================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A (Amendment No. 1)
[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, 1999
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 (I.R.S. Employer Identification Number)
incorporation or organization)
9950 Princess Palm Ave., Suite 112, Tampa, FL 33619
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 664-1100
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 (ss.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. X
As of June 1, 1999, the number of shares outstanding of the registrant's common
stock, $.01 par value, was 855,883. As of June 1, 1999 the aggregate market
value of the registrant's common stock held by non-affiliates was $2,625,000.
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
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<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
FORM 10-K/A
This Amendment No. 1 is filed to include the information required by Part III of
Form 10-K. The Registrant originally excluded the information required by Part
III of Form 10-K because the Registrant intended to incorporate that information
by reference to its proxy statement to be filed in connection with the 1999
annual meeting of its stockholders. However, the Registrant will not file its
definitive proxy statement within the required 120 days of the end of its fiscal
year end and, therefore, is required to file this Amendment. Except for the
amended and restated Items 10, 11, 12 and 13, the additional disclosure under
the subparagraph entitled "Subcontractors and Suppliers" of Item 1, and the
addition of exhibits 10.9 through 10.13 to Item 14, no other Item of this Annual
Report on Form 10-K has been amended.
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 ...................................10
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations........................12
Item 8. Financial Statements and Supplementary Data ...............21
Item 9. Change in and Disagreements with Accountants on
Accounting and Financial Disclosure........................21
Part III.
Item 10. Directors and Executive Officers of the Registrant ........21
Item 11. Executive Compensation ....................................25
Item 12. Security Ownership by Certain Beneficial Owners and
Management.................................................28
Item 13. Certain Relationships and Related Transactions ............30
Part IV.
Item 14. Exhibits, Financial Statements, Schedules, and Reports
on Form 8-K............................................... 30
Signatures ................................................................. 35
Page 2
<PAGE>
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 a
subsidiary, designs, builds, and sells single-family homes and villas and
develops finished building lots, primarily in middle income communities in
suburban residential areas in Greater Tampa, Florida.
During the fiscal year ended March 31, 1998, and in prior years, the Company
also conducted home building activities in Metropolitan Washington, D.C. Such
activities have been terminated. See Notes 1 and 11 in Notes to Consolidated
Financial Statements of the Company appearing elsewhere in this report.
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 plan expired on August 12, 1998. See Notes 1 and
7 in Notes to Consolidated Financial Statements of the Company appearing
elsewhere in this report.
Financing Arrangements
The Company, through its subsidiary, 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, 1999, the Company built and
delivered 1,163 homes realizing $170,549,000 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)
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------
Market Area
-----------
<S> <C> <C> <C>
Greater Tampa, Florida $ 49,992 $ 42,102 $ 40,282
Metropolitan Washington, D.C.* 0 12,299 25,874
---------------------------------------------------------------------------------
Total* $ 49,992 $ 54,401 $ 66,156
---------------------------------------------------------------------------------
</TABLE>
Number of Homes Delivered
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------
Market Area
-----------
<S> <C> <C> <C>
Greater Tampa, Florida 354 321 309
Metropolitan Washington, D.C. * 0 56 123
---------------------------------------------------------------------------------
Total* 354 377 432
---------------------------------------------------------------------------------
</TABLE>
* Includes home sales revenue and number of homes delivered prior to the
restructuring of operations during the year ended March 31, 1998.
The Company is currently offering single-family homes and villas in six
communities at prices ranging from $102,000 to $210,000. Purchasers of the
Company's homes include both entry-level and move-up buyers. The average sales
price of the homes delivered in the year ended March 31, 1999 was $ 141,000.
Page 4
<PAGE>
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 construction and sale of the
homes on those lots. At March 31, 1999 the Company had commitments to purchase
635 finished building lots at a total purchase price of approximately
$17,270,000 over a four-year period. These commitments assure a continuing
supply of finished building lots in the near 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 lots of which 300 were
undeveloped. At March 31, 1999, the Company had developed 257 of those lots into
finished building lots and delivered 148 homes on those lots in prior periods up
to and including March 31, 1999. 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,
Robbins Manufacturing Company, whose Vice President is Mr. Dionel Cotanda, a
member of the Company's Board of Directors. Mr. Cotanda is also a director of
Robbins Manufacturing Company. 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 an independent warranty program which insures
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 product mix, the Company's operations have not been seasonal in
nature.
Backlog
The following comparative backlog information excludes the results from
restructured operations (i.e. exiting from the Metropolitan Washington, D.C.
market).
As of March 31, 1999 and 1998 the Company had a backlog of signed non-contingent
contracts for 105 homes with aggregate sales prices of $15,168,000 and 107 homes
with aggregate sales prices of $14,676,000, respectively.
Page 5
<PAGE>
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.
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, 1999, 1998 and 1997, the Company experienced cancellation
rates of 15%, 21%, and 21%, 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 these 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 home buyers.
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 area 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, Centex
Corporation, U.S. Home Corporation and Lennar Corporation. 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 local area in which the Company operates. The
Company competes primarily on the basis of quality, location, price, design, and
reputation.
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 34 persons as of March 31, 1999 of whom 3 were executive
officers, 11 were sales personnel, 9 were administrative and clerical personnel
and 11 were involved in construction and supervision of construction. The
Company believes its employee relations are satisfactory.
Item 2. Properties
As of March 31, 1999, the Company occupied leased office facilities in Tampa,
Florida totaling approximately 3,170 square feet. See Notes 1 and 7 in 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 Plan expired on August 12, 1998.
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. See
Note 7 in Notes to Consolidated Financial Statements of the Company appearing
elsewhere in this report.
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 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.
At the 1998 Annual Meeting of Stockholders the stockholders approved a proposal
to adopt an amendment (the "Amendment"), to the Company's restated Certificate
of Incorporation to effect a 1-for-3 reverse stock split of the Company's issued
and outstanding common stock. This Amendment did not change the par value of the
common stock which remained at $.01 per share or the number of authorized shares
which remained at 10 million. The Amendment became effective on December 1, 1998
with the filing of a Certificate of Amendment with the Secretary of State of
Delaware.
The effect of the reverse stock splits as set forth above 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 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 1997
- ------------------
First Quarter $ 4.89 $ 3.57
Second Quarter 4.68 3.57
Third Quarter 4.50 4.14
Fourth Quarter 4.50 4.14
Calendar Year 1998
- ------------------
First Quarter 4.50 4.50
Second Quarter 4.50 3.47
Third Quarter 5.25 2.63
Fourth Quarter 6.38 3.93
Calendar Year 1999
- ------------------
First Quarter 7.50 4.75
Page 8
<PAGE>
As of June 1, 1999, there were 2,323 stockholders of record.
The Company has never declared or paid any cash dividends. Although in all other
respects the Plan has expired, the Company may not pay any cash dividends to
stockholders until it has first paid an additional $1,250,000 to the creditors
pursuant to a continuing obligation under the Plan.
Page 9
<PAGE>
Item 6. Selected Financial Data
Selected Consolidated Statements of Operations (1)
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------------------------------------------------------------
1999 (2) 1998 (3) 1997 1996 1995
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Home sales $49,992 $54,401 $65,156 $55,983 $50,347
Interest and other income 355 482 617 792 878
------------------------------------------------------------------------------------------------
50,347 54,883 66,773 56,775 51,225
------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of home sales 42,236 47,359 57,712 48,425 43,455
Restructuring provision - 1,840 - - -
Selling, general and administrative 6,144 6,137 7,455 6,541 5,673
Interest 373 473 545 747 857
Depreciation 88 158 131 59 81
Reversal of creditor liability(2) (1,322) - - - -
------------------------------------------------------------------------------------------------
47,519 55,967 65,843 55,772 50,066
------------------------------------------------------------------------------------------------
Income (loss) before income taxes 2,828 (1,084) 930 1,003 1,159
------------------------------------------------------------------------------------------------
Provision (benefit) for income taxes 583 (380) 280 60 72
------------------------------------------------------------------------------------------------
Net income (loss) $2,245 ($704) $650 $943 $1,087
------------------------------------------------------------------------------------------------
Per Common Share:
Basic net income (loss) $2.47 ($.76) $.71 $1.04 $1.20
================================================================================================
Weighted average number of shares
used in basic net income (loss) per
share data, as adjusted for the Reverse 908,550 928,525 921,675 908,132 908,132
================================================================================================
Stock Splits
Diluted net income (loss) $2.45 ($.76) $.70 $1.02 $1.18
Weighted average number of common
and common equivalent shares 917,350 928,525 929,345 920,637 920,099
================================================================================================
</TABLE>
Page 10
<PAGE>
Selected Consolidated Balance Sheet Data (1)
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, March 31, March 31, March 31, March 31,
1999 1998 (3) 1997 1996 1995
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Receivables $ 1,626 $ 532 $ 949 $ 1,223 $ 444
Collateral for bonds payable 3,199 4,500 4,972 5,871 7,620
Real estate inventory 18,247 20,964 22,654 21,860 16,997
Total assets 24,768 28,183 31,757 31,527 27,668
Mortgage notes and loans payable 8,571 11,246 13,967 13,814 9,724
Bonds payable 3,068 4,341 4,800 5,660 7,362
Total liabilities 16,222 21,749 24,623 25,073 22,177
Stockholders' equity 8,546 6,434 7,134 6,454 5,511
</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 March 31, 1995 through March 31,
1999 and the Selected Consolidated Balance Sheet Data as of March 31, 1995
through March 31, 1999 are not comparable to the related statements for any
prior period and as of any prior date.
(2) The Selected Consolidated Statement of Operations for the year ended March
31, 1999 includes income of $1,322,000 resulting from the reversal of an
estimated liability to creditors established during the year ended March 31,
1993 for which no payment was required.
(3) The Selected Consolidated Statement of Operations and Selected Consolidated
Balance Sheet Data for the year ended March 31, 1998 include a charge for
the restructuring of operations of $1,840,000 (i.e. exiting from the
Washington, D.C. market).
Page 11
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with, and is qualified in
its entirety by, the Consolidated Financial Statements and the notes thereto and
other financial information included elsewhere in this Annual Report on Form
10-K. Certain statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" are forward-looking statements.
See "Special Note Regarding Forward-Looking Statements".
During 1996 and 1997 an adverse housing market in Metropolitan Washington, D.C.,
especially in the areas in which the Company conducted home building operations,
resulted in continued operating losses in the Company's Metropolitan Washington,
D.C. subsidiary. Management changes were made and administrative costs were
reduced in order to minimize the loss. In addition, several communities in which
operations had been poorly performing were abandoned. Notwithstanding those
changes, lower operating margins and higher selling expenses continued to
adversely affect the Company's ability to restore profitability in the
Metropolitan Washington, D.C. market. Accordingly during the quarter ended
December 31, 1997 the Board of Directors of the Company approved management's
plan to discontinue the building and sale of homes and effect an orderly
withdrawal from the Metropolitan Washington, D.C. housing market. Homes for
which the Company had entered into non-contingent contracts have been completed
and model homes and excess lot inventory have been sold. The only remaining
activities are the administrative functions associated with the wind-down of the
subsidiary.
Liquidity and Capital Resources
The consolidated financial statements for the year ended March 31, 1998 include
a restructuring charge of $1,840,000 ($1,214,000 after benefit for federal
income tax) associated with the termination of home-building operations in
Metropolitan Washington, D.C. (See Notes 1 and 11 in Notes to the Consolidated
Financial Statements of the Company appearing elsewhere in this report). The
Company believes that it has sufficient cash flow and cash on hand to absorb any
remaining costs associated with the restructuring.
The Company, through its subsidiary, 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 subsidiary currently has financing agreements in the aggregate
amount of $19,900,000 with commercial banks located in the area in which it
operates. The terms of these financing agreements vary, are each for one year or
more from their date of origination (with expiration dates ranging from July,
1999 to October, 2000), are generally guaranteed by the Company, and are all
secured by the related real estate inventory. During the fiscal year
Page 12
<PAGE>
ended March 31, 1999 a portion of these agreements up to an aggregate maximum
amount of $19,500,000 along with a specific indemnification of certain
environmental conditions were guaranteed by the Company's Chairman and
President. In consideration thereof the Company agreed to pay a guaranty fee
equal to the lessor of $80,000 or 1% of the amount guaranteed. The obligations
of the Company's Chairman and President continue during the term of the loan
agreement subject to certain ratios and financial performance of the Company
which have been satisfied as of March 31, 1999.
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 construction and sale of homes on those
lots. At March 31, 1999, the Company had commitments to purchase 635 finished
building lots at a total purchase price of approximately $17,270,000 over a
four-year period. These commitments assure a continuing supply of finished
building lots in the near 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 lots of which 300 were
undeveloped. Through March 31, 1999, the Company had developed 257 of those lots
into finished building lots and had delivered 148 homes on those 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 market in
the area where the Company will continue operations and the ability of the
Company to maintain a continual 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 modest growth. However, there is no assurance that such financing will
be available to the Company in the future.
The Plan provided for distributions to creditors 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 plan also requires that before the Company can
pay any dividends to stockholders it must first pay to certain holders of
creditors' claims $1,250,000. The Plan also contained other restrictive
covenants regulating various aspects of the Company's operations. With the
exception of the dividend restriction which continues, all other restrictive
covenants expired on August 12, 1998.
During the year ended March 31, 1993 the Company provided an estimated liability
for potential distributions of cash flow to creditors of $1,322,000. The Company
has calculated the cash flow (as defined in the Plan) for the cumulative six
year period ended June 30, 1998 and has determined that there was no cash flow
(as defined in the Plan) for that period.
Page 13
<PAGE>
Accordingly, no distribution to creditors was required. At June 30, 1998, the
Company reversed the estimated liability and recognized income of $1,322,000.
Results of Operations
The following table and the paragraphs that follow set forth certain information
with respect to homes delivered and homes sold during the periods presented
(dollars in thousands). For comparative purposes, the information has been
restated to eliminate the results from restructured operations (i.e. the exiting
from the Washington, D.C. market).
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Home delivered
Units 354 321 309
Home sales revenue $49,992 $42,102 $40,282
Average sales price $ 141.2 $ 131.2 $ 130.4
Home sold
Units 352 346 322
Sales value $50,351 $46,244 $41,839
Average sales price $ 143.0 $ 133.7 $ 129.9
</TABLE>
The increase in home sales revenues for the year ended March 31, 1999 compared
to the year ended March 31, 1998 and the increase in home sales revenues for the
year ended March 31, 1998 compared to the year ended March 31, 1997 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 increase in the
number of units delivered results generally from a greater number of operating
communities and timing factors. The increase in the average sales price results
from a wider product range and price increases.
The Company realized an increase in the number of homes sold during the year
ended March 31, 1999 compared to the year ended March 31, 1998 and an increase
during the year ended March 31, 1998 compared to the year ended March 31, 1997.
The increases are attributable to an increase in the number of product types in
the communities in which the Company builds and a greater number of sales in
each community.
The increase in the average sales price of homes sold during the year ended
March 31, 1999 compared to the year ended March 31, 1998 and the increase during
the year ended March 31, 1998 compared to the year ended March 31, 1997 results
from a wider product range and price increases.
Page 14
<PAGE>
The following table sets forth certain information with respect to homes sold
under contract but not delivered ("backlog") at the dates shown (dollars in
thousands). For comparative purposes the information has been restated to
eliminate the results from restructured operations (i.e. the exiting from the
Washington D.C. market).
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Backlog
Units 105 107 82
Sales value $15,168 $14,676 $10,372
Average sales price $ 144.5 $ 137.2 $ 126.5
</TABLE>
There are no contingent contracts in the backlog.
The number of units in the Company's backlog of sales contracts decreased
slightly at March 31, 1999 compared to March 31, 1998. However, the value of its
backlog of sales contracts increased. The decrease in the number of units is not
material. The increase in the value of the backlog is attributed to an increase
in the average sales price per unit resulting from a wider product range and
price increases.
The Company realized an annual increase in the number and value of its backlog
of sales contracts at March 31, 1998 compared to March 31, 1997. This increase
is attributable to a greater number of product types in the communities in which
the company builds homes as well as an increase in the number of sales per
community. The increase in the average sales price results from a wider product
range and price increases.
Page 15
<PAGE>
Year Ended March 31, 1999 Compared to the Year Ended March 31, 1998.
Results of Operations
The following table sets forth, for the periods indicated, certain information
regarding the Company's operations (dollars in thousands). Operations for the
year ended March 31, 1999 are not comparable to the year ended March 31, 1998
because of the restructuring of operations (i.e.
the exiting from the Washington, D.C. market).
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------------------------------
1999 1998
-------------------------------------------------------------------
Dollars % Dollars %
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Home sales revenues $49,992 100.0 $54,401 100.0
Cost of home sales 42,236 84.5 47,359 87.1
Gross profit 7,756 15.5 7,042 12.9
Selling, general and administrative
expenses 6,144 12.3 6,137 11.3
Restructuring charge - - 1,840 3.4
Income (loss) before income taxes and
reversal of creditor liability 1,506 3.0 (1,084) (2.0)
Reversal of creditor liability 1,322 2.6 - -
Income (loss) before income taxes 2,828 5.6 (1,084) (2.0)
</TABLE>
Interest and Other Income
Interest and other income includes $337,000 and $423,000 and interest expense
includes $333,000 and $416,000 for the years ended March 31, 1999 and March 31,
1998, respectively, from wholly-owned finance subsidiaries established in prior
years to sell collateralized mortgage obligations through participation in
various multi-builder bond programs. The decrease in both income and expense
results from decreases in mortgages receivable due to payoffs which reduces the
related debt.
Income Taxes
For the year ended March 31, 1999 a provision for income tax of $583,000 was
recorded. For the year ended March 31, 1998 a net income tax benefit of $380,000
was recorded. The effective tax rates for years ended March 31, 1999 and 1998
were 21% and 35%, respectively. The change in the effective tax rate results
primarily from the reversal of creditor liability which is not subject to income
tax.
Page 16
<PAGE>
Restructuring Provision
The year ended March 31, 1998 includes a restructuring charge of $1,840,000
associated with the termination of home-building operations in Metropolitan
Washington, D.C. The year ended March 31, 1999 did not include any restructuring
charge.
Creditor Liability
The year ended March 31, 1999 includes a reversal of an estimated liability for
potential distributions of cash flow to creditors of $1,322,000. The year ended
March 31, 1998 did not include any reversal of creditor liability.
The following table sets forth, for the periods indicated, certain information
regarding the Company's remaining Florida operations (dollars in thousands).
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------------------------------
1999 1998
-------------------------------------------------------------------
Dollars % Dollars %
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Home sales revenues $49,992 100.0 $42,102 100.0
Cost of home sales 42,236 84.5 35,759 84.9
Gross profit 7,756 15.5 6,343 15.1
Selling, general and administrative
expenses 5,690 11.4 4,677 11.1
Income before income taxes 1,931 3.9 1,497 3.6
</TABLE>
Gross profit increased in amount and as a percentage of home sales revenues over
the prior comparable period. The increase in gross profit is attributed
primarily to higher home sales revenues and a decrease in cost of home sales as
a percentage of home sales revenues.
Selling, general and administrative expenses for the year ended March 31, 1999
increased in amount and as a percentage of home sales revenues over the prior
comparable period. The increase in selling expenses is primarily attributed to
the higher home sales revenues. The increase in general and administrative
expenses is attributed to higher employment costs and expenses.
The change in pre-tax profit for the year ended March 31, 1999 compared to the
year ended March 31, 1998 is a reflection of the changes in gross profit and in
selling, general, and administrative expenses as discussed above.
Page 17
<PAGE>
Year Ended March 31, 1998 Compared to the Year Ended March 31, 1997.
Results of Operations
The following table sets forth, for the periods indicated, certain information
regarding the Company's operations (dollars in thousands). Operations for the
year ended March 31, 1998 are not comparable to the year ended March 31, 1997
because of the restructuring of operations (i.e.
the exiting from the Washington, D.C. market).
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------------------------------
1998 1997
-------------------------------------------------------------------
Dollars % Dollars %
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Home sales revenues $54,401 100.0 $66,156 100.0
Cost of home sales 47,359 87.1 57,712 87.2
Gross profit 7,042 12.9 8,444 12.8
Selling, general and administrative
expenses 6,137 11.3 7,455 11.3
Restructuring provision 1,840 3.4 - -
(Loss) income before income taxes (1,084) (2.0) 930 1.4
</TABLE>
Interest and Other Income
Interest and other income includes $423,000 and $483,000 and interest expense
includes $416,000 and $471,000 for the years ended March 31, 1998 and March 31,
1997, respectively, from wholly-owned finance subsidiaries established in prior
years to sell collateralized mortgage obligations through participation in
various multi-builder bond programs. The decrease in both income and expense
results from decreases in mortgages receivable due to payoffs which reduces the
related debt.
Income Taxes
For the year ended March 31, 1998 a net income tax benefit of $380,000 was
recorded. For the year ended March 31, 1997 a provision for income taxes of
$280,000 was recorded. The effective tax rates for years ended March 31, 1998
and 1997 were 35% and 30%, respectively. The change in the effective tax rate
was the result of a reversal of a prior year tax reserve.
Restructuring Provision
The year ended March 31, 1998 includes a restructuring charge of $1,840,000
associated with the termination of home-building operations in Metropolitan
Washington, D.C. The year ended March 31, 1997 did not include any restructuring
charge.
Page 18
<PAGE>
The following table sets forth, for the periods indicated, certain information
regarding the Company's remaining Florida operations (dollars in thousands).
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------------------------------
1998 1997
-------------------------------------------------------------------
Dollars % Dollars %
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Home sales revenues $42,102 100.0 $40,282 100.0
Cost of home sales 35,759 84.9 34,172 84.8
Gross profit 6,343 15.1 6,110 15.2
Selling, general and administrative
expenses 4,677 11.1 4,123 10.2
Income before income taxes 1,497 3.6 1,874 4.7
</TABLE>
While gross profit increased for the year ended March 31, 1998 compared to the
year ended March 31, 1997, gross profit as a percentage of home sales revenue
decreased slightly. The percentage decrease is not deemed to be material.
Selling, general and administrative expenses for the year ended March 31, 1998
increased in both amount and percentage when compared to the prior comparable
period. The increase in selling, general and administrative expenses is due
principally to higher general and administrative expenses resulting from
increased employment costs. In addition, higher total selling and marketing
expenses were incurred due to the increase in home sales revenues and a small
increase in per unit selling and marketing expenses. The percentage increase in
selling, general and administrative expenses is due to the reasons set forth
above.
The change in pre-tax profit for the year ended March 31, 1998 compared to the
year ended March 31, 1997 is a reflection of the changes in gross profit and in
selling, general, and administrative expenses as discussed above.
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 market in which it builds homes. Homebuilding is
a cyclical industry in which economic conditions have a substantial impact on
operating performance.
Year 2000
The Company believes that Year 2000 issues are not material to its business and
that the consequences of such issues would not have a material effect on the
Company's business,
Page 19
<PAGE>
results of operations or financial condition without taking into account the
Company's efforts to avoid those consequences. Nevertheless management is taking
what it believes to be all necessary steps to become Year 2000 compliant.
Substantially all of the Company's computer equipment is relatively new and,
when purchased, was and is Year 2000 compliant. To bring its mainframe computer
into compliance, the Company has engaged Pro Data Business Computers ("Pro
Data") to make the changes in its mainframe computer which are necessary to make
it Year 2000 compliant. Pro Data commenced its work during the fiscal quarter
ending March 31, 1999 and expects to complete its work prior to September 30,
1999. The Company estimates that the necessary work will cost approximately
$5,000. The costs for such work will be expensed. Only limited testing of the
Company's computer systems is expected to be necessary.
The costs of purchasing existing Year 2000 compliant computer equipment was
approximately $10,000, all of which was financed from working capital and
capitalized with a provision for amortization over a period of two years.
The Company believes that its existing software programs are capable of being
modified to conform to Year 2000 requirements. The estimated costs of
modification of the Company's software programs and the purchase of comparable
Year 2000 compliant software will not exceed $5,000. Costs of modifying and
purchasing software will be expensed as incurred.
Most of the materials used by the Company in connection with its home-building
activities are purchased from local suppliers for whom Year 2000 issues as they
relate to the Company are either non-existent or immaterial. The Company has
made inquiries of its principal suppliers, i.e., those firms from whom it
purchases appliances (General Electric Company), concrete (CSR/Rinker
Materials), lumber (Hillsborough Builders Supply) and windows (Norandex) but as
yet is not in a position to assess the Year 2000 readiness of such suppliers.
Because the Company is a relatively modest customer of the suppliers of certain
of those items, management believes that it will have only limited opportunities
to engage in interactive testing with such suppliers for the purpose of
determining Year 2000 readiness for transactions with them. The Company has
received verbal assurances from these principal suppliers as to their readiness.
Because of the nature of the Company's relationship with its home-buyer
customers, Year 2000 issues are not directly relevant to such relationships.
The Company has not formulated any contingency plan with respect to its failure
or the failure of any of its suppliers to be Year 2000 compliant prior to
December 31, 1999. The Company does not believe that a failure by the Company or
any of its suppliers to be Year 2000 compliant by that date will have a material
adverse effect on its business.
Special Note Regarding Forward-Looking Statements
Certain statements in this Section and "Business" and elsewhere in this Annual
Report on Form 10-K constitute "forward-looking statements". Such
forward-looking statements
Page 20
<PAGE>
include the discussions of the business strategies of the Company and
expectations concerning future operations, margins, profitability, liquidity and
capital resources. Although the Company believes that such forward-looking
statements are reasonable, it can give no assurance that any forward-looking
statements will prove to be correct. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors, which may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the demographic trends and other conditions impacting the housing market in the
areas in which the Company operates, competition in such areas, the availability
of financing, litigation outcomes, and general economic and business conditions
which may impact levels of disposable income of potential home buyers.
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-20 of this report.
Item 9. Change in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The following table sets forth certain information concerning the directors and
executive officers of the Company as of July 31, 1999:
<TABLE>
<CAPTION>
Name Age Position Director's
Term
Ending
- ---------------- -- ----------------------------- ----
<S> <C> <C> <C>
Robert J. Suarez 50 President and Chairman of the 2001
Board of Directors
Robert I. Antle 44 Executive Vice President, 2001
Treasurer, Secretary, Chief
Financial Officer and Director
Peter A. Davis 62 Vice President and Director 2001
William D. Aiken 42 Director 1999 1/
</TABLE>
- --------
1/ The Company's Board of Directors has proposed that Mr. Aiken be elected as a
Class I director at the Company's 1999 annual meeting of shareholders. Mr. Aiken
has
(continued...)
Page 21
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Dionel Cotanda 61 Director 2000
James G. Farr 50 Director 2000
Jeffrey D. Prol 36 Director 1999 2/
</TABLE>
Set forth below are the biographies of the directors and executive officers of
the Company:
Robert J. Suarez, 50, has served as a director since 1992. Mr. Suarez was
appointed Chairman and President of the Company in September 1992. He co-founded
Suarez Housing Corporation in 1974. Mr. Suarez has for more than five years
served as Chairman and President of Suarez Housing Corporation.
Robert I. Antle, 44, has served as a director since 1996. Mr. Antle has
been employed by Suarez Housing Corporation as Vice President, Chief Financial
Officer and Secretary for a period of more than five years. He currently serves
as Executive Vice President, Treasurer, Secretary and Chief Financial Officer of
the Company.
Peter A. Davis, 62, has served as a director since 1994. Mr. Davis became a
Vice President of the Company and Suarez Housing Corporation in September 1998.
Prior thereto he had been a consultant to the Company since November 1992. Mr.
Davis is a Certified Public Accountant.
William D. Aiken, 42, has served as a director since 1992. Mr. Aiken was
appointed to the Board of Directors by the International American Homes, Inc.
Creditors Committee. Mr. Aiken is also a Director of Suarez Housing Corporation,
a subsidiary of the Company. Mr. Aiken is a Certified Public Accountant who has
been engaged in private practice in Lake Worth, Florida since 1992. Prior to
1992, and for a period of more than five years, Mr. Aiken was the Chief
Financial Officer of Pope Associates, Tru-Line Industries, and ADP Lumber, which
were primarily engaged in the businesses of retail building materials and roof
and floor truss manufacturing in Southeastern Florida.
Dionel Cotanda, 61, has served as a director since 1992. Mr. Cotanda was
appointed to the Board of Directors by the Official Creditors Committee in the
Reorganization Cases of International American Homes, Inc., Inland Pacific
Communities, Inc., Porten Sullivan Corporation of Florida, Suarez Housing
Corporation, Beacon Hill Farm Associates II and Lakeview Professional Park (the
"International American Homes, Inc. Creditors Committee"). Mr. Cotanda is also a
Director of Suarez Housing Corporation. Mr. Cotanda has been President, Chief
Executive Officer and Director of Robbins Engineering, Inc. since its
organization in 1990. In addition, Mr. Cotanda has for a period
- -----------------
1/ (...continued)
consented to serve a new three year term expiring in 2002.
2/ The Company's Board of Directors has proposed that Mr. Prol be elected as a
Class I director at the Company's 1999 annual meeting of shareholders. Mr. Prol
has consented to serve a new three year term expiring in 2002.
Page 22
<PAGE>
of more than five years been Vice President and since 1993 been a Director of
Robbins Manufacturing Company. Robbins Engineering, Inc. is a supplier of
engineering services, metal plate connectors and software to the metal plate
connected wood truss industry and is a supplier to Robbins Manufacturing
Company. Robbins Manufacturing Company is a supplier of metal plate connected
wood trusses, lumber and related building material products and is a supplier to
the Company. Robbins Engineering, Inc. and Robbins Manufacturing Company are
both located in Tampa, Florida.
James G. Farr, 50, has served as a director since 1996. Mr. Farr is an
attorney and has for a period of more than five years been the President and
Chief Executive Officer of Paramount Title Corporation, a company of which he is
the sole stockholder. Paramount Title Corporation conducts a transactional real
estate practice and title insurance business in Tampa, Florida.
Jeffrey D. Prol, 36, has served as a director since 1994. Mr. Prol is an
attorney and for a period of more than five years has been associated of the law
firm of Ravin, Sarasohn, Cook, Baumgarten, Fisch & Rosen, P.C. ("Ravin,
Sarasohn") of Roseland, New Jersey of which he became a member on January 1,
1997. Ravin, Sarasohn served as counsel to the Company in connection with the
Chapter 11 bankruptcy filings. Mr. Prol was one of the principal attorneys
involved in that matter.
The Board of Directors
The Board of Directors oversees the overall performance of the Company on
your behalf. Members of the Board stay informed of the Company's business
through discussions with the Chairman and other members of management and staff,
by reviewing materials provided to them, and by participating in board and
committee meetings. The Board met three times during the fiscal year ended March
31, 1999. All of the Directors attended at least 75% of those meetings.
Committees of the Board
The Company's Board of Directors has four committees: the Audit Committee,
the Compensation Committee, the Nominating Committee and the Executive
Committee.
Audit Committee: This committee meets with management to review the
adequacy of the Company's internal controls, accounting policies, financial
reporting, and the scope and results of the audit engagement. In addition, the
Audit Committee:
o meets with appropriate Company financial personnel and independent
auditors in connection with these reviews; and
o recommends the appointment of the Company's independent auditors to the
board.
Members of the Audit Committee are Mr. Aiken, Mr. Davis and Mr. Antle. Two
Audit Committee meetings were held during the fiscal year ended March 31, 1999.
Compensation Committee: This committee makes recommendations to the Board
of Directors regarding the amount of and form of compensation awarded to the
executive
Page 23
<PAGE>
officers of the Company and to the employees of the Company whose annual
salaries exceed $75,000 per year. The committee also administers the Company's
Non-Qualified Stock Option Plan. Members of the Compensation Committee are Mr.
Cotanda, Mr. Davis, Mr. Aiken and Mr. Prol. One meeting of the Compensation
Committee was held during the fiscal year ended March 31, 1999.
Nominating Committee: This committee establishes procedures for the
selection, retention, and performance evaluation of directors; reviews board
governance procedures; and reviews the Company's ethics and compliance program.
The committee also reviews the composition of The Company's Board of Directors
and the qualifications of persons identified as prospective directors,
recommends the candidates to be nominated for election as directors, and, in the
event of a vacancy on the board, recommends any successors. The Committee also
will consider nominations by stockholders submitted in writing to the Chairman
of the Board of Directors. Members of the Nominating Committee are Mr. Antle,
Mr. Cotanda and Mr. Farr. The Nominating Committee recommended this year's
director nominations at its June 1999 meeting.
Executive Committee: This committee has the authority to review and approve
all land acquisitions by the Company's subsidiaries and all guarantees by the
Company of loans to the Company's subsidiaries. Members of the Executive
Committee are Mr. Suarez, Mr. Antle, Mr. Cotanda, Mr. Davis and Mr. Farr. The
Executive Committee did not meet separately from the Board of Directors during
the fiscal year ending March 31, 1999.
Compensation of Directors
Directors who are employees of the Company receive no additional
remuneration for their services as directors. Non-employee directors--those
directors not entitled to receive any salary from the Company or its
subsidiaries--receive for each Board or committee meeting attended a fee of
$3,000 and reasonable travel and other out-of-pocket expenses incurred.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than ten percent of the
Company's Common Stock (the "Reporting Persons"), to file reports of ownership
and changes in ownership of such securities with the Securities and Exchange
Commission. Officers, directors and greater than ten percent beneficial owners
are required by applicable regulations to furnish the Company with copies of all
Section 16(a) forms they file. The Company is not aware of any beneficial owner
of more than ten percent of its Common Stock other than Mr. Robert J. Suarez.
Based solely upon review of the copies of the forms furnished to the
Company, or written representations from certain Reporting Persons, the Company
believes that during the fiscal year ended March 31, 1999 all filings required
to be made by Reporting Persons were made on a timely basis.
Page 24
<PAGE>
Item 11. Executive Compensation
The following table sets forth a summary of annual and long-term
compensation paid by the Company during the fiscal years ended March 31, 1999,
1998, and 1997 to the Chief Executive Officer of the Company and to the other
executive officers of the Company whose total compensation for the fiscal year
ended March 31, 1999 was in excess of $100,000.
Summary Compensation Table (1)
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Name and Salary Bonus
Principal Position Year ($) ($)
- ---------------------- ---- -------- --------
<S> <C> <C> <C>
Robert J. Suarez, (2) 1999 $318,004 $200,000
Chairman and President 1998 303,456 100,000
1997 295,888 50,000
Robert I. Antle, (2) 1999 $186,308 $120,000
Executive Vice 1998 167,526 66,000
President, 1997 162,276 33,000
Treasurer, Chief
Financial
Officer and Secretary
Peter A. Davis, (3) 1999 $78,501 $30,000
Vice President 1998 60,000 0
1997 39,000 0
</TABLE>
- ---------------------------------
(1) The columns designated for the reporting of other annual compensation,
restricted stock awards, long-term incentive plan payouts, and long-term
compensation awards have been omitted because no compensation of a type
required to be reported under such columns was paid to the named executive
officers during the period covered by the table. The Company does not grant
stock appreciation rights of any kind.
(2) Upon the confirmation of the Plan of Reorganization on August 12, 1992,
Suarez Housing Corporation entered into an employment agreement with Robert
J. Suarez. See "Employment Agreement" below. Subsequently, in September
1992, Mr. Suarez and Mr. Antle were appointed to their positions as Chairman
and President, and as Vice President and Secretary, of the Company,
respectively. Mr. Antle was subsequently elevated to the position of
Executive Vice President, Treasurer and Chief Financial Officer.
Accordingly, the compensation appearing on the table above represents all
compensation received by the named executive officers from Suarez Housing
Corporation during the fiscal years ended March 31, 1999, 1998, and 1997.
The named executive officers do not receive compensation directly from the
Company.
(3) Peter A. Davis was appointed to his position in September, 1998. Prior
thereto he served as a consultant to Suarez Housing Corporation and the
Company. Accordingly, the compensation appearing in the table includes all
payments made to Mr. Davis from Suarez
Page 25
<PAGE>
Housing Corporation and the Company during the fiscal year ended March 31, 1999,
1998 and 1997. Mr. Davis does not currently receive compensation directly from
the Company.
Stock Options
During the fiscal year ended March 31, 1999 a stock option was granted to
Peter A. Davis for 10,000 shares at an exercise price of $5.00 per share, which
was the fair market value on the date the option was granted.
The following table sets forth certain information with respect to the
named executive officers concerning the exercise of stock options during the
fiscal year ended March 31, 1999 and the value of unexercised stock options held
as of March 31, 1999.
Aggregated Option Exercises in Fiscal Year 1999 and Year-End Option Values
<TABLE>
<CAPTION>
Value of Securities Underlying
Number of Securities Unexercised In-the-Money
Shares Value Underlying Unexercised Options at Fiscal Year End
Acquired on Realized Options at Fiscal Year end ($)(1)
Exercise (#) ($) ------------------------------------- ---------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------- ------------------ ------------------ ------------------ --------------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. ---- ---- 9,999 23,334 $39,396 $91,936
Suarez
Robert I. ---- ---- 1,666 15,000 $7,497 $67,500
Antle
Peter A. ---- ---- 1,666 11,666 $4,998 $7,497
Davis
</TABLE>
(1) The fair market value of the Common Stock at the Company's fiscal year end,
March 31, 1999, was $4.75 per share based upon the last trade price as
reported by the BLOOMBERG service.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Company's Board of Directors administers
the Company's executive compensation program and makes specific recommendations
to the Board of Directors regarding the amount and form of compensation awarded
to the executive officers of the Company and to other employees of the Company
whose annual salaries exceed $75,000 per year. The Compensation Committee also
administers the Company's Non-Qualified Stock Option Plan. The Compensation
Committee is composed of three non-employee directors and one employee-director.
The Company's executive compensation program is intended to enable the
Company to attract, retain and motivate highly qualified executives for the
Company and to create an incentive to increase stockholder value. This policy is
implemented through the payment of salaries and bonuses and the granting of
stock options.
Page 26
<PAGE>
Compensation of the Chief Executive Officer
In accordance with the terms of the Plan, on August 12, 1992 Suarez Housing
Corporation entered into an employment agreement with Robert J. Suarez pursuant
to which he serves as Chairman and President of Suarez Housing Corporation. See
"Executive Compensation --Employment Agreement." This employment agreement,
which was approved by the Bankruptcy Court, governed the terms of Mr. Suarez'
employment including his compensation and covered the period from August 12,
1992 through August 12, 1995. On June 22, 1995, the Compensation Committee
recommended and the Board of Directors approved a three-year renewal of Mr.
Suarez' employment agreement with an annual salary of $290,000 subject to annual
Consumer Price Index adjustments. On June 18, 1998, the Compensation Committee
recommended and the Board of Directors approved a three year renewal of Mr.
Suarez employment agreement with an annual salary of $325,000 subject to annual
Consumer Price Index adjustments. Factors that were considered in making this
recommendation included the performance of the Company and its principal
subsidiary, his agreement to guaranty certain bank loans for Suarez Housing
Corporation, and the compensation received by Chief Executive Officers of
comparable companies. The market value of the Company's stock was not a factor
considered in determining the Chief Executive Officer's compensation. All of Mr.
Suarez' compensation is received from Suarez Housing Corporation. He does not
receive any compensation directly from the Company. During the fiscal year ended
March 31, 1997 a stock option was granted to Robert J. Suarez in the amount of
33,333 shares. The exercise price of $3.9375 was the fair market value on the
date the option was granted.
Compensation of Other Executive Officers
The Compensation Committee made recommendations regarding the compensation
of the Company's other executive officers. In those instances Mr. Suarez, the
Chairman and President, who was recognized to be most familiar with the
individual employees, made recommendations to the Committee as to the amount of
the proposed remuneration. Factors considered with respect to each component of
compensation were subjective, such as perceptions of the Company's and the
individual's performance and any changes or planned changes in functional
responsibility. Also considered were the prevailing levels of compensation
within the markets where the Company operates. The market value of the Company's
stock was not a factor considered in setting executive officer compensation.
Members of the Compensation Committee:
Dionel Cotanda
Peter A. Davis
William D. Aiken
Jeffrey D. Prol
Compensation Committee Interlocks and Insider Participation
Mr. Dionel Cotanda, a member of the Compensation Committee of the Board of
Directors, is President, Chief Executive Officer, and Director of Robbins
Engineering, Inc. and Vice President and Director of Robbins Manufacturing
Company. During the year ended March 31, 1999, Robbins Engineering, Inc. and
Robbins Manufacturing Company sold engineering services, metal plate connected
wood trusses, lumber, and related building
Page 27
<PAGE>
material products in the amount of approximately $4,625,000 to Suarez Housing
Corporation.
Mr. Peter A. Davis, a member of the Compensation Committee of the Board of
Directors, had served as a consultant to the Company since November 1992. The
Company entered into a one-year consulting agreement with Mr. Davis commencing
November 1, 1992. This agreement was subsequently renewed under similar terms
and conditions for five additional one-year terms which expired on November 1,
1998. The agreement provided for Mr. Davis to assist the Company in a broad
range of areas. Mr. Davis received compensation at the rate of $1,000 per day
with a minimum compensation of $42,000 per year. During the fiscal year ended
March 31, 1999, Mr. Davis became a Vice President of the Company.
Employment Agreement
In accordance with the terms of the Plan, the Company entered into an
employment agreement with Robert J. Suarez. The employment agreement was
approved by the Bankruptcy Court as part of the Plan and became effective as of
the date of confirmation of the Plan, August 12, 1992. Mr. Suarez is currently
employed by the Company as Chairman and President. He is also employed by Suarez
Housing Corporation as Chairman and President. The employment agreement
originally was to expire on August 12, 1995 and was extended by the Board in
June 1995 and June 1998 for three additional years, subject to certain
modifications, so that it now expires on August 12, 2001. The employment
agreement provided for base compensation during the initial three-year term of
$250,000 per annum to be adjusted annually in accordance with changes in the
Consumer Price Index ("CPI"). Mr. Suarez' base compensation was increased to
$290,000 on August 12, 1995 and to $325,000 on August 12, 1998 and will be
adjusted thereafter annually in accordance with changes in the CPI. The
employment agreement can be terminated at any time for cause, without any
further payment. If the employment agreement is terminated without cause, Mr.
Suarez shall be entitled to additional compensation equal to six months' pay.
The employment agreement, as extended, provides that in the event Mr. Suarez'
employment agreement is not renewed on substantially the same terms and
conditions, the Company will pay Mr. Suarez six months' base compensation in
return for his consulting services during such period. Mr. Suarez agreed, for a
number of months (such number of months to coincide with the number of months of
termination or non-renewal benefit) after any termination of his employment, not
to engage in any business enterprise involving the sale and/or construction of
residential housing in direct competition with the Company. Mr. Suarez also
agreed, for one year after any termination of his employment, not to induce any
employee of the Company to render any services, absent the Company's prior
written approval, to or for any person or entity in direct competition with the
Company's then existing construction activities.
Item 12. Security Ownership by Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership, as defined in the regulations of the Commission, of the Common Stock
as of July 31, 1999 held by (i) each director of the Company, (ii) each person
who is known by the Company to be the beneficial owner of more than five percent
(5%) of the issued and outstanding shares of Common Stock and (iii) all
directors and executive officers as a group. Except as
Page 28
<PAGE>
noted, the individuals named in the table have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by them:
Name Beneficially Owned Number of Shares Percent of
Owned Shares Owned
---------------------------- ---------------------- -------------------
Robert J. Suarez 290,478 33.35%
Robert I. Antle 8,181 *
Peter A. Davis (2)(5) 105,342 12.09%
William D. Aiken (1) 2,221 *
Dionel Cotanda (2) 7,803 *
James G. Farr (1) 2,221 *
Jeffrey D. Prol (2) 2,554 *
Ronald I. Heller (4) 67,190 7.72%
Ina J. Davis (5) 105,342 12.09%
David S. Nagelberg (6) 59,872 6.87%
All current directors and 418,800 47.75%
executive officers as a group
(7 persons) (3)
- ---------------------------
* Less than one percent (1%).
(1) Includes 2,221 shares of Common Stock which each director, to whom this note
applies, has the right to acquire within sixty (60) days through the
exercise of options. Such shares are deemed to be outstanding for the
purpose of computing the percentage of class beneficially owned by each of
those directors, but not for the purpose of computing the percentage of
class beneficially owned by any other person.
(2) Includes 555 shares of Common Stock which each director, to whom this note
applies, has the right to acquire within sixty (60) days through the
exercise of options. Such shares are deemed to be outstanding for the
purpose of computing the percentage of class beneficially owned by each of
those directors, but not for the purpose of computing the percentage of
class beneficially owned by any other person.
(3) Includes 6,107 shares of Common Stock which current officers and directors
have the right to acquire within sixty (60) days through the exercise of
options. Such shares are deemed to be outstanding for the purpose of
computing the percentage of class beneficially owned by the directors and
executive officers as a group, but not for the purpose of computing the
percentage of class beneficially owned by any other group.
(4) Mr. Ronald I. Heller filed a schedule 13D on December 9, 1996 disclosing
ownership of 65,894 shares. Mr. Heller is not affiliated with the company or
its subsidiaries in any capacity. At March 31, 1998, Mr. Heller reported
ownership of 67,190 shares.
(5) Peter A. Davis disclaims any beneficial interest in respect of 46,483 shares
held by Ina J. Davis; Ina J. Davis disclaims any beneficial interest in
respect of 58,859 shares held by Peter A. Davis.
(6) Although the Company is unaware of any filing on Schedule 13D or 13G filed
by Mr. David Nagelberg, pursuant to a list of non-objecting beneficial
owners obtained by the Company, it became aware of Mr. David Nagelberg's
ownership of 54,965 shares in an individual retirement account. In addition,
the Company similarly became aware of 2,100 shares held in custody for
Jeremy Nagelberg, 641 shares held in custody for Justin Nagelberg and 2,166
shares held in custody for Jenna Nagelberg, each of whom the
Page 29
<PAGE>
Company believes is a child of Mr. David Nagelberg. In the absence of a
declaration of the contrary, the Company assumes that Mr. David Nagelberg
does not disclaim beneficial ownership of such shares.
Item 13. Certain Relationships and Related Transactions
During the fiscal year ending March 31, 1999, a portion of a financing
agreement with a maximum aggregate amount of $19,500,000 including a specific
indemnification of certain environmental conditions was guaranteed by the
Company's Chairman and President, Mr. Suarez. In consideration thereof the
Company agreed to pay a guaranty fee to Mr. Suarez equal to the lesser of
$80,000 or 1% of the amount guaranteed. The obligations of the Company's
Chairman and President continue during the term of the loan agreement subject to
certain ratios and financial performance of the Company which have been
satisfied as of March 31, 1999. The Company has agreed to indemnify the
President and Chairman in the event that this personal guarantee is called.
A member of the Board of Directors, Mr. Dionel Cotanda, is Vice President
and Director of a company which during the year ended March 31, 1999 sold lumber
and certain other building material products in the amount of approximately
$4,625,000 to Suarez Housing Corporation, a subsidiary of the Company. Suarez
Housing Corporation purchases all of its requirements for those products from
this company.
A member of the Board of Directors, Mr. James G. Farr, is the sole
stockholder and President and Chief Executive Officer of Paramount Title
Corporation. During the years ended March 31, 1999, 1998 and 1997, Paramount
Title Corporation provided settlement and title insurance services for
substantially all the homes sold by Suarez Housing
Corporation.
See Note 10 in Notes to the Consolidated Financial Statements of the Company
appearing elsewhere in this report.
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. (All other
schedules are omitted as the required information is inapplicable, or
the information is presented in the financial statements and related
notes thereto):
INTERNATIONAL AMERICAN HOMES, INC. AND SUBSIDIARIES
Page
Report of Independent Certified Public Accountants...........................F-1
Consolidated Balance Sheets as of March 31, 1999 and 1998....................F-2
Consolidated Statements of Operations for the three years ended March 31,
1999.........................................................................F-4
Consolidated Statements of Changes in Stockholders' Equity for the three years
ended March 31, 1999.........................................................F-5
Consolidated Statements of Cash Flows for the three years
Page 30
<PAGE>
ended March 31, 1999.........................................................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, 1999.
(c) Exhibits. The following exhibits are filed as part of this Annual
Report:
<TABLE>
<CAPTION>
Exhibit
Number
<S> <C>
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).
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).
3.1(d) - Certificate of Amendment to the Restated Certificate of Incorporation of Registrant
dated November 19, 1998.
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).
</TABLE>
Page 31
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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 Agreement dated as of November 17, 1995
between Nations Bank of Florida, N.A. and Suarez Housing Corporation (incorporated by
reference to Exhibit 10.7 to the Annual Report on Form 10-K for the fiscal year
ended March 31, 1996).
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 (incorporated by reference to Exhibit 10.8
to the Annual Report on Form 10-K for the fiscal year ended March 31, 1996).
10.9 - Amendment, dated December 1996, between Suarez Housing Corporation and
NationsBank, N.A. (South), successor by merger to NationsBank of Florida,
N.A., to the Amended and Restated Master Loan Agreement, dated November
17, 1995, between Suarez Housing Corporation and NationsBank of Florida,
N.A. (filed herewith).
10.10 - Amendment, dated December 18, 1997, between Suarez Housing Corporation
and NationsBank, N.A., successor by merger to NationsBank, N.A. (South) to
the Amended and Restated Master Loan Agreement, dated November 17,
1995, between Suarez Housing Corporation and NationsBank of Florida, N.A.
(filed herewith).
10.11 - Amended and Restated Master Loan Agreement, dated as of July 2, 1998,
between Barnett Bank, N.A. and Suarez Housing Corporation (filed herewith).
10.12 - Amendment, dated February 23, 1999, between Suarez Housing Corporation
and NationsBank, N.A., successor by merger to Barnett Bank, N.A. to (i)
Amended and Restated Master Loan Agreement, dated November 17, 1995,
between Suarez Housing Corporation and NationsBank of Florida, N.A. and
</TABLE>
Page 32
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(ii) Amended and Restated Master Loan Agreement, dated July 2, 1998,
between Suarez Housing Corporation and Barnett Bank, N.A. (filed herewith).
10.13 - Amendment, dated July 2, 1999, by and between Suarez Housing Corporation
and Bank of America, N.A., successor by merger to NationsBank, N.A. to (i)
Amended and Restated Master Loan Agreement, dated November 17, 1995,
between Suarez Housing Corporation and NationsBank of Florida, N.A. and
(ii) Amended and Restated Master Loan Agreement, dated July 2, 1998,
between Suarez Housing Corporation and Barnett Bank, N.A. (filed herewith).
</TABLE>
Page 33
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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).
</TABLE>
Page 34
<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: August 18, 1999 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/ Robert I. Antle
-------------------
Robert I. Antle
Executive Vice President, Secretary, Treasurer, and
Chief Financial Officer
Page 35
<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 August 18, 1999
- -------------------- Directors and President
Robert J. Suarez
/s/ Robert I. Antle Executive Vice President and August 18, 1999
- -------------------- Director
Robert I. Antle
/s/ Peter A. Davis Vice President and Director August 18, 1999
- --------------------
Peter A. Davis
Director August __, 1999
- --------------------
William D. Aiken
Director August __, 1999
- --------------------
Dionel Cotanda
/s/ James G. Farr Director August 18, 1999
- --------------------
James G. Farr
Director August __, 1999
- --------------------
Jeffrey D. Prol
Page 36
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To the Stockholders of International American Homes, Inc.:
We have audited the accompanying consolidated balance sheets of International
American Homes, Inc. (a Delaware corporation) and subsidiaries (collectively,
the "Company") as of March 31, 1999 and 1998, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended March 31, 1999. 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, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1999, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tampa, Florida
May 14, 1999
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,
1999 1998
--------- ---------
CASH AND CASH EQUIVALENTS-including $40 and $290
restricted, respectively $1,461 $1,461
RECEIVABLES 1,626 532
REAL ESTATE INVENTORY 18,247 20,964
COLLATERAL FOR BONDS PAYABLE 3,199 4,500
PROPERTY AND EQUIPMENT-less accumulated
depreciation of $513 and $544, respectively 49 88
OTHER ASSETS 186 638
--------- ---------
TOTAL ASSETS $24,768 $28,183
========= =========
The accompanying notes are an integral part of these consolidated 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,
1999 1998
--------- ---------
LIABILITIES
MORTGAGE NOTES AND LOANS PAYABLE $ 8,571 $ 11,246
BONDS PAYABLE 3,068 4,341
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 4,403 5,968
CUSTOMER DEPOSITS 180 194
--------- ---------
Total Liabilities 16,222 21,749
--------- ---------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
PREFERRED STOCK - $.01 par value; 4,000,000 shares
authorized; none issued or outstanding - -
COMMON STOCK - $.01 par value; 10,000,000 shares 10 10
authorized; 985,955 and 986,947 shares issued,
respectively; 857,385 and 930,298 shares
outstanding, respectively
ADDITIONAL PAID-IN CAPITAL 2,267 2,400
RETAINED EARNINGS 6,270 4,025
TREASURY STOCK, 128,570 and 56,649 shares, respectively (1) (1)
--------- ---------
Total Stockholders' Equity 8,546 6,434
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 24,768 $ 28,183
========= =========
The accompanying notes are an integral part of these consolidated 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,
----------------------------------------
1999 1998 1997
------------ ------------ -----------
REVENUES
Home sales $ 49,992 $ 54,401 $ 66,156
Interest and other income 355 482 617
-------- -------- --------
50,347 54,883 66,773
-------- -------- --------
EXPENSES
Cost of home sales 42,236 47,359 57,712
Selling, general and administrative 6,144 6,137 7,455
Interest 373 473 545
Depreciation 88 158 131
Restructuring charge - 1,840 -
Reversal of creditor liability (1,322) - -
-------- -------- --------
47,519 55,967 65,843
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES 2,828 (1,084) 930
PROVISION (BENEFIT) FOR INCOME TAXES 583 (380) 280
-------- -------- --------
NET INCOME (LOSS) $ 2,245 $ (704) $ 650
======== ======== ========
BASIC NET INCOME (LOSS) PER SHARE $ 2.47 $ (.76) $ .71
======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
908,550 928,525 921,675
======== ======== ========
DILUTED NET INCOME (LOSS) PER SHARE $2.45 $ (.76) $.70
======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES 917,350 928,525 929,345
======== ======== ========
The accompanying notes are an integral part of these consolidated statements.
F - 4
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock
--------------- --- -----------
Shares Issued Additional
and Amount Paid-In Retained Treasury Total
Outstanding Capital Earnings Stock
--------------- ----------- ------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1996 908,131 $ 9 $ 2,367 $ 4,079 $ (1) $ 6,454
Net income - - - 650 - 650
Options Exercise 20,000 - 30 - - 30
-------------- ---------- ------------ ---------- --------- ----------
Balance, March 31, 1997 928,131 9 2,397 4,729 (1) 7,134
Net loss - - - (704) - (704)
Option exercise 2,167 1 3 - - 4
-------------- ---------- ------------ ---------- --------- ----------
Balance, March 31, 1998 930,298 10 2,400 4,025 (1) 6,434
Net income - - - 2,245 - 2,245
Treasury stock (71,921) - (189) - - (189)
Other (992) - 56 - - 56
============== ========== ============ ========== ========= ==========
Balance, March 31, 1999 857,385 $ 10 $ 2,267 $ 6,270 $ (1) $ 8,546
============== ========== ============ ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F - 5
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,245 $ (704) $ 650
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation 88 158 131
Changes in operating assets and liabilities:
(Increase) decrease in receivables (1,094) 417 274
Decrease (increase) in real estate inventory 2,717 1,690 (794)
Decrease (increase) in other assets 452 208 (209)
Decrease in collateral for bonds payable 1,301 472 899
(Decrease) increase in accounts payable and accrued liabilities (1,565) 438 168
(Decrease) increase in customer deposits (14) (132) 89
--------- -------- --------
Net cash provided by operating activities 4,130 2,547 1,208
--------- -------- --------
Cash flows from investing activities:
Decrease (increase) in restricted cash 250 284 (24)
Purchase of property and equipment (49) (97) (108)
--------- -------- --------
Net cash provided by (used in) investing activities 201 187 (132)
--------- -------- --------
Cash flows from financing activities:
Proceeds from exercise of options - 4 30
Proceeds from mortgage notes and loans payable 5,185 26,460 38,156
Payments of mortgage notes and loans payable (7,860) (29,181) (38,003)
Repayments of bonds payable - finance subsidiaries (1,273) (459) (860)
Purchase of treasury stock (189) - -
Return of unclaimed bankruptcy distributions 56 - -
--------- -------- --------
Net cash used in financing activities (4,081) (3,176) (677)
--------- -------- --------
Net increase (decrease) in cash and cash equivalents 250 (442) 399
Cash and cash equivalents at beginning of period 1,171 1,613 1,214
--------- -------- --------
Cash and cash equivalents at end of period $ 1,421 $ 1,171 $ 1,613
========= ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,217 $ 1,704 $ 1,886
========= ======== ========
Income taxes $ 65 $ 133 $ 460
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F - 6
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1999, 1998 AND 1997
NOTE 1 - THE COMPANY
International American Homes, Inc. and subsidiaries (the "Company") was
incorporated under the laws of the State of Delaware on April 27, 1983. The
Company, through a subsidiary, designs, builds, and sells single-family homes
and villas and develops finished building lots, primarily in middle income
communities in suburban residential areas in Greater Tampa, Florida.
During the fiscal year ended March 31, 1998, and in prior years, the Company
also conducted home building activities in Metropolitan Washington, D.C.. Such
activities have been terminated.
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 Plan expired on August 12, 1998, with the
exception of the continuing dividend restriction (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 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 cost of sales under
specific identification methods. Land and land development
F - 7
<PAGE>
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-term maturities or variable
interest rates 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 using 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 their estimated useful lives.
Stock-Based Compensation
The Company adopted Statement of Financial Accounting Standard ("SFAS") No. 123,
"Accounting for Stock-Based Compensation " during fiscal year 1997. The Company
has elected to continue to measure compensation costs using Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
therefore the adoption of this statement did not have any effect on the
financial results of the Company (see Note 8).
Compensation expense related to common stock options issued to directors and
employees is recognized at the time the options are granted in an amount equal
to the excess of the current trading price of the common shares over the
option's exercise price.
F - 8
<PAGE>
Concentration of Credit Risk
Financial instruments which potentially expose the Company to concentration of
credit risk consist primarily of accounts receivable. Credit risk arising from
receivables is minimal due to the large number of clients comprising the
Company's customer base. Credit losses in the past have not been material.
Earnings per Share
In the fourth quarter of fiscal year 1998, the Company adopted SFAS No. 128,
"Earnings per Share". This statement requires the computation and reporting of
both "basic" and "diluted" earnings per share.
"Basic earnings per share" is computed as net income divided by the weighted
average number of shares outstanding. "Diluted earnings per share" reflects the
potential dilution that could occur if securities and other contracts to issue
common stock were exercised or converted into common stock.
The following table provides a reconciliation of the numerator and denominator
of basic EPS to diluted EPS.
<TABLE>
<CAPTION>
For the Year Ended March 31,
1999 1998 1997
--------------------------------- -------------------------------- --------------------------------
Income Shares Per Income Shares Per Income Shares Per
(loss) Share (loss) Share (loss) Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS
Income (loss) available to
Common stockholders $2,245,000 $908,550 $2.47 ($704,000) 928,525 ($.76) $650,000 921,675 $.71
Effect Of Dilutive
Securities
Options 8,800 N/A 7,670
---------- -------- ----- --------- ------- ----- -------- ------- ----
Diluted EPS
Income(loss)
available to common
stockholders
$2,245,000 $917,350 $2.45 ($704,000) 928,525 ($.76) $650,000 929,345 $.70
========== ======== ===== ========= ======= ===== ======== ========= ====
</TABLE>
As of March 31, 1998 there were 61,661 options outstanding which were not
included in the calculation of diluted net loss per share because the effect
would be antidilutive.
F - 9
<PAGE>
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
During fiscal year 1998, the Company adopted the provisions of SFAS No. 129,
"Disclosure of Information about Capital Structure". The adoption of SFAS No.
129 did not have a material effect on the Company's financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about segments of an Enterprise and Related Information", which is
effective for fiscal years beginning after December 15, 1997. The Company
adopted SFAS No. 131 in fiscal year 1999 and the impact was not significant.
NOTE 3 - REAL ESTATE INVENTORY
Real estate inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Accumulated costs of construction completed and in progress $ 8,468 $ 10,286
Land and land development costs 9,610 10,510
Land options and deposits 169 168
------------ -------------
$18,247 $ 20,964
============ =============
</TABLE>
From time to time as part of the normal operations of the business, a subsidiary
of the Company has bought lots or land which another 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 material to the financial statements taken as a whole. The
year ended March 31, 1998 included real estate inventory for home-building
operations in Metropolitan Washington, D.C..
F - 10
<PAGE>
NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Accounts payable - trade $2,238 $ 2,488
Accrued liabilities 2,165 2,158
Accrued estimated future cash distribution to creditors - 1,322
----------- ------------
$4,403 $ 5,968
=========== ============
</TABLE>
Accounts payable and accrued liabilities as of March 31, 1999 and March 31,
1998, include liabilities of approximately $40 and $41 respectively, which
represent cash to be distributed to the creditors pursuant to the Plan of
Reorganization (See Note 7) and accrued expenses related to the bankruptcy. The
accrued estimated future cash distribution to creditors at March 31, 1998 was an
estimate of future cash distributions to creditors as defined by the Plan of
Reorganization established during the year ended March 31, 1993. This liability
was reversed during the year ended March 31, 1999 as no payment was required.
F - 11
<PAGE>
NOTE 5 - MORTGAGE NOTES AND LOANS PAYABLE
Mortgage notes and loans payable consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Acquisition and construction loans payable secured by
real estate inventory, with interest at .50% above
prime at March 31, 1999 $ 8,571 $ 11,246
=========== =============
</TABLE>
The weighted average principal amount outstanding during the year ended March
31, 1999 was approximately $8,762,000. The maximum principal amount outstanding
during the year ended March 31, 1999 was approximately $11,246,000. The weighted
average interest rate during the year ended March 31, 1999 was 8.25%. The
weighted average interest rate at March 31, 1999 was 8.66%. The prime rate of
interest at March 31, 1999 was 7.75%.
Acquisition and construction loans payable at March 31, 1999 are due as follows
(in thousands):
Year Ending
March 31, Amount
----------- ------
2000 $8,171
2001 400
------
Total $8,571
======
The acquisition and construction loans payable are principally payable from the
sales proceeds of real estate inventory, generally provide for extensions, and
are all secured by real estate inventory. As of March 31, 1999, the Company had
approximately $11,329,000 of undrawn commitments for additional construction and
land acquisition financing. Interest on the acquisition and construction loans
payable is payable monthly.
The Company's loan commitments limit the portion of each home that can be
financed to approximately 75% of its value.
The Company capitalized interest of approximately $708,000, $1,153,000 and
$1,373,000 for the years ended March 31, 1999, 1998 and 1997, respectively.
NOTE 6 - INCOME TAXES
The Company has adopted SFAS No. 109, "Accounting for Income Taxes". SFAS No.
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 No. 109 generally considers all
expected future events other than enactments of changes in the tax law or rates.
F - 12
<PAGE>
The income tax provision (benefit) consists of the following (in thousands):
Year Ended March 31,
---------------------------------------
1999 1998 1997
-------------- ------------ ------------
Current
Federal $ - $ (105) $ 280
State 83 73 69
--------- ---------- --------
83 (32) 349
--------- ---------- --------
Deferred
Federal 500 (348) (69)
State - - -
--------- ---------- --------
500 (348) (69)
--------- ---------- --------
Provision (benefit) for income taxes $ 583 $ (380) $ 280
========= ========== ========
The provision (benefit) for income taxes at the effective rate of 21% differs
from the Federal statutory corporate tax rate as follows (in thousands):
Year Ended March 31,
---------------------------------------
1999 1998 1997
-------------- ------------ ------------
Federal income tax at 34% statutory rate $ 962 $ (393) $ 316
State income tax, net of Federal benefit 55 48 37
Reversal of creditor liability (449) - -
Other 15 (35) (73)
--------- ---------- --------
$ 583 $ (380) $ 280
========= ========== ========
F - 13
<PAGE>
Temporary differences and carryforwards which give rise to a significant portion
of deferred tax assets and liabilities for March 31, 1999 and 1998 are as
follows (in thousands):
<TABLE>
<CAPTION>
Deferred
March 31, 1998 Expense (Benefit) March 31, 1999
------------------ ----------------- ------------------
<S> <C> <C> <C>
Differences in the tax basis and the book basis
of -
Real Estate Inventory $ (54) $ (3) $ (57)
Installment sales 179 (51) 128
Other (397) 250 (147)
Loss carryforwards (756) 304 (452)
Valuation allowance 486 0 486
----------------- ----------------- ----------------
Net Deferred Tax Asset $(542) $ 500 $ (42)
================= ================= ================
</TABLE>
At March 31, 1999, the Company had Federal income tax loss carryforwards of
approximately $1,250,000 that expire 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, 1999, the Company had commitments to purchase 635 finished building
lots, providing for an aggregate purchase price of approximately $17,270,000
over a four-year period. Substantial deposits will be forfeited if the Company
is unable to satisfy these commitments.
Suarez Housing Corporation, a subsidiary of the Company, has an employment
agreement with the Company's Chairman and President expiring August 12, 2001,
currently providing for base compensation of $325,000 per annum.
At March 31, 1999, the Company had open letters of credit and guarantees
totaling approximately $1,361,000 to secure performance obligations.
The Company currently occupies office space under an operating lease agreement
expiring September 30, 2004. The Company also leases storage space on a
month-to-month basis. Prior to the year ending March 31, 1999, the Company had
leased model home furniture under other operating lease agreements. The total
rental expense incurred under these leases was approximately $60,000, $349,000,
and $299,000 for the years ended March 31, 1999, 1998, and 1997, respectively.
F - 14
<PAGE>
The future minimum rental payments under these operating leases as of March 31,
1999 are as follows:
Year Ending
March 31, Amount
----------- --------
2000 $ 57,040
2001 60,066
2002 61,757
2003 63,448
2004 65,139
Thereafter 32,992
--------
Total $340,442
========
The Plan of Reorganization provided 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 calculated the cash flow (as defined
in the Plan) for the six year period ended June 30, 1998 and determined that
there was no excess cash flow (as defined in the Plan) for that six year period
and accordingly no distribution to creditors was 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 was included in
Accounts Payable and Accrued Liabilities on the accompanying consolidated
balance sheets (See Note 4). During the year ended March 31, 1999, the Company
reversed the estimated liability and recognized income of $1,322,000.
The Plan also required that before the Company can pay any dividends to
stockholders it must first pay to certain holders of creditor's claims
$1,250,000. The Plan also contained other restrictive covenants regulating
various aspects of the Company's operations. With the exception of the dividend
restriction which continues, all other restrictive covenants expired on August
12, 1998.
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 results of operations.
F - 15
<PAGE>
NOTE 8 - COMMON STOCK AND STOCK OPTIONS
On February 13, 1997, an option for 33,333 shares of common stock at a purchase
price of $3.94 per share was granted to the Chairman and President of the
Company. The exercise price equaled the market price on the date of grant. The
option is exercisable over a four-year period commencing one year after the date
granted on a cumulative basis of 10%, 30%, 60% and 100%, respectively, for each
year subsequent to the grant date. All shares must be purchased by February 12,
2007.
On August 11, 1997, an option for 16,666 shares of common stock at a purchase
price of $4.50 per share was granted to the Executive Vice President of the
Company. The exercise price equaled the market price on the date of grant. The
option is exercisable over a four-year period commencing one year after the date
granted on a cumulative basis of 10%, 30%, 60% and 100%, respectively, for each
year subsequent to the grant date. All shares must be purchased by August 10,
2007.
At the 1998 Annual Meeting of Stockholders the stockholders approved a proposal
to adopt an amendment (the "Amendment"), to the Company's restated Certificate
of Incorporation to effect a 1-for-3 reverse stock split of the Company's issued
and outstanding common stock. The Amendment did not change the par value of the
common stock which remained at $.01 per share or the number of authorized shares
which remained at 10 million. The Amendment became effective on December 1, 1998
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 the consolidated statements for all periods presented.
On February 11, 1999, an option for 10,000 shares of common stock at a purchase
price of $5.00 per share was granted to a Vice President of the Company. The
exercise price equals the market price on the date of grant. The option is
exercisable over a four-year period commencing one year after the date granted
on a cumulative basis of 10%, 30%, 60% and 100%, respectively, for each year
subsequent to the grant date. All shares must be purchased by February 11, 2009.
The Company has a Non-Qualified Stock Option Plan for which 50,000 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. There are 43,001
shares available to be issued pursuant to the Non-Qualified Stock Option Plan.
At the 1995 Annual Meeting of Stockholders 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 1,666 shares of
common stock were granted to each of the Company's non-employee Directors. Four
Directors received options to purchase 1,666 shares each in June 1995, two
Directors received options to purchase 1,666 shares each in September 1995 and
one Director received an option to purchase 1,666 shares in September 1996 upon
election as a Director. Five Directors received options to purchase 1,666 shares
each in September 1998. These options are exercisable 33% one year from the date
of grant, 33% two years from the date of grant, and 34% three years from the
date of grant. All options expire 5
F - 16
<PAGE>
years from the date of grant. All options granted must be approved by the Board
of Directors and exercise price equals market at the date of grant.
A summary of the status of the Company's stock option plans and options granted
at March 31, 1999, 1998 and 1997 and changes during the years then ended is
presented in the table and narrative below:
<TABLE>
<CAPTION>
1999 Fiscal Year 1998 Fiscal Year 1997 Fiscal Year
----------------------- ----------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
----------- -------- ----------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of period 61,661 $4.20 48,328 $ 3.90 33,333 $ 2.46
Granted 18,330 $4.77 16,666 $ 4.50 34,995 $ 3.93
Exercised - - (2,166) $(1.50) (20,000) $(1.56)
Expired - - (1,167) $(1.50) - -
----------- ----------- ---------
Outstanding, end of period 79,991 $4.33 61,661 $ 4.20 48,328 $ 3.90
=========== =========== =========
Exercisable at end of 22,772 $4.28 13,883 $ 4.44 9,933 $ 3.57
period
Weighted average
fair value of options
granted 18,330 $3.22 16,666 $ 4.14 34,995 $ 3.90
</TABLE>
The 79,991 options outstanding at March 31, 1999 have exercise prices between
$3.00 and $5.44, with a weighted average exercise price of $4.33 and a weighted
average remaining contractual life of 6.8 years. There are 22,772 of these
options exercisable with a weighted average exercise price of $4.28.
The Company accounts for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25 ("APB 25"), under which no compensation expense
has been recognized. In October 1995, the FASB issued SFAS No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"), which was effective for fiscal years
beginning after December 15, 1995. SFAS 123 allows companies to continue
following the accounting guidance of APB 25, but requires pro forma disclosure
of net income and earnings per share for the effects on compensation expense had
the accounting guidance of SFAS 123 been adopted. The Company has adopted SFAS
123 for disclosure purposes.
For SFAS 123 purposes, the fair value of each option grant is estimated on the
date of grant using the Black- Scholes option pricing model with the following
weighted average assumptions used for grants in fiscal years 1999, 1998 and
1997, respectively: risk-free rates of return of 5.26%, 6.36% and 6.42%;
expected dividend yields of 0.00%, 0.00%, and 0.00%;
F - 17
<PAGE>
expected lives of 7.27 years, 10 years and 9.76 years and expected volatility of
65.86%, 101.03% and 153.45%.
Had the compensation cost for these plans been determined consistent with SFAS
No. 123, the Company's net income and earnings per share would have been reduced
to the following pro forma amounts:
Year Ended March 31,
1999 1998 1997
---- ---- ----
Net income (loss): As Reported $2,245,000 $(704,000) $650,000
Pro Forma $2,223,000 $(777,000) $582,000
Basic net income As Reported $2.47 $(0.76) $0.71
(loss) per share:
Pro Forma $2.45 $(0.84) $0.63
Diluted net income As Reported $2.45 $(0.76) $0.70
(loss) per share:
Pro Forma $2.42 $(0.84) $0.63
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.
F - 18
<PAGE>
Condensed financial information is as follows (in thousands):
Condensed Balance Sheets
(Unaudited)
March 31, 1999 March 31, 1998
-------------- --------------
Assets:
Collateral for bonds payable $ 3,199 $ 4,500
Other assets 3 6
----------- ------------
Total Assets $ 3,202 $ 4,506
=========== ============
Liabilities and Equity:
Bonds payable $ 3,068 $ 4,341
Equity and intercompany advances 134 165
----------- ------------
Total Liabilities and Equity $ 3,202 $ 4,506
=========== ============
Condensed Statements of Income
(Unaudited)
Year Ended March 31,
-------------------------------------------
1999 1998 1997
------------ ------------ ------------
Revenues $ 337 $ 423 $ 483
============ ============ ============
Income before income taxes $ 4 $ 7 $ 12
============ ============ ============
F - 19
<PAGE>
NOTE 10 - RELATED PARTY TRANSACTIONS
During the fiscal year ending March 31, 1999, a portion of a financing agreement
with a maximum aggregate amount of $19,500,000 including a specific
indemnification of certain environmental conditions was guaranteed by the
Company's Chairman and President. In consideration thereof the Company agreed to
pay a guaranty fee equal to the lessor of $80,000 or 1% of the amount
guaranteed. The obligations of the Company's Chairman and President continue
during the term of the loan agreement subject to certain ratios and financial
performance of the Company which have been satisfied as of March 31, 1999. The
Company has agreed to indemnify the President and Chairman in the event that
this personal guarantee is called.
A member of the Board of Directors is Vice President and Director of a company
which during the year ended March 31, 1999 sold lumber and certain other
building material products in the amount of approximately $4,625,000 to Suarez
Housing Corporation, a subsidiary of the Company. Suarez Housing Corporation
purchases all of its requirements for those products from this company.
A member of the Board of Directors is the sole stockholder and President and
Chief Executive Officer of Paramount Title Corporation. During the years ended
March 31, 1999, 1998 and 1997, Paramount Title Corporation provided settlement
and title insurance services for substantially all the homes sold by Suarez
Housing Corporation.
NOTE 11- RESTRUCTURING CHARGE
During the past several years a competitive housing market in Metropolitan
Washington, D.C., especially in the areas in which the Company conducted home
building operations, resulted in continued operating losses in the Company's
Metropolitan Washington, D.C. subsidiary. Management changes were made and
administrative costs were reduced in order to minimize the loss. In addition,
several communities in which operations had been performing poorly were
abandoned. Notwithstanding those changes, lower operating margins and higher
selling expenses continued to adversely affect the Company's ability to restore
profitability in the Metropolitan Washington, D.C. market. Accordingly during
the quarter ended December 31, 1997 the Board of Directors of the Company
approved management's plan to discontinue the building and sale of homes and
affect an orderly withdrawal from the Metropolitan Washington, D.C. housing
market.
The consolidated financial statements for the year ended March 31, 1998 include
a restructuring charge of $1,840,000 ($1,214,000 after benefit for federal
income tax) associated with the termination of home-building operations in
Metropolitan Washington, D.C.. The restructuring charge of $1,840,000 includes
the following: $701,000 for selling expenses; $277,000 for write-off of deferred
charges; $327,000 for loss on remaining homes; and $535,000 for administrative
and other. At March 31, 1999 $6,000 of the restructuring charge is included in
Accounts Payable and Accrued Liabilities.
F - 20
Exhibit 10.9
<PAGE>
AMENDMENT TO MASTER LOAN AGREEMENT
(Under Revolving Line of Credit)
THIS AMENDMENT, made as of the ___ day of December, 1996, by and
between Suarez Housing Corporation, a Florida corporation, whose address 9950
Princess Palm Avenue, Suite 112, Tampa, Florida 33619, ("Borrower"), and
NationsBank, N.A. (South), a national banking association, successor by merger
to NationsBank of Florida, N.A., whose address is 1410 N. Westshore Boulevard,
Suite 100, Tampa, Florida 33607, ("Bank").
Recitals
A. In connection with a revolving line of credit loan by Bank to
Borrower for residential construction (the "Loan"), Borrower has previously
executed and delivered its Promissory Note (Revolving Line of Credit) dated
November 15, 1994, in the amount of $5,700,000.00, Additional Advance Promissory
Note (Revolving Line of Credit) dated November 17, 1995, in the amount of
$1,300,000.00, and Consolidation and Renewal Promissory Note (Revolving Line of
Credit) dated November 17, 1995, in the amount of $7,000,000.00, which are
secured by a certain Real Estate Mortgage, Assignment and Security Agreement
recorded Official Records Book 7590, page 1612, of the public records of
Hillsborough County, Florida, and in Official Records Book 3371, page 1582, of
the public records of Pasco County, Florida, as modified, extended, or amended,
(the "Mortgage") and other recorded and unrecorded loan documentation.
B. The Loan is to be administered in accordance with the terms of an
Amended and Restated, Master Loan Agreement dated November 17, 1995 (the "Loan
Agreement").
C. Borrower has requested and Bank has agreed to increase the amount of
the Loan by a future advance in the amount of $3,000,000.00 secured by the
Mortgage and administered under the terms of the Loan Agreement, except as
modified herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and in the Note, Mortgage and Loan Agreement, of the loan funds being
advanced from time to time by Bank to Borrower, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
1. The foregoing recitals are acknowledged as true and correct and are
incorporated herein.
2. References in the Loan Agreement to the "Note" are expressly amended
to include the Promissory Note (Revolving Line of Credit) dated November 15,
1994, in the amount of $5,700,000.00, Additional Advance Promissory Note
(Revolving Line of Credit) dated November 17, 1995, in the amount of
$1,300,000.00, and Consolidation and Renewal Promissory Note (Revolving Line of
Credit) dated November 17, 1995, in the amount of $7,000,000.00, the Additional
Advance Promissory Note (Revolving Line of Credit) of even date in the principal
amount of $3,000,000.00, and the Consolidation and Renewal Promissory Note
(Revolving Line of Credit) of even date in the principal
/s/ RJS
-------
Please Initial
1
<PAGE>
amount of $10,000,000.00. The additional definitions of "Note" shall remain in
effect as well.
3. Paragraph 2.3 of the Loan Agreement is modified and amended to read
as follows:
2.3 Approvals for Funding. Bank will advance funds for the
acquisition of lots and the costs of construction of single family
dwellings ("Units") on individual lots owned or to be acquired by
Borrower and mortgaged to Lender in Hillsborough, Pasco, and Pinellas
Counties in Florida, and in such other counties as Lender may approve.
Loan proceeds shall be used solely (i) to fund construction of Units
for which Lender has approved the plans and specifications, and (ii) to
finance the acquisition of developed lots in subdivisions approved by
Lender. Lender will disburse Loan proceeds subject to the following
limitations:
(a) The amount to be funded on each Pre-Sold Unit (as
hereinafter defined) shall be an amount equal to 80% of the lesser of:
(i) the "completed value" of such Unit, which amount shall be
determined by an appraisal satisfactory to Lender; or (ii) the
contracted purchase price for the Unit; provided, however, that in no
event shall Lender be obligated to fund Loan proceeds in an amount in
excess of 100% of the Unit cost breakdown submitted by Borrower and
approved by Lender.
(b) The amount to be funded for each Spec Unit and
Model Unit (as hereinafter defined) shall be in an amount equal to 80%
of the "completed value" of said Spec Unit or Model Unit, which amount
shall be determined by an appraisal satisfactory to Lender; provided,
however, that in no event shall Lender be obligated to disburse Loan
proceeds in excess of 100% of the Unit cost breakdown submitted by
Borrower and approved by Lender.
(c) Use of Loan proceeds for the construction of
Units shall be limited to: 55 Spec and Model Units and a total amount
outstanding and committed of $5,500,000.00 at any one time; and 35
Pre-Sold Units and a total amount outstanding and committed of
$3,500,000.00 at any one time.
(d) Each individual Unit financed under the Loan
shall be completed in a period not to exceed six (6) months from the
date construction commences.
(e) The total amount to be funded for the costs of
construction of a Unit, as approved and allocated by Lender pursuant to
Subparagraphs 3(a) and (b) of this Commitment shall be called the
"Committed Unit Amount." Once Lender approves the commencement of
construction of a Unit, the Committed Unit Amount shall be reserved
under the Loan, and shall not be available for disbursement for
construction of any other Units. After making the initial disbursement
under the Committed Unit Amount, the remaining unfunded Committed Unit
Amount will be disbursed on a percentage basis in accordance
/s/ RJS
-------
Please Initial
2
<PAGE>
with the attached Percentage Completion Schedule and the terms of this
Commitment. Lender shall not in any case be obligated to approve or
fund the construction of a new Unit unless there are sufficient
"available" Loan proceeds to complete the construction of that Unit.
For purposes of this Commitment, the term "available" Loan proceeds
shall mean the amount derived by subtracting the total Committed Unit
Amounts from the original, principal amount of the Loan.
(f) Use of Loan proceeds for the purchase of
developed lots shall be limited to 70 lots and a total amount
outstanding and committed of $1,000,000.00 at any one time. The amount
to be funded for each lot shall be an amount equal to the lesser of (i)
Borrower's cost, or (ii) 75% of appraised value. Any unused lot
allocation of the Loan may be used for additional Pre-Sold Units,
subject to the same conditions as to the amounts to be advanced.
(g) Use of Loan proceeds shall be limited to a
maximum of 10 Spec or Model Units in any one subdivision at any one
time, and 25 lots in any one subdivision at any one time, unless
otherwise approved by Lender.
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 5% 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. A Spec Unit is defined as a Unit for which a firm
purchase contract meeting the foregoing requirements has not been received or
approved. A Model Unit is defined as a Unit constructed and furnished initially
for inspection by prospective purchasers. Assuming the Loan is not in default
and Borrower has otherwise complied with the terms of the Loan Agreement as to
partial releases, Units will be released from the Mortgage upon payment of the
actual amount funded under the line for each Unit, plus accrued unpaid interest
thereon.
All remaining terms and provisions of Paragraph 2.3 shall be unchanged.
4. Paragraph 5.11 of the Loan Agreement is modified and amended to read
as follows:
5.11 Financial Statements. Borrower will provide Lender with: (a)
quarterly 10-Q filings for International American Homes, Inc., including
internally prepared consolidating financial information for Porten Sullivan
Corporation and Suarez Housing Corporation, within 60 days of the end of each
quarter; and (b) annual 10-K for International American Homes, including
consolidating financial information for Porten Sullivan Corporation and Suarez
Housing Corporation, within 120 days of fiscal year end. Any individual
Guarantor shall provide personal financial statements on Lender's form annually
within 120 days of the anniversary date of a previously submitted financial
statement.
5. The existing individual guaranty of Robert J. Suarez will be
released as to sums previously advanced and his guaranty shall not extend to
sums advanced under
/s/ RJS
-------
Please Initial
3
<PAGE>
the Loan in the future, for the construction of Pre-Sold Units. Furthermore, if
the financial statements for International American Homes, Inc. tested
semi-annually, show a Tangible Net Worth of $7,200,000 or more, and a Total
Debt/Tangible Net Worth ratio (adjusted for bonds) of 2.75:1, or better, then
the personal guaranty of Robert J. Suarez will be abated as to 50% of the sums
previously advanced or advanced in the future for the construction of Spec and
Model Units and lots. If the financial statements for International American
Homes, Inc. tested semi-annually, show a Tangible Net Worth of $7,500,000 or
more, and a Total Debt/Tangible Net Worth ratio (adjusted for bonds) of 2.50:1,
or better, then the personal guaranty of Robert J. Suarez will be abated in
full. The personal guaranty of Mr Suarez will be reinstated consistent with the
foregoing standards if International American Homes, Inc. fails to maintain the
stated ratios. Borrower will at all times report its financial condition using
generally accepted accounting principles consistently applied, except to the
extent modified by the following definitions:
(a) Tangible Net Worth: "Tangible Net Worth" is defined as the
aggregate of total shareholders' equity plus any debt to Related
Parties (as hereinafter defined) which are subordinated to the Loan,
less any intangible assets and any obligations due from shareholders,
partners, employees, and/or affiliates.
(b) Ratio of Total Debt to Tangible Net Worth: The "Ratio of
Total Debt to Tangible Net Worth," is defined as the aggregate of
current liabilities and non-current liabilities (excluding contingent
liabilities and non-recourse bonds) less subordinated loans from
Related Parties (as hereinafter defined), divided by Tangible Net
Worth.
(c) Related Parties: "Related Parties" shall mean the partners
or shareholders of Borrower, or any corporations, trusts, partnerships,
or other entities in which Borrower owns directly, or indirectly, a 51%
interest.
6. In all remaining respects the terms and provisions of the Loan
Agreement shall be unchanged, and Borrower ratifies and reaffirms the terms
thereof.
IN WITNESS WHEREOF, the undersigned Borrower and Guarantor have set
their hands and seals.
Suarez Housing Corporation,
a Florida corporation
{Seal}
/s/ By: /s/ Robert J. Suarez
- -------------------- --------------------
Witness
/s/ Its: President
- -------------------- --------------------
Witness
"Borrower"
4
<PAGE>
NationsBank, N.A. (South), successor by
merger to NationsBank of Florida N.A.
{Seal}
/s/ By: /s/
- -------------------- --------------------
Witness
/s/ Its: Vice President
- -------------------- --------------------
Witness
"Bank"
5
<PAGE>
JOINDER OF GUARANTOR
The undersigned as Guarantor hereby joins in and consents to the
foregoing Amendment to Amended and Restated Master Loan Agreement.
International American Homes, Inc.,
a Delaware corporation
{Seal}
/s/ By: /s/ Robert J. Suarez
- -------------------- --------------------
Witness
/s/ Its: President
- -------------------- --------------------
Witness
/s/
- --------------------
Witness
/s/ By: /s/ Robert J. Suarez
- -------------------- --------------------
Witness Robert J. Suarez
"Guarantor"
6
Exhibit 10.10
<PAGE>
AMENDMENT TO
AMENDED AND RESTATED MASTER LOAN AGREEMENT
THIS AMENDMENT, dated as of the 18th day of December, 1997 (the
"Amendment"), is made by and between Suarez Housing Corporation, a Florida
corporation (the "Borrower"), with offices located at 9950 Princess Palm Avenue,
Suite 112, Tampa, Florida 33619, and NationsBank, N.A., successor by merger to
NationsBank, N.A. (South), with its offices located at 1410 N. Westshore
Boulevard, Suite 100, Tampa, Florida (the "Bank") to modify and amend the terms
of a certain Amended and Restated Master Loan Agreement dated November 17, 1995
and riders thereto, as modified and amended, (the "Loan Agreement") made by
Borrower and Bank.
RECITALS
A. Borrower opened a revolving line of credit loan with Bank on
November 15, 1994, which has been modified and amended from time to time
thereafter (the "Loan"), and is used for the purpose of acquiring lots and
constructing single family dwellings in subdivisions acceptable to Bank and
mortgaged to Bank as security for the Loan.
B. Borrower and Bank desire to modify and amend the terms of the Loan
in the manner set out herein.
NOW, THEREFORE, in consideration of the premises, of the Loan advances
which may be agreed to be made Bank to Borrower hereinafter, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrower and Bank hereby agree as follows:
1. The foregoing recitals are true and are incorporated herein.
2. Paragraph 1.1(q) is amended as follows:
The full payment and performance of the Loan will continue to
be guaranteed, jointly and severally, by International American Homes,
Inc., a Delaware corporation, and by Robert J. Suarez, individually,
subject to the terms provided herein. The guarantee shall be in a form
and substance satisfactory to Bank's counsel. The Guarantors, at the
Loan closing, shall subordinate any and all obligations of the Borrower
to them in favor of Bank in order that there shall be no offset against
the guarantee of any amount which may be owing to the Guarantors by
Borrower. Guarantors shall join in execution at closing of the
Hazardous Substance Certificate and Indemnification Agreement. The
existing individual guaranty of Robert J. Suarez will be released as to
sums previously advanced and his guaranty shall not extend to sums
advanced under the Loan in the future, for the construction of Pre-Sold
Units. Furthermore, if the financial statements for International
American Homes, Inc., tested quarterly, show a Tangible Net Worth of
$7,200,000 or more, and a Total Debt/Tangible Net Worth ratio (adjusted
for bonds) of 2.75:1, or better, then the personal guaranty of
1
<PAGE>
Robert J. Suarez will be abated as to 50% of the sums previously
advanced or advanced in the future for the construction of Spec and
Model Units and lots. If the financial statements for International
American Homes, Inc., tested quarterly, show a Tangible Net Worth of
$7,500,000 or more, and a Total Debt /Tangible Net Worth ratio
(adjusted for bonds) of 2.50:1, or better, then the personal guaranty
of Robert J. Suarez will be abated in full. The personal guaranty of
Mr. Suarez will be reinstated consistent with the foregoing standards
if International American Homes, Inc. fails to maintain the stated
ratios.
3. Paragraph 2.3 of the Loan Agreement is amended as follows:
The Loan proceeds will be used solely to finance the
acquisition of lots and construction costs of pre-sold, model, and
speculative dwelling units ("Units") on individual lots owned or to be
acquired by Borrower and mortgaged to Bank in Hillsborough County,
Pasco County, and Pinellas County, Florida, and in such other counties
as Bank may approve. Bank will disburse Loan proceeds in accordance
with the loan documents originally dated November 15, 1994, as modified
from time to time thereafter, and with this renewal and modification.
The use of Loan proceeds for the construction of units shall be limited
to:
(a) For pre-sold Units at any one time, 70 Units in number,
$7,000,000 in maximum committed amount, and $3,500,000 in maximum
amount actually outstanding;
(b) For model and speculative units at any one time, 55 Units
in number, and $5,500,000 in maximum outstanding and committed amount;
(c) For developed lots at any one time, 70 lots in number, 25
lots in any one subdivision, $1,000,000 in maximum outstanding and
committed amount, and a maximum loan per lot of $30,000. Subdivisions
shall be subject to the approval of Bank. Any loan exposure not used
for developed lots may be used for pre-sold Units; and
(d) Notwithstanding the foregoing limitations by category, the
total amount outstanding under the Loan at any one time shall not
exceed the loan amount of $10,000,000.00.
Valuations may be based on internal Bank valuations for unit
commitments under $250,000 and on master appraisals for unit
commitments over $250,000. Borrower shall pay or reimburse Bank $100
per valuation for internal valuations and Bank's cost for master
appraisals. Valuations shall be made and paid by Borrower on the basis
of each floor plan type per subdivision. To monitor the collateral base
and to assist in calculating the Maximum Allowable Funding, Borrower
shall provide to Bank a semi-monthly report of construction completion
status on the Bank's form or other form approved by Bank. Inspection
fees under the Loan will be reduced from $250.00 per unit to $125.00
per unit, irrespective of the number of times Bank elects to inspect.
2
<PAGE>
Borrower shall provide Bank with quarterly status reports,
within 45 days of period end, reflecting the number of Units sold and
the sales price of each Unit as well as collateral inventory, including
the number of Units, their stages of development, and the status of the
sale of each Unit.
All remaining terms and provisions of Paragraph 2.3 shall be unchanged.
4. Paragraph 5.11 of the Loan Agreement is amended as follows:
Borrower will provide Bank with: (a) quarterly 10-Q filings
for International American Homes, Inc., including internally prepared
consolidating financial information for Porten Sullivan Corporation and
Suarez Housing Corporation, within 60 days of the end of each quarter;
and (b) annual 10-K for International American Homes, Inc., including
consolidating financial information for Porten Sullivan Corporation and
Suarez Housing Corporation, within 120 days of fiscal year end. Any
individual Guarantor shall provide personal financial statements on
Bank's form annually within 120 days of the anniversary date of a
previously submitted financial statement.
All remaining terms and provisions of Paragraph 5.11 shall be unchanged.
5. Paragraph 5.18 of the Loan Agreement is amended as follows:
Bank will fund under the Loan up to but not in excess of an
amount, referred to here as the Aggregate Maximum Allowable Funding,
which is from time to time the aggregate sum of the Maximum Allowable
Funding amount for all units and lots subject to the Loan. In
calculating the Maximum Allowable Funding, the amount which has been
advanced or which is eligible to be advanced on account of the
underlying land lot is referred to herein as the Lot Advance. The
Maximum Allowable Funding amount for a pre-sold unit will be the sum of
(1) the Lot Advance, plus (2) the product of (a) the then current
percentage of completion of the unit, times (b) an amount which does
not exceed 100% of the unit cost breakdown (not including the Lot
Advance) submitted by Borrower and approved by Bank, nor the lesser of
1) 80% of the completed value of each unit, which amount shall be
determined by a valuation acceptable to Bank, less the Lot Advance, or
2) 80% of the contracted purchase price of the unit, less the Lot
Advance. The Maximum Allowable Funding amount for a model or spec unit
will be the sum of (1) the Lot Advance, plus (2) the product of (a) the
then current percentage of completion of the unit, times (b) an amount
which does not exceed 100% of the unit cost breakdown submitted by
Borrower and approved by Bank, nor 80% of the completed value of each
unit, less the Lot Advance. The Maximum Allowable Funding amount for a
lot will be 75% of the appraised value. Units or lots may be released
from the lien of the mortgage: (1) without a partial release payment if
the Aggregate Maximum Allowable Funding after subtracting the released
lot or unit's Maximum Allowable Funding from the collateral pool
exceeds the then outstanding loan balance; (2) otherwise, upon payment
of the difference between the Aggregate Maximum Allowable
3
<PAGE>
Funding after subtracting the released lot or unit's Maximum Allowable
Funding from the collateral pool and the then outstanding loan balance.
Spec units subject to the Loan shall be removed from the collateral
pool after one year. Model units subject to the Loan shall be removed
from the collateral pool after two years.
All remaining terms and provisions of Paragraph 5.18 shall be unchanged.
6. The financial covenants applicable to Borrower are modified and
restated as follows:
Borrower will at all times report its financial condition
using generally accepted accounting principles consistently applied,
except to the extent modified by the following definitions:
(a) Tangible Net Worth: "Tangible Net Worth" is defined as the
aggregate of total shareholders' equity plus any debt to Related
Parties (as hereinafter defined) which are subordinated to the Loan,
less any intangible assets and any obligations due from shareholders,
partners, employees, and/or affiliates.
(b) Ratio of Total Debt to Tangible Net Worth: The "Ratio of
Total Debt to Tangible Net Worth," is defined as the aggregate of
current liabilities and non-current liabilities (excluding contingent
liabilities and non-recourse bonds) less subordinated loans from
Related Parties (as hereinafter defined), divided by Tangible Net
Worth.
(c) Related Parties: "Related Parties" shall mean the partners
or shareholders of Borrower, or any corporations, trusts, partnerships,
or other entities in which Borrower owns directly, or indirectly, a 51
% interest.
7. Article X, Special Conditions, is added to the Loan Agreement as
follows:
The following special conditions shall be applicable
throughout the term of this Loan Agreement:
10.1 Cross-Collateralization/Cross-Default. Borrower
acknowledges that all loans between Bank (or any subsidiary of Bank)
and Borrower (or any subsidiary of Borrower) shall be cross-defaulted
and cross-collateralized. Appropriate language to effect these
conditions is or will be included in the Loan Documents.
8. Except as expressly set out herein and in the loan documents of even
date, all terms and provisions of the Loan Documents shall continue
in force and effect with respect to the Loan.
4
<PAGE>
IN WITNESS WHEREOF, Borrower and Bank have executed this Loan Agreement
as of the above written date.
Suarez Housing Corporation,
a Florida corporation
[Seal]
/s/ By: /s/ Robert J. Suarez
- -------------------- --------------------
Witness Robert J. Suarez
Print or type your name here
/s/ Its: President
- -------------------- --------------------
Witness
"Borrower"
NationsBank, N.A.
By:
- -------------------- --------------------
Witness Dean W. Kuna
- -------------------- --------------------
Witness Its: Senior Vice President
"Bank"
5
<PAGE>
JOINDER OF GUARANTOR
The undersigned as Guarantor hereby joins in and consents to the
foregoing Loan Agreement.
International American Homes, Inc.,
a Delaware corporation
{Seal}
/s/ By: /s/ Robert J. Suarez
- -------------------- --------------------
Witness Robert J. Suarez
Print or type your name here
/s/ Its: President
- -------------------- --------------------
Witness
/s/
- --------------------
Witness
/s/ /s/ Robert J. Suarez
- -------------------- --------------------
Witness Robert J. Suarez,
individually {Seal}
"Guarantor"
6
Exhibit 10.11
<PAGE>
AMENDED AND RESTATED MASTER LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of the 2nd day of July, 1998 (the "Loan
Agreement" or "Agreement"), is made by and between Suarez Housing Corporation, a
Florida corporation (the "Borrower"), with offices located at 9950 Princess Palm
Avenue, Suite 112, Tampa, Florida 33619, and Barnett Bank, N.A., a national
banking association organized and existing under the laws of the United States,
with its offices located at 1410 North Westshore Blvd., Suite 100, Tampa,
Florida ("Bank").
RECITALS
A. Borrower and Bank have heretofore established a revolving line of
credit loan in the principal amount of Nine Million Five Hundred Thousand and
No/100 Dollars ($9,500,000.00) (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.
B. Borrower and NationsBank, N.A. have also established a similar
revolving line of credit loan in, the amount of Ten Million Dollars
($10,000,000.00) (the "NationsBank Loan") to be used for the same 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 that
loan.
C. By virtue of a merger of their respective holding companies, Bank
and NationsBank are now under common ownership and have agreed with Borrower to
administer their respective loan upon consistent and coordinated terms.
D. Borrower and Bank have agreed to amend and restate the loan
agreement governing the terms and administration of the Loan and this instrument
is entered into for that purpose.
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, conditions,
and documenta tion approved by Bank and accepted by Borrower upon which advances
will be made under the Loan for construction of a dwelling on a particularly
identified lot, which Approved Construction
-1-
<PAGE>
Loan may be evidenced by a written commitment letter or other confirmation 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
___________________________ 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 May 8, 1998, (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 perform various
services on behalf of Bank. The services to be performed by Bank's Construction
Consultant may include review of the Plans and all proposed changes to them,
preparation of a "cost take-off" 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 breakdown of the
cost of constructing the Improvements and an itemization of non-construction 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.
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<PAGE>
(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 11 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 therein.
(n) "General Contractor" means _____________________, 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
quasi-governmental 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 and International American Homes, Inc., a
Delaware corporation.
(q) "Guaranty" means jointly and severally the guaranty of the
full payment and performance of the Loan by International American Homes, Inc.,
a Delaware corporation, and by Robert J. Suarez, individually, subject to the
terms provided herein. The guaranty shall be in a form and substance
satisfactory to Bank and its counsel. The Guarantors shall subordinate any and
all obligations of the Borrower to them in favor of Bank in order that there
shall be no offset against the guarantee of any amount which may be owing to the
Guarantors by Borrower. The individual guaranty of Robert J. Suarez will be
released as to sums previously advanced and his guaranty shall not extend to
sums advanced under the Loan in the future, for the construction of Pre-Sold
Units. Furthermore, if the financial statements for International American
Homes, Inc., tested quarterly, show a Tangible Net Worth of $7,200,000 or more,
and a Total Debt/Tangible Net Worth ratio (adjusted for bonds) of 2.75:1, or
better, then the personal guaranty of Robert J. Suarez will be abated as to 50%
of the sums previously advanced or advanced in the future for the construction
of Spec and Model Units and lots. If the financial statements for International
American Homes, Inc., tested quarterly, show a Tangible Net Worth of $7,500,000
or more, and a Total Debt/Tangible Net Worth ratio (adjusted for bonds) of
2.50:1, or better, then the personal guaranty of Robert J. Suarez will be abated
in full. The personal guaranty of Mr. Suarez will be reinstated consistent with
the foregoing standards if International American Homes, Inc. fails to maintain
the stated ratios.
(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 by
spreader agreement.
-3-
<PAGE>
(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.
(u) "Mortgage" means the Real Estate Mortgage, Assignment and
Security Agreement of even date herewith executed by Borrower for the benefit of
Bank encumbering the Collateral (as defined in the Mortgage), and any
extensions, modifications, renewals or replacements thereof.
(v) "Note" means the promissory note dated as of the Closing
Date executed by Borrower in favor of Bank in the amount of Nine Million Five
Hundred Thousand and No/100 Dollars ($9,500,000.00), as well as any promissory
note, sub-note, 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 Mortgage 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.
(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 Nine
Million Five Hundred Thousand and No/100 Dollars ($9,500,000.00), 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 re-borrow
-4-
<PAGE>
the principal previously repaid provided no default exists. An annual loan fee
equal to five-eighths of one percent (0.625%) of the maximum loan amount shall
be due each year on the anniversary of the Loan closing if the Loan extends
beyond one year.
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. The Loan proceeds will be used solely to
finance the acquisition of lots and construction costs of pre-sold, model, and
speculative dwelling units ("Units") on individual lots owned or to be acquired
by Borrower and mortgaged to Bank in Hillsborough County, Pasco County, Pinellas
County, and Martin County, Florida, and in such other counties as Bank may
approve. Bank will disburse Loan proceeds in accordance with this Loan
Agreement, which shall supersede and shall govern any conflicts between or among
other loan documents and this Agreement. The use of Loan proceeds for the
construction of units shall be limited to:
(a) The combined NationsBank and Barnett Bank total for
pre-sold Units at any one time: 110 Units in number, $11,000,000 in maximum
committed amount, and $6,500,000 in maximum amount actually outstanding;
(b) The combined NationsBank and Barnett Bank total for model
and speculative units at any one time: 115 Units in number, and $11,500,000 in
maximum outstanding and committed amount;
(c) The combined NationsBank and Barnett Bank total for
developed lots at any one time: 85 lots in number, 25 lots in any one
subdivision, $1,500,000 in maximum outstanding and committed amount, and a
maximum loan per lot of $35,000. Subdivisions shall be subject to the approval
of Bank. Any loan exposure not used for developed lots may be used for pre-sold
Units;
(d) Notwithstanding the foregoing limitations by category, the
total amount outstanding under the NationsBank and Barnett Bank loans at any one
time shall not exceed the total loan amount of $19,500,000.00.
(e) Valuations may be based on internal Bank valuations for
unit commitments under $250,000 and on master appraisals for unit commitments
over $250,000. Borrower shall pay or reimburse Bank $100 per valuation for
internal valuations and Bank's cost for master appraisals. Valuations shall be
made and paid by Borrower on the basis of each floor plan type per subdivision.
To monitor the collateral base and to assist in calculating the Maximum
Allowable Funding, Borrower shall provide to Bank a semi-monthly report of
construction completion status on the Bank's form or other form approved by
Bank. Inspection fees under the Loan will be $125.00 per unit, irrespective of
the number of times Bank elects to inspect. Borrower shall provide Bank with
quarterly status reports, within 45 days of period end, reflecting inspect.
Borrower shall provide Bank with quarterly status reports, within 45 days of
period end, reflecting the number of Units sold and the sales price of each Unit
as well as collateral inventory, including the number of Units, their stages of
development, and the status of the sale of each Unit.
-5-
<PAGE>
(f) 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 submitted
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 or other confirmation of the
amount to be funded and detailing the terms, conditions, and further
requirements or instructions for closing as to that Approved Construction Loan.
(g) 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 construction, 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.
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<PAGE>
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 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. on Tuesday prior to each
Friday 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 disburse 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 Contractor, 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.
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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, property 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 Indemnification
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 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 21HH-6, 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.
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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 corporate 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 evidenc ing 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.
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
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initialing 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 development (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 borings 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.
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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
non-commencement 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, quasi-governmental, 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
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 disburse ments 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.
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(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:
(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
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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 as-built 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 set-offs against Lender.
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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 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 take-downs 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.
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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 will provide Bank with: (a)
quarterly 10-Q filings for International American Homes, Inc., including
internally prepared consolidating financial information for Porten Sullivan
Corporation and Suarez Housing Corporation, within 60 days of the end of each
quarter; and (b) annual 10-K for International American Homes, Inc., including
consolidating financial information for Porten Sullivan Corporation and Suarez
Housing Corporation, within 120 days of fiscal year end. Any individual
Guarantor shall provide personal financial statements on Bank's form annually
within 120 days of the anniversary date of a previously submitted financial
statement.
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.
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;
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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 Borrowing Base / Partial Releases of Property.
(a) Lender will fund under the Loan up to but not in excess of
an amount, referred to here as the Aggregate Maximum Allowable Funding, which is
from time to time the aggregate sum of the Maximum Allowable Funding amount for
all units and lots subject to the Loan. In calculating the Maximum Allowable
Funding, the amount which has been advanced or which is eligible to be advanced
on account of the underlying land lot is referred to herein as the Lot Advance.
The Maximum Allowable Funding amount for a pre-sold unit will be the sum of (1)
the Lot Advance, plus (2) the product of (a) the then current percentage of
completion of the unit, times (b) an amount which does not exceed 100% of the
unit cost breakdown (not including the Lot Advance) submitted by Borrower and
approved by Bank, nor the lesser of 1) 80% of the completed value of each unit,
which amount shall be determined by a valuation acceptable to Lender, less the
Lot Advance, or 2) 80% of the contracted purchase price of the unit, less the
Lot Advance. The Maximum Allowable Funding amount for a model or spec unit will
be the sum of (1) the Lot Advance, plus (2) the product of (a) the then current
percentage of completion of the unit, times (b) an amount which does not exceed
100% of the unit cost breakdown submitted by Borrower and approved by Bank, nor
80% of the completed value of each unit, less the Lot Advance. The Maximum
Allowable Funding amount for a lot will be the lesser of 1) 75% of Borrower's
cost, 2) 75% of the appraised value, or 3) not to exceed $35,000.00).
(b) Units or lots may be released from the lien of the
mortgage: (1) without a partial release payment if the Aggregate Maximum
Allowable Funding after subtracting the released lot or unit's Maximum Allowable
Funding from the collateral pool exceeds the then outstanding loan balance; (2)
otherwise, upon payment of the difference between the Aggregate Maximum
Allowable Funding after subtracting the released lot or unit's Maximum Allowable
Funding from the collateral pool and the then outstanding loan balance. Spec
units subject to the Loan shall be removed from the collateral pool after one
year. Model units subject to the Loan shall be removed from the collateral pool
after two years.
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
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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 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
ss.713.3471(2)(a), Fla. Stat. (1992), Borrower agrees to provide written notice
to the Contractor and all required lienors in compliance with ss.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 ss.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
ss.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 1191, 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
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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
Govern mental 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 in tended 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.
(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.
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<PAGE>
(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.
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<PAGE>
(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. 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.
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<PAGE>
(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 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) Non-Compliance with the Plans and Specifications. Failure
of any of the materials supplied for the construction of the Improvements to
comply with the Plans and
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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) Non-Payment 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) Non-Compliance 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.
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.
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<PAGE>
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
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<PAGE>
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 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 general 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
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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 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.
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<PAGE>
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 sh all 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.
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<PAGE>
ARTICLE X
Special Conditions
The following special conditions shall be applicable throughout the
term of this Loan Agreement:
10.1 Financial Terms and Covenants. Borrower will at all times report
its financial condition using generally accepted accounting principles
consistently applied, except to the extent modified by the following
definitions:
(a) Tangible Net Worth: "Tangible Net Worth" is defined
as the aggregate of total shareholders' equity plus
any debt to Related Parties (as hereinafter defined)
which are subordinated to the Loan, less any
intangible assets and any obligations due from
shareholders, partners, employees, and/or affiliates.
(b) Ratio of Total Debt to Tangible Net Worth: The "Ratio
of Total Debt to Tangible Net Worth, is defined as
the aggregate of current liabilities and non-current
liabilities (excluding contingent liabilities and
non-recourse bonds) less subordinated loans from
Related Parties (as hereinafter defined), divided by
Tangible Net Worth.
(c) Related Parties: "Related Parties" shall mean the
partners or shareholders of Borrower, or any
corporations, trusts, partnerships, or other entities
in which Borrower owns directly, or indirectly, a 51%
interest. Financial covenants in the Barnett Loan
documents will be superseded and replaced by the
foregoing covenants.
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<PAGE>
IN WITNESS WHEREOF, Borrower and Bank have executed this Loan Agreement
as of the above written date.
Suarez Housing Corporation,
a Florida corporation
[Seal]
/s/ Robert I. Antle By: /s/ Robert J. Suarez
- -------------------- --------------------
Witness ROBERT I. ANTLE
/s/ Its: President
- -------------------- --------------------
Witness
"Borrower"
Barnett Bank, N.A., a
national banking association
[Seal]
By:
- -------------------- --------------------
Witness
- -------------------- --------------------
Witness Its:
"Bank"
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<PAGE>
JOINDER OF GUARANTOR
The undersigned as Guarantor hereby joins in and consents to the
foregoing Loan Agreement.
/s/ Robert I. Antle By: /s/ Robert J. Suarez
- -------------------- --------------------
Witness ROBERT I. ANTLE Robert J. Suarez,
individually
/s/
- --------------------
Witness
International American Homes, Inc., a
Delaware corporation
{Seal}
/s/ Robert I. Antle By: /s/ Robert J. Suarez
- -------------------- --------------------
Witness ROBERT I. ANTLE
/s/ Its: President
- -------------------- --------------------
Witness
"Guarantor"
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<PAGE>
EXHIBITS
A Draw Sheets
B Hazardous Substance Certificate and Indemnification Agreement
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Exhibit 10.12
<PAGE>
AMENDMENT TO
AMENDED AND RESTATED MASTER LOAN AGREEMENT
THIS AMENDMENT, dated as of the 23rd day of February, 1999 (the
"Amendment"), is made by and between Suarez Housing Corporation, a Florida
corporation (the "Borrower"), with offices located at 9950 Princess Palm Avenue,
Suite 112, Tampa, Florida 33619, and NationsBank, N.A., a national banking
association, successor by merger to Barnett Bank, N.A., (the "Bank"), with its
offices located at 1410 N. Westshore Boulevard, Suite 100, Tampa, Florida, to
consolidate, modify and amend the terms of a certain Amended and Restated Master
Loan Agreement dated November 17, 1995 and riders thereto, as modified and
amended, and a certain Amended and Restated Master Loan Agreement dated July 2,
1998 and riders thereto, as modified and amended, made by Borrower and Bank.
RECITALS
A. Borrower opened a revolving line of credit loan in the amount of
$10,000,000.00 and a revolving line of credit loan in the amount of
$9,500,000.00 with Bank, which have been modified and amended from time to time
thereafter (the "Loan" or "Loans"), which are used for the purpose of acquiring
lots and constructing single family dwellings in subdivisions acceptable to Bank
and mortgaged to Bank as security for the Loans.
B. Borrower and Bank have previously entered into a certain Amended and
Restated Master Loan Agreement dated November 17, 1995, and Borrower and Bank
have previously entered into a certain Amended and Restated Master Loan
Agreement dated July 2, 1998, (collectively the "Loan Agreement") setting forth
the terms upon which Bank has agreed to make advances under the Loans from time
to time.
C. Borrower and Bank desire to consolidate, modify and amend the terms
of the Loan in the manner set out herein.
NOW, THEREFORE, in consideration of the premises, of the Loan advances
which may be agreed to be made Bank to Borrower hereinafter, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrower and Bank hereby agree as follows:
1. The foregoing recitals are true and are incorporated herein.
2. Bank and Barnett Bank, N.A. have merged and agreed with Borrower to
consolidate and administer the Loans upon consistent and coordinated terms.
1
<PAGE>
3. Except as expressly set out herein and in the loan documents of even
date, all terms and provisions of the Loan Documents shall continue in force and
effect with respect to the Loan.
IN WITNESS WHEREOF, Borrower and Bank have executed this Loan Agreement
as of the above written date.
Suarez Housing Corporation,
a Florida corporation
[Seal]
/s/ By: /s/ Robert J. Suarez
- -------------------- --------------------
Witness Robert J. Suarez
/s/ Its: President
- -------------------- --------------------
Witness
NationsBank, N.A.
/s/ Jackie Perdue By: /s/
- -------------------- --------------------
Witness Jackie Perdue Dean W. Kuna
/s/ Diana Brodowski
- --------------------
Witness Diana Brodowski Its: Senior Vice President
2
<PAGE>
JOINDER OF GUARANTOR
The undersigned as Guarantor hereby joins in and consents to the
foregoing Loan Agreement.
International American Homes, Inc.,
a Delaware corporation
{Seal}
/s/ By: /s/ Robert J. Suarez
- -------------------- --------------------
Witness Robert J. Suarez
/s/ Its: President
- -------------------- --------------------
Witness
/s/
- --------------------
Witness
/s/ /s/ Robert J. Suarez
- -------------------- --------------------
Witness Robert J. Suarez,
individually {Seal}
3
Exhibit 10.13
<PAGE>
AMENDMENT TO
AMENDED AND RESTATED MASTER LOAN AGREEMENT
THIS AMENDMENT, dated as of the 2nd day of July, 1999 (the
"Amendment"), is made by and between Suarez Housing Corporation, a Florida
corporation (the "Borrower"), with offices located at 9950 Princess Palm Avenue,
Suite 112, Tampa, Florida 33619, and Bank of America, N.A., a national banking
association, successor by merger to NationsBank, N.A. (the "Bank"), with its
offices located at 1410 N. Westshore Boulevard, Suite 100, Tampa, Florida, to
modify and amend the terms of a certain Amended and Restated Master Loan
Agreement dated November 17, 1995 and riders thereto, as modified and amended,
and a certain Amended and Restated Master Loan Agreement dated July 2, 1998 and
riders thereto, as modified and amended, made by Borrower and Bank.
RECITALS
A. Borrower opened a revolving line of credit loan in the amount of
$10,000,000.00 and a revolving line of credit loan in the amount of
$9,500,000.00 with Bank, which have been modified and amended from time to time
thereafter (the "Loan" or "Loans"), which are used for the purpose of acquiring
lots and constructing single family dwellings in subdivisions acceptable to Bank
and mortgaged to Bank as security for the Loans.
B. Borrower and Bank have previously entered into a certain Amended and
Restated Master Loan Agreement dated November 17, 1995, and Borrower and Bank
have previously entered into a certain Amended and Restated Master Loan
Agreement dated July 2, 1998, (collectively the "Loan Agreement") setting forth
the terms upon which Bank has agreed to make advances under the Loans from time
to time.
C. Borrower has requested and Bank has agreed to increase the amount of
the Loan by a future advance in the amount of $3,500,000.00 secured by the
Mortgage and administered under the terms of the Loan Agreement, except as
modified herein.
D. Borrower and Bank desire to modify and amend the terms of the Loan
in the manner set out herein.
NOW, THEREFORE, in consideration of the premises, of the Loan advances
which may be agreed to be made Bank to Borrower hereinafter, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrower and Bank hereby agree as follows:
1. The foregoing recitals are true and are incorporated herein.
2. Paragraph 1.1 (q) of the Loan Agreement is amended as follows:
The full payment and performance of the Loan will continue to
be guaranteed, jointly and severally, by International American Homes,
Inc., a Delaware corporation, and by
-1-
<PAGE>
Robert J. Suarez, individually, ("Guarantor"), subject to the terms
provided in the Guaranty and herein. The Guarantor hereby subordinates
any and all obligations of the Borrower to him in favor of Bank in
order that there shall be no offset against the guarantee of any amount
which may be owing to the Guarantor by Borrower. The existing
individual guaranty of Guarantor Suarez will be released as to sums
previously advanced and his guaranty shall not extend to sums advanced
under the Loan in the future, for the construction of Pre-Sold Units.
Furthermore, if the financial statements for International American
Homes, Inc., tested quarterly, show a Tangible Net Worth of $7,200,000
or more, and a Total Debt/ Tangible Net Worth ratio (adjusted for
bonds) of 2.75:1, or better, then the personal guaranty of Guarantor
Suarez will be abated as to 50% of the sums previously advanced or
advanced in the future for the construction of Spec and Model Units and
lots. If the financial statements for International American Homes,
Inc., tested quarterly, show a Tangible Net Worth of $7,500,000 or
more, and a Total Debt /Tangible Net Worth ratio (adjusted for bonds)
of 2.50:1, or better, then the personal guaranty of Guarantor Suarez
will be abated in full. The personal guaranty of Guarantor will be
reinstated consistent with the foregoing standards if International
American Homes, Inc. fails to maintain the stated ratios. If the
personal guaranty of Guarantor Suarez qualifies for abatement in full
as of January 1, 2000, then Bank will release the personal guaranty of
Guarantor Suarez in full on his request. The guaranty of International
American Homes, Inc. shall not be affected by any of the foregoing
actions taken as to Guarantor Suarez.
3. Paragraph 2.1 of the Loan Agreement is amended as follows:
Borrower covenants and agrees to pay to Bank a nonrefundable
Commitment Fee in the amount of $137,500.00, one-half ($68,750.00) of
which is due on or before closing and one-half of which ($68,750.00) is
due on or before December 15,1999. An annual loan fee equal to
137,500.00 shall be due each year on the anniversary of the Loan
closing if the Loan extends beyond one year, one-half of which is due
on or before closing and one-half of which is due on or before December
15, 2000.
4. Paragraph 2.3 of the Loan Agreement is amended as follows:
The Loan proceeds will continue to be used solely to finance
the acquisition of developed lots and the cost of construction of
single family dwellings ("Units") on lots owned or to be acquired by
Borrower and mortgaged to Bank in those certain developments located in
Hillsborough County, Pasco County and Pinellas County, Florida, and in
such other counties as Bank may approve. Bank will disburse Loan
proceeds in accordance with the Loan documents as modified from time to
time thereafter.
(a) Use of Loan proceeds for the construction of Units shall
be limited to 125 Spec and Model Units and a total outstanding and
committed of $12,500,000.00 at any one time; and 93 Pre-Sold Units and
a total amount actually outstanding of $9,300,000.00 at any
-2-
<PAGE>
one time. Use of Loan proceeds is further limited to 10 Spec and Model
Units in any one subdivision at any one time.
(b) Each individual Unit financed under the Loan shall be
completed in a period not to exceed six (6) months from the date
construction commences.
(c) Use of Loan proceeds for the purchase of developed lots
shall be limited to 220 lots and a total amount outstanding and
committed of $4,000,000.00 at any one time. The amount to be funded for
each lot shall be an amount equal to the lesser of (i) 75% of
Borrower's cost, or (ii) 75% of appraised value, with a minimum of 25%
cash equity in each lot, or (iii) $35,000.00. Use of Loan proceeds is
further limited to 50 developed lots in any one subdivision at any one
time. Lots under the Loan greater than two (2) years shall be removed
from the collateral pool.
(d) Use of Loan availability for the issuance of standby
letters of credit in support of development activities shall be limited
to $1,000,000 outstanding or committed at any one time and shall reduce
the borrowing base availability proportionately.
Notwithstanding the foregoing limitations by category, the total amount
outstanding under the Loan at any one time shall not exceed the loan
amount of $23,000,000.00.
5. Paragraph 2.3(e) of the Loan Agreement is amended as follows:
To monitor the collateral base and to assist in calculating
the Maximum Allowable Funding, Borrower shall provide to Bank monthly a
report of construction completion status on the Bank's form, or other
form approved by Bank, for all units financed under the Loans.
Inspection fees under the Loans will be $125 per unit, irrespective of
the number of times Bank elects to inspect.
6. Paragraph 2.10 is hereby added to the Loan Agreement as follows:
2.10 Inspections and Monitoring. To monitor the collateral
base and to assist in calculating the Maximum AlIowabIe Funding,
Borrower shall provide to Bank monthly a report of construction
completion status on the Bank's form, or other form approved by Bank,
for all units financed under the Loans. Inspection fees under the Loans
will be $125 per unit, irrespective of the number of times Bank elects
to inspect.
7. Paragraph 5.9 of the Loan Agreement is amended as follows:
Title insurance coverage for the Loan under a loan policy or
policies of title insurance with revolving credit endorsement shall
continue to insure advances under the Loan.
-3-
<PAGE>
8. Paragraph 5.11 of the Loan Agreement is amended as follows:
Borrower will provide Bank with (a) quarterly 10-Q filings for
International American Homes, Inc., including internally prepared
consolidating financial information for wholly-owned subsidiaries,
within 90 days of the end of each quarter; (b) annual 10-K for
International American Homes, Inc., including consolidating financial
information for wholly-owned subsidiaries, within 120 days of fiscal
year end, and (c) annual and quarterly inventory and sales reports.
9. Paragraph 5.18 of the Loan Agreement is amended as follows:
(a) Bank will fund under the Loan up to but not in excess of
an amount, referred to here as the Aggregate Maximum Allowable Funding,
which is from time to time the aggregate sum of the Maximum Allowable
Funding amount for all units and lots subject to the Loan. In
calculating the Maximum Allowable Funding, the amount which has been
advanced or which is eligible to be advanced on account of the
underlying land lot is referred to herein as the Lot Advance. The
Maximum Allowable Funding amount for a pre-sold unit will be the sum of
(1) the Lot Advance, plus (2) the product of (a) the then current
percentage of completion of the unit, times (b) an amount which does
not exceed 100% of the unit cost breakdown (not including the Lot
Advance) submitted by Borrower and approved by Bank, nor the lesser of
1) 80% of the completed value of each unit, which amount shall be
determined by a valuation acceptable to Bank, less the Lot Advance, or
2) 80% of the contracted purchase price of the unit, less the Lot
Advance. The Maximum Allowable Funding amount for a model or spec unit
will be the sum of (1) the Lot Advance, plus (2) the product of (a) the
then current percentage of completion of the unit, times (b) an amount
which does not exceed 100% of the unit cost breakdown submitted by
Borrower and approved by Bank, nor 80% of the completed value of each
unit, less the Lot Advance. The Maximum Allowable Funding amount for a
lot will be the lesser of 1) 75% of Borrower's cost, 2) 75% of the
appraised value, or 3) not to exceed $35,000.00).
(b) Units or lots may be released from the lien of the
mortgage: (1) without a partial release payment if the Aggregate
Maximum Allowable Funding after subtracting the released lot or unit's
Maximum Allowable Funding from the collateral pool exceeds the then
outstanding loan balance; (2) otherwise, upon payment of the difference
between the Aggregate Maximum Allowable Funding after subtracting the
released lot or unit's Maximum Allowable Funding from the collateral
pool and the then outstanding loan balance. Spec units subject to the
Loan shall be removed from the collateral pool after one year. Model
units subject to the Loan shall be removed from the collateral pool
after two years.
-4-
<PAGE>
10. Paragraph 6.3 is hereby added to the Loan Agreement as follows:
6.3 Year 2000 Representations, Covenants and Warranties.
(a) Borrower has (i) begun analyzing the operations
of Borrower and its subsidiaries and affiliates that could be adversely
affected by failure to become Year 2000 compliant (that is, that
computer applications, imbedded microchips and other systems will be
able to perform date-sensitive functions prior to and after December
31, 1999); and (ii) developed a plan for becoming Year 2000 compliant
in a timely manner, the implementation of which is on schedule in all
material respects. Borrower reasonably believes that it will become
Year 2000 compliant for its operations and those of its subsidiaries
and affiliates on a timely basis except to the extent that a failure to
do so could not reasonably be expected to have a material adverse
effect upon the financial condition of Borrower.
(b) Borrower reasonably believes any suppliers and
vendors that are material to the operations of Borrower or its
subsidiaries and affiliates will be Year 2000 compliant for their own
computer applications except to the extent that a failure to do so
could not reasonably be expected to have a material adverse effect upon
the financial condition of Borrower.
(c) Borrower will promptly notify Bank in the event
Borrower determines that any computer application which is material to
the operations of Borrower, its subsidiaries or any of its material
vendors or suppliers will not be fully Year 2000 compliant on a timely
basis, except to the extent that such failure could not reasonably be
expected to have a material adverse effect upon the financial condition
of Borrower.
11. Paragraph 10.1 of the Loan Agreement is amended as follows:
10.1 Financial Covenants. Borrower will at all times report
its financial condition using generally accepted accounting principles
consistently applied, except to the extent modified by the following
definitions:
(a) Tangible Net Worth: "Tangible Net Worth" is
defined as the aggregate of total shareholders' equity plus any debt to
Related Parties (as hereinafter defined) which are subordinated to the
Loan, less any intangible assets and any obligations due from
shareholders, partners, employees, and/or affiliates.
(b) Ratio of Total Debt to Tangible Net Worth: The
"Ratio of Total Debt to Tangible Net Worth," is defined as the
aggregate of current liabilities and non-current liabilities (excluding
contingent liabilities and non-recourse bonds) less subordinated loans
from Related Parties (as hereinafter defined), divided by Tangible Net
Worth shall not
-5-
<PAGE>
exceed 2.75:1, tested semi-annually, during the period from closing of
the Loan to maturity, if and as extended.
(c) Net Loss: Borrower shall not suffer any net loss
as reflected in the annual financial statements prepared and submitted
to Bank during the term of the Loan.
(d) Related Parties: "Related Parties" shall mean the
partners or shareholders of Borrower, or any corporations, trusts,
partnerships, or other entities in which Borrower owns directly, or
indirectly, a 51% interest.
(e) Minimum Tangible Net Worth: Borrower shall
maintain a minimum Tangible Net Worth of $6,500,000, tested
semiannually, during the term of the Loan.
12. Except as expressly set out herein and in the Loan Documents of
even date, all terms and provisions of the Loan Documents shall continue in
force and effect with respect to the Loan.
IN WITNESS WHEREOF, Borrower and Bank have executed this Loan Agreement
as of the above written date.
Suarez Housing Corporation,
a Florida corporation
[Seal]
/s/ Robert I. Antle By: /s/ Robert J. Suarez
- -------------------- --------------------
Witness ROBERT I. ANTLE Robert J. Suarez
/s/ Donald S. Hart, Jr. Its: President
- -------------------- --------------------
Witness DONALD S. HART, JR.
Bank of America, N.A.
By:
- -------------------- --------------------
Witness Dean W. Kuna
- --------------------
Witness Its: Senior Vice President
-6-
<PAGE>
JOINDER OF GUARANTOR
The undersigned as Guarantor hereby joins in and consents to the
foregoing Loan Agreement.
International American Homes, Inc.,
a Delaware corporation
{Seal}
/s/ Robert I. Antle By: /s/ Robert J. Suarez
- -------------------- --------------------
Witness ROBERT I. ANTLE Robert J. Suarez
/s/ Donald S. Hart, Jr. Its: President
- -------------------- --------------------
Witness DONALD S. HART, JR.
/s/ Robert I. Antle /s/ Robert J. Suarez {Seal}
- -------------------- --------------------
Witness ROBERT I. ANTLE Robert J. Suarez
individually
/s/ Donald S. Hart, Jr.
- --------------------
Witness DONALD S. HART, JR.
-7-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1461
<SECURITIES> 0
<RECEIVABLES> 1626
<ALLOWANCES> 0
<INVENTORY> 18247
<CURRENT-ASSETS> 0
<PP&E> 562
<DEPRECIATION> 513
<TOTAL-ASSETS> 24768
<CURRENT-LIABILITIES> 0
<BONDS> 11639
0
0
<COMMON> 10
<OTHER-SE> 8536
<TOTAL-LIABILITY-AND-EQUITY> 24768
<SALES> 49992
<TOTAL-REVENUES> 50347
<CGS> 42236
<TOTAL-COSTS> 47519
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2828
<INCOME-TAX> 583
<INCOME-CONTINUING> 2245
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2245
<EPS-BASIC> 2.47
<EPS-DILUTED> 2.45
</TABLE>
