election, at any time or
from time to time, assign its rights under this Agreement,
in whole or in part, to any transferee of Registrable
Securities.
7. Remedies.
The parties hereto agree that money damages
or any other remedy at law would not be sufficient or
adequate remedy for any breach or violation of, or a default
under, this Agreement by them and that, in addition to all
other remedies available to them, each of them shall be
entitled to an injunction restraining such breach, violation
or default or threatened breach, violation or default and to
any other equitable relief, including, without limitation,
specific performance, without bond or other security being
required. In any action or proceeding brought to enforce any
provision of this Agreement (including the indemnification
provisions thereof), the successful party shall be entitled
to recover reasonable attorneys' fees in addition to its
costs and expenses and any other available remedy.
188
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<PAGE> 189
Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
8. No Inconsistent Agreements.
The Company will not, on or after the date
of this Agreement, enter into any agreement with respect to
its securities which is inconsistent with the rights granted
to the Holders in this Agreement or otherwise conflicts with
the provisions hereof, other than any customary lock-up
agreement with the underwriters in connection with any
registration and offering by the Company of its securities
to the public (a "Distribution") effected hereunder,
pursuant to which the Company shall agree not to register
for sale, and the Company shall agree not to sell or
otherwise dispose of Common Stock or any securities
convertible into or exercisable or exchangeable for Common
Stock, as applicable, for a specified period following such
Distribution. The Company hereby represents and warrants
that the rights granted to the Holders hereunder do not in
any way conflict with and are not inconsistent with any
other agreements to which the Company is a party or by which
it is bound. The Company further agrees that if any other
registration rights agreement entered into after the date of
this Agreement with respect to any of its securities
contains terms which are more favorable to, or less
restrictive on, the other party thereto than the terms and
conditions contained in this Agreement are (insofar as they
are applicable) to the Holders, then the terms and
conditions of this Agreement shall immediately be deemed to
have been amended without further action by the Company or
the Holders so that the Holders shall be entitled to the
benefit of any such more favorable or less restrictive terms
or conditions.
9. Headings.
Headings of the sections and paragraphs of
this Agreement are for convenience only and shall be given
no substantive or interpretive effect whatsoever.
10. Governing Law; Jurisdiction.
(a) This Agreement shall be construed and
enforced in accordance with and governed by the laws of the
State of New York, without giving effect to the conflicts of
law principles thereof.
(b) Each of the parties hereto irrevocably
and unconditionally consents to the jurisdiction of the
federal courts and courts of the state of New York situated
in New York County, New York in respect of the
189
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<PAGE> 190
Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
interpretation and enforcement of the provisions of this
Agreement, and hereby agrees that service of process in any
such action, suit or proceeding against the other party with
respect to this Agreement may be made upon it in any manner
permitted by the laws of New York or the federal laws of the
United States.
11. Counterparts.
This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original,
but all such counterparts shall together constitute one and
the same instrument.
12. Invalidity of Provision.
The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not
affect the validity or enforceability of the remainder of
this Agreement in that jurisdiction or the validity or
enforceability of this Agreement, including that provision,
in any other jurisdiction. If any restriction or provision
of this Agreement is held unreasonable, unlawful or
unenforceable in any respect, such restriction or provision
shall be interpreted, revised or applied in a manner that
renders it lawful and enforceable to the fullest extent
possible under law.
13. Further Assurances.
Each party hereto shall do and perform or
cause to be done and performed all further acts and things
and shall execute and deliver all other agreements,
certificates, instruments, and documents as any other party
hereto reasonably may request in order to carry out the
intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
14. Entire Agreement; Effectiveness.
This Agreement and the other writings
referred to herein or delivered in connection herewith
contain the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior and
contemporaneous arrangements or understandings with respect
thereto.
190
<PAGE>
<PAGE> 191
Exhibit 10 (C) - Registration Rights Agreement between
Avatar Holdings Inc. and Leon Levy - continued
IN WITNESS WHEREOF, the undersigned have
executed this Agreement as of the date first above written.
AVATAR HOLDINGS INC.
By:
------------------------------
Name: Gerald D. Kelfer
Title: Chief Executive Officer
------------------------------
Leon Levy
191
<PAGE>
<PAGE> 192
Exhbit 11 Computation of earnings per share
<TABLE>
<CAPTION>
Year ended December 31
BASIC 1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net income (loss) from continuing operations ($26,874) $2,264 ($10,920)
Income (loss) from discontinued operations (115) (1,224) 581
---------- ---------- ----------
Net income (loss) ($26,989) $1,040 ($10,339)
========== ========== ==========
Weighted average common shares outstanding 9,113,595 9,095,102 9,095,102
========== ========== ==========
Basic earnings per common share:
Net income (loss) from continuing operations ($2.95) $0.25 ($1.20)
Income (loss) from discontinued operations (0.01) (0.14) 0.06
---------- ---------- ----------
Net income (loss) ($2.96) $0.11 ($1.14)
========== ========== ==========
DILUTED
Net income (loss) from continuing operations ($26,874) $2,264 ($10,920)
Income (loss) from discontinued operations (115) (1,224) 581
---------- ---------- ----------
Net income (loss) ($26,989) $1,040 ($10,339)
========== ========== ==========
Weighted average common shares outstanding 9,113,595 9,095,102 9,095,102
========== ========== ==========
Diluted earnings per common share:
Net income (loss) from continuing operations ($2.95) $0.25 ($1.20)
Income (loss) from discontinued operations (0.01) (0.14) 0.06
---------- ---------- ----------
Net income (loss) ($2.96) $0.11 ($1.14)
========== ========== ==========
</TABLE>
192
<PAGE>
<PAGE> 193
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 Properties Inc. Florida
Avatar Camelot Isles, 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 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
Avatar Harbor Islands, Inc. 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(1)
Optimum Environments Inc. California
Avatar Resort Group, Inc. Florida
Avatar Resort Management, Inc. Florida
Avatar Retirement Communities, Inc Delaware
Avatar Vacation Realty, Inc. Florida
Avatar Vacation Realty of Tennessee, Inc. Tennessee
193
<PAGE>
<PAGE> 194
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
Avatar Poinciana, 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
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
Brookman-Fels Communities, Inc. Delaware
Parkway Mortgage Company, Inc. Florida
Rio Rico Utilities Inc. Arizona
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.
(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.
194
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 8,775
<SECURITIES> 0
<RECEIVABLES> 46,664
<ALLOWANCES> (16,159)
<INVENTORY> 161,161
<CURRENT-ASSETS> 0
<PP&E> 286,490
<DEPRECIATION> (97,888)
<TOTAL-ASSETS> 439,368
<CURRENT-LIABILITIES> 0
<BONDS> 146,451
<COMMON> 151,422
0
0
<OTHER-SE> (151,422)
<TOTAL-LIABILITY-AND-EQUITY> 439,368
<SALES> 84,855
<TOTAL-REVENUES> 129,084
<CGS> 133,853
<TOTAL-COSTS> 107,715
<OTHER-EXPENSES> 9,437
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,668
<INCOME-PRETAX> (26,874)
<INCOME-TAX> 0
<INCOME-CONTINUING> (26,874)
<DISCONTINUED> 0
<EXTRAORDINARY> (115)
<CHANGES> 0
<NET-INCOME> (26,989)
<EPS-PRIMARY> (2.96)
<EPS-DILUTED> (2.96)
<FN>
NOTE: Total Current Assets and Total Current Liabilities are not
applicable because Registrant does not present a classified
balance sheet.
195
</TABLE>
