<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
--------------------------------------------------
[X] Quarterly report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended June 30, 1998
or
[] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from
________ to ________
----------------------------------------
Commission file number 0-7616
I.R.S. Employer Identification Number 23-1739078
Avatar Holdings Inc.
(a Delaware Corporation)
255 Alhambra Circle
Coral Gables, Florida 33134
(305) 442-7000
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 period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ].
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 9,170,102 shares of the
Company's common stock ($1.00 par value) were outstanding as of July 31, 1998.
<PAGE> 2
AVATAR HOLDINGS INC. AND SUBSIDIARIES
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited):
Consolidated Balance Sheets --
June 30, 1998 and December 31, 1997 ......................... 3
Consolidated Statements of Operations --
Six months and three months ended
June 30, 1998 and 1997 ...................................... 4
Consolidated Statements of Cash Flows --
Six months ended June 30, 1998 and 1997 ..................... 5
Notes to Consolidated Financial Statements .................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ........... 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ....................................... 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ..... 18
ITEM 5. OTHER INFORMATION ....................................... 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ........................ 20
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Balance Sheets - (Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- -----------
<S> <C> <C>
ASSETS
Cash $ 41,718 $ 4,085
Restricted cash 5,926 4,690
Contracts and mortgage notes receivables, net 18,955 24,319
Other receivables, net 7,995 6,186
Land and other inventories 167,248 161,161
Property, plant and equipment, net 188,467 188,602
Other assets 23,541 19,448
Regulatory assets 3,088 3,318
Assets of discontinued operations 29,179 27,559
--------- ---------
Total Assets $ 486,117 $ 439,368
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Notes, mortgage notes and other debt:
Corporate $ 130,000 $ 44,506
Notes collateralized by contracts and mortgage notes receivable 12,950 23,566
Real Estate 20,080 39,163
Utilities 39,346 39,216
Estimated development liability for sold land 8,585 8,697
Accounts payable 4,994 6,081
Accrued and other liabilities 39,118 36,918
Deferred customer betterment fees 19,159 18,667
Minority interest in consolidated subsidiaries 5,471 7,268
Liabilities of discontinued operations 20,032 18,662
--------- ---------
Total Liabilities 299,735 242,744
Commitments and contingent liabilities
Contributions in aid of construction 60,661 61,582
STOCKHOLDERS' EQUITY
Common Stock, par value $1 per share
Authorized: 15,500,000 shares
Issued: 9,170,102 shares 9,170 9,170
Additional paid-in capital 151,422 151,422
Accumulated deficit (34,871) (25,550)
--------- ---------
Total Stockholders' Equity 125,721 135,042
--------- ---------
Total Liabilities and Stockholders' Equity $ 486,117 $ 439,368
========= =========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Six and Three Months Ended June 30, 1998 and 1997
(Unaudited)
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Six Months Three Months
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Real estate sales $ 46,021 $ 42,746 $ 24,728 $ 22,595
Deferred gross profit 2,280 2,075 1,147 1,047
Utility revenues 18,323 17,911 9,499 8,877
Interest income 3,069 2,922 1,462 1,407
Trading account profit, net -- 207 -- 115
Other 264 384 100 185
-------- -------- -------- --------
Total revenues 69,957 66,245 36,936 34,226
EXPENSES
Real estate expenses 47,451 45,355 25,399 22,995
Utility expenses 13,647 12,892 6,962 6,457
General and administrative expenses 5,142 4,778 2,664 2,194
Interest expense 8,315 5,185 4,047 2,879
Other 274 355 124 164
-------- -------- -------- --------
Total expenses 74,829 68,565 39,196 34,689
-------- -------- -------- --------
Loss from continuing
operations before income taxes (4,872) (2,320) (2,260) (463)
Discontinued operations:
(Loss) income from operations, less
income tax expense of $0
(141) 752 14 882
Estimated loss on disposal, less
income tax expense of $0 (2,000) -- (2,000) --
-------- -------- -------- --------
(Loss) income before extraordinary item (7,013) (1,568) (4,246) 419
-------- -------- -------- --------
Extraordinary item:
Loss on early extinguishment of debt,
less income tax expense of $0 (2,308) -- -- --
-------- -------- -------- --------
Net (loss) income $ (9,321) $ (1,568) $ (4,246) $ 419
======== ======== ======== ========
Basic and Diluted EPS:
Loss from continuing operations $ (0.53) $ (0.25) $ (0.24) $ (0.05)
(Loss) income from discontinued operations $ (0.02) $ 0.08 -- $ 0.10
Estimated loss on disposal $ (0.22) -- $ (0.22) $ --
Loss from extraordinary item $ (0.25) -- -- --
Net (loss) income $ (1.02) $ (0.17) $ (0.46) $ 0.05
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 1998 and 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (9,321) $ (1,568)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 5,131 5,539
Loss on early extinguishment of debt 2,308 --
Estimated loss on disposal of discontinued operations 2,000 --
Deferred gross profit (2,280) (2,075)
Cost of homesite sales not requiring cash 877 1,554
Trading account profit, net -- (207)
Changes in operating assets and liabilities:
Restricted cash (1,236) (60)
Investments trading -- 530
Principal payments on contracts receivable 5,656 7,225
Receivables 1,988 2,530
Other receivables (1,809) 1,176
Inventories (7,076) (12,826)
Other assets (4,160) (1,212)
Assets/liabilities from discontinued operations, net (2,250) (2,637)
Accounts payable and accrued and other liabilities 1,605 (2,689)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (8,567) (4,720)
INVESTING ACTIVITIES
Investment in property, plant and equipment (5,917) (4,483)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (5,917) (4,483)
FINANCING ACTIVITIES
Proceeds from issuance of 7% Convertible Subordinated Notes 115,000 --
Net proceeds from revolving lines of credit and
long-term borrowings 7,130 33,620
Principal payments on revolving lines of credit and
long-term borrowings (68,213) (23,721)
Redemption of 9% preferred stock of subsidiary (1,800) (1,800)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 52,117 8,099
--------- ---------
INCREASE (DECREASE) IN CASH 37,633 (1,104)
Cash at beginning of period 4,085 7,567
--------- ---------
CASH AT END OF PERIOD $ 41,718 $ 6,463
========= =========
</TABLE>
5
<PAGE> 6
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited) -- continued
For the Six Months Ended June 30, 1998 and 1997
(Dollars in thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Cash paid during the period for:
Interest - Continuing operations (net of amount
capitalized of $120 and $1,569
in 1998 and 1997, respectively) $5,433 $2,807
------ ------
Interest - Discontinued operations (net of amount
capitalized of $109 and $0 in 1998
and 1997, respectively) 783 536
====== ======
Income taxes $ -- $ --
====== ======
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Contributions in aid of construction $1,253 $2,374
====== ======
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
AVATAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN THOUSANDS)
BASIS OF STATEMENT PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated balance sheets as of June 30, 1998 and December 31,
1997 and the related consolidated statements of operations for the six month and
three month periods ended June 30, 1998 and 1997 and the consolidated statements
of cash flows for the six month periods ended June 30, 1998 and 1997 have been
prepared in accordance with generally accepted accounting principles for interim
financial information, the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statement presentation. In the opinion of management, all adjustments
necessary for a fair presentation of such financial statements have been
included. Such adjustments consisted only of normal recurring items. Interim
results are not necessarily indicative of results for a full year.
For a complete description of the Company's other accounting policies,
refer to Avatar Holdings Inc.'s 1997 Annual Report on Form 10-K and the notes to
Avatar's consolidated financial statements included therein.
RECLASSIFICATIONS
Certain 1997 financial statement items have been reclassified to
conform to the 1998 presentation.
EARNINGS PER SHARE
Earnings per share is computed based on the weighted average number of
shares outstanding of 9,170,102 for the six and three months ended June 30, 1998
and 9,095,102 for the six and three months ended June 30, 1997. For computing
earnings per share for the six and three months ended June 30, 1998, the
conversion of the Notes and employee stock options was not assumed, as the
effect of both would be antidilutive. There is no difference between basic and
diluted earnings per share for 1998 and 1997.
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
$5,926 and $4,690 as of June 30, 1998 and December 31, 1997, 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.
STOCK OPTIONS
In October 1995, the Financial Accounting Standards Board 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
7
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued
STOCK OPTIONS - continued
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.
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. Accordingly, actual results could differ from those
reported.
RELATED - PARTY TRANSACTIONS
During 1997, a subsidiary of the Company entered into a joint venture
and construction management agreement with a subsidiary of Brookman-Fels for
the development of certain parcels at Harbor Islands. In November 1997, the
Company's subsidiary, Avatar Properties Inc., acquired certain assets of
Brookman-Fels and employed, as officers, the three partners. On June 1, 1998,
Avatar paid $1,995,000 to acquire certain assets from its joint venture partner
at Harbor Islands, and the joint venture and construction management agreements
were modified whereby Avatar's subsidiary will receive a 6% construction
management fee to manage construction at Harbor Islands. The purchase price
approximated the estimated fair value of the acquired assets, therefore, no
goodwill was recorded in conjunction with this transaction.
On June 1, 1998, a newly formed Avatar subsidiary and Brookman-Fels at
Presidential Estates formed a joint venture and entered into a construction
management agreement for Presidential Estates. Avatar's subsidiary will receive
a 6% construction management fee to manage construction at Presidential Estates.
Avatar paid $588,000 for a 49% interest in the joint venture and a 50% interest
in the profits in the form of a promissory note, bearing interest at an annual
rate of 8%, payable, together with accrued interest, upon closing of agreed upon
units.
CONTRACTS AND MORTGAGE NOTES RECEIVABLES
Contracts and mortgage notes receivables are summarized as follows:
June 30, December 31,
1998 1997
-------- -----------
Contracts and mortgage notes receivable $ 31,534 $ 40,478
-------- --------
Less:
Market valuation reserve -- 43
Deferred gross profit 12,885 15,659
Other (306) 457
-------- --------
12,579 16,159
-------- --------
$ 18,955 $ 24,319
======== ========
8
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - continued
LAND AND OTHER INVENTORIES
Inventories consist of the following:
June 30, December 31,
1998 1997
-------- ------------
Land developed and in process of development $ 95,632 $ 98,407
Land held for future development or sale 31,552 31,552
Dwelling units completed or under construction 39,339 30,334
Other 725 868
-------- --------
$167,248 $161,161
======== ========
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES
Minority interest in consolidated subsidiaries is represented by
preferred stock of Avatar Utilities' subsidiaries. Total preferred stock
outstanding is as follows:
June 30, December 31,
1998 1997
-------- ------------
9% Cumulative preferred stock $5,400 $7,200
Other 71 68
------ ------
$5,471 $7,268
====== ======
Avatar's utilities subsidiary's 9% cumulative preferred stock issue
provides for redemption of a minimum of $1,800 of the preferred stock per annum
beginning in 1997. During each of the first quarters of 1998 and 1997, Avatar
redeemed $1,800 of the preferred stock. A redemption of all outstanding shares
shall occur no later than March 1, 2001.
Charges to operations included in "Other expenses" relate to preferred
stock dividends of subsidiaries for the six months ended June 30, 1998 and 1997,
which amount to $274 and $355, respectively.
9
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - continued
NOTES, MORTGAGE NOTES AND OTHER DEBT
On February 2, 1998 the Company issued $115 million 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. The early
extinguishment of the 8% and 9% Senior Debentures resulted in an extraordinary
loss of $2,308 pertaining to the unamortized portion of discounts associated
with these debentures.
INCOME TAXES
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
June 30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Deferred income tax assets
Net operating loss carryforward $ 21,000 $ 20,000
Tax over book basis of land inventory 32,000 31,000
Unrecoverable land development costs 3,000 3,000
Tax over book basis of depreciable assets 5,000 5,000
Alternative minimum tax and investment tax credit carryforward 4,000 5,000
Other 2,000 2,000
-------- --------
Total deferred income taxes 67,000 66,000
Valuation allowance for deferred income tax assets (53,000) (51,000)
-------- --------
Deferred income tax assets after valuation allowance 14,000 15,000
Deferred income tax liabilities
Book over tax income recognized on homesite sales (2,000) (2,000)
Book over tax income recognized on vacation ownership sales (4,000) (4,000)
Deferred carrying charges on utilities plant (2,000) (2,000)
Other (6,000) (7,000)
-------- --------
Total deferred income tax liabilities (14,000) (15,000)
-------- --------
Net deferred income taxes $ 0 $ 0
======== ========
</TABLE>
10
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - continued
INCOME TAXES - continued
A reconciliation of income tax expense from continuing operations to
the expected income tax expense (credit) at the federal statutory rate of 34%
for the six months ended June 30, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Income tax expense (credit) computed at statutory rate $(1,656) $ (533)
Income tax effect of non-deductible dividends
on preferred stock of subsidiary 93 121
State income tax (credit), net of federal effect (179) (45)
Other, net (258) 457
Change in valuation allowance on deferred tax assets 2,000 --
------- -------
Provision for income taxes $ 0 $ 0
======= =======
</TABLE>
CONTINGENCIES
Avatar is involved in various pending litigation matters primarily
arising in the normal course of its business. Although the outcome of these and
the following matter cannot be determined, management believes that the
resolution of these matters will not have a material effect on Avatar's business
or financial position.
In May 1995, a wastewater rate increase was filed for the North Fort
Myers Division of Florida Cities Water Company (FCWC), a utilities subsidiary of
the Company. In November 1995, the Florida Public Service Commission (FPSC)
issued an Order authorizing a rate increase of approximately 18% (an annualized
revenue increase of approximately $378). Following a challenge to the Order by
the Office of Public Counsel (the customer advocate) and certain customers, FCWC
requested implementation of the rates granted in the Order. After a hearing, the
FPSC issued a new Order in September 1996 authorizing final rates which were
approximately 5% lower than rates in effect prior to the rate increase filing.
FCWC filed an appeal with the District Court of Appeal of Florida, First
District (DCA) and in January 1998, DCA reversed and remanded the September 1996
Order. By Order dated April 14, 1998, the FPSC ordered the record reopened and
scheduled a hearing in December 1998 to take testimony on one issue remanded by
the DCA. FCWC's challenge of this FPSC action was denied by the DCA on June 17,
1998. The rates implemented in January 1996 are reflected in the financial
statements and will remain in effect, subject to refund plus interest, pending
the ultimate outcome of this matter. FCWC believes that there is a reasonable
basis it will prevail.
11
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued
DISCONTINUED OPERATIONS
During 1997, the Company developed a formal plan for the disposition of its
timeshare business. During the second quarter of 1998, the Company entered into
a non-binding letter of intent with an unaffiliated third-party for the sale of
the timeshare business; however, there is no assurance that the transaction will
be consumated. The Company has revised the estimate of the net realizable value
of the discontinued timeshare operations based on current business conditions
and potential market price for the timeshare operations. As a result, an
estimated loss on the disposal of the operations amounting to $2,000 was
recorded at June 30, 1998. 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.
Consolidated operating results relating to the discontinued operations
for the six and three months ended June 30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Six Months Three Months
--------------------- --------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES
Real estate sales $ 5,410 $ 6,896 $ 3,294 $ 4,343
Interest income 1,174 749 575 390
Other 491 (237) 249 (209)
------- ------- ------- -------
Total revenues 7,075 7,408 4,118 4,524
EXPENSES
Real estate expenses 6,174 5,958 3,611 3,279
Interest expense 1,042 698 493 363
------- ------- ------- -------
Total expenses 7,216 6,656 4,104 3,642
======= ======= ======= =======
Net (loss) income from discontinued operations $ (141) $ 752 $ 14 $ 882
======= ======= ======= =======
</TABLE>
12
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued
DISCONTINUED OPERATIONS - CONTINUED
The net assets and liabilities of the discontinued operations included
in the accompanying consolidated balance sheets as of June 30, 1998 and December
31, 1997 are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 152 $ 49
Restricted cash 491 322
Contracts and mortgage notes receivables, net 17,086 15,197
Other receivables, net 677 691
Land and other inventories 9,890 8,903
Property, plant and equipment, net 251 238
Other assets 2,632 2,159
Reserve on estimated loss on disposal (2,000) --
-------- --------
Total Assets $ 29,179 $ 27,559
======== ========
LIABILITIES
Notes, mortgage notes and other debt:
Notes, collateralized by contracts and mortgage notes receivable $ 13,257 $ 12,952
Real estate 6,307 4,568
Accounts payable 119 694
Accrued and other liabilities 349 448
-------- --------
Total Liabilities $ 20,032 $ 18,662
======== ========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
RESULTS OF OPERATIONS
The following discussion of the Company's financial condition and
results of operations should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in this Form 10-Q.
Operations for the six and three month periods ended June 30, 1998
resulted in a net loss of $9,321 or $1.02 per share and $4,246 or $0.46 per
share, respectively, compared to a net loss of $1,568 or $0.17 per share and net
income of $419 or $0.05 per share, respectively, for the same period of 1997.
The decrease in operating results for the six and three months ended June 30,
1998 was primarily attributable to an increase in interest expense and general
and administrative expenditures, a decrease in the discontinued vacation
ownership operations and an estimated loss on the disposal of discontinued
operations. Also contributing to the decrease in operating results for the six
months ended June 30, 1998 was a decrease in utilities operating results, as
well as an extraordinary loss on the early extinguishment of debt as compared to
the same period in 1997. The decrease in operations for the six months ended
June 30, 1998 was partially offset by an improvement in real estate operating
results compared to the same period in 1997.
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) --CONTINUED
RESULTS OF OPERATIONS - CONTINUED
Avatar's real estate revenues for the six and three months ended June
30, 1998 increased $3,275 or 7.7% and $2,133 or 9.4%, respectively, while real
estate expenses increased $2,096 or 4.6% and $2,404 or 10.5%, respectively, when
compared to the same periods of 1997. The increase in real estate revenues for
the six and three months ended June 30, 1998 is generally a result of increased
housing revenues partially offset by a decrease in commercial and industrial
land sales. The increase in real estate expenses for the six and three months
ended June 30, 1998, when compared to the same periods of 1997, is essentially a
result of related costs associated with the increased sales volume.
Data from homebuilding operations for the six and three months ended
June 30, 1998 and 1997 is summarized as follows:
Six Months Three Months
-------------------- --------------------
1998 1997 1998 1997
------- ------- ------- -------
UNITS CLOSED
Number of units 232 214 122 106
Aggregate dollar volume $32,802 $27,868 $17,871 $13,885
Average price per unit $ 141 $ 130 $ 146 $ 131
UNITS SOLD, NET
Number of units 267 339 132 146
Aggregate dollar volume $51,215 $43,904 $29,807 $20,831
Average price per unit $ 192 $ 130 $ 226 $ 143
BACKLOG June 30,
1998 1997
------- -------
Number of units 411 428
Aggregate dollar volume $75,456 $57,385
Average price per unit $ 184 $ 134
14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
--CONTINUED
RESULTS OF OPERATIONS - CONTINUED
Data from the national and international retail land sales programs,
terminated in the second quarter of 1996, is as follows:
<TABLE>
<CAPTION>
June 30,
1998 1997
-------- --------
<S> <C> <C>
RETAIL LAND SALES OPERATIONS DATA
Deferred gross profit $ 2,280 $ 2,075
Interest income 1,739 2,794
Loss on contract cancellations (31) (646)
Contract servicing expense (302) (350)
Interest expense (785) (1,513)
BALANCE SHEET DATA
Contracts and mortgage notes receivable, net 18,955 30,520
Debt collateralized by contracts and mortgages receivable 12,950 30,138
</TABLE>
Contract servicing expense and loss on contract cancellations are included under
the caption real estate expenses on the consolidated statement of operations.
Utilities revenues for the six and three months ended June 30, 1998,
increased $412 or 2.3% and $622 or 7.0%, respectively, when compared to the same
period in 1997. The increase in utilities revenues for the six and three months
ended June 30, 1998, is primarily attributable to customer growth and increased
contract services. Utilities expenses for the six and three months ended June
30, 1998, increased $755 or 5.9% and $505 or 7.8%, respectively, when compared
to the same periods of 1997. The increase in utilities expenses for the six and
three months ended June 30, 1998, is primarily attributable to increases in
maintenance and other operational expenses.
General and administrative expenses for the six and three months ended
June 30, 1998 increased by $364 or 7.6% and $470 or 21.4%, respectively,
compared to the same periods in 1997. The increase is primarily attributed to
increased executive compensation and professional fees.
Interest expense for the six and three months ended June 30, 1998
increased $3,130 or 60.4% and $1,168 or 40.6%, respectively, compared to the
same periods in 1997. The increase is primarily attributable to the interest
expense incurred from the Notes (described below) issued February 2, 1998. Also
contributing to the increase in interest expense is the reduction in capitalized
interest in 1998 compared to 1997.
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
--CONTINUED
RESULTS OF OPERATIONS - CONTINUED
For the six and three months ended June 30, 1998 operating results from
discontinued vacation ownership operations decreased due to decreased sales
volume and changes in the product mix as compared to the same periods in 1997.
In addition, the Company revised the estimate of the net realizable value of the
discontinued timeshare operations based on current business conditions. As a
result, an estimated loss on the disposal of the operations amounting to $2,000
was recorded at June 30, 1998.
For the six months ended June 30, 1998, the Company recorded a $2,308
extraordinary loss due to the early extinguishment of the $33,000 aggregate
amount of 8% and 9% Senior Debentures due 2000. The extraordinary loss resulted
from the unamortized portion of the discounts associated with the $33,000
aggregate amount of 8% and 9% Senior Debentures due 2000 written off upon
extinguishment.
LIQUIDITY AND CAPITAL RESOURCES
Management implemented a new real estate business strategy in 1997 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 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. 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, on March 13, 1998, $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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
--CONTINUED
LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
For the six months ended June 30, 1998, net cash used in operating
activities amounted to $8,567 as a result of an increase in inventories, which
included expenditures from land development and housing operations of $7,076 and
an increase in other assets of $4,160, partially offset by principal payments
collected on contract receivables of $5,656. Net cash used in investing
activities of $5,917 resulted primarily from investments in property, plant and
equipment. Net cash provided by financing activities of $52,117 resulted
primarily from proceeds of $115,000 from the Notes after repayment of $33,000 of
the 8% and 9% Senior Debentures due 2000 and $35,213 in land, construction and
development loans.
For the six months ended June 30, 1997, net cash used by operating
activities amounted to $4,720 as a result of an increase in inventories, which
included expenditures from land development and housing operations of $12,826,
partially offset by principal payments collected on contract receivables of
$7,225. Net cash used in investing activities of $4,483 resulted primarily from
investments in property, plant and equipment. Net cash provided by financing
activities of $8,099 resulted primarily from net proceeds from revolving lines
of credit and long-term borrowings of $33,620 less principal payments on
revolving lines of credit and long-term borrowings of $23,721.
At June 30, 1998, the Company's secured real estate lines of credit,
exclusive of timeshare credit facilities, amounted to $12,950, all of which were
fully utilized. These real estate lines are secured by contracts and mortgage
receivables aggregating $14,358 and are due to mature in the second quarter of
1999. Corporate secured lines of credit were $20,000 at June 30, 1998, the
unused and available portions were $5,000, and mature in the second quarter of
1999.
At June 30, 1998, utilities unsecured lines of credit were $15,000 and
the unused and available portion was $12,892. The utilities lines mature in the
second quarter of 2000.
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. The Company's systems
which integrate all major aspects of the Company's business, including inventory
control, planning, labor utilization and financial reporting were designed in
the early 1990's and are substantially "Year 2000" compliant. Since 1997, the
Company has been continually assessing the ability of the information systems to
handle the "Year 2000 Issue", and currently does not expect this issue to be
material to the Company's business based on its assessment of its own systems.
The Company is also in process of evaluating its vendors and suppliers to
determine what effect, if any, potential lack of compliance could have on the
Company's operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
--CONTINUED
FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this Form 10-Q 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 the Company, or industry 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 such
other factors as are described in greater detail in the Company's filings with
the Securities and Exchange Commission, including its Annual Report on Form 10-K
for the fiscal year ended December 31, 1997.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information, which is set forth in the paragraph under the caption
"Contingencies" in the Notes to Consolidated Financial Statements (Unaudited)
in Item 1 of Part I of this report is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on May 28, 1998,
in Coral Gables, Florida, for the purpose of electing ten directors; approving a
proposal to amend and restate the Corporation's Certificate of Incorporation;
and approving the appointment of Ernst & Young LLP, independent accountants, as
auditors for the year ending December 31, 1998. Proxies were solicited from
holders of 9,170,102 outstanding shares of Common Stock as of the close of
business on March 31, 1998, as described in Registrant's Proxy Statement dated
April 28, 1998. All of management's nominees for directors were re-elected, the
amended and restated Certificate of Incorporation was approved, and the
appointment of Ernst & Young LLP was approved by the following votes:
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PART II -- OTHER INFORMATION - CONTINUED
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - CONTINUED
ELECTION OF DIRECTORS
NAME VOTES FOR WITHHELD
---- --------- --------
Leon Levy 7,514,768 56,620
Milton H. Dresner 7,515,573 55,815
Edwin Jacobson 7,511,042 60,346
Gerald Kelfer 7,516,235 55,153
Leon T. Kendall 7,514,583 56,805
Martin Meyerson 7,515,005 56,383
Gernot H. Reiners 7,516,240 55,148
Kenneth T. Rosen 7,518,157 53,231
Fred Stanton Smith 7,514,666 56,722
Henry King Stanford 7,511,740 59,648
APPROVAL OF THE RESTATED CERTIFICATE OF INCORPORATION
VOTES VOTES
VOTES FOR AGAINST ABSTAINED
--------- ------- ---------
7,509,552 30,757 31,079
APPOINTMENT OF AUDITORS
SHARES VOTED SHARES
SHARES VOTED FOR AGAINST ABSTAINED
- ---------------- ------------ ---------
7,545,076 6,480 19,832
ITEM 5. OTHER INFORMATION
On May 28, 1998, the Board of Directors of the Company approved an
amendment and restatement of the Company's By-Laws, which among other things,
(i) made certain changes to provisions relating to indemnification by the
Company and (ii) sets forth the procedures that stockholders must follow in
order to nominate directors or bring other business before an annual meeting of
stockholders.
Under the Amended and Restated By-Laws, if a stockholder wishes to
nominate directors or bring other business before the stockholders at an annual
meeting, in general, such stockholder must (i) notify the Secretary of the
Company not less than 60 days nor more than 90 days prior to the anniversary
date of the immediately preceding annual meeting of the stockholders and (ii)
such notice must contain the specific information required by the
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<PAGE> 20
PART II -- OTHER INFORMATION - CONTINUED
ITEM 5. OTHER INFORMATION - continued
Amended and Restated By-Laws. Accordingly, any notice received after March 29,
1999 or before February 28, 1999, with respect to the 1999 Annual Meeting of
Stockholders will be considered untimely. These conditions are separate from the
requirements of the Securities and Exchange Commission under Rule 14a-8 to have
a stockholder's proposal included in the Company's proxy statement.
If a stockholder requires more information regarding the Amended and
Restated By-Laws, you should contact the office of the Secretary, Avatar
Holdings Inc., P.O. Box 523000, Miami, FL 33152.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
3(a) Certificate of Incorporation, as amended and restated May 28,
1998 (filed herewith).
3(b) By-laws, as amended and restated May 28, 1998 (filed
herewith).
27 Financial Data Schedule (filed herewith)
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended June 30,
1998.
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AVATAR HOLDINGS INC.
Date: August 14, 1998 By: /s/ Charles L. McNairy
---------------------- ----------------------------------------
Charles L. McNairy
Executive Vice President, Treasurer and
Chief Financial Officer
Date: August 14, 1998 By: /s/ Michael P. Rama
---------------------- ----------------------------------------
Michael P. Rama
Chief Accounting Officer
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<PAGE> 22
Exhibit Index
3(a) Certificate of Incorporation, as amended and restated May 28,
1998 (filed herewith)
3(b) By-laws, as amended and restated May 28, 1998 (filed herewith)
27 Financial Data Schedule (filed herewith)
22
<PAGE> 1
RESTATED
CERTIFICATE OF INCORPORATION
OF
AVATAR HOLDINGS INC.
-----------------
AVATAR HOLDINGS INC., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Avatar Holdings Inc. (the
"Corporation"). The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on October 6, 1970
under the name "GAC Corporation" and was amended and restated by a Restated
Certificate filed with the Secretary of State on December 20, 1973 and further
amended by Certificates of Amendment filed with the Secretary of State on
October 1, 1980, June 7, 1982 and February 19, 1987.
2. This Restated Certificate of Incorporation, which restates and
further amends the provisions of the Certificate of Incorporation, was duly
adopted by the Board of Directors and the holders of a majority of the shares of
stock entitled to vote in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
3. The text of the Certificate of Incorporation, as heretofore amended
or supplemented and as currently in effect, is hereby restated and further
amended to read in its entirety as follows:
FIRST: The name of the Corporation is AVATAR HOLDINGS INC.
SECOND: The registered office of the Corporation is located at 1013
Centre Road, in the City of Wilmington, in the County of New Castle, in the
State of Delaware. The name of its registered agent at that address is
Corporation Service Company.
THIRD: The Corporation is organized for the purpose of engaging in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The Corporation shall be authorized to issue two classes of
stock to be designated, respectively, Common Stock and Preferred Stock; the
total number of shares of all classes of stock which the Corporation shall have
authority to issue shall be twenty million five hundred thousand (20,500,000),
of which the total number of authorized shares of Common Stock shall be fifteen
million five hundred thousand (15,500,000) and the total number of shares of
Preferred Stock shall be five million (5,000,000); and the par value of each
share of Common Stock shall be one dollar ($1.00) and the par value of each
share of Preferred Stock shall be ten cents ($.10). A statement of the voting
powers and of the designations, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, of each class of stock is as follows:
Section 1. COMMON STOCK
(a) All shares of Common Stock shall be identical with each
other in every respect. The Common Stock may be issued from time to
time as the Board of Directors shall determine and on such terms and
conditions and for such consideration as shall be fixed by the Board of
Directors.
<PAGE> 2
(b) The Common Stock is subject to all the powers, rights,
privileges, preferences and priorities of the Preferred Stock as are
stated and expressed herein and as shall be stated and expressed in any
resolution or resolutions adopted by the Board of Directors pursuant to
authority expressly granted to and vested in it by the provisions of
Section 2 of this Article Fourth.
(c) Except as otherwise provided in Section 3(b) of this
Article Fourth in connection with the election of directors, each
holder of Common Stock shall have one vote in respect of each share of
Common Stock held by him of record on all matters voted upon by holders
of Common Stock.
Section 2. PREFERRED STOCK
The Board of Directors is expressly vested with authority to issue the
Preferred Stock from time to time in one or more series, of such rank, with such
distinctive serial designations, and on such terms and conditions and for such
consideration, as may be stated or expressed in the resolution or resolutions
providing for the issue of such stock, and in such resolution or resolutions
providing for the issue of shares of each particular series the Board of
Directors is also expressly vested with authority to fix:
(i) the number of shares to constitute such series, provided
that, unless otherwise stated in any such resolution or resolutions,
such number of shares which are not outstanding may be increased or
decreased by the Board of Directors;
(ii) the rate and times at which, and the conditions under
which, dividends shall be payable on shares of such series, and the
status of such dividends as cumulative or noncumulative and as
participating or nonparticipating and whether such dividends shall be
payable in preference to, or the terms under which such dividends shall
be payable in relation to, the dividends payable on any other class or
classes or any other series of stock;
(iii) with respect to any series of Preferred Stock which is
to be redeemable, whether shares of such series shall be redeemable at
the option of the holder thereof or the Corporation or upon the
happening of a specified event, and the cash, property or rights,
including securities of any other corporation for which, the price or
prices or rate or rates, including any adjustments, at which, and the
time or times and/or terms and conditions, if any, at or upon which,
shares of such series shall be redeemable;
(iv) with respect to any series of Preferred Stock which is to
be convertible or exchangeable, whether shares of such series shall be
convertible or exchangeable at the option of the holder thereof or the
Corporation or upon the happening of a specified event, the other class
or classes of stock or other series of Preferred Stock for which, the
price or prices or rate or rates of exchange, including any
adjustments, at which, and the time or times and/or terms and
conditions, if any, at or upon which, shares of such series shall be
convertible or exchangeable;
(v) the terms of the sinking fund or redemption or purchase
account, if any, to be provided for shares of such series including the
extent to and manner in which such sinking fund or redemption or
purchase account shall be applied to the purchase or redemption of such
series for retirement or for other corporate purposes;
(vi) the rights of the holders of shares of such series upon
the liquidation, dissolution or winding up of the affairs of, or upon
any distribution of the assets of, the Corporation;
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<PAGE> 3
(vii) the limitations, if any, applicable, while such series
is outstanding, on the payment of dividends or making of distributions
on, or the acquisition of, or the use of monies for the purpose or
redemption of, the Common Stock or any class of stock ranking, as to
dividends or upon liquidation, on a parity with or junior to the shares
of such series;
(viii) the full or limited voting rights, if any, to be
provided for shares of such series including, without limitation,
whether or not the holders of any such series having voting rights
shall have the right to cumulate votes for the election of directors as
provided in Section 3(b) of this Article Fourth; and
(ix) any other preferences and relative, participating,
optional or other such special rights, and the qualifications,
limitations or restrictions thereon, of shares of such series;
so far as not inconsistent with the provisions of the Certificate of
Incorporation, as amended to the date of such resolution or resolutions, and to
the full extent now or hereafter permitted by the laws of the State of Delaware.
All shares of Preferred Stock shall be identical and of equal rank except in
respect to the particulars that may be fixed by the Board of Directors as
provided above; PROVIDED, HOWEVER, that all shares of each series shall be
identical and of equal rank except as to the time from which cumulative
dividends, if any, thereon shall cumulate.
The Board of Directors is also expressly vested with authority to amend
any of the provisions of any resolution or resolutions providing for the issue
of any series of Preferred Stock, subject to any class voting rights of the
holders of any series of Preferred Stock contained in the resolution or
resolutions providing for the issue of such series and subject to the
requirements of the laws of the State of Delaware.
Shares of Preferred Stock which have been issued and reacquired in any
manner by the Corporation (excluding, until the Corporation elects to retire
them, shares which are held as treasury shares but including shares redeemed,
shares purchased and retired, whether through the operation of a retirement or
sinking fund or otherwise, and shares which, if convertible or exchangeable,
have been converted into or exchanged for shares of stock of any other class or
classes or series) shall, upon compliance with any applicable provisions of the
laws of the State of Delaware, have the status of authorized and unissued shares
of Preferred Stock and may be reissued as a part of the series of which they
were originally a part (if the terms of such series do not prohibit such
reissue) or as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors or as part of any other
series of Preferred Stock the terms of which do not prohibit such reissue.
Section 3. GENERAL
(a) No dividend shall be declared or paid on any capital stock
of the Corporation which shall impair the capital of the Corporation
nor shall any distribution of assets be made to any stockholder unless
the value of the assets of the Corporation remaining after such payment
or distribution is at least equal to the aggregate of its debts,
liabilities and capital. A director shall be fully protected in relying
in good faith upon the books of account of the Corporation or
statements prepared by any of its officers or by independent public
accountants as to the value and amount of the assets, liabilities, net
profits, capital stock and surplus of the Corporation, or any other
facts pertinent to the existence and amount of surplus or other funds
from which dividends might properly be declared and paid.
(b) At each election of members of the Board of Directors,
each holder of shares of Common Stock entitled to vote thereat, and
each holder of shares of any series of Preferred
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<PAGE> 4
Stock entitled to vote thereat for which the Board of Directors has
expressly granted the right to cumulate votes for the election of
directors pursuant to Section 2 of this Article Fourth, shall have the
right to vote the number of shares of such class or series of stock
owned by him for as many persons as there are directors to be elected
at such election by holders of such class or series of stock, or to
cumulate such votes and give one candidate as many votes as the number
of directors to be elected at such election by holders of such class or
series of stock multiplied by the number of shares of such class or
series of stock owned by such stockholder, or to distribute such votes
on the same principle among as many candidates as such stockholder
shall think best.
(c) No holder of any shares of capital stock of the
Corporation of any class now or hereafter authorized shall be entitled
as a matter of right to purchase, subscribe for or otherwise acquire
any shares of capital stock of the Corporation of any class now or
hereafter authorized or any securities convertible into or exchangeable
for any such share, or any warrants or other instruments (or securities
carrying such warrants or other instruments) evidencing rights or
options to subscribe for, purchase or otherwise acquire any such
shares, whether such shares, securities, warrants or other instruments
be unissued or issued and thereafter acquired by the Corporation;
PROVIDED, HOWEVER, that nothing herein shall preclude or limit the
Board of Directors from granting any such rights in connection with the
issuance of shares of any class or series of capital stock of the
Corporation.
(d) The number of authorized shares of any class or classes of
stock may be increased or decreased by the affirmative vote of the
holders of a majority of the shares of stock of the Corporation
entitled to vote, without any requirement that such increase or
decrease be approved by a class vote on the part of any such class or
classes or on the part of any other class of stock of the Corporation,
except as otherwise may be provided in the resolution or resolutions
fixing the voting rights of any series of Preferred Stock pursuant to
Section 2 of this Article Fourth.
FIFTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation and for further
definition, limitation and regulation of the powers of the Corporation and of
its Directors and stockholders:
Section 1. The number of Directors of the Corporation shall be such as
from time to time shall be fixed by, or in the manner provided in, the
By-Laws. Election of Directors shall be by ballot unless the By-Laws
provide otherwise.
Section 2. The Board of Directors shall have power without the assent
or vote of the stockholders to make, alter, amend, change, add to or
repeal the By-Laws of the Corporation.
Section 3. The Directors in their discretion may submit any contract or
act for approval or ratification at any annual meeting of the
stockholders or at any meeting of the stockholders called for the
purpose of considering any such act or contract, and any contract or
act that shall be approved or be ratified by a majority of the votes
(except as otherwise prohibited by law or prohibited pursuant to any
Plan or Agreement) of the voting stock of the Corporation which is
represented in person or by proxy at such meeting and entitled to vote
thereat (provided that a lawful quorum of stockholders be there
represented in person or by proxy) shall be as valid and as binding
upon the Corporation and upon all the stockholders as though it had
been approved or ratified by every stockholder of the Corporation,
whether or not the contract or act would otherwise be open to legal
attack because of Directors' interest, or for any other reason.
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<PAGE> 5
SIXTH: Each person who was or is made a party or is threatened to be
made a party to or is involved in any manner in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
or a person of whom he or she is the legal representative is or was a director,
officer or employee of the Corporation or a majority-owned subsidiary of the
Corporation, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer or employee or in any other capacity
while serving as a director, officer or employee, shall be indemnified and held
harmless by the Corporation in accordance with and to the fullest extent
permitted from time to time by the General Corporation Law of the State of
Delaware as the same exists or may hereafter be amended (the "DGCL") (but, if
permitted by applicable law, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment) or any other applicable laws as presently or hereafter in
effect, and such indemnification shall continue as to a person who has ceased to
be a director, officer or employee and shall inure to the benefit of his or her
heirs, executors and administrators; PROVIDED, HOWEVER,that the Corporation
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors or is a proceeding to
enforce such person's claim to indemnification pursuant to the rights granted by
this Article Sixth. The Corporation shall pay the expenses (including legal
fees) incurred by such person in defending any such proceeding in advance of its
final disposition; PROVIDED, HOWEVER, that an advancement of expenses incurred
by such person in his or her capacity as a director, officer or employee shall
be made only upon receipt (unless the Board of Directors waives such requirement
to the extent permitted by applicable law) of an undertaking, by or on behalf of
such person, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal that such person is not entitled to be indemnified by the Corporation as
authorized in this Article Sixth or otherwise, and PROVIDED FURTHER, that, in
the case of a director or officer, such an undertaking shall be required only if
and to the extent required by the DGCL.
The rights to indemnification and advancement of expenses provided by,
or granted pursuant to, this Article Sixth shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of this Certificate of Incorporation, provision of the By-laws,
agreement, vote of stockholders or disinterested Directors or otherwise. No
repeal, modification or amendment of, or adoption of any provision inconsistent
with, this Article Sixth, nor, to the fullest extent permitted by applicable
law, any modification of law, shall adversely affect any right or protection of
any person granted pursuant hereto with respect to any events that occurred
prior to the time of such repeal, amendment, adoption or modification.
SEVENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, in the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said
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<PAGE> 6
application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders of the Corporation, as the case may
be, and also on the Corporation.
EIGHTH: The Corporation shall mail periodic reports to security
holders, no less than once each year, and shall include profit and loss
statements and balance sheets prepared in accordance with generally accepted
accounting principles.
NINTH: Section 1. The Corporation shall not merge or consolidate with
any individual, firm, corporation or partnership in which any controlling
stockholder has a direct or indirect interest of 50% or more of the Common Stock
of the company unless, the holders of at least the majority of the outstanding
stock of the Corporation, exclusive of those shares held by such Controlling
Stockholders (as hereinafter defined) approve the merger or consolidation.
Section 2. For the purposes of this Article Ninth, (i) "Controlling
Stockholder" shall mean any individual, firm, corporation or other entity which,
as of the record date for the determination of stockholders entitled to notice
of and to vote on any of the transactions described in Section 1 of this Article
Ninth, or immediately prior to the consummation of any such transaction, is the
beneficial owner of 50% or more of the outstanding voting shares; (ii) an
individual, firm, corporation or other entity shall be the beneficial owner of
any voting stock (A) which it has the right to acquire pursuant to any
agreement, or upon exercise of conversion rights, warrants or options, or
otherwise, or (B) which are beneficially owned, directly or indirectly, by it or
any of its "affiliates" or "associates" (as those terms are defined in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended, or any successor federal rule or statute, all as the same
shall be in effect from time to time), or by any other individual, firm,
corporation or other entity with which it or any "affiliate" or "associate" (as
defined above) of it has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of the
Corporation. Voting stock which may be issuable by the Corporation pursuant to
any agreement, or upon exercise of conversion rights, warrants or options, or
otherwise, shall not be considered outstanding voting stock.
TENTH: The Corporation reserves the right to amend, alter, change, or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders, Directors, and other persons herein are granted subject to this
reservation.
ELEVENTH: A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (A) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (B) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (C) under Section 174 of the Delaware General
Corporation Law or (D) for any transaction from which the director derives an
improper personal benefit. If the Delaware General Corporation Law is amended
after approval by the stockholders of this Article Eleventh to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law as so amended. Neither the amendment nor repeal of this Article
Eleventh, nor the adoption of any provision of this Certificate of Incorporation
inconsistent with this Article Eleventh shall eliminate or reduce the effect of
this Article Eleventh in respect of any matter occurring, or any cause of
action, suit or claim that, but for this Article Eleventh would accrue or arise,
prior to such amendment, repeal or adoption of an inconsistent provision.
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IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be signed by Gerald D. Kelfer, its President and
Vice Chairman of the Board, and attested by Juanita I. Kerrigan, its Vice
President and Secretary, this 28th day of May, 1998.
By: /s/ Gerald D. Kelfer
----------------------------------
Gerald D. Kelfer
President and Vice Chairman of the
Board
Attest:
/s/ Juanita I. Kerrigan
- ----------------------------
Juanita I. Kerrigan
Vice President and Secretary
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<PAGE> 1
As Amended and
Restated May 28, 1998
BY-LAWS
OF
AVATAR HOLDINGS INC.
(a Delaware corporation)
----------
ARTICLE I
Offices
SECTION 1. REGISTERED OFFICE. The registered office shall be
established and maintained at the office of Corporation Service Company, in the
City of Wilmington, in the County of New Castle, in the State of Delaware, and
said corporation shall be the registered agent of this Corporation in charge
thereof.
SECTION 2. OTHER OFFICES. The Corporation may have other
offices, either within or without the State of Delaware, at such place or places
as the Board of Directors may from time to time appoint or the business of the
Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 1. ANNUAL MEETING. The annual meeting of stockholders
of the Corporation for the election of Directors and for the transaction of such
other business as may come before the meeting shall be held in each year on such
business day and at such hour as shall be fixed by the Board of Directors. If
the annual meeting is not held at the time so fixed, the Board of Directors
shall cause the meeting to be held as soon thereafter as convenient.
SECTION 2. SPECIAL MEETINGS. Special meetings of
stockholders for any purpose or purposes, unless otherwise prescribed by law or
by the Certificate of Incorporation, may be called at any time by the Chairman
of the Board or by
<PAGE> 2
order of the Board of Directors or the Executive Committee of the Board of
Directors, and shall be called by the Chairman of the Board, the President or
the Secretary at the request in writing of a stockholder or stockholders holding
of record at least twenty percent of all the Common Stock of the Corporation
then outstanding and entitled to vote. Special meetings shall be called by means
of a notice as provided for in Section 4 of this Article II.
SECTION 3. PLACE OF MEETING. Each meeting of stockholders
shall be held at such place, within or without the State of Delaware, as shall
be fixed by the Board of Directors and specified in the notice or waiver of
notice of said meeting. If no designation is made, the place of the meeting
shall be the principal office of the Corporation in the State of Florida.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise provided by
law, by the Certificate of Incorporation or by these By-Laws, written notice of
every meeting of stockholders shall be given to each stockholder of record
entitled to vote at the meeting, not less than ten nor more than sixty days
prior to the date named for the meeting (unless a greater period of notice is
required by law in a particular case), by delivering a written or printed notice
thereof to him personally, or by sending a copy thereof, charges prepaid,
through the mail or transmitted by telex, telegraph or cable to his address
appearing on the books of the Corporation, or supplied by him to the Corporation
for the purpose of notice. If notice is sent through the mail or transmitted by
telex, telegraph or cable, it shall be deemed to have been given to the person
entitled thereto when deposited in the United States mail or with the
appropriate office for transmission to such person. Such notice shall specify
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Notice of any adjourned
meeting of stockholders shall not be required to be given, except when expressly
required by law, by the Certificate of Incorporation or by these By-Laws. As
provided in Article IX of these By-Laws, any stockholder may waive the
requirements of notice provided for herein.
SECTION 5. QUORUM. The holders of shares entitling them to
exercise a majority of the voting power of the Corporation, present in person or
by proxy at any meeting of stockholders, shall constitute a quorum. Once a
quorum shall have been established, the stockholders present at a duly organized
meeting may continue to do business
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<PAGE> 3
until adjournment, notwithstanding the withdrawal of sufficient stockholders to
leave less than a quorum. If a meeting cannot be organized because a quorum has
not attended, those present in person or represented by proxy may, except as
otherwise provided by law, adjourn the meeting to such time and place as they
determine.
SECTION 6. ADJOURNMENTS. At any annual or special meeting, the
holders of shares entitling them to exercise a majority of the voting power
which is present in person or by proxy at such meeting, although less than a
quorum, may adjourn the meeting from time to time without further notice (except
as is otherwise required by law) other than by announcement at the meeting at
which such adjournment is taken of the time and place of the adjourned meeting.
At any such adjourned meeting at which a quorum shall be present, any business
may be transacted which might have been transacted at the original meeting.
SECTION 7. VOTING. Each stockholder of record of Common Stock
shall be entitled at each meeting of stockholders to one vote for each share of
Common Stock registered in his name on the books of the Corporation, except as
hereinafter stated for the election of Directors. For all elections of
Directors, each stockholder of record of Common Stock shall be entitled to cast
as many votes as equals the number of Directors to be elected at such election
multiplied by the number of shares of Common Stock owned by such stockholder on
the record date. All such votes may be cast for a single candidate or
distributed in any number among any two or more candidates. Directors shall be
elected by a plurality of the votes cast by the stockholders present in person
or by proxy. Except as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws, all other matters shall be determined by vote
of at least a majority of the votes which all stockholders present in person or
by proxy at such meeting are entitled to cast on such matter. Voting by ballot
shall not be required for the election of Directors or for the transaction of
any other corporate business except as otherwise provided by law.
SECTION 8. ORGANIZATION. At every meeting of stockholders, the
Chairman of the Board or, in his absence, the President or, in the absence of
either of such officers, a chairman chosen by a majority vote of stockholders
present in person or by proxy and entitled to vote thereat, shall act as
chairman of the meeting. The Secretary, or in his absence an Assistant
Secretary, shall act as secretary at
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<PAGE> 4
all meetings of stockholders. In the absence of the Secretary or an Assistant
Secretary, the chairman of the meeting may appoint any person to act as
secretary of the meeting.
SECTION 9. LIST OF STOCKHOLDERS. It shall be the duty of the
Secretary or other officer of the Corporation who shall have charge of its stock
ledger, either directly or through another officer of the Corporation designated
by him or through a transfer agent or transfer clerk appointed by the Board of
Directors, to prepare, at least ten days before every meeting of stockholders
for the election of Directors of the Corporation, a complete list of
stockholders entitled to vote thereat, arranged in alphabetical order and
showing the address of each stockholder and number of shares registered in the
name of each stockholder. For said ten days such list shall be open, at the
place where said meeting is to be held or at another place within the city where
the meeting is to be held if such other place is specified in the notice of the
meeting, to the examination of any stockholder for any purpose germane to the
meeting, and shall be produced and kept at the time and place of said meeting
during the whole time thereof and subject to the inspection of any stockholder
who shall be present thereat. The original or duplicate stock ledger shall be
the only evidence as to who are the stockholders entitled to examine such list
or the books of the Corporation, or to vote in person or by proxy at any meeting
of stockholders.
SECTION 10. BUSINESS AND ORDER OF BUSINESS.
(a) ANNUAL MEETING.
No business may be transacted at an annual meeting of
stockholders, other than business that is either (a) specified in the
notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors (or any duly authorized committee
thereof), (b) otherwise properly brought before the annual meeting by
or at the direction of the Board of Directors (or any duly authorized
committee thereof) or (c) otherwise properly brought before the annual
meeting by any stockholder of the Corporation (i) who is a stockholder
of record on the date of the giving of the notice provided for in this
Section 10 and on the record date for the determination of stockholders
entitled to vote at such annual meeting and (ii) who
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<PAGE> 5
complies with the notice procedures set forth in this Section 10.
In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a
stockholder, such stockholder must have given timely notice thereof in
proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary
must be delivered to or mailed and received at the principal executive
offices of the Corporation not less than sixty (60) days nor more than
ninety (90) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; PROVIDED, HOWEVER, that in
the event that the annual meeting is called for a date that is not
within thirty (30) days before or after such anniversary date, notice
by the stockholder in order to be timely must be so received not later
than the close of business on the tenth (10th) day following the day on
which such notice of the date of the annual meeting was mailed or such
public disclosure of the date of the annual meeting was made, whichever
first occurs.
To be in proper written form, a stockholder's notice
to the Secretary must set forth as to each matter such stockholder
proposes to bring before the annual meeting (i) a brief description of
the business desired to be brought before the annual meeting and the
reasons for conducting such business at the annual meeting, (ii) the
name and record address of such stockholder, (iii) the class or series
and number of shares of capital stock of the Corporation which are
owned beneficially or of record by such stockholder, (iv) a description
of all arrangements or understandings between such stockholder and any
other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material interest
of such stockholder in such business and (v) a representation that such
stockholder intends to appear in person or by proxy at the annual
meeting to bring such business before the meeting.
No business shall be conducted at the annual meeting
of stockholders except business brought before the annual meeting in
accordance with the procedures set forth in this Section 10, PROVIDED,
HOWEVER, that,
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<PAGE> 6
once business has been properly brought before the annual meeting in
accordance with such procedures, nothing in this Section 10 shall be
deemed to preclude discussion by any stockholder of any such business.
If the chairman of an annual meeting determines that business was not
properly brought before the annual meeting in accordance with the
foregoing procedures, the chairman shall declare to the meeting that
the business was not properly brought before the meeting and such
business shall not be transacted.
(b) SPECIAL MEETING.
At a special meeting of the stockholders, only such
business shall be conducted as shall be specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the
Board of Directors.
(c) ORDER OF BUSINESS.
The order of business at all meetings of stockholders
shall be as determined by the chairman of the meeting.
SECTION 11. INSPECTORS OF ELECTION. In advance of any meeting
of stockholders, the Board of Directors may appoint one or more Inspector(s) of
Election, who need not be stockholders, to act at such meeting or any
adjournment or adjournments thereof. If Inspector(s) of Election are not so
appointed, the chairman of any such meeting may make such appointment at the
meeting. No person who is a candidate for office shall act as an Inspector. In
case any person appointed as an Inspector fails to appear or fails or refuses to
act, the vacancy may be filled by appointment made by the Board of Directors in
advance of the convening of the meeting, or at the meeting by the person acting
as chairman. Each Inspector of Election so appointed shall first subscribe an
oath or affirmation faithfully to perform the duties of an Inspector of Election
at such meeting impartially, in good faith, to the best of his ability, and as
expeditiously as is practical. The Inspector(s) of Election shall determine the
number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies, receive votes or ballots, hear and determine all
challenges and questions in any way arising in connection with the right to
vote, count and tabulate all votes, determine the result, and do such acts
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<PAGE> 7
as may be proper to conduct the election or vote with fairness to all
stockholders. On request of the chairman of the meeting, the Inspector(s) of
Election shall make a report in writing of any challenge or question or matter
determined by them, and execute a certificate of any fact found by them.
SECTION 12. PROXIES. Every stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent without a meeting may
authorize another person or persons (who need not be a stockholder) to act for
him by proxy. Every proxy must be signed by the stockholder or his
attorney-in-fact. No proxy shall be valid after the expiration of three years
from the date thereof unless otherwise provided in the proxy. The authority of
the holder of a proxy to act shall not be revoked by the incompetence or death
of the stockholder who executed the proxy unless, before the authority is
exercised, written notice of an adjudication of such incompetence or of such
death is received by the corporate officer responsible for maintaining the list
of stockholders.
SECTION 13. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING.
Whenever the vote of stockholders at a meeting thereof is required or permitted
to be taken for or in connection with any corporate action, the meeting and vote
of stockholders may be dispensed with and the action may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voting. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
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<PAGE> 8
ARTICLE III
Board of Directors
SECTION 1. GENERAL POWERS. The business and
affairs of the Corporation shall be managed by the Board of
Directors.
SECTION 2. NUMBER, QUALIFICATION AND TERM OF OFFICE. The Board
of Directors shall consist of no less than eight nor more than fifteen members
as may be fixed from time to time by resolution of the Board. As used in these
By-Laws, "whole Board of Directors" means the total number of Directors which
the Corporation would have if there were no vacancies. Directors need not be
stockholders of the Corporation. Except as provided in Section 3 of this Article
III, Directors shall be elected by the stockholders. Each Director shall hold
office until the annual meeting of stockholders next following his election and
until his successor shall be elected and shall qualify, or until such Director's
earlier death, resignation or removal in the manner hereinafter provided.
SECTION 3. VACANCIES. Vacancies in the Board of Directors,
including vacancies resulting from an increase in the number of Directors, shall
be filled by a majority of the remaining members of the Board (although less
than a quorum), and each person so elected shall hold office until the next
election of Directors by stockholders and until his successor shall be elected
and shall qualify, or until such Director's earlier death, resignation or
removal in the manner hereinafter provided.
SECTION 4. PLACE OF MEETING. The Board of Directors may hold
its meetings at such place or places within or without the State of Delaware as
a majority of the Directors may from time to time appoint, or as may be
designated in the notice calling the meeting.
SECTION 5. ORGANIZATION MEETING. As soon as practicable after
each annual election of Directors by the stockholders, the Board of Directors
shall meet for the purpose of organization, the election of the Audit Committee
of the Board of Directors, the Executive Committee of the Board of Directors,
the Chairman of the Board and the Chairman of the Executive Committee and the
transaction of other business. If held on the same day as the annual meeting of
stockholders, notice of such organization meeting of the Board of Directors need
not be given. If the
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<PAGE> 9
organization meeting is held on any other day, notice of such meeting shall be
given as hereinafter provided for regular and special meetings of the Board of
Directors.
SECTION 6. REGULAR AND SPECIAL MEETINGS. Regular meetings of
the Board of Directors shall be held at such times as the Board of Directors
shall from time to time by resolution determine. Special meetings of the Board
of Directors shall be held whenever called by the Chairman of the Board, the
President or any four Directors.
SECTION 7. NOTICE. Written notice of each regular or special
meeting of the Board of Directors shall be given by the Secretary to each
Director at least three days prior to the day named for the meeting. Notice of
each such meeting may be given to a Director, either personally or by sending a
copy thereof, charges prepaid, through the mail, or transmitted by telex,
telecopier, telegraph or cable to his address appearing on the books of the
Corporation or supplied by him to the Corporation for the purpose of notice. If
notice is sent by mail or transmitted by telex, telegraph or cable, it shall be
deemed to have been given when deposited in the United States mail or with the
appropriate office for transmission to such person. Such notice shall specify
the place, day and hour of the meeting, and notice of a special meeting shall
include a general statement of the purpose for which the meeting is called. When
a meeting is adjourned, it shall not be necessary to give any notice of the
adjourned meeting or of the business to be transacted at such adjourned meeting,
other than by announcement at the meeting at which such adjournment is taken. As
provided in Article IX of these By-Laws, any Director may waive the notice
requirements provided for herein.
SECTION 8. QUORUM AND MANNER OF ACTING. A majority of the
whole Board of Directors shall be necessary to constitute a quorum for the
transaction of business and the vote of a majority of the Directors
participating in a meeting at which a quorum is present or participating shall
be the act of the Board of Directors.
SECTION 9. ORGANIZATION. At each meeting of the Board of
Directors, the Chairman of the Board, or in his absence, a Director chosen by a
majority of the Directors present, shall act as chairman of the meeting. The
Secretary, or in his absence any person appointed by the chairman of the
meeting, shall act as secretary of the meeting.
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<PAGE> 10
SECTION 10. BUSINESS AND ORDER OF BUSINESS. At each meeting
of the Board of Directors such business may be transacted as may properly be
brought before the meeting, whether or not such business is stated in the notice
of such meeting or in a waiver of notice thereof, except as otherwise expressly
provided by law, by the Certificate of Incorporation or by these By-Laws. At all
meetings of the Board of Directors business shall be transacted in the order
determined by the chairman of the meeting subject to the approval of the Board.
SECTION 11. ACTION BY CONSENT. Any action which may be taken
by the Board of Directors or by any committee thereof may be taken without a
meeting, if a consent or consents in writing setting forth the action so taken
shall be signed by all of the Directors or members of a committee, respectively,
and shall be filed with the Secretary of the Corporation.
SECTION 12. CONSTRUCTIVE PRESENCE AT A MEETING. Any member of
the Board of Directors or of any committee thereof shall be deemed present at a
meeting of such Board or committee if a conference telephone or similar
communication equipment is used, by means of which all persons participating in
the meeting can hear each other.
SECTION 13. INTERESTED DIRECTORS; QUORUM. No contract or
transaction between the Corporation and one or more of the Directors or officers
of the Corporation, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of the
Directors or officers of the Corporation are directors or officers, or have a
financial interest, shall be void or voidable solely for such reason, or solely
because such Director or officer is present at or participates in the meeting of
the Board of Directors or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if (i) the material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested Directors, even though the disinterested Directors be less than a
quorum; or (ii) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is
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<PAGE> 11
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee
thereof, or the stockholders.
Common or interested Directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes a contract or transaction specified in this section.
SECTION 14. RESIGNATIONS. Any Director may resign at any time
upon written notice to the Secretary of the Corporation. Such resignation shall
take effect at the time specified therein, or, if no time be so specified, upon
receipt by the Secretary. The acceptance of a resignation shall not be necessary
to make it effective.
SECTION 15. REMOVAL OF DIRECTORS. Any Director or the entire
Board of Directors may be removed, with or without cause, by the vote of a
majority of the outstanding shares then entitled to vote at an election of
Directors, except if less than the entire Board of Directors is to be removed,
no Director may be removed without cause if the votes cast against his removal
would be sufficient to elect him if then cumulatively voted at an election of
the entire Board of Directors.
SECTION 16. NOMINATION OF DIRECTORS. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as Directors of the Corporation. Nominations of persons for election to
the Board of Directors may be made at any annual meeting of stockholders, or at
any special meeting of stockholders called for the purpose of electing
Directors, (a) by or at the direction of the Board of Directors (or any duly
authorized committee thereof) or (b) by any stockholder of the Corporation (i)
who is a stockholder of record on the date of the giving of the notice provided
for in this Section 16 and on the record date for the determination of
stockholders entitled to vote at such meeting and (ii) who complies with the
notice procedures set forth in this Section 16.
In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must have given timely
notice thereof in proper written form to the Secretary of the Corporation.
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<PAGE> 12
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation: (a) in the case of an annual meeting, not less than sixty (60) days
nor more than ninety (90) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders (provided, however, that in the event
that the annual meeting is called for a date that is not within thirty (30) days
before or after such anniversary date, notice by the stockholder in order to be
timely must be so received not later than the close of business on the tenth
(10th) day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure of the date of the annual meeting
was made, whichever first occurs); and (b) in the case of a special meeting of
stockholders called for the purpose of electing directors, not later than the
close of business on the tenth (10th) day following the day on which notice of
the date of the special meeting was mailed or public disclosure of the date of
the special meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth: (a) as to each person whom the stockholder proposes to
nominate for election as a Director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by the person and (iv)
any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by such stockholder,
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by such
stockholder, (iv) a representation that such stockholder intends to appear in
person or by proxy at the meeting to nominate the persons named in its notice
and (v) any other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in
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connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations promulgated
thereunder. Such notice must be accompanied by a written consent of each
proposed nominee to being named as a nominee and to serve as a Director if
elected.
No person shall be eligible for election as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 16. If the chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedures, the chairman shall declare to
the meeting that the nomination was defective and such defective nomination
shall be disregarded.
ARTICLE IV
Committees of the Board
SECTION 1. EXECUTIVE COMMITTEE. At the organization meeting
following the annual meeting of stockholders, the Board of Directors shall, by
resolution adopted by a majority of the whole Board of Directors, designate an
Executive Committee consisting of the Chairman of the Board, the Chairman of the
Executive Committee and not less than two other directors. Except as hereinafter
set forth, the Executive Committee shall have and may exercise all the authority
of the Board of Directors in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers which may require it. All acts done and power conferred by the Executive
Committee shall be deemed to be, and may be certified as being, done or
conferred under authority of the Board of Directors. Notwithstanding the
foregoing, the Executive Committee shall not have the power or authority of the
Board of Directors in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, amending these
By-Laws, declaring a dividend or authorizing the issuance of stock. Any member
of the Executive Committee may be removed at any time, and any vacancy on the
Executive Committee may be filled, by the vote of a majority of the whole Board
of Directors.
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SECTION 2. MEETINGS OF EXECUTIVE COMMITTEE. Meetings of the
Executive Committee shall be held whenever called by the Chairman of the Board
or the Chairman of the Executive Committee. Notice of each meeting of the
Executive Committee shall be given personally, in writing or by telephone to
each member of the Executive Committee at his residence or usual place of
business at least twenty-four hours in advance of the meeting. Such notice shall
state the time and place of the meeting, but need not state the purpose or
purposes thereof. As provided in Article IX of these By-Laws, any member of the
Executive Committee may waive the notice requirements provided for herein. The
Executive Committee shall adopt its own rules of procedure not inconsistent with
any rules for committees set forth in these By-Laws, and it shall keep a record
of its proceedings and report them to the Board of Directors at the next meeting
thereof after each meeting of the Executive Committee. All actions taken by the
Executive Committee shall be subject to revision or alteration by the Board of
Directors, PROVIDED, HOWEVER, that third parties shall not be prejudiced by any
such revision or alteration.
SECTION 3. QUORUM OF AND MANNER OF ACTING BY EXECUTIVE
COMMITTEE. A majority of the Executive Committee shall constitute a quorum for
the transaction of business, and the vote of a majority of those participating
at a meeting thereof at which a quorum is present or participating shall be the
act of the Executive Committee.
SECTION 4. AUDIT COMMITTEE. The Board of Directors shall by
resolution designate an Audit Committee consisting of a Chairman and not less
than two other Directors. No member of the Audit Committee shall be an officer
or employee of the Corporation. The Audit Committee shall by majority vote of
its members adopt its own rules of procedure not inconsistent with any rules for
committees set forth in these By-Laws and fix the time and place of its
meetings, unless the Board of Directors shall otherwise provide. The Audit
Committee shall: recommend to the Board of Directors, subject to approval by the
stockholders of the Corporation, the appointment of the independent auditors of
the Corporation; review with the independent auditors their report and any
management letter and reports to the Board of Directors with respect thereto;
review with the independent auditors the Corporation's accounting policies and
procedures as well as its internal controls and internal auditing procedures;
determine whether there are any conflicts of interest in financial or business
matters between the Corporation and any of its officers or
14
<PAGE> 15
employees; review the recommendations of the independent auditors; review the
aggregate fee for audit and non-audit services of the independent auditors and
consider the possible effect of such services on the independence of the
auditors; and perform such other tasks as are assigned to it from time to time
by the Board of Directors. The Board of Directors shall have power to change the
number of members or the personnel of the Audit Committee at any time and to
fill vacancies. The Audit Committee shall keep minutes of its acts and
proceedings.
SECTION 5. OTHER COMMITTEES. The Board of Directors may from
time to time by resolution create such other committee or committees of
Directors, officers, employees or other persons designated by it for the purpose
of advising the Board, the Executive Committee and the officers and employees of
the Corporation with respect to such matters as the Board shall deem appropriate
and with such functions, powers and authority as the Board shall by resolution
prescribe; PROVIDED, HOWEVER, that no such other committee shall exercise any of
the powers or authority of the Board of Directors in the management of the
business and affairs of the Corporation or have power to authorize the seal of
the Corporation to be affixed to papers which may require it, unless such other
committee shall be created by resolution passed by a majority of the whole Board
of Directors and shall be so authorized by such resolution, and PROVIDED
FURTHER, that no committee shall exercise any of the powers or authority of the
Board of Directors that are not permitted by law. A majority of all the members
of any such other committee may adopt its own rules of procedure not
inconsistent with any rules for committees set forth in these By-Laws and fix
the time and place of its meetings, unless the Board of Directors shall
otherwise provide. The Board of Directors shall have power to change the number
of members or the personnel of any such other committee at any time, to fill
vacancies, and to discharge any such other committee, either with or without
cause, at any time. The Board of Directors may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of any such committee. In the absence or
disqualification of a member of a committee, and in the absence of a designation
by the Board of Directors of an alternate member to replace the absent or
disqualified member, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or
15
<PAGE> 16
disqualified member. Each such committee shall keep minutes of its acts and
proceedings.
SECTION 6. COMPENSATION. Members of any committee contemplated
by these By-Laws shall receive such compensation, fees and allowances, if any,
for their services as shall be fixed by resolution of the Board of Directors.
Nothing herein contained shall be construed so as to preclude any member of any
such committee from serving the Corporation in any other capacity and receiving
compensation therefor.
ARTICLE V
Officers
SECTION 1. NUMBER. The officers of the Corporation shall be a
Chairman of the Board, one or more Vice Chairmen of the Board, a Chairman of the
Executive Committee, a Chief Executive Officer, a President, one or more Vice
Presidents (any one or more of whom the Board of Directors or the Executive
Committee may designate Executive Vice President or Senior Vice President or
similar title), a Secretary and a Treasurer. Any two or more offices may be held
by the same person. It shall not be necessary for officers (except the Chairman
of the Board, any Vice Chairman of the Board, the Chairman of the Executive
Committee, and the Chief Executive Officer) to be Directors.
SECTION 2. ELECTION, TERM OF OFFICE AND QUALIFICATION. Except
in the case of officers appointed in accordance with the provisions of Section 3
of this Article V, officers shall be elected annually by the Board of Directors
and each officer shall hold office until his successor shall be elected and
shall qualify, or until the officer's earlier death, resignation or removal in
the manner hereinafter provided.
SECTION 3. OTHER OFFICERS. The Corporation may have such other
officers and agents as may be deemed necessary by the Board of Directors or the
Executive Committee. Such other officers and agents shall be appointed in such
manner, have such duties and hold their offices for such terms as may be
determined by the Board of Directors or the Executive Committee. The Board of
Directors or the Executive Committee may delegate to any principal officer the
power to appoint or remove any such other officers or agents.
16
<PAGE> 17
SECTION 4. REMOVAL; RESIGNATION. Any officer or agent elected
or appointed by the Board of Directors or the Executive Committee may be removed
by the Board of Directors or the Executive Committee whenever in its judgment
the best interests of the Corporation will be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Any officer or agent may resign at any time by giving written
notice to the chief executive officer or the secretary. Unless stated in the
notice of resignation, the acceptance thereof shall not be necessary to make it
effective, and it shall take effect at the time specified therein or, in the
absence of such specification, it shall take effect upon the receipt thereof.
SECTION 5. VACANCIES. A vacancy in any office because of
death, resignation, removal or any other cause shall be filled for the unexpired
portion of the term in the manner prescribed in these By-Laws for election or
appointment to such office.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board
shall preside at all meetings of the Board of Directors and of stockholders. In
the absence of the Chairman of the Executive Committee, or if there be no
Chairman of the Executive Committee, the Chairman of the Board (if then a member
of the Executive Committee) shall preside at meetings of the Executive Committee
and shall exercise all of the powers and discharge all of the duties of the
Chairman of the Executive Committee. The Chairman of the Board shall have the
power to sign all certificates, contracts, obligations and other instruments of
whatever character on behalf of the Corporation. The Chairman of the Board shall
have and perform such other duties and may exercise such other powers as from
time to time may be assigned to him by these By-Laws, the Board of Directors or
the Executive Committee. In the absence of the Chairman of the Board, any Vice
Chairman of the Board may perform the functions of the Chairman of the Board.
SECTION 7. CHAIRMAN OF THE EXECUTIVE COMMITTEE. The Chairman
of the Executive Committee shall preside at all meetings of the Executive
Committee. The Chairman of the Executive Committee shall have the power to sign
all certificates, contracts, obligations and other instruments of whatever
character on behalf of the Corporation. He shall perform such other duties and
may exercise such other powers as from time to time may be assigned to him by
these
17
<PAGE> 18
By-Laws, the Board of Directors, the Executive Committee or the Chairman of the
Board.
Section 8. CHIEF EXECUTIVE OFFICER. The Chief Executive
Officer shall be the senior executive officer of the Corporation. He shall
transmit or cause to be transmitted necessary instructions and advice to all
other officers and all other proper persons and shall be the proper officer of
the Corporation to whom matters and issues concerning the Corporation shall be
transmitted for attention. The Chief Executive Officer shall have power to sign
all certificates, contracts, obligations and other instruments of whatever
character on behalf of the Corporation. He shall perform such other duties and
may exercise such other powers as from time to time may be assigned to him by
these By-Laws, the Board of Directors, the Executive Committee or the Chairman
of the Board.
SECTION 9. PRESIDENT. The President shall have power to sign
all certificates, contracts, obligations and other instruments of whatever
character on behalf of the Corporation. He shall perform such other duties and
may exercise such other powers as from time to time may be assigned to him by
these By-Laws, the Board of Directors, the Executive Committee or the Chairman
of the Board.
SECTION 10. VICE PRESIDENTS. Each Vice President shall perform
such duties and may exercise such powers as from time to time may be assigned to
him by these By-Laws, the Board of Directors, the Executive Committee, the
Chairman of the Board, or the President. Each Vice President shall have power to
sign all certificates, contracts, obligations and other instruments of whatever
character on behalf of the Corporation.
SECTION 11. SECRETARY. The Secretary: shall record or cause
to be recorded in books provided for that purpose the minutes of the meetings of
the stockholders, the Board of Directors and the Executive Committee; shall see
that all notices are duly given in accordance with the provisions of these
By-Laws and as required by law; shall be custodian of such corporate records as
the Board of Directors may direct and of the seal of the Corporation and may
affix the same to any instrument requiring it and, when so affixed, it shall be
attested by his signature or by the signature of an Assistant Secretary; may
sign with the Chairman of the Board, the President or any Vice President all
authorized contracts, obligations or instruments; shall see that the books,
reports, statements, certificates and
18
<PAGE> 19
all other documents and records required by law, by the Certificate of
Incorporation or by these By-Laws to be kept by him are available for
examination at reasonable times by any Director at the principal office of the
Corporation during business hours; and, in general, shall perform all duties
incident to the office of Secretary and such other duties as may, from time to
time, be assigned to him by the Board of Directors, the Executive Committee, the
Chairman of the Board or the President.
At the request of the Secretary, or in his absence or
disability, any Assistant Secretary shall perform any of the duties of the
Secretary and, when so acting, shall have all the powers of, and be subject to
all of the restrictions upon, the Secretary. Except where by law the signature
of the Secretary is required, each of the Assistant Secretaries shall possess
the same power as the Secretary to sign certificates, contracts, obligations and
other instruments of the Corporation, and to affix the seal of the Corporation
to such instruments, and attest the same.
SECTION 12. TREASURER. The Treasurer: shall have charge and
custody of all funds and securities of the Corporation and shall deposit all
such funds in the name of the Corporation in such depositories as may be
designated by the Board of Directors or pursuant to Section 3 of Article X;
shall disburse the funds of the Corporation, taking proper vouchers for such
disbursements; shall render to the Chairman of the Board or the Directors, at
the regular meetings of the Board, or whenever they may require it, an account
of all his transactions as Treasurer and of the financial condition of the
Corporation, and; in general, shall perform all duties incident to the office of
Treasurer and such other duties as may, from time to time, be assigned to him by
the Board of Directors, the Executive Committee, the Chairman of the Board or
the President. If required by the Board of Directors, he shall give a bond for
the faithful discharge of his duties in such sum and with such surety or
sureties as the Board of Directors shall determine.
At the request of the Treasurer, or in his absence or
disability, any Assistant Treasurer may perform any of the duties of the
Treasurer and, when so acting, shall have all the powers of, and be subject to
all the restrictions upon, the Treasurer. Except where by law the signature of
the Treasurer is required, each of the Assistant Treasurers shall possess the
same power as the Treasurer to sign all
19
<PAGE> 20
certificates, contracts, obligations and other instruments of the Corporation.
SECTION 13. SALARIES. The salaries of the
officers shall be fixed from time to time by the Board of Directors. No officer
shall be prevented from receiving such salary by reason of the fact that he is
also a Director of the Corporation.
ARTICLE VI
Indemnification
SECTION 1. INDEMNIFICATION; PREPAYMENT OF EXPENSES. (a) Each
person who was or is made a party or is threatened to be made a party to or is
involved in any manner in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "PROCEEDING"), by reason of the fact that he or she or a person
of whom he or she is the legal representative is or was a director, officer or
employee of the Corporation or a majority-owned subsidiary of the Corporation (a
"SUBSIDIARY"), whether the basis of such proceeding is alleged action in an
official capacity as a director, officer or employee or in any other capacity
while serving as a director, officer or employee, shall be indemnified and held
harmless by the Corporation in accordance with and to the fullest extent
permitted from time to time by the General Corporation Law of the State of
Delaware as the same exists or may hereafter be amended (the "DGCL") (but, if
permitted by applicable law, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment) or any other applicable laws as presently or hereafter in
effect, and such indemnification shall continue as to a person who has ceased to
be a director, officer or employee and shall inure to the benefit of his or her
heirs, executors and administrators; PROVIDED, HOWEVER, that the Corporation
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors or is a proceeding to
enforce such person's claim to indemnification pursuant to the rights granted by
this Article VI. The Corporation shall pay the expenses (including legal fees)
incurred by such person in defending any such proceeding in advance of its final
20
<PAGE> 21
disposition; PROVIDED, HOWEVER, that an advancement of expenses incurred by such
person in his or her capacity as a director, officer or employee shall be made
only upon receipt (unless the Board of Directors waives such requirement to the
extent permitted by applicable law) of an undertaking, by or on behalf of such
person, to repay all amounts so advanced if it shall ultimately be determined by
final judicial decision from which there is no further right to appeal that such
person is not entitled to be indemnified by the Corporation as authorized in
this Article VI or otherwise, and PROVIDED FURTHER, that, in the case of a
director or officer, such an undertaking shall be required only if and to the
extent rquired by the DGCL.
(b) The Corporation may, to the extent authorized from time to
time by the Board of Directors, grant rights to indemnification, and rights to
be paid by the Corporation the expenses incurred in defending any proceeding in
advance of its final disposition, to any person who is or was an agent (other
than a director, officer or employee) of the Corporation or a Subsidiary and to
any person who is or was serving at the request of the Corporation or a
Subsidiary as a director, officer, partner, member, employee, trustee or agent
of another corporation, partnership, limited liability company, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans maintained or sponsored by the Corporation or a Subsidiary, to the fullest
extent of the provisions of this Article VI with respect to the indemnification
of and advancement of expenses to directors, officers and employees of the
Corporation.
SECTION 2. NON-EXCLUSIVITY OF RIGHTS. The rights to
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article VI shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, provision of these By-laws, agreement, vote of stockholders or
disinterested Directors or otherwise. No repeal, modification or amendment of,
or adoption of any provision inconsistent with, this Article VI, nor, to the
fullest extent permitted by applicable law, any modification of law, shall
adversely affect any right or protection of any person granted pursuant hereto
with respect to any events that occurred prior to the time of such repeal,
amendment, adoption or modification.
SECTION 3. RIGHT TO BRING SUIT. The rights to
indemnification and to the advancement of expenses conferred in Section 1(a) of
this Article VI shall be contract rights.
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If a claim under Section 1(a) of this Article VI is not paid in full by the
Corporation within sixty days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be twenty days, the claimant may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the claimant shall be entitled to be paid also the
expense of prosecuting or defending such suit. In any suit brought by the
claimant to enforce a right to indemnification hereunder (but not in a suit
brought by the claimant to enforce an advancement of expenses) it shall be a
defense that, and in any suit by the Corporation to recover an advancement of
expenses upon a final adjudication that, the claimant has not met any applicable
standard for indemnification set forth in the DGCL. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the claimant is proper in the circumstances because
the claimant has met the applicable standard of conduct set forth in the DGCL,
nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall create a presumption that the
claimant has not met the applicable standard of conduct or, in the case of such
a suit brought by the claimant, be a defense to such suit. In any suit brought
by the claimant to enforce a right to indemnification or to an advancement of
expenses hereunder, or by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving that the claimant
is not entitled to be indemnified, or to such advancement of expenses, under
this Article VI or otherwise shall be on the Corporation.
SECTION 4. OTHER INDEMNIFICATION. The Corporation's
obligation, if any, to indemnify any person who was or is serving at its request
as a director, officer, partner, member, employee, trustee or agent of another
corporation, partnership, limited liability company, joint venture, trust or
other enterprise shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, limited liability
company, joint venture, trust or other enterprise.
22
<PAGE> 23
SECTION 5. INSURANCE. The Corporation may maintain insurance,
at its expense, to protect itself and any person who is or was a director,
officer, partner, member, employee, trustee or agent of the Corporation or a
Subsidiary or of another corporation, partnership, limited liability company,
joint venture, trust or other enterprise against any expense, liability or loss,
whether or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the DGCL.
SECTION 6. CONSTRUCTION. If any provision or provisions of
this Article VI shall be held invalid, illegal or unenforceable for any reason
whatsoever: (1) the validity, legality and enforceability of the remaining
provisions of this Article VI (including, without limitation, each portion of
any subparagraph or clause of this Article VI containing any such provision held
to be invalid, illegal or unenforceable, that is not itself held to be invalid,
illegal or unenforceable) shall not in any way be affected or impaired thereby;
and (2) to the fullest extent possible, the provisions of this Article VI
(including, without limitation, each such portion of any subparagraph of this
Article VI containing any such provision held to be invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
SECTION 7. NOTICE. Any notice, request or other communication
required or permitted to be given to the Corporation under this Article VI shall
be in writing and either delivered in person or sent by telecopy, telex,
telegram, overnight mail or courier service, or certified or registered mail,
postage prepaid, return receipt requested, to the Secretary of the Corporation
and shall be effective only upon receipt by the Secretary.
ARTICLE VII
Certificates of Stock, Books and Records
SECTION 1. FORM; SIGNATURE. A certificate of stock, signed
by the Chairman of the Board, the President or any Vice President, and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary,
shall be issued to each stockholder certifying the number of shares owned by him
in the Corporation. Any or all of the signatures on the certificates may be a
facsimile. In case
23
<PAGE> 24
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such an officer,
transfer agent or registrar at the date of issue.
If the Corporation shall be authorized to issue more than one
class of stock or more than one series of any class, there shall be set forth on
the back of the certificate which the Corporation shall issue to represent such
class or series of stock a statement that the Corporation will furnish without
charge to each stockholder who so requests the powers, designations, preferences
and relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
SECTION 2. LOST CERTIFICATES. The Board of Directors may
determine the conditions under which a new share certificate is to be issued in
place of any certificate theretofore issued by the Corporation alleged to have
been lost, stolen or destroyed. When authorizing the issuance of a new
certificate or certificates, the Board of Directors may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or his legal
representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against the Corporation on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
SECTION 3. TRANSFER OF SHARES. The shares of stock of the
Corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives, and upon
such transfer the old certificates shall be surrendered to the corporation by
the delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the Board of Directors may designate, by
whom they shall be cancelled, and new certificates shall thereupon be issued. A
record shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.
24
<PAGE> 25
SECTION 4. REGISTERED STOCKHOLDERS. The Corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by law.
SECTION 5. DETERMINING STOCKHOLDERS OF RECORD. In order that
the Corporation may determine the stockholders entitled to notice of, or to vote
at, any meeting of stockholders or any adjournment thereof or to express consent
to corporate action in writing without a meeting, or entitled to receive payment
of any dividend or other distribution, or allotment of any rights, or entitled
to exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful activity, the Board of Directors may fix
(or authorize the Secretary to fix), in advance, a record date, which (1) in the
case of determination of stockholders entitled to vote at any meeting of
stockholders or adjournment thereof, shall not be more than sixty nor less than
ten days before the date of such meeting; (2) in the case of determination of
stockholders entitled to express consent to corporate action in writing without
a meeting, shall not be more than ten days from the date upon which the
resolution fixing the record date is adopted by the Board of Directors; and (3)
in the case of any other action, shall not be more than sixty days prior to such
other action. Only such stockholders as shall be stockholders of record on the
date so fixed shall be entitled to notice of, or to vote at, such meeting, to
express consent to corporate action in writing without a meeting, to receive
payment of such dividend or other distribution, to receive such allotment of
rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any shares on the books of the Corporation after any record date
fixed as aforesaid. A determination of stockholders or record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; PROVIDED, HOWEVER, that the Board of Directors may fix a new record
date for the adjourned meeting.
25
<PAGE> 26
ARTICLE VIII
Fiscal Year
The fiscal year of the Corporation shall be as determined by
the Board of Directors or by the Executive Committee from time to time.
ARTICLE IX
Waiver of Notice
Whenever any notice whatever is required to be given by law,
by the Certificate of Incorporation or by these By-Laws, the person entitled
thereto may, in person or by attorney thereunto authorized, in writing or by
telegraph, telex or cable, waive such notice whether before or after the meeting
or other matter in respect of which such notice is to be given, and in such
event such notice need not be given to such person and such waiver shall be
deemed equivalent to such notice. Neither the purpose of nor the business to be
transacted at such meeting need be specified in any written waiver of notice.
Attendance of a person at a meeting shall constitute a waiver of such meeting,
except when the person attends a meeting for the express purpose of objecting,
at the beginning of a meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE X
General Provisions
SECTION 1. CONTRACT, ETC., HOW EXECUTED. The Board of
Directors or the Executive Committee may authorize any officer or officers,
agent or agents, or employee or employees of the Corporation to enter into any
contract or execute and deliver any instrument in the name and on behalf of the
Corporation, and such authority may be general or confined to specific instance.
SECTION 2. CHECKS, ETC. All checks, drafts, bills of exchange
or other orders for the payment of money, notes or other evidences of
indebtedness issued in the name of the Corporation, shall be signed, either
manually or in facsimile, by such officer or officers, or agent or agents, as
may from time to time be designated by these By-Laws, or
26
<PAGE> 27
by the Board of Directors or the Executive Committee, or who shall have been
designated in writing by any two officers of the Corporation, acting jointly,
who shall have been authorized and empowered by the Board of Directors or the
Executive Committee to make such designation. A designation by the Board of
Directors, the Executive Committee or by officers thereunto duly authorized and
empowered may be general or confined to specific instances.
SECTION 3. DEPOSITORIES. Funds or securities of the
Corporation shall be deposited in such depositories as shall be appointed by the
Board of Directors, the Executive Committee or as shall be appointed by any two
officers of the Corporation, acting jointly, who shall have been authorized and
empowered by the Board of Directors or the Executive Committee to make such
appointment.
SECTION 4. PROXIES. Unless otherwise provided by resolutions
of the Board of Directors, the Board of Directors or the Executive Committee may
from time to time appoint any attorney or attorneys or agent or agents of the
Corporation, in the name and on behalf of the Corporation, to cast the votes
which the Corporation may be entitled to cast as a stockholder or otherwise in
any other corporation any of whose shares or other securities may be held by the
Corporation, at meetings of holders of the shares or other securities of such
other corporation, or to consent or dissent in writing to any action by such
other corporation, and may instruct the person or persons so appointed as to the
manner of casting such votes or giving such consent or dissent, and may execute
or cause to be executed in the name and on behalf of the Corporation and under
its corporate seal, or otherwise, all such written proxies or other instruments
he or they may deem necessary and proper.
SECTION 5. SEAL. The corporate seal shall be in the form of a
circle, shall bear the name of the Corporation, the year 1970 and the words
"Corporate Seal - Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or in any manner reproduced. Except as
otherwise required by law, the affixation of the corporate seal shall not be
necessary to the valid execution, assignment or endorsement of any instrument in
writing.
27
<PAGE> 28
ARTICLE XI
Amendments
These By-Laws, or any of them, may be altered, amended or
repealed, or new By-Laws may be adopted, at any time by the affirmative vote of
at least a majority of the votes which all stockholders present in person or by
proxy at such meeting are entitled to cast, or by the Board of Directors at any
regular or special meeting of the Board.
ARTICLE XII
By-Laws Subject to Provisions
of Certificate of Incorporation
In case of any conflict between the provisions of these
By-Laws and the Certificate of Incorporation, the provisions of the Certificate
of Incorporation shall control.
ARTICLE XIII
Election Not to be Governed by the
Florida Control-Share Acquisition Statute
To the extent, if any, that the provisions of Section 607.109
of the Florida General Corporation Act (the "Florida Act") apply to any
"control-share acquisition" (as defined in Section 607.109 of the Florida Act)
of shares of the Common Stock, the Corporation hereby expressly elects that the
provisions of Section 607.109 of the Florida Act shall not apply to any
control-share acquisition of shares of Common Stock, and that shares of Common
Stock acquired in any such control-share acquisition shall have ascribed thereto
the full voting rights, powers and privileges provided by the Corporation's
Certificate of Incorporation, as amended, and these By-Laws.
28
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<CGS> 61,040
<TOTAL-COSTS> 74,829
<OTHER-EXPENSES> 5,474
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,315
<INCOME-PRETAX> (4,872)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,872)
<DISCONTINUED> (2,141)
<EXTRAORDINARY> (2,308)
<CHANGES> 0
<NET-INCOME> (9,321)
<EPS-PRIMARY> (1.02)
<EPS-DILUTED> (1.02)
<FN>
<F1>TOTAL CURRENT ASSETS AND TOTAL CURRENT LIABILITIES ARE NOT APPLICABLE
BECAUSE REGISTRANT DOES NOT PRESENT A CLASSIFIED BALANCE SHEET.
</FN>
</TABLE>
