SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Rule 13e-3 Transaction Statement (Amendment No. 1)
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934
INTERNATIONAL AMERICAN HOMES, INC.
(Name of Issuer)
INTERNATIONAL AMERICAN HOMES, INC.
(Name of Person(s) Filing Statement)
Common Stock, $.01 par value
(Title of Class of Securities)
459004 30 5
(CUSIP Number of Class of Securities)
Robert J. Suarez
President
International American Homes, Inc.
9950 Princess Palm Avenue
Suite 112
Tampa, FL 33619
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check appropriate box):
a. |X| The filing of solicitation materials or an information statement subject
to Regulation 14C or Rule 13e-3(c) under the Securities Exchange Act of
1934.
b. |_| The filing of a registration statement under the Securities Act of 1933.
c. |_| A tender offer.
d. |_| None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: |X|
CALCULATION OF FILING FEE
Transaction Valuation: $810,000* Amount of filing fee: $162
* For purposes of calculating the filing fee only. Estimated maximum price to
be paid in lieu of issuance of fractional shares of Common Stock to persons
who would hold less than one whole share of Common Stock of record in any
discrete account after the proposed Reverse Stock Split Proposal based on an
amount per share equal to the product obtained by multiplying (i) 500 times
the weighted average trading price per share of all the Common Stock sold
during the period beginning on January 1, 1999 and ending on the twelfth
business day next following [^] the date of the Notice of Annual Meeting of
Stockholders of the Company as reported or expected to be reported by the
BLOOMBERG(R)Service, by (ii) a fraction, the numerator of which shall be the
number of shares of Common Stock owned by such stockholder of record in such
stockholder's account immediately prior to the reverse stock split and the
denominator of which shall be 500. The amount of the filing fee calculated
in accordance with Regulation 240.0-11 promulgated under the Securities
Exchange Act of 1934, as amended, equals 1/50 of one percent of the
transaction valuation.
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|X| Check box if any part of the fee is offset by Rule 0-11(a)(2) and identify
the filing with which the offsetting fee was previously paid. Identify the
previous filing by either a registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid: $180
Form or Registration No.: Schedule 13E-3
Filing Party: International American Homes, Inc.
Date Filed: July 2, 1999
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SUMMARY - THE ANNUAL MEETING
This Amendment No. 1 to the Rule 13E-3 Transaction Statement is being
filed by International American Homes, Inc. (the "Company" or "IAH") with
respect to the class of equity securities of the Company that is subject to a
Rule 13E-3 transaction. The Company is submitting to its shareholders proposals
to approve and adopt a Certificate of Amendment to the Company's Restated
Certificate of Incorporation providing for (a) a one-for-500 reverse stock split
of the Company's Common Stock, (b) a cash payment per share determined by the
product obtained by multiplying (i) 500 times the weighted average trading price
of the Common Stock sold during the period beginning on January 1, 1999 and
ending on the twelfth business day next following the date of the Notice of
Annual Meeting of Stockholders of the Company as reported or expected to be
reported by the BLOOMBERG(R) Service, by (ii) a fraction, the numerator of which
shall be the number of shares of Common Stock of record owned by such
stockholder in their account immediately prior to the reverse stock split and
the denominator of which shall be 500, for the currently outstanding Common
Stock in lieu of the issuance of any resulting fractional shares of Common Stock
to persons who would hold less than one whole share of Common Stock of record in
any discrete account after the proposed reverse stock split (items (a) and (b)
will be considered one proposal and referred to herein as the "Reverse Stock
Split Proposal"), and (c) the reduction of the total number of shares of capital
stock which the Company shall have authority to issue to eleven thousand
(11,000), of which ten thousand (10,000) shall be shares of Common Stock with a
par value of $.01 per share and one thousand (1,000) shall be shares of
Preferred Stock with a par value of $.01 per share. The Reverse Stock Split
Proposal is upon the terms and subject to the conditions set forth in the
Company's Preliminary Proxy Statement for the Company's Annual Meeting scheduled
to be held on September __, 1999, a copy of which is filed as an exhibit hereto
and is incorporated herein by reference in its entirety. The other purposes of
the Annual Meeting are to elect two Class I directors and transact such other
business as may properly come before the Annual Meeting.
The following Cross-Reference Sheet is supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Amendment No. 1 to
the Preliminary Proxy Statement filed by the Company with the Securities and
Exchange Commission on August 18, 1999 (including all annexes and exhibits
thereto, the "Proxy Statement") of the information required to be included in
response to the items of this Statement. The Information in the Proxy Statement,
a copy of which is attached hereto as Exhibit A, is hereby expressly
incorporated by reference and the responses to each item are qualified in their
entirety by the provisions of the Proxy Statement.
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2
CROSS-REFERENCE SHEET
Item No. Location in Proxy Statement
1. Issuer and Class of NOTICE OF 1999 ANNUAL MEETING OF
Security Subject to STOCKHOLDERS; GENERAL INFORMATION; SPECIAL
the Transaction FACTORS--Background of the Proposed Reverse
Stock Split Proposal; PROPOSAL 2-- Summary;
Purpose Of The Reverse Stock Split; PRICE
RANGE OF COMMON STOCK; DIVIDENDS; TRADING
VOLUME; ADDITIONAL INFORMATION; Stockholder
Proposal for the 2000 Annual Meeting
2. Identity and NOTICE OF 1999 ANNUAL MEETING OF
Background STOCKHOLDERS;GENERAL INFORMATION; PROPOSAL 1
3. Past Contacts, SPECIAL FACTORS--Conduct of Company's
Transactions or Business after the Reverse Stock Split;
Negotiations Certain Relationships and Related
Transactions
4. Terms of the NOTICE OF 1999 ANNUAL MEETING OF
Transaction STOCKHOLDERS; SPECIAL FACTORS--Background of
the Proposed Reverse Stock Split Proposal;
The Effects of Reverse Stock Split and
Reduction in Authorized Stock; Potential
Detriments of the Reverse Stock Split
Proposal to Stockholders; Accretion in
Ownership and Control of Certain
Stockholders; Financial Effect of the
Reverse Stock Split; Recommendation of the
Board of Directors; Fairness of the Reverse
Stock Split Proposal; Conduct of the
Company's Business after the Reverse Stock
Split; PROPOSAL 2-- Summary; Structure of
the Reverse Stock Split; Purpose of the
Reverse Stock Split; Effect of the Reverse
Stock Split Proposal on IAH Stockholders;
Effect of the Reverse Stock Split Proposal
on IAH; Stock Certificates; Appraisal
Rights; Reservation of Rights; ADDITIONAL
INFORMATION--Cost of Proxy Solicitation and
the Reverse Stock Split
5. Plans or Proposals SPECIAL FACTORS--Conduct of the Company's
of the Issuer or Business after the Reverse Stock Split;
Affiliate Background of the Proposed Reverse Stock
Split Proposal; PROPOSAL 2--Summary; Purpose
of the Reverse Stock Split; Effect of the
Reverse Stock Split Proposal on IAH
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6. Source and SPECIAL FACTORS--Financial Effect of the
Amounts of Funds Reverse Stock Split; ADDITIONAL
or Other Consideration INFORMATION--Cost of Proxy Solicitation and
the Reverse Stock Split
7. Purpose(s), SPECIAL FACTORS--Background of the Proposed
Alternatives, Reverse Stock Split Proposal; The Effects of
Reasons and the Reverse Stock Split and Reduction in
Effects Authorized Stock; Recommendation of the
Board of Directors; Fairness of the Reverse
Stock Split Proposal; Potential Detriments
of the Reverse Stock Split Proposal to
Stockholders; Accretion in Ownership and
Control of Certain Stockholders; Financial
Effect of the Reverse Stock Split; Conduct
of the Company's Business After the Reverse
Stock Split; Stock Ownership--Security
Ownership of Certain Beneficial Owners and
Management; PROPOSAL 2--Summary; Purpose of
the Reverse Stock Split; Effect of the
Reverse Stock Split Proposal on IAH
Stockholders; Effect of the Reverse Stock
Split Proposal on IAH; Stock Certificates;
Certain Federal Income Tax Consequences.
8. Fairness of the SPECIAL FACTORS--Recommendation of the Board
Transaction of Directors; Fairness of the Reverse Stock
Split Proposal.
9. Reports, Opinions, SPECIAL FACTORS--Background of Proposed
Appraisals and Reverse Stock Split Proposal; Recommendation
Certain of the Board of Directors; Fairness of the
Negotiations Reverse Stock Split
10. Interest in Stock Ownership--Security Ownership of
Securities Certain Beneficial Owners and Management;
of the Issuer PROPOSAL 1; EXECUTIVE COMPENSATION--Stock
Options; CERTAIN RELATIONSHIPS and RELATED
TRANSACTIONS
11. Contracts, Stock Ownership--Security Ownership of
Arrangements or Certain Beneficial Owners and Management;
Understandings PROPOSAL 1; EXECUTIVE COMPENSATION--Stock
with Respect to the Options; CERTAIN RELATIONSHIPS and RELATED
Issuer's Securities TRANSACTIONS
12. Present Intention SPECIAL FACTORS--Recommendation of the Board
and of Directors; Fairness of the Reverse Stock
Recommendation Split Proposal; Potential Detriments of the
of Certain Persons Reverse Stock Split Proposal to
with Regard to the Shareholders; Accretion in Ownership and
Transaction Control of Shareholders
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4
13. Other Provisions PROPOSAL 2--Appraisal Rights
of the Transaction
14. Financial SPECIAL FACTORS--Financial Effect of the
Information Reverse Stock Split; ADDITIONAL INFORMATION--
Financial Information
15. Persons and GENERAL INFORMATION; ADDITIONAL INFORMATION--
Assets Employed, Cost of Proxy Solicitation and the Reverse
Retained or Stock Split
Utilized
16. Additional Proxy Statement
Information
17. Material to Be Proxy Statement; Form 10-K for the Fiscal Year
Filed as Exhibits Ended March 31, 1999
Item 1. Issuer and Class of Security Subject to the Transaction.
(a) International American Homes, Inc., a Delaware corporation,
the issuer of the Common Stock, is filing this Statement. The information set
forth under the captions "Notice of 1999 Annual Meeting of Stockholders";
"GENERAL INFORMATION"; "PROPOSAL 2--Purpose Of Reverse Stock Split" and
"ADDITIONAL INFORMA-TION--Stockholder Proposals For The 2000 Annual Meeting" of
the Proxy Statement is incorporated herein by Reference pursuant to General
Instruction F to Schedule 13E-3.
(b) The exact title of the class of equity securities to which
this statement relates is Common Stock, $.01 par value. There are 10,000,000
shares authorized and 870,880 issued and outstanding. The number of holders
of record at July 28, 1999 were approximately 2,319. The information set
forth under the captions "NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS";
"GENERAL INFORMATION"; and "PROPOSAL 2--Purpose of the Reverse Stock Split" of
the Proxy Statement is incorporated herein by reference pursuant to General
Instruction F of Schedule 13E-3.
(c) The information set forth under the caption "Price Range of
Common Stock; Dividends; Trading Volume" of the Proxy Statement is incorporated
herein by reference pursuant to General Instruction F to Schedule 13E-3.
(d) The information set forth under the caption "Price Range of
Common Stock; Dividends; Trading Volume" of the Proxy Statement is incorporated
herein by reference pursuant to General Instruction F to Schedule 13E-3.
(e) Not applicable
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(f) The information set forth under the caption "SPECIAL
FACTORS--Background of the Proposed Reverse Stock Split Proposal" of the Proxy
Statement is incorporated herein by reference pursuant to General Instruction F
to Schedule 13E-3."
Item 2. Identity and Background.
(a)-(d), (g) International American Homes, Inc., a Delaware
corporation, the issuer of the Common Stock, is filing this Statement. Its
principal executive office is located at 9950 Princess Palm Avenue, Suite 112,
Tampa, Florida 33619. Each Executive Officer and Director of the Company is a
United States citizen. The information set forth under the captions "NOTICE OF
1999 ANNUAL MEETING OF STOCKHOLDERS"; "GENERAL INFORMATION"; and "PROPOSAL 1" of
the Proxy Statement is incorporated herein by reference pursuant to General
Instruction F to Schedule 13E-3.
(e), (f) To the best of the Company's knowledge, during the past
five years no person with respect to whom this Item requires information to be
furnished has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), nor been a party to any proceeding of a
judicial or administrative body of competent jurisdiction, nor subject to a
judgment, decree or final order of the type required to be disclosed by this
Item.
Item 3. Past Contacts, Transactions or Negotiations.
(a) Not applicable
(b) The information set forth under the captions "SPECIAL
FACTORS--Conduct of the Company's Business After the Reverse Stock Split"; and
"Certain Relationships and Related Transactions" of the Proxy Statement is
incorporated herein by reference pursuant to General Instruction F to Schedule
13E-3.
Item 4. Terms of the Transaction.
The information set forth under the captions "NOTICE OF 1999
ANNUAL MEETING OF STOCKHOLDERS"; "SPECIAL FACTORS--Background of the Proposed
Reverse Stock Split Proposal"; "--The Effects of the Reverse Stock Split and
Reduction in Authorized Stock"; "Potential Detriments of the Reverse Stock Split
Proposal to Stockholders; Accretion in Ownership and Control of Certain
Shareholders"; "Financial Effects of the Reverse Stock Split; "--Recommendation
of the Board of Directors; Fairness of the Reverse Stock Split Proposal";
"--Conduct of the Company's Business after the Reverse Stock Split"; "PROPOSAL
2--Summary"; "--Structure of the Reverse Stock Split"; "--Purpose of the Reverse
Stock Split"; "--Effect of the Reverse Stock Split Proposal on IAH
Stockholders"; "--Effect of the Reverse Stock Split Proposal on IAH"; "--Stock
Certificates"; "--Appraisal Rights"; "--Reservation of Rights"; and "Additional
Information --Cost of Proxy Solicitation and the Reverse Stock Split" of the
Proxy Statement is incorporated herein by reference pursuant to General
Instruction F to Schedule 13E-3.
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6
Item 5. Plans or Proposals of the Issuer or Affiliate.
(a)-(e) The information set forth under the caption "SPECIAL
FACTORS--Conduct of the Company's Business after the Reverse Stock Split" of the
Proxy Statement is incorporated herein by reference pursuant to General
Instruction F to Schedule 13E-3.
(f), (g) The information set forth under the caption "SPECIAL
FACTORS--Background of the Proposed Reverse Stock Split Proposal"; "PROPOSAL
2--Summary"; "--Purpose of the Reverse Stock Split" and "--Effect of the Reverse
Stock Split Proposal on IAH" of the Proxy Statement is incorporated herein by
reference pursuant to General Instruction F to Schedule 13E-3.
Item 6. Source and Amounts of Funds or Other Consideration.
(a)-(d) The information set forth under the captions "SPECIAL
FACTORS-- Financial Effect of the Reverse Stock Split" and ADDITIONAL
INFORMATION--Cost of Proxy Solicitation and the Reverse Stock Split" of the
Proxy Statement is incorporated herein by reference pursuant to General
Instruction F to Schedule 13E-3.
Item 7. Purpose(s), Alternatives, Reasons and Effects.
(a) The information set forth under the captions "SPECIAL
FACTORS--Background of the Proposed Reverse Stock Split Proposal"; "PROPOSAL
2--Summary" and "--Purpose of the Reverse Stock Split" of the Proxy Statement is
incorporated herein by reference pursuant to General Instruction F to Schedule
13E-3.
(b) The information set forth under the captions "SPECIAL
FACTORS--Background of the Proposed Reverse Stock Split"; and "--Recommendation
of the Board of Directors; Fairness of the Reverse Stock Split Proposal" of the
Proxy Statement is incorporated herein by reference pursuant to General
Instruction F to Schedule 13E-3.
(c) The information set forth under the captions "SPECIAL
FACTORS--Background of the Proposed Reverse Stock Split Proposal"; and
"--Recommendation of the Board of Directors; Fairness of the Reverse Stock Split
Proposal" of the Proxy Statement is incorporated herein by reference pursuant to
General Instruction F to Schedule 13E-3.
(d) The information set forth under the captions "SPECIAL
FACTORS--The Effects of the Reverse Stock Split and Reduction in Authorized
Stock"; "--Potential Detriments of the Reverse Stock Split Proposal to
Stockholders; Accretion by Ownership and Control of Certain Stockholders";
"--Financial Effect of the Reverse Stock Split"; "--Conduct of the Company's
Business After the Reverse Stock Split"; "STOCK OWNERSHIP--Security Ownership of
Certain Beneficial Owners and Management"; "PROPOSAL 2--Summary"; "--Purpose of
the Reverse Stock Split"; "--Effect of the Reverse Stock Split Proposal on IAH
Stockholders"; "--Effect of the Reverse Stock Split Proposal on IAH"; "--Stock
Certificates"; and "Certain Federal Income Tax Consequences" of the Proxy
Statement is incorporated herein by reference pursuant to General Instruction F
to Schedule 13E-3.
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Item 8. Fairness of the Transaction.
(a)-(e) The information set forth under the caption "SPECIAL
FACTORS-- Recommendation of the Board of Directors; Fairness of the Reverse
Stock Split Proposal" of the Proxy Statement is incorporated herein by reference
pursuant to General Instruction F to Schedule 13E-3.
(f) Not Applicable
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
(a)-(c) The information set forth under the captions "SPECIAL
FACTORS-- Background of the Proposed Reverse Stock Split"; and "--Recommendation
of the Board of Directors; Fairness of the Reverse Stock Split Proposal"; of the
Proxy Statement is incorporated herein by reference pursuant to General
Instruction F to Schedule 13E-3.
Item 10. Interest in Securities of the Issuer.
(a) The information set forth under the caption "STOCK
OWNERSHIP--Security Ownership of Certain Beneficial Owners and Management" of
the Proxy Statement is incorporated herein by reference pursuant to General
Instruction F to Schedule 13E-3.
(b) The information set forth under the captions "STOCK
OWNERSHIP--Security Ownership of Certain Beneficial Owners and Management";
"PROPOSAL 1"; "EXECUTIVE COMPENSATION--Stock Options"; and "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS" of the Proxy Statement is incorporated
herein by reference pursuant to General Instruction F to Schedule 13E-3.
Item 11. Contracts, Arrangements or Understandings with Respect to the
Issuer's Securities.
(a) The information set forth under the captions "STOCK
OWNERSHIP--Security Ownership of Certain Beneficial Owners and Management";
"PROPOSAL 1"; "EXECUTIVE COMPENSATION--Stock Options"; and "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS" of the Proxy Statement is incorporated
herein by reference pursuant to General Instruction F to Schedule 13E-3.
Item 12. Present Intention and Recommendation of Certain Persons with
Regard to the Transaction.
(a) The information set forth under the captions "SPECIAL
FACTORS-- Recommendation of the Board of Directors; Fairness of the Reverse
Stock Split"; and "--Potential Detriments of the Reverse Stock Split to
Stockholders; Accretion in Ownership and Control of Stockholders" of the Proxy
Statement is incorporated herein by reference pursuant to General Instruction F
to Schedule 13E-3.
(b) The information set forth under the caption "SPECIAL FACTORS--
Recommendation of the Board of Directors; Fairness of the Reverse Stock Split";
of the Proxy
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8
Statement is incorporated herein by reference pursuant to General Instruction F
to Schedule 13E-3.
Item 13. Other Provisions of the Transactions.
(a) The information set forth under the caption "PROPOSAL
2--Appraisal Rights" of the Proxy Statement is incorporated herein by reference
pursuant to General Instruction F to Schedule 13E-3.
(b) Not Applicable
(c) Not Applicable
Item 14. Financial Information.
(a) The information set forth under the captions "SPECIAL
FACTORS--Financial Effect of the Reverse Stock Split"; and "ADDITIONAL
INFORMATION--Financial Information" of the Proxy Statement is incorporated
herein by reference pursuant to General Instruction F to Schedule 13E-3; Also
provided in Form 10-K/A for the Fiscal Year Ended March 31, 1999, as filed with
the Securities and Exchange Commission on August 18, 1999 and attached hereto as
Exhibit B and provided in Form 10-Q for the Quarter ended June 30, 1999, as
filed with the Securities and Exchange Commission on August 16, 1999 and
attached hereto as Exhibit C.
(b) The information set forth under the captions "SPECIAL
FACTORS--Financial Effect of the Reverse Stock Split" of the Proxy Statement is
incorporated herein by reference pursuant to General Instruction F to Schedule
13E-3; Also provided in Form 10-[^] K/A for the Fiscal Year Ended March 31,
1999, as filed with the Securities and Exchange Commission on [^] August 18,
1999 and attached hereto as Exhibit B and provided in Form 10-Q for the Quarter
ended June 30, 1999, as filed with the Securities and Exchange Commission on
August 16, 1999 and attached hereto as Exhibit C.
Item 15. Persons and Assets Employed, Retained or Utilized.
(a) The information set forth under the caption "ADDITIONAL
INFORMATION-- Cost of Proxy Solicitation and the Reverse Stock Split" of the
Proxy Statement is incorporated herein by reference pursuant to General
Instruction F to Schedule 13E-3.
(b) The information set forth under the captions "GENERAL
INFORMATION" and "ADDITIONAL INFORMATION--Cost of Proxy Solicitation and the
Reverse Stock Split" of the Proxy Statement is incorporated herein by reference
pursuant to General Instruction F to Schedule 13E-3.
Item 16. Additional information.
All of the information set forth in the Preliminary Proxy
Statement is incorporated herein by reference.
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Item 17. Material to Be Filed as Exhibits.
(a)(1) Amended and Restated Master Loan Agreement, dated
as of November 17, 1995, between NationsBank of
Florida, N.A. and Suarez Housing Corporation
(incorporated by reference to Exhibit 10.7 to the
Annual Report on Form 10-K/A for the fiscal year
ended March 31, 1999 filed with the Commission on
August 18, 1999).
(a)(2) 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.
(incorporated by reference to Exhibit 10.9 to the
Annual Report on Form 10-K/A for the fiscal year
ended March 31, 1999 filed with the Commission on
August 18, 1999).
(a)(3) 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. (incorporated by
reference to Exhibit 10.10 to the Annual Report on
Form 10-K/A for the fiscal year ended March 31, 1999
filed with the Commission on August 18, 1999).
(a)(4) Amended and Restated Master Loan Agreement, dated as
of July 2, 1998, between Barnett Bank, N.A. and
Suarez Housing Corporation (incorporated by reference
to Exhibit 10.11 to the Annual Report on Form 10-K/A
for the fiscal year ended March 31, 1999 filed with
the Commission on August 18, 1999).
(a)(5) 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 (ii) Amended and
Restated Master Loan Agreement, dated July 2, 1998,
between Suarez Housing Corporation and Barnett Bank,
N.A. (incorporated by reference to Exhibit 10.12 to
the Annual Report on Form 10-K/A for the fiscal year
ended March 31, 1999 filed with the Commission on
August 18, 1999).
(a)(6) 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
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10
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. (incorporated by reference to
Exhibit 10.13 to the Annual Report on Form 10-K/A for
the fiscal year ended March 31, 1999 filed with the
Commission on August 18, 1999).
(b) Not Applicable
(c) Not Applicable
(d)(1) Amended Preliminary Proxy Statement, as filed with
the Securities and Exchange Commission on August 18,
1999 (Exhibit A)
(d)(2) Form 10-K/A for the Fiscal Year Ended March 31,
1999, as filed with the Securities and Exchange
Commission on August 18, 1999 (Exhibit B)
(d)(3) Form 10-Q for the Quarter Ended June 30, 1999, as
filed with the Securities and Exchange Commission on
August 16, 1999 (Exhibit C).
(e) Not Applicable
(f) Not Applicable
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11
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
August 18, 1999
(Date)
/s/ Robert J. Suarez
--------------------
(Signature)
Robert J. Suarez, President
---------------------------
(Name and Title)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e) (2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
International American Homes, Inc.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11. N/A
(1) Title of each class of securities to which transaction applies:
N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Note: The Registrant is filing a Rule 13e-3 Transaction Statement
concurrently with the Preliminary Proxy Statement.
<PAGE>
Notice of Annual Meeting of
Stockholders
and
Proxy Statement
of
International American Homes, Inc.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE>
---------------------------------------------------------------
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
to be held
September __, 1999
---------------------------------------------------------------
To our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of
International American Homes, Inc., a Delaware corporation (the "Company" or
"IAH")), will be held at 10:00 A.M. on September __, 1999 at the Radisson Hotel,
10221 Princess Palm Avenue, Tampa, Florida, for the purpose of considering and
acting upon the following matters as set forth in the accompanying Proxy
Statement:
1. To elect two Class I Directors to hold office for three-year terms as
specified in the accompanying Proxy Statement.
2. To act on a proposal (the "Reverse Stock-Split Proposal") to amend the
Company's Restated Certificate of Incorporation to effect a 1 for 500
reverse stock split and to provide that the price to be paid in lieu of
issuing fractional shares to any IAH stockholder, who, following the
reverse stock split, would hold less than one share of IAH Common Stock
of record in any discrete account, shall be an amount equal to the
product obtained by multiplying (a) 500 times the weighted average
trading price per share of all IAH Common Stock sold during the period
beginning January 1, 1999 and ending on the twelfth business day next
following the date of this Notice of Annual Meeting, as reported or
expected to be reported by the BLOOMBERG(R)service, by (b) a fraction,
the numerator of which shall be the number of shares of IAH Common
Stock owned by such stockholder of record in such stockholder's account
immediately prior to the reverse stock split and the denominator of
which shall be 500.
3. If the Reverse Stock-Split Proposal is approved, to act on a proposal
to amend the Company's Restated Certificate of Incorporation to reduce
the total number of shares of capital stock which the Company shall
have authority to issue to eleven thousand (11,000), of which ten
thousand (10,000) shall be shares of Common Stock with a par value of
$.01 per share and one thousand (1,000) shall be shares of Preferred
Stock with a par value of $.01 per share.
4. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
i
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Only stockholders of record at the close of business on August , 1999
are entitled to notice of and to vote at the meeting or any adjournment or
postponement thereof. Your shares cannot be voted unless they are represented by
proxy or you make other arrangements to have them represented at the meeting.
Please vote your shares.
By Order of the Board of Directors,
Robert I. Antle
Executive Vice President, Secretary and Chief Financial Officer
August __, 1999
Whether or not you intend to be present at the meeting, please mark, sign,
date and return the enclosed proxy card and mail it promptly in the enclosed
postage-paid, addressed envelope. You may nevertheless vote in person if you
attend the meeting.
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TABLE OF CONTENTS
Page
----
GENERAL INFORMATION............................................................1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS..............................4
SPECIAL FACTORS................................................................5
Background of the Proposed Reverse Stock Split Proposal......................5
The Effects of the Reverse Stock Split and Reduction in Authorized Stock.....8
Potential Detriments of the Reverse Stock Split Proposal to Stockholders;
Accretion in Ownership and Control of Certain Stockholders................10
Financial Effect of the Reverse Stock Split.................................10
Recommendation of the Board of Directors; Fairness of the Reverse Stock
Split.....................................................................16
Conduct of the Company's Business after the Reverse Stock Split.............22
STOCK OWNERSHIP...............................................................24
PROPOSAL 1
ELECTION OF TWO CLASS I DIRECTORS...........................................26
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.......................29
EXECUTIVE COMPENSATION........................................................31
PROPOSAL 2
DIRECTORS' PROPOSAL TO AMEND THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION TO
EFFECT A REVERSE STOCK SPLIT................................................34
Summary..............................................................34
Structure of the Reverse Stock Split.................................36
Purpose of the Reverse Stock Split...................................39
Effect of the Reverse Stock Split Proposal on IAH Stockholders.......41
Fractional Share Cash-Out Amount.....................................42
Effect of the Reverse Stock Split Proposal on IAH....................43
Stock Certificates...................................................44
Certain Material Federal Income Tax Consequences.....................45
PROPOSAL 3
DIRECTORS' PROPOSAL TO AMEND THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION TO
REDUCE THE NUMBER OF AUTHORIZED SHARES
OF THE COMPANY..............................................................49
PERFORMANCE GRAPH.............................................................50
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................51
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PRICE RANGE OF COMMON STOCK; DIVIDENDS; TRADING VOLUME........................51
OTHER MATTERS.................................................................53
ADDITIONAL INFORMATION........................................................53
Financial Information.......................................................53
Cost of Proxy Solicitation and the Reverse Stock Split......................54
Independent Public Accountants..............................................54
Stockholder Proposals for 2000 Annual Meeting...............................54
Available Information.......................................................55
The Company's Annual Report on Form 10-K and Quarterly Report on Form 10-Q..55
Incorporation of Certain Documents by Reference.............................55
EXHIBIT A
CERTIFICATE OF AMENDMENT OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF INTERNATIONAL AMERICAN HOMES, INC.......................................A-1
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International American Homes, Inc.
9950 Princess Palm Avenue
Suite 112
Tampa, Florida 33619
(813) 664-1100
PROXY STATEMENT
- --------------------------------------------------------------------------------
GENERAL INFORMATION
We are delivering these proxy materials to solicit proxies on behalf of
the Board of Directors of International American Homes, Inc. (which we refer to
as "IAH," the "Company," "we," or "us"), for the 1999 Annual Meeting of
Stockholders, including any adjournment or postponement (the "Annual Meeting").
The meeting will be held on September , 1999, in Tampa, Florida.
Among the matters to be considered at the Annual Meeting are two
proposals for amendment of the Company's Restated Certificate of Incorporation.
One is a proposal for a 1 for 500 reverse stock split, which is intended to
enable, and, if approved will enable, the Company to "go private" and thus end
its obligations to file annual and periodic reports and make other filings with
the Securities and Exchange Commission. The other, which is being proposed
contingent upon adoption of the reverse stock split, would effect a major
reduction in the number of shares that the Company is authorized to issue. If
approved, and implemented, the latter proposal will effect a significant
reduction in the annual Delaware franchise taxes payable by the Company.
We are mailing this proxy statement, together with a form of proxy and
the Company's Form 10-K/A Annual Report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the Fiscal Year ended March 31, 1999,
as amended (the "1999 10-K/A Annual Report") and the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1999 (the "10-Q Report"), starting
on or about August , 1999, to stockholders entitled to vote at the meeting.
Stockholders Entitled to Vote at the Meeting
If you are a registered stockholder at the close of business on the record
date, August , 1999, you are entitled to receive this notice and to vote at the
meeting. There were 870,880 shares of common stock, par value $.01, of the
Company (the "Common Stock") outstanding on the record date. You will have one
vote for each share of Common Stock you own on each matter properly brought
before the meeting.
How to Vote Your Shares
Your vote is important. Your shares can be voted at the annual meeting only
if you are present in person or represented by proxy. Even if you plan to attend
the meeting, we urge you to vote. If you own your shares in record name, you may
cast your vote in the following way:
o Simply mark your proxy card, and then date, sign, and return it in the
postage-paid envelope provided.
Stockholders who hold their shares beneficially in street name through
a nominee (such as a bank or broker) may be able to vote by telephone or the
Internet as well as by mail. You should follow the instructions you receive from
your nominee to vote these shares.
How to Revoke Your Proxy
You may revoke your proxy at any time before it is voted at the meeting
by:
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o properly executing and delivering a later-dated proxy;
o voting by ballot at the meeting; or
o sending a written notice of revocation to the inspectors of election in
care of the Secretary of the Company at the address listed above.
Voting at the Annual Meeting
The method by which you vote will in no way limit your right to vote at the
meeting if you later decide to attend in person. If you hold your shares in
street name, you must obtain a proxy executed in your favor from your nominee
(such as a bank or broker) to be able to vote at the meeting.
Your shares will be voted at the meeting as directed by the instructions on
your proxy card if: (1) you are entitled to vote, (2) your proxy was properly
executed, (3) we received your proxy prior to the Annual Meeting, and (4) you
did not revoke your proxy prior to the meeting.
The Board's Recommendations
If you send a properly executed proxy card without specific voting
instructions, your shares represented by that proxy will be voted as recommended
by the Board of Directors:
o FOR the election of the nominated slate of directors (see pages 26 to
33); and
o FOR the approval of an amendment (the "Amendment") to IAH's Restated
Certificate of Incorporation (the "Charter") to effect a 1 for 500
reverse stock split of IAH's Common Stock and to provide that the price
to be paid in lieu of issuing fractional shares to any IAH stockholder,
who, following the reverse stock split, would own less than one share
of IAH Common Stock of record in any discrete account, shall be an
amount equal to the product obtained by multiplying (a) 500 times the
weighted average trading price per share of all IAH Common Stock sold
during the period beginning January 1, 1999 and ending on the twelfth
business day next following the date of this Notice of Annual Meeting,
as reported or expected to be reported by the BLOOMBERG(R)service by
(b) a fraction, the numerator of which shall be the number of shares of
IAH Common Stock owned by such stockholder in such account immediately
prior to the reverse stock split and the denominator of which shall be
500 (the "Reverse Stock Split Proposal"). The Company intends to issue
a press release announcing the actual amount of cash per share
calculated to be paid to holders of fewer than 500 shares in any
discrete account (in lieu of fractional shares) promptly after such
amount is determined. In addition stockholders may inquire about the
actual cash out amount by calling the Company's transfer agent, First
Union National Bank, at 1-800-829-8432 after September __, 1999. (See
pages 5 to 25 and 34 to 48).
o FOR the approval of an amendment (the "Share Reduction Amendment") to
IAH's Charter to reduce the total number of shares of capital stock
which the Company shall have authority to issue to eleven thousand
(11,000), of which ten thousand (10,000) shall be shares of Common
Stock with a par value of $.01 per share and one thousand (1,000) shall
be shares of Preferred Stock with a par value of $.01 per share. (See
page 49).
Votes Required to Approve Each Item
The presence at the meeting (in person or by proxy) of the holders of at
least a majority of the shares outstanding on the record date, August , 1999, is
necessary to have a quorum allowing us to conduct business at the meeting.
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The following votes are required to approve each item of business at the
meeting:
o Election of Directors: A plurality of the votes cast at the meeting (in
person or by proxy) is required to approve the election of directors
(Proposal 1).
o Reverse Stock Split Proposal; Approval of the proposed amendment to the
Company's Charter to effect the 1 for 500 reverse stock split and to
set forth the formula for computing the price to be paid in lieu of
issuing fractional shares to stockholders who, following the reverse
stock split, would hold of record in any discrete account, less than
one share of IAH Common Stock, requires the affirmative vote of the
holders of a majority of the shares outstanding and entitled to vote at
the meeting (Proposal 2).
o Reduction in Number of Authorized Shares: Approval of the proposed
amendment to the Company's Charter to reduce the number of authorized
shares of capital stock of the Company requires the affirmative vote of
the holders of a majority of the shares outstanding and entitled to
vote at the meeting (Proposal 3).
o Other Items: A majority of the votes cast at the meeting (in person or
by proxy) is required to approve any other items of business that may
properly come before the meeting.
Broker "no-votes" and abstentions have no effect on the outcome of the vote
for the election of directors or any other items, except that they will have the
effect of a negative vote on the proposals to amend IAH's Charter
(Proposals 2 and 3). Broker "no-votes" occur when a nominee (such as a bank
or broker) returns a proxy, but does not have the authority to vote on a
particular proposal because it has not received voting instructions from the
beneficial owner.
NOTE that the proposal to reduce the number of shares that IAH is
authorized to issue is contingent upon stockholder approval of the reverse stock
split. If the reverse stock split is not approved, the proposal to reduce the
number of authorized shares will not be submitted to a vote at the Annual
Meeting.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement and the 1999 10-K/A Annual Report and the 10-Q
Report that accompany it contain statements which constitute "forward-looking
statements" including, those preceded by, followed by or that include the words
"may," "believes," "expects," and "anticipates" or the negation thereof, or
similar expressions. The achievement of the outcomes described in such forward-
looking statements is subject to both known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the industry or locality in which the Company operates generally, and of the
Company in particular, to be materially different from any outcomes expressed or
implied by such forward-looking statements. Such forward-looking statements
include discussions of expectations concerning future operations, margins,
profitability, liquidity and capital resources and the expected effects on the
Company and its stockholders if the Reverse Stock Split Proposal is adopted. For
those statements, the Company claims protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995 (the "Reform Act"), except for those statements set forth under
"Proposal 2" and "Proposal 3" and other statements related to the Company's
"going private" transaction since the Reform Act specifically provides that such
protection is not available for forward-looking statements made in connection
with a going private transaction. 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 factors include, among
others, the demographic trends and other conditions (including weather)
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.
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SPECIAL FACTORS
Background of the Proposed Reverse Stock Split Proposal
International American Homes, Inc. was incorporated under the laws of
the State of Delaware on April 27, 1983. The Company, through its 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.
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. On August 12, 1992, the Bankruptcy Court entered an
order confirming the Company's Plan of Reorganization (the "Plan").
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 holders of certain
creditors' claims $1,250,000 (the "Dividend Restriction"). The payments to such
creditors required to release the Dividend Restriction have not been made. 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.
Of the Company's approximately 2,319 current record stockholders,
approximately 2,057 hold fewer than 100 shares, representing less than 4.6% of
the outstanding Common Stock and 171 hold between 100 and 499 shares
representing less than 4.6% of the outstanding Common Stock. Collectively, the
2,228 record holders of Common Stock holding fewer than 500 shares of Common
Stock (approximately 96% of all record holders) own an aggregate of 72,473
shares representing less than 9.1% of the outstanding Common Stock. The Company
does not have direct knowledge of the number of shares of its Common Stock that
are owned beneficially (but not of record) by persons who own fewer than 500
shares of its Common Stock in nominee name, but based on the number of sets of
proxy materials that the Company is requested to provide annually to brokers,
dealers, etc., the Company estimates that there are at least 500 such holders
owning beneficially approximately 75,000 shares of its Common Stock.
Accordingly, the Company estimates that there are at least 150,000 shares of its
Common Stock being held by stockholders of record or beneficially in discrete
accounts of fewer than 500 shares. In making the computations presented
elsewhere in this Proxy Statement (including the preparation of the pro forma
financial statements included herein), the Company has assumed that
substantially all beneficial owners of fewer than 500 shares will convert their
holdings to record ownership prior to the effective date of the reverse stock
split. The Board and the Company's management are of the view that the recurring
expense and burden of maintaining so many small stockholder accounts coupled
with the costs associated with maintaining registration of the Company's Common
Stock under Section 12 of the Securities Exchange Act of 1934, as amended (the
"1934 Act") is not cost efficient for an enterprise the size of the Company.
Twice previously the Company effected reverse stock splits in an effort
to attain an acceptable per share price and encourage development of an active
market for the Common Stock. At the Annual Meeting of Stockholders held on
September 13, 1994, the stockholders approved a proposal to amend the Company's
Restated Certificate of Incorporation (i) to effect a 1-for-10 reverse stock
split of the Company's issued and outstanding Common Stock and (ii) to reduce
the number of authorized shares of Common Stock from 30 million to 10 million.
The amendments did not change the par value of the
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Common Stock which remained at $.01 per share. The stated purpose of that
reverse stock split was to decrease the number of shares outstanding and
presumably increase the per share market price of the Common Stock. At the time,
the Company's Common Stock was considered to be a "penny stock" and as such was
more difficult to trade through stockbrokers. The Company also then intended
that if the market price per share of Common Stock increased sufficiently, and
if the other requirements for listing were satisfied, it would apply for listing
on NASDAQ or the American Stock Exchange. The Company also recognized at that
time the benefits of eliminating the cost of maintaining certain of its smaller
stockholder accounts and the ability of the reverse stock split to enable
stockholders owning of record fewer than ten shares to dispose of their
investment without brokerage charges. The amendments became effective on May 31,
1995 with the filing of a Certificate of Amendment with the Secretary of State
of Delaware.
Subsequently, at the 1998 Annual Meeting of Stockholders, which was
held on September 17, 1998, the stockholders approved a proposal to adopt an
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 stated purpose of that reverse stock split was to decrease the
number of shares outstanding and to increase the per share market price of the
Common Stock. At the time, the Company's Common Stock was considered to be a
"penny stock" and as such was more difficult to trade through stockbrokers and
would not qualify for margin accounts at most brokerage firms. The amendment
became effective on December 1, 1998 with the filing of a Certificate of
Amendment with the Secretary of State of Delaware.
In addition, promptly following the 1998 Annual Meeting of
Stockholders, on September 17, 1998 the Company's Board of Directors authorized
the repurchase by the Company of up to 15% of the Company's outstanding Common
Stock, at such prices and at such times as the Company's officers concluded that
it were to be in the best interests of the Company and its stockholders to do
so. The repurchases were to be made in market transactions as well as in block
and other negotiated transactions at prices that might be at, above or below
then current market prices for the Company's Common Stock.
Since the institution of the stock repurchase program, the Company has
purchased an aggregate of 36,769 shares of Common Stock from four different
stockholders, each of whom then held in excess of five hundred shares. The total
cost to the Company for such shares was $189,391, or approximately $5.15 per
share. The Company was not able to purchase shares from any stockholder holding
fewer than 500 shares of Common Stock.
At present, the Company has approximately 2,057 stockholders of record
with fewer than 100 shares of Common Stock (not including beneficial owners
whose shares may be registered in "street" names), 1,278 of whom have not made
the exchange of stock certificates provided for in connection with the 1995
reverse stock split, and an additional 318 of whom have not made the exchange of
stock certificates provided for in connection with the 1998 reverse stock split.
Furthermore, of the 171 stockholders owning of record between 100-499 shares of
Common Stock, 86 have not made the exchange of stock certificates provided for
in the 1995 reverse stock split and another 39 have not made the exchange of
stock certificates provided for in the 1998 reverse stock split. In sum, of the
Company's 2,228 stockholders with fewer than 500 shares of record, the Company
may have lost effective contact with all but 507 of them.
The Company is concerned about its apparent loss of effective
contact with many of its stockholders. The Company is also sensitive to the fact
that some stockholders' may believe (wrongly) that their Common Stock in the
Company is of so little value that brokerage commissions and
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administrative inconvenience deter them from selling or exchanging shares. Prior
to 1999 the Board sought to maintain the public status of the Company in part to
help encourage the development of an active public market for such shares and
make them more liquid. However, that market has not proved to be as active or
liquid as the Board had hoped. Moreover, there has been a change in the
Company's focus. With its withdrawal from the Metropolitan Washington, D.C. real
estate market (completed earlier this year), the Company has become just one of
many home builders serving Greater Tampa and surrounding Florida communities.
Consequently, the Board has come to believe that the Company, as such, derives
little benefit from the continued registration of its Common Stock under the
1934 Act. Accordingly, the Board has decided to present the Reverse Stock Split
Proposal to its stockholders for their consideration and approval as a means of
providing liquidity for the holdings of those stockholders who own fewer than
500 shares of record in any discrete account and, incident thereto and as the
primary purposes thereof, to deregister the Company's Common Stock under the
1934 Act and reduce the recurring expenses resulting from the Company's public
status.
In making this determination, the Board of Directors considered other
means of achieving this result, but rejected these alternatives because the
Board of Directors believed that the Reverse Stock Split Proposal would be
simpler and less costly. These alternatives were:
(a) A tender offer at a similar price per share, but the Board believed
it would not result in shares being tendered by a sufficient number of record
stockholders so as to accomplish the going private objective and reducing
recurring costs. In addition to the apparent loss of effective contact with many
of the record holders, it was thought unlikely that many holders of small
numbers of shares would make the effort to tender their shares;
(b) A purchase of shares in the open market. There has been modest
trading activity in the Company's shares and the Company's existing stock
repurchase program has not been met with high stockholder response; therefore,
it would be highly unlikely that shares could be acquired by the Company from a
sufficient number of holders to accomplish the Board's objectives; and
(c) A statutory merger into a new company, but this procedure would not
only involve the same issues as the Reverse Stock Split Proposal, but also the
possibility of multiple costly appraisal proceedings which the Board felt would
be disruptive and unpredictable as to outcomes. Moreover, these added costs
would only reduce further the amount of Company assets available to be paid to
the stockholders.
The Reverse Stock Split Proposal is being made at this time because the
sooner the proposal can be implemented, the sooner the Company will cease to
incur the expenses and burdens and the sooner stockholders who are to receive
cash in lieu of fractional shares of Common Stock will receive and be able to
reinvest or otherwise make use of such cash payments. Moreover, because [^] the
Reverse Stock Split Proposal will be considered and voted upon at the Company's
Annual Meeting of Stockholders, the expense to be incurred by the Company in
connection with the proposal is expected to be less than it would be if the
proposal were to be made at a different time.
As management continued to consider the Company's options, it became
apparent that the Reverse Stock Split Proposal was the best choice for the
stockholders and the Company. The Board deemed a tender offer to all holders to
be imprudent due to potential expenditures associated with it and the lack of
assurance that an adequate number of stockholders with fewer than 500 shares
would tender their shares in a tender offer, thus thwarting the Company's
intended purpose of reducing costs and terminating the registration of the
Company's Common Stock under the 1934 Act. Significantly, by setting the reverse
stock split ratio at 500-to-1, the Company estimates that following the proposed
reverse stock split
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fewer than 100 stockholders of record will remain, comfortably below the maximum
of 300 stockholders of record necessary to terminate registration under the 1934
Act.
On June 24, 1999, the Board having heard proposals from members of
management determined to proceed with the transaction and to submit the Reverse
Stock Split Proposal to the stockholders for approval.
The Effects of the Reverse Stock Split and Reduction in Authorized Stock
(1) Reduction in the Number of Stockholders and the Number of
Outstanding Shares. The Company believes that the reverse stock split will
reduce the number of record stockholders from approximately 2,319 to fewer than
100. As noted earlier, in addition to the approximately 72,473 shares held by
stockholders of record with fewer than 500 shares in their account, the Company
assumes that beneficial owners of approximately 75,000 shares will transfer such
shares into record accounts containing fewer than 500 shares prior to the
Effective Date. Accordingly, the number of outstanding shares of present Common
Stock will change from 870,880 to approximately 720,880 (or approximately 1,442
post-reverse stock split shares). The Company also believes that completion of
the reverse stock split will cause the public market for shares of Common Stock
to be eliminated.
(2) Transfer of Book Value. Because (i) the Company expects that the
price to be paid to holders of record of fewer than 500 shares of present Common
Stock will approximate $5.40 per share of present Common Stock, subject to
upward or downward adjustment depending upon fluctuation in the weighted average
price per share, (ii) the number of shares of present Common Stock expected to
be cashed out as a result of adoption of the Reverse Stock Split Proposal is
estimated to approximate 150,000, (iii) the costs to the Company (including
expenses) of effecting the reverse stock split and making payments in lieu of
fractional shares is expected to approximate $1,050,000, (iv) at March 31, 1999,
aggregate stockholders' equity in the Company approximated $8,546,000, or $9.97
per share, and (v) at June 30, 1999, aggregate stockholders' equity in the
Company approximated $8,918,000, or $10.26 per share, it is expected that
o aggregate stockholders' equity in the Company will be reduced
from approximately $8,918,000 (at June 30, 1999) to
approximately $7,868,000;
o The book value per share of present Common Stock that is not
being cashed out in the reverse stock split (720,880
shares) will increase from $10.26 per share of present
Common Stock to approximately $10.91 per share ($5,456
per post reverse stock split share);
o Net annual income per share of present Common Stock (including
non-recurring income) will increase from $2.47 to $2.98
($2.45 to $2.95 on a fully diluted basis) in each case
assuming that the Company's future annual net income
(including non-recurring income) will be the same as in fiscal
1999; and
o Net annual income per share of present Common Stock (excluding
non-recurring income) will increase from $1.02 to $1.24
($1.01 to $1.22 on a fully diluted basis) in each case
assuming that the Company's future annual net income
(excluding non-recurring income) will be the same as in fiscal
1999.
The Company currently estimates that the price per share to be paid to
holders of record of fewer than 500 shares of present Common Stock will be
approximately $5.40. The actual price
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may be higher or lower based on the weighted average trading price of the Common
Stock during the twelve business days following the date of this Proxy
Statement. The Company intends to issue a press release announcing the actual
amount of cash per share calculated to be paid to holders of fewer than 500
shares in any discrete account (in lieu of fractional shares) promptly after
such amount is determined. In addition stockholders may inquire about the actual
cash out amount by calling the Company's transfer agent, First Union National
Bank, at 1-800-829-8432 after September __, 1999. Nevertheless, for the purpose
of all calculations contained in this Proxy Statement, the Company has assumed a
$5.40 per share cash-out price.
(3) Termination of Exchange Act Registration. The Common Stock is
currently registered under the 1934 Act. Such registration may be terminated by
the Company if the Common Stock is no longer held by 300 or more stockholders of
record. Termination of registration of the Common Stock under the 1934 Act would
substantially reduce the information required to be furnished by the Company to
its stockholders and to the Commission and would make certain provisions of the
1934 Act, such as the short-swing profit recovery provisions of Section 16(b) of
the 1934 Act, proxy statement disclosure in connection with stockholders
meetings and the related requirement of an annual report to stockholders, no
longer applicable to the Company. Accordingly, for a total expenditure by the
Company of approximately $1,050,000 (including amounts payable to cashed-out
stockholders) the Company estimates it will eliminate costs and expenses
associated with continuance of the 1934 Act registration, which the Company
estimates approximate $110,000 on an annual basis. The Company intends to apply
for such termination as soon as practicable following completion of the Reverse
Stock Split.
One related benefit from the termination of registration of the Common
Stock under the 1934 Act will be the retention of certain proprietary
information of the Company. While historically the Company conducted activities
in a number of metropolitan markets, it currently operates only in the greater
Tampa market. Accordingly, the disclosure mandated in the Company's 1934 Act
filings can be readily analyzed by the Company's competitors, rendering IAH at a
competitive disadvantage since it does not have access to similar information of
its rivals who operate in more than one market.
With respect to the executive officers and directors of the Company, in
the event the registration of the Common Stock is terminated under the 1934 Act:
(a) executive officers, directors and other affiliates would no longer be
subject to many of the reporting requirements and restrictions of the 1934 Act,
including without limitation the reporting and short-swing profit provisions of
Section 16, and (b) executive officers and directors of the Company may be
deprived of the ability to dispose of shares of Common Stock pursuant to Rule
144, as amended under the Securities Act of 1933.
(4) Effect on Market for Shares. The Company's Common Stock is
currently traded in the over-the-counter market, and last sales prices are
reported on the OTC Bulletin Board(R) ("OTCBB") which is a regulated
quotation service that displays real time quotes, last sales prices and volume
information in over-the-counter equity securities. There are presently four (4)
known market makers in the Company's Common Stock. It is unlikely that the
market makers in the Common Stock will continue to act in that capacity after
the reverse stock split and termination of the registration of the Company's
Common Stock. Upon termination of the registration of the Common Stock under the
1934 Act, the reduction in public information concerning the Company and the
termination of the Company's status as a reporting company may adversely affect
the liquidity and market value of the Common Stock. In addition, the increase in
the per share price of the Common Stock and the decrease in the number of shares
of Common Stock outstanding as a result of the reverse stock split may also
adversely affect the liquidity and market value of the Common Stock.
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(5) Reduction in Number of Authorized Shares. The amendment to the
Company's Restated Certificate of Incorporation will reduce the number of
authorized shares of Common Stock from 10,000,000 shares to 10,000 shares and
the number of authorized shares of Preferred Stock from 4,000,000 to 1,000
shares. With the exception of the number of authorized shares, the terms of the
preferred stock and Common Stock before and after the reverse stock split will
remain the same. The reduction in the number of authorized shares is expected to
result in a substantial reduction in the annual franchise taxes payable by the
Company.
The par value of the Common Stock and Preferred Stock will remain $.01
per share following consummation of the reverse stock split.
If the Reverse Stock Split Proposal is effected, the Compensation
Committee of the Board of Directors will take such action as it deems necessary
to make equitable adjustments to any outstanding employee stock options.
Potential Detriments of the Reverse Stock Split Proposal to Stockholders;
Accretion in Ownership and Control of Certain Stockholders
Stockholders owning fewer than 500 shares of record in any discrete
account immediately prior to the Effective Date of the reverse stock split will,
after the reverse stock split takes place, no longer have any equity interest in
the Company and therefore will not participate in its future potential earnings
or growth. It will not be possible for cashed out stockholders to re-acquire an
equity interest in the Company unless they purchase an interest from the
remaining stockholders. Transfers by the remaining stockholders of their shares
to third parties are not anticipated.
Potential detriments to Company stockholders who remain as stockholders
if the reverse stock split is effected include decreased access to information
and decreased liquidity. If the Reverse Stock Split Proposal is effected, the
Company intends to terminate the registration of its Common Stock under the 1934
Act. As a result of such termination, the Company will no longer be subject to
the periodic reporting requirements and the proxy rules of the 1934 Act. The
liquidity and market value of the shares of Common Stock held by unaffiliated
stockholders may be adversely affected by the reverse stock split and by
termination of the registration of the Common Stock under the 1934 Act.
As a result of the reverse stock split, all stockholders who are not
cashed out stockholders will benefit from the resulting increase in the book
value of their shares. It is expected that (a) the percentage of ownership of
Common Stock of the Company held by officers and directors of the Company as a
group (including, those shares held by Mrs. Ina J. Davis) will increase from
47.39% to 57.25%, and (b) the collective book value of the shares of Common
Stock held by officers and directors as a group will increase from $4,231,000 to
$4,510,000.
The Board of Directors did not retain either an investment bank or
other financial adviser to render a report or opinion with respect to the
fairness of the Reverse Stock Split Proposal to the Company or its stockholders
or an unaffiliated representative to represent the unaffiliated stockholders of
the Company in negotiating the terms of the Reverse Stock Split Proposal.
Financial Effect of the Reverse Stock Split
The reverse stock split and the use of approximately $1,050,000 cash to
complete the reverse stock split, which includes professional fees and other
expenses related to the transaction and payments to be made in lieu of issuing
fractional shares, are not expected to have any material adverse effect on
10
<PAGE>
the Company's capitalization, liquidity, results of operations or cash flow.
Because the actual number of fractional shares which will be purchased by the
Company and the price to be paid in lieu of fractional shares to stockholders
who, following the reverse stock split, would hold of record in any discrete
account less than one share of Common Stock, are unknown at this time, the total
cash to be paid to holders by the Company is unknown, but is estimated to be
$810,000.
The Company expects to be able to finance the Reverse Stock Split
Proposal through draws upon its existing revolving line of credit with
NationsBank of Florida, N.A. The Company is generally entitled to finance its
home construction costs up to 75% of the value of each particular home unit but
has recently been borrowing significantly less and instead funding out of its
working capital. Accordingly, the Company has a reserve in its construction line
of credit which can be drawn down prior to the reverse stock split, increasing
the amount of cash from which it will fund the reverse stock split. The Company
expects to utilize this revolving line of credit to fund the entire $1,050,000
anticipated to be necessary to complete the reverse stock split. As of August
[9], 1999 the amount available under the line of credit was $[2,962,000].
Amounts borrowed under the line of credit have an interest rate of prime plus
1/4%, and are secured by the Company's work-in-progress. No specific plans or
arrangements have been made concerning the repayment of amounts to be drawn
upon.
The following pro forma financial information presents the effect on
the Company's historical financial position of the reverse stock split,
including expenses of the transactions described herein and the cash payments to
Cashed Out Stockholders estimated to aggregate $1,050,000. The unaudited pro
forma balance sheets reflect the transaction as if it occurred on the balance
sheet dates. The unaudited pro forma statements of operations reflect the
transaction as if it had occurred at the beginning of the periods presented.
The unaudited pro forma balance sheets are not necessarily indicative
of what the Company's financial position would have been if the reverse stock
split had been effected on the dates indicated, or will be in the future. The
information shown on the unaudited pro forma statements of operations is not
necessarily indicative of the results of future operations.
The unaudited pro forma financial statements should be read in
conjunction with the historical financial statements and accompanying footnotes
of the Company which are incorporated by reference into this Proxy Statement.
See "Incorporation of Certain Documents by Reference."
11
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
MARCH 31, 1999
<TABLE>
<CAPTION>
Pro forma
Historical Adjustments Pro forma
---------- ----------- ---------
<S> <C> <C>
Receivables $ 1,626 $ 1,626
Collateral for bonds payable 3,199 3,199
Real estate inventory 18,247 18,247
Total assets 24,768 24,768
Mortgage notes and loans payable 8,571 1,050 (1) 9,621
Bonds payable 3,068 3,068
Total liabilities 16,222 1,050 (1) 17,272
Stockholders' equity 8,546 (1,050) (2) 7,496
Book Value Per Share 9.97 10.60
</TABLE>
(1) To record the increase in mortgage notes and loans payable and total
liabilities for the additional indebtedness incurred for the cash payments
to cashed out stockholders and expenses of the reverse stock split. As of
August [9], 1999, the Company had unused borrowing capacity of
$[2,962,000], substantially more than the amount needed for such purposes.
See "-Financial Effect of the Reverse Stock Split."
(2) To record the reduction in stockholders' equity for the total costs
(including payments to cashed out stockholders) of effecting the proposed
reverse stock split.
12
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
MARCH 31, 1999
<TABLE>
<CAPTION>
Pro forma
Historical Adjustments Pro forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenues: $49,992 $49,992
Home sales 335 335
---------- ---------
Interest and other income 50,347 50,347
---------- ---------
Costs and expenses:
Cost of home sales 42,236 42,236
Selling, general and administrative 6,144 (110) (1) 6,034
Interest 373 87 (2) 460
Depreciation 88 88
Reversal of creditor liability (1,322) (1,322)
---------- ----------- ---------
47,519 (23) (3) 47,496
---------- ----------- ---------
Income before income taxes 2,828 (23) (4) 2,851
Provision for income taxes 583 7 (5) 590
---------- ----------- ---------
Net income $2,245 16 (6) 2,261
---------- ----------- ---------
Per Common Share: (7)
Basic net income $2.47 $2.98
---------- ---------
Weighted average number of shares used in basic net income per
share data, as adjusted for the Reverse Stock Splits 908,550 758,550
---------- ---------
Diluted net income $2.45 $2.95
---------- ---------
Weighted average number of common and common equivalent
shares 917,350 767,350
---------- ---------
Ratio of Earnings to Fixed Charges 3.25:1 3.12:1
</TABLE>
(1) To record annual savings in general and administrative expenses - See
"Proposal 2 - Purpose of the Reverse Stock Split."
(2) To record annual interest on the additional borrowings.
(3) Total reduction in expenses.
(4) Increase in income before income taxes.
(5) Additional income taxes.
(6) Increase in net income.
(7) For ease of comparison, the per common share data set forth below in the
Pro forma column is presented as if the number of shares that are not
being cashed out continued to remain unchanged. Giving effect to the 1 for
500 reverse stock split of such shares (a) basic net income would be
$1,490, (b) the weighted average number of shares used in basic net income
per share data would be 1,517.10, (c) diluted net income would be $1,473,
and (d) the weighted average number of common and common equivalent shares
would be 1,534.70.
13
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
JUNE 30, 1999
<TABLE>
<CAPTION>
Pro forma
Historical Adjustments Pro forma
---------- ----------- ---------
<S> <C> <C> <C>
Receivables $ 1,306 $ 1,306
Collateral for bonds payable 2,926 2,926
Real estate inventory 17,640 17,640
Total assets 23,994 23,994
Mortgage notes and loans payable 8,318 1,050 (1) 9,368
Bonds payable 2,808 2,808
Total liabilities 15,076 1,050 (1) 16,126
Stockholders' equity 8,918 (1,050) (2) 7,868
Book Value Per Share 10.26 10.94
</TABLE>
(1) To record the increase in mortgage notes and loans payable and total
liabilities for the additional indebtedness incurred for the cash payments
to cashed out stockholders and expenses of the proposed reverse stock
split. As of August [9], 1999, the Company had unused borrowing capacity
of $[2,962,000], substantially more than the amount needed for such
purposes. See "-Financial Effect of the Reverse Stock Split."
(2) To record the reduction in stockholders equity for the total costs
(including payments to cashed out stockholders) of effecting the proposed
reverse stock split.
14
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
JUNE 30, 1999
<TABLE>
<CAPTION>
Pro forma
Historical Adjustments Pro forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenues: $14,109 $14,109
Home sales 79 79
---------- ---------
Interest and other income 14,109 14,109
---------- ---------
Costs and expenses:
Cost of home sales 11,792 11,792
Selling, general and administrative 1,679 (28) (1) 1,651
Interest 70 22 (2) 92
Depreciation 30 30
Restructuring Provision 50 50
---------- ----------- ---------
13,621 (6) (3) 13,615
---------- ----------- ---------
Income before income taxes 488 (6) (4) 494
Provision for income taxes 172 (2) (5) 174
---------- ----------- ---------
Net income $316 4 (6) 320
---------- ----------- ---------
Per Common Share: (7)
Basic net income $.37 $.45
---------- ---------
Weighted average number of shares used in basic net income per
share data, as adjusted for the Reverse Stock Splits 858,355 708,355
---------- ---------
Diluted net income $.36 $.44
---------- ---------
Weighted average number of common and common equivalent shares 875,708 725,708
---------- ---------
Ratio of Earnings to Fixed Charges 2.07:1 2.03:1
</TABLE>
(1) To record quarterly savings in general and administrative expenses.
See "Proposal 2 - Purpose of the Reverse Stock Split"
(2) To record quarterly interest on the additional borrowings.
(3) Total reduction in expenses.
(4) Increase in income before income taxes.
(5) Additional income taxes.
(6) Increase in net income
(7) For ease of comparison, the per common share data set forth below in the
Pro forma column is presented as if the number of shares that are not
being cashed out continued to remain unchanged. Giving effect to the 1 for
500 reverse stock split of such shares (a) basic net income would be $226,
(b) the weighted average number of shares used in basic net income per
share data would be 1,416.71, (c) diluted net income would be $220, and
(d) the weighted average number of common and common equivalent shares
would be 1,451.42.
15
<PAGE>
Recommendation of the Board of Directors; Fairness of the Reverse Stock Split
Proposal
The Board believes that the Reverse Stock Split Proposal, taken as a
whole, is fair to, and in the best interests of the Company and its
stockholders, including those who will receive cash in lieu of fractional
shares, those who will receive shares of new Common Stock and those who will
receive both cash and shares. The Board also believes that the process by which
the transaction is to be approved is fair. The Board recommends that the
stockholders vote for approval and adoption of the Reverse Stock Split Proposal
and the reduction in the number of shares that the Company is authorized to
issue as described above. Each member of the Board and each officer of the
Company who owns shares of Common Stock has advised the Company that he intends
to vote his shares in favor of the Reverse Stock Split Proposal and the
reduction in the number of shares that the Company is authorized to issue.
The Board has retained for itself the absolute authority to reject (and
not implement) the Reverse Stock Split Proposal (even after approval thereof) if
it determines subsequently that the Reverse Stock Split Proposal is not then in
the best interests of the Company and its stockholders. If the Reverse Stock
Split Proposal is not approved, or, if approved, is not implemented, the
proposed reduction in the number of shares that the Company is authorized to
issue will not be implemented.
The Company did not obtain an independent fairness opinion in connection
with the proposed Reverse Stock Split Proposal. The Board unanimously approved
the Reverse Stock Split Proposal.
The Board considered a number of factors in determining whether it was
in the best interests of the Company and its stockholders to undertake a
transaction to reduce the number of stockholders to fewer than 300 persons in
order to terminate the registration of its Common Stock under the 1934 Act. The
Board of Directors reviewed and discussed with management of the Company
materials which had been prepared by management and distributed to the Board
relating to cost savings to be achieved by terminating the registration of the
Common Stock. The Board of Directors determined that cost savings of
approximately $110,000 per year could be achieved if the Company terminated the
registration. The Board of Directors also considered the time and effort
currently required of management to comply with the reporting and other
requirements associated with continued registration of the Common Stock under
the 1934 Act. The Board of Directors considered the effect that terminating the
registration of the Common Stock might have on the market for the Common Stock
and the ability of stockholders to buy and sell shares. The Board also
considered the competitive disadvantage the Company currently faces since the
mandated disclosure under the 1934 Act filings can be easily analyzed by
competitors as being derived from operations in a single housing market. The
Board of Directors determined that the cost savings, reduced burden on
management and increased confidentiality of proprietary information to be
achieved by terminating registration of the Common Stock under the 1934 Act
outweighed any potential detriment from termination of registration.
The Board of Directors considered several alternative transactions to
accomplish the reduction in the number of stockholders to fewer than 300 persons
but, ultimately determined the Reverse Stock Split Proposal was the preferred
method. See "--Background of the Proposed Reverse Stock Split Proposal."
The Board considered numerous factors, discussed below, in reaching its
conclusion as to fairness of the Reverse Stock Split Proposal to those
stockholders whose shares of Common Stock would be purchased for cash because
they did not own at least 500 shares of Common Stock. The Board did not assign
any specific weights to the factors listed below but, in reaching its conclusion
as to the fairness of the Reverse Stock Split Proposal to holders of record of
fewer than 500 shares of Common Stock, more emphasis was placed on "Current and
historical prices of the Company's Common Stock" and the
16
<PAGE>
"Purchase Price paid in Previous Purchases" than on any other factors. Moreover,
in their considerations individual directors may have given differing weights to
different factors.
(1) Current and historical market prices of the Company's Common Stock.
The Company's Common Stock is not listed on any stock exchange or quoted in the
National Association of Securities Dealers Automated Quotation (NASDAQ) system;
rather, it is traded on the over-the-counter market and actual transactions are
reported on the OTCBB. The Company knows of only four (4) market makers with
respect to its Common Stock. The Common Stock is thinly traded: according to the
records of the BLOOMBERG service, on average only approximately 7,950 shares
have been traded monthly from January 1, 1999 through July 31, 1999. The
cumulative weighted average reported price of such shares traded was $5.40
according to the BLOOMBERG service.
The Board also reviewed high and low bid prices for the Common Stock (as
adjusted for prior reverse stock splits) from April 1, 1997 to July 31, 1999,
which ranged from $2.63 to $8.00 per share. See "Price Range of Common Stock;
Dividends; Trading Volume." The price as quoted by the BLOOMBERG service in the
Company's Common Stock on August , 1999, was $___ bid and $___ asked.
The Board noted, however, the historical illiquidity of the shares,
which it believes results from the traditionally extreme spread between the bid
and asked price, which it attributes to control by a limited number of market
makers on the bid side.
(2) Net Book Value. As of March 31, 1999, the net book value per share
of outstanding Common Stock was approximately $9.97, and as of June 30, 1999,
the net book value per share of outstanding Common Stock was approximately
$10.26. Although the weighted average trading price per share of Common Stock
during the seven months ended July 31, 1999 ($5.40) is subject to further change
during the period ending twelve business days after the date of this Proxy
Statement, the final cash out price is unknown and may be higher or lower than
$5.40 per share; the Board has assumed that the projected cash out price per
share will range between 54% and 53% of book value per share of Common Stock
outstanding as of June 30, 1999 (or 63% and 61% of book value as adjusted in the
manner provided below). The Board considered whether the difference between the
net book value per share and the projected cash out price of $5.40 per share
ought to be considered as a factor inconsistent with its determination that the
cash out price should be based solely on the weighted average price of the
Company's Common Stock. For a number of reasons, it concluded that it should
not. First, the Board believes that stated book value must be adjusted downward
to reflect appropriately the fact that the Plan requires that before the Company
can pay any dividends to stockholders it must first pay $1,250,000 to holders of
certain creditors' claims that are not recorded as liabilities on the Company's
balance sheet. Assuming such adjustment were recorded as a liability, the net
book value per share as of March 31, 1999 and June 30, 1999 would have been
$8.51 and $8.82, respectively. The Company believes that such adjustment is
appropriate because absent the reverse stock split or a sale of a stockholder's
shares to a third party, there is no way that a stockholder can realize any
return on his or her shares until the $1,250,000 has been paid. Second, the
Company's assets consist primarily of construction-in-progress, finished
building lots, undeveloped land and deposits on lot purchase commitments. The
Company has financed substantially all of its acquisitions of real estate assets
with loan commitments. All of the Company's financing arrangements are secured
by the related real estate inventory. Homebuilding is a cyclical industry with
economic conditions (in addition to weather) having a substantial impact on
operating performance. Accordingly, external factors which could cause the
Company to default on its loan commitments could result in the forfeiture of
certain underlying real estate assets, and other factors which interfere with
the Company's ability to satisfy its commitments to purchase finished building
lots may result in the
17
<PAGE>
Company's forfeiture of substantial deposits related to the purchase thereof.
Moreover, the Board was acutely conscious of the Company's experience in the
recent shutdown of its operations in the Metropolitan Washington, D.C. area
which resulted in a 75% decline in the net book value of its Porten Sullivan
subsidiary which conducted the Company's operations in that area. Third, it is
the Board's view that net book value is not necessarily a true measure of value
but rather is an accounting concept based upon the historical prices paid for
assets of the Company, and that the Company may be more or less valuable as a
going concern. Although book value was a factor that was considered by the Board
among others in determining a cash-out price, the Board determined that it was
not directly relevant.
(3) Going Concern Value. While the Board fully anticipates the Company
to continue as a going concern, the experience of the Company during the
previous ten (10) years has educated the Company's management as to the
fragility of the Company's business. In particular, the bankruptcy of the
Company in 1990 and the need in fiscal 1998 to abandon operations in the
Metropolitan Washington, D.C. housing market (with a consequent loss of 75% of
the net book value of the Company's subsidiary that conducted such operations)
have taught management and the Board not to be overly confident concerning the
future viability of the Company, notwithstanding its relative current health and
other positive financial indicia. The cyclical nature of the homebuilding
industry and other factors which may interfere with the Company's financing
commitments could quickly cause the Company's financial health to shift
precariously and, as a consequence, makes it difficult in the Board's view to
assess the going concern value of the Company. To test the Board's view that it
is difficult to assess the going concern value of the Company, the Board engaged
in an analysis of publicly available data concerning 8 selected companies in the
home building industry. The companies whose data were analyzed were selected as
follows: Annually, Builder Magazine, the magazine of the National Association of
Home Builders, provides a survey of the 100 largest home building companies in
the United States. Information provided is: units delivered, gross revenue,
regional operations, types of construction activities and whether public or
private. This became a primary source to identify the eight smallest public
residential home building companies. Additionally, investment websites such as
PC Quote On-Line and Stockpoint provide listings by SIC classification of public
companies in construction with market data and relevant balance sheet and income
information along with a description of the nature of their building activities.
By searching through the above sources and limiting the universe to those
companies that had principally residential home building activities a data base
of 8 companies ("Selected Companies") was developed.
The categories compared included the following: revenues,
multiple of book value, market capitalization, stockholders' equity, share price
as a percentage of equity, return on average equity, return on average assets,
net margin and units delivered. From such analyses emerged the following
comparisons, which, in the opinion of the Board, demonstrate that none of the
Selected Companies analyzed in the Company's industry is truly comparable to the
Company.
o IAH reported revenues of $50,347,000 for the fiscal
year ended March 31, 1999. Average revenue for the
Selected Companies was $257,000,000, with a range of
$109,000,000 to $406,000,000.
o Total stockholders' equity of IAH at June 30, 1999 was
$8,918,000. Book value per share based on actual shares
outstanding at June 30, 1999 was $10.26. At the average
share price of $5.40, IAH Common Stock traded at .53
times book. The Selected Companies traded at an average
multiple of .79 times book.
18
<PAGE>
o Market capitalization of IAH based on an average price
of $5.40 for shares outstanding at July 31, 1999 was
$4,703,000. The Selected companies had an average
market capitalization of $57,000,000.
o IAH had a return on average equity for the fiscal year
ended March 31, 1999 of 12.3% after eliminating
non-recurring income. The Selected Companies had an
average return on equity of 16.7%.
o IAH had a return on average assets of 3.5% for the
fiscal year ended March 31, 1999 after eliminating
non-recurring income. The Selected Companies had an
average return on assets of 5.6%.
o IAH had a net margin of 3.0% for the fiscal year ended
March 31, 1999 after eliminating non recurring income.
The Selected Companies had an average net margin of
5.0%.
o IAH delivered 354 homes in the fiscal year ended March
31, 1999. Average homes delivered for the Selected
Companies were 1,375 with range of 589 to 1,874.
There are a number of other reasons the Board reached this conclusion.
First, most of the Selected Companies are substantially larger, have greater net
worth and have better operating performance than the Company. Second, most of
the Selected Companies are geographically diverse, which shields them from local
economic fluctuation, as distinguished from the Company, whose activity is only
in the greater Tampa area. Relatedly, the Tampa housing market has historically
been a low margin market as compared to other geographic areas. Third, while IAH
trades over-the-counter, most of the Selected Companies are listed on the New
York Stock Exchange or on NASDAQ, each of which promotes an orderly and liquid
trading market with much higher volume than the Company's shares normally
experience. And fourth, the Company's lenders have historically required and
currently require the president of the Company personally to guarantee certain
indebtedness of the Company. See "Certain Relationships and Related
Transactions." Based upon the difficulty in assessing the going concern value of
the Company, the Board concluded that it would be inappropriate to consider such
value in evaluating the fairness of the transaction.
(4) Earnings. The Board reviewed the earnings of the Company for the
previous three fiscal years, although ultimately it did not place much weight on
this factor due to the existence of non-recurring charges and credits which make
it difficult to predict future results with any degree of certainty. For the
three years ended March 31, 1999 the Company reported net income (loss) of
$2,245,000, ($704,000) and $650,000, respectively. During the fiscal year ended
March 31, 1999 income of $1,322,000 resulting from the reversal of a creditor
liability was realized. During the fiscal year ended March 31, 1998 a charge of
$1,840,000 associated with the termination of operations in Metropolitan
Washington D.C. was recorded. Both the income and the charge are considered to
be non-recurring. Adjusted net income eliminating the above two non-recurring
items for the three fiscal years ended March 31, 1999 would be $923,000,
$510,000 and $650,000, respectively. The average adjusted net income for the
three fiscal years ended March 31, 1999, excluding non-recurring items, was
$694,000 or $0.81 per share based on the number of shares outstanding on March
31, 1999. Because of the wide swings in the Company's earnings in recent years,
the Board concluded that it would be inappropriate to attach much weight thereto
in determining the fairness of the transaction.
19
<PAGE>
(5) Liquidation Value. The Company has no current plan to effect any
liquidation of the Company. See "--Conduct of the Company's Business after the
Reverse Stock Split." As described above under the caption "Book Value," the
Company's primary assets are construction in progress, finished building lots
and undeveloped land. The Board believes that the Company would not be able to
realize the full value of these assets upon liquidation because (a) the Company
would incur wind-down expenses, (b) operating costs and construction and
administrative overheads would be disproportionate to the revenue stream, (c)
deposits on land purchase agreements would be forfeited, (d) inventory of
finished building lots would have to be disposed of, (e) a percentage of
contracts for the purchase of new homes would probably be canceled by customers,
while others would be subject to additional price incentives as an inducement to
close, (f) continuing obligations to provide warranty service would extend the
Company's obligations well into the future and (g) cancellation of lease
agreements would obligate the Company to additional costs. The Board believed
that a liquidation would not result in any increased value over book value, and
likely a lower amount for the reasons noted above. The Board estimated that if
there were to be an orderly liquidation of the Company carried out over a
reasonable period of time, stockholders could expect to receive between $6.00
and $7.00 per share upon completion of such liquidation. The Board considered
whether the difference between its estimate of the liquidation value per share
should outweigh the projected average trading price per share in fixing the cash
out price. The Board determined that it should not for the following reasons:
(1) It felt that the stockholders of the Company would not support its
liquidation by the necessary vote required by Delaware law; (2) liquidation
results are uncertain, as evidenced by the results of its Washington, D.C. area
liquidation (where 75% of the book value of the relevant subsidiary was lost);
(3) cashed-out stockholders would realize cash for their investment now versus
at some future undetermined date; and (4) cashed-out stockholders would not be
subject to the risks of their investment.
(6) Purchase Prices Paid in Previous Purchases. Between April 1, 1997
and July 31, 1999 the Company purchased an aggregate of 40,102 shares (adjusted
for previous reverse stock splits) of Common Stock of the Company at prices
(similarly adjusted) ranging from $4.56 to $5.25 per share, and affiliates of
the Company purchased an aggregate of 39,317 shares (adjusted for previous
reverse stock splits) of Common Stock of the Company at prices (similarly
adjusted) ranging from $1.50 to $5.44 per share. The average purchase price
(adjusted for previous stock splits) paid by the Company and the Affiliates,
respectively, during such each quarter during such period was as follows:
<TABLE>
<CAPTION>
No. of Shares (adjusted) Average Purchase Price Paid
(adjusted)
Quarter Ended By Company By Affiliates By Company By Affiliates
------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
1997
June 30 0 0 $0 $0
September 30 0 0 0 0
December 31 0 13,998 0 3.95
1998
March 31 0 5,323 0 3.76
June 30 3,333 4,999 4.56 4.65
September 30 0 0 0 0
December 31 0 0 0 0
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1999
March 31 33,601 0 5.17 0
June 30 3,168 13,331 (1) 5.00 3.89
Month of July 1999 only 0 1,666 (1) 0 5.44
</TABLE>
(1) Represents purchase of shares upon exercise of stock options.
Furthermore, in the nine months since the institution of the stock
repurchase program, the Company has been able to purchase only 36,769 shares of
Common Stock in negotiated transactions with four different stockholders, each
holding more than 500 shares of Common Stock. The total cost to the company for
these shares of stock was $189,391, equal to $5.15 per share.
(7) Absence of Offers for Alternative Transactions. The Company has not
sought, and has not received, any proposals from any unaffiliated persons during
the preceding eighteen months for the merger or consolidation of the Company
with such person, or for the sale or other transfer of all or any substantial
portion of the Company's assets, or for securities of the Company that would
enable the holder thereof to exercise control of the Company.
(8) Opportunity to Liquidate Shares of Common Stock. In addition to that
discussed above, the Board considered the opportunity presented by the Reverse
Stock Split Proposal for stockholders owning fewer than 500 shares of record to
liquidate their holdings without incurring brokerage costs, particularly given
the relatively illiquid market for shares of the Company's Common Stock.
The Board decided that a market-based valuation was more appropriate in
setting the price because net book value, liquidation value, and going concern
value were of limited relevance to such a valuation. After consideration of all
this information, the Board of Directors determined that a fair price to be paid
in lieu of issuing fractional shares to any IAH stockholder, who, following the
reverse stock split, would hold less than one share of IAH Common Stock of
record in any discrete account, shall be an amount equal to the product obtained
by multiplying (i) 500 times the weighted average trading price per share of all
IAH Common Stock traded during the period beginning January 1, 1999 and ending
on the twelfth business day next following the date of this Notice of Annual
Meeting and Proxy Statement, as reported by the BLOOMBERG service, by (ii) a
fraction, the numerator of which shall be the number of shares of present IAH
Common Stock owned by such stockholder of record in such stockholder's account
immediately prior to the reverse stock split and the denominator of which shall
be 500 (the "Fractional Share Cash-Out Amount").
The transaction is not structured so that approval of at least a
majority of unaffiliated stockholders is required. No independent committee of
the Board of Directors has reviewed the fairness of the Reverse Stock Split
Proposal. No unaffiliated representative acting solely on behalf of the
stockholders for the purpose of negotiating the terms of the Reverse Stock Split
Proposal or preparing a report covering the fairness of the Reverse Stock Split
Proposal was retained by the Company or by a majority of directors who are not
employees of the Company. The Company did not obtain any report, opinion or
appraisal from an outside party relating to the consideration or the fairness of
the consideration to be paid to stockholders holding fewer than 500 shares of
Common Stock of record in any one account or the fairness of the Reverse Stock
Split Proposal to the Company and its remaining unaffiliated
21
<PAGE>
stockholders. The Board determined that the cost of obtaining a fairness opinion
would be prohibitively high given the small number of shares involved in the
transaction. The Reverse Stock Split Proposal is expected to result in the
cash-out of approximately 150,000 shares of Common Stock at the Fractional Share
Cash-Out Amount (currently estimated to be approximately $5.40 per share), for a
total purchase price approximating $810,000. The Board of Directors believes
that the transaction is substantively fair to all unaffiliated stockholders
notwithstanding the absence of such a committee, representative or appraisal for
the following reasons: the cash-out price will be determined by using the
weighted average per share trading price of the Company's Common Stock over a
period of at least eight months and the cash-out price is subject to change from
the first day of September to the twelfth business day following the date of
this proxy statement. During that period present stockholders (including those
whose shares are expected to be cashed out) and investors generally will have an
opportunity both to evaluate all of the information contained herein and to
compare the potential value of an investment in the Company with that of other
available investments; while unaffiliated stockholders who are not being
cashed-out will benefit from projected increases in the net book value of, and
net earnings attributable to, their shares, such projected increases will be
offset by the reduction in available information and a significant loss of
liquidity; and while cashed-out stockholders will be entitled to receive the
consideration for their shares immediately, shareholders who are not being
cashed-out will bear the burden of the increased borrowings used to fund
payments to cashed-out stockholders and the expenses of the going private
transaction and will have no assurance as to when, if ever, and for how much,
they will be able to liquidate their investments in the Company. The Board
believes that the transaction is procedurally fair because the reverse stock
split is being effected in accordance with all requirements under Delaware law
and hence will require the affirmative vote of the holders of a majority of the
Company's outstanding Common Stock; the Company's officers and directors as a
group do not own of record or beneficially a sufficient number of shares to
assure approval of the Reverse Stock Split Proposal; between the date hereof and
the effective date of the reverse stock split all stockholders of the Company
will have an opportunity to adjust the number of shares of Common Stock owned by
them so that holders who would otherwise be cashed- out stockholders can become
continuing holders, and continuing holders can so divide or otherwise adjust
their existing holdings as to become cashed-out stockholders as to some or all
of their shares; and after consideration of all the facts, all of the directors,
including those who are not employees of the Company have determined that the
Reverse Stock Proposal is fair to unaffiliated stockholders. In connection with
their latter point, it is to be noted that none of the directors of the Company
would, based upon his present holdings, be a cashed-out stockholder, and none of
the directors is expected to adjust his holdings so as to become a cashed-out
stockholder but the Company believes that, in making their decision to base the
cash-out price on the weighted average trading price, its directors were
conscious of the importance of the issues (including those that adversely affect
continuing stockholders as well as those that affect cashed-out stockholders)
and acted in accordance with their fiduciary duties to the Company and its
stockholders.
Conduct of the Company's Business after the Reverse Stock Split
Since the Company expects to borrow the approximately $1,050,000 that is
expected will be needed to complete the reverse stock split, the net stockholder
equity will decline by the same amount, and the annual interest cost on that
amount (estimated to be $57,000) will have a negative impact on the net income
of the Company. Otherwise, the Company expects its business and operations to
continue as they are currently being conducted and, except as disclosed below,
the reverse stock split is not anticipated to have any effect upon the conduct
of its business. If the reverse stock split is consummated, all persons owning
fewer than 500 shares of record at the Effective Date of the reverse stock split
will no longer have any equity interest in, and will not be stockholders of, the
Company and
22
<PAGE>
therefore will not participate in its future potential or earnings and growth.
Instead, each such owner of Common Stock will have the right to receive, upon
surrender of his stock certificate, the Fractional Share Cash-Out Amount per
share in cash, without interest.
If the Reverse Stock Split Proposal is effected, the Company believes
that, based on the Company's stockholder records, fewer than 100 stockholders of
record will remain. In addition, individuals who are members of the Board of
Directors and of management of the Company now owning approximately 47.39% of
the Common Stock will own approximately 57.25% of the Common Stock after the
Reverse Stock Split. See "Stock Ownership--Security Ownership of Certain
Beneficial Owners and Management."
The Company plans, as a result of the reverse stock split, to become a
privately held company. The registration of the Common Stock under the 1934 Act
will be terminated. In addition, because the Common Stock will no longer be
publicly held, the Company will be relieved of the obligation to comply with the
proxy rules of Regulation 14A under Section 14 of the 1934 Act, and its officers
and directors and stockholders owning more than 10% of the Common Stock will be
relieved of certain obligations under the 1934 Act. See "--The Effects of the
Reverse Stock Split--Termination of Exchange Act Registration." The Company
estimates that termination of the registration of the Common Stock under the
1934 Act will save the Company approximately $110,000 per year in legal,
accounting and other expenses.
The Share Reduction Amendment, if approved and implemented, will
decrease the number of authorized shares of Common Stock from 10,000,000 to
10,000 shares. With the exception of the number of authorized shares, the terms
of the Common Stock before and after the reverse stock split will remain the
same. Furthermore, the amendment to the Company's Restated Certificate of
Incorporation will reduce authorized shares of preferred stock from 4,000,000 to
1,000. As stated throughout this Proxy Statement, the Company believes that
there are significant advantages in effecting the Reverse Stock Split Proposal
and "going private" and the Company plans to avail itself of any opportunities
it may hereafter have as a private Company, including, but not limited to,
making itself a more viable candidate with respect to a merger or acquisition
transaction with any one of its competitors or entering into some type of joint
venture or other arrangement. Although management does not presently have an
interest in any such transaction nor is management currently in negotiations
with respect to any such transaction, there is always a possibility that the
Company may enter into such an arrangement in the future and the remaining
stockholders of the Company may receive payment for their shares in any such
transaction lower than, equal to or in excess of the Fractional Share Cash-Out
Amount which will be paid to stockholders in lieu of fractional shares in the
reverse stock split.
Other than as described in this Proxy Statement, neither the Company nor
its management has any current plans or proposals to effect any extraordinary
corporate transaction; such as a merger, reorganization or liquidation; to sell
or transfer any material amount of its assets; to change its Board of Directors
or management; to change materially its indebtedness or capitalization; or
otherwise to effect any material change in its corporate structure of business.
23
<PAGE>
STOCK OWNERSHIP
- --------------------------------------------------------------------------------
Security Ownership of 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 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:
<TABLE>
<CAPTION>
Approximate
Name Beneficially Percent of Number of Percentage of
Owned Number of Shares Shares to be Shares to be
---------------------------- Shares Owned Owned Prior Owned Owned
Prior to to Following Following
Reverse Split Reverse Split Reverse Split Reverse Split
---------------------- -------------------- ------------------- ----------------------
<S> <C> <C> <C> <C>
Robert J. Suarez 290,478 33.35% 580.956 40.29%
Robert I. Antle 8,181 * 16.362 1.13%
Peter A. Davis (2)(5) 105,342 12.09% 210.684 14.60%
William D. Aiken (1) 2,221 * 4.442 *
Dionel Cotanda (2) 7,803 * 15.606 1.08%
James G. Farr (1) 2,221 * 4.442 *
Jeffrey D. Prol (2) 2,554 * 5.108 *
Ronald I. Heller (4) 67,190 7.72% 134.380 9.32%
Ina J. Davis (5) 105,342 12.09% 210.684 14.60%
David S. Nagelberg (6) 59,872 6.87% 119.744 8.31%
All current directors and 418,800 47.75% 837.600 57.61%
executive officers as a
group (7 persons) (3)
</TABLE>
- ---------------------------
* Less than one percent (1%).
(1) Includes 2,221 shares (4.442 shares after the Reverse Stock Split) 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; and such shares cannot be voted
prior to exercise of such options.
24
<PAGE>
(2) Includes 555 shares (1.11 shares after the Reverse Stock Split) 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 (12.214 shares after the Reverse Stock Split) 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; and such shares cannot
be voted prior to exercise of such options.
(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) Totals for Peter A. Davis and Ina J. Davis, his wife, include, in the
case of Mr. Davis, 46,483 shares owned by his wife, Ina J. Davis, and,
in the case of Mrs. Davis, 58,859 shares owned by her husband. Each
disclaims beneficial, ownership of shares owned by the other.
(6) Although the Company is unaware of any filing on Schedule 13D or
Schedule 13G made 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 Company believes is a child of Mr. David
Nagelberg. In the absence of a declaration to the contrary, the Company
assumes that Mr. David Nagelberg does not disclaim beneficial ownership
of such shares.
25
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL 1
ELECTION OF TWO CLASS I DIRECTORS
(Item 1 on Proxy Card)
- --------------------------------------------------------------------------------
Pursuant to the Charter, the number of Directors shall not be less than
7 nor more than 15 as may be determined from time to time by affirmative vote of
the majority of the Board of Directors. On June 18, 1998 the Board of Directors
voted unanimously to reduce the number of Directors from nine to seven.
Directors are divided into three classes, designated class I, class II and class
III. At the Annual Meeting of Stockholders held on September 17, 1998, class I
directors were originally elected for a one-year term, class II directors were
originally elected for a two-year term and class III directors for a three-year
term. At each subsequent annual meeting of stockholders, successors to the class
of directors whose term expires at that annual meeting are elected for a term of
three years.
Proxies solicited by the Board will be voted for the election of the
nominees, unless you withhold your vote on your proxy card. The Board has no
reason to believe that these nominees will be unable to serve. However, if any
one of them should become unavailable, the board may reduce the size of the
board or designate a substitute nominee. If the Board designates a substitute,
shares represented by proxies will be voted for the substitute nominee.
The Board recommends that you vote FOR each of the following two nominees for
election as a director:
Class I--Nominees for Terms Expiring in 2002:
IAH's Board of Directors has proposed the following nominees for
election as Class I directors at the annual meeting. Each of the nominees has
consented to serve a three-year term.
William D. Aiken, 42, has served as a director since 1992. Mr. Aiken was
appointed to the Board of Directors by the IAH 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.
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 with, and
since January 1, 1997 has been a member of, the law firm of Ravin, Sarasohn,
Cook, Baumgarten, Fisch & Rosen, P.C. ("Ravin, Sarasohn") of Roseland, New
Jersey. 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.
Directors Whose Terms of Office Continue
The individuals listed below are presently serving as directors and will
be continuing their terms of office.
26
<PAGE>
Class II--Terms Expire in 2000:
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
"IAH 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 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.
Robbins Manufacturing Company is a supplier of metal plate connected wood
trusses, lumber and related building material products. 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.
Class III--Term Expires in 2001:
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.
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
IAH's Board of Directors has four committees: the Audit Committee, the
Compensation Committee, the Nominating Committee and the Executive Committee.
27
<PAGE>
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 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 IAH'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
28
<PAGE>
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.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
General
The Compensation Committee 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. See
"Proposal 1--The Board of Directors" and "--Committees of the Board."
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.
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
CPI 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 CPI 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.
29
<PAGE>
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
30
<PAGE>
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
Summary Compensation Table
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 President, 1998 167,526 66,000
Treasurer, Chief Financial 1997 162,276 33,000
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 Housing Corporation and the
Company during the three fiscal years ended March 31, 1999, 1998 and
1997. Mr. Davis does not currently receive compensation directly from
the Company.
31
<PAGE>
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 $5.00 per share,
which was the fair market value on the date the option was granted.
The following table sets forth certain information with respect to the
named executive officers concerning the exercise of stock options during the
fiscal year ended March 31, 1999 and the value of unexercised stock options held
as of March 31, 1999.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Fiscal Year 1999 and Year-End Option Values
Number of Securities Value of Securities Underlying
Shares Value Underlying Unexercised Unexercised In-the-Money
Acquired on Realized Options at Fiscal Year end Options at Fiscal Year End ($)(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
(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.
</TABLE>
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.
32
<PAGE>
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.
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 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.
33
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL 2
DIRECTORS' PROPOSAL TO AMEND THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION TO
EFFECT A REVERSE STOCK SPLIT OF IAH'S COMMON STOCK
AND TO SET FORTH THE FORMULA FOR COMPUTING THE
PRICE TO BE PAID IN LIEU OF ISSUING FRACTIONAL SHARES
TO STOCKHOLDERS WHO, FOLLOWING THE REVERSE
STOCK SPLIT, WOULD HOLD OF RECORD IN ANY
DISCRETE ACCOUNT, LESS THAN ONE SHARE OF IAH COMMON STOCK
(Item 2 on Proxy Card)
- --------------------------------------------------------------------------------
Summary
The Board of Directors has authorized, and recommends for your approval,
a proposal (the "Reverse Stock Split Proposal") to amend the Company's Restated
Certificate of Incorporation to effect a 1 for 500 reverse stock split and to
provide that the price to be paid in lieu of issuing fractional shares to any
IAH stockholder, who, following the reverse stock split, would hold less than
one share of IAH Common Stock of record in any discrete account, shall be an
amount equal to the product obtained by multiplying (a) 500 times the weighted
average trading price per share of all sales of IAH Common Stock made during the
period beginning January 1, 1999 and ending on the twelfth business day next
following the date of the attached Notice of Annual Meeting and this Proxy
Statement as reported or expected to be reported by the BLOOMBERG service, by
(b) a fraction, the numerator of which shall be the number of shares of IAH
Common Stock owned by such stockholder of record in such stockholder's account
immediately prior to the reverse stock split and the denominator of which shall
be 500. The Company intends to issue a press release announcing the actual
amount of cash per share calculated to be paid to holders of fewer than 500
shares in any discrete account (in lieu of fractional shares) promptly after
such amount is determined. In addition stockholders may inquire about the actual
cash out amount by calling the Company's transfer agent, First Union National
Bank, at 1-800-829-8432 after September __, 1999. Stockholders of record
("record stockholders") whose shares of Common Stock are converted into less
than 1 share in the reverse stock split will receive cash payments equal to the
fair value (computed as hereinabove provided) of those fractional interests,
while registered stockholders whose shares of Common Stock are converted into
greater than 1 share will receive stock reflecting any fractional interest to
which they are entitled. We also sometimes refer to our record stockholders
whose shares of IAH Common Stock are registered in their names as "registered
stockholders."
If approved, the reverse stock split will take place on the date of
filing with the Secretary of State of Delaware of a Certificate of Amendment,
unless the Company specifies otherwise (the "Effective Date"). In order to
complete the Reverse Stock Split Proposal, a majority of the stockholders
entitled to vote at the annual meeting must approve amendments to the Company's
Restated Certificate of Incorporation, as heretofore amended (the "Charter"). We
attach the proposed amendments to the Company's Charter to this proxy statement
as Appendix A.
The highlights of the Reverse Stock Split Proposal are as follows.
34
<PAGE>
Effect on Stockholders:
If approved at the annual meeting, the Reverse Stock Split Proposal will
affect IAH stockholders as follows after completion:
<TABLE>
<CAPTION>
Stockholder as of Effective Date Net Effect After Reverse Stock Split
-------------------------------- ------------------------------------
<S> <C>
Registered stockholders holding 500 or more Shares of Common Stock will be converted on a
shares of IAH Common Stock in a record account 1 for 500 basis, including fractional shares.
Registered stockholders holding fewer than 500 Shares of Common Stock will be cashed out at a
shares of IAH Common Stock in a record account price based on the weighted average trading price
of the Common Stock during the period beginning on
January 1, 1999 and ending on the twelfth business
day following the date of this Proxy Statement (see
"Fractional Share Cash-Out Amount" below). You will
not have to pay any commissions or other fees on
this cash-out. Holders of these shares will not
have any continuing equity interest in IAH.
Stockholders holding IAH Common Stock in The company does not intend the reverse stock
street name through a nominee (such as a bank or split to affect stockholders holding IAH Common
broker) Stock in street name through a nominee (such as
a bank or broker). However, nominees may have
different procedures and IAH stockholders holding
IAH stock in street name should contract their
nominees to determine whether they will be affected
by the reverse stock split.
</TABLE>
35
<PAGE>
Reasons for the Transaction:
The Board recommends that the stockholders approve the Reverse Stock
Split Proposal for the following reasons, among other things (as described in
detail under "--Purpose of the Reverse Stock Split" below):
<TABLE>
<CAPTION>
Problem Solution
<S> <C>
The Company has approximately 2,319 holders of The reverse stock split will reduce the number of
record of its Common Stock of whom registered stockholders with small accounts and,
approximately 2,228 own fewer than 500 shares. by reducing the number of stockholders of record
In the aggregate, the shares held by these record to fewer than 300, permit the Company to de-
holders comprise less than 9.1% of the register its Common Stock under the 1934 Act
outstanding Common Stock. Furthermore, the and result in significant annual cost savings for
Company is faced annually with administrative IAH.
burden and cost of filing reports and otherwise
complying with the requirements of registration
under the 1934 Act, which amounts to direct annual
costs to the Company of $110,000.
</TABLE>
Structure of the Reverse Stock Split
The transaction is a reverse stock split of IAH common stock. If the
Reverse Stock Split Proposal is approved and occurs, the reverse stock split
will occur on the date of filing with the Secretary of State of Delaware of a
Certificate of Amendment, unless the Company specifies otherwise (the "Effective
Date"). Assuming stockholder approval of the proposal is obtained, the Company
plans to file the Certificate of Amendment at a time to be determined by the
officers of the Company, but in any event not later than October 31, 1999. The
Board, however, has retained for itself the absolute authority to reject (and
not implement) the Reverse Stock Split Proposal (even after approval thereof),
if it subsequently determines that the Reverse Stock Split Proposal is not then
in the best interests of the Company and its stockholders. All registered
stockholders on the Effective Date will receive 1 share of IAH common stock for
every 500 shares of IAH stock held of record in their accounts at that time. Any
registered stockholder who holds fewer than 500 shares of IAH stock in a record
account (also referred to as a "Cashed-Out Stockholder"), will receive a cash
payment instead of a fractional shares. This cash payment will be based on the
average weighted historical trading value of the cashed-out share. (See
"Fractional Share Cash-Out Amount" below for a description of how the historical
trading value will be determined upon completion of the reverse stock split.)
36
<PAGE>
In general, the Reverse Stock Split Proposal can be illustrated by the
following examples:
<TABLE>
<CAPTION>
Hypothetical Scenario Result
--------------------- ------
<S> <C>
Ms. Smith is a registered stockholder who holds Instead of receiving a fractional share (4/5 of a
400 shares of IAH stock in her record account on share) of IAH stock after the reverse split,
the Effective Date. At that time, assume the Ms. Smith's 400 shares will be converted into the
Fractional Share Cash-Out Amount is $5.40 (see right to receive cash. Using the hypothetical
"Fractional Share Cash-Out Amount" below). Fractional Share Cash-Out Amount of
$5.40 per share, Ms. Smith will receive $2,160
($5.40 x 400 shares).
Note: If Ms. Smith wants to continue her
investment in IAH, she can buy at least 100 more
shares of IAH stock and hold it in her record
account, as applicable. Ms. Smith would have to
act far enough in advance of the Effective Date so
that the purchase is complete by the close of
business on that date.
Mrs. Jones has 2 record accounts. As of the Mrs. Jones will receive cash payments equal to
Effective Date, she holds 250 shares of IAH stock the trading value of her shares of IAH stock in
in one account and 350 shares of IAH stock in each record account instead of receiving fractional
the other. All of the shares are registered in her shares (1/2 share and 7/10 share). Assuming a
name only. hypothetical trading value of IAH stock of $5.40 per
share, Mrs. Jones would receive two checks
totaling $3,240 (250 x $5.40 = $1,350; 350 x $5.40 =
$1,890; $1,350 + $1,890 = $3,240).
Note: If Mrs. Jones wants to continue her
investment in IAH, she can consolidate/transfer her
two record accounts prior to the Effective Date. In
that case, her holdings will not be cashed out in
connection with the reverse stock split because she
will hold at least 500 shares in one record
account. She would have to act far enough in
advance so that the consolidation is complete by
the close of business on the Effective Date. Mr.
Taylor holds 775 shares of IAH stock in his After
the Reverse Stock Split, Mr. Taylor will record
account as of the Effective Date. hold 1.55 shares
of IAH stock in his record account (775 / 500 =
1.55).
Mr. Taylor holds 775 shares of IAH stock in his After the Reverse Stock Split, Mr. Taylor will
record account as of the Effective Date. hold 1.55 shares of IAH in his record account
(775 / 500 = 1.55).
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Hypothetical Scenario Result
--------------------- ------
<S> <C>
Mr. Updike holds shares of IAH stock in a IAH does not intend that the Reverse Stock Split
brokerage account as of the Effective Date. will affect stockholders holding IAH stock in
street name through a nominee (such as a bank or
broker). However, nominees may have different
procedures and IAH stockholders holding IAH stock
in street name should contact their nominees to
determine whether they will be affected by the
Reverse Stock Split Proposal. Note: If Mr. Updike
holds fewer than 500 shares and desires to have his
shares cashed out in the reverse stock split, he
should contact his broker to transfer them to his
record name prior to the Effective Date. He would
have to act far enough in advance so that the
transfer is complete by the close of business on
the Effective Date.
</TABLE>
The Company is aware that many of its stockholders are in possession of
stock certificates bearing dates prior to either of the Company's two prior
reverse stock splits. The hypotheticals and results set forth below illustrate
how the Reverse Stock Split Proposal will affect such holders.
<TABLE>
<CAPTION>
Hypothetical Scenario Result
--------------------- ------
<S> <C>
Mr. Brown holds a certificate, dated prior to For his shares, Mr. Brown will receive a cash
May 31, 1995 (the effective date of the first prior payment (based on a hypothetical weighted value
reverse stock split), which is registered in his of $5.40 per present share) of $248, i.e., 1400 /
name and on its face purports to represent 1400 10 (first reverse stock split) = 140 / 3 (second
shares of Common Stock. reverse stock split) = 46 x 5.40 = $248, plus any
payment to which he would have been entitled in
lieu of issuance of the 66/100 of a fractional
share that would have been cashed out incident to
the second reverse stock split.
Ms. Green holds a certificate, dated prior to For her shares, Ms. Green will receive 1.06
May 31, 1995 (the effective date of the first prior shares, i.e., 16,000 / 10 (first reverse stock
reverse stock split), which is registered in her split) = 1600 / 3 (second prior reverse stock
name and on its face purports to represent 16,000 split) = 533 / 500 = 1.066 share after giving
shares of Common Stock. effect to the Reverse Stock Split Proposal, plus
any payment to which she would have been entitled
in lieu of issuance of the 33/100 of a fractional
share that would have been cashed out incident to
the second reverse stock split.
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Hypothetical Scenario Result
--------------------- ------
<S> <C>
Mr. Blue holds a certificate dated subsequent to For his shares, Mr. Blue will receive a cash
May 31, 1995 (the effective date of the first prior payment (based on a hypothetical weighted
reverse stock split) but prior to December 1, 1998 trading value of $5.40 per present share) of
(the effective date of the second prior reverse $2,516.00, i.e., 1400 / 3 (second prior reverse
stock split), which is registered in his name and stock split) = 466 x $5.40, plus any payment to
on its face purports to represent 1400 shares of which he would have been entitled in lieu of
Common Stock. issuance of the 66/100 of a fractional share that
would have been cashed out incident to the
second reverse stock split.
Ms. Gray holds a certificate dated subsequent to For her shares, Ms. Gray will receive 1.2 shares,
May 31, 1995 (the effective date of the first prior i.e,. 1800 / 3 (second prior reverse stock split)
reverse stock split) but prior to December 1, 1998 = 600 / 500 = 1.20 shares of Common Stock
(the effective date of the second prior tax split) after giving effect to the Reverse Stock Split
which is registered in her name and on its face Proposal.
purports to represent 1800 shares of Common Stock.
</TABLE>
In connection with the proposed Reverse Stock Split Proposal, the
Company has filed a Rule 13e-3 Transaction Statement on Schedule 13E-3 (the
"Schedule 13E-3") with the Securities and Exchange Commission.
Purpose of the Reverse Stock Split
The purpose of the Reverse Stock Split Proposal is to cash-out the
equity interests in the Company of the approximately 2,228 record holders of
Common Stock that, as of Effective Date, own fewer than 500 shares of Common
Stock in any discrete account at a price determined to be fair by the entire
Board of Directors in order (i) to eliminate the cost of maintaining small
stockholder accounts, (ii) to permit small stockholders to receive cash for
their shares without having to pay brokerage commissions, and (iii) to reduce
the number of stockholders of record of the Company to fewer than 300 persons in
order to relieve the Company of the administrative burden and cost and
competitive disadvantages associated with filing reports and otherwise complying
with the requirements of registration under the '34 Act, by deregistering its
Common Stock under the 1934 Act. See "Special Factors--Background of the
Proposed Reverse Stock Split Proposal" and "--The Effects of the Reverse Stock
Split" for a discussion regarding the burden of continued registration of the
Common Stock and the intended benefits to the Company of the Reverse Stock Split
Proposal. If the Reverse Stock Split is implemented, the officers and directors
of the Company (and other holders of more than 500 shares) will benefit by an
increase in their percentage ownership of the Company's Common Stock and in the
net book value of their holdings; but, following the deregistration of the
Company's Common Stock under the 1934 Act, there will be no public market for
transactions in such stock.
The Transaction will provide those registered stockholders with fewer
than 500 shares in a discrete account with a cost-effective way to cash out
their investments, because IAH will pay all transaction costs in connection with
the Reverse Stock Split Proposal. See "Special Factors--Recommendation of the
Board of Directors; Fairness of the Reverse Stock Split Proposal--Opportunity to
Liquidate Shares of Common Stock." Moreover, IAH will benefit from substantial
cost savings as a result of the Reverse
39
<PAGE>
Stock Split Proposal. See "Special Factors--The Effects of the Reverse Stock
Split--Termination of Exchange Act Registration."
The Board believes that the disadvantages of having the Company continue
to be a public company outweigh any advantages. The Board has no present
intention to raise capital through sales of securities in a public offering in
the future or to acquire other business entities using stock as the
consideration for any such acquisition. Accordingly, the Company is not likely
to make use of any advantage (for raising capital, effecting acquisitions or
other purposes) that the Company's status as a reporting company may offer.
The Company incurs direct and indirect costs associated with compliance
with the Commission's filing and reporting requirements imposed on public
companies. The Company also incurs substantial indirect costs as a result of,
among other things, the executive time expended to prepare and review such
filings. Since the Company has relatively few executive personnel, these
indirect costs can be substantial. Based on its experience in prior years, the
Company's direct costs are estimated to approximate $110,000 annually as
follows:
Independent Auditors: $ 10,000
SEC Counsel 12,000
Printing and Mailing 14,000
Transfer Agent 15,000
Outside Directors 30,000
Directors and Officers Insurance 25,000
Miscellaneous Costs 4,000
--------
$ 110,000
In light of the company's size and resources, the Board does not believe such
costs are justified.
In light of these disproportionate costs, the board believes that it is
in the best interests of the Company and its stockholders as a whole to
eliminate the administrative burden and costs associated with these small record
accounts.
Although all of these factors have existed for some time, the Company
began to consider the Reverse Stock Split Proposal during calendar year 1999,
and based upon an analysis of its options, risks and expenses relating to
remaining a public company which is detailed in this Proxy Statement, led it to
this Reverse Stock Split Proposal. Another reason for making the Reverse Stock
Split Proposal is the continued illiquidity of the stock despite the previous
attempts to encourage trading. See "Special Factors --Background of the Proposed
Reverse Stock Split Proposal."
The Board has determined that the Reverse Stock Split Proposal is the
most expeditious and economical way of liquidating the holdings of small
stockholders and changing the Company's status from that of a reporting company
to that of a more closely held, non-reporting company. See "Special
Factors--Recommendation of the Board of Directors; Fairness of the Reverse Stock
Split Proposal." The Board has determined the reverse split ratio to be 500 to
1. The Board believes that it would be in the best interests of the stockholders
to maximize the number of common stockholders who would receive cash (which the
Board has determined to be fair value) for their shares. Several factors were
considered in reaching its determination. See "Special Factors--Recommendation
of the Board of Directors; Fairness of the Reverse Stock Split Proposal."
40
<PAGE>
The Reverse Stock Split Proposal, if approved, will have divergent
effects depending on whether you hold more, or fewer, than 500 shares of IAH
Common Stock in a record account immediately prior to the reverse stock split.
See "Special Factors--Potential Detriments of the Reverse Stock Split Proposal
to Stockholders; Accretions in Ownership and Control of Certain Stockholders";
"--Recommendation of the Board of Directors; Fairness of the Reverse Stock Split
Proposal"; and "Proposal 2--Effect of the Reverse Stock Split Proposal on IAH
Stockholders."
The reverse stock split is structured to be a "going private"
transaction as defined in Rule 13e-3 promulgated under the Exchange Act because
it is intended to, and, if completed, will likely terminate the Company's
reporting requirements under Section 12(g) of the 1934 Act. In connection with
the Reverse Stock Split Proposal, the Company has filed with the Commission a
Schedule 13E-3 pursuant to Rule 13e-3 under the 1934 Act.
Effect of the Reverse Stock Split Proposal on IAH Stockholders
Registered Stockholders With Fewer Than 500 Shares:
If the Reverse Stock Split Proposal is implemented and you are a
Cashed-Out Stockholder (i.e., a stockholder holding fewer than 500 shares of IAH
common stock in a discrete record account immediately prior to the reverse stock
split):
o You will not receive a fractional share of IAH stock as a
result of the reverse split.
o Instead of receiving a fractional share of IAH stock, you will
receive cash equal to the Fractional Share Cash-out Amount for
your share.
o After the reverse split, you will have no further interest in
the Company with respect to your cashed-out shares, and you
will no longer be entitled to vote as a stockholder or share in
the Company's assets, earnings, or profits. Your only right
will be to receive cash for these shares.
o You will not have to pay any service charges or brokerage
commissions in connection with the reverse stock split.
o As soon as practicable after the Effective Date, you will
receive cash for the IAH common stock you held in your record
account immediately prior to the reverse split in accordance
with the procedures described below.
Stockholders With Certificated Shares:
* If you are a Cashed-Out Stockholder with a stock
certificate representing your cashed-out shares, you
will receive a transmittal letter from IAH as soon as
practicable after the Effective Date. The letter of
transmittal will contain instructions on how to
surrender your existing certificate(s) to the Company's
transfer agent, First Union National Bank, for your
cash payment. You will not receive your cash payment
until you surrender your outstanding certificate(s) to
First Union National Bank, together with a completed
and executed copy of the letter of transmittal. Please
do not send your certificates until you receive your
letter of transmittal.
41
<PAGE>
o All amounts owed to you will be subject to applicable federal
and state income taxes and state abandoned property laws.
o You will not receive any interest on cash payments owed to you
as a result of the Reverse Stock Split Proposal.
NOTE: If you want to continue to hold IAH stock after the reverse stock split,
you may do so by taking either of the following actions far enough in advance so
that it is complete by the Effective Date:
(1) purchase a sufficient number of shares of IAH stock on the open market
and have them registered in your name so that you hold at least 500
shares in your record account immediately prior to the reverse split; or
(2) if applicable, consolidate your record accounts so that you hold at
least 500 shares of IAH stock in one record account immediately prior to
the reverse split.
Registered Stockholders With 500 or More Shares:
If you are a registered stockholder with 500 or more shares of Common
Stock in your record account as of the Effective Date, we will convert your
shares into one-five hundredth (1/500) of the number of shares you held
immediately prior to the reverse split. For example, if you were a registered
owner of 1250 shares of IAH stock immediately prior to the reverse split, your
shares would be converted to 2.5 shares in the reverse split.
Beneficial Owners of IAH Stock:
IAH does not intend to have the reverse stock split affect stockholders
holding IAH stock in street name through a nominee (such as a bank or broker).
However, nominees may have different procedures and stockholders holding IAH
stock in street name should contact their nominees to determine whether they
will be affected by the reverse stock split.
NOTE: If you are a beneficial owner of fewer than 500 shares of IAH Common Stock
and want to have your shares exchanged for cash in the reverse stock split, you
should instruct your nominee to transfer your shares into a record account in
your name in a timely manner so that you will be considered a holder of record
immediately prior to the reverse split.
Fractional Share Cash-Out Amount
In order to reduce the number of IAH stockholders of record to below
300, the Company will pay cash for fractional shares owned by registered
stockholders who would hold less than one share in a record account after the
reverse stock split. If stockholders approve the Reverse Stock Split Proposal at
the Annual Meeting and the reverse stock split is completed, the Company will
pay cash for the fractional shares based on the average weighted trading price
of the IAH Common Stock that is cashed out (the "Fractional Share Cash-Out
Amount"). The details of the manner of determining the Fractional Share Cash-Out
Amount is summarized in the following chart:
42
<PAGE>
<TABLE>
<CAPTION>
Action Determination of Fractional Share Cash-Out Amount
------ -------------------------------------------------
<S> <C>
Cash-Out of Fractional Each Cashed-Out Stockholder will receive cash in an amount equal to
Shares: In lieu of the the product obtained by multiplying (i) 500 times the weighted average
issuance of fractional shares trading price per share of all reported trades of IAH Common Stock
to Cashed-Out Stockholders, made during the period beginning January 1, 1999 and ending on the
the Company will make cash twelfth business day next following the date of this Proxy Statement as
payments based on the reported by the BLOOMBERG service, by (ii) a fraction, the
weighted average trading numerator of which shall be the number of shares of IAH Common
price. Stock owned by such stockholder of record in such account
immediately prior to the reverse stock
split and the denominator of which shall be
500. The Company intends to issue a press
release announcing the actual Fractional
Share Cash-Out Amount promptly after it is
determined. In addition, shareholders may
inquire about the actual Fractional Share
Cash-Out Amount by calling the Company's
transfer agent, First Union National Bank,
at 1-800-829-8432, after September __, 1999
</TABLE>
Effect of the Reverse Stock Split Proposal on IAH
The Reverse Stock Split Proposal will affect the public registration of
IAH's common stock with the SEC under the Securities Exchange Act of 1934, as
amended, as the Company intends to apply for such termination as soon as
practicable after approval by stockholders.
IAH's Charter currently authorizes the issuance of 10 million shares of
common stock and 4 million shares of Preferred Stock. As a result of the
approval and implementation of the Share Reduction Amendment, the number of
authorized shares of Common Stock will be reduced to 10,000 and the number of
authorized shares of Preferred Stock will be reduced to 1,000 shares. The
Reverse Stock Split Proposal, if approved and effected, will reduce
significantly the number of IAH stockholders and the number of outstanding
shares. See "Special Factors--The Effects of the Reverse Stock Split--Reduction
in the Number of Stockholders and the Number of Outstanding Shares." The Company
believes that completion of the Reverse Stock Split and the deregistration of
the Company's Common Stock under the 1934 Act will cause the public market for
shares of Common Stock to be eliminated.
The Company has no current plans to issue Common Stock other than
pursuant to the Company's existing stock option plans, but the Company reserves
the right to do so at any time and from time to time at such prices and on such
terms as the Company's Board determines to be in the best interests of the
Company and its then stockholders. Persons who continue as stockholders
following implementation of the Reverse Stock Split Proposal will not have any
preemptive or other preferential rights to purchase any of IAH's stock that may
be issued by the Company in the future, unless such rights are specifically
granted to the stockholders.
The total number of shares that will be purchased and the total cash to
be paid by the Company are unknown. Based upon the reported trades during the
period January 1, 1999 through July 31, 1999, the Company estimates that the
Fractional Share Cash-out Amount will approximate $5.40 per cashed-out present
share. The Company believes that approximately 150,000 shares of Common Stock
will have to be canceled by the Company. This assumes that in addition to the
approximately 72,473
43
<PAGE>
shares held by stockholders of record with fewer than 500 shares in their
accounts, beneficial owners of approximately 75,000 shares will transfer such
shares into record accounts containing fewer than 500 shares prior to the
Effective Date. The actual amounts will depend on the number of Cashed-Out
Stockholders on the Effective Date, which may vary from the number of such
stockholders on July 31, 1999. In addition, at this time we do not know what the
Fractional Share Cash-Out Amount will be.
The estimated $5.40 Fractional Share Cash-Out Amount has been determined
from the following data obtained from the BLOOMBERG service: in January 1999,
there were 4 days on which there were trades involving 4,600 total shares and a
cumulative dollar value of $32,100; in February 1999, there were 3 days on which
there were trades involving 700 total shares and a cumulative dollar value of
$3,500; in March 1999, there were 3 days on which there were trades involving
10,300 total shares and a cumulative dollar value $50,150; in April 1999, there
were 8 days on which there were trades involving 3,400 total shares and a
cumulative dollar value of $21,500; in May 1999, there were 3 days on which
there were trades involving 4,400 total shares and a cumulative dollar value of
$27,600; in June 1999, there were 5 days on which there were trades involving
8,500 total shares and a cumulative dollar value of $50,850; and in July 1999,
there were 8 days on which there were trades involving 23,700 total shares and a
cumulative dollar value of $114,425. Accordingly, for the period January 1, 1999
through July 31, 1999, there were 34 days on which there were trades involving
55,600 total shares and a cumulative dollar value of $300,125, for a weighted
average price of $5.40.
Stock Certificates
If the Company's stockholders approve the Reverse Stock Split Proposal,
it is the present intention of the Company to file a Certificate of Amendment to
its Restated Certificate of Incorporation with the Secretary of State of the
state of Delaware. The reverse stock split will become effective on the date of
that filing. Assuming stockholder approval of the proposal is obtained, the
Company plans to file the Certificate of Amendment at a time to be determined by
the officers of the Company, expected to be as promptly as possible, but in any
event not later than October 31, 1999. First Union National Bank has been
appointed exchange agent (the "Transfer Agent") to carry out the exchange of
certificates for new Common Stock and/or cash.
On the Effective Date, each 500 shares of "old" Common Stock will
automatically be combined and changed into one share of "new" Common Stock. No
additional action on the part of the Company or any stockholder will be required
in order to effect the reverse stock split. Stockholders of record with greater
than 499 shares in any discrete account will be requested to exchange their
certificates representing shares of Common Stock held prior to the reverse stock
split for new certificates representing shares of Common Stock issued as a
result of the reverse stock split. Such stockholders will be furnished the
necessary materials and instructions to effect such exchange promptly following
the Effective Date by the Company's transfer agent. Certificates representing
shares of "old" Common Stock subsequently presented for transfer will not be
transferred on the books and records of the Company until the certificates
representing the shares of "old" Common Stock have been exchanged for
certificates representing shares of "new" Common Stock. Stockholders should not
submit any certificates until requested to do so. In the event any certificate
representing shares of "old" Common Stock is not presented for exchange upon
request by the Company, any dividends that may be declared after the Effective
Date with respect to the Common Stock represented by such certificate will be
withheld by the Company until such certificate has been properly presented for
exchange, at which time all such withheld dividends which have not yet been paid
to the public official pursuant to relevant abandoned property laws will be paid
to the holder thereof or his designee, without interest.
44
<PAGE>
In connection with the Reverse Stock Split Proposal, IAH's Common Stock
will be identified by a new Committee On Uniform Security Identification
Procedures ("CUSIP") number. This new CUSIP number will appear on any stock
certificates representing shares of IAH common stock after the Effective Date.
The Reverse Stock Split Proposal will not affect any certificates representing
shares of Common Stock or the book-entry account records held by registered
stockholders owning 500 or more shares immediately prior to the reverse split.
Old certificates held by any of these stockholders will continue to evidence
ownership of one-five-hundredth of the number of shares now represented by such
certificates.
As described above, any Cashed-Out Stockholder with share certificates
will receive a letter of transmittal after the reverse stock split is completed.
These stockholders must complete and sign the letter of transmittal and return
it with their stock certificate(s) to IAH's transfer agent before they can
receive cash payment for those shares.
No service charges will be payable by stockholders in connection with
the exchange of certificates or the payment of cash in lieu of issuing
fractional shares, all expenses of which will be borne by the Company.
Certain Material Federal Income Tax Consequences
We summarize below certain material federal income tax consequences to
the Company and stockholders resulting from the Reverse Stock Split Proposal.
This summary is based on existing U.S. federal income tax law, which may change,
even retroactively. This summary does not discuss all aspects of federal income
taxation which may be important to you in light of your individual
circumstances. Many stockholders (such as financial institutions, insurance
companies, broker-dealers, tax-exempt organizations, and foreign persons) may be
subject to special tax rules. Other stockholders may also be subject to special
tax rules, including but not limited to: stockholders who received IAH stock as
compensation for services or pursuant to the exercise of an employee stock
option, or stockholders who have held, or will hold, stock as part of a
straddle, hedging, or conversion transaction for federal income tax purposes. In
addition, this summary does not discuss any state, local, foreign, or other tax
considerations.
This summary assumes that you are a one of the following: (1) a citizen
or resident of the United States; (2) a corporation or other entity taxable as a
corporation created or organized under U.S. law (federal or state); (3) an
estate the income of which is subject to U.S. federal income taxation regardless
of its sources; (4) a trust if a U.S. court is able to exercise primary
supervision over administration of the trust and one or more U.S. persons have
authority to control all substantial decisions of the trust; or (5) any other
person whose worldwide income and gain is otherwise subject to U.S. federal
income taxation on a net basis. This summary also assumes that you have held and
will continue to hold your shares as capital assets for investment purposes
under the Internal Revenue Code of 1986, as amended.
You should consult your tax advisor as to the particular federal, state,
local, foreign, and other tax consequences, in light of your specific
circumstances.
We believe that the Reverse Stock Split Proposal will be treated as a
tax-free "recapitalization" for federal income tax purposes. This will result in
no material federal income tax consequences to the Company.
45
<PAGE>
Federal Income Tax Consequences to Stockholders Who Are Not Cashed Out by the
Reverse Stock Split:
If you (1) continue to hold IAH stock immediately after the reverse
stock split, and (2) you receive no cash as a result of the reverse stock split,
you will not recognize any gain or loss in the reverse stock split and you will
have the same adjusted tax basis and holding period in your IAH stock as you had
in such stock immediately prior to the reverse stock split.
Federal Income Tax Consequences to Cashed-Out Stockholders:
If you receive cash as a result of the reverse stock split, your tax
consequences will depend on whether, in addition to receiving cash, you or a
person or entity related to you continues to hold IAH stock immediately after
the reverse stock split, as explained below.
a. Stockholders Who Exchange All of Their IAH Stock for Cash as a
Result of the Reverse Stock Split.
If you (1) receive cash in exchange for a fractional share as a result
of the reverse stock split, (2) you do not continue to hold any IAH stock
immediately after the reverse stock split, and (3) you are not related to any
person or entity which holds IAH stock immediately after the reverse stock
split, you will recognize capital gain or loss. The amount of capital gain or
loss you recognize will equal the difference between the cash you receive for
your cashed-out stock and your aggregate adjusted tax basis in such stock.
If you are related to a person or entity who continues to hold IAH stock
immediately after the reverse stock split, you will recognize gain or loss in
the same manner as set forth in the previous paragraph, provided that your
receipt of cash either (1) is "not essentially equivalent to a dividend," or (2)
is a "substantially disproportionate redemption of stock," as described below.
o "Not Essentially Equivalent to a Dividend." You will satisfy
the "not essentially equivalent to a dividend" test if the
reduction in your proportionate interest in the Company
resulting from the reverse stock split is considered a
"meaningful reduction" given your particular facts and
circumstances. The Internal Revenue Service has ruled that a
small reduction by a minority stockholder whose relative stock
interest is minimal and who exercises no control over the
affairs of the corporation will meet this test.
o "Substantially Disproportionate Redemption of Stock." The
receipt of cash in the reverse stock split will be a
"substantially disproportionate redemption of stock" for you if
the percentage of the outstanding shares of IAH stock owned by
you immediately after the reverse stock split is less than 80%
of the percentage of shares of IAH stock owned by you
immediately before the reverse stock split.
In applying these tests, you will be treated as owning shares actually
or constructively owned by certain individuals and entities related to you. If
your receipt of cash in exchange for IAH stock does not give rise to capital
gain or loss under any of the tests, it will be treated first as ordinary
dividend income to the extent of your ratable share of IAH's undistributed
earnings and profits, then as a tax-free return of capital to the extent of your
aggregate adjusted tax basis in your shares, and any remaining amount will be
treated as capital gain. See "Capital Gain and Loss" below.
46
<PAGE>
b. Stockholders Who Both Receive Cash and Continue to Hold IAH
Stock Immediately After the Reverse Stock Split.
If you both receive cash as a result of the reverse stock split and
continue to hold IAH stock immediately after the reverse stock split, you
generally will recognize gain, but not loss, in an amount equal to the lesser of
(1) the excess of the sum of aggregate fair market value of your shares of IAH
stock plus the cash received over your adjusted tax basis in the shares, or (2)
the amount of cash received in the reverse stock split. In determining whether
you continue to hold stock immediately after the reverse stock split, you will
be treated as owning shares actually or constructively owned by certain
individuals and entities related to you. Your aggregate adjusted tax basis in
your shares of IAH stock held immediately after the reverse stock split will be
equal to your aggregate adjusted tax basis in your shares of IAH stock held
immediately prior to the reverse stock split, increased by any gain recognized
in the reverse stock split, and decreased by the amount of cash received in the
reverse stock split.
Any gain recognized in the reverse stock split will be treated, for
federal income tax purposes, as capital gain, provided that your receipt of cash
either (1) is "not essentially equivalent to a dividend" with respect to you, or
(2) is a "substantially disproportionate redemption of stock" with respect to
you. (Each of the terms in quotation marks in the previous sentence is discussed
above under the heading "--Stockholders Who Exchange All of Their IAH Stock for
Cash as a Result of the Reverse Stock Split.") In applying these tests, you may
possibly take into account sales of shares of IAH stock that occur substantially
contemporaneously with the reverse stock split. If your gain is not treated as
capital gain under any of these tests, the gain will be treated as ordinary
dividend income to you to the extent of your ratable share of IAH's
undistributed earnings and profits, then as a tax-free return of capital to the
extent of your aggregate adjusted tax basis in your shares, and any remaining
gain will be treated as a capital gain. See "Capital Gain and Loss" below.
Capital Gain and Loss:
For individuals, net capital gain (defined generally as your total
capital gains in excess of capital losses for the year) recognized upon the sale
of capital assets that have been held for more than 12 months generally will be
subject to tax at a rate not to exceed 20%. Net capital gain recognized from the
sale of capital assets that have been held for 12 months or less will continue
to be subject to tax at ordinary income tax rates. In addition, capital gain
recognized by a corporate taxpayer will continue to be subject to tax at the
ordinary income tax rates applicable to corporations. There are limitations on
the deductibility of capital losses.
Backup Withholding:
Stockholders will be required to provide their social security or other
taxpayer identification numbers (or, in some instances, additional information)
to the Transfer Agent in connection with the Reverse Stock Split to avoid backup
withholding requirements that might otherwise apply. The letter of transmittal
will require each stockholder to deliver such information when the Common Stock
certificates are surrendered following the Effective Date. Failure to provide
such information may result in backup withholding.
As explained above, the amounts paid to you as a result of the reverse
stock split may result in dividend income, capital gain income, or some
combination of dividend and capital gain income to you depending on your
individual circumstances. You should consult your tax advisor as to the
particular federal, state, local, foreign, and other tax consequences of the
transaction, in light of your specific circumstances.
47
<PAGE>
Appraisal Rights
No appraisal rights are available under the Delaware General Corporation
Law or under the Company's Charter or Bylaws to any stockholder who dissents
from the proposal to approve the Reverse Stock Split Proposal. There may exist
other rights or actions under state law for stockholders who are aggrieved by
reverse stock splits generally. Although the nature and extent of such rights or
actions are uncertain and may vary depending upon the facts or circumstances,
stockholder challenges to corporate action in general are related to the
fiduciary responsibilities of corporate officers and directors and to the
fairness of corporate transactions.
Reservation of Rights
Although the Board of Directors requests stockholder approval of the
proposed Amendment to the Restated Certificate of Incorporation, the Board
reserves the right to decide, in its discretion, to withdraw the proposed
amendment from the agenda of the annual stockholders' meeting prior to any
stockholder vote thereon or to abandon the Reverse Stock Split Proposal after
such vote and before the Effective Date even if the proposal is approved.
Although the Board presently believes that the proposed Amendment is in the best
interests of the Company and its stockholders, and thus has recommended a vote
for the proposed amendment, the Board nonetheless believes that it is prudent to
recognize that, between the date of this Proxy Statement and the Effective Date,
factual circumstances could possibly change such that it might not be
appropriate or desirable to effect the Reverse Stock Split Proposal at that
time. If the Board decides to withdraw the proposed Amendment from the agenda of
the Annual Meeting, the Board will notify the stockholders of such decision
promptly by mail and by announcement at the meeting. If the Board decides to
abandon the Reverse Stock Split Proposal after the meeting and before the
Effective Date, the Board will notify the stockholders of such decision promptly
by mail.
The board recommends that you vote FOR this proposal. Proxies solicited
by the Board of Directors will be voted FOR this proposal, unless you specify
otherwise in your proxy.
48
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL 3
DIRECTORS' PROPOSAL TO AMEND THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION TO
REDUCE THE NUMBER OF AUTHORIZED SHARES
OF THE COMPANY
(Item 3 of Proxy Card)
- --------------------------------------------------------------------------------
If the Reverse Stock Split Proposal is approved by stockholders at the
meeting, the Board of Directors has authorized and recommends for your approval,
a proposal to reduce the total number of shares of capital stock which the
Company shall have authority to issue to eleven thousand (11,000), of which ten
thousand (10,000) shall be shares of Common Stock with a par value of $.01 per
share and one thousand (1,000) shall be shares of Preferred Stock with a par
value of $.01 per share.
The purpose of the proposed reduction in the number of shares that the
Company is authorized to issued is to reduce, substantially, the amount of
Delaware franchise tax that the Company now pays.
With the exception of the number of authorized shares, the terms of the
Common Stock and Preferred Stock before and after the proposed amendment will
remain the same.
If the Reverse Stock Split Proposal and the proposed reduction in
authorized shares are both approved, the reduction will take place on the date
of filing with the Secretary of State of Delaware of a Certificate of Amendment
unless the Company specifies otherwise. In order to effect the proposed
reduction in the number of authorized, a majority of the stockholders entitled
to vote at the annual meeting must approve amendments to the Company's Charter.
We attach the proposed amendments to this proxy statement as Exhibit A.
The Board recommends approval of this proposal. If the Reverse Stock
Split Proposal is not approved, the proposal to reduce the number of authorized
shares will be withdrawn.
49
<PAGE>
The following performance graph and report of the Board's Compensation
Committee shall not be deemed filed or incorporated by reference into any other
Company filing under the Securities Act of 1933 or the Securities Exchange Act
of 1934, except to the extent we specifically incorporate this information by
reference into such filing.
PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
The following graph compares, on a cumulative basis, the yearly
percentage change during the five years ended March 31, 1999 in (i) the total
stockholder return on Common Stock of the Company with (ii) the total return on
the Standard & Poor's 500 Index and with (iii) the total return on the Standard
& Poor's Homebuilding Group Index. Such yearly percentage change has been
measured by dividing (i) the sum of (a) the amount of dividends for the
measurement periods, assuming dividend reinvestment, and (b) the price per share
at the end of the measurement period less the price per share at the beginning
of the measurement period, by (ii) the price per share at the beginning of the
measurement period. The price of each unit has been set at $100 on March 31,
1994 for preparation of the graph.
TOTAL SHAREHOLDER RETURNS
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
INDEXED RETURNS
Base
Period
Mar94 Years Ending
Company / Index Mar95 Mar96 Mar97 Mar98 Mar99
- --------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
INTL AMERICAN HOMES 100 65.79 72.37 62.47 80.58 83.33
S&P 500 INDEX 100 115.54 152.51 182.70 270.39 320.30
HOMEBUILDING-500 100 75.18 94.68 91.29 185.39 144.71
</TABLE>
50
<PAGE>
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.
Upon the completion of the reverse stock split, the directors and
executive officers of IAH (including those shares owned by Mrs. Ina J. Davis)
will own approximately 825 post-reverse stock split shares of Common Stock, or
approximately 57.25% of the then issued and outstanding shares, as compared to
412,693 shares and 47.37%, respectively, prior to the reverse stock split.
Furthermore, such directors and executive officers will benefit from an increase
in book value of the pre-reverse stock split shares from $10.25 to approximately
$10.93. See "Special Factors--Potential Determents of the Reverse Stock Split
Proposal to Stockholders; Accretion In Ownership and Control of Certain
Stockholders."
PRICE RANGE OF COMMON STOCK; DIVIDENDS; TRADING VOLUME
The Company's Common Stock is traded over-the-counter. On August __,
1999, the bid price for the Common Stock as reported by the BLOOMBERG service
was $____ per share.
As of July 28, 1999 the Company had approximately 2,319 holders of
record of its Common Stock. The Company believes there are approximately 900
beneficial owners of the Company's Common Stock.
There are four (4) market makers in the Company's stock. As of July 31,
1999, there were 870,880 shares outstanding. The high and low bid prices of the
stock for each quarter during the past two full fiscal years and the first
quarter of the current fiscal year and the period since July 1, 1999 as reported
by the National Quotation Bureau through March 1999 and by the BLOOMBERG service
since April 1999 (which reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions)
were:
51
<PAGE>
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C> <C> <C>
Fiscal 1997
April 1997-June 1997..................................................... $4.68 $3.57
July 1997-September 1997................................................. $4.50 $4.14
October 1997-December 1997............................................... $4.50 $4.14
January 1998-March 1998.................................................. $4.50 $4.50
Fiscal 1998
April 1998-June 1998..................................................... $4.50 $3.47
July 1998-September 1998................................................. $5.25 $2.63
October 1998-December 1998............................................... $6.38 $3.93
January 1999-March 1999.................................................. $7.50 $4.75
Fiscal 1999
April 1999-June 1999..................................................... $8.00 $5.00
July 1, 1999-August __, 1999............................................. $ $
</TABLE>
Stock Repurchases by Company
The Company made the following purchases of Common Stock during each
quarter of the past two full fiscal years and the first quarter of the 1999
fiscal year:
<TABLE>
<CAPTION>
Number of Range of Average
Securities Prices Paid Purchase
Purchased Price
-----------------------------------------------------------------
<S> <C> <C> <C>
Fiscal 1997
April 1997-June 1997................................. 0 NA NA
July 1997-September 1997............................. 0 NA NA
October 1997-December 1997........................... 0 NA NA
January 1998-March 1998.............................. 0 NA NA
Fiscal 1998
April 1998-June 1998................................. 3,333 $4.56-$4.56 $4.56
July 1998-September 1998............................. 0 NA NA
October 1998-December 1998........................... 0 NA NA
January 1999-March 1999.............................. 33,601 $4.78-$5.25 $5.17
Fiscal 1999
April 1999-June 1999................................. 3,168 $5.00-$5.00 $5.00
</TABLE>
July 1, 1999-August , 1999
52
<PAGE>
The Company has not paid any dividends on its Common Stock and does not
foresee that it will pay dividends on its Common Stock in the near future. Under
the terms of the Plan, the Company must pay to certain holders of creditors'
claims $1,250,000 before it can pay any dividends to stockholders.
No dividends are payable unless declared by the Board of Directors.
OTHER MATTERS
The Board does not know of other matters which are likely to be brought
before the Annual Meeting. However, in the event that any other matters properly
come before the Annual Meeting, the persons named in the enclosed proxy are
expected to vote the shares represented by such proxy on such matters in
accordance with their best judgment.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Meeting and the enclosed proxy is to be borne by the Company.
ADDITIONAL INFORMATION
Financial Information
The Company hereby incorporates by reference (a) the Financial
Statements and the notes thereto contained on pages F-1 through F-20 of the
Company's 1999 10-K/A Annual Report, (b) the report of independent certified
public accountants thereon contained on page F-1 of the 1999 10-K/A Annual
Report, (c) the Financial Statement Schedule contained on page 30 of the 1999
10-K/A Annual Report, (d) Selected Financial Data contained on pages 10 and 11
of the 1999 10-K/A Annual Report, (e) Management's Discussion and Analysis of
Financial Condition and Results of Operations contained on pages 12 through 21
of the 1999 10-K/A Annual Report, (f) the Financial Statements and notes thereto
contained on pages 3 through 8 of the 10-Q Report and (g) Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained on pages 9 through 14 of the 10-Q Report. To the extent that such
filings include forward-looking statements relative to the going-private
transaction discussed in this proxy statement, such forward-looking statements
will not be entitled to the safe-harbor for forward-looking statements otherwise
provided by the Securities Litigation Reform Act of 1995.
In addition, the following sets forth certain financial information for
the Company and its subsidiaries for and as of the following periods and dates:
<TABLE>
<CAPTION>
Year Ended Quarter Ended
March 31, 1999 March 31, 1998 June 30, 1999 June 30, 1998
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings
to Fixed Charges 3.25 to 1 .16 to 1 2.07 to 1 5.14 to 1
Book Value Per Share $9.97 $6.92 $10.26 $8.77
</TABLE>
The number of common shares deemed outstanding for purposes of the
calculation of book value per common share at March 31, 1999 was 857,385 shares
and at March 31, 1998 was 930,298 shares. The number of common shares deemed
outstanding for purposes of the calculation of book value per common share at
June 30, 1999 was 869,214 shares and at June 30, 1998 was 926,965 shares.
53
<PAGE>
Cost of Proxy Solicitation and the Reverse Stock Split
The cost of preparing, assembling and mailing this proxy soliciting
material and Notice of Annual Meeting of Stockholders will be paid by the
Company. The Company may retain Corporate Investor Communication, Inc., a
professional soliciting organization, to assist in soliciting proxies for a fee
based on the number of telephone calls made plus reimbursement of reasonable
out-of-pocket expenses. Solicitation by mail, telephone, facsimile, or personal
solicitation may also be done by directors, executive officers, or regular
employees of the Company and its subsidiaries, for which they will receive no
additional compensation. Brokerage houses and other nominees, fiduciaries, and
custodians nominally holding shares of the Company's stock as of the record date
will be requested to forward proxy soliciting material to the beneficial owners
of such shares, and will be reimbursed by the Company for their reasonable
expenses.
The following is an estimate of the costs incurred or expected to be
incurred by the Company in connection with the Reverse Stock Split Proposal
excluding payments to be made to Cashed-Out Stockholders. Amounts shown below
exclude the cost of paying for fractional shares after the reverse stock split
is effected. Final costs of the transaction may be more, but the Company intends
to use its best efforts to cause than to be less, than the estimates shown
below.
Professional Fees, disbursements and $ 130,000
other charges
Transfer and exchange agent fees 22,000
Printing, mailing and Proxy Solicitation
costs 45,000
Other costs including Commission filing
fees, facility rental etc. 43,000
-------
Total $ 240,000
=======
These expenses include the normal costs of preparing and mailing proxy
materials and conducting the Annual Meeting of Stockholders.
The Company intends to indirectly finance the reverse stock split
(including the cost of paying for fractional shares after the reverse stock
split is effected) by using funds available to it under its line of credit
facility at NationsBank of Florida, N.A. (See also "Special Factors--Financial
Effects of the Reverse Stock Split.")
Independent Public Accountants
Representatives of Arthur Andersen LLP, the Company's independent
accountants for the fiscal year ended March 31, 1999, are not expected to be
present at the Annual Meeting. No accountant has been selected or recommended by
the Company for the fiscal year ending March 31, 2000, as the Company and its
current accountants have not yet reached agreement on appropriate levels of
compensation.
Stockholder Proposals for 2000 Annual Meeting
From time to time, stockholders present proposals which may be proper
subjects for inclusion in the Proxy Statement and for consideration at the
Annual Meeting of Stockholders. If registration of the Company's Common Stock
has not been terminated prior to 2000, proposals of stockholders of the Company
intended to be presented at the Annual Meeting of Stockholders of the Company in
2000 must
54
<PAGE>
be received by the Secretary of the Company at 9950 Princess Palm Ave, Suite
112, Tampa, Florida 33619 not later than May __, 2000 and must otherwise comply
with the rules of the Securities and Exchange Commission to be eligible for
inclusion in the Proxy Statement and proxy for the Annual Meeting in 2000. If
the date of such meeting is changed by more than thirty (30) days from its
currently contemplated date, proposals must be received a reasonable time before
solicitation of proxies for such meeting is made.
Available Information
The Company is subject to the informational requirements of the 1934 Act
and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 and at the regional offices of the Commission located at
7 World Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and Suite
1400, Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material can also be obtained at prescribed rates by
writing to the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. In addition, such reports, proxy
statements and other information are available from the Edgar filings obtained
through the Commission Internet Website (http://www.sec.gov.)
The Company's Annual Report on Form 10-K/A and Quarterly Report on Form 10-Q
The Company's 1999 10-K/A Annual Report including the financial
statements and schedules thereto and the Company's 10-Q Report including the
financial statements and schedules thereto, both of which the Company has filed
with the Securities and Exchange Commission, are being mailed to all
stockholders of record together with the Proxy Statement.
Additional copies of the 1999 10-K/A Annual Report and the 10-Q Report
will be provided without charge upon the written request of any stockholder.
Such requests may be sent to Robert I. Antle, Executive Vice President,
Secretary and Chief Financial Officer, International American Homes, Inc., 9950
Princess Palm Ave, Suite 112, Tampa, Florida 33619.
Incorporation of Certain Documents by Reference
The Company's 1999 10-K/A Annual Report and 10-Q Report, each filed with
the Commission by the Company (File No. 0-13800), are incorporated by reference
in this Proxy Statement. To the extent that such filings include forward-looking
statements relative to the going-private transaction discussed in this proxy
statement, such forward-looking statements will not be entitled to the
safe-harbor for forward-looking statements provided by the Securities Litigation
Reform Act of 1995.
55
<PAGE>
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein (or in any other subsequently filed documents which also is deemed to be
incorporated by reference herein) modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.
August ___, 1999
By Order of the Board of Directors
Robert I. Antle
Executive Vice President, Secretary and Chief Financial Officer
Stockholders who desire to have their stock voted at the Meeting are
requested to mark, sign and date the enclosed proxy card and return it promptly
in the enclosed postage-paid envelope. Stockholders may revoke their proxies at
any time prior to the Annual Meeting and stockholders who are present at the
Annual Meeting may revoke their proxies and vote, if they so desire, in person.
56
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
INTERNATIONAL AMERICAN HOMES, INC.
-----------------------------------------------------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
-----------------------------------------------------------------------
INTERNATIONAL AMERICAN HOMES, INC., a Delaware corporation, does hereby
certify as follows:
FIRST: The first paragraph of Paragraph 5 of the Corporation's Restated
Certificate of Incorporation is hereby amended to read in its entirety as set
forth below:
"The total number of shares of capital stock which the
Corporation shall have authority to issue is eleven thousand (11,000),
of which ten thousand (10,000) shall be shares of common stock with a
par value of $.01 per share (the "Common Stock") and one thousand
(1,000) shall be shares of preferred stock with a par value of $.01 per
share (the "Preferred Stock").1/ Each share of Common Stock issued and
outstanding or issued and held in the treasury of the Corporation as of
the close of business on the date (the "Effective Date") on which the
amendment to the Restated Certificate of Incorporation of the
Corporation adding this sentence shall become effective, is hereby
automatically and without further action reclassified, converted, and
changed into one-five hundredth (1/500th) of a share of Common Stock,
par value $.01 per share, provided that no fractional shares shall be
issued to any stockholder of record holding less than one (1) share of
Common Stock pursuant to and immediately after such reclassification,
conversion and change. In lieu of issuing fractional shares to any
stockholder of the Corporation, who, following the reverse stock split,
would hold less than one share of Common Stock of record in any discrete
account, shall be paid an amount equal to the product obtained by
multiplying (i) 500 times the weighted average trading price per share
of all sales of Common Stock made during the period beginning January 1,
1999 and ending on the twelfth business day next following the date of
the Notice of Annual Meeting and Proxy Statement relating to the
amendment to the Restated Certificate of Incorporation of the
Corporation adding this sentence, by (ii) a fraction, the numerator of
which shall be the number of shares of Common Stock owned by such
stockholder of record in such account immediately prior to the reverse
stock split and the denominator of which shall be 500. Each certificate
for Common Stock outstanding or held in treasury on the Effective Date
shall thereupon and thereafter evidence the number of shares of Common
Stock, and/or the right to receive cash into which such shares shall
- --------
1/ If the Reverse Stock Split Proposal is approved but the
reduction in authorized shares is not approved this sentence
will be revised to accord with the present authorized number of
shares.
A-1
<PAGE>
have been reclassified, converted and changed, and may be surrendered to
the Corporation for cancellation in exchange for new certificates
representing such number of shares and/ or such cash."
SECOND: The foregoing amendments were duly adopted in accordance with
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
duly executed in its corporate name this ___ day of ________, 1999.
INTERNATIONAL AMERICAN HOMES, INC.
By: _____________________________
Name:
Title:
ATTEST:
By: ___________________________________
Name:
Title:
A-2
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS SEPTEMBER __, 1999
Whether or not you expect to attend the meeting, you are urged to
execute and return this proxy, which may be revoked at any time prior to its
use.
The undersigned hereby appoints Robert J. Suarez and Robert I. Antle
individually as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and to vote, as designated below,
all of the shares of Common Stock of International American Homes, Inc. (the
"Company") held of record by the undersigned on August , 1999 at the annual
meeting of stockholders to be held on September __, 1999 or at any adjournment
or postponement thereof.
(Continued, and to be dated and signed on the reverse side.)
<PAGE>
1. PROPOSAL ONE--ELECTION OF DIRECTORS NOMINATED AND LISTED BELOW
FOR ALL nominees listed below [ ] WITHHOLD AUTHORITY to vote [ ] Exception [ ]
for all nominees listed below
Class I (terms expiring in 2002) nominees:
William D. Aiken and Jeffrey D. Prol;
*(Instruction: To withhold authority to vote for any individual nominee, mark
the Exception Box and write that nominee's name in the space provided below)
-------------------------------------------------
2. PROPOSAL TWO--Approval of amendment to the Restated Certificate of
Incorporation of the Company to effect a 1-for-500 reverse stock split of the
Company's issued and outstanding common stock, par value $.01 per share and to
provide for cash to be paid (in lieu of fractional shares) to holders of record
of fewer than 500 shares in any discrete account.
This proposal is intended to enable the Company to go private. Holders
of fewer than 500 shares in any discrete account will, as to such account,
receive cash in lieu of fractional shares and have no continuing interest in the
Company. The Company intends to issue a press release announcing the amount of
cash per share calculated to be paid to holders of record of fewer than 500
shares in any discrete account (in lieu of fractional shares) promptly after
such amount is determined. In addition stockholders may inquire about actual
cash-out amount by calling the Company's transfer agent, First Union National
Bank, at 1-800-829-8432 after September __, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL THREE--Approval of amendment to the Restated Certificate of
Incorporation of the Company to reduce the total number of shares of authorized
capital stock of the Company to eleven thousand (11,000), of which ten thousand
(10,000) shall be shares of Common Stock and one thousand (1,000) shall be
shares of Preferred Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting and any adjournment or
postponement thereof.
Address Change [ ]
and/or Comments
NOTE: Proposal Three is contingent on Proposal Two being approved.
<PAGE>
PROXY TABULATION
NOTE: Signatures should agree with the name specified herein. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. For joint accounts or co-fiduciaries, all joint owners or
co-fiduciaries should sign.
<TABLE>
<CAPTION>
<S> <C>
THIS PROXY WHEN
PROPERLY
EXECUTED WILL
BE VOTED IN THE
MANNER DIRECTED
HEREIN BY THE
UNDERSIGNED
STOCKHOLDERS.
IF NO DIRECTION
IS MADE, THE
PROXY WILL BE
VOTED FOR
PROPOSAL 1,
PROPOSAL 2 AND
PROPOSAL 3.
Dated________________________________________, 1999
---------------------------------------------------
Signature
---------------------------------------------------
Signature, if held jointly
SIGN, DATE, AND RETURN THE PROXY CARD Votes MUST be indicated (x) in Black or Blue ink.
PROMPTLY USING THE ENCLOSED ENVELOPE.
</TABLE>
================================================================================
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
================================================================================
<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
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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
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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
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<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.
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(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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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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(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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(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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(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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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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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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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.
-26-
<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.
-27-
<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"
-28-
<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"
-29-
<PAGE>
EXHIBITS
A Draw Sheets
B Hazardous Substance Certificate and Indemnification Agreement
-30-
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-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
(MARK ONE)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
--------------- ---------------
COMMISSION FILE NUMBER 0-13800
INTERNATIONAL AMERICAN HOMES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2472608
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
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
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since
last report)
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 |_|
APPLICABLE ONLY TO ISSUERS 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 |_|
As of July 31, 1999, the number of shares outstanding of the registrant's common
stock, par value $.01, was 870,880.
================================================================================
Total number of pages: 16
PAGE 1
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
Index
Page
----
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) as of June
30, 1999 and March 31, 1999 ........................................3
Consolidated Statements of Income and Retained
Earnings (Unaudited) for the three months ended
June 30,1999 and 1998 ..............................................5
Consolidated Statements of Cash Flows (Unaudited)
for the three months ended June 30, 1999 and 1998 ..................6
Notes to Consolidated Financial Statements (Unaudited)..............7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................9
Item 3. Quantitative and Qualitative Disclosures About Market Risk ........15
Part II. Other Information:
Item 2. Changes in Securities and Use of Proceeds..........................15
Item 6. Exhibits and Reports on Form 8-K...................................15
Signatures ...................................................................16
PAGE 2
<PAGE>
Part I. Financial Information
ITEM 1
FINANCIAL STATEMENTS
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
ASSETS
June 30, 1999 March 31, 1999
------------- ---------------
CASH AND CASH EQUIVALENTS - including $40 and $ 2,077 $ 1,461
$40 restricted, respectively
RECEIVABLES 1,306 1,626
REAL ESTATE INVENTORY 17,640 18,247
COLLATERAL FOR BONDS PAYABLE 2,926 3,199
PROPERTY AND EQUIPMENT - less accumulated
depreciation of $545 and
$513, respectively 17 49
OTHER ASSETS 28 186
------- -------
TOTAL ASSETS $23,994 $24,768
======= =======
The accompanying notes are an integral part of these consolidated
balance sheets.
PAGE 3
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, 1999 March 31, 1999
------------- --------------
LIABILITIES
MORTAGE NOTES AND LOANS PAYABLE $ 8,318 $ 8,571
BONDS PAYABLE 2,808 3,068
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 3,715 4,403
CUSTOMER DEPOSITS 235 180
-------- --------
Total Liabilities 15,076 16,222
-------- --------
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 authorized; 1,000,952
and 985,955 shares issued, respectively;
869,214 and 857,385 shares outstanding,
respectively 10 10
ADDITIONAL PAID-IN CAPITAL 2,323 2,267
RETAINED EARNINGS 6,586 6,270
TREASURY STOCK - 131,738 and 128,570 shares,
respectively (1) (1)
-------- --------
Total Stockholders' Equity 8,918 8,546
======== ========
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 23,994 $ 24,768
======== ========
The accompanying notes are an integral part of these
consolidated balance sheets.
PAGE 4
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED
EARNINGS (Dollars in thousands, except per
share amounts)
(Unaudited)
Three Months Ended June 30,
---------------------
1999 1998
--------- ---------
REVENUES
Home sales $ 14,030 $ 14,551
Interest and other income 79 75
--------- ---------
14,109 14,626
--------- ---------
COSTS AND EXPENSES
Cost of home sales 11,792 12,276
Selling, general and administrative 1,679 1,589
Interest 70 83
Depreciation 30 24
Restructuring provision 50 --
Reversal of creditor liability -- (1,322)
--------- ---------
13,621 12,650
--------- ---------
INCOME BEFORE INCOME TAXES 488 1,976
PROVISION FOR INCOME TAXES 172 270
--------- ---------
NET INCOME 316 1,706
RETAINED EARNINGS, BEGINNING OF PERIOD 6,270 4,025
========= =========
RETAINED EARNINGS, END OF PERIOD $ 6,586 $ 5,731
========= =========
BASIC NET INCOME PER SHARE $ .37 $ 1.84
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (as adjusted for the
reverse stock split effective on
December 1, 1998) 858,355 926,965
========= =========
DILUTED NET INCOME PER SHARE $ .36 $ 1.84
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES (as adjusted
for the reverse stock split effective
on December 1, 1998) 875,708 926,965
========= =========
The accompanying notes are an integral part of these
consolidated statements.
PAGE 5
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
------------------
1999 1998
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 316 $ 1,706
Adjustments to reconcile net income to net cash
provided by operating activities:
Reversal of creditor liability -- (1,322)
Depreciation 30 24
Changes in operating assets and liabilities
Decrease (Increase) in receivables 320 (2,142)
Decrease in real estate inventory 607 3,647
Decrease in collateral for bonds payable 273 251
Decrease in accounts payable and accrued liabilities (688) (601)
Increase (Decrease) in customer deposits 55 (58)
Decrease in other assets 158 137
------- -------
Net cash provided by operating activities 1,071 1,642
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash -- 239
Property and equipment, net 2 2
------- -------
Net cash provided by investing activities 2 241
------- -------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Proceeds from mortgage notes and loans payable -- 2,671
Payments of mortgage notes and loans payable (253) (5,264)
Repayments of bonds payable - finance subsidiaries (260) (243)
Proceeds from stock options exercised 57 --
Purchase of treasury stock (16) (15)
Return of unclaimed bankruptcy distributions 15 --
------- -------
Net cash used in financing activities (457) (2,851)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 616 (968)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,421 1,171
======= =======
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,037 $ 203
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 243 $ 332
======= =======
Income taxes $ 85 $ 0
======= =======
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
PAGE 6
<PAGE>
INTERNATIONAL AMERICAN HOMES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
International American Homes, Inc. (the "Company") was incorporated under the
laws of the State of Delaware on April 27, 1983. The Company, through its
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.
The interim consolidated financial statements have been prepared without audit
and pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, all adjustments for interim periods
presented have been made (which include only normal recurring accruals and
deferrals) for a fair presentation of consolidated financial position, results
of operations, and cash flows. The consolidated financial statements and
condensed notes should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included in the Company's latest Annual Report on
Form 10-K. Results for interim periods are not necessarily indicative of the
results which might be expected for a full year.
NOTE 2 - 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.
NOTE 3 - PLAN OF REORGANIZATION
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 a continuing dividend restriction. The dividend restriction
requires that before the Company can pay any dividends to stockholders it must
first pay to certain holders of creditor's claims $1,250,000.
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. Accordingly, no distribution to
creditors was required. At June 30, 1998, the Company reversed the estimated
liability and recognized income of $1,322,000.
PAGE 7
<PAGE>
NOTE 4 - REAL ESTATE INVENTORY
Real estate inventory consists of the following ( in thousands):
June 30, 1999 March 31, 1999
------------- --------------
Accumulated costs of construction
completed and in progress $ 8,007 $ 8,468
Land and land development costs 9,476 9,610
Land options and deposits 157 169
------- -------
$17,640 $18,247
======= =======
NOTE 5 - 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 that
comprise the collateral for bonds payable roughly equate with the interest rates
on the related bonds payable.
Condensed financial information is as follows (in thousands):
Condensed Balance Sheets
(Unaudited)
June 30, 1999 March 31, 1999
------------- --------------
Assets:
Collateral for bonds payable $2,926 $3,199
Other Assets 2 3
------ ------
Total Assets $2,928 $3,202
====== ======
Liabilities and Equity:
Bonds payable $2,808 $3,068
Equity and intercompany advances 120 134
------ ------
Total Liabilities and Equity $2,928 $3,202
====== ======
Condensed Statements of Operations
(Unaudited)
Three Months Ended June 30,
---------------------------
1999 1998
---- ----
Revenues - Interest and other income $67 $86
=== ===
Income before income taxes $ 2 $ 3
=== ===
PAGE 8
<PAGE>
NOTE 6 - COMMITMENTS AND CONTINGENCIES
During the quarter ended June 30, 1999 an additional charge of $50,000 was taken
to reflect the current period estimate for completing the termination of
home-building operations in Metropolitan Washington, D.C. The interim
Consolidated Financial Statements at June 30, 1999 reflect a liability of
$44,000 representing the remaining balance of the additional restructuring
provision associated with the termination of home-building operations in
Metropolitan Washington, D.C.. Although the Company believes that the remaining
provision is sufficient based on current period estimates, the actual cost may
be greater or less. (See note 1)
At June 30, 1999, the Company had commitments to purchase 567 finished building
lots in the Greater Tampa area at a total purchase price of approximately
$15,627,000 over a three-year period. Substantial deposits will be forfeited if
the Company is unable to satisfy these commitments. See Management Discussion
and Analysis of Financial Condition and Results of Operations- Liquidity and
Capital Resources.
The Company is involved from time to time in litigation arising in the ordinary
course of business, none of which is expected to have a material adverse effect
on the Company's financial position or the results of operations.
NOTE 7 - COMMON STOCK
At the 1998 Annual Meeting of Stockholders, which was held on September 17,
1998, the stockholders approved a proposal to adopt an 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. The Amendment became effective with the filing of a Certificate of
Amendment with the Secretary of State of Delaware on December 1, 1998. The
effect of the Reverse Stock Split has been retroactively reflected in the
statements for all periods presented.
ITEM 2
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 Quarterly Report on Form
10-Q. Certain statements in this Item 2 and Notes to Financial Statements
(Unaudited) and elsewhere in this Quarterly Report on Form 10-Q constitute
"forward-looking statements." Such forward- looking statements include
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, that 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.
LIQUIDITY AND CAPITAL RESOURCES
The interim Consolidated Financial Statements for the quarter ended June 30,
1999 reflect a liability of $44,000 representing the remaining balance of the
additional restructuring provision associated with the termination of
home-building operations in Metropolitan Washington, D.C.. (see note 1) The
actual cost may be greater or less
PAGE 9
<PAGE>
than the remaining provision. The Company believes that it has sufficient cash
flow on hand to absorb the 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 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.
The Company currently has financing agreements in the aggregate amount of
$23,280,000 with commercial banks located in the areas in which its subsidiary
operates. The terms of these financing agreements vary, are each for one year or
more from their date of origination, are generally guaranteed by the Company,
and are all secured by the related real estate inventory. The Company's Chairman
and President has agreed to personally guarantee a portion of the financing
agreements including a specific indemnification of certain environmental
conditions. 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 at June 30, 1999.
The Company generally acquires finished building lots under contracts which
spread the time for acquisition of such lots over a period of time that roughly
coincides with the estimated time required for the sale of the homes on those
lots. At June 30, 1999, the Company had commitments to purchase 567 finished
building lots in the Greater Tampa area at a total purchase price of
approximately $15,627,000 over a three-year period. These commitments assure a
continuing supply of finished building lots in the future. In conjunction
therewith $157,000 of land options and deposits have been paid. A substantial
portion of those 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 June 30, 1999, the Company had developed 257 of those
undeveloped lots into finished building lots and delivered 164 homes on those
lots in prior periods up to and including June 30, 1999. 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 expenditure 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 areas where the Company operates and the ability of the Company to maintain
a continued supply of finished building lots will also affect the Company's
long-term liquidity. Management believes that the Company currently has adequate
financing and liquidity to meet its short-term financial obligations and to fund
the short-term acquisition and construction of inventory. However, there is no
assurance that such 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.
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, results of operations or financial condition without taking
into account the Company's efforts to avoid those consequences. Nevertheless
management is
PAGE 10
<PAGE>
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
$20,000. 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 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.
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.
PAGE 11
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain information with respect to homes
delivered and homes sold during the periods presented, as well as homes sold
under contract but not delivered ("Backlog") at the dates shown (dollars in
thousands).
Three Months Ended
June 30,
---------------------
1999 1998
------- -------
Homes delivered
Units 93 109
Home sales revenue $14,030 $14,551
Average sales price $ 150.9 $ 133.5
Homes sold
Units 110 94
Sales value $16,646 $13,137
Average sales price $ 151.3 $ 139.8
June 30,
---------------------
1999 1998
------- -------
Backlog
Units 122 92
Sales value $17,831 $13,301
Average sales price $ 146.2 $ 144.6
The decrease in home sales revenues for the three months ended June 30, 1999
compared to the three months ended June 30, 1998 results from a decrease in the
number of units delivered substantially offset by an increase in average sales
price of the units delivered. The decrease in the number of units delivered
results generally from 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 three
months ended June 30, 1999 compared to the three months ended June 30, 1998. The
increase is attributed to an increase in the number of operating communities and
a greater number of sales in each community.
The increase in the average sales price of homes sold during the three months
ended June 30, 1999 compared to the three months ended June 30, 1998 results
from a wider product range and price increases.
PAGE 12
<PAGE>
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
The following table sets forth, for the periods indicated, certain information
regarding the Company's operations (dollars in thousands).
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------------
1999 1998
--------------- ---------------
Dollars % Dollars %
------- ----- ------- -----
<S> <C> <C> <C> <C>
Home sales revenues $14,030 100.0 $14,551 100.0
Cost of home sales 11,792 84.0 12,276 84.4
Gross profit 2,238 16.0 2,275 15.6
Selling, general and administrative expenses 1,679 12.0 1,589 10.9
Income before restructuring charge, reversal of
creditor liability and income taxes 538 3.9 654 4.5
Restructuring charge 50 .4 -- --
Reversal of creditor liability -- -- 1,322 9.1
Income before income taxes 488 3.5 1,976 13.6
</TABLE>
Gross profit decreased for the three months ended June 30, 1999 while gross
profit as a percentage of home sales revenues increased. The decrease in gross
profit is attributed to the reduction in home sales revenues, partially offset
by the higher gross profit percentage.
Selling, general and administrative expenses for the three months ended June 30,
1999 increased in amount and as a percentage of home sales revenues over the
prior comparable period. Selling expenses were constant in amount but increased
as a percentage of home sales revenues. The increase in percentage is attributed
to the absorption of fixed costs and other selling expenses over lower home
sales revenues. The increase in general and administrative expenses is
attributed primarily to higher employment costs. General and administrative
expenses increased as a percentage of home sales revenues as a result of the
increased costs and the reduction in home sales revenues.
The change in income before restructuring charge, reversal of creditor liability
and income taxes for the three months ended June 30, 1999 compared to the three
months ended June 30, 1998 reflects the changes in gross profit and selling,
general and administrative expenses.
The reversal of creditor liability results from the elimination of the estimated
liability for potential distributions of cash flow to creditors provided during
the year ended March 31, 1993. (see note 3, "plan of reorganization")
PAGE 13
<PAGE>
The change in income before income taxes for the three months ended June 30,
1999 compared to the three months ended June 30, 1998 reflects the changes in
all the components of income and expense set forth above.
For the three months ended June 30, 1999 and June 30, 1998 a provision for
income taxes of $172,000 and $270,000 was recorded. For both periods the rates
were calculated at statutory rates.
Interest and other income includes $67,000 and $86,000 and interest expense
include $65,000 and $83,000 for the three months ended June 30, 1999 and June
30, 1998 respectively, from wholly-owned finance subsidiaries established in
prior years to sell collateralized mortage obligations through participation in
various multi-builder bond programs.
PAGE 14
<PAGE>
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None
Part II. Other Information
ITEM 2
CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) On December 1, 1998 the Company effected a 1-for-3 reverse stock
split combination of its shares of common stock.
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
PAGE 15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERNATIONAL AMERICAN HOMES, INC.
Date: August 12, 1999 By: /s/ ROBERT J. SUAREZ
--------------------------------------
Robert J. Suarez
President
Date: August 12, 1999 By: /s/ ROBERT I. ANTLE
--------------------------------------
Robert I. Antle
Executive Vice President, Treasurer, and
Chief Financial Officer
PAGE 16
