U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File Number 1-8631
DOVER INVESTMENTS CORPORATION
(Name of small business issuer in its charter)
DELAWARE 94-1712121
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
350 California Street, Suite 1650, San Francisco, California 94104
(Address of Principal Executive Offices) (Zip Code)
(415) 951-0200
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
None None
Securities registered under Section 12(g) of the Exchange Act:
Class A Common Stock, $.01 par value per share
(Title of class)
Class B Common Stock, $.01 par value per share
(Title of class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year, which is the year
ended December 31, 1994, were $9,086,889.
The aggregate market value of the voting stock held by non-affiliates,
computed by reference to the average bid and asked prices of the Class A
Common Stock and Class B Common Stock as of March 15, 1995, was
$1,122,358. The average bid and asked prices of Class A Common Stock and
Class B Common Stock were $2.25 and $2.25 per share, respectively, on that
date.
The number of shares outstanding of each of the issuer's classes of Common
Stock as of March 15, 1995, were as follows:
Title Shares Outstanding
Class A Common Stock .......................... 795,020
Class B Common Stock .......................... 327,338
Transitional Small Business Disclosure Statement
Yes No X
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Proxy Statement relating to the registrant's 1995
Annual Meeting of Stockholders are incorporated by reference into Part III of
this Report on Form 10-KSB.
TABLE OF CONTENTS
Page No.
PART I
ITEM 1. DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . . . 1
ITEM 2. DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . . 3
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . 3
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . 4
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . 6
ITEM 7. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . 8
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . 9
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 10. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . 9
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . 10
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K . . . . . . . . . . . 10
APPENDIX A. CONSOLIDATED FINANCIAL STATEMENTS OF DOVER INVESTMENTS
CORPORATION AND SUBSIDIARIES,
DECEMBER 31, 1994 AND 1993, AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Dover Investments Corporation as Thrift Holding Company
Dover Investments Corporation (the Company), formerly
Homestead Financial Corporation, previously owned all of the outstanding
stock of Homestead Savings, a Federal Savings and Loan Association (the
Association). (The term "the Company", as used herein, includes the Company
and all of its wholly-owned subsidiaries.) On August 6, 1991, the
Association completed the exchange of certain subordinated debentures for
convertible voting preferred stock of the Association. The exchange reduced
the Company's voting control of the Association to 20.7%.
On October 30, 1992, the Office of Thrift Supervision (OTS)
placed the Association in receivership with the Resolution Trust Corporation
(RTC) as receiver. Certain assets and liabilities of the Association were
transferred to a newly created federal savings association. The new
association was then placed in conservatorship and the RTC appointed as
conservator. The Company retains no interest in the Association or in the new
institution.
Current Operations
The Company engages primarily in developing single family
homes. It has phased out its trustee and insurance agency services.
Real Estate Development. In August 1988, the Association
acquired an option from the San Lorenzo Unified School District ("the
District") to acquire a 37 acre parcel of land in San Leandro, California.
As a result of regulatory limitations on the Association, the Association was
prohibited from exercising the option. On March 29, 1991, the Company
purchased the San Leandro property for $13.5 million from the District and
paid the Association $1.144 million, representing the difference between the
purchase price and the appraised value as determined by an appraiser
recommended by the OTS.
The Company continues to develop its 249 lot residential
project in San Leandro, California, known as Marina Vista. The Company has
improved 97 lots, and has built seventy houses. Aside from the four model
homes, which are not for sale, all but seven of the homes have been sold.
The Company has recently commenced construction on an additional 10 houses.
When the Company purchased the Marina Vista property, the District carried
back a $10 million mortgage loan secured by the property and the balance of
the purchase price consisted of cash generated from the liquidation of short-
term assets consisting of securities purchased under agreements to resell.
This mortgage loan has been paid down to $6 million. See "Item 6 --
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" for a description of this
loan. In addition to the release of the 97 lots which the Company has
improved, the District is further obligated pursuant to the terms of the
secured loan agreement to release an additional 33 lots from the lien of
their deed of trust for no additional consideration at such time as the
Company is ready to record its next subdivision map.
The real estate market for new homes in the San Francisco
Bay Area is highly competitive. Factors such as interest rates and general
economic conditions influence the prices at which the Company is able to sell
homes at Marina Vista. The Company has noted a slowing in the real estate
market since mid 1994 when interest rates on real estate loans began to
increase substantially.
In December 1993, the Company provided a developer, Westco
Community Builders, Inc. ("WCB"), with financing in the amount of $1,100,000
to acquire a parcel of land in Tracy, California. The loan was secured by
the real property. During 1994, the Company and WCB entered into a joint
venture, Glenbriar Joint Venture ("Glenbriar") for the development and sale
of the property. In September of 1994, WCB arranged for financing which paid
off the Company's loan in the amount of $1,100,000.
The Company expects that the Marina Vista project and the
Tracy project will provide a profit from the sale of homes and lots. The
Company expects to invest in other real estate projects when appropriate
opportunities occur and is not subject to any limitations on the percentage
of assets which may be invested in any single investment or type of
investment.
Other Assets. The Company also holds approximately $2.9
million of cash, cash equivalents, and securities purchased under agreement
to resell.
Regulation
Because the Company owned 100% of the outstanding common
stock of the Association, it was required to register as a savings and loan
holding company under the Home Owners' Loan Act of 1933, as amended, and the
regulations promulgated by the OTS at 12 CFR 584. Although the Company
neither has an interest in or exercises control of the Association, the OTS
takes the position that the Company continues to be registered as a savings
and loan holding company. As a result, the Company may be subject to the
examination, supervision and reporting requirements of the OTS and the
Federal Deposit Insurance Corporation (the FDIC).
The Company is evaluating the possibility of obtaining a
release from registration. There can be no assurance as to when, or if, the
OTS will approve a release, or what conditions might accompany such approval.
Employees
The Company currently has four full-time employees, all of
whom work at the Company's executive offices in San Francisco.
Leases
The Company entered into an agreement to sublease new
premises from a related party corporation for a term that commenced on April
1, 1993 and ends on February 15, 1999. The Company's share of the sublease
equals 46% of rent expenses which approximates $2,876 per month for 1994.
The yearly operating cost increase equals 1.256 percent.
ITEM 2. DESCRIPTION OF PROPERTY
Information required by this item is incorporated by
reference to the information included under "Item 1 -- Description of
Business -- Current Operations -- Real Estate Development" and " -- Leases"
in this report.
ITEM 3. LEGAL PROCEEDINGS
The Company, as the parent company of a group of affiliated
corporations filing consolidated Federal income tax returns, is contingently
liable for any liabilities arising with respect to the Association from such
returns filed for tax years through August 6, 1991. The Internal Revenue
Service ("IRS") has completed examinations of all such federal income tax
returns from 1985 through 1990. The results of such examinations are as
follows: a deficiency of $97,265 for 1986 and a refund of $949,552 for 1985,
plus interest due to the IRS attributable to 1986 and later years, all of
which is attributable to the operations of the Association. There are no
deficiencies or refunds for 1988, 1989 or 1990. Although the interest
referred to above has not yet been calculated, it is anticipated that the
amount of such interest plus the 1986 deficiency will not exceed the amount
of the 1985 refund which has been approved. A refund of $2,854,669, plus
interest, for 1987 has been approved by the San Francisco Appeals Office of
the IRS. In March 1995, the Company received verbal notification from the
San Francisco Appeals Office of the IRS that the Congressional Joint
Committee on Taxation has approved the settlement for these years. This
refund is not attributable to the operations of the Association and will be
paid by the IRS directly to the Company.
In addition, the Company recovered an aggregate of
$2,700,000 advanced to the IRS by the Company on behalf of the Association,
together with interest.
The Franchise Tax Board ("FTB") of the State of California
has also made tax claims against the Company for certain years when combined
returns were filed with the Association. The RTC is handling these claims,
all of which are attributable to the operations of the Association. The FTB
and RTC have verbally advised representatives of the Company that the amount
of tax in controversy is now less than $1,000,000.
The Company filed a lawsuit against the RTC in 1994 based
on the RTC's disallowance of certain claims made against the RTC by the
Company in its capacity as a creditor of the Association. Substantially all
of the claims made by the Company against the RTC had to do with the
Company's potential liability to the IRS and FTB arising from the tax
controversies referred to above. Since the above-referenced IRS tax
controversies are now being resolved as set forth above, it is hoped that a
basis for settlement of the RTC lawsuit can be reached and documented.
The Company has an agreement to indemnify its directors who
formerly served as directors and/or officers of the Association and its
subsidiaries. The RTC, in a letter dated March 10, 1993, advised the present
and former directors and officers of the Association and its subsidiaries of
potential claims that the RTC may assert against them for the recovery of
losses suffered by the Association and its subsidiaries in connection with
certain specified actions and loan transactions. The Company maintained a
directors and officers liability insurance policy to cover such potential
liabilities. The Company cannot estimate at this time its liability under
the indemnity agreement nor can it estimate the extent of its insurance
coverage with respect to such potential claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information
Shares of the Class A Common Stock and the Class B Common
Stock are currently traded on the NASD OTC Bulletin Board under the symbols
DOVR-A and DOVR-B.
The high and low bid information for 1994 and 1993 are as
reported on the National Quotation Bureau Pink Sheets. The information has
been adjusted to reflect the 1-for-10 reverse stock split effected in May,
1993. Such bid quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not represent actual transactions.
CLASS A COMMON STOCK
High Low
Fiscal 1994 Quarter Ended:
March 31 1.750 1.375
June 30 2.750 2.250
September 30 4.000 3.500
December 31 2.625 2.125
Fiscal 1993 Quarter Ended:
March 31 0.700 0.700
June 30 1.000 1.000
September 30 1.000 1.000
December 31 0.500 0.500
CLASS B COMMON STOCK
High Low
Fiscal 1994 Quarter Ended:
March 31 1.750 1.375
June 30 2.750 2.250
September 30 4.000 3.500
December 31 2.625 2.125
Fiscal 1993 Quarter Ended:
March 31 0.700 0.700
June 30 1.000 1.000
September 30 1.000 1.000
December 31 0.500 0.500
Quasi-reorganization and Reverse Stock Split
In connection with the Company's change of business from a
savings and loan holding company to a builder of single family homes, the
Company, with the approval of its Board of Directors, adopted a quasi-
reorganization effective January 1, 1993. The quasi-reorganization, which
did not require the approval of the Company's stockholders, resulted in the
elimination of the accumulated deficit of $16,017,000, the cancellation of
the treasury stock having a cost of $14,526,000, a decrease in additional
paid-in capital of $30,512,000, a decrease in Class A Common Stock of
$25,000, and a decrease in Class B Common Stock of $6,000, but did not result
in any adjustments to the value of assets or liabilities. As part of the
plan, 2,479,929 Class A and 594,029 Class B Common Shares held by the Company as
treasury shares were cancelled.
The Board of Directors approved a 1-for-10 reverse stock
split of all shares of its Class A Common Stock and Class B Common Stock
outstanding as of the close of business on May 17, 1993. Each share of Class
A Common Stock outstanding on May 17, 1993, was converted into one-tenth of a
share of Class A Common Stock, and each share of Class B Common Stock was
converted into one-tenth of a share of Class B Common Stock. The Company
paid each stockholder who would have received a fraction of a share cash
equal to the average of the bid and ask prices of a share of the Class A
Common Stock or Class B Common Stock, as applicable, on the OTC Bulletin
Board at the close of business on May 17, 1993, multiplied by the number of
shares, resulting in the fractional interest.
Holders
As of March 15, 1995, there were 633 stockholders of record
of the Class A Common Stock and 190 stockholders of record of the Class B
Common Stock.
Dividends
The Company has not paid dividends on the Class A Common
Stock and Class B Common Stock since June 30, 1989 and presently has no
intention to pay dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Years Ended December 31, 1994 and 1993
The Company had net income of $248,000 for the year ended
December 31, 1994, compared to $358,000 for the year ended December 31, 1993.
The income was attributable to the sale of homes at the Marina Vista project.
The Company had operating profit of $359,000 in 1994 as
contrasted to an operating profit of $876,000 in 1993. In the year ended
December 31, 1994, the Company closed the sale of 26 homes, compared to 29
homes sold in the year ending December 31, 1993. Total sales were
$9,087,000, resulting in a gross profit of $2,028,000, ending December 31,
1994, a gross profit margin of 22 percent, compared to total sales of
$9,823,000, resulting in a gross profit of $2,524,000 ending December 31,
1993, a gross profit margin of 25 percent. The decrease in profit is
attributable to additional buyer incentives due to a decrease in demand
caused primarily by higher interest rates. Selling expenses of $865,000
include the costs of maintaining a sales office and the four model homes and
approximately $448,000 of fees payable to WCB. General and administrative
expenses increased by $59,000 in 1994. The increase resulted from payments
of Franchise Tax to the State of Delaware and legal fees.
Interest income in 1994 increased to $235,000 compared to
$49,000 in 1993. The increase was attributable to two sources; $110,000 was
received from the IRS as interest on the $2,700,000 refund discussed above
under "Item 3 -- Legal Proceedings" and $125,000 was attributable to the
Company investing its funds in overnight investments which are collateralized
by mortgage-backed certificates and are held on behalf of the Company by
dealers who arranged the transaction. At December 31, 1994, such overnight
investments, with a weighted average interest rate of 4.08% and a market
value of the underlying collateral of $2,500,000, totalled $2,400,000,
compared to $2,500,000 in 1993.
In 1992, the Company discontinued its insurance and trustee
activities, and, accordingly, had no loss in 1994, as compared to a loss of
$3,000 in 1993. The Company does not expect to have any revenues or incur
expenses from this source in future years.
Costs for the development of property and the building of
homes are capitalized during the construction period. Such costs include
expenditures for land, land improvements, model homes, capitalized interest,
and construction in progress. (See NOTE C to the Consolidated Financial
Statements). When a home is sold, cost of sales includes land, site
development, construction and financing costs.
Liquidity and Capital Resources
At December 31, 1994, the Company had total assets of
$29,818,000, as compared to total assets of $27,558,000 at December 31, 1993.
The cost of the Company's property being developed was $23,522,000 in 1994,
compared to $21,280,000 in 1993. Highly liquid assets were $2,873,000 at
December 31, 1994, compared to $4,683,000 at December 31, 1993. The decrease
is attributable to the additional investment in the property and the
reduction in notes payable.
The Company's total liabilities decreased to $14,206,000 at
December 31, 1994, compared to $15,711,000 at December 31, 1993. This
decrease was attributable primarily to a decrease in accrued interest and
other liabilities to $3,806,000, in 1994, from $4,127,000, in 1993, resulting
from accrued expenses relating to the Marina Vista and Tracy projects, a
$942,000 reduction in notes payable.
During 1994 and 1993, taxes payable decreased and
additional paid-in capital increased by $368,000 and $358,000, respectively,
resulting from the realization of a benefit from net operating loss
carryforwards arising in periods prior to the quasi-reorganization.
The increase in additional paid-in capital for the year
ended December 31, 1994, was a result of the recovery of the $2,700,000
advanced to the IRS by the Company on behalf of the Association, together
with $169,000 in accrued interest. The increase is related to the period
prior to the quasi-reorganization.
During 1992, the Company renegotiated several terms of the
$10,000,000 mortgage loan payable to the seller of the Marina Vista property.
The loan had been secured by a deed of trust which liened the entire Marina
Vista property and matured on March 21, 1994. The loan has been modified to
mature on March 29, 1997, with interim payments of principal as described
below, and the seller has released the first fifty-four lots (Phase I) from
the lien of its deed of trust without receiving any release price in
exchange. The release price on the balance of the lots securing the deed of
trust was adjusted accordingly. The Company has made the required principal
payment of $2,500,000 on September 29, 1994. The Company paid an additional
principal payment of $1,500,000 on December 6, 1994, therefore reducing the
required principal payment on September 29, 1995, to $1,000,000. The note
requires a principal payment of $2,500,000 on September 29, 1996, and the
balance of unpaid principal on March 29, 1997. The Company expects that the
construction and sale of the homes will be sufficient to pay down the
principal balance of the loan by the required dates, although no assurances
can be given in this regard. Interest on the loan at 12% per annum continues
to be payable quarterly.
During 1994, the Company's primary liquidity need was
funding development costs of the Marina Vista project, principal payments of
$4,000,000 and interest of $1,112,500 on the $10,000,000 loan.
During 1994, the Company borrowed a total of $2,500,000
from a private source to pay for construction costs and the 36 homes
completed at year end. The loan is secured by lots and homes under
construction and will be paid from the proceeds from the sale of homes. The
Company also has previously obtained an $800,000 loan secured by the four
model homes. These loans bear interest at the rate of prime plus 1.5 percent
per annum and 12 percent per annum, respectively, and mature on July 1, 1995,
and September 28, 1995, respectively.
The Company's primary source of liquidity during 1994 was
from the proceeds of home sales and the construction loans described above.
In addition to home sales proceeds, the Company may borrow funds from time to
time to develop fully both the Marina Vista and the Tracy projects.
ITEM 7. FINANCIAL STATEMENTS
The following consolidated financial statements of the
Company, as set forth on the pages indicated, are filed as part of this
report.
Index to Financial Statements
Report of Independent Certified Public Accountants . . . . . A-1
Consolidated Balance Sheets at December 31, 1994 and 1993 . A-2
Consolidated Statements of Income for the Years Ended
December 31, 1994 and 1993 . . . . . . . . . . . . . . . . . A-3
Consolidated Statement of Stockholders' Equity for the
Years Ended December 31, 1994 and 1993 . . . . . . . . . . . A-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994 and 1993 . . . . . . . . . . . . . . . . . A-5
Notes to Consolidated Financial Statements for the Years
Ended December 31, 1994 and 1993 . . . . . . . . . . . . . . A-6
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
The information required by this item is incorporated by
reference to the information set forth under the caption "Proposal 1 --
Election of Directors" contained in the Proxy Statement to be used by the
Company in connection with its 1995 Annual Meeting of Stockholders.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this item is incorporated by
reference to the information set forth under the caption "Compensation of
Executive Officers and Directors" contained in the Proxy Statement to be used
by the Company in connection with its 1995 Annual Meeting of Stockholders.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is incorporated by
reference to the information set forth under the caption "Security Ownership
of Certain Beneficial Owners and Management" contained in the Proxy Statement
to be used by the Company in connection with its 1995 Annual Meeting of
Stockholders.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by
reference to the information set forth under the caption "Certain
Transactions" contained in the Proxy Statement to be used by the Company in
connection with its 1995 Annual Meeting of Stockholders.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) The exhibits listed below are filed with this report.
Copies of such exhibits may be obtained without charge by
any stockholder upon request addressed to the Assistant
Secretary of the Company.
3.1 Restated Articles of Incorporation and
Restated By-Laws of the Company.
10.1 1982 Stock Option Plan.(1)
10.2 Form of Nonqualified Incentive Stock
Option Agreement.(1)
10.3 $10,000,000 Promissory Note Secured by
Deed of Trust dated March 29, 1991.(1)
10.4 Development Agreement dated November 15,
1991 between H.F. Properties, Ltd. and
Westco Marina, Inc., as amended.(1)
10.5 Tax Sharing Agreement dated November 20,
1989 among the Company, the Association,
Homestead Land Development Corporation and
Gramercy.(1)
10.6 Stock Option Plan for Nonemployee
Directors.(2)
10.7 Sublease Agreement dated April 1, 1993
between the Company and Wilfred, Inc.(2)
10.8 Extension and Modification Agreement for
Promissory Note and Deed of Trust dated
August 25, 1992.(2)
10.9 Partnership Agreement, Glenbriar Joint
Venture, dated January 7, 1994 between GIC
Investment Corporation and Westco
Community Builders.(3)
22.1 Subsidiaries of the registrant.(3)
24.1 Consent of Grant Thornton.
27.1 Financial Data Schedule for the Year Ended
December 31, 1994.
___________________
(1) - Incorporated by reference to the exhibit bearing
the same numerical description in the Company's
Annual Report on Form 10-K for the Year Ended
December 31, 1991.
(2) - Incorporated by reference to the Exhibit bearing
the same numerical description in the Company's
Annual Report on Form 10-KSB for the Year Ended
December 31, 1992.
(3) - Incorporated by reference to the Exhibit bearing
the same numerical description in the Company's
Annual Report on Form 10-KSB for the Year Ended
December 31, 1993.
(b) No reports on Form 8-K were filed with the Securities and
Exchange Commission during the fourth quarter of the year
ended December 31, 1994.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DOVER INVESTMENTS CORPORATION
Date: March 15, 1995 By: /s/ Lawrence Weissberg
Lawrence Weissberg
Chairman of the Board,
President and Chief
Executive Officer
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature Title Date
/s/ Arnold Addison Director March 15, 1995
(Arnold Addison)
/s/ Larry Freels Director March 15, 1995
(Larry Freels)
/s/ John Gilbert Director March 15, 1995
(John Gilbert)
/s/ Michael Raddie Director and Chief Financial March 15, 1995
(Michael Raddie) Officer
/s/ Lawrence Weissberg Director, Chairman of the March 15, 1995
(Lawrence Weissberg) Board, President and Chief
Executive Officer (Principal
Executive Officer and
Principal Accounting Officer)
/s/ Will C. Wood Director March 15, 1995
(Will C. Wood)
APPENDIX A
CONSOLIDATED FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
DOVER INVESTMENTS CORPORATION
AND SUBSIDIARIES
December 31, 1994 and 1993
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Dover Investments Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of
Dover Investments Corporation and Subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of income, stockholders' equity
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Dover Investments Corporation and Subsidiaries as of December 31, 1994 and
1993, and the consolidated results of their operations and their consolidated
cash flows for the years then ended in conformity with generally accepted
accounting principles.
GRANT THORNTON LLP
San Francisco, California
February 10, 1995
DOVER INVESTMENTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
(in thousands except share amounts)
ASSETS 1994 1993
Cash $ 381 $ 1,667
Restricted Cash 92 516
Securities Purchased under Agreement to Resell 2,400 2,500
Cash and Securities Held in Trust Account 2,500 -
Homes Held for Sale 1,291 1,409
Property Held for Development 22,231 19,871
Other Assets 923 1,595
Total Assets $29,818 $27,558
LIABILITIES AND STOCKHOLDERS' EQUITY
Income Taxes Payable $ 230 $ 242
Accrued Interest and Other Liabilities 3,576 4,127
Notes Payable 10,400 11,342
Total Liabilities 14,206 15,711
Minority Interest in Joint Venture 297 -
Stockholders' Equity
Class A Common Stock Par Value, $.01 Per Share-
Authorized 2,000,000 Shares; Issued 795,020
Shares at 12/31/94 and 793,914 Shares at 12/31/93 8 8
Class B Common Stock Par Value, $.01 Per Share-
Authorized 1,000,000 Shares; Issued 327,338
Shares at 12/31/94 and 333,441 Shares at 12/31/93 3 3
Additional Paid-In Capital 14,715 11,478
Retained Earning from January 1, 1993 606 358
Treasury Stock (5000 Shares Class A) (17) -
Total Stockholders' Equity 15,315 11,847
Total Liabilities and Stockholders' Equity $29,818 $27,558
The accompanying notes are an integral part of these statements.
DOVER INVESTMENTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
(in thousands except per share amounts)
1994 1993
Home Sales $ 9,087 $ 9,823
Cost of Sales 7,059 7,299
Gross Profit 2,028 2,524
Selling Expenses 865 903
General and Administrative Expenses 804 745
1,669 1,648
Operating Profit 359 876
Other Income (Expense)
Interest 235 49
Other 22 (75)
257 (26)
Income before Provision for Income
Taxes and Discontinued Operations 616 850
Provision for Income Taxes 368 489
Net Income before Discontinued
Operations 248 361
Discontinued Operations - (3)
Net Income $ 248 $ 358
Net Income per Share:
Continuing Operations $ 0.22 $ 0.32
Discontinued Operations 0.00 0.00
Net Income $ 0.22 $ 0.32
The accompanying notes are an integral part of these statements.
<TABLE>
DOVER INVESTMENTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Two years ended December 31
(in thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C>
Additional Retained Treasury
Common Stock Paid-In Earnings Stock
Class A Class B Capital (Deficit) at Cost Total
Balance at January 1, 1993 $ 104 $ 39 $41,531 $(16,017) $(14,526) $11,131
Quasi-reorganization as of
January 1, 1993
Transfer of deficit to
additional paid-in capital
and cancellation of
treasury shares (25) (6) (30,512) 16,017 14,526 -
Effect of the 1-for-10
reverse stock split (71) (30) 101 - - -
Realization of prequasi-
reorganization net
operating loss tax
benefits - - 358 - - 358
Net income for the year - - - 358 - 358
Balance at December 31, 1993 8 3 11,478 358 - 11,847
Prequasi-reorganization
tax refund - - 2,869 - - 2,869
Treasury stock - - - - (17) (17)
Realization of prequasi-
reorganization net
operating loss tax
benefits - - 368 - - 368
Net income for the year - - - 248 - 248
Balance at December 31, 1994 $ 8 $ 3 $14,715 $ 606 $ (17) $15,315
The accompanying notes are an integral part of this statement.
</TABLE>
DOVER INVESTMENTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
(in thousands)
1994 1993
Cash Flows from Operating Activities:
Net Income $ 248 $ 358
Reconciliation of Net Income to Net Cash
(Used in) Provided by Operating Activities:
Minority Interest 297 -
Changes in Assets and Liabilities:
Restricted Cash 424 194
Property Held for Development (2,360) (781)
Homes Held for Sale 118 -
Other Assets 672 (1,217)
Income Taxes Payable (12) 370
Accrued Interest and Other Liabilities, Net (551) 2,889
Net Cash (Used in) Provided by Operating Activities (1,164) 1,813
Cash Flows from Investing Activities:
Proceeds from (Purchase of) Securities Purchased
under Agreement to Resell 100 (2,500)
Proceeds from Sale of Marketable Securities - 100
Cash and Securities Held in Trust Account (2,500) -
Net Cash (Used in) Investing Activities (2,400) (2,400)
Cash Flows from Financing Activities:
(Repayment of) Proceeds from Notes Payable (942) 892
Proceeds from Recovery of Taxes and Interest Due to
Prequasi-Reorganization Net Operating Loss Tax Benefits 3,237 -
Treasury Stock (17) -
Net Cash Provided by Financing Activities 2,278 892
Net (Decrease) Increase in Cash (1,286) 305
Cash at Beginning of Year 1,667 1,362
Cash at End of Year $ 381 $ 1,667
Additional paid-in capital in 1994 and 1993 increased and
taxes payable decreased by $368 and $358, respectively,
resulting from prequasi-reorganization net operating loss
tax benefits.
The accompanying notes are an integral part of this statement.
DOVER INVESTMENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
(in thousands except share amounts)
NOTE A - ORGANIZATION AND ACCOUNTING POLICIES
Dover Investments Corporation (the Company), formerly Homestead Financial
Corporation, is in the business of developing and building single family
homes. In that connection, the Company is the parent corporation for H.F.
Properties, Ltd. (H.F. Properties), which owns property in San Leandro,
California, and GIC Investment Corporation ("GIC").
GIC and Westco Community Builders, Inc. ("WCB") formed a joint venture
general partnership, Glenbriar Joint Venture ("Glenbriar"), for the purpose
of owning, subdividing and developing a tract of land comprising of
approximately 105 acres located in Tracy, California known as the Glenbriar
project.
The Company also has a wholly-owned subsidiary, Gramercy Mortgage
Corporation, Inc. (GMC), whose principal business was providing mortgage
lending related services to Homestead Savings, a Federal Savings and Loan
Association (the Association). GMC has one wholly-owned subsidiary,
Homestead Insurance Services, Inc. (HISI), which is a licensed insurance
agency which, through agreements with unaffiliated insurance marketing
companies, marketed products to customers of the Association. Operations of
both entities were discontinued in 1992.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries and joint venture general partnership.
All significant intercompany transactions are eliminated in
consolidation.
Property Held for Development
Costs for the development of property and the building of homes are
capitalized during the construction period. Such costs include
expenditures for land, land improvements, model homes, capitalized
interest, and construction-in-progress. (See Note C.)
Quasi-Reorganization
The Company, with the approval of its Board of Directors, adopted a
quasi-reorganization effective January 1, 1993. The quasi-
reorganization resulted in the elimination of the accumulated
deficit of $16,017, the cancellation of the treasury stock having a
cost of $14,526, a decrease in additional paid-in capital of
$30,512, a decrease in Class A Common Stock of $25 and a decrease in
Class B Common Stock of $6, but did not result in any adjustments to
the value of assets or liabilities. As part of the plan, all of the
Class A and Class B common shares held by the Company at that time
as treasury shares were cancelled.
DOVER INVESTMENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
(in thousands except share amounts)
NOTE A - ORGANIZATION AND ACCOUNTING POLICIES (continued)
Revenues From and Cost of Home Sales
The Company recognizes income from home sales when the closing and
transfer of title for the homes sold to the buyer occurs. When a
home is sold, cost of sales include land, site development,
construction and financing costs. For each home sold, a reserve
equal to one percent of the selling price is established to cover
warranty expense incurred subsequent to the home sale. Warranty
expenditures then are charged to the reserve.
Additionally, management fees and percentage of profits payable to
the developer of approximately $448 are included in selling expenses.
Income Taxes
The Company follows the liability method in accounting for income
taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and
tax basis of assets and liabilities and on the expected future tax
benefit to be derived from tax loss carryforwards, if any.
Additionally, deferred tax items are measured using current tax
rates. The principal types of differences between assets and
liabilities for financial statement and tax return purposes are
certain accrued liabilities.
Net Income Per Share
Net income per share is computed based on the weighted average
number of common shares on a combined basis for the two classes of
common stock, Class A and Class B. The weighted average number of
Class A and Class B common share equivalents used to compute income
per share was 1,122,358 at December 31, 1994, and 1,127,355 at
December 31, 1993, adjusted for the 1-for-10 reverse stock split.
Restricted Cash
Restricted cash is to be used for certain infrastructure
improvements relating to the development.
Reclassification
Prior year financial statements have been reclassified to conform to
current year presentation.
DOVER INVESTMENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
(in thousands except share amounts)
NOTE B - SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
The Company purchased securities under agreements to resell (repurchase
agreements) with primary securities dealers. Such repurchase agreements are
typically overnight investments and collateralized by mortgage-backed
certificates which are held on behalf of the Company by the dealers who
arrange the transaction. At December 31, 1994, such repurchase agreements
with a weighted average interest rate of 4.08% and a market value of the
underlying collateral of $2,570 totaled $2,400.
NOTE C - PROPERTY HELD FOR DEVELOPMENT
In March 1991, the Company purchased the San Leandro property for $13.5
million from the San Lorenzo Unified School District, with the seller
carrying back a $10 million mortgage loan secured by the property. The
Company also paid the Association $1,144, representing the difference
between the purchase price and the appraised value of the property, as
determined by an appraiser recommended by the OTS, but less than the
Association's carrying value. Since acquiring the property, the Company has
obtained the approval for the subdivision of the property into 249 single
family lots. Through December 31, 1994, the Company has retained the
services of a developer/contractor to build out the project, completed the
construction of 70 homes (of which 55 have been sold and 4 are models).
In December 1993, the Company provided a developer with financing in the
amount of $1,100,000 to acquire a parcel of land in Tracy, California. The
loan was secured by the real property. During 1994, the Company and the
developer entered into a joint venture for the development and sale of the
property. In September of 1994, the developer arranged for financing which
paid off the Company's loan in the amount of $1,100,000.
The carrying value of the developments consists of:
MARINA VISTA - SAN LEANDRO
1994 1993
Land $11,172 $12,700
Land improvements 1,634 1,109
Model homes 1,291 1,409
Capitalized interest 3,669 2,961
Construction in progress 2,694 2,201
Developer's fee 900 900
Subtotal $21,360 $21,280
DOVER INVESTMENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
(in thousands except share amounts)
NOTE C - PROPERTY HELD FOR DEVELOPMENT (continued)
TRACY
1994 1993
Land $ 1,526 $ -
Land improvements 3 -
Model homes - -
Capitalized interes 44 -
Construction in progress 529 -
Developer's fee 60 -
Subtotal 2,162 -
TOTAL (Marina Vista and Tracy) $23,522 $21,280
NOTE D - NOTES PAYABLE
Notes payable at December 31, are comprised of the following:
1994 1993
Note Payable, maturing October 15, 1994,
and bearing interest at prime
(6% at December 31, 1993) plus 1.5%
secured by 11 lots and improvements $ - $ 442
Note Payable, maturing December 2, 1994,
and bearing interest at 12% per annum
secured by 2 lots - 100
Notes Payable, maturing July 1, 1995,
and bearing interest at 11% per annum
secured by four model homes 800 800
Notes Payable, maturing March 29, 1997,
payable in annual installments of $2,500
and bearing interest at 12% per annum,
payable quarterly; secured by 152 lots 6,000 10,000
DOVER INVESTMENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
(in thousands except share amounts)
NOTE D - NOTES PAYABLE (continued)
Notes Payable, maturing September 28, 1995,
and bearing interest at prime
(9% at February 1, 1995) plus 1.5%
secured by 43 lots $ 2,500 $ -
Notes Payable, maturing September 30, 1996,
and bearing interest at 12% per annum
secured by the Deed of Trust 1,100 -
$10,400 $11,342
Aggregate principal payments subsequent to December 31, 1994, are as follows:
1995 $ 4,300
1996 3,600
1997 2,500
$10,400
Interest paid in 1994 and 1993, amounted to $1,312 and $1,409, respectively,
and was capitalized as part of property held for development.
NOTE E - LEASE COMMITMENT
The Company has entered into an agreement with a related party to sublease
its office space. The agreement requires monthly payments totaling $34 per
year from 1995 through 1996, $35 per year from 1997 through 1998 and $7 in
1999. The lease expires February 15, 1999.
Rent expenses for the years ended December 31, 1994 and 1993 totaled $34 and
$30, respectively.
DOVER INVESTMENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
(in thousands except share amounts)
NOTE F - INCOME TAXES
Income tax expenses for the years ended December 31, consist of:
1994 1993
Current
Federal $276 $386
State 92 103
368 489
Deferred
Federal - -
State - -
- -
$368 $489
A tax benefit for 1994 and 1993 of $368 and $358, respectively, for
pre-quasi reorganization net operating losses has been credited to paid-in
capital.
The following is a reconciliation between the federal statutory rate and the
effective rate used for the Company's provision for taxes:
1994 1993
Tax expense at statutory
federal income tax rate (34%) $211 $298
Increase in tax resulting from
state franchise tax 92 103
Change in valuation allowance
for deferred tax assets 52 88
Other 13 -
Income tax expense $ 36 $489
DOVER INVESTMENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
(in thousands except share amounts)
NOTE F - INCOME TAXES (continued)
At December 31, 1994 and 1993, the Company has a deferred tax asset of $156
and $104, respectively, related to the following items:
1994 1993
Interest $ 33 $ 66
Accrued warranty reserve 40 -
Accrued state taxes 52 8
Capital loss carryover 31 30
$156 $104
SFAS 109 requires the establishment of a valuation allowance to reflect the
likelihood of realization of deferred tax assets. Accordingly, the Company
has recorded a valuation allowance for an amount equal to the deferred tax
asset. The deferred tax asset schedule above does not give effect to any
deferred tax asset resulting from the utilization of any tax loss
carryforward. Tax benefits resulting from net operating loss carryforwards
will be reflected in the financial statements as credits to additional
paid-in capital rather than as reductions in current income tax expense, when
and if recognized. The increase in the valuation allowance was $52 and $88
for the years ended December 31, 1994 and 1993, respectively.
The Company has net operating loss carryovers which may be available to
offset income in future years. The amount of these carryovers has yet to be
determined pending the resolution of certain issues related to the Company's
deconsolidation of its former subsidiary, the Association, and the completion
of federal and state income tax audits of the Association for tax years prior
to the deconsolidation.
At December 31, 1993, the Company had receivables of $1,103 from the
Association resulting from the payment of taxes and interest by the Company
on behalf of the Association. An $820 payment of Federal income taxes and
interest related to assessments for 1986 and 1987. A $283 payment of
California franchise taxes and interest related to assessments for the years
1983 through 1985. In September 1992, the Company received a refund of $966
from a carryback of net operating losses. The Company has not recognized
this refund as income. Such taxes, related interest and refunds are
allocable to the Association under the Company's tax allocation procedures.
The Company, as the parent company of a group of affiliated corporations
filing consolidated Federal income tax returns, is contingently liable for
any liabilities arising with respect to the Association from such returns
filed for tax years through August 6, 1991. The Internal Revenue Service has
completed examinations of all such federal income tax returns from 1985
through 1990. The results of such examinations are as follows: a deficiency
of $97,265 for 1986 and a refund of $949,552 for 1985, plus interest due to
the IRS attributable to 1986 and later years, all of which is attributable to
the operations of the Association. There are no deficiencies or refunds for
1988, 1989 or 1990.
DOVER INVESTMENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
(in thousands except share amounts)
NOTE F - INCOME TAXES (continued)
Although the interest referred to above has not yet been calculated, it is
anticipated that the amount of such interest plus the 1986 deficiency will
not exceed the amount of the 1985 refund which has been approved. A refund of
$2,854,669, plus interest, for 1987 has been approved by the San Francisco
Appeals Office of the IRS. It must also be approved by the Congressional
Joint Committee on Taxation. This refund is not attributable to the
operations of the Association and, if approved by the Joint Committee, will
be paid by the IRS directly to the Company.
The Franchise Tax Board ("FTB") of the State of California has also made tax
claims against the Company for certain years when combined returns were filed
with the Association. The RTC is handling these claims, all of which are
attributable to the operations of the Association. The FTB and RTC have
verbally advised representatives of the Company that the total amount in
controversy is now less than $1,000,000.
NOTE G - CONTINGENCIES
The Company filed a lawsuit against the RTC in 1994 based on the RTC's
disallowance of certain claims made against the RTC by the Company in its
capacity as a creditor of the Association. Substantially all of the claims
made by the Company against the RTC had to do with the Company's potential
liability to the IRS and FTB arising from the tax controversies referred to
above. Since the above-referenced IRS tax controversies are now being
resolved as set forth above, it is hoped that a basis for settlement of the
RTC lawsuit can be reached and documented.
The Company has an agreement to indemnify its directors who formerly served
as directors and/or officers of the Association and its subsidiaries. The
RTC, in a letter dated March 10, 1993, advised the present and former
directors and officers of the Association and its subsidiaries of potential
claims that the RTC may assert against them for the recovery of losses
suffered by the Association and its subsidiaries in connection with certain
specified actions and loan transactions. The Company maintained a directors
and officers liability insurance policy to cover such potential liabilities.
The Company cannot estimate at this time its liability under the indemnity
agreement nor can it estimate the extent of its insurance coverage with
respect to such potential claims.
NOTE H - DISCONTINUED OPERATIONS
On October 30, 1992, the Office of Thrift Supervision (OTS) placed the
Association in receivership. Due to the actions taken by the OTS in 1992,
operating revenues and expenses including tax expenses related to the
Association for 1992 and 1993 have been included in discontinued operations.
(See note A). It is expected that GMC will be fully discontinued within one
year. HISI discontinued its operations in November of 1992. No gain or loss
is expected on the liquidation of HISI and GMC assets. At December 31, 1994
and 1993, the consolidated statements of GMC and HISI included the following
information:
DOVER INVESTMENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
(in thousands except share amounts)
NOTE H - DISCONTINUED OPERATIONS (continued)
1994 1993
Total assets $100 $101
Total liabilities $ - $ -
NOTE I - STOCKHOLDERS' EQUITY
The Board of Directors approved a 1-for-10 reverse stock split of all shares
of its Class A Common Stock and Class B Common Stock outstanding as of the
close of business on May 17, 1993. Each share of Class A Common Stock
outstanding on May 17, 1993, was converted into one-tenth of a share of Class
A Common Stock, and each share of Class B Common Stock was converted into
one-tenth of a share of Class B Common Stock. The Company paid each
shareholder who would have received a fraction of a share cash equal to the
average of the bid and ask prices of a share of the Class A Common Stock or
Class B Common Stock, as applicable, on the OTC Bulletin Board at the close
of business on May 17, 1993, multiplied by the number of shares resulting in
the fractional interest. The financial statements have been restated to
reflect the reverse stock split.
NOTE J - STOCK OPTION PLANS
Under the Amended and Restated 1982 Stock Option Plan, 1,000 options to
purchase Class A stock at $1.50 a share were granted in 1992. The options
become exercisable over 5 years. A grant of 500 options expired due to the
termination of employment. The options will terminate upon the earliest of
(a) thirty days after the date of cessation of employment, (b) one year after
an optionee's death or (c) ten years after the date such options were
granted. No new options may be granted under the plan.
Under the 1990 Stock Option Plan for Nonemployee Directors, which was
restated subject to stockholder approval on November 16, 1994, options to
purchase 1200 shares of Class A stock were granted in 1993 and 900 in 1994.
The per share option prices range from $.55 to $1.75 for 1993 grants and
$1.50 to $3.25 for 1994 grants. The aggregate number of shares which may be
issued under the Plan shall not exceed 12,500 shares of Class A stock.
600 options were exercisable at December 31, 1993, and 1200 options were
exercisable at December 31, 1994.
DOVER INVESTMENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
(in thousands except share amounts)
NOTE J - STOCK OPTION PLANS (continued)
A summary of changes in Class A stock options during 1993 and 1994 is:
Option Price
Number of Shares per Share
Outstanding at January 1, 1993 3,000 $1.50
Granted 1,200 $0.55 to $1.75
Cancelled 500 $0.55 to $1.75
Outstanding at December 31, 1993 3,700 $0.55 to $1.75
Granted 900 $1.50 to $3.25
Cancelled 500 $0.55 to $1.75
Outstanding at December 31, 1994 4,100 $0.55 to $3.25
Exercisable at December 31, 1993 600 $0.55 to $1.75
Exercisable at December 31, 1994 1,200 $0.55 to $3.25
The Restated Plan provides that each director who is not an employee of the
Company and has not been an employee of the Company for all or any part of
the preceding fiscal year automatically receives options to purchase 1000
shares of Class A Common Stock upon his election or appointment as a director
of the Company. Thereafter, every year options to purchase 500 shares of
Class A Common Stock (subject to adjustment for recapitalizations, stock
splits and similar events) will automatically be granted to such director,
provided, however, that such automatic option grants will be made only if the
director (a) has served on the Board of Directors for the entire two
preceding fiscal years, (b) is not otherwise an employee of the Company or
any subsidiaries on the date of grant and (c) has not been an employee of the
Company or any subsidiaries for all or any part of the preceding fiscal years.
The exercise price for shares subject to options granted under the Plan is
the fair market value of the shares at the date of the option grant. Options
granted under the Plan become exercisable in 50% increments on each
anniversary of the grant date, with full vesting occurring on the second
anniversary date. No options were exercised in 1994 or 1993. All of such
options terminate upon the earliest of (a) thirty days after an optionee
ceases to be a director of the Company for any reason other than death,
(b) six months after an optionee's death or (c) ten years after the date such
options were granted.
EXHIBIT INDEX
Exhibit
Number Exhibit
3.1 Restated Articles of Incorporation and Restated
By-Laws of the Company.
24.1 Consent of Grant Thornton.
27.1 Financial Data Schedule
Exhibit 3.1
RESTATED CERTIFICATE OF CERTIFICATE OF INCORPORATION
OF
DOVER INVESTMENTS CORPORATION
Dover Investments Corporation, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
A. The name of the corporation is Dover Investments Corporation.
The corporation was originally incorporated under the name of Homestead
Financial Corporation. The date of filing of its original Certificate of
Incorporation with the Secretary of State of the State of Delaware was August
11, 1986.
B. This Restated Certificate of Incorporation restates and
integrates and further amends the Restated Certificate of Incorporation, as
amended, of the corporation.
C. The text of the Restated Certificate of Incorporation as
amended and supplemented shall be and read in full as follows:
FIRST: The name of the corporation is Dover Investments
Corporation.
SECOND: The address of the registered office of the
corporation in the State of Delaware is Corporation Trust Center, 1209 Orange
Street, in the City of Wilmington, County of New Castle. The name of its
registered agent at that address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
FOURTH: (a) The aggregate number of shares which the
corporation is authorized to issue is 3,000,000 shares, all which shall be
shares of Common Stock, $.01 par value per share (the "Common Stock"), of
which 2,000,000 shall be shares of Class A Common Stock, $.01 par value per
share ("Class A Common Stock"), and 1,000,000 shall be shares of Class B
Common Stock, $.01 par value per share ("Class B Common Stock").
(b) Common Stock. The relative voting, dividend, liquidation
and other rights, preferences and limitations or restrictions of the Class A
Common Stock and Class B Common Stock are stated in this Certificate of
Incorporation as follows:
(i) Voting. Except as otherwise required by Article EIGHTH or
NINTH or by applicable law, voting power shall be divided between
the holders of Class A Common Stock and Class B Common Stock of the
corporation as follows:
(A) With respect to the election of directors, holders of
Class A Common Stock, voting as a separate class, shall be
entitled to elect that number of directors which constitutes
twenty-five percent (25%) of the authorized number of members
of the Board of Directors of the corporation and, if such
twenty-five percent (25%) is not a whole number, then the
holders of Class A Common Stock shall be entitled to elect the
next higher whole number of directors that is at least twenty-
five percent (25%) of the authorized number of members of the
Board of Directors of the corporation. The holders of the
Class B Common Stock, voting as a separate class, shall be
entitled to elect the remaining directors.
(B) The holders of Class A Common Stock shall be entitled
to vote as a separate class on the removal, with or without
cause, of any director elected exclusively by the holders of
Class A Common Stock and the holders of Class B Common Stock
shall be entitled to vote as a separate class on the removal,
with or without cause, of any director elected exclusively by
the holders of Class B Common Stock.
(C) If, on the record date for any meeting of
stockholders at which directors are to be elected, the number
of outstanding shares of Class B Common Stock is less than
twelve and one-half percent (12 1/2 %) of the total number of
shares of Common Stock of both classes then outstanding, then
the holders of Class A Common Stock shall be entitled to vote
with the holders of Class B Common Stock as a single class
(with the respective number of votes per share provided by
paragraph (b)(i)(D) of this Article FOURTH) to elect all of the
directors not elected exclusively by the holders of Class A
Common Stock as provided by paragraph (b)(i)(A) of this Article
FOURTH.
(D) At every meeting of stockholders, every holder of
Class A Common Stock shall be entitled to one vote for every
share of Class A Common Stock standing in such stockholder's
name on the record of stockholders and every holder of Class B
Common Stock shall be entitled to ten votes for every share of
Class B Common Stock standing in such stockholder's name on the
record of stockholders.
(E) Except as otherwise required by applicable law or any
other provision of this Certificate of Incorporation, holders
of Class A Common Stock and Class B Common Stock shall vote
together as a single class on all matters submitted to the
stockholders for a vote, including any amendment to this
Certificate of Incorporation which would increase or decrease
the number of authorized shares of Class A Common Stock and
Class B Common Stock.
(F) If, at any time, there shall be shares of only one
class of Common Stock issued and outstanding, the holders of
such class shall be entitled to elect the entire Board of
Directors.
(ii) Dividends. (A) Subject to any other provisions of this
Certificate of Incorporation, holders of Class A Common Stock and
Class B Common Stock shall be entitled to receive such dividends and
other distributions in cash, stock or property of the corporation as
may be declared thereon by the Board of Directors from time to time
out of assets or funds of the corporation legally available
therefor; provided, however, that during any calendar year, no cash
dividends may be paid on Class B Common Stock unless the corporation
shall have paid cash dividends with respect to Class A Common Stock,
either concurrently or previously during such calendar year, in an
amount per share not less than 10% greater than the aggregate cash
dividends per share, if any, paid by the corporation on Class B
Common Stock during such calendar year.
(B) No distribution or dividend payable in Class A Common
Stock may be declared on Class A Common Stock unless a
distribution or dividend payable in Class B Common Stock at the
same time and at the same rate per share is concurrently
declared on Class B Common Stock then outstanding. No
distribution or dividend payable in Class B Common Stock may be
declared on Class B Common Stock unless a distribution or
dividend payable in Class A Common Stock at the same time and
at the same rate per share is concurrently declared on Class A
Common Stock then outstanding. So long as shares of both Class
A Common Stock and Class B Common Stock shall remain
outstanding, no dividend or distribution payable in property or
securities of any other class or kind of the corporation shall
be declared or paid on either of such classes unless a dividend
equal in kind and amount on a per share basis and payable at
the same time is concurrently declared on the other class. No
split-up, combination or other reclassification of the shares
of Class A Common Stock or Class B Common Stock into a
different number of shares of such class shall be made unless a
split-up, combination or other reclassification of the shares
of the other class then outstanding, if any, into a different
number of shares of such other class if made at the same time
and at the same rate per share.
(iii)Conversion Rights. (A)Subject to the terms and conditions
of this Article FOURTH, each share of Class B Common Stock shall be
convertible at any time, at the option of the respective holder
thereof, at the office of any transfer agent for Class B Common
Stock, and at such other place or places, if any, as the Board of
Directors may designate, or, if the Board of Directors shall fail
so to designate, at the principal office of the corporation (to the
attention of the Secretary of the corporation), into one fully paid
and non-assessable share of Class A Common Stock. Upon conversion,
the corporation shall make no payment or adjustment on account of
dividends accrued or in arrears on Class B Common Stock surrendered
for conversion or on account of any dividends on the Class A Common
Stock issuable on such conversion. Before any holder of Class B
Common Stock shall be entitled to convert the same into Class A
Common Stock, such holder shall surrender the certificate or
certificates for such Class B Common Stock at the office of said
transfer agent (or other place as provided above), which certificate or
certificates, if the corporation shall so request, shall be duly
endorsed to the corporation or in blank or accompanied by proper
instruments of transfer to the corporation or in blank (such
endorsements or instruments of transfer to be in a form satisfactory
to the corporation), and shall give written notice to the
corporation at said office that such holder elects so to convert
said Class B Common Stock in accordance with the terms of this
subsection (b)(iii)(A), and shall state in writing therein the name
or names in which such holder wishes the certificate or certificates
for Class A Common Stock to be issued. Every such notice of
election to convert shall constitute a contract between the holder of
such Class B Common Stock and the corporation, whereby the holder of
such Class B Common Stock shall be deemed to subscribe for the
amount of Class A Common Stock which such holder shall be entitled
to receive upon such conversion, and, in satisfaction of such
subscription, to deposit the Class B Common Stock to be converted
and to release the corporation from all liability thereunder, and
thereby the corporation shall be deemed to agree that the surrender
of the certificate or certificates therefor and the extinguishment
of liability thereon shall constitute full payment of such
subscription or Class A Common Stock to be issued upon such
conversion. The corporation will as soon as practicable after such
deposit of a certificate or certificates for Class B Common Stock
issue and deliver at the office of said transfer agent (or other
place as provided above) to the person for whose account such Class
B Common Stock was so surrendered, or to such holder's nominee or
nominees, a certificate or certificates for the number of full shares
of Class A Common Stock to which such holder shall be entitled as
aforesaid. Subject to the provisions of subsection (b)(iii)(C)
below, such conversion shall be deemed to have been made as of the
date of such surrender of Class B Common Stock to be converted, and
the person or persons entitled to receive the Class A Common Stock
issuable upon conversion of the Class B Common Stock shall be
treated for all purposes as the record holder or holders of such
Class A Common Stock on such date.
(B) The issuance of certificates for shares of Class A
Common Stock upon conversion of shares of Class B Common Stock
shall be made without charge for any stamp or other similar tax
in respect of such issuance. However, if any such certificate
is to be issued in a name other than that of the holder of the
share or shares of Class B Common Stock converted, the person
or persons requesting the issuance thereof shall pay to the
corporation the amount of any tax which may be payable in
respect of any transfer involved in such issuance or shall
establish to the satisfaction of the corporation that such tax
has been paid.
(C) The corporation shall not be required to convert
Class B Common Stock, and no surrender of Class B Common Stock
shall be effective for that purpose, while the stock transfer
books of the corporation are closed for any purpose; but the
surrender of Class B Common Stock for conversion during any
period while such books are so closed shall become effective
for conversion immediately upon the reopening of such books, as
if the conversion had been made on the date such Class B Common
Stock was surrendered.
(D) The corporation shall at all times reserve and keep
available, out of its authorized and unissued shares, solely
for the purpose of effecting the conversion of Class B Common
Stock, such number of shares of Class A Common Stock as shall
from time to time be sufficient to effect the conversion of all
shares of Class B Common Stock which at any such times are
convertible.
(iv) Liquidation Rights. In the event of any merger or
consolidation to which the corporation is a party, the Class A
Common Stock and the Class B Common Stock shall be of equal rank and
shall entitle the holders thereof to equal rights and privileges. In
the event of a dissolution or liquidation of the corporation, or a
sale of all its assets, whether voluntary or involuntary, or in the
event of its insolvency or upon any distribution of its capital, the
Class A Common Stock and the Class B Common Stock shall be of equal
rank and shall entitle the holders thereof to equal rights and
privileges.
(v) Restriction on Issuance of Class B Common Stock. Except
as otherwise expressly provided in this paragraph (b)(v) of Article
FOURTH, the corporation shall not issue any authorized shares of
Class B Common Stock unless such issuance, or a transaction
contemplating such issuance, shall have been approved or authorized
by the affirmative vote of the holders of not less than a majority
of the outstanding shares of Class A Common Stock present in person
or by proxy, voting as a separate class, at a meeting of the
stockholders of the corporation at which such issuance or
transaction is voted upon. Notwithstanding the foregoing, the
corporation may issue authorized shares of Class B Common Stock,
without the vote of the Class A Common Stock described above:
(A) to officers, directors or employees of the
corporation or any direct or indirect subsidiary of the
corporation pursuant to any stock grant, stock option, stock
purchase or other employee benefit plan or agreement; and
(B) subject to paragraph (b)(ii)(B) of Article FOURTH,
pursuant to any stock split with respect to the Class B Common
Stock, or stock dividend or distribution payable in Class B
Common Stock.
In addition, subsequent to the effective date of the Agreement
and Plan of Merger between the corporation and Homestead Financial
Corporation, a California corporation, the corporation may from time
to time issue, without the vote of the Class A Common Stock
described above, an aggregate of 750,000 shares of Class B Common
Stock.
FIFTH: In furtherance and not in limitation of the powers
conferred by law, the Board of Directors shall have power to make, alter,
amend and repeal the by-laws (except so far as the by-laws adopted by the
stockholders shall otherwise provide). Any by-laws made by the Board of
Directors under the powers conferred hereby may be altered, amended or
repealed by the Board of Directors or by the stockholders.
SIXTH: (a) The business and affairs of the corporation shall
be managed by the Board of Directors of the corporation.
(b) The number of directors which shall constitute the whole
Board of Directors of the corporation shall be as specified in the by-laws of
the corporation.
(c) To the fullest extent permitted by the General Corporation
Law of the State of Delaware, newly created directorships resulting from any
increase in the number of directors and any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal or
other cause shall be filled by the affirmative vote of a majority of the
remaining directors then in office (and not by stockholders), even though
less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office until the next
election of directors by the stockholders and until such director's successor
shall have been elected and qualified. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director. The foregoing notwithstanding, for so long as shares of
Class A Common Stock and Class B Common Stock shall remain outstanding:
(i) any vacancy in the office of a director elected exclusively by the
holders of Class A Common Stock may be filled by a vote of the holders of
Class A Common Stock voting as a separate class; (ii) any vacancy in the
office of a director elected exclusively by the holders of Class B Common
Stock may be filled by a vote of the holders of Class B Common Stock voting
as a separate class; and (iii) the Board of Directors may be enlarged by the
Board of Directors only to the extent that at least twenty-five percent (25%)
of the enlarged Board of Directors consists of directors elected by the
holders of Class A Common Stock as provided by paragraph (b)(i)(A) of Article
FOURTH or by persons appointed to fill vacancies resulting from such increase
created by the death, resignation, disqualification, removal or other cause
of directors elected or to be elected exclusively by the holders of Class A
Common Stock.
(d) To the fullest extent permitted by the General Corporation
Law of the State of Delaware, a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director. Any repeal or modification of
this paragraph by the stockholders of the corporation shall be prospective
only, and shall not adversely affect any limitation on the personal liability
of a director of the corporation with respect to any act or omission
occurring prior to the time of such repeal or modification.
SEVENTH: (a) Advance notice of stockholder nominations for
the election of directors shall be given in the manner provided in the
by-laws of the corporation.
(b) Election of directors need not be by written ballot unless
the by-laws of the corporation shall so provide.
EIGHTH: (a) In addition to any affirmative vote required by
law, this Certificate of Incorporation, any resolution or resolutions adopted
by the Board of Directors pursuant to its authority under Article FOURTH of
this Certificate of Incorporation, any agreement with any national securities
exchange or otherwise, any Business Combination involving the corporation or
any Subsidiary and any Related Person or any Affiliate or Associate of a
Related Person shall be subject to approval or authorization in the manner
provided by this Article EIGHTH. Certain capitalized terms used herein are
defined in paragraph (d) of this Article EIGHTH.
(b) Except as otherwise expressly provided in paragraph (c) of
this Article EIGHTH, no Business Combination shall be consummated or effected,
either directly or indirectly, unless such Business Combination shall have
been approved or authorized by the affirmative vote of the holders of not
less than sixty-six and two-thirds percent (66 2/3 %) of the outstanding
shares of Voting Stock which are not Beneficially Owned by any Related Person
or an Affiliate or Associate of such Related Person, voting together as a
single class (it being understood that for purposes of this Article EIGHTH,
each share of Voting Stock shall have one vote, notwithstanding any provision
contained in Article FOURTH to the contrary), notwithstanding the fact that
no vote for such transaction or approval by some lesser percentage of
stockholders may be required or specified by law, this Certificate of
Incorporation, any resolution or resolutions adopted by the Board or Directors
of the corporation pursuant to its authority under Article FOURTH of this
Certificate of Incorporation, any agreement with any national securities
exchange or otherwise.
(c) The approval or authorization of any Business Combination
in the manner provided for by paragraph (b) of this Article EIGHTH shall not
be required if all the conditions specified in either paragraph (c)(i) or
paragraph (c)(ii) of this Article EIGHTH are satisfied:
(i) such Business Combination shall have been expressly
approved by not less than two-thirds of the Continuing Directors,
either in advance of or subsequent to a Related Person having become
a Related Person; or
(ii) all of the conditions specified in the following clauses
shall have been met:
(A) the Fair Market Value as of the Consummation Date of
the consideration to be received per share of each class or
series of Capital Stock by Disinterested Stockholders in the
Business Combination is not less than the Highest Per Share
Price (it being understood that the provisions of this
subparagraph (c)(ii)(A) shall be required to be met with
respect to every class or series of the outstanding Capital
Stock, whether or not the Related Person has previously
acquired any shares of a particular series or class of Capital
Stock); and
(B) the form of consideration to be received by
Disinterested Stockholders in the Business Combination shall be
United States currency or the form of consideration used by the
Related Person in acquiring the largest aggregate number of
shares of the Capital Stock that such Related Person has
previously acquired; and
(C) after such Related Person has become a Related Person
and prior to the Consummation Date: (1) except as approved by
not less that two-thirds of the Continuing Directors, there
shall have been no failure to declare and pay at the regular
date therefor any full quarterly dividends (whether or not
cumulative) on the outstanding Capital Stock; (2) there shall
have been (a) no reduction in the annual rate of dividends paid
on the Class A Common Stock or Class B Common Stock (except as
necessary to reflect any subdivision of the Class A Common Stock
or the Class B Common Stock, as the case may be), except as
approved by not less than two-thirds of the Continuing
Directors, and (b) an increase in such annual rate of dividends
as necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or any
similar transaction which has the effect of reducing the number
of outstanding shares of the Class A Common Stock or the Class
B Common Stock, unless the failure so to increase such annual
rate is approved by not less than two-thirds of the Continuing
Directors; and (3) such Related Person shall have not become
the beneficial owner of any additional shares of Voting Stock
except as part of the transaction which results in such Related
Person becoming a Related Person; and
(D) after such Related Person has become a Related Person,
such Related Person shall not have received the benefit,
directly or indirectly (except proportionately as a stockholder
of the corporation of in the ordinary course of business), of
any loans, advances guarantees, pledges or other financial
assistance or tax advantages provided by the corporation or any
Subsidiary, whether in anticipation of or in connection with
such Business Combination or otherwise: and
(E) a proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Act as then in effect shall have been mailed
to all Disinterested Stockholders at least thirty (30) days
prior to the date of the stockholders' meeting at which such
Business Combination is to be considered (whether or not a
proxy or information statement is required to be mailed
pursuant to the Act) and such proxy or information statement
shall have contained at the front thereof, in a prominent
place, such recommendations and other relevant information
concerning the Business Combination as a majority of the
Continuing Directors may determine so to include.
(d) For the purposes of this Article EIGHTH:
(i) The term "Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
thereunder, or any similar United States statute enacted to
supersede or supplement the Act.
(ii) The term "Affiliate" shall have the meaning ascribed to
it in Rule 12b-2 under the Act, as in effect on December 3, 1986,
and shall include any Person that, after giving effect to a Business
Combination, would become an Affiliate, but shall not include the
corporation or any subsidiary.
(iii) The term "Announcement Date" shall mean the date of the
first public announcement of a proposed Business Combination.
(iv) The term "Associate" shall have the meaning ascribed to
it in Rule 12b-2 under the Act as in effect on December 3, 1986 (the
term "registrant", as used in such Rule 12b-2, meaning in this case
the corporation), and shall include any Person that, after giving
effect to a Business Combination, would become an Associate, but
shall not include the corporation or any subsidiary.
(v) The terms "Beneficial Owner" or "Beneficially Owned" shall
mean, or refer to stock ownership by, any Person who beneficially
owns any Voting Stock within the meaning ascribed in Rule 13d-3
under the Act as in effect on December 3, 1986 or who has the right
to acquire any such beneficial ownership (whether or not such right
is exercisable immediately, with the passage of time or subject to
any condition) pursuant to any agreement, contract, arrangement or
understanding or upon the exercise of any conversion, exchange or
other right, warrant or option, or otherwise. A Person shall be
deemed the Beneficial Owner of all Capital Stock of which any
Affiliate or Associate of such Person is the Beneficial Owner.
(vi) The term "Business Combination" shall mean any (A) merger
or consolidation of the corporation or a Subsidiary with or into a
Related Person or any other corporation which is, or after such
merger or consolidation would be, an Affiliate or Associate of a
Related Person; (B) sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series of
transactions) to or with any Related Person or any Affiliate or
Associate of any Related Person, of all or any Substantial Amount of
the assets of the corporation, one or more Subsidiaries, or the
corporation and one or more Subsidiaries, other than in the ordinary
course of business; (C) adoption of any plan or proposal for the
liquidation or dissolution of the corporation proposed by or on
behalf of a Related Person or any Affiliate or Associate of any
Related Person; (D) sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series of
transactions) to the corporation, one or more Subsidiaries or the
corporation and one or more Subsidiaries (in one transaction or a
series of transactions) of all or any Substantial Amount of the
assets of a Related Person or any Affiliate or Associate of any
Related Person, other than in the ordinary course of business;
(E) issuance, pledge or transfer of securities of the corporation,
one or more Subsidiaries, or the corporation and one or more
Subsidiaries, (in one transaction or a series of transactions) to or
with a Related Person or any Affiliate or Associate of any Related
Person in exchange for a Substantial Amount of cash, securities or
other property (or a combination thereof), except any issuance,
pledge or transfer of such securities to any such Person if such
Person is acting as an underwriter with respect to such securities;
(F) reclassification of securities (including any reverse stock
split) or recapitalization of the corporation, any merger or
consolidation of the corporation with or into one or more
Subsidiaries, or any other transaction that would have the effect,
either directly or indirectly, of increasing the proportionate
voting power or the proportionate share of any class of equity or
convertible securities of the corporation or any Subsidiary which is
directly or indirectly Beneficially Owned by any Related Person or
any Affiliate or Associate of any Related Person; (G) agreement,
contract or other arrangement providing for any of the transactions
described in this definition of Business Combinations; and (H) any
series of transactions that not less than two-thirds of the
Continuing Directors determine are related and, if taken together,
would constitute a Business Combination under this definition of
Business Combination.
(vii) The term "Capital Stock" shall mean all capital stock of
any class of the corporation authorized to be issued from time to
time under the Certificate of Incorporation, whether now or hereafter
outstanding.
(viii) The term "Consummation Date" shall mean the date of the
consummation of the Business Combination.
(ix) The term "Continuing Director" shall mean any member of
the Board of Directors of the corporation who is not the Related
Person, and not an Affiliate, Associate, representative or nominee
of the Related Person or of such an Affiliate or Associate, that is
involved in the relevant Business Combination, and (A) was a member
of the Board of Directors prior to the Determination Date with
respect to such Related Person or (B) whose initial election as a
director of the corporation succeeds a Continuing Director and was
recommended by a majority vote of the Continuing Directors then in
office; provided, that, in either case, such Continuing Director
shall have continued in office after becoming a Continuing Director.
(x) The term "Determination Date" shall mean the date and time
at which a Person became a Related Person.
(xi) The term "Disinterested Stockholder" shall mean a holder
of shares of a particular class or series of Capital Stock who is
not (A) a Related Person with or for the benefit of whom a Business
Combination is proposed to be consummated or (B) an Affiliate or
Associate of such Related Person.
(xii) The term "Fair Market Value" shall mean (A) in the case
of United State currency, the amount thereof; (B) in the case of
stock and other securities, the highest closing sales price during
the 30-day period immediately preceding the date in question of a
share or trading unit of such stock or security on the Composite Tape
for New York Stock Exchange -- Listed Stocks, or, if such stock or
security is not listed on the New York Stock Exchange, on the
principal United States securities exchange registered under the Act
on which such stock or security is listed, or, if such stock or
security is not listed on any such securities exchange, the highest
closing sale price or bid quotation with respect to a share or
trading unit of such stock or security during the 30-day period on
the National Association of Securities Dealers, Inc. Automated
Quotations System or any successor system or, if no such quotations
are available, the fair market value on the date in question of a
share or trading unit of such stock or security as determined in good
faith by a majority vote of the Continuing Directors; and (C) in the
case of property other than cash, stock or other securities, the
fair market value of such property on the date in question as
determined in good faith by a majority vote of the Continuing
Directors.
(xiii) The term "Highest Per Share Price" shall mean, with
respect to the consideration to be received per share of each class
or series of Capital Stock by Disinterested Stockholders in any
particular Business Combination, the higher of the following:
(A) the highest per share price (including brokerage
commissions, transfer taxes and soliciting dealers' fees) paid
by or on behalf of the Related Person in acquiring Beneficial
Ownership of any of its holdings of such class or series of
Capital Stock of this corporation (1) within the two-year
period immediately prior to the Announcement Date or (2) in the
transaction or series of transactions in which the Related
Person became a Related Person (but only if the Determination
Date with respect to such Related Person shall have been less
than two years prior to the Announcement Date), whichever is
higher; or
(B) the Fair Market Value per share of the shares of
Capital Stock being acquired in the Business Combination as of
(1) the Announcement Date or (2) the Determination Date with
respect to such Related Person (but only if such Determination
Date shall have been less than two years prior to the
Announcement Date), whichever is higher; or
(C) in the case of any class or series of outstanding
Capital Stock other than Class A Common Stock and Class B
Common Stock, the (1) highest preferential amount per share to
which the holders of shares of such class or series of Capital
Stock would be entitled as of the Consummation Date in the
event of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the corporation, regardless of
whether the Business Combination to be consummated constitutes
such an event, or (2) highest redemption price to which the
holders of such class or series of Capital Stock would be
entitled, whichever is higher.
For the purposes of this paragraph (d)(xiii), (A) the price
deemed to have been paid by a Related Person for any shares of
Capital Stock of which an Affiliate or Associate is the Beneficial
Owner shall be the price which is the highest of the following:
(1) the price paid upon the acquisition thereof by the relevant
Affiliate or Associate (if any, and whether or not such Affiliate or
Associate was an Affiliate or Associate at the time of such
Acquisition) or (2) the Fair Market Value of such Capital Stock as
of the day when the Related Person became a Beneficial Owner there;
(B) in determining the Highest Per Share Price, all purchases by the
Related Person shall be taken into account, regardless of whether
the shares were purchased before or after the Related person became
a Related Person; (C) a Person shall be deemed to have acquired a
share of Capital Stock at the time when such Person became the
Beneficial Owner thereof; and (D) appropriate adjustments shall be
made to reflect the relevant effect of any stock dividends, splits
and distributions and any combination or reclassification of Capital
Stock.
(xiv) The phrase "consideration to be received" as used in
subparagraph (c)(ii)(A) of this Article EIGHTH shall include,
without limitation, the shares of Class A Common Stock and Class B
Common Stock or any other class or series of Capital Stock retained
by the Disinterested Stockholders in the event of a Business
Combination that is a merger or consolidation in which the
corporation is the surviving entity.
(xv) The term "Person" shall mean any individual, corporation,
partnership or other entity, including any group comprising of any
Person and any other Person or any Affiliate or Associate thereof
with whom such Person or any Affiliate or Associate thereof has any
agreement, arrangement or understanding, directly or indirectly, for
the purpose of acquiring, holding, voting or disposing of Voting
Stock and each Person, and any Affiliate or Associate thereof, that
is a member of such group.
(xvi) The term "Related Person" shall mean any Person who,
alone or together with any Affiliates or Associates:
(A) is the Beneficial Owner, directly or indirectly, of
an aggregate percentage of the outstanding Voting Stock equal
to or exceeding ten percent (10%).
(B) is the Beneficial Owner, directly or indirectly, of
an aggregate percentage of the outstanding Class B Common Stock
equal to or exceeding five percent (5%), or
(C) is an assignee of or otherwise has succeeded to the
Beneficial Ownership of any shares of Class B Common Stock or
other Voting Stock which were at any time within the two-year
period immediately prior to the date in question Beneficially
Owned by any Related Person, if such assignment or succession
shall have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning
of the Securities Act of 1933, as amended;
provided, however, that the term "Related Person" shall not
include (x) the corporation or any Subsidiary all of the
Capital Stock of or other ownership interest in which is
directly or indirectly owned by the corporation, (y) any Person
whose acquisition of such aggregate percentage of Voting Stock
or Class B Common Stock was approved by not less than a
two-thirds vote of the Continuing Directors prior to such
acquisition or (z) any pension, profit sharing, employee stock
ownership or other employee benefit plan of the corporation or
any Subsidiary or any trustee or fiduciary when acting in such
capacity with respect to any such plan.
(xvii) The term "Subsidiary" shall mean any Person a
majority of any class of equity securities in which is owned,
directly or indirectly, by the corporation, one or more
Subsidiaries or the corporation and one or more Subsidiaries.
(xviii) The term "Substantial Amount" shall mean an
amount of stock, securities or other assets or property having
a Fair Market Value equal to ten percent (10%) or more of the
Fair Market Value of the total consolidated assets of the
corporation and its Subsidiaries taken as a whole as of the
end of the most recent fiscal year of the corporation ended
prior to the time as of which the determination is being made.
(xix) The term "Voting Stock" shall mean all outstanding
Class A Common Stock and Class B Common Stock of the
corporation and all other outstanding Capital Stock, if any,
entitled to vote on each matter on which the holders of record
of Class A Common Stock and Class B Common Stock shall be
entitled to vote, and each reference to a proportion of shares
of Voting Stock shall refer to such proportion of votes
entitled to be cast by the holders of such shares of Class A
Common Stock and Class B Common Stock and other Capital Stock
voting as one class (it being understood that for purposes of
this Article EIGHTH, each share of Voting Stock shall have one
vote, notwithstanding any provision to the contrary contained
in Article FOURTH of this Certificate of Incorporation).
(e) The fact that any Business Combination complies with the
provisions of paragraph (c)(ii) of this Article EIGHTH shall not be construed
to impose any fiduciary duty, obligation or responsibility on the Board of
Directors, or any member thereof, to approve such Business Combination or
recommend its adoption or approval to the stockholders of the corporation, nor
shall such compliance limit, prohibit or otherwise restrict in any manner the
Board of Directors, or any member thereof, with respect to evaluations of or
actions and responses taken with respect to such Business Combination.
(f) Two-thirds of the Continuing Directors of the corporation
shall have the power and duty to determine for the purposes of this Article
EIGHTH, on the basis of information known to them after reasonable inquiry,
(i) whether a person is a Related Party, (ii) the number of shares of Voting
Stock Beneficially Owned by any person, and (iii) whether a person is an
Affiliate or Associate of another. A majority of the Continuing Directors of
the corporation shall have the further power to interpret all of the terms
and provisions of this Article EIGHTH.
NINTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute and this Certificate of
Incorporation, and all rights conferred on stockholders herein are granted
subject to this reservation. Notwithstanding the foregoing, the affirmative
vote of not less that sixty-six and two-thirds percent (66 2/3 %) of the
outstanding shares of Voting Stock which are not Beneficially Owned by any
Related Person or any Affiliate or Associate of a Related Person (it being
understood that for purposes of this Article NINTH, the terms "Voting Stock,"
"Beneficially Owned," "Related Person," "Affiliate" and "Associate" shall
have the meanings assigned to such terms in Article EIGHTH), voting together
as a single class (it being understood that for the purposes of altering,
amending or repealing Article EIGHTH and this Article NINTH, each share of
Voting Stock shall have one vote notwithstanding any provisions contained in
Article FOURTH to the contrary) shall be required to alter, amend or repeal,
or adopt any provisions inconsistent with, the provisions set forth in
Article EIGHTH and this Article NINTH.
D. This Restated Certificate of Incorporation was proposed by the
directors and duly adopted by the written consent of the stockholders in
accordance with the applicable provisions of Sections 228, 242 and 245 of the
General Corporation Law of Delaware and written notice of the adoption of this
Restated Certificate of Incorporation has been given as provided by Section
228 of the General Corporation Law of Delaware to every stockholder entitled
to such notice.
IN WITNESS WHEREOF, such Dover Investments Corporation has caused
this certificate to be signed by Lawrence Weissberg, its Chairman of the
Board, President and Chief Executive Officer, and attested by Erika Kleczek,
its Secretary, this 26th day of October, 1994.
DOVER INVESTMENTS CORPORATION
By
Lawrence Weissberg
Chairman of the Board, President
and Chief Executive Officer
Attest:
By
Erika Kleczek
Secretary
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