<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
AVATAR HOLDINGS INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
AVATAR
HOLDINGS INC.
201 Alhambra Circle
Coral Gables, Florida 33134
(305) 442-7000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 25, 2000
To the Stockholders of Avatar Holdings Inc.:
The Annual Meeting of Stockholders of Avatar Holdings Inc. will be held at
the Hyatt Regency Coral Gables, 50 Alhambra Plaza, Coral Gables, Florida on May
25, 2000, at 10:00 a.m. local time, for the following purposes:
1. To elect nine directors.
2. To consider and vote upon a proposal to amend Avatar's Restated
Certificate of Incorporation to increase the number of authorized shares
of Common Stock from 15,500,000 to 50,000,000 and the number of
authorized shares of Preferred Stock from 5,000,000 to 10,000,000.
3. To approve the appointment of Ernst & Young LLP, independent
accountants, to act as auditors for Avatar for the year ending December
31, 2000.
4. To transact such other business as properly may come before the meeting,
or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on March 31, 2000 as
the record date for the determination of stockholders entitled to receive notice
of, and to vote at, the Annual Meeting or any adjournment or adjournments
thereof.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE
POSTAGE-PREPAID ENVELOPE PROVIDED FOR YOUR CONVENIENCE. IF YOU ATTEND THE ANNUAL
MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON IF YOU WISH.
By Order of the Board of Directors,
Juanita I. Kerrigan
Vice President and Secretary
Dated: April 27, 2000.
<PAGE> 3
AVATAR HOLDINGS INC., 201 ALHAMBRA CIRCLE, CORAL GABLES, FLORIDA 33134
(305) 442-7000
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 25, 2000
This Proxy Statement and the enclosed form of proxy are furnished to the
stockholders of Avatar Holdings Inc., a Delaware corporation ("Avatar"), in
connection with the solicitation of proxies by and on behalf of the Board of
Directors of Avatar for use at the Annual Meeting of Stockholders to be held at
the place and time and for the purposes set forth in the annexed Notice of
Annual Meeting of Stockholders.
VOTING RIGHTS AND PROXY INFORMATION
Record Date; Voting Rights
Pursuant to the By-Laws of Avatar, the Board of Directors has fixed the
close of business on March 31, 2000 as the record date for the determination of
stockholders entitled to notice of and to vote at the meeting or any adjournment
or adjournments thereof.
At the close of business on March 31, 2000, 8,405,938 shares of Common
Stock, $1.00 par value, of Avatar ("Common Stock"), which constitutes the only
class of voting securities of Avatar, were outstanding and entitled to vote. For
each share of Common Stock held of record as of the close of business on March
31, 2000, stockholders are entitled to one vote, except in regard to the
election of directors, for which there will be cumulative voting as described
under the heading "Election of Directors." In accordance with Avatar's By-Laws,
the holders of a majority of the outstanding shares of Common Stock, present in
person or represented by proxy, will constitute a quorum for the transaction of
business at the Annual Meeting.
At the close of business on March 31, 2000, $112,367,000 principal amount
of Avatar's 7% Convertible Subordinated Notes due 2005 (the 7% Notes") were
outstanding which are in the aggregate convertible into an aggregate of
3,533,553 shares of Common Stock. Ownership of 7% Notes does not entitle any
holder thereof to any voting rights in connection with this Annual Meeting of
Stockholders.
Proxies
When a proxy is received, properly executed, in time for the Annual
Meeting, the shares represented thereby will be voted at the meeting as
directed. If no such direction is specified, such shares will be voted: (1) FOR
the election as directors of Avatar of the nine nominees named therein; (2) FOR
approval of the proposal to amend Avatar's Restated Certificate of
Incorporation; (3) FOR approval of the appointment of Ernst & Young LLP,
independent accountants, as auditors of Avatar for the year ending December 31,
2000; and (4) in connection with the transaction of such other business as
properly may come before the meeting in accordance with the judgment of the
person or persons voting the proxy. Any stockholder who executes a proxy may
revoke it at any time prior to its exercise by giving written notice of such
revocation to the Secretary of Avatar. In addition, a stockholder who attends
the meeting may vote in person, thereby cancelling any proxy previously given by
such stockholder.
Nominees for director will be elected by a plurality of the votes cast at
the Annual Meeting by the holders of Common Stock present in person or by proxy
and entitled to notice of, and to vote at, the Annual Meeting. Consequently,
only shares that are voted in favor of a particular nominee will be counted
toward such nominee's achievement of a plurality. Shares present at the meeting
that are not voted for a particular nominee or shares present by proxy where the
stockholder properly withheld authority to vote for such nominees (including
broker non-votes) will not be counted toward such nominee's achievement of a
plurality.
1
<PAGE> 4
The affirmative vote of a majority of the outstanding shares of Common
Stock is necessary to approve the proposal to amend Avatar's Restated
Certificate of Incorporation. Abstentions and broker non-votes will have the
same effect as votes against the proposal. The affirmative vote of a majority of
the shares of Common Stock present in person or by proxy and entitled to notice
of, and to vote at, the Annual Meeting is necessary to ratify the appointment of
Ernst & Young LLP as auditors for the year ending December 31, 2000. Abstentions
will have the same effect as votes against the proposal because the shares are
considered present at the meeting but are not affirmative votes, and broker
non-votes will not be counted in respect of the proposal.
This proxy statement and the form of proxy enclosed herewith, and the
accompanying Annual Report of Avatar for the fiscal year ended December 31,
1999, including financial statements, were first mailed to stockholders of
record as of the close of business on March 31, on or about April 27, 2000.
PRINCIPAL STOCKHOLDERS AND SECURITY
OWNERSHIP OF MANAGEMENT
Principal Stockholders
The following table sets forth, as of March 31, 2000, information with
respect to each person or entity known by the Board of Directors to be the
beneficial owner of more than 5% of the outstanding Common Stock. Except as
otherwise indicated, all shares are owned directly.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Odyssey Partners, 31 West 52nd Street 2,107,763(2)(3) 25.1%
L.P. New York, NY 10019
KeyBank National 127 Public Square 781,777(4) 9.0%
Association Cleveland, Ohio 44114
Sterling Capital 301 South College Street, #3200 503,130(5) 6.0%
Management Charlotte, NC 28202
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated pursuant to Rule 13d-3(d) of the Exchange Act. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants, rights
or conversion privileges exercisable within 60 days are deemed outstanding for
the purpose of calculating the number and percentage owned by such person, but
not deemed outstanding for the purpose of calculating the percentage owned by
each other person listed.
(2) Does not include shares owned by Leon Levy, who is Chairman of the
Board and a member of the Executive Committee of Avatar and is a general partner
of Odyssey Partners, L.P., a Delaware limited partnership ("Odyssey"). Mr. Levy,
Jack Nash, Stephen Berger, Joshua Nash, Brian Wruble and Nash Family
Partnership, L.P., by virtue of being general partners of Odyssey, share voting
and dispositive power with respect to the Common Stock owned by Odyssey and,
accordingly, may each be deemed to own beneficially the Common Stock owned by
Odyssey. Each of the aforesaid persons has expressly disclaimed any such
beneficial ownership (within the meaning of Exchange Act Rule 13d-3(d)(1)) which
exceeds the proportionate interest in the Common Stock which he or it may be
deemed to own as a general partner of Odyssey. Avatar has been advised that no
other person exercises (or may be deemed to exercise) any voting or investment
control over the Common Stock owned by Odyssey. Odyssey is a private investment
2
<PAGE> 5
partnership. Mr. Levy's ownership of Common Stock is indicated in the table
included in "Security Ownership of Management."
(3) By virtue of its present Common Stock ownership, Odyssey may be deemed
to be a "control" person of Avatar within the meaning of that term as defined in
Rule 12b-2 under the Securities Exchange Act of 1934, as amended.
(4) Includes 2,175 shares held and 39,308 shares issuable on conversion of
$1,250,000 principal amount of 7% Notes held by KeyBank and 494,325 shares held
and 248,144 shares issuable upon conversion of $7,891,000 principal amount of 7%
Notes held by Spears, Benzak, Salomon & Farrell, Inc. (a registered investment
adviser). The information as to securities owned was furnished to Avatar by
KeyBank and Spears, Benzak. Based upon information set forth in the Schedule
13G, dated February 14, 2000, as amended on February 28, 2000, filed by
KeyCorp., the parent holding company of KeyBank and Spears, Benzak, such 7%
Notes and such shares are held for the benefit of various clients; KeyBank has
sole voting power with respect to such shares and 7% Notes and sole dispositive
power with respect to such 7% Notes; and Spears, Benzak has revocable
dispositive and voting power with its clients.
(5) The information as to shares of Common Stock was furnished to Avatar by
Sterling Capital (a registered investment adviser), which firm has sole voting
and dispositive power with respect to such shares.
Securities Ownership of Management
The following table sets forth, as of March 31, 2000, information with
respect to the outstanding shares of Common Stock beneficially owned by each
present director, nominee for director, by each of the Named Executive Officers
identified herein under the caption "Summary Compensation Table," and by all
present directors and executive officers of Avatar as a group. Except as
otherwise indicated, all shares are owned directly.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OR GROUP BENEFICIAL OWNERSHIP(1)(2) CLASS(2)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Leon Levy 3,014,689(3) 33.4%
Milton Dresner 3,644(4) *
Gerald D. Kelfer 144,433(5) 1.7%
Martin Meyerson 2,347(6) *
Gernot H. Reiners 628(7) *
Kenneth T. Rosen 1,000 *
Fred Stanton Smith 1,943(8) *
William G. Spears 45,820(9) *
Henry King Stanford 200 *
Jonathan Fels 21,383(10) *
Michael Levy 22,012(11) *
Michael S. Rubin 16,667(12) *
Dennis J. Getman 3,334(12) *
Lawrence R. Sherry None *
All directors and executive officers
as a group (consisting of 16
persons of whom 15 beneficially
own shares of Common Stock) 3,278,571(3)(4)(5)(6)(7)(8)(9)(10)(11)(12) 35.4%
- --------------------------------------------------------------------------------------------------
</TABLE>
* Represents less than one percent.
(1) The information as to securities owned by directors, officers and
nominees was furnished to Avatar by such directors, officers and nominees.
(2) Calculated pursuant to Rule 13d-3(d) of the Exchange Act. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants, rights
or conversion privileges exercisable within 60 days are deemed outstanding for
the purpose of calculating the number and percentage
3
<PAGE> 6
owned by such person, but not deemed outstanding for the purpose of calculating
the percentage owned by each other person listed. As of March 31, 2000, there
were 8,405,938 shares of Common Stock outstanding.
(3) Includes 2,107,763 shares owned by Odyssey. Mr. Levy is a general
partner of Odyssey and therefore may be deemed to own beneficially the shares of
Common Stock owned by Odyssey. See Notes (2) and (3) to the preceding table
included in "Principal Stockholders." Also includes 628,930 shares issuable upon
conversion of $20,000,000 principal amount of 7% Notes owned by Mr. Levy.
(4) Includes 3,144 shares issuable upon conversion of $100,000 principal
amount of 7% Notes.
(5) Includes 135,000 shares issuable upon exercise of options which are
exercisable as of February 13, 2000 and 9,433 shares issuable upon conversion of
$300,000 principal amount of 7% Notes.
(6) Does not include 847 shares owned by Mr. Meyerson's wife, as to which
shares Mr. Meyerson disclaims beneficial ownership.
(7) Represents shares issuable upon conversion of $20,000 principal amount
of 7% Notes.
(8) Includes 943 shares issuable upon conversion of $30,000 principal
amount of 7% Notes.
(9) Does not include 1,000 shares owned by Mr. Spears' wife for her own
account, as to which shares Mr. Spears disclaims beneficial ownership. Includes
16,000 shares held and 10,220 shares issuable upon conversion of $325,000
principal amount of 7% Notes held by an individual profit sharing plan, a
charitable remainder trust and a family foundation, over which shares Mr. Spears
has either sole or shared voting and investment power. Does not include 169,883
shares held and 209,465 shares issuable upon conversion of $6,661,000 principal
amount of 7% Notes held by W.G. Spears Grisanti & Brown LLC, a registered
investment adviser, of which Mr. Spears is Managing Partner.
(10) Represents 16,667 shares issuable upon exercise of options which are
exercisable as of February 19, 2000 and 4,716 shares issuable upon conversion of
$150,000 principal amount of 7% Notes.
(11) Represents 16,667 shares issuable upon exercise of options which are
exercisable as of February 19, 2000 and 5,345 shares issuable upon conversion of
$170,000 principal amount of 7% Notes.
(12) Represents 16,667 and 3,334 shares issuable upon exercise of options
which are exercisable as of February 19, 2000.
1. ELECTION OF DIRECTORS
Nine directors are to be elected for the ensuing year and until their
respective successors are duly elected and qualified. Stockholders have
cumulative voting rights with respect to election of directors. Under cumulative
voting, each stockholder is entitled to the same number of votes per share as
the number of directors to be elected (or, for purposes of this election, nine
votes per share). A stockholder may cast all such votes for a single nominee or
distribute them among the nominees, as he wishes, either by so marking his
ballot at the meeting or by specific voting instructions sent to Avatar with a
signed proxy. In connection with the solicitation of proxies, discretionary
authority to cumulate votes is being solicited. Unless authority to vote for the
nominees for director is withheld, it is the intention of the persons named in
the accompanying proxy to vote the proxies in such manner as will elect as
directors the nominees named below.
All of the nominees were elected at the May 27, 1999 Annual Meeting of
Avatar's Stockholders. The Board of Directors met six times during 1999,
including the annual meeting of directors held immediately following the 1999
Annual Meeting of Stockholders.
4
<PAGE> 7
The Board of Directors does not contemplate that any of the persons named
below will be unable, or will decline, to serve. However, if any of such persons
is unable or declines to serve, the persons named in the accompanying proxy may
vote for another person or persons in their discretion.
The following table sets forth certain information with respect to each
nominee for director. Except as otherwise indicated, each nominee has held his
present occupation or occupations for more than the past five years and has not
been principally employed by any subsidiary or affiliate of Avatar. There are no
family relationships between any nominee, director or executive officer of
Avatar.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME AGE OCCUPATIONS AND DIRECTORSHIPS
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
Leon Levy 74 Chairman of the Board of Avatar since January 22, 1981;
Director since General Partner, Odyssey Partners, L.P., a private
September 1980 investment partnership; Chairman of the Board of
Oppenheimer funds; former Chairman of the Board
(1974-1985) of Oppenheimer Management Corp.
- --------------------------------------------------------------------------------------------------
Gerald D. Kelfer 54 Vice Chairman of the Board of Avatar since December 1996,
Director since Chief Executive Officer since July 31, 1997, President
October 1996 since February 13, 1997 and Chairman of the Executive
Committee since May 27, 1999; formerly a principal in
Odyssey Partners, L.P., from July 1994 to February 1997;
and Executive Vice President, Senior General Counsel and
Director of Olympia & York Companies, from 1985 to 1994.
- --------------------------------------------------------------------------------------------------
Milton Dresner 74 Founding Partner, The Highland Companies, since 1960, a
Director since diversified real estate development and management organi-
July 1995 zation; Director: Childtime Childcare, BioTime, Inc.
- --------------------------------------------------------------------------------------------------
Martin Meyerson 77 President Emeritus and Professor of Policy and Planning,
Director since University of Pennsylvania, since February 1981, and
May 1981 President thereof from 1970 to 1981; President, FISCIT
(Switzerland/U.S.); also, Chairman, University of
Pennsylvania Foundation; Chairman, Marconi International
Foundation.
- --------------------------------------------------------------------------------------------------
Gernot H. Reiners 58 Principal, Sage Consult L.L.C., a real estate and
Director since financial consulting business, since January 1998;
October 1997 partner, Real Estate Capital Partners, a real estate
advisory and management firm, from September 15, 1997 to
December 1998; former Managing Partner and a member of the
Board of Managers of BHF-BANK AG from May 1992 to March
1997 and Co-Manager of the Bank's New York Branch from
March 1987 to May 1992.
- --------------------------------------------------------------------------------------------------
Kenneth T. Rosen 51 Professor of Business Administration, since 1979, and
Director since Chairman of the Fisher Center for Real Estate and Urban
September 1994 Economics, since 1981, University of California, Berkeley;
also President, Rosen Consulting Group, a real estate
consulting business, since 1990, and Chief Executive
Officer of Lend Lease Rosen Real Estate Securities, a
registered investment adviser, since February 1995;
Director: Golden West Financial Corporation, The PMI
Group, Inc.
- --------------------------------------------------------------------------------------------------
Fred Stanton Smith 71 Vice Chairman of the Board, The Keyes Company, a real
Director since estate brokerage, financing, management, insurance and de-
September 1980 velopment firm, since January 28, 1992; formerly
President, The Keyes Company; Director, Eagle National
Bank.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME AGE OCCUPATIONS AND DIRECTORSHIPS
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
William G. Spears 61 Principal, W.G. Spears, Grisanti & Brown LLC, a registered
Director since investment adviser, since July 1, 1999; formerly Chairman
May 1999 of the Board, from 1972 to June 30, 1999, Spears, Benzak,
Salomon & Farrell, Inc., a registered investment adviser,
which in April 1995 became a wholly-owned subsidiary of
KeyCorp; also, Chairman of the Board, Key Asset Management
(a subsidiary of KeyCorp), a registered investment
adviser, since August 1996; Director: United HealthGroup,
Alcide Corporation.
- --------------------------------------------------------------------------------------------------
Henry King Stanford 84 President Emeritus, The University of Miami since July
Director since 1981, and President Emeritus, University of Georgia since
September 1980 July 1987; formerly President, The University of Miami,
from July 1962 to June 1981; also formerly Interim
President, University of Georgia, from July 1986 to June
1987.
</TABLE>
6
<PAGE> 9
INFORMATION REGARDING THE BOARD OF DIRECTORS
Certain Committees of the Board
To assist it in carrying out its duties, the Board of Directors has
established an Executive Committee, an Audit Committee, a Community Affairs
Committee and an Incentive Plan Committee, the current members of which are as
follows:
<TABLE>
<CAPTION>
COMMUNITY AFFAIRS
EXECUTIVE COMMITTEE AUDIT COMMITTEE COMMITTEE INCENTIVE PLAN COMMITTEE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gerald D. Kelfer(1)(2) Kenneth T. Rosen(1) Henry King Stanford(1) William G. Spears(1)
Leon Levy(2) Milton Dresner Martin Meyerson Milton Dresner
Fred Stanton Smith Martin Meyerson Fred Stanton Smith Kenneth T. Rosen
Fred Stanton Smith
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Chairman
(2) Officer of Avatar
The Board of Directors has not established a Nominating Committee. As more
fully described below, the Executive Committee ordinarily performs the functions
of a compensation committee.
Executive Committee
The Executive Committee of the Board of Directors has authority to exercise
most powers of the full Board of Directors in connection with matters which
arise during the intervals between meetings of the Board of Directors. In
addition to such other functions as are assigned to it from time to time by the
Board of Directors, the Executive Committee also reviews and approves or
recommends to the Board the compensation and terms of employment of all officers
and employees of Avatar and its subsidiaries whose base salaries exceed $100,000
per annum. The Executive Committee met four times during the fiscal year ended
December 31, 1999.
Audit Committee
The Audit Committee of the Board of Directors recommends to the Board of
Directors the appointment of the independent auditors, subject to approval by
the stockholders of Avatar; reviews the independent auditors' report and
management letters and reports to the Board of Directors with respect thereto;
reviews with the internal auditors Avatar's accounting policies and procedures,
including its internal accounting controls and internal auditing procedures;
determines whether there are any conflicts of interest in financial or business
matters between Avatar and any of its officers or employees; and reviews the
recommendations of the independent auditors. The Audit Committee also performs
such other tasks as are assigned to it from time to time by the Board of
Directors. The Audit Committee met four times during the fiscal year ended
December 31, 1999.
Community Affairs Committee
The Community Affairs Committee of the Board of Directors monitors the
reputation and standing in the community of Avatar and its various subsidiaries
and divisions, and oversees the interaction of Avatar with the community. The
Community Affairs Committee also performs such other tasks as are assigned to it
from time to time by the Board of Directors. The Community Affairs Committee met
twice during the fiscal year ended December 31, 1999.
Incentive Plan Committee
The Incentive Plan Committee of the Board of Directors administers the 1997
Incentive and Capital Accumulation Plan (the "Incentive Plan") and approves
grants thereunder. The Incentive Plan Committee selects the officers and other
key employees to receive grants and determines the form, amount and other terms
and conditions of grants. The Incentive Plan Committee met once during the
fiscal year ended December 31, 1999.
7
<PAGE> 10
Directors' Compensation
Compensation of directors who are not salaried employees of Avatar is
$17,500 per annum. A member of the Executive Committee who is not a salaried
employee of Avatar receives a fee of $500 for attendance at each meeting.
Members and the Chairman of the Audit Committee receive additional compensation
of $12,000 and $14,000 per annum, respectively. Members and the Chairman of the
Community Affairs Committee receive additional compensation of $2,000 per annum
plus a fee of $500 for attendance at each meeting. Members and the Chairman of
the Incentive Plan Committee receive additional compensation of $1,000 per annum
plus a fee of $500 for attendance at each meeting.
Directors' Attendance
In fiscal year 1999 all of the incumbent directors attended 75% or more of
the aggregate of their respective Board and Committee meetings.
8
<PAGE> 11
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table sets forth information with respect to compensation of
the Chief Executive Officer and five other highest paid executive officers of
Avatar whose total salary and bonus was $100,000 or more for the year ended
December 31, 1999 (these six executive officers being hereinafter referred to as
the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- ---------------
OTHER(1) RESTRICTED SECURITIES
NAME AND PRINCIPAL ANNUAL STOCK UNDERLYING
POSITION(S) YEAR SALARY BONUS COMPENSATION AWARDS($) OPTIONS(#)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gerald D. Kelfer(3) 1999 $487,692(4) $1,500,000(4)(5) $ --
Chairman of the 1998 485,000(4) 500,000(4) -- $ 1,600,000(2)
Executive Committee, 1997 383,367(3) -- 44,513(6) 225,000
Chief Executive Officer
and President
- ------------------------------------------------------------------------------------------------------------------
Jonathan Fels(9) 1999 $304,808(4)(7) $ 285,000 50,000
President, Avatar 1998 311,538(4)(7) --
Properties Inc.
- ------------------------------------------------------------------------------------------------------------------
Michael Levy(9) 1999 $304,808(4)(7) $ 285,000 50,000
Executive Vice President 1998 311,538(4)(7) --
and Chief Operating
Officer, Avatar Properties
Inc.
- ------------------------------------------------------------------------------------------------------------------
Michael S. Rubin(9) 1999 $275,000(4) $ 5,000 50,000
President, Avatar 1998 226,442(4) 75,000(8)
Retirement Communities,
Inc.
- ------------------------------------------------------------------------------------------------------------------
Dennis J. Getman 1999 $218,400 $ 135,500 10,000
Executive Vice President 1998 230,800 25,000
and General Counsel 1997 208,000 20,000
- ------------------------------------------------------------------------------------------------------------------
Lawrence R. Sherry(11) 1999 $275,000 $ 5,000
Executive Vice President
and Chief Financial
Officer
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
NAME AND PRINCIPAL ALL OTHER
POSITION(S) COMPENSATION(10)
- --------------------------------------------------------------
<S> <C>
Gerald D. Kelfer(3)
Chairman of the
Executive Committee,
Chief Executive Officer
and President
- --------------------------------------------------------------
Jonathan Fels(9)
President, Avatar
Properties Inc.
- --------------------------------------------------------------
Michael Levy(9)
Executive Vice President
and Chief Operating
Officer, Avatar Properties
Inc.
- --------------------------------------------------------------
Michael S. Rubin(9)
President, Avatar
Retirement Communities,
Inc.
- --------------------------------------------------------------
Dennis J. Getman $ 2,500
Executive Vice President 2,500
and General Counsel 2,375
- --------------------------------------------------------------
Lawrence R. Sherry(11)
Executive Vice President
and Chief Financial
Officer
- --------------------------------------------------------------
</TABLE>
(1) The Named Executive Officers also received automobile allowances and/or the
use of company-leased automobiles. Avatar also provides group life, health,
hospitalization and medical reimbursement plans which do not discriminate
in scope, terms or operation in favor of officers and are available to all
full-time employees. The aggregate value of these and any additional
perquisite and other personal benefits cannot be specifically or precisely
ascertained but do not, in any event, exceed 10% of the total annual salary
and bonus reported for each of the Named Executive Officers.
(2) On December 7, 1998, Mr. Kelfer was awarded an opportunity to receive
100,000 Performance Conditioned Restricted Stock Units, which are subject
to conditions of grant as well as vesting. See "Employment and Other
Agreements" below. The dollar amount reported in the table has been
calculated by multiplying the closing price of Avatar Common Stock on the
date of award by 100,000. At December 31, 1999, Mr. Kelfer continued to
hold the award, and the dollar amount calculated on such date was the same.
Mr. Kelfer is not entitled to receive dividends on the units.
(3) Includes director's fees of $2,598 paid prior to Mr. Kelfer's employment as
an executive officer. Mr. Kelfer has served as Chief Executive Officer
since July 31, 1997, as President since February 13, 1997, as Chairman of
the Executive Committee since May 27, 1999 and as a member of the Board
since October 1996 and as Vice Chairman thereof since December 1996. See
"Employment and Other Agreements" below.
(4) For discussion of Avatar's employment agreements with Messrs. Kelfer, Fels,
Levy and Rubin, see "Employment and Other Agreements" below.
(5) Includes success fee of $1 million paid to Mr. Kelfer following the April
15, 1999 sale of Avatar's utilities businesses under an agreement with Mr.
Kelfer dated December 7, 1998.
(6) Represents payments by Avatar of relocation expenses and temporary living
and commutation costs aggregating $29,432 and $15,081, respectively.
(7) For information with respect to transactions regarding Mr. Fels and Mr.
Levy see "Certain Relationships and Related Transactions."
(8) Represents salary adjustment retroactive to October 6, 1997, date of
employment. See "Employment and Other Agreements" below.
(9) Messrs. Fels, Levy and Rubin became executive officers on December 7, 1998.
(10) Reflects Avatar's contribution to the 401(k) Plan.
(11) Mr. Sherry was employed as Executive Vice President and Chief Financial
Officer effective January 4, 1999.
9
<PAGE> 12
Option/SAR Grants in 1999
The following table shows all grants of options to the Named Executive
Officers of the Corporation in 1999. No SARs were granted to any Named Executive
Officers during 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
----------------------------------------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS/SARS EMPLOYEES IN EXERCISE EXPIRATION PRESENT
NAME GRANTED(#) 1999 PRICE($/SH) DATE VALUE(2)(3)
---- ------------ ---------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gerald D. Kelfer........................ 0 --% $ -- -- $ --
Jonathan Fels........................... 50,000 26.3 25.00 2/19/09 424,500
Michael Levy............................ 50,000 26.3 25.00 2/19/09 424,500
Michael S. Rubin........................ 50,000 26.3 25.00 2/19/09 424,500
Dennis J. Getman........................ 10,000 5.3 25.00 2/19/09 84,900
Lawrence R. Sherry...................... 0 -- -- -- --
</TABLE>
- ------------------------
(1) For discussion of terms of options granted, see "Employment and Other
Agreements" below.
(2) Present value on the grant date was determined by using the Black-Scholes
option pricing model. The model assumed (i) a risk-free rate of return of
5.06%, which was the implied rate on 10-year U.S. Treasury 7 5/8% bonds on
the grant date; (ii) a stock price volatility of 31.3% and (iii) the
exercise of all options on the final day of their 10-year terms. No discount
from the theoretical value was taken to reflect the waiting period prior to
vesting, the limited transferability of the options, and the likelihood of
the options being exercised in advance of the final day of their terms.
(3) There is no assurance that the values actually realized upon the exercise of
these options will be at or near the present value shown in the table as of
the date of grant. The Black-Scholes option pricing model is a widely used
mathematical formula for estimating option values that incorporates various
assumptions that may not hold true over the 10-year life of these options.
For example, assumptions are required about the risk-free rate of return as
well as about the dividend yield on Common Stock and the volatility of the
Common Stock over the 10-year period. Also, the Black-Scholes model assumes
that an option holder can sell the option at any time at a fair price that
includes a premium for the remaining time value of the option. However, an
optionee can realize an option's value before maturity only by exercising
and thereby sacrificing the option's remaining time value. Although the
negative impact of this and other restrictions on the value of this type of
option is well recognized, there is no accepted method for adjusting the
theoretical option value for them. The values set forth in the table should
not be viewed in any way as a forecast of the performance of Avatar's Common
Stock, which will be influenced by future events and unknown factors.
Aggregated Option Exercises in 1999 and Option Values at December 31, 1999
During 1999 no options were exercised by any Named Executive Officer and no
options held by any Named Executive Officer were in-the-money at December 31,
1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT
DECEMBER 31, 1999(#)
-------------------------
NAME EXERCISABLE/UNEXERCISABLE
- ---- -------------------------
<S> <C>
Gerald D. Kelfer........................................ 90,000/135,000
Jonathan Fels........................................... 0/50,000
Michael Levy............................................ 0/50,000
Michael S. Rubin........................................ 0/50,000
Dennis J. Getman........................................ 0/10,000
Lawrence R. Sherry...................................... 0/0
</TABLE>
Employment and Other Agreements
Agreements With Gerald Kelfer
Employment
Gerald Kelfer, President, Chief Executive Officer, Chairman of the
Executive Committee and Vice Chairman of the Board, has an employment agreement
with Avatar, pursuant to which Mr. Kelfer currently receives an annual base
salary of $510,000, with mandatory annual increases in
10
<PAGE> 13
the amount of $20,000, and an annual bonus of $500,000. The employment agreement
provides for a five-year term, which expires on February 13, 2002.
If Mr. Kelfer's employment is terminated due to his disability or death, he
or his estate will receive his accrued but unpaid base salary and a prorated
bonus through the date of termination. If Mr. Kelfer resigns without good reason
or is terminated for cause, he is entitled to receive his base salary (but not
his bonus) through the date of termination. If Mr. Kelfer resigns for good
reason or is terminated without cause, he is entitled to receive his base salary
and bonus for the balance of the term of his employment agreement.
Nonqualified Stock Option
Pursuant to a Nonqualified Stock Option Agreement, on February 13, 1997 Mr.
Kelfer was granted options to purchase 225,000 shares of Avatar Common Stock
under the 1997 Incentive and Capital Accumulation Plan (the "Incentive Plan"),
which was approved by Avatar's stockholders at the 1997 Annual Meeting, at an
exercise price of $34.00 per share. Mr. Kelfer may pay the exercise price in
cash or by executing a non-recourse promissory note. Three-fifths of the options
were vested as of February 13, 2000 and an additional one-fifth of these options
will vest on each February 13 thereafter through 2002.
If Mr. Kelfer's employment is terminated due to his disability or death,
the options will remain exercisable for a period of one year following the date
of termination. If Mr. Kelfer resigns without good reason or is terminated for
cause, any unexercised options become null and void upon such termination.
Otherwise, the option will remain exercisable until February 13, 2007.
Restricted Stock Unit
Pursuant to the Amended and Restated 1997 Incentive and Capital
Accumulation Plan (the "Amended and Restated Incentive Plan") approved by
Avatar's stockholders at the 1999 Annual Meeting, on December 7, 1998 Avatar
entered into a restricted stock unit agreement with Mr. Kelfer pursuant to which
Mr. Kelfer has been awarded an opportunity to receive 100,000 performance
conditioned restricted stock units representing 100,000 shares of Avatar Common
Stock. The actual grant of the units is conditioned upon (i) the closing price
of Avatar Common Stock being at least $25.00 per share for 20 trading days out
of 30 consecutive trading days during the period beginning on the date
immediately following stockholder approval of the Amended and Restated Incentive
Plan (May 28, 1999) and ending on February 12, 2002 (the "Grant Period"), and
(ii) the continued employment of Mr. Kelfer at the time the foregoing condition
is satisfied. Any units granted to Mr. Kelfer vest in full on February 13, 2002
or upon the occurrence of a change in control of Avatar, provided that, in
either case, Mr. Kelfer is then employed by Avatar.
If Mr. Kelfer's employment is terminated due to his disability or death,
the units granted to him will vest pro rata based on the number of whole months
having elapsed during the Grant Period prior to Mr. Kelfer's disability or
death. If Mr. Kelfer resigns without good reason or is terminated for cause, all
of the units will be forfeited. Otherwise, the units immediately vest in full
upon termination of Mr. Kelfer's employment.
Employment Agreements with Jonathan Fels and Michael Levy
On December 4, 1997, Avatar acquired certain assets of Brookman-Fels, Jeff
Ian, Inc. (see "Certain Relationships and Related Transactions") and entered
into employment agreements with its principals. Jonathan Fels is employed as
President of Avatar Properties Inc. ("Properties") for a term of five years at a
base salary of $300,000 per annum subject to review and increase by the Board;
and Michael Levy is employed as Executive Vice President and Chief Operating
Officer of Properties for a term of five years at a base salary of $300,000 per
annum, subject to review and increase by the Board. Effective November 29, 1999,
base salaries of Mr. Fels and Mr. Levy were increased to $350,000 per annum.
11
<PAGE> 14
Pursuant to their employment agreements Messrs. Fels and Levy were entitled
to participate in certain future real estate transactions ("carried interest").
The employment agreements with Messrs. Fels and Levy were amended as of February
19, 1999, among other things, to terminate the "carried interest" provisions, in
lieu of which each of Messrs. Fels and Levy was granted an option to purchase
50,000 shares of Avatar Common Stock. (See "Nonqualified Stock Option Agreements
with Mr. Fels, Mr. Levy, Mr. Rubin and Mr. Getman" below.)
If the employment of Mr. Fels or Mr. Levy, as the case may be, is
terminated due to disability, death or resignation without good reason or
terminated by Avatar for cause, then he or his estate (in the event of his
death) will receive his accrued but unpaid base salary through the date of
termination. If Mr. Fels or Mr. Levy resigns for good reason or is terminated
without cause, he is entitled to receive his base salary for a period of six
months from the date of termination.
Employment Agreement with Michael S. Rubin
On October 3, 1997, Avatar acquired certain assets of Hilcoast Development
Corp. (the Developer of the Century Village concept of active adult communities)
and employed its principal officers. As of October 6, 1997, Avatar entered into
an employment agreement with Michael S. Rubin, pursuant to which Mr. Rubin was
employed as President of Avatar Retirement Communities, Inc. for a term of two
years at a base salary of $200,000 per annum in addition to the grant of stock
appreciation rights ("SARs") in Avatar Retirement Communities. As of February
19, 1999 the employment agreement was amended to, among other things: extend the
term of employment to October 6, 2002; ratify a salary adjustment to $275,000
retroactive to October 6, 1997; and terminate the SARs, in lieu of which Mr.
Rubin was granted an option to purchase 50,000 shares of Avatar Common Stock.
(See "Nonqualified Stock Option Agreements with Mr. Fels, Mr. Levy, Mr. Rubin
and Mr. Getman" below.)
If Mr. Rubin's employment is terminated due to his disability or death, he
or his estate will receive his accrued but unpaid base salary through the date
of termination. If Mr. Rubin resigns without good reason or is terminated for
cause, he is entitled to receive his base salary for a period of six months from
the date of termination. If Mr. Rubin resigns for good reason or is terminated
without cause, he is entitled to receive his base salary for a period of six
months from the date of termination.
Nonqualified Stock Option Agreements with Mr. Fels, Mr. Levy, Mr. Rubin and
Mr. Getman
Pursuant to separate nonqualified stock option agreements with Messrs.
Fels, Levy, Rubin and Getman, each of them was granted options to purchase
50,000, 50,000, 50,000 and 10,000, respectively, shares of Avatar Common Stock
under the Incentive Plan, at an exercise price of $25.00 per share. One-third of
the options granted to each of Messrs. Fels, Levy, Rubin and Getman vest on
February 19, 2000 and on each of the next two anniversaries thereof.
If the employment of Messrs. Fels, Levy or Rubin, as the case may be, is
terminated due to his disability or death, the options will remain exercisable
until the later of one year following the date of termination or the fifth
anniversary of the date he commenced employment with Avatar. If Messrs. Fels,
Levy or Rubin resigns without good reason or is terminated for cause, any
unexercised options become null and void upon such termination. If the
employment of Mr. Getman is terminated due to his disability or death, the
options will remain exercisable for one year following the date of termination.
If Mr. Getman resigns without good reason or is terminated for cause, any
unexercised options become null and void upon such termination. Otherwise, the
options will remain exercisable until February 13, 2007.
12
<PAGE> 15
Executive Committee, Incentive Plan Committee and Board of Directors Report on
Executive Compensation
The Executive Committee of Avatar's Board of Directors traditionally
performs the functions of a compensation committee, including the review and
approval of compensation and terms of employment for all officers and those
employees of Avatar and its subsidiaries whose base salaries exceed $100,000 per
annum. The compensation arrangements regarding any executive officer who is also
a member of the Executive Committee have been acted on and approved by the Board
of Directors (with such member not participating) or a committee thereof
composed of outside directors.
Avatar's executive compensation is intended to reward, retain and motivate
management. In determining salary levels and bonuses for the executive officers,
primary consideration is given to each executive's level of responsibility and
individual performance, as well as compensation generally received by executives
in the real estate business. In 1999, certain executives (other than Avatar's
CEO) received discretionary bonuses based on subjective factors. In awarding
these bonuses, the Executive Committee considered the successful efforts of
certain executives in guiding development and increasing profitability of
Avatar's real estate operations and selling certain of Avatar's non-core real
estate assets.
In 1998, Avatar retained a benefits consulting firm to review Avatar's
executive compensation policies. The Board of Directors and the Incentive Plan
Committee (a committee of outside Directors that administers Avatar's Incentive
Plan) reviewed the consulting firm's recommendations and analyses, which
included comparisons to other public companies in the real estate development
business, the recommendation of Avatar's CEO, and relevant accounting and
federal tax considerations. Following this study, it was determined that
additional incentives based on the value of Avatar's common stock were
appropriate for key executives. In December 1998, the Incentive Plan Committee
considered stock option grants to certain executives and key employees but
deferred action at that time pending the negotiation and resolution of
amendments to the employment arrangements with certain executives and key
employees. When these arrangements were completed in early 1999, the executives
were granted options to purchase an aggregate of 190,000 shares at an exercise
price of $25 per share. The last sale price on Nasdaq on the date of grant was
$18 31/32 per share.
CEO Compensation
In 1998, Gerald D. Kelfer, Avatar's CEO, was paid salary and a bonus in
accordance with terms of his employment agreement, which had been authorized by
the Incentive Plan Committee and ratified by the Board of Directors in 1997. The
amounts paid in 1998 were not discretionary or otherwise related to the
financial performance of Avatar.
In December 1998, Avatar's Board of Directors (without Mr. Kelfer)
authorized the payment of a fee to Mr. Kelfer of an amount up to $1 million if
he was successful in selling Avatar's Florida utilities businesses for a
specified minimum sales price prior to December 31, 1999. Payment of the success
fee was separate from the compensation payable under his employment agreement
and was also conditioned on Mr. Kelfer performing the services required of him
to the reasonable satisfaction of the Executive Committee. On April 15, 1999,
the sale transaction was consummated, and Mr. Kelfer earned the full amount of
the success fee.
13
<PAGE> 16
The Board considered a number of factors in determining the success fee
including the uniqueness and importance of the sale of these businesses to
Avatar's long-term business plans and the significance of Mr. Kelfer's role in
the sale process. Furthermore, the Board considered the analyses of a benefits
consulting firm retained by Avatar concerning precedents for the payment of this
type of fee as well as the reasonableness of the amount of the fee and the
conditions to its payment.
<TABLE>
<S> <C> <C>
March 23, 2000 EXECUTIVE COMMITTEE INCENTIVE PLAN COMMITTEE
Gerald D. Kelfer, Chairman William G. Spears, Chairman
Leon Levy Milton Dresner
Fred Stanton Smith Kenneth T. Rosen
BOARD OF DIRECTORS
(other than Gerald D. Kelfer)
Leon Levy, Chairman Kenneth T. Rosen
Milton Dresner Fred Stanton Smith
Martin Meyerson William G. Spears
Gernot H. Reiners Henry King Stanford
</TABLE>
Compensation Committee Interlocks and Insider Participation
The members of the Executive Committee are Messrs. Kelfer, Levy and Smith.
Mr. Kelfer serves as Chairman of the Executive Committee and as Vice Chairman of
the Board of Directors, Chief Executive Officer and President; and Mr. Levy
serves as Chairman of the Board of Directors. The members of the Incentive Plan
Committee are Messrs. Dresner, Rosen and Spears.
14
<PAGE> 17
Performance Graph
The following graph provides a comparison of the cumulative total returns
based on an investment of $100 after the close of the market on December 31,
1994 in Avatar's Common Stock, The Nasdaq Market Index, a composite peer group
index (the "Composite Peer Index") and a real estate subdividers and developers
index (the "Peer Index") for the periods indicated, in each case assuming
reinvestment of any dividends. The cumulative total returns for the Nasdaq
Market Index were prepared by Media General Financial Services, Inc. ("Media
General"). The Composite Peer Index is a combination of the Real Estate
Subdividers and Developers Index and the Water Utilities Index, each of which is
published by Media General. The cumulative total returns for each index were
prepared by Media General and were combined by Avatar to form the Composite Peer
Index based on the relative percentage of Avatar's assets applicable to each of
Avatar's lines of business (i.e., real estate and water utilities) at the end of
each year depicted in the graph. The Peer Index is the Real Estate Subdividers
and Developers Index published by Media General. The Peer Index reflects the
change in the Company's business following the sale by subsidiaries of
substantially all water and wastewater utilities operations in April 1999.
(Performance Graph)
<TABLE>
<CAPTION>
COMPOSITE PEER
AVATAR HOLDINGS, INC. NASDAQ INDEX PEER INDEX
--------------------- ------ -------------- ----------
<S> <C> <C> <C> <C>
1994 100.00 100.00 100.00 100.00
1995 92.11 129.71 118.72 114.86
1996 84.21 161.18 141.06 133.56
1997 74.84 197.16 191.41 184.04
1998 42.11 278.08 183.56 135.45
1999 47.70 490.46 138.57 132.50
</TABLE>
Certain Relationships and Related Transactions
Leon Levy, Avatar's Chairman of the Board, has an agreement with Avatar
whereby Avatar provides Mr. Levy with certain registration rights, with respect
to Avatar's 7% Notes purchased by Mr. Levy in an underwritten public offering in
1998, any shares of Common Stock issued upon conversion of such 7% Notes and
certain shares of Common Stock owned by him.
On December 4, 1997, Avatar acquired certain assets of Brookman-Fels, Jeff
Ian, Inc. ("Brookman-Fels"), a regional developer of custom and semi-custom
homes and communities in South Florida, and entered into employment agreements
with its three principals. Two of the principals, Jonathan Fels and Michael
Levy, each own 45% of Brookman-Fels. The purchase price is payable in
installments from February 1, 1998 through November 1, 2002. Under the
acquisition agreement, as amended in 1999, the payment, including interest, of
$800,000, due November 1, 1999, was deferred and paid in January 2000; and the
outstanding principal balance is $1,905,000.
15
<PAGE> 18
On June 1, 1998, a newly-formed subsidiary of Avatar and a subsidiary of
Brookman-Fels formed a joint venture and entered into a construction management
agreement for Presidential Estates, a South Florida residential community. The
purchase price of $588,000 for a 49% interest in the joint venture and 50% of
the profits is represented by a promissory note, bearing interest at 8% per
annum, payable, together with accrued interest, upon the closing of agreed upon
units. Avatar's subsidiary manages construction at Presidential Estates.
2. AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors has authorized, subject to approval by the
stockholders at the Annual Meeting, an amendment to Article FOURTH of Avatar's
Restated Certificate of Incorporation (the "Restated Certificate") to increase
(i) the total number of shares of all classes of stock that Avatar is authorized
to issue from 20,500,000 to 60,000,000, (ii) the number of shares of Common
Stock that Avatar is authorized to issue from 15,500,000 to 50,000,000 and (iii)
the number of shares of Preferred Stock that Avatar is authorized to issue from
5,000,000 to 10,000,000. Under the proposed amendment, the first paragraph of
Article FOURTH of the Restated Certificate would be amended and restated to read
as follows:
"FOURTH: The Corporation shall be authorized to issue two classes of
stock to be designated, respectively, Common Stock and Preferred Stock; the
total number of shares of all classes of stock which the Corporation shall
have authority to issue shall be sixty million (60,000,000), of which the
total number of authorized shares of Common Stock shall be fifty million
(50,000,000) and the total number of shares of Preferred Stock shall be ten
million (10,000,000); and the par value of each share of Common Stock shall
be one dollar ($1.00) and the par value of each share of Preferred Stock
shall be ten cents ($.10). A statement of the voting powers and of the
designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions
thereof, of each class of stock is as follows:"
As of March 31, 2000, 8,405,938 shares of Common Stock were issued and
outstanding, 3,533,553 shares of Common Stock were reserved for issuance upon
conversion of Avatar's 7% Notes, and 750,000 shares of Common Stock were
reserved for issuance under Avatar's Incentive Plan. Therefore, at March 31,
2000, only 2,810,509 shares of Common Stock were available for future issuance
that were not otherwise reserved.
The Board of Directors believes that the number of authorized shares of
Common and Preferred Stock should be increased to provide sufficient shares for
a variety of corporate purposes. These purposes may include without limitation:
acquisitions of other businesses in exchange for shares of Common and/or
Preferred Stock; financing activities; and providing options or other stock
incentives to valuable employees, consultants or others.
If the amendment is approved by the stockholders, the Board of Directors
does not intend to solicit further stockholder approval prior to the issuance of
any additional shares of Common and/or Preferred Stock, except as may be
required by applicable law or the rules of The Nasdaq Stock Market. As presently
provided in the Restated Certificate, holders of Common Stock do not have any
preemptive rights in connection with the issuance of any shares of Avatar's
stock.
The potential future issuance of shares of Avatar's Common and/or Preferred
Stock authorized by the amendment may adversely affect the rights and interests
of stockholders of Avatar. The stockholders of Avatar may experience substantial
voting dilution upon the issuance of shares of Avatar's Common Stock authorized
by the Amendment.
The Board of Directors is not proposing the increase in the authorized
number of Avatar's shares with the intention of using the shares for
anti-takeover purposes. It is possible, however, that
16
<PAGE> 19
the additional shares could be used to discourage an attempt to acquire or to
takeover Avatar, but Avatar has no present intention to do so.
The affirmative vote of the holders of not less than a majority of the
outstanding shares of Common Stock will be required for approval of the proposed
amendment to Article FOURTH of the Restated Certificate. If approved by the
stockholders, this amendment will become effective upon its filing with the
Secretary of State of Delaware.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE ACCOMPANYING PROXY BE VOTED FOR
SUCH APPROVAL AND IT IS INTENDED THAT THE PROXIES WILL BE VOTED IN SUCH MANNER
UNLESS OTHERWISE DIRECTED.
17
<PAGE> 20
3. APPOINTMENT OF AUDITORS
Ernst & Young LLP, independent accountants, audited the financial
statements of Avatar for the fiscal year ended December 31, 1999. Such audit
services consisted of the firm's examination of and report on the annual
financial statements and assistance and consultation in connection with filings
with the Securities and Exchange Commission and other matters.
Representatives of Ernst & Young LLP are expected to attend the Annual
Meeting, will have the opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions.
Based upon the recommendation of the Audit Committee, and subject to
approval by the stockholders, the Board of Directors has appointed Ernst & Young
LLP, independent accountants, as auditors of Avatar for the fiscal year ending
December 31, 2000. Approval by the stockholders will require the affirmative
vote of a majority of the votes present at the meeting in person or by proxy and
entitled to be cast. The Board of Directors recommends that the accompanying
proxy be voted FOR such approval and it is intended that the proxies will be
voted in such manner unless otherwise directed.
STOCKHOLDERS' PROPOSALS AND NOMINATIONS OF BOARD MEMBERS
If a stockholder intends to present a proposal for action at the 2001
Annual Meeting and wishes to have such proposal considered for inclusion in
Avatar's proxy materials in reliance on Rule 14a-8 under the Securities Exchange
Act of 1934, the proposal must be submitted in writing and received by the
Secretary of the Company by December 29, 2000. Such proposal must also meet the
other requirements of the rules of the Securities and Exchange Commission
relating to stockholders' proposals.
Avatar's By-Laws establish an advance notice procedure with regard to
certain matters, including stockholder proposals and nominations of individuals
for election to the Board of Directors. In general, notice of a stockholder
proposal or a director nomination for an annual meeting must be received by
Avatar not less than 60 days nor more than 90 days prior to the anniversary date
of the preceding annual meeting of stockholders and must contain specified
information and conform to certain requirements, as set forth in the By-Laws. If
the chairman at any stockholders' meeting determines that a stockholder proposal
or director nomination was not made in accordance with the By-Laws, Avatar may
disregard such proposal or nomination.
In addition, if a stockholder submits a proposal outside of Rule 14a-8 for
the 2001 Annual Meeting, and the proposal fails to comply with the advance
notice procedure prescribed by the By-Laws, then Avatar's proxy may confer
discretionary authority on the persons being appointed as proxies on behalf of
the Board of Directors to vote on the proposal. Proposals and nominations should
be addressed to the Secretary of Avatar, Juanita I. Kerrigan, Avatar Holdings
Inc., 201 Alhambra Circle, Coral Gables, Florida 33134.
18
<PAGE> 21
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Avatar's
officers and directors, and any persons who own more than ten percent of
Avatar's Common Stock to file reports of initial ownership of Avatar's Common
Stock and subsequent changes in that ownership with the Securities and Exchange
Commission. Officers, directors and greater than ten-percent beneficial owners
are also required to furnish Avatar with copies of all Section 16(a) forms they
file. Based solely upon a review of the copies of the forms furnished to Avatar,
or written representations from certain reporting persons that no Forms 5 were
required, Avatar believes that during the 1999 fiscal year all Section 16(a)
filing requirements were complied with except that one report on Form 5 was not
timely filed by Fred Stanton Smith.
ADDITIONAL INFORMATION
All of the expenses involved in preparing, assembling and mailing this
Proxy Statement and the accompanying material will be paid by Avatar. In
addition to the solicitation of proxies by mail, Avatar will request brokers and
securities dealers to obtain proxies from and send proxy material to their
principals. Expenses incurred in this connection will be reimbursed by Avatar.
Proxies may be solicited personally, by telephone or telegraph, by the directors
and officers of Avatar without additional compensation. The Board of Directors
knows of no business to come before the meeting other than as stated in the
Notice of Annual Meeting of Stockholders. Should any business other than that
set forth in such Notice properly come before the meeting, or any adjournment or
adjournments thereof, it is the intention of the persons named in the
accompanying proxy to vote such proxy in accordance with their judgment on such
matters.
By Order of the Board of Directors,
Juanita I. Kerrigan
Vice President and Secretary
Dated: April 27, 2000.
19
<PAGE> 22
Notice of 2000
Annual Meeting
and Proxy
Statement
- --------------------------------------------------------------------------------
AVATAR
HOLDINGS INC.
<PAGE> 23
AVATAR HOLDINGS INC.
201 ALHAMBRA CIRCLE
CORAL GABLES, FLORIDA 33134
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gerald D. Kelfer and Juanita I. Kerrigan as
Proxies, each with the power to appoint his or her substitute; and hereby
authorizes them to represent and vote, as designated on the reverse side, all
the shares of Common Stock of Avatar Holdings Inc. held of record by the
undersigned at the close of business on March 31, 2000 at the Annual Meeting of
Stockholders to be held on May 25, 2000, or any adjournment or adjournments
thereof.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
(continued on next page)
<TABLE>
<S> <C> <C>
This proxy when properly executed will be voted in the Please mark X
manner directed herein by the undersigned stockholder. your votes
If no direction is made, this proxy will be voted FOR Items as
1, 2 and 3. indicated in
this example
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FOR AGAINST ABSTAIN
Item 1 -- ELECTION OF NINE FOR all nominees WITHHOLD Item 2 -- APPROVAL OF THE PROPOSAL TO / / / / / /
DIRECTORS listed at left AUTHORITY to AMEND ARTICLE FOURTH OF
Nominees: L. Levy, (except as vote for all AVATAR'S RESTATED
M. Dresner, G.D. Kelfer, marked to the nominees listed. CERTIFICATE OF
M. Meyerson, contrary below). INCORPORATION TO INCREASE
G.H. Reiners, THE NUMBER OF AUTHORIZED
K.T. Rosen, F.S. Smith, SHARES OF COMMON AND
W.G. Spears, PREFERRED STOCK.
H.K. Stanford
/ / / / Item 3 -- APPROVAL OF THE APPOINTMENT / / / / / /
OF ERNST & YOUNG, LLP,
INDEPENDENT ACCOUNTANTS, AS AUDITORS OF
AVATAR HOLDINGS INC. FOR
2000.
(INSTRUCTION: To withhold authority to vote for any individual Item 4 -- In their discretion the proxies are authorized to
nominee write that nominee's name in the space provided below.) vote upon such other business as may properly come
before the meeting.
- -------------------------------------------------------------
</TABLE>
Date: , 2000
--------------------------------------
(Signature)
--------------------------------------
(Signature if held jointly)
Please sign exactly as name appears.
When shares are held by joint tenants,
both should sign. When signing as
attorney, executor, administrator,
trustee, or guardian, please give full
title as such. If a corporation,
please sign in full corporate name by
President or other authorized officer.
If a partnership, please sign in
partnership name by authorized person.
