UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File Number 0-13800
INTERNATIONAL AMERICAN HOMES, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2472608
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification Number)
4640 Forbes Boulevard, Lanham, Maryland 20706
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 306-5306
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12 (g) of the Act:
Title of class
Common Stock, $.01 par value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of June 1, 1996, the number of shares outstanding of the
registrant's common stock, $.01 par value, was 2,724,395. As of June 1, 1996
the aggregate market value of the registrant's common stock held by
non-affiliates was $2,646,143.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13, or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. Yes [X] No
DOCUMENTS INCORPORATED BY REFERENCE
Applicable portions of the registrant's Proxy Statement for the 1996
Annual Meeting of Shareholders to be filed with the Securities and
Exchange Commission are incorporated by reference in Part III of this
report.
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
FORM 10-K
Index
Page
Part I.
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . .7
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . .7
Part II.
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . 8
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . 9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . 11
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . 16
Item 9. Change in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . 16
Part III.
Item 10. Directors and Executive Officers of the Registrant . . . . . . . 17
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . 17
Item 12. Security Ownership by Certain Beneficial Owners and Management. . 17
Item 13. Certain Relationships and Related Transactions . . . . . . . . . 17
Part IV.
Item 14. Exhibits, Financial Statements, Schedules, and Reports on
Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . 18
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Page 2
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PART I
Item 1. Business
General Description
International American Homes, Inc. (the "Company") was incorporated under
the laws of the State of Delaware on April 27, 1983. The Company, through
its subsidiaries, Porten Sullivan Corporation and Suarez Housing
Corporation, designs, builds, and sells single-family homes and townhomes
and develops finished building lots, primarily in middle income
communities. The Company currently conducts its building and developing
activities in suburban residential areas in the Maryland and Virginia
suburbs of Metropolitan Washington, D.C. and in Greater Tampa and Martin
County, Florida.
On April 16, 1990, the Company and certain of its wholly-owned subsidiaries
filed voluntary petitions for relief under Chapter 11, Title 11 of the
United States Bankruptcy Code in the United States Bankruptcy Court for the
District of New Jersey (the "Bankruptcy Court"). On August 12, 1992, the
Bankruptcy Court entered an order confirming the Company's Plan of
Reorganization (the "Plan" or "Plan of Reorganization"). Pursuant to the
Plan, the Company has completed the initial distribution to creditors by
paying $4,149,000 in cash and by issuing 2,043,296 shares of the Company's
common stock to the creditors through March 31, 1996. See Note 1, "The
Company" and Note 7, "Commitments and Contingencies" to Notes to
Consolidated Financial Statements of the Company appearing elsewhere in
this report.
Financing Arrangements
The Company, through its subsidiaries, obtains financing from commercial
banks for a portion of the cost of acquiring finished building lots and
undeveloped land and for most of the costs of the construction of homes.
This financing is generally available for homes that are subject to a
contract of sale and also for a limited number of homes in advance of sale.
The Company's loan commitments as well as current banking regulations limit
the portion of each home that can be financed to approximately 75% of its
value. Since the Company uses its own capital resources to fund those
costs that cannot be financed, the Company's future growth will be limited
by the amount of such resources. As a result of the use of these financing
arrangements, the Company is currently, and expects to continue to be,
highly leveraged. All of the Company's financing arrangements are secured
by the related real estate inventory.
Management believes that the Company currently has adequate financing and
liquidity to meet its financial obligations and will be able to fund the
acquisition and construction of inventory to support modest growth.
However, there is no assurance that financing will be available to the
Company in the future. In addition, homebuilding is a cyclical industry
with economic conditions having a substantial impact on operating
performance.
Page 3
<PAGE>
Markets
During the three fiscal years ended March 31, 1996, the Company built and
sold 979 homes realizing $140,686,000 in revenues. The following tables
summarize, by market area, the Company's sales revenues and number of homes
delivered, respectively, for its last three fiscal years.
Home Sales Revenue
(Dollars in thousands)
Year Ended March 31,
1996 1995 1994
Market Area
Metropolitan Washington, D.C. $ 23,657 $ 19,559 $ 8,419
Greater Tampa, Florida 32,326 30,788 25,937
Total $ 55,983 $ 50,347 $ 34,356
Number of Homes Delivered
Year Ended March 31,
1996 1995 1994
Market Area
Metropolitan Washington, D.C. 112 87 40
Greater Tampa, Florida 257 254 229
Total 369 341 269
The Company is currently offering single-family homes and townhomes in 14
communities at prices ranging from $91,000 to $275,000. Purchasers of the
Company's homes include both entry-level and move-up buyers. The average
sales price of the homes settled in the year ended March 31, 1996 was
$152,000.
Land Acquisition and Development
The Company generally acquires finished building lots under contracts which
spread the acquisition of those lots over a period of time that roughly
coincides with the estimated time required for the sale of the homes on
those lots. At March 31, 1996 the Company had commitments to purchase 694
finished building lots at a total purchase price of approximately
$24,989,000 over a four-year period. These commitments assure a continuing
supply of finished building lots in the future. Substantial deposits will
be forfeited if the Company is unable to satisfy these commitments.
Page 4
<PAGE>
During the year ended March 31, 1996, the Company purchased a parcel of
land in Greater Tampa, Florida containing approximately 360 developed and
undeveloped lots. At March 31, 1996, the Company had developed 30 of those
lots into finished building lots and had begun construction of homes on
some of those lots. The Company is not engaged in any other land
development activities.
Subcontractors and Suppliers
The Company constructs homes utilizing subcontractors who operate under the
supervision of the Company's staff. The subcontracts are generally
fixed-price, short-term agreements. Building materials and subcontractors
are readily available in the areas where the Company constructs its homes.
Although the Company believes that no relationship with any particular
supplier or subcontractor is material to its operations, the Company
purchases substantially all of its requirements for lumber and certain
other building material products for the homes that it builds in Greater
Tampa, Florida from one supplier. The Company does not believe that this
relationship results in any significant risk to the Company.
Warranties
The Company provides warranties to all of its customers. The Company
provides a written ten-year warranty through independent warranty programs
which insure performance by the Company. The warranties cover major
structural defects for ten years, limited structural and mechanical defects
for one to two years, and all defects for one year.
Seasonal Nature of Business
Due to its geographic and product mix, the Company's operations taken as a
whole are not seasonal in nature.
Backlog
As of March 31, 1996 and 1995, the Company had a backlog of signed
contracts for 142 homes with aggregate sales prices of $25,138,000
(including $8,460,000 of contingent contracts) and 121 homes with aggregate
sales prices of $21,025,000 (including $3,353,000 of contingent contracts),
respectively. The Company anticipates that substantially all the homes in
backlog at March 31, 1996 will be delivered by December 31, 1996.
Sales and Marketing
The Company generally sells its homes through its own sales personnel who
work in on-site model homes. Sales personnel are compensated through a
combination of salary and commission. A significant portion of those sales
are initiated by independent real estate brokers who are compensated on a
commission basis.
Page 5
<PAGE>
The Company advertises in local and regional newspapers and publications
and provides prospective purchasers with illustrated brochures and floor
plans. The Company's customers may select custom options to be
incorporated into their homes at additional cost.
The Company requires a cash deposit from purchasers at the time a contract
of sale is executed. Such deposits are held in trust, escrow, or
segregated bank accounts. Purchasers are permitted to cancel their
contract and receive a refund of their deposit under certain limited
circumstances including their inability to obtain permanent mortgage
financing or to sell their existing home. For the years ended March 31,
1996, 1995 and 1994, the Company experienced cancellation rates of 19%,
29%, and 22%, respectively.
Although the Company attempts to limit its inventory of unsold homes, it
may commence construction of homes prior to obtaining sales contracts. The
Company frequently discounts the purchase price of homes or provides
various options and other sales incentives to purchasers.
Customer Financing
The Company assists customers in arranging permanent mortgage financing by
providing information regarding potential mortgage lenders. There
currently is an adequate supply of competitively priced permanent mortgages
available from unrelated sources to satisfy the needs of homebuyers.
Prior to 1987, the Company originated mortgages (secured by the homes it
built and sold) for certain of its subsidiaries through its wholly-owned
mortgage subsidiaries and assembled them into pools against which
collateralized mortgage obligation bonds were issued or such mortgages were
sold in the open market. Most of such mortgage loan repayments are insured
by the U.S. Department of Housing and Urban Development or the Federal
Housing Administration ("FHA"), or guaranteed by the Veterans'
Administration ("VA").
The Company receives in cash, at closing, the full sales price for its
homes, less any financing subsidies, deposits, closing costs, and loan
repayments.
Competition
The homebuilding industry is highly competitive and fragmented. The
Company competes in the geographic areas in which it operates with numerous
residential construction companies ranging from small local builders to
large regional and national builders. The Company's competitors include:
Pulte Corporation, U.S. Home Corporation, Lennar Corporation, M.D.C.
Holdings, Inc., NVR, Inc., and Washington Homes, Inc. The national
builders and many of the local and regional companies have higher sales and
greater financial resources than the Company. The Company considers all
homes, whether offered for sale or rent (including apartment and
condominium housing), to be competitive with its homes in each locality
where the Company operates. The Company competes primarily on the basis of
quality, location, price, design, and reputation in each local market.
Page 6
<PAGE>
Regulation
The Company's business is affected by various local, state, and Federal
statutes, ordinances, rules, and regulations concerning zoning, building
design and construction, home sales, environmental protection, and other
matters. Changes in governmental regulations may adversely affect the
Company's business.
Many of the homes built by the Company are approved for FHA or VA
financing. Where required, all construction is inspected by local
government inspectors and, on FHA and VA approved homes, by FHA or VA
building inspectors.
Employees
The Company employed 61 persons as of March 31, 1996 of whom 4 were
executive officers, 20 were sales personnel, 14 were administrative and
clerical personnel, and 23 were involved in construction and supervision of
construction. The Company believes its employee relations are
satisfactory.
Item 2. Properties
As of March 31, 1996, the Company occupied leased office facilities in
Lanham, Maryland and in Tampa, Florida totaling approximately 8,420 square
feet. See Note 8 to Notes to Consolidated Financial Statements of the
Company appearing elsewhere in this report.
Item 3. Legal Proceedings
On April 16, 1990, the Company and certain of its wholly-owned subsidiaries
filed voluntary petitions for relief under Chapter 11, Title 11 of the
United States Bankruptcy Code in the United States Bankruptcy Court for the
District of New Jersey (the "Bankruptcy Court"). On August 12, 1992, the
Bankruptcy Court entered an order confirming the Company's Plan of
Reorganization (the "Plan" or "Plan of Reorganization").
The Company is involved from time to time in other litigation arising in
the ordinary course of business which is not expected to have a material
adverse effect on the Company's financial position or its results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of shareholders during the fourth
quarter of the fiscal year covered by this report.
Page 7
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
At the 1994 Annual Meeting of Stockholders, which was held on September 13,
1994, the stockholders approved a proposal to adopt certain amendments (the
"Amendments"), to the Company's Restated Certificate of Incorporation (i)
to effect a 1-for-10 reverse stock split of the Company's issued and
outstanding common stock (the "Reverse Stock Split"), and (ii) to change
the number of authorized shares of common stock from 30 million to 10
million. The Amendments did not change the par value of the common stock
which remained at $.01 per share. The Amendments became effective on May
31, 1995 with the filing of a Certificate of Amendment with the Secretary
of State of Delaware. The effect of the Reverse Stock Split has been
retroactively reflected in this report.
Shares of the Company's common stock are traded in the over-the-counter
market. The trading symbol is "IAHM".
The following table sets forth the range of high and low bid prices, as
adjusted for the Reverse Stock Split, for the periods indicated as reported
by the National Quotation Bureau (which reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions).
High Low
Calendar Year 1994
Second Quarter $ 1.90 $ .40
Third Quarter 1.20 .20
Fourth Quarter .80 .20
Calendar Year 1995
First Quarter 1.40 .35
Second Quarter 1.75 1.50
Third Quarter 1.88 .25
Fourth Quarter .88 .31
Calendar Year 1996
First Quarter 1.00 .38
As of June 1, 1996, there were 2,681 stockholders of record.
The Company has never declared or paid any cash dividends. In addition,
the payment of dividends is not permitted under the Plan of Reorganization
during the six (6) year period ending August 13, 1998. The Plan also
provides that after August 12, 1998, the Company may not pay any cash
dividends to stockholders until it has first paid an additional $1,250,000
to the creditors.
Page 8
<PAGE>
Item 6. Selected Financial Data
Selected Consolidated Statements of Operations (1)
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended March 31,
<S> <C> <C> <C> <C> <C> <C>
Period / Period
August 13, 1992 / April 1, 1992 Year Ended
through / through March 31, 1992
1996 1995 1994 March 31, 1993 / August 12, 1992
--------- --------- -------- --------- -------- ---------
Revenues:
Home sales $ 55,983 $ 50,347 $ 34,356 $ 19,618 $ 11,569 $ 24,795
Land sales - - - 28 32 2,872
Interest and other
income 792 878 1,277 1,116 949 2,520
--------- --------- -------- --------- -------- ---------
56,775 51,225 35,633 20,762 12,550 30,187
--------- --------- -------- --------- -------- ---------
Costs and expenses:
Cost of home sales 48,425 43,455 28,814 16,476 9,898 21,555
Cost of land sales - - - 28 33 2,779
Net charge to write down
real estate inventory,
receivables, investments
in and advances to
unconsolidated
partnerships, and adjust
lease expense - - - - 240 3,017
Selling, general and
administrative 6,541 5,673 4,560 2,252 1,973 5,555
Interest 747 857 1,239 1,077 647 2,220
Depreciation and
amortization 59 81 64 25 11 81
--------- --------- -------- --------- -------- ---------
55,772 50,066 34,677 19,858 12,802 35,207
--------- --------- -------- --------- -------- ---------
Income (loss) before
income taxes and
extraordinary item 1,003 1,159 956 904 (252) (5,020)
--------- --------- -------- --------- -------- ---------
Provision (Benefit) for
income taxes 60 72 (124) (65) (18) (1,344)
-------- --------- -------- --------- -------- ---------
Income (loss) before
extraordinary item 943 1,087 1,080 969 (234) (3,676)
Extraordinary item:
Effect of Plan of
Reorganization - - - - 16,303 -
--------- --------- -------- --------- -------- ---------
Net income (loss) $ 943 $1,087 $ 1,080 $ 969 $ 16,069 $ (3,676)
========= ========= ======== ========= ======== =========
</TABLE>
Page 9
<PAGE>
Selected Consolidated Statements of Operations (1)
<TABLE>
<CAPTION>
Year Ended March 31,
<S> <C> <C> <C> <C> <C> <C>
Period / Period
August 13, 1992 / April 1, 1992 Year Ended
through / through March 31, 1992
1996 1995 1994 March 31, 1993 / August 12, 1992
---------- --------- -------- --------- -------- ---------
Per Common Share:
Income (loss) before
extraordinary item $ .35 $ .40 $ .40 $ .36 $ (.34) $ (5.39)
Extraordinary item:
Effect of Plan of
Reorganization - - - - 23.93 -
---------- --------- -------- --------- -------- ---------
Net income (loss) $ .35 $ .40 $ .40 $ .36 $ 23.59 $ (5.39)
========== ========= ======== ========= ======== =========
Weighted average
number of shares
used in earnings
per share data,
as adjusted for
the Reverse Stock
Split 2,724,395 2,724,395 2,724,395 2,724,395 681,099 681,587
========= ========= ========= ========== ======== =========
</TABLE>
Selected Consolidated Balance Sheet Data (1)
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
March 31, 1996 March 31, 1995 March 31, 1994 March 31, 1993 August 12, 1992 March 31, 1992
Receivables $ 1,223 $ 444 $ 431 $ 445 $ 204 $ 4,508
Collateral for bonds payable 5,871 7,620 9,666 14,170 17,037 18,968
Real estate inventory 21,860 16,997 11,177 9,143 8,890 19,669
Total assets 31,527 27,668 25,395 28,082 34,090 49,436
Mortgage notes and loans payable 13,814 9,724 6,116 6,003 6,973 20,247
Bonds payable 5,660 7,362 9,337 13,699 16,493 18,434
Total liabilities 25,073 22,177 20,971 24,738 31,715 62,354
Stockholders' equity (deficit) 6,454 5,511 4,424 3,344 2,375 (12,918)
</TABLE>
(1) In conjunction with the reorganization, the Company adopted fresh
start reporting pursuant to which all assets and assumed liabilities are
restated to reflect their reorganization value which approximates their
fair value at the date of reorganization. Accordingly, the Selected
Consolidated Statements of Operations for the period August 13, 1992
through March 31, 1996 and the Selected Consolidated Balance Sheet Data as
of August 12, 1992, March 31, 1993, March 31, 1994, March 31, 1995, and
March 31, 1996 are not comparable to the related statements for any prior
period and as of any prior date.
Page 10
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Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The Company, through its subsidiaries, obtains financing from commercial
banks for a portion of the cost of acquiring finished building lots and for
most of the costs of the construction of homes. This financing is
generally available for homes that are subject to a contract of sale and
also for a limited number of homes in advance of sale. The Company's loan
commitments as well as current banking regulations generally limit the
portion of each home that can be financed to approximately 75% of its
value. Since the Company must use its own capital resources to fund those
costs that cannot be financed, the Company's future growth will be limited
by the amount of such resources. As a result of the use of these financing
arrangements, the Company is currently, and expects to continue to be,
highly leveraged.
The Company's subsidiaries currently have financing agreements in the
aggregate amount of $34,450,000 with commercial banks located in the areas
in which the subsidiaries operate. The terms of these financing agreements
vary, are each for one year or more from their date of origination (with
expiration dates ranging from June 1996 to October 1998), are generally
guaranteed by the Company, and are all secured by the related real estate
inventory. The Company's Chairman and President has personally guaranteed
certain of these obligations in the aggregate maximum amount of
$14,500,000, at a fee of one percent of the amount guaranteed, not to
exceed $80,000 per year. At March 31, 1996, the outstanding principal
amount of loans guaranteed by the Company's Chairman and President was
$5,516,000.
The Company generally acquires finished building lots under contracts which
spread the acquisition of such lots over a period of time that roughly
coincides with the estimated time required for the sale of homes on those
lots. At March 31, 1996, the Company had commitments to purchase 694
finished building lots at a total purchase price of approximately
$24,989,000 over a four-year period. These commitments assure a continuing
supply of finished building lots in the future. Substantial deposits will
be forfeited if the Company is unable to satisfy these commitments.
During the year ended March 31, 1996, the Company purchased a parcel of
land in Greater Tampa, Florida containing approximately 360 developed and
undeveloped lots. At March 31, 1996, the Company had developed 30 of those
lots into finished building lots. The Company obtained financing from a
commercial bank to fund a portion of the cost of acquiring and developing
the land.
The Company's short-term liquidity and its ability to operate over the
short-term are reasonably assured by the financing agreements in place, by
the Company's backlog of sales contracts, and by the commitments to acquire
finished building lots. The Company's long-term liquidity is not affected
by any material capital expenditures but would be impacted by the inability
to renew certain of the financing agreements when they mature. The
strength of the housing markets in the areas where the Company operates and
the ability of the Company to maintain a continued supply of finished
building lots will also affect the Company's long-term liquidity.
Management believes that the Company currently has adequate financing and
liquidity to meet its financial obligations and will be able to fund the
acquisition and construction of inventory to support
Page 11
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modest growth. However, there is no assurance that such financing will be
available to the Company in the future.
The Plan does not permit the subsidiaries of the Company to pay any
dividends to the Company. The Plan further prohibits the Company and its
subsidiaries from acquiring debt securities from or loaning or advancing
any money to any other party except in the ordinary course of business.
These restrictions are effective until August 12, 1998 and by their nature
require the Company's subsidiaries to be self-sufficient. From time to
time, a subsidiary of the Company makes a purchase of land or finished
building lots from or on behalf of another subsidiary and later resells
that land to the latter on terms that will assure that the accommodation
purchaser recovers its costs. While such transactions can temporarily
affect the cash flow of each of the participating subsidiaries, they do not
impact the overall cash flow of the Company. The Plan further provides for
the payment of distributions to the creditors equal to 50 percent of cash
flows (as defined in the Plan), if any, generated by the Company's
subsidiaries for the periods ending June 30, 1993 through June 30, 1998.
Any such payment of 50 percent of the cash flow would be funded from the
cash flow generated. Despite these requirements and restrictions,
management believes that the Company and each of its subsidiaries currently
have adequate liquidity to meet their financial obligations. However,
there is no assurance that these requirements and restrictions will not
have an impact on the future liquidity of the Company or its subsidiaries.
Results of Operations
The following tables sets forth certain information with respect to homes
delivered and homes sold during the periods presented (dollars in
thousands).
Year Ended March 31,
1996 1995 1994
Homes delivered
Units 369 341 269
Home sales revenue $ 55,983 $ 50,347 $ 34,356
Average sales price $ 151.7 $ 147.6 $ 127.7
Homes sold
Units 390 351 305
Sales value $ 60,096 $ 53,891 $ 41,927
Average sales price $ 154.0 $ 153.5 $ 137.5
The increase in home sales revenues for the year ended March 31, 1996
compared to the year ended March 31, 1995 and the increase in home sales
revenues for the year ended March 31, 1995 compared to the year ended March
31, 1994 both result from a combination of an increase in the number of
units delivered and an increase in the average sales price of the units
delivered. The increases in the number of units delivered are due to
opening new communities, primarily in Metropolitan Washington, D.C. The
increases in the average price of the units delivered are due primarily to
increased sales prices in Greater Tampa, Florida and a greater percentage
of
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<PAGE>
deliveries in Metropolitan Washington, D.C. where the average sales
price is higher than in Greater Tampa, Florida.
The Company realized an increase in the number of homes sold during the
year ended March 31, 1996 compared to the year ended March 31, 1995 and an
increase during the year ended March 31, 1995 compared to the year ended
March 31, 1994. These increases are attributable to an increase in the
number of communities in which the Company builds homes and a greater
number of sales in each community.
The increase in the average sales price of the homes sold during the year
ended March 31, 1996 compared with the prior year is attributable to higher
sales prices in Greater Tampa, Florida which were partially offset by
lower prices in Metropolitan Washington, D.C., where the average sales
price decreased due to the introduction of a lower priced townhome
product. The increase in the average sales price of the homes sold during
the year ended March 31, 1995 compared with the prior year is due primarily
to increased sales prices in Greater Tampa, Florida and a greater
percentage of sales in Metropolitan Washington, D.C. where the average
sales price is higher than in Greater Tampa, Florida.
The following tables sets forth certain information with respect to homes
sold under contract but not delivered ("Backlog") at the dates shown
(dollars in thousands).
March 31,
1996 1995 1994
Backlog
Units 142 121 111
Sales value $ 25,138 $ 21,025 $ 17,481
Average sales price $ 177.0 $ 173.8 $ 157.5
The Backlog at March 31, 1996, 1995 and 1994 includes $8,460,000,
$3,353,000, and $3,128,000 of contingent contracts, respectively.
From March 31, 1994 to March 31, 1996, the Company realized an increase in
both the number of its backlog of sales contracts and the average sales
price of those contracts. The increases are attributable to a greater
number of communities in which the Company builds homes, a greater
percentage of backlog from Metropolitan Washington, D.C., where the average
sales price is substantially higher than in Greater Tampa, Florida, and
higher sales prices in Greater Tampa, Florida.
Page 13
<PAGE>
Year Ended March 31, 1996 Compared to the Year Ended March 31, 1995.
Results of Operations
The following table sets forth, for the periods indicated, certain
information regarding the Company's operations (dollars in thousands).
Year Ended March 31,
1996 1995
Dollars % Dollars %
Home sales revenues $ 55,983 100.0 $ 50,347 100.0
Cost of home sales 48,425 86.5 43,455 86.3
Gross profit 7,558 13.5 6,892 13.7
Selling, general and
administrative expenses 6,541 11.7 5,673 11.3
Pre-tax profit 1,003 1.8 1,159 2.3
While gross profit increased for the year ended March 31, 1996 compared to
the year ended March 31, 1995, gross profit as a percentage of home sales
revenue decreased from 13.7% to 13.5%. This percentage decrease results
primarily from the comparative increase in developed lot costs from period
to period as well as increases in other construction costs. These cost
increases could not be recouped through higher sales prices due to strong
competition in the markets where the Company operates.
Selling, general and administrative expenses for the year ended March 31,
1996 increased when compared with the prior comparable period and increased
as a percentage of the related home sales revenue. These increases are due
to the increase in sales and are also due to an increase in the fixed
components of selling, general and administrative expenses.
The change in pre-tax profit for the year ended March 31, 1996 compared to
the year ended March 31, 1995 is a reflection of the changes in gross
profit and in selling, general, and administrative expenses.
Uncertain local economic conditions in the areas where the Company operates
have adversely affected sales of new homes and the level of gross profit.
The Company is unable to predict the extent to which such factors will
continue to adversely affect the Company's operations in the future.
See "Fresh Start Reporting" appearing under Note 2, "Summary of Significant
Accounting Policies" to Notes to Consolidated Financial Statements of the
Company appearing elsewhere in this report.
Page 14
<PAGE>
Interest and Other Income
Interest and other income includes $647,000 and $791,000 and interest
expense includes $623,000 and $752,000 for the years ended March 31, 1996
and March 31, 1995, respectively, from wholly-owned finance subsidiaries
established in prior years to sell collateralized mortgage obligations
through participation in various multi-builder bond programs.
Income Taxes
The provisions for income taxes for the years ended March 31, 1996 and 1995
of $60,000 and $72,000, respectively, are for state income taxes and were
provided for at the statutory rates. Provisions for federal income taxes
were not required for the years ended March 31, 1996 and 1995 due to the
utilization of loss carryforwards, however, the Company expects to incur
federal income tax liability at statutory rates in the future
Year Ended March 31, 1995 Compared to the Year Ended March 31, 1994.
Results of Operations
The following table sets forth, for the periods indicated, certain
information regarding the Company's operations (dollars in thousands).
Year Ended March 31,
1995 1994
Dollars % Dollars %
Home sales revenues $ 50,347 100.0 $ 34,356 100.0
Cost of home sales 43,455 86.3 28,764 83.7
Gross profit 6,892 13.7 5,592 16.3
Selling, general and
administrative expenses 5,673 11.3 4,560 13.3
Pre-tax profit 1,159 2.3 956 2.8
While gross profit increased for the year ended March 31, 1995 compared to
the year ended March 31, 1994, gross profit as a percentage of home sales
revenue decreased from 16.3% to 13.7%. This percentage decrease results
primarily from the comparative increase in developed lot costs from period
to period as well as increases in other construction costs.
Selling, general and administrative expenses for the year ended March 31,
1995 increased when compared with the prior comparable period but decreased
as a percentage of the related home sales revenue. The increase in
selling, general and administrative expenses is due to the increase in
sales while the percentage decrease results primarily from the more
efficient absorption of the fixed components of selling, general and
administrative expenses over higher revenues.
The change in pre-tax profit for the year ended March 31, 1995 compared to
the year ended March 31, 1994 is a reflection of the changes in gross
profit and in selling, general, and administrative expenses.
Page 15
<PAGE>
See "Fresh Start Reporting" appearing under Note 2, "Summary of Significant
Accounting Policies" to Notes to Consolidated Financial Statements of the
Company appearing elsewhere in this report.
Interest and Other Income
Interest and other income includes $791,000 and $1,119,000 and interest
expense includes $752,000 and $1,032,000 for the years ended March 31, 1995
and March 31, 1994, respectively, from wholly-owned finance subsidiaries
established in prior years to sell collateralized mortgage obligations
through participation in various multi-builder bond programs.
Income Taxes
The provision for income taxes for the year ended March 31, 1995 of $72,000
is for state income taxes and was provided for at the statutory rates. A
provision for federal income taxes was not required for the year ended
March 31, 1995.
The benefit for income taxes for the year ended March 31, 1994 of $124,000
includes federal income taxes of $66,000 and state income taxes of $88,000,
offset by $278,000 in state income tax refunds which were received during
the year ended March 31, 1994.
Inflation and Business Cycles
General economic conditions in the United States, and particularly
the impact of inflation, availability of funds, and other factors on
interest rates, affect both the Company's sales and its costs. Inflation
can have a long-term impact on the Company because increasing costs of
land, materials, and labor result in higher sales prices of its homes. In
addition, increases in interest rates on permanent mortgages generally
result in reduced sales rates. The Company's business is also affected by
local economic conditions, such as unemployment rates and housing demand in
the markets in which it builds homes. Homebuilding is a cyclical industry
in which economic conditions have a substantial impact on operating
performance.
Item 8. Financial Statements and Supplementary Data
The information required under this item is incorporated herein by
reference to the information provided at Pages F-1 through F-16 of this
report.
Item 9. Change in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
Page 16
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information required to be set forth hereunder has been omitted and will be
incorporated by reference, when filed, from the Company's Proxy Statement
for its 1996 Annual Meeting of Stockholders.
Item 11. Executive Compensation
Information required to be set forth hereunder has been omitted and will be
incorporated by reference, when filed, from the Company's Proxy Statement
for its 1996 Annual Meeting of Stockholders.
Item 12. Security Ownership by Certain Beneficial Owners and
Management
Information required to be set forth hereunder has been omitted and will be
incorporated by reference, when filed, from the Company's Proxy Statement
for its 1996 Annual Meeting of Stockholders.
Item 13. Certain Relationships and Related Transactions
Information required to be set forth hereunder has been omitted and will be
incorporated by reference, when filed, from the Company's Proxy Statement
for its 1996 Annual Meeting of Stockholders.
Page 17
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules, and Reports
on Form 8-K
(a) Financial Statements. The following consolidated
financial statements are filed as part of this Annual Report on
Form 10-K to Stockholders. (All other schedules are omitted as the
required information is inapplicable, or the information is
presented in the financial statements and related notes thereto):
Page
INTERNATIONAL AMERICAN HOMES, INC. AND SUBSIDIARIES ----
Report of Independent Public Accountants . . . . . . . . . . F-1
Consolidated Balance Sheets as of March 31, 1996 and
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Operations for the three years
ended March 31, 1996. . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Changes in Stockholders'
Equity for three the years ended March 31, 1996. . . . . . . F-5
Consolidated Statements of Cash Flows for the three years
ended March 31, 1996. . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . F-7
(b) Reports on Form 8-K. No reports on Form 8-K were
filed by the Company during the last quarter of the fiscal year ended
March 31, 1996.
(c) Exhibits. The following exhibits are filed as part of
this Annual Report:
Exhibit
Number
- -------
2.1 Second Amended Disclosure Statement dated as of June 29,
1992 and Third Amended Joint Plan of Reorganization dated
June 29, 1992 (incorporated by reference to Exhibit 2.4
to Annual Report on Form 10-K for the fiscal year ended
March 31, 1993).
2.2 Fourth Amended Joint Plan of Reorganization dated
November 17, 1992 (incorporated by reference to Exhibit
2.5 to Annual Report on Form 10-K for the fiscal year
ended March 31, 1993).
3.1(a) Restated Certificate of Incorporation of Registrant
(incorporated by reference to Exhibit 4 to
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1989).
3.1(b) Certificate of Amendment to the Restated
Certificate of Incorporation of Registrant dated
September 8, 1994 (incorporated by reference to Exhibit
3.1(b) to Annual Report on Form 10-K for the fiscal year
ended March 31, 1995).
Page 18
<PAGE>
3.1(c) Certificate of Amendment to the Restated
Certificate of Incorporation of Registrant dated
May 22, 1995 (incorporated by reference to Exhibit
3.1(c) to Annual Report on Form 10-K for the fiscal year
ended March 31, 1995).
3.2 By-laws of Registrant (incorporated by reference to Exhibit
3.2 to Annual Report on Form 10-K for the fiscal year ended
March 31, 1989).
10.1 Key Employee Agreement dated August 12, 1992 of Robert J.
Suarez (incorporated by reference to Exhibit 10.17 to
Annual Report on Form 10-K for the fiscal year ended
March 31, 1993).
10.2 Non-Qualified Stock Option Agreement dated August 12,
1992 between Robert J. Suarez and the Registrant
(incorporated by reference to Exhibit 10.19 to Annual
Report on Form 10-K for the fiscal year ended March 31,
1993).
10.3 Guaranty dated as of January 20, 1993 by Robert J. Suarez
to First Florida Bank, N.A. (incorporated by reference to
Exhibit 10.23 to Annual Report on Form 10-K for the
fiscal year ended March 31, 1993).
10.4 Indemnity Agreement dated as of January 20, 1993 by
Suarez Housing Corporation, the Registrant, and Robert J.
Suarez to and for the benefit of First Florida Bank, N.A.
(incorporated by reference to Exhibit 10.24 to Annual
Report on Form 10-K for the fiscal year ended March 31,
1993).
10.5 Mortgage Modification Agreement dated as of October 7,
1994 by and between Barnett Bank of Tampa and Suarez
Housing Corporation (incorporated by reference to Exhibit
10.6 to Annual Report on Form 10-K for the fiscal year
ended March 31, 1995).
10.6 Consulting Agreement dated as of November 1, 1993 between
Peter Davis and the Registrant (incorporated by reference
to Exhibit 10.1 to Quarterly Report on Form 10-Q for the
quarter ended December 31, 1993).
10.7 Amended and Restated Master Loan dated as of November 17, 1995
between Nations Bank of Florida, N.A. and Suarez Housing
Corporation (filed herewith).
10.8 Second Amendment to Amended and Restated Loan Agreement and
Partial Release of Guaranty Agreement dated as of October
30, 1995 by and between Barnett Bank of Tampa and Suarez
Housing Corporation (filed herewith).
21 List of subsidiaries of the registrant (incorporated by
reference to Exhibit 21 to Annual Report on Form 10-K for
the fiscal year ended March 31, 1994).
27 Financial Data Schedule (filed herewith)
Page 19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: June 28, 1996 INTERNATIONAL AMERICAN HOMES, INC.
By: /s/ Robert J. Suarez
----------------------
Robert J. Suarez
Chairman of the Board of Directors and President
(Principal Executive Officer)
By: /s/ Michael P. Villa
-------------------------
Michael P. Villa
Vice President, Treasurer, and
Chief Financial Officer
Page 20
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the date indicated.
Signature Title Date
/s/ Robert J. Suarez Chairman of the Board of
- -------------------- Directors and President June 28, 1996
Robert J. Suarez
/s/ Kenneth W. Carlson
- -----------------------
Kenneth W. Carlson Vice President and Director June 28, 1996
/s/ William D. Aiken
- -----------------------
William D. Aiken Director June 28, 1996
/s/ Dionel Cotanda
-----------------------
Dionel Cotanda Director June 28, 1996
/s/ Peter A. Davis
- -----------------------
Peter A. Davis Director June 28, 1996
/s/ Robert E. Everett
- -----------------------
Robert E. Everett Director June 28, 1996
/s/ Brian Gibney
- -----------------------
Brian Gibney Director June 28, 1996
/s/ Jeffrey D. Prol
- -----------------------
Jeffrey D. Prol Director June 28, 1996
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To International American Homes, Inc.:
We have audited the accompanying consolidated balance sheets of
International American Homes, Inc. (a Delaware corporation) and
subsidiaries as of March 31, 1996 and 1995, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows
for the three years ended March 31, 1996. 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 financial statements referred to above present fairly,
in all material respects, the financial position of International American
Homes, Inc. and subsidiaries as of March 31, 1996 and 1995, and the results
of their operations and their cash flows for the three years ended March
31, 1996, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
May 31, 1996
F-1
<PAGE>
Item 14(a) Financial Statements
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
March 31, March 31,
1996 1995
CASH AND CASH EQUIVALENTS - including $550
and $457 restricted, respectively $ 1,764 $ 1,938
RECEIVABLES 1,223 444
REAL ESTATE INVENTORY 21,860 16,997
COLLATERAL FOR BONDS PAYABLE 5,871 7,620
PROPERTY AND EQUIPMENT - less accumulated
depreciation of $223 and $164,
respectively 172 106
OTHER ASSETS 637 583
--------- ---------
TOTAL ASSETS $ 31,527 $ 27,688
========= =========
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-2
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, March 31,
1996 1995
MORTGAGE NOTES AND LOANS PAYABLE
Acquisition and construction loans payable $ 13,785 $ 9,664
Other secured notes payable 29 60
-------- ---------
13,814 9,724
BONDS PAYABLE 5,660 7,362
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 5,362 4,908
CUSTOMER DEPOSITS 237 183
-------- ---------
Total Liabilities 25,073 22,177
-------- ---------
STOCKHOLDERS' EQUITY
PREFERRED STOCK - $.01 par value, 4,000,000
shares authorized, none issued - -
COMMON STOCK - $.01 par value, 10,000,000
shares authorized, 2,894,343 shares issued 29 29
ADDITIONAL PAID-IN CAPITAL 2,348 2,348
RETAINED EARNINGS 4,079 3,136
TREASURY STOCK, 169,948 shares (2) (2)
--------- --------
Total Stockholders' Equity 6,454 5,511
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 31,527 $ 27,688
========= =========
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-3
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
Year Ended March 31,
1996 1995 1994
REVENUES
Home sales $ 55,983 $ 50,347 $ 34,356
Interest and other income 792 878 1,277
--------- -------- ---------
56,775 51,225 35,633
--------- -------- --------
EXPENSES
Cost of home sales 48,425 43,455 28,814
Selling, general and administrative 6,541 5,673 4,560
Interest 747 857 1,239
Depreciation 59 81 64
--------- -------- --------
55,772 50,066 34,677
--------- -------- --------
INCOME BEFORE INCOME TAXES 1,003 1,159 956
(PROVISION) BENEFIT FOR INCOME TAXES (60) (72) 124
--------- -------- -------
NET INCOME $ 943 $ 1,087 $ 1,080
========= ======== ========
PER SHARE DATA (as adjusted for the
Reverse Stock Split)
Net income $ .35 $ .40 $ .40
========= ======== =======
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING (as adjusted for the
Reverse Stock Split) 2,724,395 2,724,395 2,724,395
========= ========= =========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-4
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock
----------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares Additional
Issued and Amount Paid-In Retained Treasury Total
Outstanding Capital Earnings Stock
------------- -------- ---------- --------- ----------- ---------
Balance, March 31, 1993 27,243,948 $ 289 $ 2,103 $ 969 $ (17) $ 3,344
Net income - - - 1,080 - 1,080
Balance, March 31, 1994 27,243,948 289 2,103 2,049 (17) 4,424
Reverse stock split (24,519,553) (260) 245 - 15 -
Net income - - - 1,087 - 1,087
Balance, March 31, 1995 2,724,395 29 2,348 3,136 (2) 5,511
Net income - - - 943 - 943
Balance, March 31, 1996 2,724,395 $ 29 $ 2,348 $ 4,079 $ (2) $ 6,454
=========== ======= ========== ======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-5
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Year Ended March 31,
1996 1995 1994
Cash flows from operating activities:
Net income $ 943 $ 1,087 $ 1,080
Adjustments to reconcile net
income to net cash (used in)
provided by operating activities:
Depreciation 59 81 64
Deferred income taxes - - (3)
Changes in operating assets and
liabilities:
(Increase) decrease in restricted
cash (93) 1,075 204
(Increase) decrease in receivables (779) (13) 14
Increase in real estate inventory (4,863) (5,820) (2,084)
Decrease in collateral for bonds
payable 1,749 2,046 4,504
Increase (decrease) in accounts
payable and accrued liabilities 454 (411) 444
Increase (decrease) in customer
deposits 54 (16) 41
Other (54) 65 (177)
------- -------- -----
Net cash (used in) provided by operating
activities (2,530) (1,906) 4,087
------- --------- -----
Cash flows from investing activities:
Property and equipment, net (127) (67) (85)
------- --------- -----
Cash flows from financing activities:
Proceeds from mortgage notes
and loans payable 35,466 30,521 18,895
Payments of mortgage notes
and loans payable (31,374) (26,913) (18,782)
Repayments of bonds payable
- finance subsidiaries (1,702) (1,975) (4,362)
-------- ------- ----
Net cash provided by (used in)
financing activities 2,390 1,633 (4,249)
------- ------- ----
Net decrease in cash and cash
equivalents (267) (340) (247)
Cash and cash equivalents at
beginning of period 1,481 1,821 2,068
------- ------- -----
Cash and cash equivalents at end
of period $ 1,214 $ 1,481 $1,821
======= ======= =======
Supplemental disclosures of cash flow
information:
Cash paid (recovered) during the
year for:
Interest $ 1,860 $ 1,591 $ 1,438
======= ========= =======
Income taxes $ 64 $ 67 $ (239)
======= ========= =======
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-6
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 AND 1995
NOTE 1 - THE COMPANY
International American Homes, Inc. (the "Company") was incorporated under
the laws of the State of Delaware on April 27, 1983. The Company, through
its subsidiaries, designs, builds, and sells single-family homes and
townhomes and develops building lots. The Company currently conducts its
building activities in Metropolitan Washington, D.C. and Florida.
On April 16, 1990, the Company and certain of its wholly-owned subsidiaries
filed voluntary petitions for relief under Chapter 11, Title 11 of the
United States Bankruptcy Code in the United States Bankruptcy Court for the
District of New Jersey (the "Bankruptcy Court"). On August 12, 1992, the
Bankruptcy Court entered an order confirming the Company's Plan of
Reorganization (the "Plan" or "Plan of Reorganization").
Pursuant to the Plan, the Company made cash distributions to creditors of
$4,149,000 through March 31, 1996, of which $408,000 was made during the
year ended March 31, 1996. In addition, the Company issued 2,043,296
shares of the Company's common stock to the creditors of which 112,263
shares were issued during the year ended March 31, 1996. The issuance of
the stock to the creditors resulted in the dilution of existing
shareholders to 25 percent of the common stock outstanding.. (See Note 7).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
International American Homes, Inc. and all wholly-owned subsidiaries. All
significant intercompany transactions and balances have been eliminated.
Revenue Recognition
Revenues from sales are recognized at the time of closing, i.e., when a
sufficient down payment has been made; financing has been arranged with a
third party lender; title, possession and other attributes of ownership
have been transferred to the buyer; and the Company is not obligated to
perform significant additional activities after the sale.
Real Estate Inventory
Real estate inventory is carried at the lower of cost or net realizable
value. Net realizable value is defined as the estimated proceeds upon
disposition less all future costs to complete and expected costs to sell.
Construction costs are accumulated during the period of construction and
charged to
F-7
<PAGE>
cost of sales under specific identification methods. Land and
land development costs are charged to cost of sales under specific
identification methods or are amortized to cost of sales based upon the
number of homes to be constructed in each community.
Interest costs related to projects in progress are capitalized during the
construction period and charged to cost of sales as the related inventories
are sold (see Note 5).
Land option costs are capitalized when incurred and either included as part
of the purchase price when the land is acquired or charged to operations to
the extent of any unrecoverable amount when the Company determines it will
not exercise the option.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, receivables, mortgage
notes and loans payable, accounts payable and accrued liabilities, and
customer deposits approximate fair value due to the short maturities of
these instruments.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Depreciation
Depreciation is computed on the straight-line method for all depreciable
assets. Estimated useful lives range from two to five years. Maintenance
and repairs are charged to expense as incurred. Major renewals and
improvements are capitalized and depreciated over the estimated useful
life.
Per Share Data
Net income per share is based upon the weighted average number of common
shares outstanding during each period, as adjusted for the Reverse Stock
Split. Primary and fully diluted earnings per share data is not presented
as the effect of common stock equivalents is not material.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company generally
considers all highly liquid instruments purchased with an original maturity
of three months or less to be cash equivalents.
New Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued "Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" SFAS No.
121. This statement established financial and
F-8
<PAGE>
accounting reporting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used, and
for long lived assets and certain identifiable intangibles to be disposed
of. This statement is effective for financial statements with fiscal years
beginning after December 15, 1995, although earlier application is
encouraged. The Company plans to adopt SFAS 121 during fiscal year 1997
and has concluded that the impact of this statement to its financial
statements is not material.
Fresh Start Reporting
The American Institute of Certified Public Accountants issued Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" ("SOP 90-7"). Pursuant to the guidance provided by SOP
90-7, the Company adopted fresh start reporting as of August 12, 1992 and
all assets and liabilities are restated to reflect their reorganization
value which approximates their fair value at the date of reorganization.
Due to these adjustments combined with adjustments to write down real
estate inventory which were recorded in prior periods, cost of home sales
was $0, $266,000, and $885,000 lower for the years ended March 31, 1996,
1995 and 1994, respectively, than it would have been had it been based on
previously recorded cost.
Reclassifications
Certain amounts in the prior periods' consolidated financial statements
have been reclassified to conform with the current year presentation.
NOTE 3 - REAL ESTATE INVENTORY
Real estate inventory consists of the following (in thousands):
March 31, 1996 March 31, 1995
-------------- --------------
Accumulated costs of construction
completed and in progress $ 9,595 $ 9,121
Land and land development costs 11,504 6,833
Land options and deposits 761 1,043
--------- ---------
$ 21,860 $ 16,997
========= =========
From time to time as part of the normal operations of the business, the
subsidiaries of the Company have bought lots or land which the other
subsidiary of the Company was obligated to buy from a third party seller or
which the other subsidiary of the Company owned. Such transactions were at
prices approximating fair market value and were not significant.
F-9
<PAGE>
NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following (in
thousands):
March 31, 1996 March 31, 1995
-------------- --------------
Accounts payable - trade $ 2,185 $ 2,033
Accrued liabilities 1,855 1,553
Accrued estimated future cash
distribution to creditors 1,322 1,322
---------- ----------
$ 5,362 $ 4,908
========== ==========
Accounts payable and accrued liabilities as of March 31, 1996 and March 31,
1995, include liabilities of approximately $49,000 and $294,000,
respectively, which represent cash to be distributed to the creditors
pursuant to the Plan of Reorganization and accrued expenses related to the
bankruptcy. The accrued estimated future cash distribution to creditors is
an estimate of future cash distributions to creditors as defined by the
Plan of Reorganization.
NOTE 5 - MORTGAGE NOTES AND LOANS PAYABLE
Mortgage notes and loans payable consist of the following (in thousands):
March 31, 1996 March 31, 1995
Acquisition and construction loans
payable secured by real estate
inventory, with interest at .75%
to 2.25% above prime $ 13,785 $ 9,664
Notes payable principally secured
by mortgage notes receivable with
interest at .75% above prime 29 60
-------- -------
$ 13,814 $ 9,724
======== =======
Acquisition and construction loans payable at March 31, 1996 are due as
follows (in thousands):
Year Ending March 31, 1997 $ 12,253
Year Ending March 31, 1998 1,012
Year Ending March 31, 1999 520
The acquisition and construction loans payable are principally payable from
sales proceeds, generally provide for extensions, and are all secured by
real estate inventory. As of March 31, 1996, the Company had $21,010,000
of undrawn commitments for additional construction and land acquisition
financing. Interest on the acquisition and construction loans payable is
payable monthly.
F-10
<PAGE>
Interest costs incurred and the related amount capitalized to inventories
and expensed to the Consolidated Statements of Operations are as follows
(in thousands):
Year Ended March 31,
1996 1995 1994
Incurred $ 1,897 $ 1,627 $ 1,504
Capitalized 1,150 770 265
Expensed 747 857 1,239
NOTE 6 - INCOME TAXES
The Company has adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" SFAS 109. SFAS 109 is an asset and
liability approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been recognized in the Company's financial statements or tax returns. In
estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactments of changes in the tax law or
rates.
The income tax provision (benefit) consisted of the following (in
thousands):
Year Ended March 31,
1996 1995 1994
Current
Federal $ - $ - $ 69
State 60 72 (190)
--------- --------- ----------
60 72 (121)
--------- --------- ----------
Deferred
Federal - - (3)
State - - -
--------- --------- -----------
- - (3)
--------- --------- -----------
Provision (Benefit) for income taxes $ 60 $ 72 $ (124)
========= ========= ============
F-11
<PAGE>
The provision for income taxes at an effective rate of 6%, differs from the
Federal statutory corporate tax rate as follows (in thousands):
Year Ended March 31,
1996 1995 1994
Federal Income Tax at 34% statutory rate $ 341 $ 394 $ 325
State income tax (benefit),
net of Federal benefit 40 48 (125)
Taxes applicable to loss carryforwards (418) (26) (325)
Changes in temporary differences 90 (356) -
Other 7 12 1
------- ------- -------
$ 60 $ 72 $(124)
======= ======= =======
Temporary differences and carryforwards which give rise to a significant
portion of deferred tax assets and liabilities for March 31, 1996 and 1995
are as follows (in thousands):
Deferred Expense
(Benefit)
March 31, 1995 March 31, 1996
Differences in the tax basis
and the book basis of -
Partnerships $ (11) $ 11 $ 0
Inventory (90) 37 (53)
Installment sales 358 (100) 258
Other (228) (38) (266)
Loss carryforwards (1,008) 418 (590)
Valuation allowance 979 (328) 651
------------ ---------- ----------
Net Deferred Tax Liability $ - $ - $ -
============ =========== ==========
At March 31, 1996, the Company had Federal income tax loss carryforwards of
approximately $1,700,000 that become available at approximately $150,000
per year through 2008. The Company has provided a valuation allowance on
the net deferred tax assets which primarily results from the restricted use
of net operating loss carryforwards.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
At March 31, 1996, the Company had commitments to purchase 694 finished
building lots, providing for an aggregate purchase price of approximately
$24,989,000, over a four year period. Substantial deposits will be
forfeited if the Company is unable to satisfy these commitments.
F-12
<PAGE>
Suarez Housing Corporation, a subsidiary of the Company, has an employment
agreement with the Company's Chairman and President expiring August 12,
1998, currently providing for compensation of $290,000 per annum.
At March 31, 1996, the Company had open letters of credit and guarantees
totaling approximately $314,000 to secure performance obligations.
The Company currently occupies office space and leases model home furniture
under operating lease agreements expiring at various dates through 2000.
The Company also leases storage space on a month to month basis. The
combined rental expense incurred under these leases was $275,000, $215,000,
and $131,000 for the years ended March 31, 1996, 1995, and 1994,
respectively. The future minimum rental payments under these operating
leases as of March 31, 1996 are as follows:
Year Ending March 31, 1997 $223,379
Year Ending March 31, 1998 $198,158
Year Ending March 31, 1999 $106,423
Year Ending March 31, 2000 $ 27,430
The Plan of Reorganization provides for distributions equal to 50 percent
of future cash flows (as defined in the Plan), if any, for the periods
ending June 30, 1993 through June 30, 1998. The Company has calculated the
cash flow (as defined in the Plan) for the period ended June 30, 1995 and
has determined that there was no excess cash flow (as defined in the Plan)
for that period and accordingly no distribution to creditors was required.
Based on the Company's projections, it is anticipated that there will be no
excess cash flow (as defined in the Plan) for the period ending June 30,
1996 and accordingly no distribution to creditors is expected to be
required. During the year ended March 31, 1993, the Company estimated the
initial liability for these potential distributions in the amount of
$1,322,000 and such amount is included in Accounts Payable and Accrued
Liabilities on the accompanying consolidated balance sheets.
Under the Company's Plan of Reorganization, the payment of dividends is not
permitted during the six year period beginning August 13, 1992. The Plan
also provides that after August 12, 1998, the Company may not pay any cash
dividends to stockholders until it has first paid an additional $1,250,000
to the creditors.
The Company's Plan of Reorganization does not permit the subsidiaries of
the Company to pay any dividends to the parent company. The Plan further
restricts the Company and its subsidiaries from acquiring debt securities
from or loaning or advancing any money to any other party except in the
ordinary course of business. The net assets at March 31, 1996 of the
Company's two subsidiaries are as follows (in thousands):
Net Assets at
March 31, 1996
(Unaudited)
Porten Sullivan Corporation $ 2,948
Suarez Housing Corporation 2,796
F-13
<PAGE>
The Company is involved from time to time in litigation arising in the
ordinary course of business, none of which is expected to have a material
adverse effect on the Company's financial position or the results of
operations.
NOTE 8 - COMMON STOCK AND STOCK OPTIONS
At the 1994 Annual Meeting of Stockholders, which was held on September 13,
1994, the stockholders approved a proposal to adopt certain amendments to
the Company's Restated Certificate of Incorporation (i) to effect a
1-for-10 reverse stock split of the Company's issued and outstanding common
stock and (ii) to change the number of authorized shares of common stock
from 30 million to 10 million. The Amendments did not change the par value
of the common stock which remained at $.01 per share. The Amendments
became effective on May 31, 1995 with the filing of a Certificate of
Amendment with the Secretary of State of Delaware on May 31, 1995. The
effect of the Reverse Stock Split has been retroactively reflected in the
statements for all periods presented.
On August 12, 1992, an option for 50,000 shares of common stock at a
purchase price of $.50 per share was granted to the Chairman and President
of the Company. The exercise price equals the market price on the date of
grant. The option is 100% exercisable currently and all shares must be
purchased by August 11, 1996.
The Company has a Non-Qualified Stock Option Plan for which 150,000 shares
of common stock have been reserved for issuance under this plan. All
grants of options pursuant to this plan must be approved by the Board of
Directors and the exercise price equals the market price at the date of
grant. On February 9, 1993, pursuant to this plan, certain key employees
of the Company were granted options to purchase 11,000 shares of common
stock at a price of $.50 per share of which 10,000 shares are or may become
exercisable. These options are exercisable 60% currently, and additional
40% on or after February 9, 1997, all of the shares must be purchased by
February 9, 1998. In addition, on November 9, 1993, pursuant to this plan,
the Company's former Executive Vice President, who retired on May 12, 1995,
was granted options to purchase 10,000 shares of common stock at a price of
$.60 per share. These options were exercised in full on May 12, 1996.
129,000 shares remain available to be issued pursuant to the Non-Qualified
Stock Option Plan.
At the 1995 Annual Meeting of Stockholders, which was held on September 12,
1995, the stockholders approved a proposal to adopt a Non-Employee
Directors Stock Option Plan. Pursuant to the Non-Employee Directors Stock
Option Plan, options to purchase 5,000 shares of common stock were granted
to each of the Company's non-employee directors. Four directors received
options to purchase 5,000 shares each at a price of $1.8125 per share.
These options are exercisable 33% currently, 33% on or after June 22, 1997,
34% on or after June 22, 1998, and all of the shares must be purchased by
June 22, 2000. Two directors received options to purchase 5,000 shares each
at a price of $1.00 per share. These options are exercisable 33% on or
after September 12, 1996, 33% on or after September 12, 1997, 34% on or
after September 12, 1998, and all of the shares must be purchased by June
22, 2000. These option grants were approved by the Board of Directors and
the exercise prices equal the market price on the date of grant.
F-14
<PAGE>
NOTE 9 - CONDENSED FINANCIAL STATEMENTS OF CONSOLIDATED FINANCE
SUBSIDIARIES
The Company's wholly-owned finance subsidiaries were established to sell
collateralized mortgage obligations through participation in various
multi-builder bond programs. In these sales, which last occurred in 1987,
the Company originated and pooled mortgage loans which were then pledged as
collateral for bonds payable. The interest rates on the mortgage loans
which comprise the collateral for bonds payable, roughly equate with the
interest rates on the related bonds payable.
Condensed financial information is as follows (in thousands):
Condensed Balance Sheets
(Unaudited)
March 31, 1996 March 31, 1995
Assets:
Collateral for bonds payable $ 5,871 $ 7,620
Other assets 30 9
-------------- --------------
$ 5,901 $ 7,629
============== ==============
Liabilities and Equity:
Bonds payable $ 5,660 $ 7,362
Equity and intercompany advances 241 267
-------------- --------------
$ 5,901 $ 7,629
============== ==============
Condensed Statements of Income
(Unaudited)
Year Ended March 31,
1996 1995 1994
Revenues $ 647 $ 791 $ 1,119
====== ====== =======
Income before income taxes $ 17 $ 22 $ 58
====== ====== =======
NOTE 10 - RELATED PARTY TRANSACTIONS
The Company's Chairman and President has personally guaranteed bank loans
in the aggregate maximum amount of $14,500,000 for Suarez Housing
Corporation, a subsidiary of the Company, at a fee of one percent of the
amount guaranteed, not to exceed $80,000 per year. At March 31, 1996, the
outstanding principal amount of loans guaranteed by the Company's Chairman
and President was $5,516,000. The Company has agreed to indemnify the
President and Chairman in the event that this personal guarantee is called.
F-15
<PAGE>
The Chairman and President of the Company is a one third partner in a
partnership from which the Company bought 24 finished building lots during
the year ended March 31, 1996 for $612,000, a price which approximates fair
market value.
A member of the Board of Directors is Vice President and a Director of a
company which during the year ended March 31, 1996 sold lumber and certain
other building material products in the amount of approximately $2,798,000
to Suarez Housing Corporation, a subsidiary of the Company. Suarez Housing
Corporation purchases all of its requirements for those products from this
company.
Another member of the Board of Directors is Executive Vice President of a
company which during the year ended March 31, 1996 sold heating,
ventilating and air conditioning systems in the amount of approximately
$568,000 to Porten Sullivan Corporation, a subsidiary of the Company.
Porten Sullivan Corporation purchases all of its requirements for heating,
ventilating and air conditioning systems from this company.
F-16
AMENDED AND RESTATED MASTER LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of the 17th day of November, 1995 (the
"Loan Agreement" or "Agreement"), is made by and between Suarez Housing
Corporation, a Florida corporation, ("Borrower"), with its principal place
of business in Temple Terrace, Hillsborough County, Florida, and
NationsBank of Florida, N.A., a national banking association organized and
existing under the laws of the United States, with its offices located at
1410 North Westshore Boulevard, Suite 100, Tampa, Florida ("Bank").
RECITALS
A. Borrower has previously taken out with Bank a revolving line of
credit loan in the original principal amount of $5,700,000.00 (the "Loan")
to be used for the purpose of constructing single family dwellings on
individual lots now owned or to be acquired by Borrower in fee simple and
mortgaged to Bank as security for the Loan. Bank and Borrower have agreed
to renew and extend the Loan and to increase the amount by a future advance
under the mortgage.
B. Bank has not agreed in advance nor committed to Borrower to fund
any or all of the construction funding which might be advanced to Borrower,
but has agreed to establish a master note and master mortgage structure
under which advances may be made for construction on individual lots and
dwellings in accordance with plans, specifications, terms, and conditions
approved by Bank.
C. Bank is willing to renew and extend the Loan described above
based on the terms and conditions set forth in this Loan Agreement and in
the Loan Documents referred to herein.
NOW, THEREFORE, in consideration of the premises, of the loan advances
which may be agreed to be made Bank to Borrower hereinafter and the note
and mortgage given by Borrower in evidence thereof, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrower and Bank hereby agree as follows:
ARTICLE I
Definitions
1.1 For the purposes hereof:
(a) "Approved Construction Loan" means the terms, con*ditions,
and documentation approved by Bank and accepted by Borrower upon which
advances will be made under the Loan for con*struction of a dwelling on a
particularly identified lot, which Approved Construction Loan shall be
evidenced by a written commitment letter from Bank to Borrower.
(b) "Borrower's Representative" means the person or persons
designated in writing to Bank by Borrower as being authorized to submit
Draw Requests on Borrower's behalf and to consent to changes in the Cost
Breakdown. Unless and until changed by written notice to Bank, Borrower
designates Robert J. Suarez or Robert I. Antle as its Borrower's
Representative(s).
(c) "Closing Date" means the date as of which this Loan
Agreement is executed by Borrower and Bank.
(d) "Collateral" means the Mortgaged Property, Rents, Intangible
Property and other property rights as described in and encumbered by the
Mortgage.
(e) "Commitment" means Bank's commitment letter to Borrower
dated September 28, 1994 (and all amendments thereto), the terms and
conditions of which are incorporated herein by reference, but in the event
of any conflict or discrepancy between the terms of this Agreement and the
Commitment, the terms of this Agreement shall control.
(f) "Construction Consultant" means the architectural,
engineering, or consulting firm which Bank may designate to per*form
various services on behalf of Bank. The services to be
1
<PAGE>
performed by Bank's Construction Consultant may include review of the
Plans and all proposed changes to them, preparation of a "cost takeoff"
construction analysis (the "Construction Analysis"), periodic inspections
of construction work for conformity with the Plans, and approval of Draw
Requests.
(g) "Construction Documents" means the stipulated sum
construction contract between Borrower and the General Contractor, if a
General Contractor is engaged, and all other contracts, plans or documents
concerning the construction of the Improvements and any addenda,
amendments or modifications thereto. The Construction Documents shall
include a hard cost breakdown and a maximum fixed cost for the performance
of all services, labor, and materials furnished thereunder.
(h) "Construction Loan Agreement" means the written agreement
made by Borrower and Bank as to each Approved Construction Loan containing
terms and conditions governing construction funding and administration.
(i) "Cost Breakdown" means the detailed trade breakown of the
cost of constructing the Improvements and an itemiza*tion of
nonconstruction and Land costs, all as approved by Bank from time to time
as to each Approved Construction Loan.
(j) "Default" means a violation of any term, covenant, or
condition hereunder or a Default as defined under any of the other Loan
Documents.
(k) "Default Condition" means the occurrence or existence of an
event or condition which, upon the giving of notice or the passage of time,
or both, would constitute a Default.
(l) "Draw Request" means a request for any disbursement of Loan
proceeds, which shall be submitted for each requested disbursement as set
forth in Article II hereof.
(m) "Financing Statements" means the UCC financing statements
filed in order to perfect Bank's lien on certain personal property and
fixtures as more particularly described there*in.
(n) "General Contractor" means Suarez Housing Corporation, if
named here, who will serve as the general contractor in accordance with
the Construction Documents; if a General Contractor is not engaged or is
not named here, any obligation of the General Contractor referred to in the
Loan Documents shall be the obligation of the Borrower to perform or to
cause to be performed.
(o) "Governmental Authorities" means any local, state, or
federal governmental agency, regulatory body or office, or any
quasigovernmental office (including health and environmental), or any
officer or official of any such agency, office, or body whose consent or
approval is required as a prerequisite to the commencement of the
construction of the Improvements or to the operation and occupancy of the
Improvements or the Project or to the performance of any act or obligation
or the observance of any agreement, provision or condition of whatsoever
nature herein contained.
(p) "Guarantor" means collectively, and jointly and severally,
the following: Robert J. Suarez, individually; and International American
Homes, Inc.
(q) "Guaranty" means the Guaranty Agreement executed by
Guarantor in favor of Bank, providing for Guarantor's payment of all sums
due under the Loan Documents and of performance of all obligations of
Borrower thereunder, including, without limitation, timely Completion of
the Improvements in accordance with the Construction Documents and Loan
Documents.
(r) "Improvements" means all improvements on the Land as defined
in the Mortgage.
(s) "Land" means the real property described in the Mortgage at
the inception of the Loan and as may be later included by modification and
spreader agreement.
(t) "Loan Documents" means this Loan Agreement, the Note and any
funding agreement, the Mortgage, the Guaranty, the Financing Statements,
any Construction Loan Agreement, and any other document or writing
executed in connection therewith or in furtherance thereof.
2
<PAGE>
(u) "Mortgage" means the Real Estate Mortgage, Assignment and
Security Agreement dated November 15, 1994 executed by Borrower for the
benefit of Bank encumbering the Collateral (as defined in the Mortgage),
and any extensions, modifications, re*newals or replacements thereof.
(v) "Note" means the collective reference to the promissory note
dated as of November 15, 1994 executed by Borrower in favor of Bank in the
amount of Five Million Seven Hundred Thousand and No/100 Dollars
($5,700,000.00), the Additional Advance Promissory Note of even date
herewith in the amount of One Million Three Hundred Thousand and No/100
Dollars ($1,300,000.00) and the Consolidation and Renewal Promissory Note
of even date in the amount of $7,000,000.00, as well as any promissory
note, consolidation, or other notes issued by Borrower in substitution,
replacement, extension, future advance, amendment or renewal of the Note
or any such promissory note or notes.
(w) "Permitted Encumbrances" means those liens, encumbrances,
easements and other matters defined in the Mort*gage as "Permitted
Encumbrances".
(x) "Plans" means plans and specifications for the construction
of the Improvements submitted to and approved by Bank from time to time,
and including such amendments thereto as may from time to time be made by
Borrower and approved by Bank.
(y) "Project" means the collective reference to the Land, the
Improvements, rights, property, and appurtenances as defined, described or
identified in the Mortgage, and means, as the context may require, an
individual lot and the Approved Construction Loan thereon, as well as the
aggregate of all such lots and loans.
(z) "Security Documents" means the Mortgage, the Financing
Statements, and any other instrument executed to establish and perfect
Bank's lien, and any extensions, modifications, renewals, or replacements
thereof.
(aa) "Site Plan" means the site plan for the Project prepared by
____________________________________________________ and dated
_______________, 199__.
(ab) "Title Policy" means the mortgagee title policy meeting the
requirements of this Loan Agreement.
ARTICLE II
The Loan
2.1 Loan Terms. Subject to the terms and conditions of this Loan
Agreement, Bank will lend and Borrower will borrow up to a principal sum of
Seven Million and No/100 Dollars ($7,000,000.00), which borrowing shall be
evidenced by the Note. Also, all of the terms, definitions, conditions,
and covenants of the Note, the Guaranty, the Mortgage, and any other
documents executed in connection therewith or pursuant thereto are
expressly made a part of this Loan Agreement by reference in the same
manner and with the same effect as if set forth herein at length and shall
have the meaning set forth in such instrument(s) unless otherwise defined
herein. The Loan will be a revolving line of credit. Borrower will be
entitled to borrow and reborrow the principal previously repaid provided no
default exists.
2.2 Interest. The outstanding principal balance of the Loan shall
bear interest, and principal and interest shall be repayable, all in
accordance with the terms of the Note.
2.3 Approvals for Funding. Bank will advance funds for individual
home construction loans within the projects previously approved by Bank.
The amount to be funded on each pre*sold unit will be an amount which does
not exceed 100% of the unit cost breakdown submitted by Borrower and
approved by Bank nor 80% of the lesser of 1) the completed value of each
unit, which amount shall be determined by an appraiser acceptable to
Lender, or 2) the contracted purchase price of the unit. The amount to be
funded on each speculative or model unit will be an amount which does not
exceed 100% of the unit cost breakdown submitted by Borrower and approved
by Lender nor 80% of the completed value of each unit, which amount shall
be determined by an appraiser acceptable to Lender. Said appraisals will
be at Borrower's expense. Funding under the construction line will be
limited to: (a)no more than 10 spec or model units under this line in
any one subdivision at one time; (b)no more than 22 spec or model units
under this line at any one time; (c)no more than 35 presold units
under this line at any one time; (d)no more than 75 spec or model units
from all
3
<PAGE>
lenders at any time. Pre*sold units are defined as those having a firm
purchase contract negotiated at arm's length with bona fide third party
purchasers (no relatives or affiliates of Borrower or Guarantors) with no
contingencies except a first mortgage financing contingency and either a)
a minimum of $1,000.00 deposit, and a preliminary mortgage approval from
an institutional lender to include income qualification and credit
verification, or b) a minimum of 10% deposit on a contract for all cash.
Expenses associated with the individual funding agreements to be drawn
against this construction line may be funded from the initial draw on each
unit. Bank shall not be obligated to advance funds under the Note except
in accordance with the terms and conditions for an Approved Construction
Loan as described in this Agreement. Funding for construction in projects
or locations other than a previously approved project shall be in Bank's
sole discretion.
(a) Request for Approval. Borrower may initiate funding for
construction of a particular dwelling by submitting a request to Bank,
together with supporting items or documents required by Bank as conditions
precedent to funding, including but not limited to:
(i) Construction plans and specifications;
(ii) Cost breakdown for the construction;
(iii) Appraisal in form and content and by an appraiser
satisfactory to Bank;
(iv) True copy of the presale contract on the dwelling, if
any;
(v) Such other information as may from time to time be
required by Bank to be submit*ted under its credit underwriting
practices.
After receipt and review of the foregoing and such other information as it
may require, Bank will evaluate the application and determine whether the
required documentation is complete. If Bank approves the request for
funding, it shall issue to Borrower its written commitment letter
confirming the amount to be funded and detailing the terms, conditions, and
further requirements or instructions for closing as to that Approved
Construction Loan.
(b) Closing on Approved Construction Loan. When Borrower has
accepted and returned the commitment letter and complied with or fulfilled
its requirements for closing, Borrower and Bank shall qualify the Approved
Construction Loan for funding under the Loan by executing and providing
documentation more specifically detailed in the commitment letter from
Bank to Borrower, including but not limited to:
(i) Funding agreement, reciting the maximum amount
approved for funding on account of this construc*tion, and incorporating
the terms of the Note and Mortgage;
(ii) Notice of Commencement;
(iii) Builder's Risk Insurance Policy or endorsement
adding the subject property;
(iv) Such other documents as may customarily be required by
Bank in connection with construction loans.
Unless stated otherwise in the funding agreement, all sums disbursed on
account of an Approved Construction Loan shall mature and shall be due and
payable, and the Bank's obligation to fund shall cease, on the maturity
date of the Note, or nine months from the date of execution of the funding
agreement, or Bank's acceleration of maturity of the Note on Borrower's
default, whichever comes first. If there is a Default under the Note,
Mortgage, this Loan Agreement, or any of the Loan Documents, or if Bank
elects in the future to terminate this Loan Agreement or not to renew the
Note at its maturity, Bank may, at its option, declare the Note and any
outstanding Approved Construction Loans immediately due and payable,
whereupon Bank shall not be obligated to make any further disbursements
under the Loan or under any Approved Construction Loans.
2.4 Disbursements. Bank agrees that it will, from time to time, and
so long as there shall exist no Default Condition or Default, but not more
frequently than monthly disburse Loan proceeds to Borrower. The conditions
set forth in Article III hereof must be satisfied before Bank will make the
4
<PAGE>
first advance or disbursement, and the conditions set forth in Article IV
hereof must be and remain satisfied before Bank will make each subsequent
disbursement or advance.
2.5 Draw Requests. No later than 3:00 P.M. Tuesday prior to each
Loan disbursement by Bank, Borrower must submit to Bank a Draw Request,
which shall include or be accompanied by the requirements set out herein
for draws.
2.6 Disbursement Amounts. Following receipt of a Draw Request and
receipt and review of Bank's inspection, Bank shall determine the amount of
the disbursement it will make in accordance with Bank's standard draw
sheet, a copy of which is attached as Exhibit A, provided no Default
Condition or Default exists.
2.7 Equity Requirements. If Bank at any time determines in its
reasonable discretion that the Loan proceeds plus the amount of all equity
investments made or scheduled to be made are not sufficient to fully
complete the Improvements in accordance with the Plans and to pay all
other sums due under the Loan Documents, then Bank shall have the option of
requiring Borrower to deposit with Bank additional funds from some other
source (or submit evidence to Bank of equity investments previously made)
in amounts sufficient to cover the resulting deficit before Bank will
dis*burse any additional Loan proceeds. Deposited funds shall be
advanced as construction progresses in accordance with this Loan Agreement
before any additional Loan disbursements are made.
2.8 Option to Disburse Funds to any Guarantor and/or to Pay
Contractors. If a Default shall exist, at its option, Bank may make Loan
disbursements directly to any guarantor or obligor of the Debt when such
party shall be performing the obligations of Borrower hereunder or the
General Contractor or any unpaid subcontractor, laborer or material
supplier providing labor, services or materials in connection with the
construction of the Improvements, and the execution of this Loan Agreement
by Borrower shall, and hereby does, constitute an irrevocable direction
and authorization to Bank to so disburse the funds. No further direction
or authorization from Borrower shall be necessary to warrant such direct
disbursements and all such disbursements shall be secured by the Security
Documents as fully as if made to Borrower, regardless of the disposition
thereof by the General Contrac*tor, any subcontractor, laborer or material
supplier so paid.
2.9 Line of Credit Proceeds Availability. Prior to each Approved
Construction Loan funding, and at all times during the term of each
Approved Construction Loan, Bank must be satisfied that the outstanding
Loan balance plus the cost to complete construction of all units then
under construction does not exceed the total amount of the Loan. Bank
shall not be obligated to make Loan disbursements if it is not satisfied
that there are sufficient Loan proceeds available as set forth herein.
ARTICLE III
Conditions Precedent to First Disbursement
Bank shall not be obligated to make the first Loan disbursement
until all of the following conditions have been satisfied by proper
evidence, execution and/or delivery to Bank, all in form and substance
reasonably satisfactory to Bank and Bank's counsel:
3.1 Note. The original Note, properly executed, shall have been
delivered to Bank.
3.2 Guaranty. The original Guaranty(s), properly executed, shall
have been delivered to Bank.
3.3 Mortgage. The Mortgage, which shall be a first lien on the
Project, shall have been properly executed in recordable form.
3.4 Indemnity. The Hazardous Substance Certificate and
In*demnification Agreement, properly executed by Borrower and each
Guarantor, shall have been delivered to Bank.
3.5 Financing Statements. The Financing Statements on forms approved
for filing in the appropriate state and local filing offices shall have
been properly executed.
3.6 Title Policy. A standard ALTA mortgagee title policy as to the
Project from a company or from companies approved by Bank (including any
reinsurance agreements required by Bank, together with direct access
provisions in favor of Bank): (1) providing coverage for the full principal
amount of the Loan, (2) providing a variable rate endorsement, if
appropriate, the Form 9 Endorsement, the Revolving Loan Endorsement, the
Survey Endorsement, and any other endorsements requested by Bank, (3)
deleting all "standard" exceptions except taxes for the current
5
<PAGE>
year, (4) insuring all appurtenant easements, and (5) containing no title
exceptions not approved by Bank.
3.7 Title Exceptions. Copies of all documents creating exceptions
to the Title Policy.
3.8 Survey. Three copies of a recent survey of the Land prepared by
a registered land surveyor acceptable to Bank and certified to Bank, the
title insurance company, and Borrower. Such survey shall contain a
certification as to the applicable flood zone(s) for the Land, and a
certification that the survey was made in accordance with the Minimum
Technical Standards for Surveys as set out in Chapter 21HH6, Florida
Administrative Code.
3.9 Flood Hazards. Evidence as to whether or not the Land is located
within an area identified as having "special flood hazards" as such term is
used in the federal Flood Disaster Protection Act of 1973. Such evidence
can be the certification that is required in connection with the survey
required herein.
3.10 Flood Hazard Insurance. If all or any part of the Improvements
is or is to be located in an area having "special flood hazards", a flood
insurance policy naming the Bank as mortgagee must be submitted to Bank.
Satisfactory evidence of premium payments must also be provided.
3.11 Builder's Risk Insurance. A builder's risk insurance policy
meeting the requirements set forth in the Mortgage. Satisfactory evidence
of premium payments must also be provided.
3.12 Liability Insurance. Liability insurance meeting the
requirements set forth in the Mortgage. Satisfactory evidence of premium
payments must be provided.
3.13 Borrower's Organizational Documents and Resolutions. A certified
copy, from the appropriate governmental body or corporate officer, of
organizational documents of Borrower, and any partner of Borrower, as
appropriate, certifying that Borrower and/or such partner (i) is duly
organized, validly existing, and in good standing under the state of its
existence, (ii) has the authority under such documents and laws to enter
into the Loan as contemplated by the Loan Documents, and (iii) has made
all appropriate filings, including without limitation, qualification to do
business in the State of Florida, necessary to enter into the Loan and
execute the Loan Documents. Additionally, Borrower shall provide (i) if
appropriate, certified resolutions or other internal documents or writing
of Borrower and such partner evidencing that Borrower and such partner have
taken all requisite organizational action, and received all organizational
approvals necessary to enter into the Loan and execute the Loan Documents,
and (ii) such other documents or writings as Bank may request.
3.14 Guarantor's Organizational Documents and Resolutions. A
certified copy, from the appropriate governmental body or corpo*rate
officer, of organizational documents of Guarantor, and any partner of
Guarantor, as appropriate, certifying that Guarantor and/or such partner
(i) is duly organized, validly existing, and in good standing under the
state of its existence, (ii) has the authority under such documents and
laws to enter into and execute the Guaranty, (iii) has made all appropriate
filings, including without limitation, qualification to do business in the
State of Florida, necessary to enter into the Guaranty. Additionally,
Guarantor shall provide (i) if appropriate, certified resolutions or other
internal documents or writing of Guarantor and such partner evidencing
that Guarantor and such partner have taken all requisite organizational
action, and received all organizational approvals, necessary to enter into
and execute the Guaranty, and (ii) such other documents or writings as Bank
may request.
3.15 Fictitious Name Certificate. If Borrower utilizes or intends to
utilize a fictitious name, a copy of the Fictitious Name Certificate of the
Borrower issued by the Florida Secretary of State.
3.16 Attorney's Opinion. The written opinions of counsel to Borrower
and Guarantor, addressed to Bank, acceptable to Bank and Bank's counsel, as
to those matters required by Bank. The attorney's opinion, with respect
to the enforceability of remedies provided in any instrument may be made
subject to or affected by, applicable bankruptcy, moratorium,
reorganization, insolvency or similar laws from time to time in effect
affecting the rights of creditors generally. As to matters of fact, such
opinions may be qualified to the extent of the knowledge of such counsel
based upon inquiry and reasonable investigation.
3.17 Compliance with Laws and Matters of Record. Satisfactory
documentary evidence that the Land, and the intended uses of the Land are
in compliance with all applicable laws, regulations and ordinances and
private covenants, easements, and conditions of record.
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3.18 Plans and Specifications. As to each Approved Construction
Loan, two sets of the Plans which must have been approved in writing by
Borrower and the General Contractor either by initialling same or by other
written approval identifying all pages and dates, including revision dates.
The Plans must include architectural, structural, mechanical, plumbing,
electrical and site de*velopment (including storm drainage and utility
lines) plans and specifications. The Plans for each type of proposed
residential unit must have been approved in accordance with governing
homeowners' documents and any other restrictions governing construction
of improvements, and written evidence of such approval shall be provided to
Bank at its request.
3.19 Permits. At Bank's request, a copy certified by Borrower of all
applicable permits including, without limitation, the building permit and
all permits pursuant thereto, excavation permits, tree removal permits,
land development permits, dredge and fill permits, stormwater discharge
permits (federal and state), and any other permits required for development
and completion of the Project.
3.20 Soil Tests. If required by Bank, a report as to soil bor**ings
and tests made on the Land by a soil testing firm satisfactory to Bank as
to the suitability of the surface and subsoils for the intended
improvements.
3.21 Environmental Assessment. If upon reasonable cause Bank shall so
require:
(a) An environmental assessment of the Land and Improvements
performed at Borrower's expense by a licensed engineer or other
environmental consultant satisfactory to Bank stating that:
(i) the Land is not located within any area designated as
a hazardous substance site by any of the Governmental Authorities; and
(ii) no hazardous or toxic wastes or other materials or
substances regulated, controlled, or prohibited by any federal, state, or
local environmental laws, including but not limited to asbestos, are
located on the Land or Improvements; and
(iii) the Land has not been cited or investigated in
the past for any violation of any such laws, regulations, or ordinances.
(b) If the environmental assessment shall reveal any condition
unacceptable to Bank and Borrower shall fail to cure or mitigate such
condition after request or demand by Bank, same shall constitute a Default
hereunder and in addition to all remedies available to Bank, Bank shall be
relieved of any obligation under the Commitment. If the environmental
assessment recommends, or if Bank so requests, in its sole and absolute
discretion, a Phase II audit, additional testing or remedial action,
Borrower, at its sole cost and expense shall promptly conduct such
additional audits and testing and/or complete such remedial action. Bank
may require the Borrower to provide evidence that all necessary actions
have been taken to remove any hazardous substance contamination and/or to
restore the site to a condition acceptable to Bank and state and federal
governmental agencies.
3.22 Taxpayer Identification Number. Borrower's federal taxpayer
identification number.
3.23 Borrower's Affidavit. An affidavit of Borrower regarding the
absence of any other parties in possession of the Land, stating that a
notice of commencement has not been filed with respect to the Property,
the noncommencement of Construction Work, and such other matters as may be
requested by Bank.
3.24 Commitment Fee. The commitment fee required by the Commitment
Letter.
3.25 Site Plan Approval. If requested by Bank, evidence that all
applicable governmental, quasigovernmental, or regulatory authorities
have approved Borrower's site plan for the Project. A copy of the recorded
plat for the Project shall be provided to Bank without cost or charge at
Bank's request.
3.26 Facilities For Handicapped. Bank shall have received and
approved evidence, satisfactory to Bank, that the plans and specifications
do, and the Improvements, when constructed, will comply to the extent
applicable with all legal requirements regarding access and facilities for
handicapped or disabled persons, including, without limitation, and to
the extent applicable, Part V of
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the Florida Building Construction Standards Act entitled "Accessibility by
Handicapped Persons", Chapter 553, Fla. Stat.; the Federal Architectural
Barriers Act of 1988 (42 U.S.C. {4151, et. seq.), The Fair Housing
Amendment Act of 1988 (42 U.S.C. {3601, et. seq), The Americans With
Disabilities Act of 1990 (42 U.S.C. {12101 et. seq.), and The
Rehabilitation Act of 1973 (29 U.S.C. {794).
3.27 Miscellaneous. All other Loan Documents or items that are
customarily provided in loan transactions of this type and all other loan
documents or items set forth in the Commitment.
3.28 No Defaults. No Default Condition or Default shall exist under
the Loan Documents.
3.29 Draw Request. Bank shall have received Borrower's Draw Request.
ARTICLE IV
Conditions Precedent to Disbursements
Following the First Disbursement
4.1 Periodic Disbursements. Bank shall not be obligated to make any
Loan disbursements as to an Approved Construction Loan after the first
disbursement until the following requirements and conditions have been and
remain satisfied as of the date of each such disbursement:
(a) The real estate is free and clear of all liens and
encumbrances except the Security Instrument of Bank.
(b) All evidence, statements and writings required to be
furnished under the terms of this Agreement are true and omit no material
fact, the omission of which may make them misleading.
(c) All moneys previously advanced have been used solely to pay
for financing, labor, materials and fixtures used or on hand and to be used
in the construction of Improvements.
(d) No mechanic's or materialmen's lien or other encumbrance
shall have been filed and remain in effect against the Property.
(e) All terms of the Draw Requirements marked with an (x) on the
Loan Commitment have been complied with.
(f) At the time of the first advance there shall be no
construction on the Property and no material shall have been placed thereon
to be used in construction.
(g) No Event of Default, as herein defined, shall have occurred.
(h) The construction has been in accordance with the Plans and
Specifications and satisfactory evidence thereof has been furnished Bank,
and all change orders for amounts in the aggregate in excess of 10% of the
original contract price for construction of Improvements have been
approved in writing by the Bank.
(i) In the sole opinion of Bank the estimated remaining cost of
construction in accordance with the approved Plans and Specifications does
not exceed the balance hereunder to be advanced.
(j) Bank may, at its option, retain up to 7% from the amount of
the last scheduled advance pending (i) Bank's receipt of a certificate of
completion executed by the general contractor; (ii) receipt by Bank of all
lien waivers required by Bank; and (iii) receipt by Bank of the Certificate
of Occupancy or local equivalent.
(k) All applicable construction permits issued by appropriate
governmental authorities and other necessary approvals have been issued and
Bank is satisfied that all roads necessary for ingress and egress to the
Property have been completed.
(l) The representations and warranties made in the Loan
Documents must be true and correct on and as of the date of each advance.
4.2 General Conditions of Disbursement. Construction financing
under the Loan shall be subject to the following limitations:
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(a) Only residential units within the Project to be constructed
by Borrower shall be financed thereby;
(b) Any Loan Default declared by Bank shall render the entire
Loan in default, notwithstanding the fact that Default may relate directly
only to the construction of a specific unit. Accordingly, any Default
shall cease further funding of every nature under the Loan, at Bank's sole
discretion.
(c) The Loan is a revolving line of credit for the purposes
stated herein. Consequently, funding from the Loan may be advanced by
Bank, repaid by Borrower, and subsequently readvanced by Bank, all subject
to the provisions of the Loan Documents. However, notwithstanding any
contrary provisions of said Loan Documents, the outstanding Loan principal
plus remaining committed funds available to complete construction of the
units upon which construction has commenced under the Loan shall never
exceed the face amount of the Note at any one time.
(d) All units shall be commenced and shall thereafter progress
until the Loan maturity date, whereupon the entire outstanding
indebtedness evidenced by the Note shall be due and payable. Borrower
shall bear all risks that the units may not be completed by the Loan
maturity date.
4.3 Limitations on Disbursements. If any of the above conditions
are not satisfied, as determined by Bank, in its sole discretion, Bank
shall not be obligated to disburse any Loan proceeds. In addition to the
foregoing requirements, Bank reserves the right to require the Borrower to
furnish prior to each disbursement at Borrower's expense: (a) a waiver of
lien or release of lien from any contractor, subcontractor, supplier,
laborer or other lienor who has furnished labor, materials, or other
services for construction of the Improvements or who has issued a Notice
to Owner or filed a claim of lien; (b) a certificate from the architect,
engineer, or Bank's inspector, certifying that the Improvements have been
completed to date in accordance with the plans and specifications or have
been substantially completed in accordance with the plans and
specifications; (c) a foundation or asbuilt survey; (d) any permits,
certificate of occupancy, licenses, or other evidence of compliance with
applicable laws and building codes; (e) an endorsement to Bank's title
policy or other form of title update satisfactory to Bank evidencing that
the Security Instrument continues to be a first lien on the Property and
that no intervening liens or other encumbrances not consented to by Bank
have been filed against the Property since the recordation of the Security
Instrument; (f) affidavit of the Borrower that each person or entity
supplying materials or performing labor or services in connection with the
Improvements has been paid in full; (g) such other items as may be required
by the Bank in its discretion.
4.4 Requirements for Disbursement at Completion. Bank shall not be
obligated to make the final construction disbursement as to an Approved
Construction Loan until all of the requirements and conditions set out in
the applicable Construction Loan Agreement have been and remain satisfied
as of the date of disbursement.
ARTICLE V
The Borrower's Covenants and Agreements
5.1 Payment and Performance. Borrower will pay when due all sums
owing to Bank under the Note, this Loan Agreement, the Mortgage and the
other Loan Documents, and perform all obligations as outlined or referenced
therein.
5.2 Further Assurances. On demand by Bank, Borrower will do any act
and execute any additional documents reasonably required by Bank to secure
the Loan, to confirm or perfect the lien of the Security Documents or to
comply with the Commitment, including, but not limited to, additional
financing statements or continuation statements, new or replacement notes
and/or Security Documents and agreements supplementing, extending or
otherwise modifying the Loan Documents, certificates as to the amount of
the indebtedness evidenced by the Note from time to time, and
certificates that Borrower knows of no defaults by or defenses or setoffs
against Lender.
5.3 Construction. The Borrower will: (a) begin construction on the
Improvements as soon as practicable after closing on an Approved
Construction Loan, and in any event, within thirty (30) days after the date
thereof; (b) continue conscientiously the construction of the
Improvements; (c) not discontinue or permit the discontinuance of work on
the Improvements for longer than ten (10) consecutive business days, (d) in
any event, complete the Improvements, including installation of any
required items of personalty in substantial compliance with the Plans,
free and clear of liens or
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claims of liens for material supplied or for labor or services performed
in connection with the construction of the Improvements; (e) not file,
prior to the recording of the Mortgage, a Notice of Commencement for the
Project; and (f) meet the schedule for lot takedowns as described in
Exhibit A attached.
5.4 Payment of Contractors. Borrower will advise Bank in writing
immediately if Borrower receives any notice, written or oral, from any
laborer, contractor, subcontractor, materialmen, or other party to the
effect that said party has not been paid for any labor, services, or
materials furnished to or in the Project, and Borrower will deliver to
Bank on demand, any contracts, bills of sale, statements, receipted
vouchers or agreements, under which Borrower claims title to any
materials, fixtures or articles used in the construction of the
Improvements. Borrower shall comply with the Construction Contract Prompt
Payment Law contained in the Florida Construction Lien Law, Chapter 713,
Fla. Stat.
5.5 Fees and Expenses. Whether or not the Loan is made, or all Loan
proceeds disbursed hereunder, Borrower agrees to pay all expenses incurred
by Bank, or by Borrower in order to meet Bank's requirements, in connection
with the Loan, including without limitation, commitment and renewal fees
or deposits to Bank, fees for appraisal, environmental assessment, fees for
builder's risk and other insurance premiums, brokerage commissions and
claims of brokerage, property taxes, intangible taxes, documentary stamp
taxes, architect's fees, engineer's fees, the Construction Consultant's
fees, the General Contractor's fees, and such legal fees and costs incurred
by Bank in connection with the making of the Loan, the enforcement of
Bank's rights under the Loan Documents, arbitration, or in connection with
litigation or threatened litigation by a third party which arises because
Bank made this Loan. Any such amounts paid by Bank shall constitute part
of the Debt which is secured by the Security Documents, and shall be due
and payable upon demand.
5.6 Use of Loan Funds. Borrower shall use all Loan proceeds
disbursed to Borrower solely in payment of costs incurred in connection
with acquiring, constructing, developing and operating the Project, in
accordance with the Cost Breakdown.
5.7 Insurance. Borrower covenants to maintain insurance as required
herein and in the Mortgage.
5.8 Taxes and Insurance. Upon the request of Bank, Borrower shall
submit to Bank such receipts and other statements which shall evidence, to
the satisfaction of Bank, that all taxes, assessments and insurance
premiums have been paid in full.
5.9 Title Policy. When requested by Bank during the Loan term,
Borrower shall provide an endorsement to the Title Policy certifying that
(a) real estate taxes due through such date have been paid; (b) no
additional restrictions or encumbrances are of record which have not been
approved by Bank; and (c) no liens or lis pendens have been filed against
the Mortgaged Property. In the event that periodic title endorsements are
not required to be issued in connection with the title insurance, Borrower
agrees to cause title endorsements to be issued as reasonably required by
Bank. When requested, after the final disbursement of Loan proceeds,
Borrower will provide Bank with an endorsement to the Title Policy
insuring the principal balance of the Loan and containing no exceptions not
approved by Bank.
5.10 Additional Construction. Borrower shall not construct or permit
the construction of any improvements on the Project other than those
Improvements described in the Plans, or approved in writing by Bank.
5.11 Financial Statements. Borrower (and Borrower's general partners,
if applicable) and each Guarantor shall submit current internal financial
statements on a quarterly basis within 45 days after each quarter's end and
annual, audited, consolidated statements for International American Homes,
including consolidating financial statements for Suarez Housing Corporation
and Porten Sullivan Corporation annually within 120 days after period end.
Guarantor Robert J. Suarez shall provide personal financial statements on
Bank's form within 120 days after yearend.
5.12 Appraisals. In addition to the appraisals required by Bank prior
to closing of the Loan and the individual Approved Construction Loans,
updated appraisals shall be prepared at Borrower's expense when requested
by Bank or when required in connection with any extension options in the
Note. Such appraisals shall be prepared in accordance with written
instructions from Bank and by a professional appraiser selected and engaged
by Bank. Borrower shall cooperate fully with the appraisal process and
shall allow the appraisers reasonable access to the Project and its
tenants.
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5.13 Hazardous Substances. Borrower affirms and incorporates by
reference the representations, warranties, terms, conditions, and
indemnities contained in that certain Hazardous Substance Certificate and
Indemnification Agreement of even date herewith, a copy of which is
attached.
5.14 Leases Affecting Project. Borrower shall not, without the
express prior written consent of Bank, enter into any lease affecting the
Project or any part thereof.
5.15 Assignment of Contracts. As additional security for the Loan and
for the performance by Borrower of all of its obligations hereunder,
Borrower hereby assigns to Bank all of Borrower's interest in any and all
contracts, agreements, permits, licenses, approvals, or other documents or
writings relating to the construction, leasing, management or operation
of the Improvements, including but not limited to the Construction
Documents, the architect's contract, the engineer's contract, and the
Plans. This assignment shall not, however, be deemed to impose upon Bank
any of Borrower's obligations under any such contract. Incident to the
assignment of the Construction Documents, the architect's contract, the
engineer's contract, and the Plans, Borrower will fulfill the obligations
of Borrower thereunder, enforce the performance thereof and give immediate
notice to Bank of any default by the architect, the engineer, or the
General Contractor thereunder. Further, Borrower will not, without the
prior written consent of Bank (i) modify, or amend the terms of the
architect's contract, the Plans, engineer's contract, or the Construction
Documents; or (ii) waive or release the performance of any material
obligation to be performed by the architect, the engineer, or the General
Contractor thereunder.
5.16 Subordinate Financing. Borrower shall not permit there to exist
nor shall Borrower obtain any subordinate financing of the Land or any
other Property granted as security for the Loan.
5.17 Transfer of Property or Borrower. The Borrower shall not permit
any change in its ownership (or the ownership of its general partners, if
applicable), its corporate or trade name, the nature and operation of its
business or the nature and character of the Borrower or the Project, nor
shall the Borrower sell, assign, transfer, hypothecate or dispose of all
or any portion of the Property or the Project except as permitted hereby,
without the prior written consent of Bank, which consent shall be withheld
or granted in Bank's sole and absolute discretion.
5.18 Partial Releases of Property. Provided the Borrower is not then
in Default hereunder, under the Note, the Mortgage or any other Loan
Document, Bank will provide partial releases in respect of its interest
under the Mortgage and other Loan Documents upon the terms and conditions
set out in Exhibit B attached. Payments made for releases shall be applied
by Bank against the outstanding principal of the Loan unless the release
payment is calculated to take into account allocable interest or other
constituent costs or accruals, in which event Bank may apply the release
payment in accord with such calculations. Borrower agrees to reimburse
Bank for all out-of-pocket fees and costs, including, without limitation,
legal fees, in connection with the granting of such partial releases and
shall provide Bank with any and all information requested by Bank with
respect to the Unit to be released.
5.19 Disclosure of Contracts and Notices. Borrower shall disclose to
Bank upon demand, the names of all persons with whom Borrower has
contracted or intends to contract for any construction or for the
furnishing of labor or materials therefor, and when required by Bank obtain
the approval by Bank of all such persons. Borrower shall, at all times
during the construction period of any Improvements, provide to the Bank,
within 10 days of the Borrower's receipt thereof, copies of all notices to
owner, claims of lien, and demands for sworn statement of account, issued
by any party, whether pursuant to any notice of commencement or otherwise,
in connection with the Premises.
5.20 Construction Lien Law Notification Requirements. Borrower
hereby authorizes Bank to provide written notices to Contractor and
lienors providing notices to owner pursuant to {713.3471(1)(a), Fla. Stat.,
and {713.3471(2)(b), Fla. Stat., to the extent such notices are required by
law. Borrower hereby releases Bank and waives all claims it may have
against Bank for damages Borrower may incur as a result of Bank's failure
to deliver said notices. Borrower hereby agrees to provide all required
notices to the Contractor and all lienors providing notices to owner in
compliance with {713.3471(2)(a), Fla. Stat., in a timely fashion.
5.21 Amendments to Construction Budget. Lender shall not be permitted
to reallocate items in the Construction Budget without the Borrower's prior
consent. For purposes of this and the preceding section, "Construction
Budget" shall mean for each Approved Construction Loan that
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portion of the Cost Breakdown allocated to actual construction costs, not
including non-construction and land costs. If Borrower and Lender agree
to amend the Construction Budget or reallocate items in the Construction
Budget such that written notice to the Contractor and lienors serving
notices to owner would be required under {713.3471(2)(a), Fla. Stat.
(1992), Borrower agrees to provide written notice to the Contractor and all
required lienors in compliance with {713.3471(2)(a), Fla. Stat. Lender
shall not be obligated to make any disbursements of Loan proceeds until
Borrower has provided Lender with copies of any required notices to the
Contractor and required lienors in compliance with {713.3471(2)(a), Fla.
Stat., together with evidence that such notices have been countersigned
by the Contractor and all lienors who are required to receive the notice
under {713.3471(2)(a), Fla. Stat., thereby confirming receipt thereof.
5.22 Americans With Disabilities Act. Borrower covenants and agrees
that, during the term of the Loan, to the extent such Act is applicable,
the Property will be in full compliance with the Americans with
Disabilities Act ("ADA") of July 26, 1990, 42 U.S.C Section 12191, et.
seq.) as amended from time to time, and the regulations promulgated
pursuant thereto. Borrower shall be solely responsible for all ADA
compliance costs, including without limitation, attorneys' fees and
litigation costs, which responsibility shall survive the repayment of the
Loan and foreclosure of the Property.
ARTICLE VI
Representations and Warranties
6.1 Representations and Warranties. Borrower hereby represents and
warrants to Bank that:
(a) Representations and Warranties in Mortgage and Guaranty.
All of the representations and warranties contained in the Mortgage and
Guaranty are true and correct and are incorporated herein by reference as
if set out in full.
(b) Other Financing. The Borrower has not (i) received any
other financing for the acquisition of the Land existing as of the date
hereof for which a lien equal to or superior to Bank's mortgage could be
successfully asserted, or (ii) received any other financing for the
construction of the Improvements.
(c) Plans. The Plans have been approved by the Borrower, the
Guarantors, and each appropriate Governmental Authority.
(d) Governmental Requirements and Other Requirements. Borrower
will cause the Improvements to be constructed in accordance with the Plans
submitted to and approved by Bank, and when so constructed the Land and the
Improvements do and shall comply with all covenants, conditions and
restrictions affecting the Land or any portion thereof, and do and shall
comply with all Governmental Requirements.
(e) Use of the Project. There is no (i) plan, study or effort
by any Governmental Authority or any nongovernmental person or agency which
may adversely affect the current or planned use of the Project, or (ii) any
intended or proposed Governmental Requirement (including, but not limited
to, zoning changes) which may adversely affect the current or planned use
of the Project.
(f) Moratorium. There is no moratorium or like governmental
order or restriction now in effect with respect to the Project and, to the
best of Borrower's knowledge, no moratorium or similar ordinance or
restriction is now contemplated.
(g) Permits. All permits, approvals and consents of
Governmental Authorities and public and private utilities having
jurisdiction necessary in connection with the Project have been issued and
are in good standing.
(h) Condition of Project. No defect or condition of the Land or
the soil or geology thereof exists which will impair the construction, use,
or the operation of the Project for its intended purpose.
(i) Labor and Materials. All labor and materials contracted
for in connection with the construction of the Improvements shall be used
and employed solely on the Land in said construction and only in
accordance with the Plans.
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(j) Surveys. The Survey, and all plot plans and other documents
heretofore furnished by the Borrower to Bank with respect to Land and
Improvements are accurate and complete as of their respective dates. There
are no encroachments onto the Land and no improvements on the Land
encroach onto any adjoining property.
(k) Construction Costs. The amount of the hard costs and soft
costs are accurate, true and correct and are satisfactory to Borrower.
(l) Sale of Securities. The Borrower has not instituted,
caused to be instituted or been a party to and, to the best of Borrower's
knowledge, there has not been any public offering with respect to the Land
and Improvements, or either, within the meaning of the Securities Act of
1933 and the Securities Exchange Act of 1934.
(m) Construction Lien Law. At the time of Closing and at the
time of the recording of the Security Instrument, no work has been done on
Improvements or on the Property by the Borrower or anyone else acting for,
or on behalf of the Borrower, and no materials have been placed on the
Property by any materialmen or by anyone else. No Notice of Commencement
has been recorded in the Public Records with respect to the Property at the
time of Closing. Borrower shall not permit the commencement of any
excavation or construction work of any nature whatsoever, nor the
delivery of any materials to the Property, prior to the recordation and
posting of a Notice of Commencement as hereinafter set forth. Borrower
shall execute an appropriate Notice of Commencement and cause the same to
be recorded in the public records of the county in which the Property is
located in sequence after the recording of the Security Instrument.
Borrower shall post a certified copy of the Notice of Commencement on the
Property, in strict conformity with the Florida Construction Lien Law. If
construction is commenced prior to the recordation and posting of the
Notice of Commencement, or the Notice of Commencement is recorded prior to
the Security Instrument, Bank shall have the absolute right to cancel this
Agreement and be immediately reimbursed by Borrower for all disbursements
of loan proceeds, together with expenses and reasonable attorneys' fees
incurred in connection therewith. Construction shall commence within 90
days after recordation of the Notice of Commencement. Construction shall
proceed continuously in a workmanlike manner. Bank reserves the right to
require Borrower to furnish an itemized cost breakdown for the
Improvements to be constructed.
(n) Representations and Warranties in Other Loan Documents.
All of the representations and warranties contained in the other Loan
Documents are true and correct.
6.2 Reliance on Representations. The Borrower acknowledges that Bank
has relied upon the Borrower's representations and is not charged with any
knowledge contrary thereto that may be received by an examination of the
public records wherein the Land is located or that may have been received
by any officer, director, agent, employee or shareholder of Bank.
ARTICLE VII
Events of Default
7.1 Default. The occurrence of any one or more of the following
events (time being of the essence as to this Loan Agreement and all of its
provisions) constitutes a "Default" by Borrower under this Loan
Agreement, and at the option of Bank, under the other Loan Documents:
(a) Scheduled Payment. Borrower's failure to make any payment
required under the Note when due or within an applicable grace period, if
any.
(b) Monetary Default. Borrower's failure to make any other
payment required by this Loan Agreement or the other Loan Documents within
15 days after demand therefor.
(c) Other. Borrower's failure to perform any other obligation
imposed upon Borrower by this Loan Agreement or any other Loan Document
within 30 days after demand, or as may be specified by Bank, if in the sole
opinion of Bank such Default is curable. This provision shall not be
construed to provide Borrower with any grace period in complying with any
obligations imposed on Borrower by the terms of the Loan Documents.
(d) Representation. Any representation or warranty of Borrower
contained in this Loan Agreement or in any certificate delivered pursuant
hereto, or in any other instrument or statement furnished in connection
herewith, proves to be incorrect or misleading in any adverse respect as
of the time when the same shall have been made, including, without
limitation, any and all
13
<PAGE>
financial statements, operating statements, and schedules attached
thereto, furnished by Borrower or any guarantor of the Loan to Bank or
pursuant to any provision of this Loan Agreement.
(e) Bankruptcy. Borrower or any general partner of Borrower or
any guarantor of the Loan (i) files a voluntary petition in bankruptcy or
a petition or answer seeking or acquiescing in any reorganization or for
an arrangement, composition, readjustment, liquidation, dissolution, or
similar relief for itself pursuant to the United State Bankruptcy Code or
any similar law or regulation, federal or state, relating to any relief for
debtors, now or hereafter in effect; or (ii) makes an assignment for the
benefit of creditors or admits in writing its inability to pay or fails to
pay its debts as they become due; or (iii) suspends payment of its
obligations or takes any action in furtherance of the foregoing; or (iv)
consents to or acquiesces in the appointment of a receiver, trustee,
custodian, conservator, liquidator or other similar official of Borrower,
a general partner of Borrower, or any guarantor, for all or any part of the
Collateral or other assets of such party, or either; or (v) has filed
against it an involuntary petition, arrangement, composition,
readjustment, liquidation, dissolution, or an answer proposing an
adjudication of it as a bankrupt or insolvent, or is subject to
reorganization pursuant to the United States Bankruptcy Code, an action
seeking to appoint a trustee, receiver, custodian, or conservator or
liquidator, or any similar law, federal or state, now or hereinafter in
effect, and such action is approved by any court of competent jurisdiction
and the order approving the same shall not be vacated or stayed within
thirty (30) days from entry; or (vi) consents to the filing of any such
petition or answer, or shall fail to deny the material allegations of the
same in a timely manner.
(f) Judgments. (1) A final judgment other than a final judgment
in connection with any condemnation is entered against Borrower,
Guarantors, or any general partner of Borrower, that (i) adversely affects
the value, use or operation of the Collateral (as defined in the Mortgage)
in Bank's sole judgment, or (ii) adversely affects, or may adversely
affect, the validity, enforceability or priority of the lien or security
interest created by the Mortgage or any other Loan Document in Bank's sole
judgment, or both; or (2) execution or other final process issues thereon
with respect to the Collateral; and (3) Borrower, Guarantors, or any
general partner of Borrower, does not discharge the same or provide for its
discharge in accordance with its terms, or procure a stay of execution
thereon, in any event within thirty (30) days from entry, or Borrower shall
not, within such period or such longer period during which execution on
such judgment shall have been entered, and cause its execution to be stayed
during such appeal, or if on appeal such order, decree or process shall be
affirmed and Borrower shall not discharge such judgment or provide for its
discharge in accordance with its terms within sixty (60) days after the
entry of such order or decree or affirmance, or if any stay of execution
on appeal is released or otherwise discharged.
(g) Liens. Any federal, state or local tax lien or any claim of
lien for labor or materials or any other lien or encumbrance of any nature
whatsoever is recorded against Borrower or the Mortgaged Property (as
defined in the Mortgage) and is not removed by payment or transferred to
substitute security in the manner provided by law, within ten (10) days
after it is recorded in accordance with applicable law.
(h) Other Notes or Mortgages. Borrower's default in the
performance or payment of Borrower's obligations under any other note, or
under any other mortgage encumbering all or any part of the Mortgaged
Property, if the other mortgage is permitted by the Bank, whether such
other note or mortgage is held by Bank or by any other party.
(i) Borrower Default Under Loan Documents. Borrower's default
in the payment or performance of any of Borrower obligations under any of
the Loan Documents, including this Loan Agreement and any riders thereto.
(j) Guarantor Default. The death of a guarantor, or any default
in the payment or performance of any obligation of any guarantor of the
Note arising under its guaranty or pursuant to any other Loan Document.
(k) Borrower's Continued Existence. Borrower shall cease to
exist or to be qualified to do or transact business in the State in which
the Mortgaged Property is located, or shall be dissolved or shall be a
party to a merger or consolidation, or shall sell all or substantially all
of its assets, or shall change its corporate name or trade name without
prior written notice to Bank.
(l) Stock in Borrower/Change in Partners. If Borrower is a
partnership and without the prior written consent of Bank, any shares of
stock of any corporate general partner of Borrower are issued, sold,
transferred, conveyed, assigned, mortgaged, pledged, or otherwise disposed
of so as to result in change of control of Borrower, whether voluntarily or
by operation of
14
<PAGE>
law, and whether with or without consideration, or any agreement for any
of the foregoing is entered into; or, if any general partnership interest
or other equity interest in the Borrower is sold, transferred, assigned,
conveyed, mortgaged, pledged, or otherwise disposed or, whether voluntarily
or by operation of law, and whether with or without consideration, or any
agreement for any of the foregoing is entered into, or any general partner
of Borrower withdraws from the partnership.
(m) Transfer of Property or Ownership. Any sale, conveyance,
transfer, assignment, or other disposition or encumbrance of all or any
part of the Collateral or any ownership interest in Borrower or any
guarantor without the prior consent of Bank or except as otherwise
permitted hereby.
(n) False Statement. Any statement or representation of
Borrower or any guarantor contained in the loan application or any
financial statements or other materials furnished to Bank or any other
lender prior or subsequent to the making of the Loan secured hereby are
discovered to have been false or incorrect or incomplete.
(o) Default Under Indemnity. Borrower or any guarantor shall
default under any obligation imposed by any indemnity whether contained
within any of the Loan Documents, the Hazardous Waste Certification and
Indemnification, or otherwise.
(p) Cross Default. Any default by the Borrower under any other
documents or instruments evidencing any other loans by Bank to Borrower or
in any mortgages or other collateral documents securing such loans.
(q) NonCompliance with the Plans and Specifications. Failure
of any of the materials supplied for the construction of the Improvements
to comply with the Plans and Specifications or any requirements of any
Governmental Authority unless the Borrower undertakes and diligently
pursues the correction of such failure.
(r) Projected Completion of Construction. Failure to construct
the Improvements with reasonable dispatch, or the discontinuance of
construction at any time for a period of 10 days consecutively, or
determination by Bank's Construction Consultant that construction of the
Improvements will not be timely completed and Borrower's failure to
complete, cure or provide satisfactory assurances after notice or demand
from Bank.
(s) NonPayment of Debts. Borrower is generally not paying its
debts as such debts become due.
(t) Securities Laws Violation. The assertion of any violation
of the 1933 Securities Act, 1934 Securities Act or the Florida Blue Sky
Laws by any Governmental Authorities or the institution of any securities
litigation not dismissed within sixty (60) days of the commencement of
same.
(u) NonCompliance with Homeowner Association Documents.
Borrower shall fail to perform any duty required of it, fulfill any
condition, abide by any covenant or in any manner default under the
homeowners' association documents encumbering the Project, if any.
(v) Adverse Actions. Any legal or equitable action is commenced
against Borrower which, if adversely determined, could reasonably be
expected to impair substantially the ability of Borrower to perform each
and every obligation under the Loan Documents and this Agreement.
(w) Government Challenges. The validity of any permit, approval
or consent by any Governmental Authority relating to the Property, the
Improvements, or the operation thereof is challenged by a proceeding before
a board, commission, agency, court or other authority having jurisdiction.
(x) Miscellaneous. If at any time the Bank shall determine
that there has been a material adverse change in the financial condition
or prospects of Borrower, any guarantor, or if applicable any general
partner of Borrower, which is not corrected or cured after reasonable
notice from Bank.
15
<PAGE>
ARTICLE VIII
Bank's Rights and Remedies
The following rights and remedies are available to Bank:
8.1 Acceleration. Upon the occurrence of a Default, the entire
unpaid principal balance of the Loan and all accrued but unpaid interest
thereon and any costs or expenses then due to Bank and any and all other
obligations of Borrower to Bank, shall, at the option of Bank and without
notice to Borrower, become immediately due and payable.
8.2 Completion of Construction. From and after the occurrence of a
Default, Bank shall be entitled to have and use the Plans and the
Construction Documents and, after first having given written notice to the
architect, the engineer, or the General Contractor, shall be entitled from
and after such notice to enjoy and enforce all of the rights of Borrower
under the architect's contract, engineer's contract, the Plans or the
Construction Contracts. Borrower hereby irrevocably constitutes and
appoints Bank its true and lawful attorney in fact with full power of
substitution in the Project to complete the Improvements in the name of
Borrower. Borrower hereby empowers Bank as it attorney in fact as follows:
(a) to use any funds of Borrower, including any Loan proceeds or equity
deposits which may remain undisbursed hereunder, for the purpose of
completing the Improvements in accordance with the Plans; (b) to make such
additions, changes, modifications, or corrections in, or deviations from,
the Plans as shall be necessary or desirable to complete the Improvements;
(c) to employ such contractors, subcontractors, agents, architects,
engineers, inspectors, or other parties as shall be required for said
purposes; (d) to pay, settle, or compromise all existing bills and claims
which may be liens against the Improvements or as may be necessary or
desirable in the sole discretion of Bank for the Completion of the
Improvements or for clearance of title; (e) to direct use of and/or use
all or any part of the labor, materials, supplies and equipment contracted
for, owned by, or under the control of Borrower, whether or not
previously incorporated into the Improvements; (f) to execute all
applications and certificates in the name of Borrower which may be required
by the Construction Documents, the architect's contract, the engineer's
contract, Plans, or any of the contract documents; (g) to prosecute and
defend all actions or proceedings in connection with the Project or the
construction of the Improvements and take such action and require such
performance as Bank shall deem necessary under any performance or payment
bond; and (h) to do any and every act with respect to construction or
Completion of the Improvements or the closing of any permanent financing
which Borrower might do in its own behalf including, without limitation,
execution, acknowledgment, and delivery of all instruments, documents, and
papers in the name of Borrower as may be necessary or desirable in the sole
discretion of Bank. It is further understood and agreed that this power of
attorney which shall be deemed to be a power coupled with an interest,
cannot be revoked. All sums expended by Bank pursuant hereto shall be
deemed to have been disbursed to Borrower and secured by the Security
Documents, and the other Loan Documents.
8.3 Disputes. Where disputes have arisen which, in the opinion of
Bank, may endanger timely completion of the Improvements or fulfillment of
any condition or covenant herein, Bank may agree to disburse Loan proceeds
for the account of Borrower without prejudice to Borrower's rights, if
any, to recover said proceeds from the party to whom paid. Such agreement
or agreements may take the form which Bank in its discretion deems proper,
including, but without limiting the generality of the foregoing,
agreements to indemnify (on behalf of Borrower and/or for Bank's own
account) any title insurer against possible assertion of lien claims,
agreements to pay disputed amounts and the like. All sums paid or agreed
to be paid pursuant to such undertaking shall be advances of Loan proceeds.
8.4 Remedies Cumulative; Nonwaiver. All remedies of Bank provided
for herein or in the other Loan Documents are cumulative and shall be in
addition to any and all other rights and remedies provided for or available
under the other Loan Documents, at law or in equity. The exercise of any
right or remedy by Bank hereunder shall not in any way constitute a cure
or waiver of a Default Condition or a Default hereunder or under the Loan
Documents, or invalidate any act done pursuant to any notice of the
occurrence of a Default Condition or Default, or prejudice Bank in the
exercise of any of its rights hereunder or under any of the other Loan
Documents, unless, in the exercise of said rights, Bank realizes all
amounts owed to it under the Loan Documents.
8.5 No Liability of Bank. Whether or not Bank elects to employ any
or all remedies available to it in the event of an occurrence of a Default
Condition or Default, Bank shall not be liable for the construction of or
failure to construct or complete or protect the Improvements or for
payment of any expense incurred in connection with the exercise or any
remedy available to Bank or for the
16
<PAGE>
construction or Completion of the Improvements or for the performance or
nonperformance of any other obligation of Borrower.
8.6 Security Interest. It is understood and agreed that Bank shall
have and enjoy and is hereby granted a lien on, and a security interest
in, all Collateral described in the Mortgage, and including without
limitation, any and all materials (stored on-site or off-site), reserves,
deferred payments, deposits or advance payments for materials (stored
on-site or off-site) undisbursed Loan proceeds, insurance refunds, impound
accounts, refunds for overpayment of any kind, and such lien and security
interest shall constitute additional security for the Debt of Borrower, and
Bank shall have and possess any and all rights and remedies of a secured
party provided by law with respect to enforcement of and recovery on its
security interest on such items and amounts. In the event of a conflict
between this paragraph and any security interest granted pursuant to the
Mortgage, the Mortgage shall control.
8.7 Cessation of Funding. Upon the occurrence of a Default, Bank
shall have the right to immediately terminate further funding of any
Approved Construction Loan irrespective of the stage of completion, and to
terminate consideration of applications for new Approved Construction
Loans.
ARTICLE IX
General Conditions
The following conditions shall be applicable throughout the term of
this Loan Agreement:
9.1 Waivers. No waiver of any Default Condition or Default or breach
by Borrower hereunder shall be implied from any delay or omission by Bank
to take action on account of such Default Condition or Default, and no
express waiver shall affect any Default Condition or Default other than the
Default specified in the waiver and it shall be operative only for the
time and to the extent therein stated. Waivers of any covenants, terms or
conditions contained herein must be in writing and shall not be construed
as a waiver of any subsequent breach of the same covenant, term or
condition. The consent or approval by Bank to or of any act by Borrower
requiring further consent or approval shall not be deemed to waive or
render unnecessary the consent or approval to or of any subsequent or
similar act. No single or partial exercise of any right or remedy of Bank
hereunder shall preclude any further exercise thereof or the exercise of
any other or different right or remedy.
9.2 Benefit. This Loan Agreement is made and entered into for the
sole protection and benefit of Bank and Borrower, their successors and
assigns, and no other person or persons have any right to action hereon or
rights to the Loan all proceeds at any time, nor shall Bank owe any duty
whatsoever to any claimant for labor or services performed or material
furnished in connection with the Project, or to apply any undisbursed
portion of the Loan to the payment of any such claim, or to exercise any
right or power of Bank hereunder or arising from any Default Condition or
Default by Borrower.
9.3 Assignment. The terms hereof shall be binding upon and inure to
the benefit of the heirs, successors, assigns, and personal
representatives of the parties hereto; provided, however, that Borrower
shall not assign this Loan Agreement or any of its rights, interests,
duties or obligations hereunder or any Loan proceeds or other moneys to be
advanced hereunder in whole or in part without the prior written consent of
Bank and that any such assignment (whether voluntary or by operation of
law) without said consent shall be void. It is expressly recognized and
agreed that Bank may assign this Loan Agreement, the Note, the Security
Documents, and any other Loan Documents, in whole or in part, to any other
person, firm, or legal entity provided that all of the provisions hereof
shall continue in full force and effect and, in the event of such
assignment, Bank shall thereafter be relieved of all liability under the
Loan Documents and any Loan disbursements made by any assignee shall be
deemed made in pursuant and not in modification hereof and shall be
evidenced by the Note and secured by the Security Documents and any other
Loan Documents.
9.4 Amendments. This Loan Agreement shall not be amended except by a
written instrument signed by all parties hereto.
9.5 Terms. Whenever the context and construction so require, all
words used in the singular number herein shall be deemed to have been used
in the plural, and vice versa, and the masculine gender shall include the
feminine and neuter and the neuter shall include the masculine and
feminine.
9.6 Governing Law and Jurisdiction. This Loan Agreement and the
other Loan Documents and all matters relating thereto shall be governed by
and construed and interpreted in accordance
17
<PAGE>
with the laws of the State of Florida. Borrower [and all of its general
partners] hereby submits to the jurisdiction of the state and federal
courts located in Florida and agree that Bank may, at its option, enforce
its rights under the Loan Documents in such courts.
9.7 Publicity. At Bank's request and expense, and subject to
applicable laws, regulations and restrictions, Borrower shall place upon
the Project, at a location mutually acceptable to Borrower and Bank, a sign
or signs advertising the fact that financing is being provided by Bank.
Bank shall also have the right to secure printed publicity through
newspaper and other media concerning the Project and source of financing.
9.8 Savings Clause. Invalidation of any one or more of the
provisions of this Loan Agreement shall in no way affect any of the other
provisions hereof, which shall remain in full force and effect.
9.9 Execution in Counterparts. This Loan Agreement may be executed
in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same instrument,
and in making proof of this Loan Agreement, it shall not be necessary to
produce or account for more than one such counterpart.
9.10 Captions. The captions herein are inserted only as a matter of
convenience and for reference and in no way define, limit or describe the
scope of this Loan Agreement nor the intent of any provision hereof.
9.11 Notices. All notices required to be given hereunder shall be
given in accordance with the requirements of the Mortgage.
9.12 Mandatory Arbitration. Any controversy or claim between or among
the parties hereto including but not limited to those arising out of or
relating to this Loan Agreement or any related agreements or instruments,
including any claim based on or arising from an alleged tort, shall be
determined by binding arbitration in accordance with the Federal
Arbitration Act (or if not applicable, the applicable state law), the Rules
of Practice and Procedure for the Arbitration of Commercial Disputes of
Judicial Arbitration and Mediation Services, Inc. (J.A.M.S.), and the
"Special Rules" set forth below. In the event of any inconsistency, the
Special Rules shall control. Judgment upon any arbitration award may be
entered in any court having jurisdiction. Any party to this Loan Agreement
may bring an action, including a summary or expedited proceeding, to
compel arbitration of any controversy or claim to which this Loan
Agreement applies in any court having jurisdiction over such action.
(a) Special Rules. The arbitration shall be conducted in Tampa,
Florida, and administered by Endispute, Inc., d/b/a J.A.M.S./Endispute who
will appoint an arbitrator; if J.A.M.S./Endispute is unable or legally
precluded from administering the arbitration, then the American
Arbitration Association will serve. All arbitration hearings will be
commenced within 90 days of the demand for arbitration; further, the
arbitrator shall only, upon a showing of cause, be permitted to extend the
commencement of such hearing for up to an additional 60 days.
(b) Reservation of Rights. Nothing in this Loan Agreement
shall be deemed to (i) limit the applicability of any otherwise applicable
statutes of limitation or repose and any waivers contained in this Loan
Agreement; or (ii) be a waiver by the Bank of the protection afforded to it
by 12 U.S.C. Sec. 91 or any substantially equivalent state law; or (iii)
limit the right of the Bank hereto (A) to exercise self help remedies such
as (but not limited to) setoff, or (B) to foreclose against any real or
personal property collateral, or (C) to obtain from a court provisional
or ancillary remedies such as (but not limited to) injunctive relief or
the appointment of a receiver. The Bank may exercise such self help
rights, foreclose upon such property, or obtain such provisional or
ancillary remedies before, during or after the pendency of any arbitration
proceeding brought pursuant to this Agreement. At Bank's option,
foreclosure under a deed of trust or mortgage may be accomplished by any of
the following: the exercise of a power of sale under the deed of trust or
mortgage, or by judicial sale under the deed of trust or mortgage, or by
judicial foreclosure. Neither this exercise of self help remedies nor the
institution or maintenance of an action for foreclosure or provisional or
ancillary remedies shall constitute a waiver of the right of any party,
including the claimant in any such action, to arbitrate the merits of the
controversy or claim occasioning resort to such remedies.
18
<PAGE>
IN WITNESS WHEREOF, Borrower and Bank have executed this Loan
Agreement as of the above written date.
Suarez Housing Corporation, a Florida corporation
___________________________________
Witness [Seal]
___________________________________
By:/s/ Robert J. Suarez
_______________________________________
Witness Robert J. Suarez
Its: President
"Borrower"
NationsBank of Florida, N.A.
___________________________________
Witness
___________________________________
By:____________________________________
Witness
Its:___________________________________
"Bank"
JOINDER OF GUARANTOR
The undersigned as Guarantor hereby joins in and consents to the
foregoing Loan Agreement.
___________________________________
Witness
___________________________________ /s/ Robert J. Suarez
_______________________________________
Witness ROBERT J. SUAREZ
International American Homes, Inc.,
a Delaware corporation
___________________________________
Witness [Seal]
___________________________________ /s/ Robert J. Suarez
By:___________________________________
Witness Robert J. Suarez
Its: President
"Guarantor"
19
<PAGE>
EXHIBITS
A Draw Sheets
B Partial Releases
C Hazardous Substance Certificate and Indemnification Agreement
20
<PAGE>
EXHIBIT B
Partial Releases
PARTIAL RELEASES. Provided the Borrower is not then in Default
hereunder, under the Note, the Mortgage or any other Loan Document, Bank
will provide partial releases in respect of its interest under the Mortgage
and other Loan Documents upon the following terms:
(1) If the partial release relates to developed lots in connection
with a bona fide sale or construction loan on which no home construction
advances have been made:
(a) Bank shall be given written notice of the request for each
partial release at least 5 business days prior to each partial release.
(b) The cost of each partial release, including reasonable
attorney's fees for Bank's attorney, shall be paid by Borrower.
(c) Contemporaneously with the delivery to Borrower of each
partial release, Borrower shall prepay principal in an amount equal to
$_______________ per lot.
(2) If the partial release relates to lots on which home construction
advances have been made:
(a) Borrower shall prepay principal of the revolving line of
credit Note in an amount equivalent to the total advanced by Bank under
the Loan on account of the lot to be released, together with interest
accrued thereon.
SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT AND
PARTIAL RELEASE OF GUARANTY AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT
AND PARTIAL RELEASE OF GUARANTY AGREEMENT (the "Second Amendment")
is made and entered into this 30th day of October, 1995, to be
effective for all purposes as of September 26, 1995 by and between
SUAREZ HOUSING CORPORATION, a Florida corporation (the "Borrower")
and BARNETT BANK OF TAMPA (the "Bank").
WHEREAS, Borrower and Bank entered into a certain Amended and
Restated Loan Agreement dated effective as of September 30,1993 in
connection with certain loans made by Bank to Borrower, and the
Agreement was modified by acertain First Amendment to Amended and
Restated Loan Agreement dated October 7, 1994 (collectively, the
"Loan Agreement");
WHEREAS, Borrower has requested and Bank has agreed to make
certain modifications to the Loan Agreement as hereinafter set
forth;
NOW THEREFORE, in consideration of Ten Dollars ($10.00) and
other good valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties agree as follows:
1. The foregoing recitals are true and correct and
incorporated herein by reference. All capitalized terms used
herein shall have the meaning given thereto in the Loan Agreement
unless separately defined in this Second Amendment.
2. The last sentence of Section 1.2 of the Loan Agreement is
deleted and replaced with the following:
"The interest rate for Note #1 and Note # 2 is the Prime Rate
plus seventy five one-hundredths percent (.75%) and the terms of
principal repayment are as stated in Section 4 hereof."
3. Section 3.4 of the Loan Agreement is modified to the
extent required to provide as follows:
(i) Bank hereby releases Robert J. Suarez ("Suarez") from his
obligations arising under any and all Guaranty Agreements executed
in favor of Bank pertaining to and quaranteeing repayment of all
sums due under Note # 2. Suarez hereby further agrees, that
notwithstanding the foregoing release, all other Guaranty
Agreements executed in favor of Bank, including without limitation,
those which guarantee repayment of Note #1, remain in full force
and effect and are unmodified by the foregoing partial release.
(ii) If Borrower achieves a debt to tangible net worth ratio
of not greater than 3.5 to 1.0 as reflected in the March 31, 1996
fiscal year end audited financial statement for Borrower, which
statement shall be in a form and content satisfactory to Bank, in
its sole discretion, then Bank agrees to modify Suarez' Guaranty of
Note #1 to provide that such Guaranty is limited to fifty percent
(50%) :of the outstanding sums owed under Note # 1 and any and all
Loan Documents securing Note # 1.
4. The first sentence of Section 4.1 of the Loan Agreement
is deleted and replaced with the following:
"Interest upon the Notes shall accrue daily at the rate of the
Prime Rate plus seventy five one-hundredths percent (.75%)."
5. The second sentence of Section 4.6(B)1. of the Loan
Agreement is deleted and replaced with the following:
"Minimum deposit requirements are $500.00 for FHA financed
contracts and $1,000.00 for contracts financed byconventional
loans. No deposit is required for VA financed contracts."
<PAGE>
6. Except as expressly modified herein, the Loan Agreement
remains in full force and effect and the terms and conditions are
hereby ratified and confirmed.
7. The undersigned Guarantors hereby join in and consent to
the modifications and amendments setforth inthis Second Amendment
and agree that their respective Guaranty Agreements remain in full
force and effect and enforceable in accordance with their terms.
IN WITNESS WHEREOF, the parties have executed this Second
Amendment the day and year first above written.
"BORROWER"
SUAREZ HOUSING CORPORATION, a
Florida Corporation
By:/s/ Robert J. Suarez
------------------------
Robert J. Suarez
President
(Corporate Seal)
"BANK"
BARNETT BANK OF TAMPA
By:/s/ Carole D. Hartunian
--------------------------
Carole D. Hartunian
Vice President
"GUARANTORS"
/s/ Robert J. Suarez
----------------------------
Robert J. Suarez
INTERNATIONAL AMERICAN HOMES,
a Delaware Corporation
By: /s/ Robert J. Suarez
--------------------------
Robert J. Suarez
President
(Corporate Seal)
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
This instrument was executed before me this 30th day of
October, 1995 by Robert J. Suarez, as President of Suarez Housing
Corporation, a Florida corporation, on behalf of the corporation.
/s/ Kimberly A. Orsi
Notary Public
Name Printed
(NOTARY SEAL)
2
STATE OF FLORIDA.
COUNTY OF HILLSBOROUGH
This instrument was executed before me this 31st day of
October, 1995 by Carole D. Hartunian, as Vice Preside
Bank of Tampa, on behalf of the bank. She is personally known to
me or has produced
as identification.
/s/ Linda G. DeBlasio
Notary Public
Name Printed
( NOTARY SEAL)
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
This instrument was executed before me this 30th day of
October, 1995 by Robert J. Suarez, who is personally known to me
/s/ Kimberly A. Orsi
Notary Public
Name Printed
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
This instrument was executed before me this 30th day of
October, 1995 by Robert J. Suarez, as President of International
American Homes, a Delaware corporation, on behalf of the
corporation. He is personally known to me.
/s/ Kimberly A. Orsi
Notary Public
Name Printed
3
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<EPS-PRIMARY> 0.35
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</TABLE>
