<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, 1999
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)
201 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: 9,138,038 shares of the
Company's common stock ($1.00 par value) were outstanding as of July 31, 1999.
1
<PAGE> 2
AVATAR HOLDINGS INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited):
Consolidated Balance Sheets --
June 30, 1999 and December 31, 1998 .............................. 3
Consolidated Statements of Operations --
Six months and three months ended June 30, 1999 and 1998 ......... 4
Consolidated Statements of Cash Flows --
Six months ended June 30, 1999 and 1998 .......................... 5
Notes to Consolidated Financial Statements ......................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ......... 16
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .......... 24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................. 25
</TABLE>
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,
1999 1998
--------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 173,427 $ 32,521
Restricted cash 5,857 5,232
Contracts and mortgage notes receivable, net 9,830 13,737
Other receivables, net 3,800 4,257
Land and other inventories 154,103 170,555
Property, plant and equipment, net 20,099 26,366
Other assets 14,760 11,724
Deferred income taxes 6,261 --
Assets of discontinued operations 40,106 208,599
--------- ---------
Total Assets $ 428,243 $ 472,991
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Notes, mortgage notes and other debt:
Corporate $ 112,367 $ 130,000
Notes, collateralized by contracts and mortgage notes receivable -- 9,060
Real estate 2,984 18,493
Estimated development liability for sold land 16,173 8,671
Accounts payable 2,926 3,385
Accrued and other liabilities 35,143 35,182
Income taxes payable 11,450 --
Deferred customer betterment fees -- 18,837
Liabilities of discontinued operations 33,833 137,106
--------- ---------
Total Liabilities 214,876 360,734
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 155,618 151,422
Retained earnings (deficit) 49,059 (48,335)
--------- ---------
213,847 112,257
Treasury stock, at cost, 25,464 shares (480) --
--------- ---------
Total Stockholders' Equity 213,367 112,257
--------- ---------
Total Liabilities and Stockholders' Equity $ 428,243 $ 472,991
========= =========
</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, 1999 and 1998
(Unaudited)
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
------------------------ -----------------------
Six Months Three Months
------------------------ -----------------------
1999 1998 1999 1998
--------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Real estate sales $ 100,970 $ 46,021 $ 73,057 $ 24,728
Deferred gross profit 2,015 2,280 965 1,147
Interest income 3,000 3,069 2,007 1,462
Other 1,007 946 550 494
--------- -------- -------- --------
Total revenues 106,992 52,316 76,579 27,831
EXPENSES
Real estate expenses 90,524 47,451 63,482 25,399
General and administrative expenses 5,430 5,142 2,889 2,664
Interest expense 5,301 6,745 2,587 3,268
Other 637 644 321 354
--------- -------- -------- --------
Total expenses 101,892 59,982 69,279 31,685
--------- -------- -------- --------
Income (loss) from continuing operations before income taxes 5,100 (7,666) 7,300 (3,854)
Income tax expense 1,978 -- 2,773 --
--------- -------- -------- --------
Income (loss) from continuing operations after income taxes 3,122 (7,666) 4,527 (3,854)
Discontinued operations:
Income (loss) from discontinued operations less income tax
expense of $571 and $64 for the six and three
months ended 1999 and $0 for 1998 671 2,653 (137) 1,608
Gain on sale of discontinued operations less income tax
expense of $7,653 for the six and three months ended 1999 94,934 -- 94,934 --
Estimated loss on disposal, less income tax benefit of $817
for the six and three months ended 1999 and $0 for 1998 (1,333) (2,000) (1,333) (2,000)
Extraordinary item:
Loss on early extinguishment of debt,
less income tax expense of $0 -- (2,308) -- --
--------- -------- -------- --------
Net income (loss) $ 97,394 $ (9,321) $ 97,991 $ (4,246)
========= ======== ======== ========
BASIC AND DILUTED EPS:
Income (loss) from continuing operations after income taxes $ 0.34 $ (0.84) $ 0.49 $ (0.42)
Income (loss) from discontinued operations $ 0.07 $ 0.29 $ (0.01) $ 0.18
Gain on sale of discontinued operations $ 10.36 -- $ 10.36 --
Estimated loss on disposal $ (0.15) $ (0.22) $ (0.15) $ (0.22)
Loss from extraordinary item -- $ (0.25) -- --
Net income (loss) $ 10.62 $ (1.02) $ 10.69 $ (0.46)
</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, 1999 and 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 97,394 $ (9,321)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 1,780 1,626
Gain on sale of Florida Utilities assets (94,934) --
Gain on sale of Cape Coral assets (7,024) --
Loss on early extinguishment of debt -- 2,308
Estimated loss on disposal of discontinued operations 1,333 2,000
Deferred gross profit (2,015) (2,280)
Deferred income taxes (6,261) --
Cost of homesite sales not requiring cash 1,234 877
Changes in operating assets and liabilities:
Restricted cash (625) (1,260)
Principal payments on contracts receivable 5,066 5,656
Receivables 856 1,988
Other receivables 415 (1,541)
Inventories (1,618) (7,147)
Other assets 283 (4,717)
Income taxes payable 11,450 --
Accounts payable and accrued and other liabilities (17,854) 1,919
Assets/liabilities from discontinued operations, net (5,250) (5,996)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (15,770) (15,888)
INVESTING ACTIVITIES
Investment in property, plant and equipment (6,712) (348)
Net proceeds from sale of Florida Utilities assets 164,071 --
Net proceeds from sale of Cape Coral assets 37,588 --
--------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 194,947 (348)
FINANCING ACTIVITIES
Proceeds from issuance of 7% Convertible Subordinated Notes -- 115,000
Payment of financing fees -- (3,450)
Proceeds from revolving lines of credit and long-term borrowings 109 8,802
Principal payments on revolving lines of credit and long-term borrowings (35,267) (66,568)
Repurchase of 7% Convertible Subordinated Notes (2,633) --
Purchase of treasury stock (480) --
--------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (38,271) 53,784
--------- ---------
INCREASE IN CASH 140,906 37,548
Cash and cash equivalents at beginning of period 32,521 3,860
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 173,427 $ 41,408
========= =========
</TABLE>
5
<PAGE> 6
AVATAR HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited) -- continued
For the Six months ended June 30, 1999 and 1998
(Dollars in thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
Cash paid during the period for: 1999 1998
------ ------
<S> <C> <C>
Interest - Continuing operations (net of amount
capitalized of $234 and $1,480
in 1999 and 1998, respectively) $4,632 $3,979
====== ======
Interest - Discontinued operations (net of amount
capitalized of $33 and $109 in
and 1998, respectively $2,361 $2,237
====== ======
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Contributions in aid of construction $ -- $1,253
====== ======
See notes to consolidated financial statements.
</TABLE>
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, 1999 and December 31,
1998, and the related consolidated statements of operations for the six month
and three month periods ended June 30, 1999 and 1998 and the consolidated
statements of cash flows for the six months ended June 30, 1999 and 1998 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 statements 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 1998 Annual Report on Form 10-K and the notes to
Avatar's consolidated financial statements included therein.
RECLASSIFICATIONS
Certain 1998 financial statement items have been reclassified to
conform to the 1999 presentation.
EARNINGS PER SHARE
Earnings per share is computed based on the weighted average number of
shares outstanding of 9,166,675 and 9,163,286 for the six and three months ended
June 30, 1999, respectively and 9,170,102 for the six and three months ended
June 30, 1998. For computing earnings per share for the six and three months
ended June 30, 1999 and 1998, the conversion of the Notes and employee stock
options were not assumed, as the effect of both would be antidilutive. There is
no difference between basic and diluted earnings per share for 1999 and 1998.
REPURCHASE OF COMMON STOCK AND NOTES
On April 26, 1999, Avatar's Board of Directors authorized the
expenditure of up to $15,000 to purchase, from time to time, shares of its
common stock and/or its 7% Convertible Subordinated Notes (the "Notes") in the
open market, through privately negotiated transactions or otherwise, depending
on market and business conditions and other factors. During the second quarter
of 1999, the Company repurchased $2,633 principal amount of the Notes and $480
of its common stock.
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
$5,857 and $5,232 as of June 30, 1999 and December 31, 1998, respectively. These
7
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - continued
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH (Unaudited) - continued
balances are comprised primarily of housing deposits that will become available
to the Company when the housing contracts close.
Restricted cash from discontinued operations includes deposits of $185
and $198 for vacation ownership and $0 and $35 for Florida utilities operations
as of June 30, 1999 and December 31, 1998, respectively. Vacation ownership
deposits are deposits received from purchasers that are held in escrow until a
certificate of occupancy is obtained or the legal rescission period has expired.
STOCK OPTIONS
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 123, "Accounting for Stock-Based Compensation." Statement No. 123
allows companies to measure compensation cost in connection with employee stock
compensation plans using a fair value based method or to use an intrinsic value
based method in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25). The Company has elected to
follow APB 25 and related interpretations in accounting for its employee stock
options.
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.
CONTRACTS AND MORTGAGE NOTES RECEIVABLES
Contracts and mortgage notes receivables are summarized as follows:
June 30, December 31,
1999 1998
------- ------------
Contracts and mortgage notes receivable $19,690 $24,992
------- -------
Less:
Deferred gross profit 8,345 10,532
Other 1,515 723
------- -------
9,860 11,255
------- -------
$ 9,830 $13,737
======= =======
8
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued
LAND AND OTHER INVENTORIES
Inventories consist of the following:
June 30, December 31,
1999 1998
-------- -----------
Land developed and in process of development $ 83,705 $100,414
Land held for future development or sale 31,027 31,027
Dwelling units completed or under construction 38,662 38,590
Other 709 524
-------- --------
$154,103 $170,555
======== ========
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES
As of June 30, 1999 and December 31, 1998, preferred stock outstanding
of the Florida utilities (classified as Discontinued Operations) owned by
minority interests is as follows:
June 30, December 31,
1999 1998
------ -----------
9% Cumulative preferred stock $ -- $5,400
Other 250 72
------ ------
$ 250 $5,472
====== ======
The Florida utilities subsidiary's 9% cumulative preferred stock
provides for redemption of a minimum of $1,800 of the preferred stock each year
beginning in 1997. During each of the first quarters of 1999 and 1998, Avatar
redeemed $1,800 of the preferred stock. In addition during the second quarter of
1999 and after the sale of Florida Utilities, the remaining $3,600 of preferred
stock was redeemed.
Charges to operations recorded as "Other Expenses" (See Discontinued
Operations) relating to preferred stock dividends of subsidiaries amounted to
$438 in 1999 and $274 in 1998.
NOTES, MORTGAGE NOTES AND OTHER DEBT
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.
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, in part, used to repay $33,000 aggregate amount of 8%
Senior Debentures due 2000 and 9% Senior Debentures due 2000. 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. During 1999, the Company repurchased $2,633 principal
amount of the Notes.
9
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued
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, 1999 and December 31, 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Deferred income tax assets
Net operating loss carry-forward $ -- $ 27,000
Tax over book basis of land inventory 29,000 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 carry-forward -- 4,000
Attributable to Discontinued Operations 4,000 4,000
Other 2,261 1,000
-------- --------
Total deferred income taxes 43,261 75,000
Valuation allowance for deferred income tax assets (29,000) (59,000)
-------- --------
Deferred income tax assets after valuation allowance 14,261 16,000
Deferred income tax liabilities
Book over tax income recognized on home-site sales (1,000) (2,000)
Attributable to Discontinued Operations (7,000) (14,000)
-------- --------
Total deferred income tax liabilities (8,000) (16,000)
-------- --------
Net deferred income taxes $ 6,261 $ 0
======== ========
</TABLE>
A reconciliation of income tax expense before discontinued operations
to the expected income tax expense (credit) at the federal statutory rate of 35%
and 34% for the six months ended June 30, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
------ -------
<S> <C> <C>
Income tax expense (credit) computed at statutory rate $1,785 $(1,656)
State income tax (credit), net of federal effect 183 (179)
Other, net 10 (165)
Change in valuation allowance on deferred tax assets -- 2,000
------ -------
Provision for income taxes $1,978 $ 0
====== =======
</TABLE>
In 1999, $4,196 was credited to additional paid-in capital representing
the benefit of utilizing deferred income tax assets which were generated in
prior years.
10
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued
CONTINGENCIES
Avatar is involved in various pending litigation matters primarily
arising in the normal course of its business. Although the outcome of these
matters cannot be determined, management believes that the resolution of these
matters will not have a material effect on Avatar's business or financial
position.
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
The Company is primarily engaged in real estate operations. The Company
owns and develops land, primarily in various locations in Florida and Arizona.
The Company's current and planned real estate operations include the following
segments: the development, sale and management of active adult communities; the
development and sale of residential communities (including construction of
upscale custom and semi-custom homes, mid-priced single- and multi-family
homes); the development, leasing and management of improved commercial and
industrial properties; operations of amenities and resorts; cable television
operations; and property management services.
Prior to April 15, 1999, the Company's utilities operations included
the purification and distribution of water and the treatment and disposal of
wastewater through plants in Florida and Arizona. On April 15, 1999, two
operating subsidiaries of the Company closed on the sale of the assets used in
their Florida utilities operations (See Discontinued Operations), subsequent to
which the Company expanded its contract management operations to include the
purification and distribution of water and the treatment and disposal of
wastewater for unaffiliated public and private utilities.
The following table summarizes the Company's information for reportable
segments for the six and three months ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
Six Months Three Months
--------------------- --------------------
1999 1998 1999 1998
-------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES:
Segment revenues
Residential development $ 43,120 $33,728 $21,173 $18,464
Active adult -- -- -- --
Resorts 7,546 7,944 3,124 3,322
Commercial and industrial 2,477 1,662 2,477 1,555
Rental, leasing, cable and
other real estate operations 2,910 2,651 1,366 1,383
All other 45,615 669 45,292 349
-------- ------- ------- -------
101,668 46,654 73,432 25,073
Unallocated revenues
Deferred gross profit 2,015 2,280 965 1,147
Interest income 3,000 3,069 2,007 1,462
Other 309 313 175 149
-------- ------- ------- -------
Total revenues $106,992 $52,316 $76,579 $27,831
======== ======= ======= =======
</TABLE>
11
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS - CONTINUED
<TABLE>
<CAPTION>
Six Months Three Months
----------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- -------
<S> <C> <C> <C> <C>
OPERATING INCOME (LOSS):
Segment operating income (loss)
Residential development $ 4,576 $ 889 $ 2,420 $ 650
Active adult (833) (368) (432) (193)
Resorts 597 131 (251) (556)
Commercial and industrial 2,078 1,198 2,145 1,258
Rental, leasing, cable and
other real estate operations 926 663 593 333
All other 7,069 (37) 7,098 --
-------- -------- -------- -------
14,413 2,476 11,573 1,492
Unallocated income (expenses)
Deferred gross profit 2,015 2,280 965 1,147
Interest income 3,000 3,069 2,007 1,462
General and administrative expenses (5,430) (5,142) (2,889) (2,664)
Interest expense (4,713) (5,742) (2,367) (2,887)
Other (4,185) (4,607) (1,989) (2,404)
-------- -------- -------- -------
Income (loss) from continuing operations $ 5,100 ($ 7,666) $ 7,300 ($3,854)
======== ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------- -----------
<S> <C> <C>
ASSETS:
Segment assets
Residential development $ 84,742 $ 87,795
Active adult 28,564 19,710
Resorts 5,262 9,318
Commercial and industrial 13,857 14,081
Rental, leasing, cable and
other real estate operations 4,157 10,685
Discontinued assets 40,106 208,599
Unallocated assets 251,555 122,803
-------- --------
Total assets $428,243 $472,991
======== ========
</TABLE>
(a) Avatar's businesses are primarily conducted in the United States.
(b) Identifiable assets by segment are those assets that are used in the
operations of each segment.
(c) No significant part of the business is dependent upon a single customer
or group of customers.
(d) Bulk land sales, Arizona utilities, the cost to carry land and the sale
of Cape Coral assets do not qualify individually as separate reportable
segments and are included in "All Other".
(e) Included in segment profit/(loss) for the six months ended in 1999 is
interest expense of $244, $59 and $285 from residential development,
resorts and rental/leasing, respectively. Included in segment
profit/(loss) for the six months ended in 1998 is interest expense of
$647, $80 and $276 from residential development, resorts and
rental/leasing, respectively. Included in segment profit/(loss) for the
three months ended in 1999 is interest expense of $62, $21 and $137
from residential development, resorts and rental/leasing, respectively.
Included in segment profit/(loss) for the three months ended in 1998 is
interest expense of $206, $40 and $135 from residential development,
resorts and rental/leasing, respectively.
12
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS - CONTINUED
(f) Included in operating profit/(loss) for the six months ended in 1999 is
depreciation expense of $112, $617, $267 and $80 from residential
development, resorts, rental/leasing and unallocated corporate,
respectively. Included in operating profit/(loss) for the six months
ended in 1998 is depreciation expense of $135, $620, $206 and $168 from
residential development, resorts, rental/leasing and unallocated
corporate, respectively. Included in operating profit/(loss) for the
three months ended in 1999 is depreciation expense of $55, $314, $149
and $39 from residential development, resorts, rental/leasing and
unallocated corporate, respectively. Included in operating
profit/(loss) for the three months ended in 1998 is depreciation
expense of $69, $308, $103 and $82 from residential development,
resorts, rental/leasing and unallocated corporate, respectively.
DISCONTINUED OPERATIONS
During 1997, the Company developed a formal plan for the disposition of
its timeshare business. On July 30, 1999, the Company closed on the sale of its
timeshare subsidiary under a contract executed during the second quarter of
1999. The net cash sales price was $3,497, subject to certain adjustments. The
Company revised the estimate of the net realizable value of the discontinued
operations based on the July 30, 1999 closing and current business conditions.
As a result, the Company recorded an estimated loss on the disposal of the
timeshare operations of $2,150 and $2,000 for the six and three months ended
June 30, 1999 and 1998, respectively, less income tax benefit of $817 and $0 for
the six and three months ended June 30, 1999 and 1998, respectively. 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.
On April 15, 1999, two operating subsidiaries of the Company, closed on
the sale of substantially all of the assets used in their Florida utilities
operations for a cash sales price of $208,619 subject to certain adjustments.
The sale transaction resulted in gain of $94,934, net of income tax expense of
$7,653 that is classified in the accompanying consolidated statement of
operations as a gain from the sale of discontinued operations. Net assets and
liabilities of the Florida utilities operations 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.
13
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued
DISCONTINUED OPERATIONS -- continued
Consolidated operating results relating to the discontinued operations
for the six and three months ended June 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999
-------------------------------------------------------------------------------
Six Months Three Months
------------------------------------- ------------------------------------
Vacation Florida Vacation Florida
Ownership Utilities Total Ownership Utilities Total
--------- --------- -------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Real estate sales $6,392 $ -- $ 6,392 $ 4,008 $ -- $ 4,008
Utilities revenues -- 14,864 14,864 -- 5,388 5,388
Interest income 1,659 -- 1,659 848 -- 848
Other 503 (678) (175) 249 (700) (451)
------ -------- -------- ------- ------- -------
Total revenues 8,554 14,186 22,740 5,105 4,688 9,793
EXPENSES
Real estate expenses $6,926 $ -- $ 6,926 $ 3,906 $ -- $ 3,906
Utilities expenses -- 11,746 11,746 -- 4,633 4,633
Interest expense 1,316 1,072 2,388 667 332 999
Minority interest -- 438 438 -- 328 328
------ -------- -------- ------- ------- -------
Total expenses 8,242 13,256 21,498 4,573 5,293 9,866
Income (loss) from
discontinued operations
before income taxes 312 930 1,242 532 (605) (73)
Income tax expense (benefit) 143 428 571 228 (164) 64
------ -------- -------- ------- ------- -------
Income (loss) from
discontinued operations $ 169 $ 502 $ 671 $ 304 $ (441) $ (137)
====== ======== ======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
1998
---------------------------------------------------------------------------
Six Months Three Months
------------------------------------ ----------------------------------
Vacation Florida Vacation Florida
Ownership Utilities Total Ownership Utilities Total
--------- --------- ------- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Real estate sales $ 5,410 $ -- $ 5,410 $3,294 $ -- $ 3,294
Utilities revenues -- 17,730 17,730 -- 9,165 9,165
Interest income 1,174 -- 1,174 575 -- 575
Other 491 (89) 402 249 (60) 189
------- -------- ------- ------ ------- -------
Total revenues 7,075 17,641 24,716 4,118 9,105 13,223
EXPENSES
Real estate expenses 6,174 -- 6,174 3,611 -- 3,611
Utilities expenses -- 13,003 13,003 -- 6,608 6,608
Interest expense 1,042 1,570 2,612 493 779 1,272
Minority interest -- 274 274 -- 124 124
------- -------- ------- ------ ------- -------
Total expenses 7,216 14,847 22,063 4,104 7,511 11,615
Income (loss) from
discontinued operations $ (141) $ 2,794 $ 2,653 $ 14 $ 1,594 $ 1,608
======= ======== ======= ====== ======= =======
</TABLE>
14
<PAGE> 15
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, 1999 and December
31, 1998 are as follows:
<TABLE>
<CAPTION>
As of June 30, 1999
----------------------------------------------------
Vacation Florida
Ownership Utilities Total
--------- --------- -----
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 207 $ 7,586 $ 7,793
Restricted cash 185 -- 185
Contracts and mortgage notes receivable, net 23,822 -- 23,822
Other receivables, net 86 1,519 1,605
Land and other inventories 6,371 38 6,409
Property, plant and equipment, net 169 5,869 6,038
Other assets 2,153 651 2,804
Reserve for estimated loss on disposal (8,550) -- (8,550)
------- ------- -------
Total assets $24,443 $15,663 $40,106
======= ======= =======
LIABILITIES AND CONTRIBUTIONS IN AID OF CONSTRUCTION
Notes, mortgage notes and other debt:
Notes, collateralized by contracts and mortgage
notes receivable $19,102 $ -- $19,102
Real estate 2,827 -- 2,827
Accounts payable 175 1,248 1,423
Accrued and other liabilities 381 6,797 7,178
Minority interest -- 250 250
------- ------- -------
Total liabilities 22,485 8,295 30,780
Contributions in aid of construction -- 3,053 3,053
------- ------- -------
Total liabilities & contributions in aid of construction $22,485 $11,348 $33,833
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1998
---------------------------------------------------
Vacation Florida
Ownership Utilities Total
--------- --------- -----
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 32 $ 471 $ 503
Restricted cash 198 35 233
Contracts and mortgage notes receivable, net 22,861 - 22,861
Other receivables, net 319 3,959 4,278
Land and other inventories 7,357 256 7,613
Property, plant and equipment, net 196 164,751 164,947
Other assets 1,916 9,812 11,728
Regulatory assets -- 2,836 2,836
Reserve for estimated loss on disposal (6,400) -- (6,400)
-------- -------- --------
Total assets $ 26,479 $182,120 $208,599
======== ======== ========
LIABILITIES AND CONTRIBUTIONS IN AID OF CONSTRUCTION
Notes, mortgage notes and other debt:
Notes, collateralized by contracts and mortgage
notes receivable $ 18,298 $ -- $18,298
Real estate 3,647 -- 3,647
Utilities -- 39,219 39,219
Accounts payable 38 1,171 1,209
Accrued and other liabilities 266 8,374 8,640
Minority interest -- 5,472 5,472
-------- -------- --------
Total liabilities 22,249 54,236 76,485
Contributions in aid of construction -- 60,621 60,621
-------- -------- --------
Total liabilities & contributions in aid of construction $ 22,249 $114,857 $137,106
======== ======== ========
</TABLE>
15
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued
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.
Net income for the six and three month periods ended June 30, 1999 was
$97,394 or $10.62 per share and $97,991 or $10.69 per share, respectively,
compared to a net loss of $9,321 or $1.02 and $4,246 or $0.46 per share for the
same periods of 1998. The increase in net income for the six and three months
was primarily attributable to an increase in real estate operating results, a
decrease in interest expense, an after-tax gain on the sale of the assets of
Florida Utilities during the three months ended June 30, 1999 and an
extraordinary loss on the early extinguishment of debt recorded during the first
quarter of 1998. The increase in net income for the three months ended June 30,
1999 compared to the same period in 1998 is also due to the increase in interest
income.
Avatar's real estate revenues for the six and three months ended June
30, 1999 increased $54,949 or 119.4%, and $48,329 or 195.44%, respectively,
while the real estate expenses increased by $43,073 or 90.77% and $38,083 or
149.94% when compared to the same period of 1998. The increase in real estate
revenues for the six and three months ended June 30, 1999 is generally a result
of increased residential homebuilding revenues, an increase in bulk
commercial/industrial sales and the sale of real estate assets located in Cape
Coral. The increase in real estate expenses for the six and three month periods
ended June 30, 1999 when compared to the same period of 1998, is generally a
result of related costs associated with the increased sales volume as well as
the cost of assets associated with the Cape Coral sale. Operating profits for
residential homebuilding for the six and three months ended June 30, 1999
increased $3,687 and $1,770, respectively, when compared to the same period of
1998 due to the increased closings of higher-margin product at Harbor Islands
and Cape Coral. On June 30, 1999, the Company closed on the sale of
substantially all of its real estate assets located at Cape Coral. The sales
price was $44,852 resulting in a pre-tax gain of $7,024.
16
<PAGE> 17
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 homebuilding operations for the six and three months ended
June 30, 1999 and 1998 is summarized as follows:
<TABLE>
<CAPTION>
Six Months Three Months
------------------------- -------------------------
1999 1998 1999 1998
------- ------- ------- --------
<S> <C> <C> <C> <C>
UNITS CLOSED
Number of units 220 232 109 122
Aggregate dollar volume $42,198 $32,802 $20,449 $17,871
Average price per unit $192 $141 $188 $146
UNITS SOLD, NET
Number of units 273 267 120 132
Aggregate dollar volume $58,835 $51,215 $28,910 $29,807
Average price per unit $216 $192 $240 $226
June 30,
--------------------------
1999 1998
-------- -------
BACKLOG
Number of units 450 411
Aggregate dollar volume $101,348 $75,456
Average price per unit $225 $184
</TABLE>
Data from the national and international retail land sales programs,
terminated in the second quarter of 1996, is as follows:
<TABLE>
<CAPTION>
June 30,
-------------------------
1999 1998
------- -------
<S> <C> <C>
RETAIL LAND SALES OPERATIONS DATA
Deferred gross profit $ 2,015 $ 2,280
Interest income 1,051 1,739
Loss on contract cancellations (33) (31)
Contract servicing expense (257) (302)
Interest expense (127) (785)
BALANCE SHEET DATA
Contracts and mortgage notes receivable, net 9,830 18,955
Debt collateralized by contracts and mortgages receivable -- 12,950
</TABLE>
Contract servicing expense and loss on contract cancellations are included under
the caption "Real estate expenses" on the consolidated statements of operations.
Interest income for the three months ended June 30, 1999 increased $545
or 37.28%, compared to the same period in 1998. The increase is primarily
attributable to higher interest income earned for 1999 from the proceeds
invested from the sale of Florida Utilities that closed on April 15, 1999.
Interest expense for the six months and three months ended June 30,
1999 decreased $1,444 or 21.41% and $681 or 20.84%, respectively, compared to
the same period in 1998. The decrease is primarily attributable to a reduction
of the real estate and notes collateralized by contracts and mortgage notes
receivable outstanding debt.
17
<PAGE> 18
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 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.
On April 15, 1999, Florida Cities Water Company and Poinciana
Utilities, Inc., two operating subsidiaries of Avatar Utilities Inc., a
wholly-owned subsidiary of the Company, that owned and operated water and
wastewater utilities located in the counties of Brevard, Collier, Hillsborough,
Lee, Osceola, Polk and Sarasota, Florida, closed on the sale of substantially
all of their assets used in the Florida Utilities operations to The Florida
Governmental Utility Authority for a cash sales price of $208,619, subject to
certain adjustments. The sale transaction resulted in a gain of $94,934, net of
income tax expense of $7,653 which is classified in the accompanying
consolidated statement of operations as a gain from the sale of discontinued
operations.
Income (loss) from discontinued operations before income taxes
(vacation ownership and Florida Utilities operations) for the six and three
months ended June 30, 1999 decreased $1,411 or 53.19% and $1,681 or 104.54%,
respectively, compared to the same period of 1998. Income before income taxes
from the vacation ownership operations for the six and three months ended June
30, 1999 when compared to the same periods in 1998 increased $453 and $518,
respectively. The increase in operating results for the six and three months
ended in 1999 when compared to 1998 is due to changes in product mix as compared
to 1998 and an increase in interest income. In addition, the Company revised the
estimate of the net realizable value of the discontinued operations based on the
July 30, 1999 closing and current business conditions. As a result, the Company
recorded an estimated loss on the disposal of the timeshare operations of $2,150
and $2,000 for the six and three months ended June 30, 1999 and 1998,
respectively, less income tax benefit of $817 and $0 for the six and three
months ended June 30, 1999 and 1998, respectively. Income (loss) before income
taxes from the Florida utilities operations for the six and three months ended
June 30, 1999 when compared to the same periods in 1998 decreased by $1,864 and
$2,199, respectively. The decrease in income (loss) before income taxes from the
Florida utilities operations for the six and three months ended 1999 when
compared to 1998 is primarily the result of reduced operations due to the sale
of the assets of the Florida Utilities operations.
LIQUIDITY AND CAPITAL RESOURCES
During 1997, management began implementing its current real estate
business strategy to capitalize on the Company's distinct competitive advantages
and emphasize higher profit margin businesses. 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 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 planned active adult communities, homebuilding
construction in process, infrastructure for roads, water and wastewater
utilities, selling expenses and working capital needs, including funding of debt
service requirements,
18
<PAGE> 19
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
operating deficits and the carrying cost of land. The Company expects to fund
its operations and capital requirements through a combination of cash and
operating cash flows.
On June 30, 1999, Avatar Properties Inc., a wholly-owned subsidiary of
the Company, closed on the sale of substantially all of its real estate assets
located in Cape Coral, Florida. The sales price was $44,852, subject to certain
adjustments. The available net cash proceeds from the sale was approximately
$37,000 after the payment of related indebtedness and expenses. Avatar will
retain a 692-acre site in northeast Cape Coral for potential future inclusion in
its active adult community development operations.
On April 15, 1999, Florida Cities Water Company and Poinciana
Utilities, Inc., two operating subsidiaries of Avatar Utilities Inc., a
wholly-owned subsidiary of the Company, that owned and operated water and
wastewater utilities located in the counties of Brevard, Collier, Hillsborough,
Lee, Osceola, Polk and Sarasota, Florida, closed on the sale of substantially
all of their assets used in the Florida Utilities operations to The Florida
Governmental Utility Authority for a cash sales price of $208,619, subject to
certain adjustments. The sale transaction resulted in a gain of $94,934, net of
income tax expense of $7,653 which is classified in the accompanying
consolidated statement of operations as a gain from the sale of discontinued
operations.
For the six months ended June 30, 1999, net cash used in operating
activities amounted to $15,770 as a result of a decrease in accounts payable and
accrued and other liabilities of $17,854 and expenditures on land development
and housing operations of $1,618; partially offset by principal payments
collected on contract receivables of $5,066. Net cash provided by investing
activities of $194,947 resulted from proceeds from the sale of Florida Utilities
and Cape Coral assets of $164,071 and $37,588, respectively, partially offset by
investments in property, plant and equipment of $6,712. Net cash used in
financing activities of $38,271 resulted primarily from repayment of $35,267 in
land development and construction loans.
For the six months ended June 30, 1998, net cash used in operating
activities amounted to $15,888 as a result of an increase in inventories, which
included expenditures from land development and housing operations of $7,147,
and an increase in other assets of $4,717, partially offset by principal
payments collected on contract receivables of $5,656. Net cash used in investing
activities of $348 resulted primarily from investments in property, plant and
equipment. Net cash provided by financing activities of $53,784 resulted
primarily from proceeds of $111,550 from the issuance of 7% Convertible
Subordinated Notes (the "Notes") after repayment of $33,000 of the 8% and 9%
Senior Debentures due 2000 and $33,568 in land development and construction
loans.
During the second quarter of 1999 the Company repaid all unsecured and
secured lines of credit, exclusive of timeshare credit facilities.
On April 26, 1999, Avatar's Board of Directors authorized the
expenditure of up to $15,000 to purchase from time to time shares of its common
stock and/or the Notes in the open market, through privately negotiated
transactions or otherwise, depending on market and business conditions and other
factors. During the second quarter of 1999, the Company repurchased $2,633
principal amount of the Notes and $480 of its common stock.
19
<PAGE> 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) --CONTINUED
YEAR 2000
The Year 2000 issue relates to computer systems programmed to use
two digits rather than four to define the applicable year. Computer systems and
other programmable devices utilizing time/date-sensitive software and hardware
may recognize a date using "00" as the year 1900 rather than the Year 2000 which
could result in the computer or device shutting down, performing incorrect
computations or performing inconsistently.
Various systems could be affected, ranging from complex
information technology (IT) computer systems and applications which may be
impacted by the Year 2000 issue and the actions related to non-IT systems and
equipment which include embedded technology which may be impacted by the Year
2000 problem and the actions related thereto. In addition, the failure to be
Year 2000 compliant by third party vendors and suppliers with whom a company has
material relationships could adversely affect such company.
The Company's systems that 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 system to handle the "Year 2000 Issue", and currently
does not expect this issue to be material to the Company's business based upon
its assessment of its own system.
State of Readiness
The Company has conducted a comprehensive review of its computer
systems to identify those systems that could be affected by the Year 2000 issue
and has developed an implementation plan to resolve the issue. The
implementation plan includes the following phases: formation of a team of
internal resources to inventory affected technology and assess the impact of the
Year 2000 issue; develop solution plans; modify or replace existing processes,
hardware and software; test and certify modified, existing and new processes;
and develop contingency plans. All components of software and hardware of the
Company are currently in various phases of review, modification or
implementation.
As of June 30, 1999, all critical hardware and software systems
utilized by the Company have been tested and/or verified as Year 2000 compliant.
Certain non-critical software systems were determined not to be Year 2000
compliant and have been modified and converted to compliant systems. Testing
systems utilized to verify compliance include the posting to the systems of the
date of January 1, 2000 as though the date were effective. The Company has
tested all critical IT and non-IT systems as of June 30, 1999. Offsite testing
of critical systems was performed during the second quarter of 1999 in
conjunction with the company's standard testing of its business recovery
program. The offsite test was successful in that it revealed no significant
issues. Additional offsite testings will be conducted during the third quarter
of 1999 to substantiate the results of the prior test.
20
<PAGE> 21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) --CONTINUED
YEAR 2000 - CONTINUED
The Company also developed a third-party vendor and business partner
awareness program, which communicates matters of concern to the Company
pertaining to the Year 2000 issue. A comprehensive Year 2000 questionnaire has
been circulated to material third-party vendors and business partners to enable
the Company to ascertain their status of Year 2000 readiness and/or compliance.
The Company's questionnaire was prepared and circulated during the third quarter
of 1998 to more than 300 parties. There can be no assurance that systems of
third parties on which the Company relies will be converted in a timely manner,
or that a failure to properly convert by another company would not have a
material adverse effect on the Company. For those critical third-party vendors
and business partners who reported failure to be compliant or who do not respond
to the Company's questionnaire, the Company believes it has developed a
contingency plan to seek alternate vendors or maintain adequate levels of
supplies to prevent the interruption in, or failure of, certain normal business
activities or operations.
Cost of addressing Year 2000
The Company is in its final phase with its implementation plan to
address Year 2000 issues. During the past few years nominal expenditures were
effected to upgrade and/or replace certain software, which expenditures were not
directly related to Year 2000 issues but to general improvements to the systems.
Total expenditures related to the Year 2000 project are estimated not to exceed
$200 with $50 related to equipment and $150 to software. All costs associated
with the Company's Year 2000 effort have come from, or are expected to come
from, cash flow from operations.
Because it was not necessary to replace the Company's midrange computer
and/or its major operating systems, nominal expenditures to date are estimated
to approximate $125. It is not possible to determine absolute expenditures
because appropriate modifications to software applications systems were made
from time to time as potential issues were discovered. Costs associated
therewith were not specifically designated and for the most part represented
installation of equipment and conversion and/or modification of systems
performed by employees of the Company.
The estimated cost of the Company's Year 2000 project and the dates
on which the Company believes it will complete such efforts are based on
management's best estimates, which were derived using numerous assumptions
regarding future events, including the number of man-hours to program and/or
install equipment and software, as well as response to the Company's
questionnaire regarding vendor readiness. The Company does not separately track
internal costs related to the Year 2000 issue. Such costs are principally the
related payroll costs for the Company's Business Information Systems personnel.
The Company's estimated total expenditures related to the Year 2000 of $200
represents less than 5% of the Company's aggregate IT budgets for 1997, 1998 and
1999. There can be no assurance that these estimates will prove to be accurate.
Specific factors that could cause material differences with actual results
include, but are not limited to, the results of testing and the timeliness and
effectiveness of remediation efforts of third parties.
21
<PAGE> 22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) --CONTINUED
YEAR 2000 - CONTINUED
The Company believes its systems have been adequately and appropriately
reviewed and tested, and minor modifications and/or conversions have been or
will be effected as necessary.
Risk Presented by Year 2000 Issues
A failure by the Company to resolve a material Year 2000 issue could
result in the interruption in, or failure of, certain normal business activities
or operations and could materially and adversely affect the Company's financial
condition, results of operations and cash flows. The Company has assessed those
scenarios in which unexpected failures could have a material adverse effect on
the Company and has developed contingency plans designed to deal with such
scenarios. In general, the Company could continue basic real estate operations
in the event of failure of its computer systems. The Company's utilities
operations are highly regulated and the operating systems were designed with
manual overrides to operate the physical plants in the event of failure of
automated systems.
Based on current plans and assumptions, the Company does not expect
that the Year 2000 issue will have a material adverse impact on the Company as a
whole. Due to the general uncertainty inherent in the Year 2000 issue, however,
there can be no assurance that all Year 2000 issues will be foreseen and
corrected on a timely basis, or that no material disruption to the Company's
business operations will occur. Further, the Company's expectations are based on
the assumption that there will be no general failure of external local, national
or international systems (including power, communications, postal,
transportation, or financial systems) necessary for the ordinary conduct of
business.
Contingency Plan
In the normal course of business, the Company maintains contingency
plans designed to address various other potential interruptions. These
preexisting contingency plans are being incorporated into the Year 2000
contingency plan and are expected to assist in mitigating any adverse effect due
to interruption of support provided by third parties resulting from their
failure to be Year 2000 compliant. There can be no assurance, however, that
successful contingency plans to address the Year 2000 issue can, in fact, be
developed or implemented or that certain development and implementation would be
economically feasible.
22
<PAGE> 23
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS) - 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 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 of the Company to comply with, government regulations; the ability of
the Company and third parties to address Year 2000 issues adequately; and such
other factors as are described in greater detail in the Company's filing with
the Securities and Exchange Commission, including its Annual Report on Form 10-K
for the fiscal year ended December 31, 1998.
23
<PAGE> 24
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on May 27, 1999,
in Coral Gables, Florida, for the purpose of electing nine directors;
considering and voting upon a proposal to amend and restate the 1997 Incentive
and Capital Accumulation Plan; and approving the appointment of Ernst & Young
LLP, independent accountants, as auditors for the year ending December 31, 1999.
Proxies were solicited from holders of 9,170,102 outstanding shares of Common
Stock as of the close of business on March 31, 1999, as described in
Registrant's Proxy Statement dated April 28, 1999. All of management's nominees
for directors were re-elected, the amended and restated 1997 Incentive and
Capital Accumulation Plan was approved, and the appointment of Ernst & Young LLP
was approved by the following votes:
ELECTION OF DIRECTORS
NAME VOTES FOR WITHHELD
---- --------- --------
Leon Levy 7,617,759 55,122
Milton H. Dresner 7,615,443 57,438
Gerald Kelfer 7,617,980 54,901
Martin Meyerson 7,616,221 56,660
Gernot H. Reiners 7,286,890 385,991
Kenneth T. Rosen 7,618,533 54,348
Fred Stanton Smith 7,615,616 57,265
William G. Spears 7,618,533 54,348
Henry King Stanford 7,613,368 59,513
APPROVAL OF AMENDED AND RESTATED 1997 INCENTIVE
AND CAPITAL ACCUMULATION PLAN
Votes Votes
Votes FOR AGAINST ABSTAINED
--------- ------- ---------
7,149,332 497,558 25,991
APPOINTMENT OF AUDITORS
Shares Voted Shares
Shares Voted FOR AGAINST ABSTAINED
---------------- ------------ ---------
7,645,076 7,436 19,939
24
<PAGE> 25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
2.1 Utility System Asset Acquisition Agreement, dated as of April 1, 1999,
by and between Florida Governmental Utility Authority and Florida
Cities Water Company and Poinciana Utilities, Inc.* (previously filed
as Exhibit 2.1 to Form 8-K as of April 15, 1999).
2.2 Addendum to Utility System Asset Acquisition Agreement concerning the
Fort Myers Utility System, dated as of April 1, 1999. (previously filed
as Exhibit 2.2 to Form 8-K as of April 15, 1999).
2.3 Assignment (of the Fort Myers Utility System to Lee County), dated as
of April 1, 1999, by and among Florida Governmental Utility Authority;
Board of County Commissioners of Lee County, Florida; Florida Cities
Water Company; and Poinciana Utilities, Inc. (previously filed as
Exhibit 2.3 to Form 8-K as of April 15, 1999).
10(a) Amended and Restated 1997 Incentive and Capital Accumulation
Plan (filed herewith).
10(b) Restricted Stock unit Agreement, dated as of December 7, 1998,
between Gerald D. Kelfer (filed herewith).
10(c) Employment agreement dated as of April 1,1999 between Avatar
Holdings Inc. and Deborah G. Tomusko (filed herewith).
10(d) Nonqualified Stock Option Agreement, dated as of April 1, 1999, by
and between Avatar Holdings Inc. and Deborah G. Tomusko (filed
herewith).
27 Financial Data Schedule (filed herewith)
- -------------------
* Certain schedules and similar attachments have been omitted. The Registrant
agrees to furnish supplementary a copy of any omitted schedule or attachment to
the Commission upon request.
(b) REPORTS ON FORM 8-K
Form 8-K as of April 15, 1999, filed April 30, 1999.
25
<PAGE> 26
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 13, 1999 By: /s/ Lawrence R. Sherry
---------------------------- -------------------------------
Lawrence R. Sherry
Executive Vice President
and Chief Financial Officer
Date: August 13, 1999 By: /s/ Charles L. McNairy
---------------------------- -------------------------------
Charles L. McNairy
Executive Vice President
and Treasurer
Date: August 13, 1999 By: /s/ Michael P. Rama
---------------------------- -------------------------------
Michael P. Rama
Chief Accounting Officer
26
<PAGE> 1
Exhibit 10(a)
AVATAR HOLDINGS INC.
AMENDED AND RESTATED
1997 INCENTIVE AND CAPITAL ACCUMULATION PLAN
1. Purpose. The Avatar Holdings Inc. Amended and Restated 1997 Incentive
and Capital Accumulation Plan (the "Plan") is intended to provide incentives
which will attract, retain and motivate highly competent persons as key
employees of Avatar Holdings Inc. (the "Company") and of any subsidiary
corporation now existing or hereafter formed or acquired, by providing them
opportunities to acquire shares of the common stock, par value $1.00 per share,
of the Company ("Common Stock") or to receive monetary payments based on the
value of such shares pursuant to the Benefits (as defined below) described
herein. Furthermore, the Plan is intended to assist in aligning the interests
of the Company's key employees to those of its stockholders.
2. Administration. (a) The Plan will be administered by a committee of the
Board of Directors of the Company (the "Board") or a subcommittee of a
committee of the Board (which may be the Company's Compensation Committee),
appointed by the Board from among its members (the "Committee"), and shall be
comprised, unless otherwise determined by the Board, solely of not less than
two members who shall be (i) "Non-Employee Directors" within the meaning of
Rule 16b-3(b)(3) (or any successor rule) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and (ii) "outside
directors" within the meaning of Treasury Regulation Section 1.162-27(e)(3)
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). The Committee is authorized, subject to the provisions of the Plan, to
establish such rules and regulations as it deems necessary for the proper
administration of the Plan and to make such determinations and interpretations
and to take such action in connection with the Plan and any Benefits (as
defined in Section 4 hereof) granted hereunder as it deems necessary or
advisable. All determinations and interpretations made by the Committee shall
be binding and conclusive on all participants and their legal representatives.
No member of the Board of Directors, no member of the Committee and no employee
of the Company shall be liable for any act or failure to act hereunder, except
in circumstances involving his or her bad faith, gross negligence or willful
misconduct, or for any act or failure to act hereunder by any other member or
employee or by any agent to whom duties in connection with the administration
of this Plan have been delegated. The Company shall indemnify members of the
Committee and any agent of the Committee who is an employee of the Company or
any of its subsidiaries, against any and all liabilities or expenses to which
they may be subjected by reason of any act or failure to act with respect to
their duties on behalf of the Plan, except in circumstances involving such
person's bad faith, gross negligence or willful misconduct.
(b) The Committee may delegate to one or more of its members, or to one or
more agents, such administrative duties as it may deem advisable, and the
Committee, or any person to whom it has delegated duties as aforesaid, may
employ one or more persons to render advice with respect to any responsibility
the Committee or such person may have under the Plan. The Committee may employ
such legal or other counsel, consultants and agents as it may deem desirable
for the administration of the Plan and may rely upon any opinion or computation
received from any such counsel, consultant or agent. Expenses incurred by the
Committee in the engagement of such counsel, consultant or agent shall be paid
by the Company, or the subsidiary or affiliate whose employees have benefitted
from the Plan, as determined by the Committee.
3. Participants. Participants will consist of such key employees of the
Company and any subsidiary corporation of the Company as the Committee in its
sole discretion determines to be in a position to impact the success and future
growth and profitability of the Company and whom the Committee may designate
from time to time to receive Benefits under the Plan. Designation of a
participant in any year shall not require the Committee to designate such
person to receive a Benefit in any other year or, once designated, to receive
the same type or amount of Benefit as granted to the participant in any other
year. The Committee shall consider such factors as it deems pertinent in
selecting participants and in determining the type and amount of their
respective Benefits.
4. Type of Benefits. Benefits under the Plan may be granted in any one or a
combination of (a) Stock Options, (b) Stock Appreciation Rights, (c) Stock
Awards, (d) Performance Awards, and (e) Stock Units (each as described below,
and collectively, the "Benefits"). Stock Awards, Performance Awards, and Stock
Units may, as determined by the Committee in its discretion, constitute
Performance-Based Awards, as described in Section 11 hereof. Benefits shall be
evidenced by agreements (which need not be identical) in such forms as the
Committee may from time to time approve; provided, however, that in the event
of any conflict between the provisions of the Plan and any such agreements, the
provisions of the Plan shall prevail.
<PAGE> 2
5. Common Stock Available Under the Plan. The aggregate number of shares of
Common Stock that may be subject to Benefits, including Stock Options, granted
under this Plan shall be 750,000 shares of Common Stock, which may be
authorized and unissued or treasury shares, subject to any adjustments made in
accordance with Section 12 hereof. The maximum number of shares of Common Stock
with respect to which Benefits may be granted or measured to any individual
participant under the Plan during the term of the Plan shall not exceed
350,000, provided, however, that the maximum number of shares of Common Stock
with respect to which Stock Options and Stock Appreciation Rights may be
granted to an individual participant under the Plan during the term of the Plan
shall not exceed 350,000 (in each case, subject to adjustments made in
accordance with Section 12 hereof). Any shares of Common Stock subject to a
Stock Option or Stock Appreciation Right which for any reason is cancelled or
terminated without having been exercised, any shares subject to Stock Awards,
Performance Awards or Stock Units which are forfeited, any shares subject to
Performance Awards settled in cash or any shares delivered to the Company as
part or full payment for the exercise of a Stock Option or Stock Appreciation
Right shall again be available for Benefits under the Plan. The preceding
sentence shall apply only for purposes of determining the aggregate number of
shares of Common Stock subject to Benefits but shall not apply for purposes of
determining the maximum number of shares of Common Stock with respect to which
Benefits (including the maximum number of shares of Common Stock subject to
Stock Options and Stock Appreciation Rights) that may be granted to any
individual participant under the Plan.
6. Stock Options. Stock Options will consist of awards from the Company
that will enable the holder to purchase a number of shares of Common Stock, at
set terms. Stock Options may be "incentive stock options" ("Incentive Stock
Options"), within the meaning of Section 422 of the Code, or Stock Options
which do not constitute Incentive Stock Options ("Nonqualified Stock Options").
The Committee will have the authority to grant to any participant one or more
Incentive Stock Options, Nonqualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights). Each Stock
Option shall be subject to such terms and conditions consistent with the Plan
as the Committee may impose from time to time, subject to the following
limitations:
(a) Exercise Price. Each Stock Option granted hereunder shall have such
per-share exercise price as the Committee may determine at the date of
grant; provided, however, subject to subsection (d) below, that the per
share exercise price shall not be less than 100% of the Fair Market Value
(as defined below) of the Common Stock on the date the Stock Option is
granted.
(b) Payment of Exercise Price. The option exercise price may be paid in
cash or, in the discretion of the Committee determined at the date of
grant, by the delivery of shares of Common Stock of the Company then owned
by the participant, by the withholding of shares of Common Stock for which
a Stock Option is exercisable, by delivering to the Company an executed
prommissory note (or such other form of indebtedness) on such terms and
conditions as the Committee shall determine in its sole discretion at the
date of grant, or by a combination of these methods. In the discretion of
the Committee, payment may also be made by delivering a properly executed
exercise notice to the Company together with a copy of irrevocable
instructions to a broker to deliver promptly to the Company the amount of
sale or loan proceeds to pay the exercise price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures
with one or more brokerage firms. The Committee may prescribe any other
method of paying the exercise price that it determines to be consistent
with applicable law and the purpose of the Plan, including, without
limitation, in lieu of the exercise of a Stock Option by delivery of shares
of Common Stock of the Company then owned by a participant, providing the
Company with a notarized statement attesting to the number of shares owned,
where, upon verification by the Company, the Company would issue to the
participant only the number of incremental shares to which the participant
is entitled upon exercise of the Stock Option. In determining which methods
a participant may utilize to pay the exercise price, the Committee may
consider such factors as it determines are appropriate.
(c) Exercise Period. Stock Options granted under the Plan shall be
exercisable at such time or times and subject to such terms and conditions
as shall be determined by the Committee; provided, however, that no Stock
Option shall be exercisable later than ten years after the date it is
granted except in the event of a participant's death, in which case, the
exercise period of such participant's Stock Options may be extended beyond
such period but no later than one year after the participant's death. All
Stock Options shall terminate at such earlier times and upon such
conditions or circumstances as the Committee shall in its discretion set
forth in such option agreement at the date of grant.
(d) Limitations on Incentive Stock Options. Incentive Stock Options may
be granted only to participants who are employees of the Company or
subsidiary corporation of the Company at the date of grant. The aggregate
Fair Market Value (determined as of the time the Stock Option is granted)
of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by a participant during any calendar year
(under all option plans of the Company) shall not exceed $100,000. For
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<PAGE> 3
purposes of the preceding sentence, Incentive Stock Options will be taken
into account in the order in which they are granted. The per share exercise
price of an Incentive Stock Option shall not be less than 100% of the Fair
Market Value of the Common Stock on the date of grant, and no Incentive
Stock Option may be exercised later than ten years after the date it is
granted; provided however, Incentive Stock Options may not be granted to
any participant who, at the time of grant, owns stock possessing (after the
application of the attribution rules of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any subsidiary corporation of the Company, unless the exercise
price is fixed at not less than 110% of the Fair Market Value of the Common
Stock on the date of grant and the exercise of such option is prohibited by
its terms after the expiration of five years from the date of grant of such
option. In addition, no Incentive Stock Option may be issued to a
participant in tandem with a Nonqualified Stock Option.
7. Stock Appreciation Rights. The Committee may, in its discretion, grant
Stock Appreciation Rights to the holders of any Stock Options granted
hereunder. In addition, Stock Appreciation Rights may be granted independently
of, and without relation to, options. A Stock Appreciation Right means a right
to receive a payment, in cash, Common Stock or a combination thereof, in an
amount equal to the excess of (x) the Fair Market Value, or other specified
valuation, of a specified number of shares of Common Stock on the date the
right is exercised over (y) the Fair Market Value, or other specified valuation
(which shall be no less than the Fair Market Value), of such shares of Common
Stock on the date the right is granted, all as determined by the Committee;
provided, however, that if a Stock Appreciation Right is granted in tandem with
or in substitution for a Stock Option, the designated Fair Market Value in the
award agreement may be the Fair Market Value on the date such Stock Option was
granted. Each Stock Appreciation Right shall be subject to such terms and
conditions as the Committee shall impose from time to time.
8. Stock Awards. The Committee may, in its discretion, grant Stock Awards
(which may include mandatory payment of bonus incentive compensation in stock)
consisting of Common Stock issued or transferred to participants with or
without other payments therefor. Stock Awards may be subject to such terms and
conditions as the Committee determines appropriate, including, without
limitation, restrictions on the sale or other disposition of such shares, the
right of the Company to reacquire such shares for no consideration upon
termination of the participant's employment within specified periods, and may
constitute Performance-Based Awards, as described in Section 11 hereof. The
Committee may require the participant to deliver a duly signed stock power,
endorsed in blank, relating to the Common Stock covered by such an Award. The
Committee may also require that the stock certificates evidencing such shares
be held in custody or bear restrictive legends until the restrictions thereon
shall have lapsed. The Stock Award shall specify whether the participant shall
have, with respect to the shares of Common Stock subject to a Stock Award, all
of the rights of a holder of shares of Common Stock of the Company, including
the right to receive dividends and to vote the shares.
9. Performance Awards. (a) Performance Awards may be granted to
participants at any time and from time to time, as shall be determined by the
Committee. Performance Awards may constitute Performance-Based Awards, as
described in Section 11 hereof. The Committee shall have complete discretion in
determining the number, amount and timing of awards granted to each
participant. Such Performance Awards may be in the form of shares of Common
Stock or Stock Units. Performance Awards may be awarded as short-term or
long-term incentives. Performance targets may be based upon, without
limitation, Company-wide, divisional and/or individual performance.
(b) With respect to those Performance Awards that are not intended to
constitute Performance-Based Awards, the Committee shall have the authority at
any time to make adjustments to performance targets for any outstanding
Performance Awards which the Committee deems necessary or desirable unless at
the time of establishment of such targets the Committee shall have precluded
its authority to make such adjustments.
(c) Payment of earned Performance Awards shall be made in accordance with
terms and conditions prescribed or authorized by the Committee. The participant
may elect to defer, or the Committee may require or permit the deferral of, the
receipt of Performance Awards upon such terms as the Committee deems
appropriate.
10. Stock Units. (a) The Committee may, in its discretion, grant Stock
Units to participants hereunder. The Committee shall determine the criteria for
the vesting of Stock Units. Stock Units may constitute Performance-Based Awards
as described in Section 11 hereof. A Stock Unit granted by the Committee shall
provide payment in shares of Common Stock at such time as the award agreement
shall specify. Shares of Common Stock issued pursuant to this Section 10 may be
issued with or without other payments therefor as may be required by applicable
law or such other consideration as may be determined by the Committee. The
Committee shall determine whether a participant granted a Stock Unit shall be
entitled to a Dividend Equivalent Right (as defined below).
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<PAGE> 4
(b) Upon vesting of a Stock Unit, unless the Committee has determined to
defer payment with respect to such unit or a participant has elected to defer
payment under subsection (c) below, shares of Common Stock representing the
Stock Units shall be distributed to the participant unless the Committee, with
the consent of the participant, provides for the payment of the Stock Units in
cash or partly in cash and partly in shares of Common Stock equal to the value
of the shares of Common Stock which would otherwise be distributed to the
participant.
(c) Prior to the date on which a Stock Unit may vest, the Committee may
permit a participant to elect not to receive Common Stock upon the vesting of
such Stock Unit and for the Company to continue to maintain the Stock Unit on
its books of account. In such event, the value of a Stock Unit shall be payable
in shares of Common Stock pursuant to the agreement of deferral.
(d) A "Stock Unit" means a notional account representing one share of
Common Stock. A "Dividend Equivalent Right" means the right to receive the
amount of any dividend paid on the share of Common Stock underlying a Stock
Unit, which shall be payable in cash or in the form of additional Stock Units.
11. Performance-Based Awards. Certain Benefits granted under the Plan may
be granted in a manner such that the Benefits qualify for the performance-based
compensation exemption of Section 162(m) of the Code ("Performance-Based
Awards"). As determined by the Committee in its sole discretion, either the
granting or vesting of such Performance-Based Awards is to be based upon one or
more of the following factors: net sales, pretax income before allocation of
corporate overhead and bonus, budget, earnings per share, net income, division,
group or corporate financial goals, return on stockholders' equity, return on
assets, attainment of strategic and operational initiatives, appreciation in
and/or maintenance of the price of the Common Stock or any other
publicly-traded securities of the Company, market share, gross profits,
earnings before interest and taxes, earnings before interest, taxes,
depreciation and amortization, economic value-added models and comparisons with
various stock market indices, reductions in costs or any combination of the
foregoing. With respect to Performance-Based Awards, (i) the Committee shall
establish in writing (x) the performance goals applicable to a given period,
and such performance goals shall state, in terms of an objective formula or
standard, the method for computing the amount of compensation payable to the
participant if such performance goals are obtained and (y) the individual
employees or class of employees to which such performance-based goals apply no
later than 90 days after the commencement of such period (but in no event after
25% of such period has elapsed) and (ii) no Performance-Based Awards shall be
payable to or vest with respect to, as the case may be, any participant for a
given period until the Committee certifies in writing that the objective
performance goals (and any other material terms) applicable to such period have
been satisfied. With respect to any Benefits intended to qualify as
Performance-Based Awards, after establishment of a performance goal, the
Committee shall not revise such performance goal or increase the amount of
compensation payable thereunder (as determined in accordance with Section
162(m) of the Code) upon the attainment of such performance goal.
Notwithstanding the preceding sentence, the Committee may reduce or eliminate
the number of shares of Common Stock or cash granted or the number of shares of
Common Stock vested upon the attainment of such performance goal.
12. Adjustment Provisions; Change in Control. (a) If there shall be any
change in the Common Stock of the Company, through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, reverse stock
split, split up, spinoff, combination of shares, exchange of shares, dividend
in kind or other like change in capital structure or distribution (other than
normal cash dividends) to stockholders of the Company, an adjustment shall be
made to each outstanding Stock Option and Stock Appreciation Right such that
each such Stock Option and Stock Appreciation Right shall thereafter be
exercisable for such securities, cash and/or other property as would have been
received in respect of the Common Stock subject to such Stock Option or Stock
Appreciation Right had such Stock Option or Stock Appreciation Right been
exercised in full immediately prior to such change or distribution, and such an
adjustment shall be made successively each time any such change shall occur. In
addition, in the event of any such change or distribution, in order to prevent
dilution or enlargement of participants' rights under the Plan, the Committee
will have authority to adjust, in an equitable manner, the number and kind of
shares that may be issued under the Plan, the number and kind of shares subject
to outstanding Benefits, the exercise price applicable to outstanding Benefits,
and the Fair Market Value of the Common Stock and other value determinations
applicable to outstanding Benefits. Appropriate adjustments may also be made by
the Committee in the terms of any Benefits under the Plan to reflect such
changes or distributions and to modify any other terms of outstanding Benefits
on an equitable basis, including modifications of performance targets and
changes in the length of performance periods. In addition, other than with
respect to Stock Options, Stock Appreciation Rights and other awards intended
to constitute Performance-Based Awards, the Committee is authorized to make
adjustments to the terms and conditions of, and the criteria included in,
Benefits in recognition of unusual or nonrecurring events affecting the Company
or the financial statements of the Company, or in response to changes in
applicable laws, regulations, or accounting principles. Notwithstanding the
foregoing, (i) each such adjustment with respect to an Incentive Stock Option
shall comply with the rules of Section 424(a) of the Code, and (ii) in no event
shall any adjustment be made which would render any Incentive Stock Option
granted hereunder other than an incentive stock option for purposes of Section
422 of the Code.
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<PAGE> 5
(b) Notwithstanding any other provision of this Plan, in the event of a
Change in Control (as defined below), the Committee, in its discretion, may
take such actions as it deems appropriate with respect to outstanding Benefits,
including, without limitation, accelerating the exercisability or vesting of
such Benefits.
The Committee, in its discretion, may determine that, upon the occurrence
of a Change in Control of the Company, each Stock Option and Stock Appreciation
Right outstanding hereunder shall terminate within a specified number of days
after notice to the holder, and such holder shall receive, with respect to each
share of Common Stock subject to such Stock Option or Stock Appreciation Right,
an amount equal to the excess of the Fair Market Value of such shares of Common
Stock immediately prior to the occurrence of such Change in Control over the
exercise price per share of such Stock Option or Stock Appreciation Right; such
amount to be payable in cash, in one or more kinds of property (including the
property, if any, payable in the transaction) or in a combination thereof, as
the Committee, in its discretion, shall determine.
For purposes of this Section 12(b), a "Change in Control" of the Company
shall be deemed to have occurred upon any of the following events:
(A) A person or entity or group of persons or entities, acting in
concert, shall become the direct or indirect beneficial owner (within the
meaning of Rule 13d-3 of the Exchange Act) of securities of the Company
representing fifty-one percent (51%) or more of the combined voting power
of the issued and outstanding common stock of the Company (a "Significant
Owner"), unless such shares are originally issued to such Significant Owner
by the Company; or
(B) The majority of the Company's Board of Directors is no longer
comprised of the incumbent directors who constitute the Board of Directors
on the Effective Date (as defined in Section 22 hereof) and any other
individual(s) who becomes a director subsequent to the Effective Date whose
initial election or nomination for election as a director, as the case may
be, was approved by at least a majority of the directors who comprised the
incumbent directors as of the date of such election or nomination; or
(C) A sale of all or substantially all of the assets of the Company; or
(D) The Board of Directors shall approve any merger, consolidation, or
like business combination or reorganization of the Company, the
consummation of which would result in the occurrence of any event described
in clause (C) above, and such transaction shall have been consummated.
13. Nontransferability. Each Benefit granted under the Plan to a
participant shall not be transferable otherwise than by will or the laws of
descent and distribution, and shall be exercisable, during the participant's
lifetime, only by the participant. In the event of the death of a participant,
each Stock Option or Stock Appreciation Right theretofore granted to him or her
shall be exercisable during such period after his or her death as the Committee
shall in its discretion set forth in such option or right at the date of grant
and then only by the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased participant's rights
under the Stock Option or Stock Appreciation Right shall pass by will or the
laws of descent and distribution. Notwithstanding the foregoing, at the
discretion of the Committee, an award of a Benefit other than an Incentive
Stock Option may permit the transferability of a Benefit by a participant
solely to the participant's spouse, siblings, parents, children and
grandchildren or trusts for the benefit of such persons or partnerships,
corporations, limited liability companies or other entities owned solely by
such persons, including trusts for such persons, subject to any restriction
included in the award of the Benefit.
14. Other Provisions. The award of any Benefit under the Plan may also be
subject to such other provisions (whether or not applicable to the Benefit
awarded to any other participant) as the Committee determines appropriate,
including, without limitation, for the installment purchase of Common Stock
under Stock Options, for the installment exercise of Stock Appreciation Rights,
to assist the participant in financing the acquisition of Common Stock, for the
forfeiture of, or restrictions on resale or other disposition of, Common Stock
acquired under any form of Benefit, for the acceleration of exercisability or
vesting of Benefits in the event of a change of control of the Company (whether
or not a Change in Control), for the payment of the value of Benefits to
participants in the event of a change of control of the Company (whether or not
a Change in Control), or to comply with federal and state securities laws, or
understandings or conditions as to the participant's employment in addition to
those specifically provided for under the Plan.
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<PAGE> 6
15. Fair Market Value. For purposes of this Plan and any Benefits awarded
hereunder, Fair Market Value shall be the closing price of the Company's Common
Stock on the date of calculation (or on the last preceding trading date if
Common Stock was not traded on such date) if the Company's Common Stock is
readily tradeable on a national securities exchange or other market system, and
if the Company's Common Stock is not readily tradeable, Fair Market Value shall
mean the amount determined in good faith by the Committee as the fair market
value of the Common Stock of the Company.
16. Withholding. All payments or distributions of Benefits made pursuant to
the Plan shall be net of any amounts required to be withheld pursuant to
applicable federal, state and local tax withholding requirements. If the
Company proposes or is required to distribute Common Stock pursuant to the
Plan, it may require the recipient to remit to it or to the corporation that
employs such recipient an amount sufficient to satisfy such tax withholding
requirements prior to the delivery of any certificates for such Common Stock.
In lieu thereof, the Company or the employing corporation shall have the right
to withhold the amount of such taxes from any other sums due or to become due
from such corporation to the recipient as the Committee shall prescribe. The
Committee may, in its discretion and subject to such rules as it may adopt
(including any as may be required to satisfy applicable tax and/or non-tax
regulatory requirements), permit an optionee or award or right holder to pay
all or a portion of the federal, state and local withholding taxes arising in
connection with any Benefit consisting of shares of Common Stock by electing to
have the Company withhold shares of Common Stock having a Fair Market Value
equal to the amount of tax to be withheld, such tax calculated at rates
required by statute or regulation.
17. Tenure. A participant's right, if any, to continue to serve the Company
or any of its subsidiaries or affiliates as a director, officer, employee, or
otherwise, shall not be enlarged or otherwise affected by his or her
designation as a participant under the Plan.
18. Unfunded Plan. Participants shall have no right, title, or interest
whatsoever in or to any investments which the Company may make to aid it in
meeting its obligations under the Plan. Nothing contained in the Plan, and no
action taken pursuant to its provisions, shall create or be construed to create
a trust of any kind, or a fiduciary relationship between the Company and any
participant, beneficiary, legal representative or any other person. To the
extent that any person acquires a right to receive payments from the Company
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made hereunder shall be
paid from the general funds of the Company and no special or separate fund
shall be established and no segregation of assets shall be made to assure
payment of such amounts except as expressly set forth in the Plan. The Plan is
not intended to be subject to the Employee Retirement Income Security Act of
1974, as amended.
19. No Fractional Shares. No fractional shares of Common Stock shall be
issued or delivered pursuant to the Plan or any Benefit. The Committee shall
determine whether cash, or Benefits, or other property shall be issued or paid
in lieu of fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
20. Duration, Amendment and Termination. No Benefit shall be granted more
than ten years after the Effective Date. The Committee may amend the Plan from
time to time or suspend or terminate the Plan at any time. However, no action
authorized by this Section 20 shall reduce the amount of any existing Benefit
or change the terms and conditions thereof without the participant's consent.
No amendment of the Plan may be made without approval of the stockholders of
the Company if the amendment will: (i) disqualify any Incentive Stock Options
granted under the Plan; (ii) increase the total number of shares which may be
issued under the Plan; (iii) increase the maximum number of shares with respect
to Stock Options, Stock Appreciation Rights and other Benefits that may be
granted to any individual under the Plan; (iv) change the types of factors on
which Performance-Based Awards are to be based under the Plan; or (v) modify
the requirements as to eligibility for participation in the Plan.
21. Governing Law. This Plan, Benefits granted hereunder and actions taken
in connection herewith shall be governed and construed in accordance with the
laws of the State of Delaware (regardless of the law that might otherwise
govern under applicable Delaware principles of conflict of laws).
22. Effective Date. (a) The Plan shall be effective as of December 7, 1998,
the date on which the Plan was adopted by the Committee (the "Effective Date"),
provided that the Plan is approved by the stockholders of the Company at an
annual meeting or any special meeting of stockholders of the Company within 12
months of the Effective Date, and such approval of stockholders shall be a
condition to the right of each participant to receive any Benefits hereunder.
Any Benefits granted under the Plan prior to such approval of stockholders
shall be effective as of the date of grant (unless, with respect to any
Benefit, the Committee specifies otherwise at the time of grant), but no such
Benefit may be exercised or settled and no restrictions relating to any Benefit
may lapse prior to such stockholder approval, and if stockholders fail to
approve the Plan as specified hereunder, any such Benefit shall be cancelled.
(b) This Plan shall terminate on February 13, 2007 (unless sooner
terminated by the Committee).
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<PAGE> 1
Exhibit 10(b)
RESTRICTED STOCK UNIT AGREEMENT
THIS RESTRICTED STOCK UNIT AGREEMENT, dated December 7, 1998 (the
"Agreement"), is made between Avatar Holdings Inc. a Delaware corporation (the
"Company") and Gerald D. Kelfer (the "Participant").
1. AWARD. Pursuant to the provisions of the Amended and Restated 1997
Incentive and Capital Accumulation Plan, as the same may be amended, modified
and supplemented (the "Plan"), the Incentive Plan Committee (the "Committee")
of the Board of Directors of the Company (the "Board") hereby awards to the
Participant, on the date hereof, subject to the terms and conditions of the
Plan and subject further to the terms and conditions herein set forth (and
subject to the approval of the Plan by the Company's stockholders at the 1999
Annual Meeting), an opportunity to receive 100,000 Performance Conditioned
Restricted Stock Units ("Units"). Capitalized terms used but not defined herein
shall have the meanings assigned to them in the Plan. This award is intended to
constitute a Performance-Based Award within the meaning of the Plan.
2. TERMS AND CONDITIONS. It is understood and agreed that the award
evidenced by this Agreement is subject to the following terms and conditions:
(a) The Participant shall be granted, automatically and without
further authorization on the part of the Committee, 100,000 Units upon
satisfaction of all of the following conditions (the first date on which all
such conditions are satisfied being hereinafter referred to as the "Grant
Date"): (i) the Plan shall have been approved by the stockholders of the
Company at the 1999 Annual Meeting (the "Stockholder Approval"), and (ii) the
closing stock price of the Common Stock on its principal trading market shall
have been at least $25 per share for 20 trading days out of 30 consecutive
trading days during the period beginning on the date immediately following the
Stockholder Approval and ending on February 12, 2002; provided, however, that
no Units shall be granted if the Participant's employment with the Company has
terminated for any reason on or prior to the time the condition in clause (ii)
is satisfied.
(b) The Participant shall not possess any incidents of ownership
(including, without limitation, dividend and voting rights) in shares of Common
Stock in respect of the Units until such Units have vested and been distributed
to the Participant in the form of shares of Common Stock in accordance with
Sections 3 and 4 hereof.
(c) Except as provided in this Section 2(c), the Units and any
interest of the Participant therein may not be sold, assigned, transferred,
pledged, hypothecated or otherwise disposed of. Any attempt to transfer Units
in contravention of this Section 2(c) is void ab initio. Units shall not be
subject to execution, attachment or other process. Notwithstanding the
foregoing, with the written consent of the Committee the Participant shall be
permitted to transfer such Units to members of his immediate family (i.e.,
children, grandchildren or spouse), trusts for the benefit of such family
members, and partnerships whose only partners are such family members;
provided, however, that no consideration can be paid for the transfer of the
<PAGE> 2
Units and the transferee of the Units shall be subject to all conditions
applicable to the Units (including all of the terms and conditions of this
Agreement) prior to transfer.
3. VESTING AND CONVERSION OF UNITS. On February 13, 2002, the Units
granted to the Participant pursuant to Section 2(a) hereof, if any, shall vest
in full and such vested Units shall be converted into an equivalent number of
shares of Common Stock that will be immediately distributed to the Participant;
provided, however, that subject to the provisions of Section 4 hereof, no Units
shall vest or be converted and distributed to the Participant unless the
Participant is an employee of the Company on February 13, 2002.
Upon the distribution of the shares of Common Stock in respect of the
Units, the Company shall issue to the Participant or the Participant's personal
representative a stock certificate representing such shares of Common Stock,
free of any restrictions, subject to Section 8 hereof.
4. TERMINATION OF EMPLOYMENT; CHANGE OF CONTROL.
(a) Notwithstanding any other provision contained herein:
(i) if the Participant's employment with the Company is
terminated by the Company for "cause" (as defined
below) or by the Participant for other than "good
reason" (as defined below), the Participant shall
forfeit all Units granted to the Participant
pursuant to Section 2(a) hereof, if any, as of the
date of termination of employment.
(ii) if the Participant's employment with the Company is
terminated by the Company other than for "cause", or
is terminated by the Participant for "good reason",
all Units granted to the Participant pursuant to
Section 2(a) hereof, if any, shall vest, be
converted into shares of Common Stock and be
immediately distributed to the Participant.
(iii) if the Participant dies or in the event of the
Participant's employment with the Company is
terminated by the Company for reason of the
Participant's "permanently disability" (as defined
below), the number of Units granted to the
Participant pursuant to Section 2(a) hereof, if any,
which equals the product of (x) a fraction the
numerator of which is the number of completed whole
months elapsed after the Grant Date to the date of
death or permanent disability, as the case may be
(whichever is sooner), and the denominator of which
is the number of whole months from the Grant Date
until February 13, 2002 and (y) 100,000, shall vest,
be converted into shares of Common Stock and be
immediately distributed to the Participant (or the
executor or administrator of the deceased
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<PAGE> 3
Participant's estate or the person or persons to
whom the deceased Participant's rights shall pass by
will or the laws of descent or distribution, as
applicable), and any portion of the Units then
remaining unvested shall be forfeited.
For purposes of this Section 4(a), the terms "cause", "good reason" and
"permanent disability", shall have the meanings ascribed to such terms in the
Participant's employment agreement with the Company, dated February 13, 1997, as
amended from time to time.
(b) In the event of a Change of Control (as defined below), all Units
granted to the Participant pursuant to Section 2(a) hereof shall vest, be
converted into shares of Common Stock and be immediately distributed to the
Participant. For purposes of this Section 4(b), the term "Change of Control"
shall mean any of the following events:
(A) a person or entity or group of persons or entities,
acting in concert, become the direct or indirect beneficial owner
(within the meaning of Rule 13d-3 of the Securities Exchange Act of
1934, as amended) of securities of the Company representing ninety
percent (90%) or more of the combined voting power of the issued and
outstanding Common Stock (a "Significant Owner"), unless such
securities are originally issued to such Significant Owner by the
Company; or
(B) the Board approves any merger, consolidation or like
business combination or reorganization of Avatar, the consummation of
which would result in the occurrence of the event described in clause
(A) above, and such transaction shall have been consummated.
5. DEFERRAL. The Participant may elect to defer the receipt of Common
Stock upon the vesting of the Units granted to the Participant pursuant to
Section 2(a) hereof and for the Company to continue to maintain such Units on
its books of account if the Participant delivers to the Company a written
notice of such election at least six months prior to such vesting and enters
into a deferral agreement with the Company on terms satisfactory to the
Committee.
6. EQUITABLE ADJUSTMENT. If there shall be any change in the Common
Stock of the Company, through merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, reverse stock split, split up,
spinoff, combination of shares, exchange of shares, dividend in kind or other
like change in capital structure or distribution (other than normal cash
dividends) to stockholders of the Company, in order to prevent dilution or
enlargement of the Participant's rights under this Agreement and the Plan, the
Committee may, in an equitable manner, adjust the number and kind of shares
that may be issued under this Agreement and make any other appropriate
adjustments in the terms of the Units and this Agreement to reflect such
changes or distributions. In addition, the Committee may make adjustments to
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the terms and conditions of the Units and this Agreement in recognition of
unusual or nonrecurring events affecting the Company or the financial
statements of the Company, or in response to changes in applicable laws,
regulations, or accounting principles.
7. TAXES. Any distribution of Common Stock pursuant to this Agreement
shall be net of any amounts required to be withheld pursuant to applicable
federal, state and local tax withholding requirements. In connection with any
such distribution, the Company may require the Participant to remit to it an
amount sufficient to satisfy such tax withholding requirements prior to the
delivery of any certificates for such Common Stock. In lieu thereof, the
Company shall have the right to withhold the amount of such taxes from any
other sums due or to become due from the Company to the Participant as the
Committee shall prescribe. The Committee may, in its discretion and subject to
such rules as it may adopt (including any as may be required to satisfy
applicable tax and/or non-tax regulatory requirements), permit the Participant
to pay all or a portion of the federal, state and local withholding taxes
arising in connection with the Units granted hereunder and any distribution of
shares of Common Stock in respect thereof by electing to have the Company
withhold shares of Common Stock having a Fair Market Value (as defined in the
Plan) equal to the amount of tax to be withheld, such tax calculated at rates
required by statute or regulation.
8. REGULATORY COMPLIANCE AND LISTING. The issuance or delivery of any
stock certificates representing shares of Common Stock issuable pursuant to
this Agreement may be postponed by the Committee for such period as may be
required to comply with any applicable requirements under the federal or state
securities laws, any applicable listing requirements of any national securities
exchange or the NASDAQ National Market System, and any applicable requirements
under any other law, rule or regulation applicable to the issuance or delivery
of such shares, and the Company shall not be obligated to deliver any such
shares of Common Stock to the Participant if either delivery thereof would
constitute a violation of any provision of any law or of any regulation of any
governmental authority, any national securities exchange or the NASDAQ National
Market System, or the Participant shall not yet have complied fully with the
provisions of Section 7 hereof.
9. INVESTMENT REPRESENTATIONS AND RELATED MATTERS. The Participant
hereby represents that the Common Stock issuable pursuant to this Agreement is
being acquired for investment and not for sale or with a view to distribution
thereof. The Participant acknowledges and agrees that any sale or distribution
of shares of Common Stock issued pursuant to this Agreement may be made only
pursuant to either (a) a registration statement on an appropriate form under
the Securities Act of 1933, as amended (the "Securities Act"), which
registration statement has become effective and is current with regard to the
shares being sold, or (b) a specific exemption from the registration
requirements of the Securities Act that is confirmed in a favorable written
opinion of counsel, in form and substance satisfactory to counsel for the
Company, prior to any such sale or distribution. The Participant hereby
consents to such action as the Committee or the Company deems necessary or
appropriate from time to time to prevent a violation of, or to perfect an
exemption from, the registration requirements of the Securities Act or to
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<PAGE> 5
implement the provisions of this Agreement, including but not limited to
placing restrictive legends on certificates evidencing shares of Common Stock
issued pursuant to this Agreement and delivering stop transfer instructions to
the Company's stock transfer agent.
10. NO RIGHT TO CONTINUED EMPLOYMENT. This Agreement does not confer
upon the Participant any right to continued employment by the Company or any of
its subsidiaries or affiliated companies, nor shall it interfere in any way
with the right of the Participant's employer to terminate the Participant's
employment at any time for any reason or no reason.
11. CONSTRUCTION. The Plan and this Agreement will be construed by and
administered under the supervision of the Committee, and all determinations of
the Committee will be final and binding on the Participant.
12. NOTICES. Any notice required or permitted under this Agreement
shall be deemed given when delivered personally, or when deposited in a United
States Post Office, postage prepaid, addressed, as appropriate, (i) to the
Participant at the last address specified in Participant's employment records,
or such other address as the Participant may designate in writing to the
Company, or (ii) to the Company, Avatar Holdings Inc., 255 Alhambra Circle,
Coral Gables, Florida 33134 Attention: Chairman of the Board, or such other
address as the Company may designate in writing to the Participant.
13. FAILURE TO ENFORCE NOT A WAIVER. The failure of either party
hereto to enforce at any time any provision of this Agreement shall in no way
be construed to be a waiver of such provision or of any other provision hereof.
14. GOVERNING LAW. This Agreement shall be governed by and construed
according to the laws of the State of Delaware, without regard to the conflicts
of laws provisions thereof.
15. INCORPORATION OF PLAN. The Plan is hereby incorporated by
reference and made a part of this Agreement, and this Agreement shall be
subject to the terms of the Plan, as the Plan may be amended from time to time.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original but all of which together
shall represent one and the same agreement.
17. MISCELLANEOUS. This Agreement cannot be changed or terminated
orally. This Agreement and the Plan contain the entire agreement between the
parties relating to the subject matter hereof. The section headings herein are
intended for reference only and shall not affect the interpretation hereof.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
AVATAR HOLDINGS INC.
By: /s/ Juanita I. Kerrigan
--------------------------------
Name: Juanita I. Kerrigan
Title: Vice President
/s/ Gerald D. Kelfer
--------------------------------
Gerald D. Kelfer
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<PAGE> 1
Exhibit 10(c)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 1, 1999, between
Avatar Holdings Inc., a Delaware corporation (the "Company"), and Deborah G.
Tomusko (the "Employee").
W I T N E S S E T H :
WHEREAS, the Company desires to employ the Employee as its
Executive Vice President--Strategic Planning and the Employee desires to accept
such employment, all on the terms and conditions specified herein; and
WHEREAS, the Employee and the Company desire to set forth in
writing all of their respective duties, rights and obligations with respect to
the Employee's employment by the Company; and
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and obligations hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Employment and Term. The Company hereby employs the
Employee, and the Employee hereby accepts employment by the Company, in the
capacity and upon the terms and conditions hereinafter set forth. The term of
employment under this Agreement shall be for the period commencing on the date
hereof (the "Commencement Date") and ending on the second anniversary thereof,
unless earlier terminated as herein provided (the "Term of Employment"). The
last day of the Employee's Term of Employment shall be referred to in this
Agreement as the "Date of Termination."
2. Duties. During the Term of Employment, the Employee shall
serve as the Company's Executive Vice President--Strategic Planning, and shall
perform such duties, functions and responsibilities as are associated with and
incident to the position of Executive Vice President--Strategic Planning and as
the Company may, from time to time, require of the Employee, including, but not
limited to, the performance of such functions and duties for the Company's
subsidiaries and affiliates as the Company may require, subject to the
direction of the Company's Board of Directors. The Employee shall serve the
Company faithfully, conscientiously and to the best of the Employee's ability
and shall promote the interests and reputation of the Company. Unless prevented
by sickness or disability, the Employee shall devote all of the Employee's
time, attention, knowledge, energy and skills, during normal working hours, and
at such other times as the Employee's duties may require, to the duties of the
Employee's employment. The principal place of employment of the Employee shall
be the principal executive offices of the Company and/or such other location in
the state of Florida as shall be necessary for the Employee to discharge the
<PAGE> 2
Employee's duties hereunder. The Employee acknowledges that in the course of
employment the Employee may be required, from time to time, to travel on behalf
of the Company.
3. Compensation and Benefits. As full and complete
compensation for the Employee's execution and delivery of this Agreement and
performance of any services hereunder, the Company shall pay, grant or provide
the Employee, and the Employee agrees to accept, the following compensation and
benefits:
(a) Base Salary. The Company shall pay the Employee a base
salary at an annual rate of $200,000 payable at such times and in accordance
with the Company's customary payroll practices as they may be adopted or
modified from time to time. On an annual basis or at such other times as the
Company may determine, the Company may review the Employee's performance and
determine whether, in its sole discretion, the Company will increase (but not
decrease) the Employee's base salary.
(b) Employee Benefits. The Company shall afford the Employee
the opportunity to participate during the Term of Employment in any medical,
dental, disability insurance, retirement, savings and any other employee
benefits plans, policies or arrangements which the Company maintains for its
senior executives in accordance with the written terms of such plans, policies
or arrangements. Nothing in this Agreement shall require the Company or its
affiliates to establish, maintain or continue any benefit plan, policy or
arrangement or restrict the right of the Company or any of its affiliates to
amend, modify or terminate any such benefit plan, policy or arrangement.
(c) Expenses. The Employee shall be entitled to (i)
reimbursement or payment of reasonable business expenses (in accordance with
the Company's policies for its senior executives, as the same may be amended
from time to time in the Company's sole discretion), (ii) reimbursement or
payment of direct costs and expenses, in an amount not to exceed $21,000 in the
aggregate, reasonably incurred by the Employee in relocating to the vicinity of
the principal executive offices of the Company and (iii) a car allowance of
$600 per month, subject in the case of the foregoing clauses (i) and (ii) to
the Employee's submission of appropriate receipts and/or vouchers to the
Company.
(d) Vacations, Holidays or Temporary Leave. The Employee
shall be entitled to take three (3) weeks of vacation per year, without loss or
diminution of compensation. Such vacation shall be taken at such time or times,
and as a whole or in increments, as the Employee shall elect, consistent with
the reasonable needs of the Company's business. The Employee shall further be
entitled to the number of paid holidays, and leaves for illness or temporary
disability in accordance with the policies of the Company for its senior
executives (as such policies may be amended from time to time or terminated in
the Company's sole discretion).
(e) Stock Options. In the Company's sole discretion, the
Employee also may be granted options for the purchase of shares of common stock
issued by the Company, in accordance with the written terms and conditions of
such stock option plan as the Company from time to time may adopt; provided,
however, that nothing in this Agreement shall require the Company or its
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<PAGE> 3
affiliates to adopt or continue any stock option plan or restrict the right of
the Company or any of its affiliates to amend, modify or terminate any such
stock option plan.
(f) Annual Bonus. The Employee shall be eligible to receive
an anticipated, but not mandatory, bonus of $50,000, based on the Employee's
performance.
4. Protection of Confidential Information.
(a) Trade Secrets and Know-how.
(i) During the Term of Employment and for all time
following the Date of Termination, the Employee shall not, directly or
indirectly, use, furnish or make accessible to any person, firm or corporation
or other business entity, whether or not he, she, or it competes with the
business of the Company, its subsidiaries and/or affiliates (each of the
foregoing entities being referred to herein, collectively and individually, as
the "Avatar Entities"), (x) any trade secret or know-how acquired by the
Employee during the Employee's employment by the Company which relates to the
business practices, methods, processes or other confidential or secret aspects
of the business of any of the Avatar Entities, (y) any information concerning
the business and affairs of the Avatar Entities and (z) any notes, analysis,
compilations, studies, summaries and other material prepared by or for the
Company continuing or based, in whole or in part, on any information included
in clause (x) or (y) above, without the prior written consent of the Company
(such information, subject to Section 4(a)(ii) below, being referred to as the
"Confidential Information").
(ii) Confidential Information shall not include any
information or documents that (A) are or become publicly available without
breach by the Employee of Section 4(a)(i) hereof, (B) the Employee receives
from any third party who, to the best of the Employee's knowledge upon
reasonable inquiry, is not in breach of an obligation of confidence with any of
the Avatar Entities, or (C) is required to be disclosed by law, statute,
governmental or judicial proceeding; provided, however, that in the event that
the Employee is requested by any governmental or judicial authority to disclose
any Confidential Information, the Employee shall give the Company prompt notice
of such request, such that the Company may seek a protective order or other
appropriate relief, and in any such proceeding the Employee shall disclose only
so much of the Confidential Information as is required to be disclosed.
(b) Remedies. The Employee acknowledges that the Employee's
position with the Company places the Employee in a position of confidence and
trust with the clients and employees of the Avatar Entities, and that in
connection with the Employee's services to the Company, the Employee will have
access to confidential information vital to the Avatar Entities' businesses.
The Employee further acknowledges that in view of the nature of the businesses
in which the Avatar Entities are engaged, the foregoing restrictive covenants
in this Section 4 hereof are reasonable and necessary in order to protect the
legitimate interests of the Avatar Entities and that violation thereof would
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result in irreparable injury to the Avatar Entities. Accordingly, the Employee
consents and agrees that if the Employee violates or threatens to violate any
of the provisions of this Section 4 hereof the Avatar Entities would sustain
irreparable harm and, therefore, one or more of the Avatar Entities shall be
entitled to obtain from any court of competent jurisdiction, without posting
any bond or other security, preliminary and permanent injunctive relief as well
as damages and an equitable accounting of all earnings, profits and other
benefits arising from such violation, which rights shall be cumulative and in
addition to any other rights or remedies in law or equity to which any of the
Avatar Entities may be entitled.
(c) Return of Confidential Information. Upon termination of
the Employee's employment, the Employee shall promptly return all Confidential
Information in tangible form, and shall not make or retain any copies thereof.
5. Termination of Employment.
(a) The Employee's employment with the Company shall
terminate upon the occurrence of any of the following events:
(i) the termination of the Employee's employment
upon and at any time following the Date of Termination and absent the parties
having entered into a written agreement for the renewal of this Agreement;
(ii) the death of the Employee during the Term of
Employment;
(iii) the Disability (as defined below) of the
Employee during the Term of Employment;
(iv) at any time upon written notice to the Employee
from the Company of termination of the Employee's employment for Cause (as
defined below);
(v) at any time upon written notice to the Employee
from the Company of termination of the Employee's employment Without Cause (as
defined below);
(vi) the resignation by the Employee for Good Reason
(as defined below) during the Term of Employment; or
(vii) the resignation by the Employee Without Good
Reason (as defined below) during the Term of Employment.
(b) For purposes of this Agreement, the "Disability" of the
Employee shall mean the Employee's inability, because of mental or physical
illness or incapacity, whether total or partial, to perform one or more of the
material functions of the Employee's employment under this Agreement with or
without reasonable accommodation and which entitles the Employee to receive
benefits under a disability plan, policy or arrangement that is provided to the
Employee by the Company.
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(c) For purposes of this Agreement, the term "Cause" shall
mean the Employee's (i) conviction or entry of a plea of guilty or nolo
contendere, with respect to any felony; (ii) commission of any act of willful
misconduct, gross negligence, fraud or dishonesty; or (iii) violation of any
material term of this Agreement or any material written policy of the Company,
provided that the Company first deliver written notice thereof to the Employee
and the Employee shall not have cured such violation within thirty (30) days
after receipt of such written notice.
(d) For purposes of this Agreement, "Without Cause" shall
mean any reason other than the reasons described in Sections 5(a)(i), 5(a)(ii),
5(a)(iii), 5(a)(iv) and 5(a)(vi) hereof. The parties expressly agree that a
termination of employment Without Cause pursuant to Section 5(a)(v) hereof may
be for any reason whatsoever, or for no reason, in the sole discretion of the
Company.
(e) For purposes of this Agreement, "Good Reason" shall mean
a material breach of the provisions of this Agreement by the Company which
remains uncured for a period of at least 30 days after the Employee has
provided written notice to the Company in accordance with Section 15 of the
existence of such breach and the Employee's intention to terminate this
Agreement (it being understood that no such termination shall be effective if
such breach is cured during such period).
(f) For purposes of this Agreement, "Without Good Reason"
shall mean any reason other than that defined in this Agreement as constituting
Good Reason.
6. Payments Upon Termination of Employment.
(a) Death or Disability. If the Employee's employment
hereunder is terminated due to the Employee's death or Disability pursuant to
Sections 5(a)(ii) or (iii) hereof, the Company shall pay or provide to the
Employee, the Employee's designated beneficiary or to the Employee's estate:
(i) all base salary pursuant to Section 3(a) hereof and any vacation pay
pursuant to Section 3(d) hereof, in each case which has been earned but unpaid
as of the Date of Termination; and (ii) any benefits to which the Employee may
be entitled under any employee benefits plan, policy or arrangement pursuant to
Section 3(b) hereof in which the Employee is a participant in accordance with
the written terms of such plan, policy or arrangement up to and including the
Date of Termination. Should the Company wish to purchase insurance to cover the
costs associated with the Employee's termination of employment pursuant to
Sections 5(a)(ii) or (iii), the Employee agrees to execute any and all
necessary documents required in connection with such insurance. Upon
termination of the Employee's employment due to the Employee's Disability, the
Employee shall continue to have the obligations provided for in Section 4
hereof.
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(b) Termination for Cause or Resignation Without Good Reason.
If the Employee's employment hereunder is terminated by the Company for Cause
pursuant to Section 5(a)(iv) or due to the Employee's resignation Without Good
Reason pursuant to Section 5(a)(vii), the Company shall pay or provide to the
Employee: (i) all base salary pursuant to Section 3(a) hereof and any vacation
pay pursuant to Section 3(d) hereof, in each case which has been earned but
unpaid as of the Date of Termination; and (ii) any benefits to which the
Employee may be entitled under any employee benefits plan, policy or
arrangement pursuant to Section 3(b) hereof in which the Employee is a
participant in accordance with the written terms of such plan, policy or
arrangement up to and including the Date of Termination.
(c) Termination Without Cause; Resignation For Good Reason.
(i) If, prior to the second anniversary of the
Commencement Date, the Employee's employment hereunder is terminated by the
Company Without Cause pursuant to Section 5(a)(v) or due to the Employee's
resignation for Good Reason pursuant to Section 5(a)(vi), the Company shall
continue to pay or provide to the Employee: (x) any benefits to which the
Employee may be entitled under any employee benefits plan, policy or
arrangement pursuant to Section 3(b) hereof in which the Employee is a
participant in accordance with the written terms of such plan, policy or
arrangement up to and including the date immediately prior to the second
anniversary of the Commencement Date; and (y) in lieu of any other payments or
benefits (other than as provided in clause (x) above), the Employee's current
base salary through the second anniversary of the Commencement Date, at the
rate provided in Section 3(a) hereof and on the regular payment dates of the
Company.
(ii) In addition, the Employee agrees to keep the
Chief Executive Officer of the Company or his designee apprised of the
Employee's status during the entire period of time that the Employee shall be
entitled to receive salary continuation pursuant to Section 6(c)(i) above, and,
if requested, to provide appropriate supporting documentation with respect to
the salary, bonuses or other income earned by and benefits made available to
the Employee in respect of any employment or other engagement secured by the
Employee. In the event the Employee secures employment or any other engagement,
the Company shall be entitled to deduct from the amounts payable to the
Employee pursuant to Section 6(c)(i), any salary, bonuses or other income
earned by the Employee in connection with such employment, and the Employee
shall promptly repay to the Company any amounts paid to him by the Company
pursuant to Section 6(c)(i) which the Company was entitled to deduct from such
amounts pursuant to this Section 6(c)(ii).
(d) No Other Payments. Except as provided in this Section 6,
the Employee shall not be entitled to receive any other payments or benefits
from the Company due to the termination of the Employee's employment, including
but not limited to, any employee benefits under any of the Company's employee
benefits plans or programs (other than at the Employee's expense under the
Consolidated Omnibus Budget Reconciliation Act of 1985 or pursuant to the terms
of any pension benefit plan which the Company may have in effect from time to
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time) or any right to be paid severance pay. If the Employee is entitled to any
notice or payment in lieu of any notice of termination required by Federal,
State or local law, including but not limited to the Worker Adjustment and
Retraining Notification Act, the Company's obligation to make payments pursuant
to Section 6(c)(i) shall be reduced by the amount of any such payment in lieu
of notice. This Section 6 shall in no way be deemed a waiver or release of
Employee's rights to any claims or demands under any and all forms of
employment discrimination law including, but not limited to, Title VII of the
Civil Rights Act of 1964, the Employee Retirement Income Security Act, the
Americans with Disabilities Act, the Age Discrimination in Employment Act, and
all comparable state laws, and including claims for attorney's fees, expenses,
and costs related to any of the foregoing.
7. No Conflicting Agreements.
(a) The Employee hereby represents and warrants that the
Employee is not a party to any agreement, or non-competition or other covenant
or restriction contained in any agreement, commitment, arrangement or
understanding (whether oral or written), which would in any way conflict with
or limit the Employee's ability to commence work on the first day of the Term
of Employment or would otherwise limit the Employee's ability to perform all
responsibilities in accordance with the terms and subject to the conditions of
this Agreement.
(b) The Employee agrees that the compensation provided for in
Section 3 represents the sole compensation to be paid to the Employee in
respect of the services performed or to be performed for the Company and/or its
affiliates by such Employee.
8. Deductions and Withholding. The Employee agrees that the
Company shall withhold from any and all compensation required to be paid to the
Employee pursuant to this Agreement all federal, state, local and/or other
taxes which the Company determines are required to be withheld in accordance
with applicable statutes and/or regulations from time to time in effect and all
amounts required to be deducted in respect of the Employee's coverage under
applicable employee benefit plans.
9. Entire Agreement. This Agreement embodies the entire
agreement of the parties with respect to the Employee's employment and
supersedes any other prior oral or written agreements between the Employee and
the Company and its affiliates. This Agreement may not be changed or terminated
orally but only by an agreement in writing signed by the parties hereto.
10. Waiver. The waiver by the Company of a breach of any
provision of this Agreement by the Employee shall not operate or be construed
as a waiver of any subsequent breach by the Employee. The waiver by the
Employee of a breach of any provision of this Agreement by the Company shall
not operate or be construed as a waiver of any subsequent breach by the
Company.
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11. Governing Law. This Agreement shall be subject to, and
governed by, the laws of the State of Florida applicable to contracts made and
to be performed in the State of Florida, regardless of where the Employee is in
fact required to work.
12. Jurisdiction. Any legal suit, action or proceeding
against any party hereto arising out of or relating to this Agreement shall be
instituted in a federal or state court in the State of Florida, and each party
hereto waives any objection which it may now or hereafter have to the laying of
venue of any such suit, action or proceeding and each party hereto irrevocably
submits to the jurisdiction of any such court in any suit, action or
proceeding.
13. Assignability. The obligations of the Employee may not be
delegated and, except as expressly provided in Section 6(a) relating to the
designation of beneficiaries, the Employee may not, without the Company's
written consent thereto, assign, transfer, convey, pledge, encumber,
hypothecate or otherwise dispose of this Agreement or any interest therein. Any
such attempted delegation or disposition shall be null and void and without
effect. The Company and the Employee agree that this Agreement and all of the
Company's rights and obligations hereunder may be assigned or transferred by
the Company to and may be assumed by and become binding upon and may inure to
the benefit of any affiliate of or successor to the Company, provided that no
such assignment shall relieve the Company from liability for its obligations
hereunder. The term "successor" shall mean (with respect to the Company or any
of its subsidiaries) any other corporation or other business entity which, by
merger, consolidation, purchase of the assets, or otherwise, acquires all or a
material part of the assets of the Company. Any assignment by the Company of
its rights and obligations hereunder to any affiliate of or successor to the
Company shall not be considered a termination of employment for purposes of
this Agreement.
14. Severability. If any provision of this Agreement as
applied to either party or to any circumstances shall be adjudged by a court of
competent jurisdiction to be void or unenforceable, the same shall in no way
affect any other provision of this Agreement or the validity or enforceability
of this Agreement.
15. Notices. All notices to the Employee hereunder shall be
in writing and shall be delivered personally or sent by registered or certified
mail, return receipt requested, to:
Deborah G. Tomusko
8627 Torrance Avenue
Cleveland, Ohio 44144
with a copy to:
Armond D. Budish, Esq.
30100 Chagrin Boulevard
Suite 301
Pepper Pike, Ohio 44124-5704
8
<PAGE> 9
All notices to the Company hereunder shall be in writing and shall be delivered
personally or sent by registered or certified mail, return receipt requested,
to:
Avatar Holdings Inc.
201 Alhambra Circle
Coral Gables, Florida 33134
Attention: Chief Executive Officer
Facsimile: (305) 441-7876
with a copy to:
Avatar Holdings Inc.
201 Alhambra Circle
Coral Gables, Florida 33134
Attention: General Counsel
Facsimile: (305) 448-9927
Either party may change the address to which notices shall be sent by sending
written notice of such change of address to the other party.
16. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
17. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first above written.
AVATAR HOLDINGS INC.
By: /s/ Gerald D. Kelfer
--------------------------------
Name: Gerald D. Kelfer
Title: Chief Executive Officer
/s/ Deborah G. Tomusko
-------------------------------------
Employee
Name: Deborah G. Tomusko
9
<PAGE> 1
Exhibit 10(d)
NONQUALIFIED STOCK OPTION AGREEMENT
GRANTED TO: Deborah G. Tomusko
DATE OF GRANT: April 1, 1999
GRANTED PURSUANT TO: Avatar Holdings Inc. 1997 Incentive and
Capital Accumulation Plan
NUMBER OF UNDERLYING
SHARES OF COMMON
STOCK: 30,000 shares
EXERCISE PRICE: $25 per share
1. This Nonqualified Stock Option Agreement (the "Agreement") is made
and entered into as of April 1, 1999, between Avatar Holdings Inc., a Delaware
corporation (the "Company"), and Deborah G. Tomusko ("Employee"). It is the
intent of the Company and Employee that the Option (as defined in Paragraph 2
below) will not qualify as an "incentive stock option" under Section 422 of the
Internal Revenue Code of 1986, as amended from time to time (the "Code").
2. Employee is granted an option by the Incentive Plan Committee of
the Company's Board of Directors (the "Committee") to purchase 30,000 shares of
Common Stock (the "Option") pursuant to the Company's 1997 Incentive and
Capital Accumulation Plan (the "Plan"). Capitalized terms not defined herein
shall have the meanings ascribed thereto in the Plan.
3. The Option's exercise price is $25 per share, such exercise price
being in the judgment of the Committee not less than one hundred percent (100%)
of the Fair Market Value of the Common Stock on the date of grant.
4. Subject to Paragraphs 5 and 6 below, the Option shall be
exercisable, on a cumulative basis, according to the vesting schedule set forth
below:
15,000 shares shall become exercisable and remain exercisable on April 1, 2000.
15,000 shares shall become exercisable and remain exercisable on April 1, 2001.
5. Subject to Paragraph 6 below, the unexercised portion of the
Option, unless sooner terminated, shall expire on April 1, 2009 (the
"Expiration Date") and, notwithstanding anything contained herein to the
contrary, no portion of the Option may be exercised after such date.
6. If prior to the Expiration Date, Employee's employment with the
Company or any subsidiary corporation terminates, the Option will terminate on
the applicable date as described below, provided, however, that none of the
<PAGE> 2
events described below shall extend the period of exercisability beyond the
Expiration Date:
(a) If the employment of Employee is terminated by reason of
Employee's death either while in the employ of the Company or any subsidiary
corporation, or during the one (1) year period specified in clause (b) below,
the Option shall immediately become fully exercisable and remain exercisable
until the later of the first anniversary of Employee's death or the second
anniversary of the Commencement Date (as defined below), and shall be
exercisable by the executor or administrator of the estate of the deceased
Employee or the person or persons to whom the deceased Employee's rights under
the Option shall pass by will or the laws of descent or distribution;
(b) If the employment of Employee is terminated by the
Company due to Employee's "disability" (as defined below), the Option shall
immediately become fully exercisable and remain exercisable until the later of
the first anniversary of the date of termination of employment or the second
anniversary of the Commencement Date;
(c) If the employment of Employee is terminated by the
Company "without cause" (as defined below), or is terminated by Employee for
"good reason" (as defined below), the Option to the extent not theretofore
exercised shall remain exercisable in accordance with the terms of this
Agreement, including without limitation, the provisions of Sections 4 and 5
hereof.
(d) If the employment of Employee is terminated (i) by the
Company for "cause" (as defined below) or (ii) by Employee "without good
reason" (as defined below), the Option shall, to the extent not theretofore
exercised, immediately become null and void.
For purposes of this Agreement, the terms "Commencement
Date", "disability", "cause", "without cause", "good reason" and "without good
reason" shall have the meanings ascribed to such terms in Employee's employment
agreement with the Company, dated as of April 1, 1999, as amended from time to
time.
7. Employee may exercise the Option regardless of whether any other
option that Employee has been granted by the Company remains unexercised. In no
event may Employee exercise the Option for a fraction of a share or for less
than 100 shares unless the number purchased is the remaining balance for which
the Option is then exercisable.
8. The Option's exercise price shall be paid by Employee on the date
the option is exercised, in full in cash.
9. The Company may withhold from sums due or to become due to Employee
from the Company an amount necessary to satisfy its obligation to withhold
taxes incurred by reason of the issuance or disposition of shares pursuant to
the Option, or may require Employee to reimburse the Company in such amount.
2
<PAGE> 3
10. Employee shall not have any of the rights of a shareholder with
respect to the shares of Common Stock underlying the Option while the Option is
unexercised.
11. Any exercise of this Option shall be in writing addressed to the
Corporate Secretary of the Company at the principal place of business of the
Company, specifying the Option being exercised and the number of shares to be
purchased, accompanied by payment therefor.
12. This Option shall not be transferable otherwise than by will or
the laws of descent and distribution, and shall be exercisable, during
Employee's lifetime, only by Employee. Notwithstanding the foregoing, this
Option may be transferred by Employee solely to Employee's spouse, siblings,
parents, children and grandchildren or trusts for the benefit of such persons
or partnerships, corporations, limited liability companies or other entities
owned solely by such persons, including trusts for such persons, subject to any
restriction included in this Agreement.
13. If the Company, in its sole discretion, shall determine that it is
necessary, to comply with applicable securities laws, the certificate or
certificates representing the shares purchased pursuant to the exercise of the
Option shall bear an appropriate legend in form and substance, as determined by
the Company, giving notice of applicable restrictions on transfer under or in
respect of such laws.
14. The Company agrees that at the time of exercise of the Option it
will use reasonable efforts in good faith to have an effective Registration
Statement on Form S-8 under the Securities Act of 1933, as amended (the "Act"),
which includes a prospectus that is current with respect to the shares subject
to the Option. Employee covenants and agrees with the Company that if, at the
time of exercise of the Option, there does not exist a Registration Statement
on an appropriate form under the Act, which Registration Statement shall have
become effective and shall include a prospectus that is current with respect to
the shares subject to the Option, (i) that he or she is purchasing the shares
for his or her own account and not with a view to the resale or distribution
thereof, (ii) that any subsequent offer for sale or sale of any such shares
shall be made either pursuant to (x) a Registration Statement on an appropriate
form under the Act, which Registration Statement shall have become effective
and shall be current with respect to the shares being offered and sold, or (y)
a specific exemption from the registration requirements of the Act, but in
claiming such exemption, Employee shall, prior to any offer for sale or sale of
such shares, obtain a favorable written opinion from counsel for or approved by
the Company as to the applicability of such exemption and (iii) that Employee
agrees that the certificates evidencing such shares shall bear a legend to the
effect of the foregoing.
15. This Agreement is subject to all terms, conditions, limitations
and restrictions contained in the Plan, which shall be controlling in the event
of any conflicting or inconsistent provisions.
16. This Agreement is not a contract of employment and the terms of
Employee's employment shall not be affected hereby or by any agreement referred
to herein except to the extent specifically so provided herein or therein.
3
<PAGE> 4
Nothing herein shall be construed to impose any obligation on the Company to
continue Employee's employment, and it shall not impose any obligation on
Employee's part to remain in the employ of the Company.
17. Employee acknowledges and agrees that neither the Company, its
shareholders nor its directors and officers, has any duty or obligation to
disclose to Employee any material information regarding the business of the
Company or affecting the value of the Common Stock before or at the time of a
termination of the employment of Employee by the Company, including, without
limitation, any information concerning plans for the Company to make a public
offering of its securities or to be acquired by or merged with or into another
firm or entity.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
AVATAR HOLDINGS INC.
By: /s/ Gerald Kelfer
-----------------------------------
Name: Gerald Kelfer
Title: Chief Executive Officer
ACCEPTED:
/s/ Deborah G. Tomusko
- ----------------------
Deborah G. Tomusko
4
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 179,284
<SECURITIES> 0
<RECEIVABLES> 19,690
<ALLOWANCES> (9,860)
<INVENTORY> 154,103
<CURRENT-ASSETS> 0
<PP&E> 20,099
<DEPRECIATION> 0
<TOTAL-ASSETS> 428,243
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 115,351
0
0
<COMMON> 9,170
<OTHER-SE> (480)
<TOTAL-LIABILITY-AND-EQUITY> 428,243
<SALES> 100,970
<TOTAL-REVENUES> 106,992
<CGS> 90,524
<TOTAL-COSTS> 101,892
<OTHER-EXPENSES> 6,067
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,301
<INCOME-PRETAX> 5,100
<INCOME-TAX> (1,978)
<INCOME-CONTINUING> 3,122
<DISCONTINUED> 94,272
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 97,394
<EPS-BASIC> 10.62
<EPS-DILUTED> 10.62
<FN>
<F1>Total Current Assets and Total Current Liabilities are not applicable
because Registrant does not present a classified balance sheet.
</FN>
</TABLE>
