SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission File Number 1-9393
INTERSTATE GENERAL COMPANY L.P.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1488756
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
222 Smallwood Village Center
St. Charles, Maryland 20602
- ------------------------------- --------------------------
(Address of principal executive Offices) (Zip Code)
Registrant's telephone number, including area code (301) 843-8600
----------------------
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Class A Units representing assignment of American Stock Exchange
beneficial ownership of Class A limited
partnership interest and evidenced by Pacific Stock Exchange
beneficial assignment certificates ("Units")
Securities registered pursuant to Section 12(g) of the Act:
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 is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
As of March 24, 1995 the aggregate market value of the Units held by
non-affiliates of the registrant based on the closing price reported on the
American Stock Exchange was $21,420,274
Class A Units Outstanding at March 24, 1995: 10,256,785 Class A Units
DOCUMENTS INCORPORATED BY REFERENCE
Form 10-K
Item
N/A
<PAGE>2
INTERSTATE GENERAL COMPANY L.P.
1994 Form 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
------
Page
----
Item 1. Business 3
Item 2. Properties 30
Item 3. Legal Proceedings 30
Item 4. Submission of Matters to a Vote
of Security Holders 31
PART II
-------
Item 5. Market Prices and Distribution on Units 32
Item 6. Selected Financial and Operating Data 32
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 34
Item 8. Financial Statements and Supplementary Data 49
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 125
PART III
--------
Item 10. Directors and Executive Officers
of the Registrant 126
Item 11. Executive Compensation 129
Item 12. Security Ownership of Certain
Unitholders and Management 133
Item 13. Certain Relationships and Related
Transactions 134
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 135
<PAGE>3
PART I
ITEM 1. BUSINESS
Interstate General Company L.P. ("IGC") was formed as a Delaware limited
partnership in 1986. IGC directly and through predecessors has been engaged in
business since 1957 and is the developer of the 9,100-acre planned community of
St. Charles, Maryland, located 23 miles southeast of Washington, D.C. It
engages in community development in Maryland, Virginia and Puerto Rico and in
homebuilding in Maryland, Virginia, North Carolina, South Carolina and Puerto
Rico. IGC also holds ownership interests in investment properties, and manages
rental apartment projects in Puerto Rico, Maryland, Virginia, and Washington,
D.C. IGC is also engaged in the pre-development of municipal waste treatment
facilities.
The following is a discussion of the business activities of IGC and its
subsidiaries:
COMMUNITY DEVELOPMENT
IGC has extensive experience in developing planned communities. IGC, and
its predecessors, have developed sites for approximately 12,000 single-family
homes, condominiums and apartments in two planned communities in Puerto Rico
and one community in St. Charles, Maryland. In St. Charles, IGC has developed
approximately 4,000 acres of the planned 9,100-acre community. Outside of St.
Charles, IGC has land holdings planned for development of approximately 890
acres at two locations in Puerto Rico and approximately 1,600 acres at several
locations in suburban Washington, D.C., including Prince William County,
Virginia and Charles County, Prince George's County and St. Mary's County,
Maryland.
The aggregate number of residential lots and commercial and industrial
acres developed by IGC that have been sold during each of the past five years
is as follows:
Years Ended December 31,
----------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Community Development:
Residential lots sold 228 295 80 81 148
Residential lots used by IGC's
homebuilding division 44 91 120 140 155
--- --- --- --- ---
Total residential
lots used and sold 272 386 200 221 303
=== === === === ===
Commercial and business park acres sold 76 12 1 6 32
=== === === === ===
Undeveloped acres sold 20 27 46 -- --
=== === === === ===
Charles County, Maryland. IGC is the developer of the planned community
of St. Charles, Maryland. Located 23 miles southeast of Washington, D.C., St.
Charles consists of five separate villages: Smallwood, Westlake, Fairway,
Piney Reach and Wooded Glen. Each village consists of individually planned
neighborhoods and includes schools, churches, recreation centers, sports
<PAGE>4
facilities and a shopping center. Other amenities include parks, lakes, hiking
trails and bicycle paths. Charles County owns and manages an 18-hole public
golf course in St. Charles. Each community is planned for a mix of residential
housing, including detached homes, townhomes, multiplex units and rental
apartments. Typical lot sizes for detached homes range from 5,000 to 8,000
square feet.
A substantial portion of the households in St. Charles include persons who
work in Washington, D.C. and surrounding communities. Homebuyers and renters
are attracted to St. Charles in part by the prices of homes and apartments,
which are less expensive than similar homes and apartments in sections of the
metropolitan area closer to downtown Washington. In addition, the amenities of
a planned community, including extensive recreation and community facilities,
accessible shopping and schools within the community, have provided a desirable
alternative to subdivision developments in the metropolitan area. The
population of St. Charles is currently approximately 32,000 which has grown
significantly from the 1970 population of 4,200.
IGC's development of St. Charles as a planned community began in 1972 when
a comprehensive planned unit development (the "Master Plan") for St. Charles
was approved by the Charles County government. The Master Plan contemplates
construction of over 20,000 housing units and over 1,300 acres (including land
for roads, open space and storm water management) of commercial and industrial
development. Currently, there are over 10,500 completed housing units in
Smallwood and Westlake Villages, as well as schools, recreation facilities,
approximately 3 million square feet of developed commercial space and 1.4
million square feet of industrial buildings. IGC, through outside planners,
engineers, architects and contractors, obtains necessary approvals for land
development, plans individual neighborhoods in accordance with regulatory
requirements and constructs roads, utility facilities and community facilities.
IGC develops lots for sale for single-family homes, townhomes, apartment
complexes and commercial and industrial development.
St. Charles consists of approximately 9,100 acres. In addition, from 1987
to 1990, IGC acquired approximately 1,200 additional acres in Charles County
for future development. IGC currently owns approximately 5,500 acres of land
in Charles County. This land is planned for more than 15,000 housing units and
approximately 500 acres of commercial/industrial land including land for roads,
open space and storm water management.
Smallwood Village, the first of the five planned villages, contains
approximately 2,700 acres. Smallwood Village contains approximately 6,700
housing units in four neighborhoods, a 270,000-square-foot shopping center that
opened for business in 1981, and 250 acres of developed commercial and
industrial land. One of these neighborhoods, containing 800 acres and some
2,000 housing units, was not developed by IGC. Substantially all available
land has been developed and sold, except for approximately 45 commercial and
industrial acres and land for approximately 115 additional housing units.
Westlake Village, the second village, contains approximately 1,700 acres.
Development started in 1983 of approximately 4,300 units of single-family
homes, townhomes and apartments in Westlake. As of December 31, 1994, lots for
approximately 4,200 housing units had been sold to third party homebuilders or
sold by IGC in its own homebuilding operations. Westlake Village had
originally 538 acres of land designated for commercial use, of which
approximately 190 acres remain to be sold. Dorchester Greens, a 32 acre site
within Westlake Village, which was originally planned for commercial/light
<PAGE>5
industrial use, was approved for residential development by the Charles County
Commissioners late in 1994. Subdivision planning is currently in process for a
maximum of 145 lots. Most of 1995 will be needed to complete necessary
engineering and municipal reviews and approvals.
Fairway Village, the third village in St. Charles, contains 1,300 acres
including land for roads, open space, and storm water management. Development
is in the planning stage. The plan for Fairway Village has two neighborhoods
with a total of approximately 3,300 units. Thirty-five acres are planned for
commercial development, in addition to a 215-acre business park adjacent to
Fairway Village, of which 159 acres remain to be sold. IGC received
preliminary plan approval for Fairway Village from Charles County in August of
1994.
Wooded Glen and Piney Reach, the remaining two villages, will be the final
phases of development for St. Charles. These villages will consist of
approximately 3,400 acres, including land for open space, roads and storm water
management. Approximately 10,000 residential units are planned for the two
villages. The villages also include approximately 350 acres of industrial
property including a 114-acre state-of-the-art landfill owned and operated by
Charles County. Approximately 140 acres of commercial and industrial property
remain to be sold.
Commercial and Business Park Property - Commercial property is located
primarily in Westlake Village, but each village has ample commercial acreage to
meet the service needs of the Village's residents. At the present time,
approximately 3.0 million square feet of commercial space in St. Charles has
been completed. The most significant commercial development in St. Charles is
along Route 301, a four-lane divided highway. In 1985, an affiliate of Melvin
Simon & Associates Inc. acquired 169 acres from IGC for construction of a
regional shopping mall and a shopping center. The shopping center was
completed in 1987, and contains approximately 400,000 square feet of retail
space and has as tenants T. J. Maxx, Ames, Hechinger, Service Merchandise and
CVS, among others. The regional shopping mall opened in March 1990, and has as
major tenants Hecht's, Sears, J.C. Penney and Montgomery Ward. The regional
shopping mall, with approximately 1.1 million square feet, is the largest
shopping center in the region and attracts customers from throughout Southern
Maryland. In response to strong sales levels at the center, Hecht's, one of
the center's major tenants, recently expanded its retail space within the
center during 1994. Approximately 200 acres of commercial land surrounding the
regional shopping mall are available for sale in tracts ranging from one to 20
acres. In 1994, a five acre site was sold to a local church and two acres were
sold to a local volunteer fire department.
The business park property in St. Charles consists of three business parks
which include approximately 800 acres. Land development of the first park,
totaling 297 acres (including land for roads, open space and storm water
management) in Smallwood Village, has been completed and 45 acres remain for
sale. Approximately 1.4 million square feet of industrial buildings, primarily
for warehouse use are completed. Land development in a second park is
partially complete, consisting of 215 acres (including land for roads, open
space and storm water management) adjacent to Fairway Village of which 56 acres
have been sold. This second park is bisected by a four-lane divided highway.
Both business parks are served by ConRail.
In connection with its community development activities, IGC and its
affiliates have in the past developed commercial and industrial properties,
including shopping centers, office buildings and warehouses, in Puerto Rico and
<PAGE>6
St. Charles. Although IGC does not expect to engage in development of such
structures in the near future, IGC may engage in such development if
appropriate opportunities arise. Meanwhile, IGC will continue to develop and
sell land for commercial and business park use.
Environmental Concerns - In 1977, a full environmental impact statement
for the Master Plan was prepared by the federal government and considered at
federal, state and local levels. The statement included specific consideration
of the effect of planned development upon land classified as "wetlands".
Development of wetlands is subject to approval by the U.S. Army Corps of
Engineers ("the Corps"), the U.S. Environmental Protection Agency ("EPA") and
the State of Maryland. While the Corps has approved development of land
containing wetlands where adequate steps were taken to mitigate the impact on
wetlands, proposed policies by the state and Federal agencies may further
restrict development which disturbs wetlands.
Whitman, Requardt and Associates ("WRA"), an independent engineering
consultant to IGC, and HOH Associates, Inc. ("HOH"), an independent land
planning consultant, were retained to assist IGC in evaluating the potential
effects of the new policies on the development of St. Charles. Based upon
currently available information, WRA believes that less than 15% of the
remaining land planned for development in Westlake Village and less than 8% of
the land in the undeveloped villages of Fairway, Wooded Glen and Piney Reach,
are subject to wetlands classification. Moreover, HOH believes that a
substantial portion of the potential wetlands areas can be incorporated into
the 20% open space contemplated by the Master Plan. Management believes that
this should minimize any adverse effect of wetlands regulation on IGC's planned
development at St. Charles.
In March 1990, the Company received a notice (the "Notice") from the Corps
asserting that unauthorized fill materials had been placed in portions of an
approximately five-acre parcel in Charles County, Maryland (the "Site") owned
by the Company and claimed by the Corps to constitute wetlands subject to
regulation pursuant to the Clean Water Act. Following receipt of the Notice,
the Company ceased development of the Site and remediated a portion of the Site
in accordance with instructions issued by the Corps. The Company also
commenced discussions with the Corps regarding mitigation plans that would
preserve some commercial value for the Site. The Company took the position
that a prohibition of development on the entire Site would constitute a
governmental taking for which the Company would be entitled to compensation.
In November 1993, the Company believed it had an agreement in principle with
the Corps that would permit commercial development of a portion of the Site.
However, in early 1994, the Company became aware that this matter had been
referred to the U.S. Attorney for the District of Maryland who has convened a
grand jury and is now conducting an investigation of the Company's wetlands
practices in St. Charles including the Site. A representative of the U.S.
Attorney has advised the Company that the investigation is expected to be
completed during the second quarter at which time the U.S. Attorney will
determine whether to charge the Company with a violation of the Clean Water Act
or other laws. Management believes the Company has complied with applicable
laws and regulations governing wetlands practices, and therefore intends to
defend vigorously if charged by the U.S. Attorney with any violation relating
to wetlands practices. Nonetheless, the Company is not presently in a position
to determine whether it will be charged with a violation of any laws, or if
charged, what the outcome will be.
<PAGE>
<PAGE>7
Utilities - Water supply and sewage treatment for St. Charles are provided
by Charles County under agreements with IGC. In 1989, the Charles County
government and IGC entered into an agreement (the "Water and Sewer Agreement")
which provides for the continued availability of water and sewer services for
the balance of housing units to be developed in St. Charles. For its part, IGC
has agreed to a cumulative limit of the community's growth to 600 units per
year during the 1990's and 650 units thereafter until full buildout. Water is
presently being supplied from county wells. Additionally, the Charles County
government has agreed with neighboring Prince George's County to purchase water
from the Washington Suburban Sanitary Commission, a regional water and sewer
authority, through transmission lines to be constructed during the next few
years. In the opinion of WRA and IGC, the County will be able to provide
sufficient water for full planned development of St. Charles. Pursuant to the
Water and Sewer Agreement with Charles County, St. Charles is permitted to
discharge into the existing county sewage facilities. This agreement obligates
Charles County to provide water and sewer service to St. Charles for the 24,730
units planned for St. Charles.
Zoning and Other Ordinances - The Master Plan has been incorporated in
Charles County's Comprehensive Master Plan. Notwithstanding such zoning,
county approval of specific plans for each village is required. Such approval
has been obtained with respect to Smallwood Village, Westlake Village and
Fairway Village. Approval has not yet been sought with respect to the other
two villages. IGC believes that the land in Westlake and Fairway Villages will
be sufficient for IGC's development and homebuilding operations in St. Charles
for the next 10-12 years. Under the applicable regulations, St. Charles must
be developed so as to achieve balanced residential and commercial growth such
that Charles County revenues generated from St. Charles each year equal or
exceed the cost of Charles County services to St. Charles. In the event that
such a balance is not maintained, the Charles County government could delay
development or alter the terms of the Master Plan. The latest study conducted
by the Company's independent consultants during 1994 indicated that St. Charles
had a significant favorable impact on the County.
Brandywine Investment Associates Limited Partnership. IGC is the general
partner in a limited partnership that owns a 277-acre tract of land in
Brandywine, Prince George's County, Maryland. The property was acquired in
October 1985 in partial consideration for the regional shopping mall site in
St. Charles. The partnership agreement provides for IGC to receive
reimbursement of expenses, a development fee equal to 5% of development costs
and the first $5,540,000 of net cash proceeds from the property, after which
the remaining proceeds are to be divided equally between IGC and the non-
affiliated limited partners.
The tract is part of a sectional map amendment process by the regional
planning agency, Maryland-National Capital Park and Planning ("MNCPP"). The
Company's staff and planners have been working with the MNCPP staff in an
effort to achieve approval for a community of some 1,200 housing units and
approximately 400,000 square feet for various commercial uses. In November of
1994, the Company received approval for the development of the first 300 of
these housing units.
Montclair, Prince William County, Virginia. Montclair, a planned unit
development of approximately 4,000 residential units, was initially undertaken
by other developers. Montclair is located in Prince William County, Virginia,
approximately 28 miles southwest of Washington, D.C. and is developed around a
108-acre lake.
<PAGE>8
IGC owns the last remaining developable land in Montclair. Land
development began in 1987 and the remaining land is currently planned for over
300 residential units. Completed amenities include a $1 million recreation
complex including clubhouse, olympic pool, tennis courts, multi-purpose court,
playgrounds and ballfield. In 1994, IGC sold 105 lots under an option contract
with a third party builder, and 335 lots remain to be sold.
Lexington Park, St. Mary's County, Maryland. In 1987, IGC purchased
Westbury, a 170-acre planned unit development currently zoned for 150 single-
family homes, 600 multi-family units and 16 acres of commercial and industrial
property in St. Mary's County near the Patuxent River Naval Air Station. The
community offers residents use of a six-acre recreation center, including
swimming pool, lake and clubhouse. Development of Phase I commenced in 1988,
and consists of two townhome and one single-family housing developments. The
two townhome developments are further discussed in the Business-Homebuilding
section of this document. The remaining single family lots were sold to an
outside homebuilder during 1994. Due to higher demand for single-family lots
within the development, IGC is currently in the process of converting 34 lots
zoned for townhouse units into 14 single-family lots. Development of Phase II
of Westbury is currently in the planning stage.
Puerto Rico. IGC's predecessor was a pioneer in planned communities on
large land parcels in Puerto Rico. It developed sites for more than 2,100
single-family homes, condominiums and apartments in the El Senorial subdivision
in Rio Piedras, Puerto Rico, and approximately 1,500 single-family home sites
in the Parkville-College Park urbanizations. IGC's current community
development activity is being conducted through Land Development Associates
S.E. ("LDA"), its 80%-owned subsidiary. The remaining 20% is owned by an
unrelated party, Supra and Co. ("Supra").
In December 1989, LDA acquired two land parcels of approximately 975 acres
(885 acres remaining at December 31, 1994) in Carolina and Canovanas, Puerto
Rico (together, the "LDA Properties") from San Juan Racing Association, Inc.
for a purchase price, including closing and other costs, of $20 million. One
parcel currently owned by LDA, (including the 61-acre sale discussed below), of
approximately 432 acres ("Parque Escorial"), now reduced to 346 acres, was the
site of the former El Comandante Race Track in Carolina and the other parcel of
approximately 539 acres ("Parque El Comandante") surrounds the present El
Comandante Race Track in Canovanas. On March 28, 1991, LDA sold a 61-acre
parcel of land in the planned Parque Escorial development to a major retailer
who is developing a shopping center ("LDA Land Sale"). The purchase agreement
provided for an initial, non-refundable payment of $1.5 million and an
additional $12.0 million payable upon completing certain infrastructure plans
and signing contracts for infrastructure work. The closing took place in June
1994, and $7,266,000 of the $12 million was escrowed for infrastructure work
which commenced in October, 1994. On December 28, 1994, LDA sold another
commercial parcel of 1.4 acres to an auto dealer for approximately $1.2
million.
Zoning and Development - The master plan for the Parque Escorial site was
approved in October 1992 by the Puerto Rico Planning Board (the "Planning
Board") and the Planning Board approved a series of amendments in 1994.
Development work on the first phase commenced in October of 1994.
<PAGE>
<PAGE>9
Parque Escorial is a planned community encompassing a variety of uses and
will be a place where residents can live, work, play and shop in a pleasant and
ordered environment. A wide range of housing types will be available at Parque
Escorial, including single-family homes, apartments and condominiums. Security
will be provided at the main entrances into the residential area.
A commercial center fronting a major highway and two service centers will
provide a mix of retail, office and service uses. Twenty-seven percent of the
Parque Escorial land has been set aside for a variety of community facilities,
open space and roads.
IGC plans to develop and sell land parcels in Parque Escorial in phases
over the next ten years. The Parque Escorial land use summary approved by the
Planning Board is as follows:
Number of Dwelling % of
Acres Units Land Area
--------- -------- ---------
Residential
Medium high density 71.0 1,968
Medium density 79.4 669
Low density 21.6 63
Independent parcels 22.8 200
----- -----
194.8 2,900 45%
----- -----
Commercial, light industrial and office 120.3 28%
-----
Community
Private school 5.8
Private park 13.5
Public park 2.6
Private open space 53.8
Private community club 3.8
Roads 37.6
-----
117.1 27%
----- ----
Total 432.2 100%
===== ====
The master plan for Parque El Comandante is expected to be submitted to
the Planning Board in 1995. While there can be no assurance as to the
availability, IGC's management believes that there will be sufficient sewer,
water and electrical capacity for the community. The availability of such
capacity is a prerequisite to successful development.
<PAGE>
<PAGE>10
The preliminary plans for Parque El Comandante include a mix of uses
similar to Parque Escorial with land uses summarized as follows:
Number of % of
Uses Acres Land Area
---- --------- ---------
Residential (3,104 dwelling units) 325 60%
---
Commercial, light industrial and office 109 20%
---
Community
Public school 7
Park 9
Private open space 16
Community club 5
Roads 14
Other public uses 54
---
105 20%
--- ----
Total 539 100%
=== ====
Parque El Comandante will be a community of similar size and scope as
Parque Escorial and will feature security entrances to provide an environment
for pleasant living in a community affordable to moderate income residents.
The development process is expected to extend over a period of approximately 20
years, with site development work expected to commence in 1997.
Lots developed by LDA are expected to be sold by LDA to Supra and
unrelated developers, and IGC may purchase some of the lots for its own
homebuilding operations. The presence of a number of builders should provide a
mix of home styles in the communities.
Environmental Concerns - IGC believes that the Parque Escorial Master Plan
can be implemented without material adverse environmental impact and in
compliance with Planning Board environmental criteria. All of the concerned
agencies have endorsed Parque Escorial's Environmental Impact Statement which
was finalized on January 21, 1992.
The buyer of the 61-acre shopping center, assisted by LDA, submitted a
mitigation plan for 11.87 acres of wetlands on the shopping center site and
other Parque Escorial land. Final approval of the mitigation plan by the
Department of the Army was issued on August 13, 1993 and the construction of
the mitigation work commenced in October 1994.
Utilities - Development of LDA properties requires design and construction
of adequate infrastructure for streets, electrical, water, sewer and telephone
service.
Parque Escorial's Phase I infrastructure design is complete and
construction commenced in October 1994. Design of Phase II, which encompasses
1,000 residential lots has also been completed. Parque El Comandante
infrastructure design work has not been started.
<PAGE>11
The proposed water supply systems for Parque Escorial and Parque El
Comandante will connect with the existing Puerto Rico Aquaduct and Sewer
Authority ("PRASA") system. Systems consisting of trunk lines, a storage tank
and distribution loops to provide domestic, commercial and fire protection
water requirements will be provided by LDA.
For Parque Escorial, PRASA has approved the formation of a combine (the
"Combine") of LDA and two other developers in the Carolina area to make certain
improvements to the existing Canovanas water filter plant (the "Plant") in
order to increase its production by a million gallons per day. The effect on
the Parque Escorial project will be as follows: (i) LDA's share of the Combine
costs is $728,000, (ii) PRASA reserved in its system the total of 1,400
equivalent residential units (ERU's) to be used by LDA and the shopping center;
(iii) the special contribution of $4,000 per ERU previously established by
PRASA was reduced to $480 per unit for the first 1,400 units and to $1,000 per
unit thereafter.
The sanitary sewage system for Parque Escorial will consist of a gravity
sewer system which will flow into an existing PRASA trunk sewer system. The
sanitary sewage system for Parque El Comandante will consist of gravity sewers,
a pumping station and force mains, collecting sewage for discharge into the
PRASA trunk system. Sewage from both sites will be treated by PRASA at the
Carolina Regional Water Treatment Plant.
The power and energy system for both sites will be supplied by the Puerto
Rico Electrical Power Authority ("PREPA"). A request to provide tie-in
facilities for 25,000 KVA to Parque Escorial and 26,000 KVA for Parque El
Comandante has been granted by PREPA.
Parque Escorial and Parque El Comandante are both served by a major six-
lane arterial and other local roads. A planned limited access expressway,
which will be a private toll road, will bisect Parque El Comandante and pass
within one mile of Parque Escorial. The Puerto Rico Highway Authority ("PRHA")
approved Parque Escorial subject to the contribution by LDA and the buyer of
the shopping center site, of approximately $7 million for the improvement of
Highway 3, including an overpass serving Parque Escorial which is estimated to
cost $4.7 million. This amount is payable over the construction period of the
Parque Escorial project. The buyer of the shopping center has agreed to build
the overpass and to pay up to $4.2 million of these costs.
Seasonality - IGC's community development activities in the United States
are influenced by seasonal factors. Due to the unfavorable weather conditions
in the region where IGC operates during the winter months, the heavier periods
of land development activities and related sales typically occur during the
spring and summer months. IGC's land development activities in Puerto Rico are
generally not influenced by seasonal factors.
Competition - There are currently approximately twenty single-family
communities in the Waldorf/St. Charles area which would qualify as subdivision
sites. The majority of the sites, aside from St. Charles, are on the 228
corridor which is the main east-west access road in the County. In the last
few years, several major national and regional builders have entered the
marketplace.
In 1994, there were 971 building permits issued for new residential units
compared to 962 in 1993. St. Charles has historically captured approximately
40% of the market over the past twenty years. With the addition of more
competition and two planned communities scheduled to start development over the
<PAGE>12
next twelve months, competition for lot and house sales will be more intense.
St. Charles' reputation as a totally planned community with a full amenity
package and neighborhood schools will be important in meeting the challenges of
increased competition over the next several years.
Parque Escorial and the 500-acre Encantada planned community under
development in the San Juan Metropolitan area are the only master planned
communities at the planning or development stage in Puerto Rico. Encantada is
primarily geared at higher income homebuyers than Parque Escorial which will
primarily seek entry level buyers. The developer of Encantada is a homebuilder
and does not sell land to other home builders, whereas IGC plans to sell Parque
Escorial lots to others.
Due to the scarcity of developable land in the San Juan Metropolitan area,
competition foreseen for Parque Escorial is expected to be primarily from small
walk-up projects being developed in areas considered to be less attractive than
Parque Escorial.
HOMEBUILDING
IGC, primarily through American Family Homes, Inc. (AFH), builds semi-
custom single-family homes for homebuyers who own their own land or who intend
to purchase land in a location of their choice. The Semi-Custom Homebuilding
Division currently markets its products in the mid-Atlantic region of the
United States. IGC's Tract Homebuilding Division also constructs tract homes
on land developed as part of its community development activities. IGC has
built and marketed single-family detached homes, duplexes and townhomes in its
communities of St. Charles, Montclair, Westbury and in Puerto Rico.
The market for housing units consists of several primary home market
segments. These include the "entry level" or first-time buyer segment, which
consists of young couples or families attracted to homes with relatively low
prices, the "move-up" segment, which consists of somewhat older or more
affluent buyers attracted to relatively more expensive and, generally, larger
homes, and the "luxury" segment, which consists of buyers of substantially
larger and more luxurious homes at higher prices. IGC has historically focused
its homebuilding efforts on the entry-level and move-up segments.
<PAGE>
<PAGE>13
The following table shows the number of housing units sold by IGC during
1990 through 1994 and the number of units under contract not yet closed
(backlog) as of December 31, 1994:
Units Sold
-----------------------------------------------
Backlog as of
December 31,
1994 1993 1992 1991 1990 1994
---- ---- ---- ---- ---- -------------
Semi-Custom Homebuilding
Division
North Carolina 44 38 61 37 86 14
South Carolina 26 21 16 22 35 15
Virginia 58 46 62 46 62 35
Maryland 16 20 15 11 1 10
Tennessee -- -- -- 6 7 --
Georgia -- -- -- -- 17 --
Tract Division
St. Charles 49(2) 76(1) 93 116 119 5
Montclair 1 13 14 14 24 --
Westbury 6 2 13 10 12 --
Puerto Rico Division -- -- 14 22 33 --
--- --- --- --- --- ---
Total 200 216 288 284 396 79
=== === === === === ===
(1) Three houses were built on lots purchased from third parties.
(2) Seven houses were built on lots purchased from third parties.
Semi-Custom Homebuilding Division. In February 1990, IGC purchased
substantially all of the operating business of American Family Homes. Formerly
based in Charlotte, North Carolina, AFH was one of the leading homebuilders in
the Southeastern United States for families who own their own land. Since
IGC's acquisition, AFH has expanded its operations to Maryland in addition to
operating sales centers in North Carolina, South Carolina and Virginia. In
1994, AFH opened new sales centers in Richmond, Virginia and Raleigh, North
Carolina, and closed its sales center in Danville, Virginia in response to
market conditions in these areas. A new sales office in Lynchburg, Virginia is
also planned for early 1995.
AFH builds homes and arranges financing for families who own their own
land or who intend to purchase land in a location of their choice primarily in
rural or semi-rural areas. Homes constructed by AFH include single-family
detached homes in colonial, split level and contemporary styles, base-priced
from the $60,000's to the $200,000's, exclusive of land costs. The homes
include a variety of floor plans, which range in size from 1,000 to 3,200
square feet and include such standard features as one and two-car garages,
family rooms and luxury baths. Many optional features are also available,
including fireplaces, sunrooms, skylights and outdoor decks and patios.
Marketing of homes by the Semi-Custom Homebuilding Division is currently
directed at the entry-level and move-up markets.
<PAGE>14
Tract Homebuilding Division. The Tract Homebuilding Division currently
consists of homebuilding operations in St. Charles and Westbury in Lexington
Park, Maryland.
Current homebuilding operations are primarily located in St. Charles,
Maryland in Westlake Village in the Hampshire and Dorchester Neighborhoods.
IGC's housing projects in St. Charles range from three- and four-bedroom
townhomes, including three-level garage townhomes, with 1,716 to 2,400 square
feet, to three- and four-bedroom single-family detached homes with 1,374 to
2,469 square feet. Single-family homes are available in colonial, split-level
and contemporary styles. IGC is currently planning to complete the buildout of
the projects it has started within the Hampshire and Dorchester Neighborhoods
in Westlake Village, but has no plans to commence any new tract home
developments in St. Charles at the present time. IGC does not expect to incur
any significant costs in connection with its decision to terminate tract
homebuilding activities in St. Charles.
In 1992, IGC curtailed its speculative homebuilding operations in
Lexington Park in St. Mary's County, Maryland, but continues to construct
townhouse units within the Westbury development as sales occur. The homeowners
share the amenities described previously in the community development section.
In addition, IGC continues to sell lots within the development to other
builders as discussed above in the "Community Development" section.
Marketing. There are approximately 13 full-time and part-time
salespersons operating in the Semi-Custom Division. Salespersons are
compensated on a commission basis. Homes are also sold by independent realtors
and under co-broker arrangements with unrelated or marketing firm real estate
agents who are compensated on a commission basis. Furnished models of housing
products are open for inspection by prospective purchasers, and salespersons
provide sales literature, including floor plans, elevations and price
information.
Home Financing. The Company utilizes the services of several unaffiliated
mortgage companies to provide mortgage loans for qualified homebuyers. Because
most loans in the United States qualify for FHA/VA mortgage insurance,
availability of financing has not been a limiting factor with respect to most
of IGC's homebuilding operations.
Construction. The Semi-Custom Division builds homes only after receipt of
a firm contract and the buyer's mortgage is in place. A certain number of
townhomes and single-family homes in Montclair, Westbury and St. Charles have
historically been built by the Tract Housing Division in advance of receiving a
firm customer contract. This practice is expected to decline significantly as
IGC reduces its tract homebuilding activities. Construction is generally
completed within 90 to 120 days after commencement.
IGC enters into contracts with qualified subcontractors on a fixed-price
basis and utilizes its own staff to supervise construction in the field.
<PAGE>
<PAGE>15
The following table indicates the number of homes completed or under
construction and models by location at December 31, 1994:
Units Completed
or Under
Construction Models
--------------- ------
Single-Family
Semi-Custom Division 34 2
St. Charles 7 3
Townhomes
St. Charles 10 2
Westbury -- 2
Backlog. The Company's backlog as of December 31, 1994, 1993 and 1992 is
summarized below for homes where it holds reservation deposits or sales
contracts that have not yet closed:
1994 1993 1992
----------- ----------- ----------
Semi-Custom (excludes land)
Number of units 74 134 110
Average contract price $91,700 $82,800 $77,300
Total sales price $6,788,000 $11,095,000 $8,510,000
Tract
Number of units 5 17 26
Average contract price $158,800 $154,600 $133,000
Total sales price $794,000 $2,629,000 $3,458,000
Under IGC's standard sales agreements, IGC has the right to retain the
purchaser's deposit in the event of default or cancellation without cause by
the purchaser. However, in practice IGC has generally returned deposits.
Purchasers may cancel without penalty in the event of construction defects,
delays by the builder or certain other events specified in the sales
agreements. During 1994, IGC experienced approximately a 53% cancellation rate
due primarily to the inability of homebuyers to sell their existing homes or to
qualify for financing.
Seasonality. The homebuilding business in the northeastern United States
is generally influenced by seasonal trends. As the result of unfavorable
weather during the winter, the heavier periods of construction typically take
place in spring, summer and, to a lesser extent, fall. As a result of these
factors, as well as a less active market during November and December, the
volume of home closings typically is reduced during the late winter months.
Competition. The homebuilding industry is competitive nationwide. The
market is readily accessible to new builders, including builders without
previous experience in building or marketing a high volume of homes. In the
Washington, D.C. area, Southeastern United States and Puerto Rico, IGC competes
with local and regional homebuilders, many of which are larger than IGC and
have greater financial resources. In the region where the Semi-Custom Division
conducts its operations, there are generally fewer than five major competitors
in each of the market areas where this division operates. Currently, there are
approximately ten homebuilders active in St. Charles where the majority of
IGC's tract homebuilding operations are conducted.
<PAGE>16
Puerto Rico Division. IGC's homebuilding operations have been inactive
since the sellout of the Paseo del Prado project in 1992. Ten sites of
approximately three to five acres each will be developed for 80 to 120 walk-up
units per site in the new community, Parque Escorial, discussed in the
"Community Development" section. The Company is exploring the possibility of
building a portion of these units. Homebuilding in Puerto Rico is generally
not affected by seasonal trends.
DEVELOPMENT AND OWNERSHIP OF INVESTMENT PROPERTIES
Residential Rental Investment Properties. IGC develops and retains
ownership interests in residential rental properties. Since 1959, IGC and its
predecessors have been engaged in the development, ownership and management of
rental apartment properties in Puerto Rico, Maryland, Virginia and Washington,
D.C. IGC is a general partner owning, in most cases, a 50% residual equity
interest in the 29 partnerships that own 32 rental apartment properties. The
apartment projects are financed by non-recourse mortgages. Of the 6,559
apartment units in the various partnerships, the U.S. Department of Housing and
Urban Development ("HUD") provides subsidies for 5,371 low- and moderate-income
units.
These apartment projects are in the following locations:
Number of Apartment Units
------------------------------------------
Number of Market
Projects Subsidized Rate Total
--------- ---------- ------ -----
Puerto Rico 18 3,963 -- 3,963
St. Charles, MD 12 912 888(1) 1,800
Washington, DC 1 -- 300(2) 300
Richmond, VA 1 496 -- 496
--- ----- ----- -----
32 5,371 1,188 6,559
=== ===== ===== =====
(1) Includes 56 units completed during 1994 which IGC will lease to low and
moderate income tenants at below market rates pursuant to the Low Income
Housing Tax Credit ("LIHTC") program.
(2) Includes 60 units which IGC leases to low- and moderate-income tenants at
below market rates pursuant to the terms of mortgage bond financing
provided by the District of Columbia Housing Finance Agency.
Investment Property Development Activity - For a typical apartment
project, IGC locates the land, conducts a feasibility study, forms a
partnership to acquire the project, arranges for construction and permanent
financing for the project (including governmental mortgage insurance, rent
subsidy or other forms of housing assistance) and provides cost and completion
guarantees. For projects developed through 1986, limited partners were
admitted to the partnerships through syndication at the time the financings for
the projects were closed. Typically, the limited partners' capital
contributions were sufficient to pay the development costs in excess of
available mortgage loan proceeds, to reimburse IGC for its front-end expenses,
and to pay IGC a developer fee or other fee in the form of cash and partners'
notes. Capital contributions were generally paid in installments over a four-
to five-year period.
<PAGE>17
In three projects developed since 1986 (Coachman's, Fox Chase, and New
Forest Apartments), IGC admitted a financing partner and Interstate Business
Corporation ("IBC") as partners.
During 1991, IGC entered into an agreement with the limited partners of
Lancaster Associates L.P., the owner of Lancaster Apartments, to purchase their
99% limited partnership interest over a five year period, payable in five
annual installments which commenced in 1991. The Company's interest in
Lancaster Apartments increased by 19.8% each year as a result of this
agreement, thereby increasing IGC's ownership interest in the partnership to
80.2% at December 31, 1994.
IGC, IBC and the Resolution Trust Corporation ("RTC") as Receiver for
Perpetual Savings Bank F.S.B. were general partners in New Forest General
Partnership ("New Forest") and Fox Chase General Partnership ("Fox Chase")
entities. Both New Forest and Fox Chase own apartment projects in St. Charles.
During August, 1993, New Forest and Fox Chase bought the RTC's general partner
interest for $200,000. The buy-out was funded by surplus cash in the
partnerships and an additional capital contribution from IGC. As a result of
this transaction, IGC's ownership interest in the partnerships increased to
90%.
On December 30, 1994, IGC executed a purchase and sale agreement with IBC
which provided for the transfer of 9.9% general partnership interests in New
Forest and Fox Chase and 49.9% limited partnership interests in four other
partnerships to IGC in satisfaction of $3,722,000 of accounts and notes
receivable due from IBC. The partnerships in which IGC received a 49.9%
limited partnership interest included Wakefield Terrace Associates Limited
Partnership ("Terrace"), Wakefield Third Age Limited Partnership ("Third Age"),
Palmer Associates Limited Partnership ("Palmer") and Headen House Associates
Limited Partnership ("Headen"). The amount of IBC receivables satisfied via
this transaction was based on the fair market value of the apartment projects
as determined by a third party independent appraisal. As a result of this
transaction, IGC became a 99.9% general partner in Fox Chase and New Forest and
a 49.9% limited partner in Terrace, Third Age, Palmer and Headen.
IGC completed Brookside Gardens (a 56-unit project) during 1994. IGC owns
the 1% general partner interest in Brookside Gardens Limited Partnership and a
tax credit fund owns the 99% limited partnership interest. Currently IGC has
two additional projects in the planning stage in St. Charles:
Number of Units Status
--------------- ------------------
Darby Station Apartments 127 Planned
Lakeside Apartments 54 In planning
<PAGE>
<PAGE>18
The following table lists the completed apartment projects in which IGC
has an ownership interest:
Year of
Number of 12/31/94 Completion
Project Name Apartment Project or
and Location (1) Units Cost Acquisition
- ---------------- --------- -------------- -----------
(In thousands)
Apartment Projects Owned by
Partnerships Accounted for Under
the Equity Method of Accounting
Las Americas I, P.R. (2) 266 $ 6,540 1972
Las Americas II, P.R. (2) 266 6,523 1973
Las Lomas, P.R. 120 3,337 1974
Monacillos, P.R. 266 7,104 1974
Bannister, St. Charles (2) 208 5,395 1976
San Anton, P.R. 184 4,466 1974
Crossland, St. Charles (3) 96 3,276 1978
Monte de Oro, P.R. 196 6,549 1977
New Center, P.R. 196 6,525 1978
Monserrate I, P.R. 304 11,073 1979
Alturas del Senorial, P.R. 124 4,599 1979
Palmer, St. Charles (4) 152 6,189 1980
Wakefield Third Age St. Charles (2) 104 3,353 1979
Wakefield Terrace St. Charles (2) 204 7,181 1979
Headen, St. Charles 136 6,267 1980
Huntington, St. Charles 204 10,121 1980
Monserrate II, P.R. 304 12,034 1980
Torre de las Cumbres, P.R. 155 6,517 1979
De Diego, P.R. 198 7,482 1980
Santa Juana, P.R. 198 7,344 1980
Jardines de Caparra, P.R. 198 7,253 1980
Colinas de San Juan, P.R. 300 11,728 1981
Bayamon Gardens, P.R. 280 13,249 1981
Vistas del Turabo, P.R. 96 3,293 1983
Essex Apartments, VA 496 24,564 1982
Valle del Sol, P.R. 312 15,099 1983
Chastleton, D.C. (3) 300 27,600 1986
Coachman's Landing, St. Charles (3) 104 6,894 1989
Brookside Gardens St. Charles (3) 56 2,613 1994
----- --------
6,023 244,168
Apartment Projects Owned by
Partnerships whose Operations, Assets
and Liabilities are Consolidated
with those of IGC
Lancaster, St. Charles (3) 104 5,140 1985
Fox Chase, St. Charles (3) 176 7,802 1987
New Forest, St. Charles (3) 256 13,547 1988
----- --------
6,559 $270,657
===== ========
(1) Unless otherwise indicated the projects receive subsidies under Section 8
of the National Housing Act for all of the apartment units.
(2) Receives interest subsidies under Section 236 of the National Housing Act.
(3) Not subsidized.
(4) 56 units subsidized and 96 units are not subsidized.
<PAGE>19
The following table sets forth the historical net cash flow as defined in
Note (6) below for the completed apartment projects in which IGC has an
ownership interest:
Net Cash Flow for the
Years Ended December 31,
-------------------------------------
Project Name and Location (1) 1994 1993 1992
- ----------------------------------- ---------- ----------- ----------
Apartment Projects Owned by
Partnerships Accounted for Under
the Equity Method of Accounting
Las Americas I, P.R. (2) $ (1,010) $ 12,088 $ 48,292
Las Americas II, P.R. (2) (1,135) (37,981) 57,026
Las Lomas, P.R. 76,140 (72,140) (1,642)
Monacillos, P.R. 144,346 (2,645) 144,031
Bannister, St. Charles (2) 136,536 106,560 168,205
San Anton, P.R. 113,326 201,492 65,730
Crossland, St. Charles (3) 152,269 169,862 148,138
Monte de Oro, P.R. 482,562 544,131 520,990
New Center, P.R. 499,243 395,461 538,916
Monserrate I, P.R. 544,572 665,598 593,197
Alturas del Senorial, P.R. 125,117 204,912 125,628
Palmer, St. Charles (4) 290,633 270,727 262,136
Wakefield Third Age St. Charles (2) 80,961 76,632 100,833
Wakefield Terrace St. Charles (2) 216,126 93,222 217,419
Headen, St. Charles 489,346 493,413 424,290
Huntington, St. Charles 771,586 782,946 560,650
Monserrate II, P.R. 57,073 688,589 537,110
Torre de las Cumbres, P.R. 10,578 335,333 295,672
De Diego, P.R. (22,152) 275,221 128,007
Santa Juana, P.R. (23,610) 375,261 303,388
Jardines de Caparra, P.R. 292,215 373,371 214,244
Colinas de San Juan, P.R. 332,056 483,720 376,064
Bayamon Gardens, P.R. 128,733 373,298 285,557
Vistas del Turabo, P.R. (11,515) 783 2,109
Essex Apartments, VA 201,795 275,159 268,098
Valle del Sol, P.R. 3,778 330,413 178,592
Chastleton, D.C. (3) (556,156) (675,977) (790,788)
Coachman's Landing, St. Charles (3) (118,046) (159,045) (131,984)
Lancaster, St. Charles (3,5) -- -- (73,341)
Fox Chase, St. Charles (3,5) -- 86,003 139,094
New Forest, St. Charles (3,5) -- (101,934) (83,071)
Brookside Gardens, St. Charles (7) (12,262) -- --
---------- ---------- ----------
4,403,105 6,564,473 5,622,590
Apartment Projects Owned by
Partnerships whose Operations, Assets
and Liabilities are Consolidated
with those of IGC
Lancaster, St. Charles (3,5) (53,612) (109,547) --
Fox Chase, St. Charles (3,5) 133,800 63,660 --
New Forest, St. Charles (3,5) (90,278) (47,283) --
---------- ---------- ----------
$4,393,015 $6,471,303 $5,622,590
========== ========== ==========
<PAGE>
<PAGE>20
(1) Unless otherwise indicated the projects receive subsidies under Section 8
of the National Housing Act for all (or in the case of the Palmer project,
a portion) of the apartment units.
(2) Receives interest subsidies under Section 236 of the National Housing Act.
(3) Not subsidized.
(4) 56 units subsidized and 96 units are not subsidized.
(5) These apartment projects were consolidated in 1994 and 1993 but not
consolidated in 1992. For 1993, Lancaster operations for the full year
were consolidated, while New Forest and Fox Chase operations from August
20, 1993 through December 31, 1993 were consolidated.
(6) Net cash flow is defined as net operating income on an accrual basis plus
releases from replacement reserves less mortgage principal payments and
capital expenditures.
(7) Construction of this project was completed in November of 1994.
Residential Rental Projects - Based on the terms of the partnership
agreements, the Company, as general partner, typically recognizes zero to 5% of
profits and losses of the partnerships until such time as the limited partners
have recovered their capital and the partnerships have accumulated earnings.
Thereafter, the Company generally recognizes 50% of the partnerships' profits
and losses.
Cash From Operations - HUD, which provides mortgage insurance and/or
interest subsidies, and the Maryland, Virginia, Puerto Rico and Washington,
D.C. housing agencies ("State Finance Agencies"), which provide financing for
many of the IGC apartment projects, place limits on the cash from operations
that may be distributed while HUD mortgage insurance is in effect and/or State
Finance Agencies are providing financing. The projects have generated
significant cash from operations and amounts in excess of permitted cash
distributions are deposited in restricted escrow accounts which are generally
invested in certificates of deposit and U.S. Government securities. Seven
Puerto Rico properties were refinanced in December 1993 and March 1994,
resulting in release of escrow funds of $8,261,000 and $16,159,000,
respectively, and removal of restrictions on distributions.
Funds in restricted cash accounts may be used, with the approval of HUD
and/or the State Finance Agencies, for maintenance and capital improvements.
When the partnerships' projects are refinanced or sold, or the partnerships are
liquidated, the cash accumulated in these restricted cash accounts is available
for distribution to IGC and limited partner investors. Most partnership
agreements provide that cash proceeds from a refinancing or sale are to be
distributed in the following priorities: (i) to IGC in payment of long term
receivables which represent amounts owed by the partnerships to IGC (ii) to
limited partners in amounts equal to their unrecovered capital investments and
(iii) typically 50% of the remaining proceeds to IGC as general partner and the
balance to the limited partners.
<PAGE>
<PAGE>21
The combined cash flow from the unconsolidated operations of the
residential rental partnerships that IGC has an ownership interest in are as
follows for the last three years:
Years Ended December 31,
------------------------------
1994(1) 1993(1) 1992
------- ------- -------
(In thousands)
Revenues $41,066 $44,767 $44,618
------- ------- -------
Cash Expenditures
Total expenses 39,938 43,314 43,971
Less - Depreciation (6,501) (6,637) (6,830)
- Other non-cash expenses (470) (706) (679)
------- ------- -------
32,967 35,971 36,462
Mortgage principal and capital
additions 3,696 2,232 2,533
------- ------- -------
Total cash expenditure 36,663 38,203 38,995
------- ------- -------
Cash flow before distributions $ 4,403(2) $ 6,564 $ 5,623
======= ======= =======
(1) The cash flow activity of Fox Chase and New Forest after August 20,
1993 and the cash flow activity of Lancaster after December 31, 1992
are excluded from these statements. These activities are reflected
on IGC's consolidated Statements of Cash Flow for the years ended
December 31, 1993 and 1994.
(2) The decline in cash flow before distributions from the prior year is
attributable primarily to reductions in interest income on funds
released from escrow on refinanced projects. In December 1993 and
March 1994, $8,261,000 and $16,159,000, respectively, was released
from residual receipt and replacement reserve accounts in connection
with project refinancings.
IGC had non-interest bearing long-term receivables of approximately $3.4
million from the partnerships as of December 31, 1994. Substantially all of
these receivables are collectible solely upon a refinancing or sale of the
apartment projects or upon liquidation of the partnerships.
In December 1993, four projects in Puerto Rico which were originally
financed with the Puerto Rico Housing Finance Corporation were refinanced for
25 years with the Federal National Mortgage Association and approximately $9.3
million in residual receipts, replacement reserves and other reserves were
released. Substantially all of the net proceeds from the refinancing and the
funds released from restricted accounts were distributed in January 1994. The
Company received approximately $6 million of the funds (excluding refinancing
fees of $640,000) of which $5,678,000 was used to pay bank debt.
In March 1994 three more Puerto Rico projects were refinanced with bank
loans ranging from 44 months to 61 months. Substantially all of the funds of
approximately $15 million released from residual receipts and replacement
<PAGE>22
reserves were used to pay the HUD insured mortgages and a portion of these
funds together with net refinancing proceeds were distributed to the Company
and limited partners in 1994. The Company's share was approximately $1.7
million (excluding refinancing fees of $142,000) which was used for debt
service on the FDIC loan.
In March of 1993, the Company applied for economic incentives under the
1990 Low-Income Housing Preservation and Resident Homeownership Act ("LIHPRHA")
for four projects in Puerto Rico. Under LIHPRHA the partnerships have the
option of obtaining additional HUD insured financing and additional subsidy
funds, and distributing net refinancing proceeds to partners, or selling the
projects to non-profit organizations which would continue the projects under
HUD's low income housing program. Management believes that the economic
benefit to the Company and the partners will be greater from a sale of the
projects, in which case the Company will endeavor to retain the right to manage
the properties. It is anticipated that the first closings pursuant to LIHPRHA
could be accomplished in the fourth quarter of 1995, in which event the Company
expects that its share of the cash proceeds will be approximately $9.0 million
after taxes, subject to proposed changes to LIHPRHA. The Company would be
required to use the cash to pay existing bank debt. The decision to sell the
four projects under LIHPRHA is dependent on the outcome of certain proposed
legislation to be considered by Congress in 1995. Management expects that the
Clinton Administration will submit a bill to Congress during 1995 which will
dramatically impact subsidized housing programs, and which could significantly
reduce the proceeds available to the Company. If this occurs, management will
need to reconsider its decision to sell the projects under the LIHPRHA program.
It is not possible at the present time to predict the outcome of the proposed
changes to this program.
In March, 1994 a LIHPRHA application was filed for a fifth project in
Puerto Rico. The timetable for completing the LIHPRHA processing is
approximately two years. However, if proposed legislation is enacted,
management may withdraw the application.
Should management decide not to sell the five projects under the LIHPRHA
prgram, an alternative exit strategy may be to convert the projects into
condominiums and sell the individual units. If this alternative is pursued,
the conversion and subsequent sale of the units is expected to take
approximately three years.
Operation of Residential Rental Projects - The value of IGC's residual
interest as a general partner of the partnerships owning the apartment projects
is dependent, among other things, upon the properties being well maintained.
Therefore, replacements and maintenance are done in a timely manner and
emphasis is placed on preventive maintenance. Tenant relations specialists are
used with an average of one specialist for every 220 apartment units in Puerto
Rico and one for every 313 apartment units in the United States. In Puerto
Rico, these specialists perform regular social work activities, and provide
special programs for the elderly and summer athletic programs for children. In
St. Charles, the tenants have free access to community centers which provide
social and athletic facilities. Through the combination of active property
management, property maintenance and social work programs, IGC seeks to provide
quality housing for tenants in its apartment projects and to maintain the
properties in excellent condition for possible future sale or condominium
conversion.
<PAGE>23
There is a strong demand for IGC apartments which, coupled with IGC's
rental collection program, has permitted the partnerships to collect on the
average 97% of their potential rental income over the five years ended December
31, 1994. IGC's policy is to rent only to individuals who demonstrate a
willingness and ability to meet their obligations under their leases, and in
Puerto Rico, IGC requires a third-party guarantee where appropriate. At
December 31, 1994, apartment occupancy was 96%.
Government Subsidies - Twenty-five of the 32 apartment projects owned by
partnerships of which IGC is a general partner, provide low- and moderate-
income housing with rents subsidized by HUD. Subsidies are provided
principally under Sections 8 and 236 of the National Housing Act. Under
Section 8, the government pays to the owner of the project the difference
between market rental rates (determined in accordance with government
procedures) and the rents that tenants are deemed able to afford. Under
Section 236, the government provides interest subsidies directly to the owner
with a corresponding reduction in tenant rents. In order to comply with
Section 8 and Section 236 requirements, tenants are screened by IGC for
eligibility pursuant to HUD guidelines. Subsidies are provided under long-term
subsidy contracts between the federal government and the owner/partnerships.
The Subsidy Contracts are summarized as follows:
Contract Amounts
-----------------------
Remaining
Number of Balance
Number of Subsidized Expiration December 31,
Projects Apartments of Contracts Total 1994
--------- ---------- ------------ ----- ------------
(In thousands)
5 962 1997 - 1998 $ 61,043 $ 8,084
10 1,877 1999 - 2000 278,283 136,344
4 1,172 2001 - 2002 126,089 54,717
1 312 2003 43,936 23,981
2 532 2011 - 2012 23,507 10,771
1 208 2016 3,098 1,779
2 308 2019 5,208 3,124
-- ----- -------- --------
25 5,371 $541,164 $238,800
== ===== ======== ========
Each owner/partnership with a subsidy contract has the right under its
contract to cancel at the end of every five-year period. Any lifting of
restrictions upon the distribution of cash by the owner-partnerships under the
1990 Housing Act may require the waiver by IGC of its cancellation rights, as
well as the extension of the term of the subsidy contracts.
The federal government has virtually eliminated subsidy programs for the
new construction of low- and moderate-income housing by profit-motivated
developers such as IGC. As a result, IGC has developed only five new apartment
projects since 1981, providing for rentals at market rates. IGC expects to
develop additional unsubsidized apartments in St. Charles and may develop such
projects in Puerto Rico.
<PAGE>24
Refinancings - Refinancings of two U.S. apartment projects during the
first quarter of 1993 and one U.S. apartment project during the fourth quarter
of 1994 with the Maryland Community Development Administration and FHA resulted
in lower mortgage rates and higher operating cash flow available for
distribution. Also, as discussed above, seven Puerto Rico projects were
refinanced in December 1993 and March 1994.
Condominium Conversion - Upon the termination or cancellation of the
existing subsidy contracts, IGC may convert units in such projects into
condominiums and sell such units, particularly if the benefits under LIHPRHA
are significantly reduced. The subsidized apartment projects incorporate
features, such as separate utility metering for each apartment, designed to
facilitate such conversion. Alternatively, IGC could elect to rent the
apartments at market rates or sell entire projects. IGC and its management
have experience in converting non-subsidized projects into condominiums. IGC's
predecessors have converted approximately 1,800 units in Puerto Rico. There
can be no assurance that market conditions will be favorable for sale or rental
at market rates at the time that any subsidy contracts terminate. Five
projects in Puerto Rico are presently subject to regulatory restrictions under
LIHPRHA which are designed to keep such housing as rental apartments.
Seasonality - IGC's development of investment properties in the United
States is generally influenced by seasonal factors. Due to unfavorable weather
conditions during the winter months, IGC's development activities during this
period are generally limited. The operation of IGC's investment properties in
the United States is not generally influenced by such factors, however, and is
more heavily influenced by local economic and competitive conditions as further
discussed below. IGC's development and operation of investment properties in
Puerto Rico is not generally affected by seasonal factors.
Competition - IGC's investment properties in St. Charles compete with
other apartment projects in the Charles County area, as well as with other
projects located throughout the greater metropolitan Washington, D.C. area.
The operation of IGC's investment properties in the United States is
impacted not only by the supply and demand for competing rental units within
the area, but also by local market conditions for housing. When market
conditions for housing become favorable to potential buyers due to excess
supply or a softening of home prices, this can adversely impact the market for
rental units such as those owned by IGC. Similarily, when market conditions
for housing deteriorate for potential buyers due to rising interest rates or an
increase in housing prices, the market for IGC's rental units may benefit.
In Puerto Rico, IGC's apartment projects compete with other similar
projects located in San Juan, Carolina, Guaynabo and Caguas, Puerto Rico. All
of IGC's projects have subsidized rent and occupancy has averaged more than 98%
for 3,963 apartments during the past year. As a result of the rent subsidies,
the projects in Puerto Rico are not subject to market conditions that affect
market rate projects.
Valuation - Management's estimate of IGC's residual interest as of
December 31, 1994 in the 31 completed projects listed above was approximately
$62 million. The residual interest was based on IGC's receivables and expected
share of cash flow distributions in accordance with the priorities determined
in the partnership agreements, assuming the properties are sold at their
estimated fair market value. This interest (consisting of investments in
partnerships' working capital loans and long-term receivables) and the assets
<PAGE>25
and liabilities of the three consolidated apartment partnerships are carried on
the Company's books at approximately $8.7 million at December 31, 1994. At
December 31, 1994, IGC's residual interest is assigned as collateral for loans
with the FDIC and NationsBank.
The 6,559 completed rental apartments in which IGC has an interest as
general partner had a total cost of approximately $270.7 million, and an
average cost per apartment unit of approximately $41,000. As of December 31,
1994, the average mortgage debt was $30,000 per unit, and management's
estimated average value was approximately $46,000 per apartment unit.
Management determined its valuation estimate from third party appraisals for
four projects and internal estimates for the remaining projects based on the
discounted cash flow method incorporating historical occupancy rates,
performance and current discount rates for similar projects.
Investment in Housing Development Associates S.E. and Equus Gaming Company
L.P. (Gaming Properties). On December 14, 1989, Housing Development Associates
S.E. ("HDA") purchased the El Comandante Race Track ("Race Track"), the only
licensed thoroughbred horse racing facility in Puerto Rico, and Land
Development Associates S.E. ("LDA") purchased 975 acres of land from San Juan
Racing Association, Inc. ("SJRA"). Pursuant to a lease agreement, El
Comandante Operating Company, Inc. ("ECOC") maintains the Race Track and
manages El Comandante's racing operations. Live thoroughbred horse racing has
been conducted continuously at El Comandante since 1976 and at a predecessor
facility since 1957.
The purchases of properties from SJRA by HDA and LDA were originally
financed by a $50 million loan to HDA and LDA from Chase Manhattan Bank N.A.
(the "Chase Loan") and $21.9 million in loans to HDA and LDA from IGC and Supra
in respect to their percentage ownership interests. The Chase Loan proceeds
were allocated $42 million to HDA for purchase of the Race Track and related
assets (the "El Comandante Loan") and $8 million to LDA for purchase of the 975
acres of undeveloped land (the "Land Loan").
On December 15, 1993, HDA refinanced the Race Track acquisition loans
through a private placement of 68,000 units (the "Private Placement"), each
unit consisting of (i) $1,000 principal amount of 11.75% First Mortgage Notes
due 2003 (the "Mortgage Notes") and (ii) one warrant (the "Warrants") to
purchase one share of the Class A Common Stock ("Class A Stock") of HDA
Management Corporation ("HDAMC"). Following approval of the Puerto Rico Racing
Board on July 21, 1994, HDA issued additional partnership interests so that
HDAMC became the owner of a 15% partnership interest, and could serve as a
conduit for payments to warrantholders. As a result, IGC's and IBC's interests
in HDA were diluted to 41.65% and 26.35%, respectively. The Warrants, together
with HDAMC's Class A Stock, gave the warrantholders an indirect 15% interest in
HDA.
Equus Gaming Company L.P. ("Equus") was formed on September 17, 1993 as a
general partnership between IGC and IBC to hold their interests in HDA and to
hold all of the stock of Virginia Jockey Club, Inc. ("VJC"). VJC was formed in
April of 1993 to apply for licenses from the Commonwealth of Virginia to
construct, own and operate Virginia's first thoroughbred racing and pari-mutuel
wagering facility.
<PAGE>
<PAGE>26
Through a series of transactions completed on August 2, 1994, Equus was
restructured as a limited partnership between IGC and a wholly-owned
subsidiary, Equus Management Company ("EMC"), for the purpose of holding all of
IGC's ownership interests in real estate assets employed in thoroughbred racing
and related wagering businesses.
In connection with the August 1994 restructuring of Equus as a limited
partnership, HDA's partnership agreement was amended to permit IBC to transfer
its entire 26.35% HDA interest in profits and capital to Equus and to permit
IGC to transfer a 40.65% profits interest to Equus. A transfer of 50% of the
profits and capital interests in HDA within any 12-month period would result in
a termination of HDA as a partnership for federal tax purposes. IGC retained a
1% profits interest and 41.65% capital interest in HDA and Equus has replaced
IGC as managing partner of HDA. Equus then admitted IGC's wholly-owned
subsidiary, EMC, as a partner with a .99% general partnership and .01% limited
partnership interest and IBC contributed to IGC its 38.75% interest in Equus.
These transactions resulted in IGC and EMC owning the entire partnership
interest in Equus and Equus owning 67% of the profits interests and 26.35% of
the capital interests in HDA.
Coincident with the acquisition by Equus in August 1994 of interests in
HDA, HDA distributed to its partners, excluding HDAMC, approximately $13.3
million of notes receivable from LDA. IGC and IBC received $6.5 million and
$4.1 million, respectively, of the notes distributed. IBC then contributed its
portion of the LDA notes received to Equus as a capital contribution. Equus
subsequently transferred its portion of the LDA notes receivable to IGC. The
initial notes receivable from LDA to HDA arose from HDA's funding of debt
service on the Land Loan and from loans made by HDA to LDA from the proceeds of
the Private Placement. LDA used the funds to pay loans made by IGC and Supra
upon LDA's acquisition of land parcels from SJRA. Because this receivable
related to financing of real estate held for development by a consolidated
subsidiary of IGC, rather than the racing related assets of HDA, IGC management
determined that this asset should be retained by IGC which will continue real
estate development activities.
A Registration Statement was filed with the Securities and Exchange
Commission ("SEC") for the distribution of Equus limited partnership units
("Equus Units") representing a 99% limited partnership interest in Equus on
August 12, 1994, and arrangements were made to list Equus Units on NASDAQ. The
Registration Statement was declared effective by the SEC on January 10, 1995
and the distribution of the Equus Units (the "Distribution") was accomplished
on February 6, 1995, when IGC distributed 5,128,372 Equus Units to IGC
Unitholders. The Distribution was made on the basis of one Equus Unit for
every two IGC Units outstanding on the record date of January 25, 1995.
IGC, through EMC, will continue to manage Equus following the
Distribution. Certain directors and officers of EMC, including EMC's chief
executive officer, will continue to serve as officers and directors of IGC's
managing general partner, Interstate General Management Corporation ("IGMC").
IGC and EMC will together retain a 1% general partnership interest in Equus.
For a transitional period following completion of the Distribution, IGC
will provide certain administrative services and support to Equus pursuant to a
Master Support and Services Agreement (the "Support Agreement"). Equus will
reimburse IGC for the costs incurred by IGC in providing these services. An
IGC subsidiary, Interstate General Properties Limited Partnership S.E., will
continue to provide management services to HDA pursuant to an existing
management agreement.
<PAGE>27
Prior to the Distribution, during the first quarter of 1995, IGC agreed to
transfer to Equus a 40.65% capital interest in HDA for no additional
consideration. The transfer is required to take place on February 7, 1996,
unless prior to that date HDA dissolves, liquidates or adopts a plan of
liquidation, or sells or enters into a definitive agreement to sell the Race
Track. If any of the foregoing occurs before February 7, 1996, IGC's
obligation to transfer the capital interest will be cancelled.
Equus, including its investment in VJC, is consolidated in the Company's
financial statements at December 31, 1994 and 1993. IGC accounted for its
investment in HDA using the equity method of accounting. During 1994, HDA had
net income of $4,073,000, however, no equity in earnings of HDA was recorded by
IGC. Because HDA is a limited liability partnership, IGC and IBC were not
required to record losses in excess of their investment in HDA and there were
suspended losses at the time of their capital contributions to Equus in August
of 1994. As a result, the Company cannot recognize equity in earnings of HDA
until the suspended losses are recovered through future earnings. IGC did,
however, recognize as earnings from investments in gaming properties, $763,000
of cash distributions received from HDA and $6.5 million of LDA notes
receivable distributed to IGC by HDA. In 1994, IGC reported a provision for
Puerto Rico income tax of $221,000 related to the cash distributions.
In 1993, HDA had income of $2,622,000, before a prepayment penalty on a
mortgage note and write-off of deferred financing costs of $7,157,000 for a net
loss of $4,535,000. HDA made cash distributions of $2,000,000 to the company
in 1993. Earnings from investment in gaming properties in the consolidated
statement of income for the year ended December 31, 1993 includes equity in
earnings of HDA and is comprised of (1) IGC's $2.2 million share of earnings
before the prepayment penalty, (2) a portion of the prepayment penalty which
was limited to $.6 million that represented IGC's remaining book investment in
HDA, and consequently reduced the investment to zero, (3) a cash distribution
of $800,000 received after the investment in HDA had been reduced to zero, and
(4) by previous cash distributions of $1,200,000.
ECOC leases the race track facilities from HDA under a 15 year lease which
expires December 14, 2004. The terms of the lease agreement require ECOC to
pay annual rent equal to the greater of 25% of the race track commissions
("Basic Rent") or $7,500,000 with annual adjustments based on any increase in
the Consumer Price Index from the 1989 level ("Minimum Basic Rent"). ECOC is
also responsible for payment of all insurance, taxes and other costs to operate
and to maintain the race track, and HDA is responsible for capital
improvements, if any, up to certain specified limits. In December 1993, the
Lease Agreement was amended to modify the rent and provide certain other
covenants. Under the revised terms, ECOC is obligated to pay additional fixed
rent ("Fixed Rent") of $150,000 in 1994, $400,000 annually in 1995 through 1998
and $1.3 million in 1999.
On August 1, 1994, ECOC, which was a 29.4% owned non-consolidated
affiliate of IGC, was reorganized as a non-stock corporation. As a result,
IGC's ownership interest in ECOC was terminated. Because ECOC was an
unconsolidated affiliate of IGC, the transaction had no financial statement
impact to the Company.
As noted above, VJC, a subsidiary of Equus, was formed for the purpose of
obtaining licenses from the Commonwealth of Virginia to own and operate
Virginia's first thoroughbred racing and pari-mutuel wagering facility. On
October 12, 1994, the Virginia Racing Commission denied VJC's application for
such licenses and awarded licenses to another applicant. VJC filed a notice of
<PAGE>28
appeal with the Circuit Court of the City of Richmond on November 10, 1994 with
respect to the decision of the Virginia Racing Commission. However, at the
present time, the eventual outcome of the appeal is uncertain. As a result of
the Racing Commission's unfavorable decision in 1994, the Company wrote off
$1.8 million of deferred project costs associated with VJC's application.
Investment Properties--Cable Television. On January 6, 1988, Maryland
Cable Limited Partnership closed the sale of the assets of its cable television
system in Charles County, Maryland to Jones Intercable, Inc. Prior to the
sale, IGC held a 40% general partnership and a 1.7% limited partnership
interest in Maryland Cable Limited Partnership. In connection with the sales
agreement, IGC earned $345,000, $508,000 and $456,000 of fees in 1994, 1993 and
1992, respectively. An additional $2.3 million of fees is expected to be paid
to IGC over the next five years. These proceeds are pledged as security for a
loan with Citibank.
MANAGEMENT SERVICES
IGC earns management fees from management of apartment complexes owned by
partnerships in which IGC is the general partner and from management of other
apartment complexes and commercial and industrial properties. The commercial
and industrial properties and most of the other apartments are owned by
affiliates of IGC. Management agreements for the rental apartments owned by
partnerships of which IGC is a general partner call for management fees based
on a percentage of rents ranging from 2.25% to 10.95%. These contracts are for
periods of one or two years and are customarily renewed. Although HUD and the
State Finance Agencies have the right to cancel these contracts with or without
cause, no contracts of IGC have ever been cancelled. Fees for managing other
apartment projects range from 2.5% to 4.5% of rents and fees for managing
commercial and industrial properties are typically 3.5% of gross rents on the
properties.
Management fees for each of the years ended December 31, 1994, 1993 and
1992 were:
1994 1993 1992
---- ---- ----
(In thousands)
Property Management Fees:
Apartment projects $2,715 $2,719 $2,996
Commercial properties 253 236 215
HDA (1) 257 593 498
Development fees 86 136 147
Refinancing fees 142 769 --
------ ------ ------
$3,453 $4,453 $3,856
====== ====== ======
(1) Until December 15, 1993, this management agreement provided for
payments by HDA of 5% of HDA's rental income as a management fee.
The management agreement was amended on December 15, 1993 to provide
for payment of a $250,000 annual fee, adjusted beginning in 1994 by
the increase in the CPI over the prior year.
<PAGE>
<PAGE>29
INTERSTATE WASTE TECHNOLOGIES, INC.
IGC formed a wholly-owned corporation, Interstate Waste Technologies, Inc.
("IWT"), to pursue contracts with municipalities regarding waste treatment
facilities. IWT's first project (in the pre-development stage) was a sludge
reduction facility in Carteret, New Jersey for the Passaic Valley Sewerage
Commissioners ("PVSC"). IWT located a site and entered into a contract with
the Borough of Carteret to serve, for a fee, as a host community. However, on
December 30, 1991, the Borough Council passed a resolution rescinding the
Carteret Mayor's authority to enter into the agreement. IWT commenced legal
action seeking a declaratory judgment that the contract is valid and
enforceable. In February 1993, the contract was ruled valid and enforceable.
In May 1994, IWT accepted a cash settlement of $750,000 from the Borough of
Carteret and its insurers which was recorded as a recovery of deferred costs.
The attempt to invalidate the contract and the lawsuit has required IWT to
discontinue its plans to develop the Carteret project.
IWT responded to a Request for Proposals from Bridgeport, Connecticut for
a regional sludge management facility to dispose of the city's sludge as well
as sludge from other communities. In February 1994, IWT was notified that it
was identified by the city as the preferred vendor for the regional sludge
management facility. In June 1994, IWT and the city executed a host community
agreement. The agreement affirms the willingness of Bridgeport to allow the
sludge management facility to be built in the city. Before construction can
begin on the facility, IWT must acquire long-term sludge disposal service
agreements with sludge generators in the New Jersey-New York-New England
service region of the facility. Negotiation of a sludge disposal service
agreement with the city's wastewater authority is pending the acquisition of
other sludge disposal contracts for the facility. IWT holds an option on the
site described in the host community agreement.
Three individuals (including the Chief Executive Officer of the Company)
representing IWT have filed for patent protection for a process which converts
sludge into three useful and saleable products: methanol, sulfur and an
aggregate material. An amended patent application was filed in February 1995
in response to additional information requests from the U.S. Patent Office.
The issuance of such patents is currently pending and there is no assurance
that patents for such process will be issued. IWT utilized the methanol
production process for the conversion of sludge in its Statement of
Qualifications response to a public Request for Qualifications issued by PVSC.
Accordingly, original plans for incineration facilities at various sites have
been abandoned in favor of this new process.
In September 1994, PVSC issued a Request for Proposals to IWT and several
other companies. IWT submitted its proposal in January 1995, which was based
on preparing the sludge at a site in Newark, New Jersey and converting the
prepared sludge to methanol at the facility in Bridgeport. IWT holds a long
term lease option on the site in Newark.
GENERAL
Employees. IGC had 346 full-time employees as of December 31, 1994 (142
based in Puerto Rico and 204 in the United States). These employees are
engaged in project maintenance, construction, accounting and other areas.
Included among these employees are on-site personnel for various rental
apartment projects of partnerships of which IGC is the management agent.
Employees' salaries (other than executive officers and certain other employees)
related to the apartment projects are funded by the apartment partnerships.
<PAGE>30
IGC intends to continue its practice of contracting out a substantial portion
of land development, project maintenance and construction work.
Significant Customers. During 1994, IGC sold a 61 acre commercial parcel
located in Puerto Rico, which is to be used for development of a shopping
center, to an unaffiliated party for $12.0 million. This sale accounted for
approximately 19% of the Company's revenues during 1994. No other single
customer accounted for more than 10% of IGC's revenues during the year ended
December 31, 1994. Management services revenue and revenue from investment
properties are primarily derived from partnerships in which IGC is the general
partner. Homebuilding income is derived from sales to individual homebuyers.
Community development income is derived from sales to other homebuilders with
respect to residential lots and other developers or buyers with respect to
commercial and industrial land.
ITEM 2. PROPERTIES
IGC owns real property located in Charles County, Maryland; Prince
George's County, Maryland; St. Mary's County, Maryland; Prince William County,
Virginia; North Carolina; South Carolina, Virginia and Puerto Rico. Properties
in Maryland and Puerto Rico are described above in Item 1 and Schedule III.
The other properties consist primarily of model home sites for the AFH
division.
ITEM 3. LEGAL PROCEEDINGS
On February 22, 1993, the Company filed suit against the County
Commissioners of Charles County, Maryland in the Circuit Court for Charles
County seeking compensation for a school site that it had deeded to the County
on June 26, 1990. The Company seeks a minimum of $3.2 million, equal to the
fair market value of the school site. The action seeks to enforce an agreement
settling litigation between the parties that was entered into in 1989. Under
the terms of that agreement, the County agreed to credit the Company for school
sites contributed and also agreed to refund to the Company any excess school
impact fees paid. In February 1994, the Circuit Court granted the County's
partial summary judgment motion and directed the Company to file its suit for
compensation in the Maryland Tax Court. The Company appealed that decision to
the Court of Special Appeals of Maryland, which affirmed the Circuit Court's
decision. The Company has appealed that decision to the Court of Appeals of
Maryland, where it is now pending, and also has filed for relief in the
Maryland Tax Court.
In a separate proceeding, the Company filed suit in 1990 against the
County Commissioners in the Circuit Court for Charles County to enforce a
provision of the same settlement agreement that required the County to conduct
an appropriate water and sewer connection fee study. On June 22, 1992,
judgment was rendered in favor of the Company. The judgment required the
County to conduct the appropriate water and sewer connection fee study as the
basis on which to set fees for St Charles. The County has appealed the
judgment to the Court of Special Appeals of Maryland, where the case is now
pending.
In March 1990, the Company received a notice (the "Notice") from the U.S.
Army Corps of Engineers (the "Corps") asserting that unauthorized fill
materials had been placed in portions of an approximately five-acre parcel in
Charles County, Maryland (the "Site") owned by the Company and claimed by the
Corps to constitute wetlands subject to regulation pursuant to the Clean Water
Act. Following receipt of the Notice, the Company ceased development of the
<PAGE>31
Site and remediated a portion of the Site in accordance with instructions
issued by the Corps. The Company also commenced discussions with the Corps
regarding mitigation plans that would preserve some commercial value for the
Site. The Company took the position that a prohibition of development on the
entire Site would constitute a governmental taking for which the Company would
be entitled to compensation. In November 1993, the Company believed it had an
agreement in principle with the Corps that would permit commercial development
of a portion of the Site. However, in early 1994, the Company became aware
that this matter had been referred to the U.S. Attorney for the District of
Maryland who has convened a grand jury and is now conducting an investigation
of the Company's wetlands practices in St. Charles including the Site. A
representative of the U.S. Attorney has advised the Company that the
investigation is expected to be completed during the second quarter at which
time the U.S. Attorney will determine whether to charge the Company with a
violation of the Clean Water Act or other laws. Management believes the
Company has complied with applicable laws and regulations governing wetlands
practices, and therefore intends to defend vigorously if charged by the U.S.
Attorney with any violation relating to wetlands practices. Nonetheless, the
Company is not presently in a position to determine whether it will be charged
with a violation of any laws, or if charged, what the outcome will be.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
IGC did not submit to its partners or Unitholders any matters for a vote
during the fourth quarter of the year ended December 31, 1994.
<PAGE>
<PAGE>32
PART II
ITEM 5. MARKET PRICES AND DISTRIBUTIONS ON UNITS
The IGC Units are traded on the American and the Pacific Stock Exchanges.
The following table sets forth, for the periods indicated, the high and low
sales prices per IGC Unit as reported in the consolidated transaction reporting
system, and cash distributions paid to unitholders during these periods. IGC
Units commenced public trading on February 19, 1987.
Cash Distributions Price Range of IGC Units
------------------ ------------------------
Total Per Unit High Low
----- -------- ----------- ---------
1994 Quarter:
Fourth $ -- $ -- 8-7/8 6
Third 516 .05 9-1/4 6-7/8
Second 504 .05 7-5/8 6-1/4
First -- -- 7-7/8 6
1993 Quarter:
Fourth -- -- 7-3/4 5-1/8
Third -- -- 5-7/8 4-1/2
Second -- -- 6-1/8 5-1/4
First -- -- 6-3/8 4-1/8
As of the close of business on March 24, 1995, there were 376 Unitholders
of record. As of March 24, 1995, the closing price reported by the American
Stock Exchange was $3-3/4 per unit. This price reflects the market impact of
IGC's distribution of Equus limited partnership units representing a 99%
limited partnership interest in Equus, to IGC Unitholders on February 6, 1995,
as further discussed in Note 5 to the Consolidated Financial Statements
included in Item 8 of this report.
IGC is required by its Third Amended and Restated Limited Partnership
Agreement, as amended, to make cash distributions to limited partners of not
less than 55% of taxable income calculated for public IGC Unitholders as of the
date of IGC's initial public offering. During the years ended December 31,
1994 and 1993, IGC had taxable losses of $1,749,000 and $1,498,000,
respectively, or .17 and .15, respectively, per unit.
ITEM 6. SELECTED FINANCIAL AND OPERATING DATA
The following tables set forth combined financial data and operating data
for IGC. The following selected income statement and balance sheet data have
been extracted from the audited financial statements of IGC for each of the
years in the five-year period ended December 31, 1994. (See "Management's
Discussion and Analysis of Financial Condition and Results of Operations.")
This information should be read in conjunction with, and is qualified in its
entirety by, the consolidated financial statements and related footnotes.
<PAGE>
<PAGE>33
IGC SELECTED FINANCIAL AND OPERATING DATA
Years Ended December 31,
----------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(In thousands, except per unit amounts)
Income Statement Data
Revenues
Land sales $22,296 $13,809 $ 3,359 $ 3,151 $ 8,659
Home sales 20,265 21,884 30,761 33,043 40,701
Investment in gaming
properties 7,288 2,358 591 4,881 8,309
Equity in earnings from
partnerships and
development fees 4,938 3,701 2,672 2,070 2,606
Apartment rental revenues 4,538 2,113 -- -- --
Management and other fees 3,453 4,453 3,856 3,410 3,362
Interest and other income 648 451 743 1,253 1,670
------- ------- ------- ------- -------
Total revenues 63,426 48,769 41,982 47,808 65,307
Provision for restructuring -- -- 15,795 -- --
Other expenses 53,274 42,411 40,663 47,199 59,103
Income taxes 3,511 (835)(1) 471 133 465
Net income (loss) 6,641 7,193 (1) (14,947) 476 5,739
Net income (loss) per unit .66 .71 (1) (1.47) .05 .57
Years Ended December 31,
----------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(In thousands)
Balance Sheet Data
Assets related to
community development $ 70,061 $ 78,876 $ 82,686 $ 95,549 $ 89,210
Assets related to home
building projects 4,998 7,566 8,637 15,674 24,698
Assets related to
investment properties 35,608 42,707 23,516 19,132 59,821
Total assets 123,513 140,314 125,523 144,779 191,190
Short-term debt
Banks
Recourse 25,130 39,026 35,174 41,929 63,131
Non-recourse 122 321 1,142 930 1,589
Long-term debt
Banks
Recourse 15,333 16,113 34,889 35,662 19,867
Non-recourse 26,917 25,501 10,415 10,646 54,449
Total liabilities 82,808 108,069 100,481 104,790 151,677
Partners' equity 40,705 32,245 25,042 39,989 39,513
<PAGE>
<PAGE>34
(1) Included in this amount is a $1.5 million or .15 per unit benefit for the
cumulative effect of a change in accounting principle to reflect the
adoption of SFAS No. 109 "Accounting for Income Taxes". See additional
discussion of this change in Note 1 to the Company's consolidated
financial statements included at Item 8.
Years Ended December 31,
----------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(In thousands)
Operating Data
Community Development
Residential lots sold 228 295 80 81 148
Residential lots used
by Company 44 91 120 140 155
Commercial and business park
acres sold 76 12 1 6 32
Undeveloped acres sold 20 27 46 -- --
Homebuilding, all locations
Contracts for sale, net of
cancellations 128 231 256 348 450
Number of homes sold 200 216 288 284 396
Backlog at end of period 79 151 136 168 104
Rental apartment units
managed at end of period 8,085 8,029 7,907 7,933 7,933
Units under construction -- 56 -- -- --
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The real estate industry is cyclical, and is especially susceptible to
fluctuations in economic activity and movements in interest rates. Sales of
new homes are affected by market conditions for rental properties and by the
condition of the resale market for used homes, including foreclosed homes, in
certain cities, as well as the competitive supply of other new homes for sale.
An oversupply of rental real estate depresses rents and reduces incentives for
renters to purchase homes. An oversupply of resale units depresses prices and
reduces the margins available on sales of new homes. In addition, the slowing
of the economy and its impact on consumer spending, particularly in overbuilt
markets, can adversely impact construction activity and demand for housing.
However, entry-level housing has traditionally not been as negatively
influenced since financing has been readily available to individuals with small
amounts of capital.
The Company's homebuilding and community development sales are greatly
influenced by consumer confidence, housing demand, prevailing market interest
rates, movements in such rates and expectations about future rates. Long-term
interest rates declined in 1993 to their lowest level in approximately 20 years
making entry-level housing more affordable to homebuyers. In 1994, interest
rates increased somewhat over the 1993 levels, but continued to remain at
relatively low levels in relation to market interest rates during the past
several years. In spite of this favorable interest rate environment, the
<PAGE>35
Company's home sales have decreased over the past three years. This is due
primarily to the reduction of the Company's homebuilding operations in St.
Charles. In St. Charles, the Company's recent focus has been on lot sales to
other builders which has increased the Company's competition in the home
building market and has resulted in a decrease in the Company's St. Charles
home sales.
During 1992, in response to the decline in the real estate markets and
significant liquidity concerns, IGC developed a comprehensive business plan to
restructure its operations. IGC's management performed a detailed review of
the profit potential of its homebuilding and land development operations on a
project-by-project basis, and decisions were made as to the extent and manner
in which IGC should continue to conduct operations in each market. The plan
emphasized the generation of cash flow as rapidly as possible and the reduction
of expenses. In addition, the Company performed a review of the net realizable
value of its non-real estate related assets in light of its liquidity
constraints and the financial restructuring it has undertaken.
This plan was presented to various financial institutions and new or
amended loan agreements have been executed for all loans which required
restructuring. The overall plan called for certain concessions from lenders
and changes in the business strategy of IGC as follows:
Financial Institution Concessions - IGC requested deferral of interest,
loan fees and principal payments, extensions of loan maturity dates,
reduction of collateral release prices, new financing and waivers of
certain restrictive covenants on substantially all of its loans. IGC has
been successful in extending bank debt in accordance with the Company's
restructuring plans, with the last loan restructuring completed during the
fourth quarter of 1994. During 1994 and 1993, IGC's bank debt was reduced
by over $14 million and $23 million, respectively.
Homebuilding - IGC discontinued expansion in less profitable markets and
exited certain other markets. The mix of homes offered by IGC has been
adjusted toward lower priced homes, believed by management to possess the
strongest sales potential.
Land Development and Acquisition - IGC reduced land development operations
in the United States until it disposed of its existing developable
inventory and discontinued certain development efforts. Certain land
holdings have been offered for sale as undeveloped or semi-developed,
shifting the risk of development to third parties.
Investment in Partnerships - Management has refinanced several apartment
properties to enhance current and future cash distributions to IGC.
Four projects containing 855 apartments owned by one partnership in Puerto
Rico were refinanced in December 1993, and three other partnerships owning
696 apartments refinanced their projects in March 1994. These
refinancings provided approximately $7.4 million to IGC and were used to
further reduce debt. In addition, two projects containing 340 apartments
owned by two partnerships in the United States were refinanced in February
1993, and one project containing 104 apartments owned by a U.S.
partnership was refinanced in December 1994. IGC received approximately
$129,000 as a result of these refinancings; however, future cash flow will
increase as the interest rates on the new mortgage notes reduced these
partnership interest obligations from 10.85% to 7.28% and from 10.3% to
6.85%, respectively.
<PAGE>36
Five other Puerto Rico projects containing 1,102 apartments are being
processed through HUD's LIHPRHA program. Certain proposed changes to
LIHPRHA to be considered by Congress in 1995 could alter management's
decision to sell the projects under this program. It is expected by
management that the Clinton Administration will submit a bill to Congress
during 1995 which will dramatically impact subsidized housing programs and
which could significantly reduce the proceeds available to the Company.
If this occurs, management will need to reconsider its decision to sell
the projects under this program and consider other exit strategies such as
conversion of the units into condominiums.
In December 1993, HDA, a 49% owned partnership that owns the El Comandante
Race Track in Puerto Rico, completed a $68 million mortgage note offering,
coupled with warrants aggregating the right to purchase a 15% equity
interest in HDA. IGC received approximately $13 million as a result of
this refinancing, most of which was used for bank debt and other IGC
obligations.
Management Services - IGC continues to offer management services.
General and Administrative - IGC reduced the number of employees in 1992
and additional staff has been added only when warranted as IGC continues
to monitor corporate expenses closely.
Certain new terms resulting from the loan restructure negotiations require
an accelerated sale pace for the disposition of homebuilding and land
development assets. Management also evaluated its investments, deferred
project costs, notes receivable and non-real estate assets for any potential
losses. In 1992, IGC recorded a provision for various net realizable value
reductions and restructuring costs as set forth below:
Reserve for land and homebuilding inventory,
notes receivable and investment in partnerships $13,279,000
Reserves against other assets and expenses
related to the restructuring 2,516,000
-----------
$15,795,000
===========
During 1993, in response to improving conditions with certain of its real
estate assets and reductions in its estimates of expenses related to the
restructuring as well as its decision to abandon certain development efforts
with respect to its waste technology investment as discussed in Note 6,
management reallocated $420,000 of reserves from the land and homebuilding
category to the reserve for other assets and expenses related to the
restructuring.
As a part of its ongoing determination of the realizable value of its
assets, management continually monitors the need for additional adjustments to
the carrying value of its assets. During 1994, the real estate market
continued to show signs of improvements. As of December 31, 1994, management
has concluded that additional reserves are not required.
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
Net income for 1994 totalled $6,641,000 compared to net income of
$7,193,000 for 1993, which included the cumulative effect of a change in
accounting principle of $1,500,000, which resulted from the Company's adoption
<PAGE>37
of Statement of Financial Accounting Standard, No. 109, Accounting for Income
Taxes. Excluding the cumulative effect of the change in accounting principle,
the Company's net income for 1994 increased approximately $948,000 or 17% from
the prior year. Factors contributing to the increased level of net earnings
are discussed in the revenues and expenses sections below.
Revenues. Revenues for 1994 totalled $63.4 million as compared to $48.8
million for 1993, increasing by $14.7 million or 30% over the prior year. The
increased revenue levels during 1994 were attributable to an increase in land
sales, increased revenues from investments in residential rental and gaming
partnerships, increased apartment rental revenues and increased interest and
other income. These increases were somewhat offset by decreases in home sales,
and management and other fees.
Revenues from land sales increased to $22,296,000 for 1994 from
$13,809,000 for 1993, and were comprised of the following:
1994 1993
---- ----
(In thousands)
Commercial and Business Parks
St. Charles
(15 acres in 1994, 12 acres in 1993) $ 1,418 $ 3,000
Puerto Rico (61 acres in 1994) 12,000 --
Residential
St. Charles
Developed lots-single family
(100 in 1994, 114 in 1993) 4,488 5,194
Developed lots-townhome (66 in 1993) -- 1,650
Montclair
Developed lots (36 in 1994, 61 in 1993) 1,364 2,167
Semi-developed lots (69 in 1994, 45 in 1993) 778 378
Westbury developed lots (22 in 1994, 9 in 1993) 599 233
Undeveloped land
St. Charles (27 acres in 1993) 31 687
Puerto Rico (20 acres in 1994) 1,494 --
Recognition of deferred income - Puerto Rico 124 500
------- -------
$22,296 $13,809
======= =======
Average residential lot sale price
St. Charles
Developed
Single-family $ 45 $ 46
Townhome -- 25
Montclair
Developed lots 38 36
Undeveloped lots 11 8
Westbury 27 26
Land sales increased by $8.5 million or 61% due primarily to the closing
of the sale of a shopping center site in Puerto Rico, and to the sale of an
undeveloped land parcel in Puerto Rico during 1994. Somewhat offsetting this
<PAGE>38
increase was a decline in residential land sales which resulted from increased
competition and a greater percentage of move up buyers refinancing their homes
rather than purchasing new homes. The decrease in the U.S. commercial land
sales is primarily attributable to the cyclical nature of commercial
development.
Revenues from home sales decreased 7% to $20,265,000 for 1994 from
$21,884,000 for 1993. The primary reason for the decrease is an overall
decline in the number of units sold by the Company's Tract Homebuilding
Division. The increased focus by the Company on its Semi-Custom homebuilding
operations and the reduced availability of townhome lots to the Company's
homebuilding division in St. Charles and Montclair due to lot sales to third
party homebuilders resulted in a 38% decline in the number of units sold during
1994 as compared to 1993. As a result of the declining sales of this
division, management has decided to curtail expansion of any tract homebuilding
operations during 1995 and to complete the buildout of only those projects
which have already been commenced. Somewhat offsetting this decline in sales
levels by the Tract Homebuilding Division was a 15% increase in the number of
units settled by the Semi-Custom Homebuilding Division. This increase was
attributable to increased market demand in the market areas where this division
operates and to the new marketing plan implemented in 1994. This plan
established sales centers in key marketing areas, increased sales staff and
provided extensive sales training to homebuilding sales personnel.
The following is a comparative analysis of home sales and average sales
prices for 1994 and 1993 along with backlog information at December 31, 1994
and 1993:
1994 1993
------------------------- -------------------------
Average Average
Sales Units Sales Units
Prices Closed Backlog Prices Closed Backlog
-------- ------ ------- -------- ------ -------
(Dollars in thousands)
Home Sales
Semi-Custom
Homebuilding Division
(excludes lots) $ 84 144 74 $ 79 125 134
Tract Homebuilding
Division
St. Charles, MD 153 49(1) 5 136 76(2) 17
Montclair, VA 118 1 -- 127 13 --
Lexington Park, MD 81 6 -- 91 2 --
--- --- --- ---
101 200 79 101 216 133
=== === === ===
(1) Includes seven homes sold on lots purchased from third parties.
(2) Includes three homes sold on lots purchased from third parties.
<PAGE>
<PAGE>39
Revenues from investment properties, management fees and interest and
other income increased 60% to $20,865,000 for 1994 from $13,076,000 for 1993,
and were comprised of the following:
1994 1993
---- ----
(In thousands)
Revenues from investment properties
Investment in gaming properties $ 7,288 $ 2,358
Equity in earnings from partnerships 4,938 3,701
Apartment rental revenues 4,538 2,113
Management and other fees 3,453 4,453
Interest and other income 648 451
------- -------
$20,865 $13,076
======= =======
Revenues from investment in gaming properties consisted of cash
distributions received from HDA in 1994 of $763,000 and $6.5 million of LDA
notes receivable distributed by HDA to IGC in 1994. HDA is a Puerto Rico
special partnership and partners in such partnerships are not liable for losses
in excess of their capital investment. Due to the costs related to the
refinancing of HDA's debt in 1993 and HDA's distributions to partners, the
partner's capital account is in a deficit position. As a result of HDA's
deficit position and the distribution of the Company's 99% ownership interest
in Equus in early 1995, the Company did not recognize any earnings from its
interest in HDA during 1994. Earnings from investment in gaming properties for
1993 included equity in earnings of HDA. These earnings included the Company's
$2.2 million share of earnings before a prepayment penalty, the Company's share
of a prepayment penalty of $.6 million which reduced the Company's investment
in HDA to zero, a cash distribution of $800,000 received after the investment
in HDA was reduced to zero and previous cash distributions of $1,200,000.
Equity in earnings from partnerships during 1994 increased $1.2 million or
33% over the prior year due primarily to the receipt of distributions from
certain partnerships that exceeded the Company's basis in those partnerships.
These distributions included $2.6 million from a Puerto Rico partnership that
refinanced four apartment projects which it owns.
Apartment rental revenues during 1994 increased by $2.4 million over the
prior year due primarily to the fact that the operating results of the
partnerships owning the Fox Chase and New Forest apartment complexes were
consolidated during 1994 for the entire year but were consolidated for only a
portion of 1993. In August of 1993, the Company purchased an unaffiliated
party's 50% interest in these partnerships, thereby increasing the Company's
interest to 90%. Prior to this transaction, the Company accounted for it's
interest using the equity method of accounting.
Management fees declined $1.0 million or 22% during 1994, as compared to
the prior year. This decline was attributable primarily to a reduction in the
management fees received from HDA during 1994 as a result of an amendment to
their management agreement in 1993, and from the receipt of refinancing fees
earned in the 1993 period which were not repeated in 1994.
Interest and other income increased $197,000 or 44% during 1994 as
compared to the prior year. This increase was due primarily to interest income
associated with receivables from affiliates that were satisfied in 1994. IGC
recognized $182,000 of interest earned during 1994 whereas interest earned on
these receivables in 1993 was fully reserved.
<PAGE>40
GROSS PROFITS FROM COMMUNITY DEVELOPMENT AND HOMEBUILDING
The gross profits from community development are summarized as follows:
1994
----------------------------------------
Gross
Cost of Gross Profit
Sales Sales Profit Margins
----- ------- ------ -------
(In thousands)
Commercial and business parks
St. Charles $ 1,418 $ 437 $ 981 69.18%
Puerto Rico 12,000 7,582 4,418 36.82%
Residential
St. Charles
Developed lots-single family 4,488 2,710 1,778 39.62%
Montclair
Developed lots 1,364 1,378 (14) (1.03%)
Semi-developed lots 778 778 -- --
Westbury developed lots 599 607 (8) (1.34%)
Undeveloped land
St. Charles 31 -- 31 100.00%
Puerto Rico 1,494 886 608 40.70%
Recognition of deferred
income - Puerto Rico 124 20 104 83.87%
Period costs -- 572 (572)
------- ------- -------
$22,296 $14,970 $ 7,326 32.86%
======= ======= =======
<PAGE>
<PAGE>41
1993
----------------------------------------
Gross
Cost of Gross Profit
Sales Sales Profit Margins
----- ------- ------ -------
(In thousands)
Commercial and business parks
St. Charles $ 3,000 $ 1,010 $ 1,990 66.33%
Puerto Rico
Residential
St. Charles
Developed lots-single family 5,194 3,156 2,038 39.24%
Developed lots-townhome 1,650 1,203 447 27.09%
Montclair
Developed lots 2,167 2,051 116 5.35%
Semi-developed lots 378 360 18 4.76%
Westbury developed lots 233 225 8 3.43%
Undeveloped land
St. Charles 687 675 12 1.75%
Recognition of deferred
income - Puerto Rico 500 80 420 84.00%
Period costs -- 742 (742) --
------- ------- -------
$13,809 $ 9,502 $ 4,307 31.19%
======= ======= =======
The increase in gross profit margins to 32.86% in 1994 from 31.19% in the
1993 period is due primarily to the absorption of lower period costs by higher
land sales during 1994. Period costs in 1994 declined by $170,000 or 23% from
the prior year due primarily to the inclusion of certain non-recurring charges
in 1993 period costs which were not repeated in 1994. Gross profit margins
before period costs were 35.42% in 1994 compared to 36.56% in 1993. This
difference is due to the mix of the type and location of land sold.
Gross profits from homebuilding operations for 1994 and 1993,
respectively, were as follows:
1994 1993
--------------------- --------------------
(In thousands)
$ % $ %
------ ------- ------ -------
Home sales $20,265 21,884
Cost of sales 18,508 18,880
------- ------
Gross profits before
marketing costs 1,757 8.67% 3,004 13.73%
====== ======
<PAGE>42
Gross profits as a percentage of homebuilding revenues for a particular
period, are a function of various factors including pricing, efficiency of
homebuilding operations, financing costs (including costs of subsidizing
customer financing, if any) and differences in gross profit margins between the
homebuilding divisions. The gross profit margins earned during 1994 decreased
5% to 8.7% from the 13.7% achieved during 1993. The Tract Homebuilding
Division has historically been more profitable than the Semi-Custom operation
due to the profits associated with the low land basis and reduced costs because
of the close proximity of the units under construction. During 1994, tract
homebuilding in Maryland became extremely competitive resulting in builders
offering buyer incentives and reduced prices. As a result of this development,
the Company's tract homebuilding profits were significantly reduced and
management has decided to complete the projects it is currently committed to
and halt future tract building expansion until the situation improves. Certain
capitalized overhead costs associated with this expansion were written off in
1994 which further reduced the gross profit margin.
Selling and marketing, general and administrative, rental apartment
expenses, depreciation and amortization, interest expense, and write-off of
deferred project costs were as follows:
1994 1993
----------- -----------
(In thousands)
Selling & marketing $ 1,556 $ 1,285
General & administrative 8,614 7,754
Rental apartment expenses 4,526 2,176
Depreciation & amortization,
excluding apartments 591 629
Interest expense 2,032 2,063
Write-off of deferred project costs 1,761 --
------- -------
$19,080 $13,907
======= =======
Selling and marketing expenses increased by $271,000 or 21% during 1994 as
compared to 1993. As part of the 1992 restructure plan, certain model homes
were sold and sales centers established in our key marketing area during 1994.
In addition to the sales centers, the new marketing plan included increasing
the size and quality of the sales staff for the homebuilding division. Also
responsible for this increase were write-offs of receivables from sales agents
of $108,000 during 1994.
General and administrative expenses increased by approximately $860,000
million or 11% during 1994 as compared to the 1993 level. Of this amount,
$264,000 was compensation expense recognized in connection with the issuance of
Unit Appreciation Rights to the Company's employees during 1994. Also
contributing to the increase was an increase in general and administrative
salaries and benefits expense of $100,000. The higher salaries and benefits
costs were attributable to increased staffing levels by the Company during 1994
as compared to the prior year. Other factors contributing to the increase in
general and administrative expenses were an increase in legal fees of $197,000,
an increase in consulting fees of approximately $44,000, an increase in travel
expenses of $133,000, and increases in office rent and miscellaneous taxes of
approximately $60,000 and $56,000, respectively. The increase in legal fees
was primarily attributable to the Company's involvement in various legal
<PAGE>43
proceedings during 1994 as further discussed in Note 9 to the financial
statements. The increased level of travel expenses in 1994 was due to the
Company's expansion of its operating activities into new geographic areas in
both the United States and Puerto Rico.
Depreciation and amortization decreased by approximately $38,000 from the
prior year, due to certain fixed assets, financing fees and similar assets
becoming fully amortized or depreciated during 1993.
Interest expense decreased approximately $31,000 during 1994 as compared
to the prior year due primarily to a reduction in the Company's debt levels
during 1994 as compared to the prior year.
Rental apartment expenses include the operating expenses associated with
the Lancaster, Fox Chase and New Forest partnerships. The increase in such
expenses from the prior year of approximately $2.4 million is attributable
primarily to the fact that 1993 expenses included expenses associated with New
Forest and Fox Chase for only a portion of the year, (from August 20, 1993
through December 31, 1993) whereas the 1994 expenses reflect a full year of
expenses for these entities.
The write-off of deferred project costs consists of $1,761,000 of costs
associated with the Company's application for a license to operate and
construct a Virginia horse racing facility which was denied during 1994.
Provision for Income Taxes. The provision for income taxes in 1994
increased to $3,511,000 compared to $665,000 during 1993. This increase was
due primarily to taxable income resulting from distributions received from
partnerships in Puerto Rico that refinanced their apartment projects and from
the sale of a shopping center site in Puerto Rico during 1994. The
implementation of SFAS No. 109 by the Company during 1993 generated a $1.5
million Puerto Rico income tax benefit which has been reflected in the
Company's 1993 financial statements as the cumulative effect of an accounting
change.
Minority Interest Expense. Minority interest expense increased $594,000
to $716,000 in 1994 compared to $122,000 in 1993. This increase is
attributable to the increased profits generated from the land sales in Puerto
Rico in which a minority partner holds a 20% interest.
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
Net income for 1993 was $7,193,000 compared to a net loss of $14,947,000
in 1992. The 1993 net income included the cumulative effect of a change in
accounting principle of $1,500,000 which resulted from the Company's adoption
of Statement of Financial Accounting Standard No. 109, Accounting For Income
Taxes. The 1992 net income included a provision of $15,795,000 for the affects
of a restructuring plan. Excluding the cumulative affect of a change in
accounting and the restructuring provision, the Company had net income of
$5,693,000 in 1993 compared to $848,000 in 1992. Factors contributing to these
differences in net earnings are discussed in the revenues and expenses sections
below.
Revenues. Revenues for 1993 increased 16.2% to $48,769,000 from
$41,982,000 in 1992 primarily due to an increase in land sales, revenues from
investments in gaming properties, equity in earnings from partnerships, the
consolidation of three apartment projects, and refinancing fees from apartment
projects, offset in part by a decrease in homebuilding revenue.
<PAGE>44
Revenues from land sales increased to $13,809,000 for 1993 from $3,359,000
for 1992 as follows:
1993 1992
---- ----
(In thousands)
Commercial and business parks
St. Charles
(12 acres in 1993, 1 acre in 1992) $ 3,000 $ 248
Residential
St. Charles
Developed lots-single family
(114 in 1993, 11 in 1992) 5,194 499(1)
Developed lots-townhome (66 in 1993) 1,650 --
Semi-developed lots (43 in 1992) -- 900
Montclair
Developed lots (61 in 1993, 25 in 1992) 2,167 832
Semi-developed lots (45 in 1993) 378 --
Westbury developed lots (9 in 1993, 1 in 1992) 233 25
Undeveloped land
St. Charles (27 acres in 1993, 46 acres in 1992) 687 231(1)
Recognition of deferred income - Puerto Rico 500 624
------- ------
$13,809 $3,359
======= ======
Average residential lot sale price
St. Charles
Developed
Single-family $ 46 $ 45
Townhome 25 --
Semi-developed -- 21
Montclair
Developed lots 36 33
Undeveloped lots 8 --
Westbury 26 25
(1) In 1992, 46 acres of undeveloped land and two lots were transferred
to vendors as payment in full satisfaction of trade payables. The
terms of these vendor sales are similar to third-party sales.
Land sales increased primarily due to a shift in emphasis from
homebuilding to lot sales, the impact of increased option contracts and an
increase in overall market demand for developed lots.
Revenues from home sales decreased 29% to $21,884,000 for 1993 from
$30,761,000 for 1992. The reason for this decrease is an overall decline in
home sales in all divisions and a decrease in the average sales price to
approximately $101,000 for 1993 from $107,000 for 1992. The decline in home
sales in the Tract Homebuilding Division is primarily due to the Company's
shift in emphasis on lot sales. Reduced home sales in the Semi-Custom Division
reflect the effects of its reorganization and changes in key personnel during
the year. Home sales and average sales prices for 1993 and 1992, and backlog
as of December 31, 1993 and 1992 were as follows:
<PAGE>45
1993 1992
------------------------- -------------------------
Average Average
Sales Units Sales Units
Prices Closed Backlog Prices Closed Backlog
-------- ------ ------- -------- ------ -------
(In thousands)
Home Sales
Semi-Custom
Homebuilding Division
(excludes lots) 79 125 134 76 154 110
Tract Homebuilding
Division
St. Charles, MD $136 76(1) 17 $140 93 23
Montclair, VA 127 13 -- 131 14 3
Lexington Park, MD 91 2 -- 88 13 --
Puerto Rico Division -- -- -- 225 14 --
--- --- --- ---
101 216 151 107 288 136
=== === === ===
(1) Includes three homes sold on lots purchased from third parties.
Revenues from investment properties, management fees and interest and
other income increased 66.3% to $13,076,000 for 1993 from $7,862,000 for 1992,
and are summarized as follows:
1993 1992
---- ----
(In thousands)
Revenues from investment properties
Investment in gaming properties $ 2,358 $ 591
Equity in earnings from partnerships 3,701 2,672
Apartment rental revenues 2,113 --
Management and other fees 4,453 3,856
Interest and other income 451 743
------- -------
$13,076 $ 7,862
======= =======
Revenues from investment in gaming properties consists of IGC's equity in
earnings of HDA which increased to $2,358,000 in 1993, compared to $591,000 in
1992. This increase was due to the increased rental income in HDA and
distributions from HDA, offset in part by a prepayment penalty paid by HDA in
connection with refinancing its former indebtedness to Chase Manhattan Bank.
HDA's rental income is based on commissions earned by ECOC on wagering at El
Comandante Race Track. These commissions have increased due to increased
wagering at off-track betting agencies converted to an on-line computerized
system.
Revenues from equity in earning from partnerships increased due primarily
to the recognition of sponsor fees when certain long-term receivables were
collected from refinanced projects and increased earnings from the partnerships
in which the Company holds an investment.
<PAGE>46
Apartment rental revenues were $2,113,000 in 1993 due to the consolidation
of three apartment partnerships in 1993. During May 1993, the Company
purchased from an unaffiliated party an additional 19.8% limited partnership
interest in Lancaster, increasing its ownership to 60.4% at this date. During
August 1993, the partnerships owning the New Forest and Fox Chase Apartment
complexes purchased the 50% partnership interests of an unaffiliated party
thereby increasing the Company's interest in these partnerships from 40% to
90%. Prior to these purchases, the Company accounted for these interests under
the equity method. The December 31, 1993 financial statements include the
operations of Lancaster since January 1, 1993 and the operations of New Forest
and Fox Chase since the date of purchase, August 20, 1993 (see Note 4 to the
Company's consolidated financial statements included in Item 8 of the report).
Revenues from management fees increased primarily due to fees earned in
1993 from the refinancing of apartment projects owned by partnerships in which
the Company is the general partner, with no similar fees in 1992, and increased
developer fees earned during 1993 compared to 1992.
The decrease in interest and other income was due to the reduced balances
in 1993 of promissory notes due from third-party builders.
GROSS PROFITS FROM COMMUNITY DEVELOPMENT AND HOMEBUILDING
The gross profits from community development are summarized as follows:
1993
----------------------------------------
Gross
Cost of Gross Profit
Sales Sales Profit Margins
----- ------- ------ -------
(In thousands)
Commercial and business parks
St. Charles $ 3,000 $1,010 $1,990 66.33%
Residential
St. Charles
Developed lots-single family 5,194 3,156 2,038 39.24%
Developed lots-townhome 1,650 1,203 447 27.09%
Montclair
Developed lots 2,167 2,051 116 5.35%
Semi-developed lots 378 360 18 4.76%
Westbury developed lots 233 225 8 3.43%
Undeveloped land
St. Charles 687 675 12 1.75%
Puerto Rico
Recognition of deferred income 500 80 420 84.00%
Period costs -- 742 (742) --
------- ------ ------
$13,809 $9,502 $4,307 31.19%
======= ====== ======
<PAGE>47
1992
----------------------------------------
Gross
Cost of Gross Profit
Sales Sales Profit Margins
----- ------- ------ -------
(In thousands)
Commercial and business parks
St. Charles $ 248 $ 161 $ 87 35.08%
Residential
St. Charles
Developed lots-single family 499 284 215 43.09%
Undeveloped lots 900 749 151 16.78%
Montclair
Developed lots 832 832 -- --
Westbury developed lots 25 25 -- --
Undeveloped land
St. Charles 231 198 33 14.29%
Recognition of deferred income 624 80 544 87.18%
Period costs -- 869 (869) --
------ ------ ------
$3,359 $3,198 $ 161 4.79%
====== ====== ======
The increase in gross profit margins to 31.19% in 1993 from 4.79% in the
1992 period is primarily due to the upturn of the real estate industry
resulting in an increase in sales and to the mix of sales, and from a decline
in period costs as a percentage of overall sales revenues. Gross profit
margins before period costs were 36.56% in 1993 compared to 30.66% in 1992.
The increased margin in 1993 reflects a more favorable sales mix.
Gross profits from homebuilding operations for 1993 and 1992,
respectively, were as follows:
1993 1992
--------------------- --------------------
(In thousands)
$ % $ %
------- ------- ------- -------
Home sales $21,884 $30,761
Cost of sales 18,880 25,272
------- -------
Gross profits $ 3,004 13.73% $ 5,489 17.84%
======= =======
Gross profits as a percentage of homebuilding revenues for a particular
period, are a function of various factors including pricing, efficiency of
homebuilding operations, financing costs (including costs of subsidizing
customer financing, if any) and differences in gross profit margins between the
homebuilding divisions. The lower margins in 1993 are primarily due to fewer
sales, the mix of sales, some price reductions and increased carrying costs on
a per unit basis.
<PAGE>48
Selling and marketing, general and administrative, depreciation and
amortization, interest expense, rental apartment expenses and restructuring
provision for 1993 and 1992 were as follows:
1993 1992
----------- -----------
(In thousands)
Selling & marketing $ 1,285 $ 1,332
General & administrative 7,754 7,780
Depreciation & amortization,
excluding apartments 629 897
Interest expense 2,063 2,103
Rental apartment expenses 2,176 --
Restructuring provision -- 15,795
------- -------
$13,907 $27,907
======= =======
Selling and marketing and general and administrative expenses did not vary
materially between 1993 and 1992. Rental apartment expenses include the
expenses of Fox Chase and New Forest after the purchase date of August 20,
1993, and a full year's expenses for Lancaster. The Company previously
accounted for these partnerships on the equity method (see Note 4 to the
Consolidated Financial Statements included in Item 8 of this report).
Depreciation and amortization decreased primarily due to certain financing
costs, organization costs and start-up costs that were fully amortized during
1992.
Interest expense decreased $40,000 primarily due to the impact of loan
repayments.
Provision for Income Tax. The provision for income taxes in 1993
increased to $665,000 compared to $471,000 in 1992. In addition, the
implementation in 1993 of FSAS No. 109 generated a $1,500,000 Puerto Rico
income tax credit.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its liquidity requirements principally
from cash flow generated from home and land sales, property management fees,
distributions from HDA, and from bank financing providing funds for development
and working capital. In response to the decline in the real estate markets and
the decline in the availability of financing, the Company undertook a financial
restructuring in 1992. During 1994, the Company continued to make progress in
completing the objectives it set forth in its 1992 restructuring plan. New or
amended loan agreements have been executed for all loans which required
restructuring. Under the terms of IGC's loans, most of the cash flow generated
by U.S. home and land sales and distributions from partnerships, including
distributions from partnership refinancings, will be used to further reduce
bank loans and to meet debt service requirements. During 1994, debt
curtailments net of debt financings totaled $14,927,000. Scheduled loan
curtailments during 1995 include payments of $2,400,000 in May, a $1,000,000
payment in September and payments totaling $2,200,000 in November. These
curtailments are expected to be made with proceeds from the sale of commercial
and business park land which secures the loans, proceeds of new project
financings, or proceeds from the sale of investment properties. In addition to
these scheduled curtailments, a loan which had a balance at December 31, 1994
<PAGE>49
of approximately $6,533,000 that is being curtailed with the proceeds from the
sale of residential lots, matures in September of 1995. This loan, if not
fully paid, is expected to be significantly reduced prior to its maturity date
and it is anticipated that any remaining balance will be extended although
there are no current contractural extensions on the loan. In addition, as a
result of the Company's distribution of Equus Units representing a 99% limited
partnership interest in Equus to IGC Unitholders in February, 1995, as further
discussed in Note 5, the Company will no longer receive cash distributions from
HDA. Given these factors, the Company's ability to generate cash for overhead,
development and other uses is limited and it may become necessary for the
Company to negotiate with its lenders to reschedule future payments. In
addition, project financing will be necessary to fund the development of needed
inventory. Pending legal proceedings may also hamper the Company's ability to
complete its restructuring plan including the timing and/or terms of any new
financing.
In addition to its traditional sources of liquidity, the Company is
currently investigating opportunities in the capital markets for longer term
debt or possible equity financings.
A potential source of liquidity in late 1995 includes cash from four
projects in Puerto Rico which applied in March of 1993 for economic incentives
under the 1990 Low-Income Housing Preservation and Resident Homeownership Act
("LIHPRHA"). Under LIHPRHA the partnerships have the option of obtaining
additional HUD insured financing and additional subsidy funds, and distributing
net refinancing proceeds to partners, or selling the projects to non-profit
organizations which would continue the projects under HUD's low income housing
program. Management believes that the economic benefit to the Company and the
partners will be greater from a sale of the projects, in which event the
Company will endeavor to retain the right to manage the properties. It is
anticipated that the first closings pursuant to LIHPRHA will be accomplished in
the fourth quarter of 1995 in which event the Company expects that its share of
the cash proceeds will be approximately $9.0 million net of taxes, subject to
proposed changes to LIHPRHA. The decision to sell the projects under LIHPRHA
is largely dependent on the outcome of proposed legislation to be considered by
Congress in 1995. Management expects that the Clinton Administration will
submit a bill to Congress during 1995 which, if enacted, will dramatically
impact subsidized housing programs and which could significantly reduce the
proceeds available to the Company. If this occurs, management will need to
reconsider its decision to sell the projects under the LIHPRHA program. It is
not possible at the present time to predict the outcome of the proposed changes
to the LIHPRHA program. Should management decide not to sell the projects
under this program, an alternative exit strategy may be to convert the projects
to condominiums and sell the individual units. If this alternative is pursued,
the conversion and subsequent sale of the units is expected to take
approximately three years. The proceeds of any sales pursuant to LIHPRHA have
been assigned to the FDIC and NationsBank for repayment of debt.
A LIHPRHA application was filed for a fifth project in Puerto Rico in
March 1994. The timetable for completing the LIHPRHA processing is
approximately two years. However, if the proposed legislation discussed above
is enacted, management may withdraw the application.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<PAGE>
<PAGE>50
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Interstate General Company L.P.:
We have audited the accompanying consolidated balance sheets of Interstate
General Company L.P. (a Delaware limited partnership) and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of income,
changes in partners' capital and cash flows for each of the three years in the
period ended December 31, 1994. These consolidated financial statements and
the schedules referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Interstate
General Company L.P. as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
As discussed further in Note 9, the Company is being investigated by the
United States Attorney for the District of Maryland for possible violations of
the Clean Water Act and other laws relating to wetlands preservation. The
investigation is in the preliminary stage, and although being contested by the
Company, the outcome is uncertain at this time. Accordingly, no provisions for
any liabilities that may result upon the resolution of this matter have been
made in the accompanying consolidated financial statements.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedule
included on pages 97 through 110 of the Form 10-K is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
Arthur Andersen LLP
Washington, D.C.
March 30, 1995
<PAGE>51
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per unit amounts)
YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1993 1992
------------ ------------ -----------
REVENUES
Community development-land sales $ 22,296 $ 13,809 $ 3,359
Homebuilding-home sales 20,265 21,884 30,761
Revenues from investment properties
Investment in gaming properties 7,288 2,358 591
Equity in earnings from partnerships
and development fees 4,938 3,701 2,672
Apartment rental revenues 4,538 2,113 --
Management and other fees,
substantially all from
related entities 3,453 4,453 3,856
Interest and other income 648 451 743
----------- ----------- -----------
Total revenues 63,426 48,769 41,982
----------- ----------- -----------
EXPENSES
Cost of land sales 14,970 9,502 3,198
Cost of home sales 18,508 18,880 25,272
Selling and marketing 1,556 1,285 1,332
General and administrative 8,614 7,754 7,780
Rental apartment expenses 4,526 2,176 --
Depreciation and amortization 591 629 897
Interest expense 2,032 2,063 2,103
Restructuring provision -- -- 15,795
Write-off of deferred project costs 1,761 -- --
----------- ----------- -----------
Total expenses 52,558 42,289 56,377
----------- ----------- -----------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES 10,868 6,480 (14,395)
PROVISION FOR INCOME TAXES 3,511 665 471
----------- ----------- -----------
INCOME (LOSS) BEFORE MINORITY
INTEREST 7,357 5,815 (14,866)
Minority interest (716) (122) (81)
----------- ----------- -----------
NET INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 6,641 5,693 (14,947)
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE -- 1,500 --
----------- ----------- -----------
NET INCOME (LOSS) $ 6,641 $ 7,193 $ (14,947)
=========== =========== ===========
<PAGE>
<PAGE>52
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) (continued)
(In thousands, except per unit amounts)
YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1993 1992
------------ ------------ -----------
PER UNIT AMOUNTS--
NET INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE $ .66 $ .56 $ (1.47)
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE -- .15 --
----------- ----------- ------
- -----------
NET INCOME (LOSS) PER UNIT $ .66 $ .71 $ (1.47)
=========== =========== ===========
NET INCOME (LOSS)
General Partners 66 $ 71 $ (149)
Limited Partners 6,575 7,122 (14,798)
----------- ----------- -----------
6,641 $ 7,193 $ (14,947)
=========== =========== ===========
WEIGHTED AVERAGE UNITS
OUTSTANDING 10,126 10,080 10,079
=========== =========== ===========
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>53
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
A S S E T S
DECEMBER 31,
---------------------------
1994 1993
------------ ------------
CASH AND SHORT-TERM INVESTMENTS
including restricted cash of $5,713
and $2,587 at December 31, 1994
and 1993, respectively $ 6,833 $ 4,596
-------- --------
ASSETS RELATED TO COMMUNITY DEVELOPMENT
Land and development costs
St. Charles, Maryland 26,426 26,683
Puerto Rico 26,103 31,389
Other United States locations 16,014 18,660
Notes receivable on land sales, net of
reserves of $94 and $230
as of December 31, 1994 and 1993,
respectively 1,256 1,785
Other 262 359
-------- --------
70,061 78,876
-------- --------
ASSETS RELATED TO HOMEBUILDING PROJECTS
Homebuilding construction and land 4,384 6,645
Mortgages receivable 222 396
Receivables on home sales 271 405
Other 121 120
-------- --------
4,998 7,566
-------- --------
ASSETS RELATED TO INVESTMENT PROPERTIES
Investment in residential rental partnerships 9,976 14,953
Investment properties, net of accumulated
depreciation of $4,746 and $4,106,
as of December 31, 1994 and 1993,
respectively 24,499 24,551
Other receivables, net of reserves of
$1,071 and $2,800 as of December 31,
1994 and 1993, respectively 1,133 2,610
Other -- 593
-------- --------
35,608 42,707
-------- --------
<PAGE>
<PAGE>54
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
A S S E T S (continued)
DECEMBER 31,
---------------------------
1994 1993
------------ ------------
OTHER ASSETS
Property, plant and equipment, less
accumulated depreciation of $1,948
and $1,837 as of December 31, 1994
and 1993, respectively 1,588 1,704
Costs in excess of net assets acquired,
less accumulated amortization of
$735 and $584 as of
December 31, 1994 and 1993,
respectively 2,299 2,450
Deferred costs regarding waste technology
and other 2,126 2,415
-------- --------
6,013 6,569
-------- --------
Total assets $123,513 $140,314
======== ========
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
<PAGE>55
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
LIABILITIES AND PARTNERS' CAPITAL
DECEMBER 31,
---------------------------
1994 1993
------------ ------------
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and other accrued
liabilities $ 3,521 $ 3,661
Mortgages and notes payable 370 428
Accrued income tax liability 4,553 1,379
-------- --------
8,444 5,468
-------- --------
LIABILITIES RELATED TO COMMUNITY DEVELOPMENT
Recourse debt 36,661 50,137
Non-recourse debt 4,268 2,762
Loan payable to HDA -- 12,684
Accounts payable, accrued liabilities
and deferred income 2,728 2,752
-------- --------
43,657 68,335
-------- --------
LIABILITIES RELATED TO HOMEBUILDING
Recourse debt 2,398 3,320
Accounts payable and accrued liabilities 2,506 4,231
-------- --------
4,904 7,551
-------- --------
LIABILITIES RELATED TO INVESTMENT PROPERTIES
Recourse debt 1,559 1,857
Non-recourse debt 22,771 22,457
Accounts payable, and accrued liabilities 1,473 2,401
-------- --------
25,803 26,715
-------- --------
Total liabilities 82,808 108,069
-------- --------
PARTNERS' CAPITAL
General partners' capital 4,322 155
Limited partners' capital-10,215 and
10,082 Units issued and outstanding as
of December 31, 1994 and 1993, respectively 36,383 32,090
-------- --------
Total partners' capital 40,705 32,245
-------- --------
Total liabilities and partners' capital $123,513 $140,314
======== ========
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>56
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 and 1992
(In thousands)
General Limited
Partners' Partners'
Capital Capital Total
-------- ----------- -----------
BALANCES, December 31, 1991 233 39,756 39,989
Net loss for the year (149) (14,798) (14,947)
------- ------- -------
BALANCES, December 31, 1992 84 24,958 25,042
Net income for the year 71 7,122 7,193
Employee unit options exercised -- 10 10
------- ------- -------
BALANCES, December 31, 1993 $ 155 $32,090 $32,245
Net income for the year 66 6,575 6,641
Employee unit options exercised -- 531 531
Cash distributions to partners (10) (1,010) (1,020)
Capital contribution 4,129 -- 4,129
Assets transferred at general
partner's basis (18) (1,803) (1,821)
------- ------- -------
BALANCES, December 31, 1994 $ 4,322 $36,383 $40,705
======= ======= =======
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>57
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
YEARS ENDED DECEMBER 31,
--------------------------------------
1994 1993 1992
------------ ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 6,641 $ 7,193 $(14,947)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization
Residential rental properties 640 432 --
Other 703 706 897
Provision for deferred income taxes 1,486 275 469
Equity in earnings of
partnerships (4,250) (1,668) (1,727)
Increase in sponsor and
developer fees from
partnerships (323) (902) (312)
Distribution of note receivable
from HDA (6,526) -- --
Cumulative effect of
accounting change -- (1,500) --
Provision for restructuring -- -- 15,795
Increase (decrease) in
Income taxes currently payable 2,025 390 2
Accounts payable, accrued
liabilities and deferred income (2,226) (1,215) (1,598)
Decrease (increase) in
Receivables 703 3,458 3,509
Homebuilding assets 2,394 1,022 5,964
Community development assets 8,182 339 (2,121)
Restricted cash (3,126) (2,121) (202)
------- -------- -------
Net cash provided by
operating activities 6,323 6,409 5,729
------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in assets related
to investment properties 8,768 7,219 865
Net (acquisitions) dispositions
of other assets (79) 740 347
Purchase of residential rental
partnership interest (170) (370) (170)
------- -------- -------
Net cash provided by
investing activities 8,519 7,589 1,042
------- -------- -------
<PAGE>58
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
YEARS ENDED DECEMBER 31,
--------------------------------------
1994 1993 1992
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from HDA -- 8,853 1,396
Cash proceeds from debt financing 7,750 14,003 8,619
Payment of debt (22,992) (37,119) (16,166)
Cash distributions to partners (1,020) -- --
Employee Unit options exercised 531 10 --
------- -------- -------
Net cash used in
financing activities (15,731) (14,253) (6,151)
------- -------- -------
NET (DECREASE) INCREASE IN CASH
AND SHORT-TERM INVESTMENTS (889) (255) 620
CASH AND SHORT-TERM INVESTMENTS,
BEGINNING OF YEAR 2,009 2,264 1,644
------- -------- -------
CASH AND SHORT-TERM INVESTMENTS,
END OF YEAR $ 1,120 $ 2,009 $ 2,264
======= ======== =======
SUPPLEMENTAL DISCLOSURES
Interest paid (net of amount
capitalized) $ 3,787 $ 4,127 $ 1,820
Income taxes paid $ 337 $ -- $ --
Non-cash transactions
Distribution of notes receivable
from partners (1) $10,654 $ -- $ --
Acquisition of interest in
apartment partnerships, assets $ -- $ 22,641 $ --
Acquisition of interest in
apartment partnerships,
liabilities $ -- $ 22,532 $ --
Deed in lieu of payment of
purchase money mortgage $ 670 $ -- $ 568
Lot sale transfers to
trade creditors $ -- $ -- $ 518
Partnership interests received in
satisfaction of accounts and notes
receivable from general partner (1) $ 626 $ -- $ --
Accounts and notes receivable, net
of reserves, satisfied via transfer
of partnership interests from
general partner (1) $ 2,446 $ -- $ --
Capital contribution by
general partner (1) $ 4,129 $ -- $ --
(1) See Notes 5 and 10 to these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(1) BASIS OF PRESENTATION AND PRINCIPLES OF ACCOUNTING
On September 26, 1986, Interstate General Company L.P. ("IGC" or "the
Company"), a Delaware limited partnership, was formed, and on December 31,
1986, acquired substantially all of the community development, homebuilding,
investment properties and management services businesses of Interstate General
Business Corporation, Interstate St. Charles, Inc. and a trust for the benefit
of the stockholders of Interstate General Business Corporation (the
"Predecessors"). The assets relating to these businesses were acquired in
exchange for (1) 7,900,000 Units representing assignment of beneficial
ownership of limited partnership interest ("Units"), (2) a 1% general
partnership interest in IGC and (3) the assumption by IGC of certain
indebtedness relating to these businesses. The 1% general partner interest is
shared by the managing general partner, Interstate General Management
Corporation, and Interstate Business Corporation ("IGMC" and "IBC,"
respectively, referred to collectively as the "General Partner") as successors
to Interstate General Business Corporation and Interstate St. Charles, Inc.
Net income (loss) per Unit for the years ended December 31, 1994, 1993 and
1992, is calculated using weighted average Units outstanding. Outstanding
options and warrants to purchase Units and Unit appreciation rights do not have
a material dilutive effect on the calculation of earnings per Unit (see Note
12).
The accompanying consolidated financial statements include the accounts of
IGC and all of its subsidiaries, after eliminating intercompany transactions.
Reference to IGC or the Company refers to the consolidated group of entities or
to any one of the individual entities involved. IGC's investments in
partnerships in which IGC's interest is 50% or less are accounted for by the
equity method of accounting.
For purposes of reporting cash flows, cash and short-term investments
include cash on hand, unrestricted deposits with financial institutions and
short-term investments with original maturities of three months or less.
Sales and Profit Recognition
Sales revenues and profits from community development and homebuilding are
recognized at closing, when sufficient down payments have been obtained,
possession and other attributes of ownership have been transferred to the buyer
and IGC has no significant continuing involvement.
During 1992, IGC transferred developed lots and undeveloped land to third-
party vendors in satisfaction of certain short-term payables. In accordance
with generally accepted accounting principles, the transactions were recognized
as sales in the year of transfer. Revenues from community development included
$518,000 related to such transfers during 1992.
Revenues from Investment Properties
Revenues from investment properties include revenues from investments in
gaming properties, equity in earnings from partnerships and development fees
and apartment rental revenues. Revenues from investment in gaming properties
includes distributions received by IGC from Housing Development Associates S.E.
<PAGE>60
("HDA") and equity in earnings (losses) of HDA, including HDA's equity in
earnings (losses) of El Comandante Operating Company ("ECOC") through August 1,
1994 when IGC's ownership interest in this entity was terminated (See Note 5).
Equity in earnings from partnerships and development fees is comprised of IGC's
share of the earnings (losses) of the residential rental apartment project
partnerships accounted for under the equity method of accounting, income from
sponsor and developer fees and income related to a previous investment in a
cable television partnership. Apartment rental revenues include the revenues
of the consolidated partnerships owning apartment complexes.
Management Fees
IGC performs property management services including leasing, maintenance
and accounting for properties owned by affiliated entities. Fees are recorded
in the period in which the services are rendered and/or paid.
Community Development and Homebuilding Inventories
The costs of acquiring and developing land and homebuilding construction
are allocated and charged to cost of sales as the related inventories are sold.
IGC carries land, development and homebuilding costs (including capitalized
interest) at the lower of cost or net realizable value. Net realizable value
is defined as the estimated amount IGC expects to realize in the ordinary
course of business less costs of completion.
Capitalization of Interest
IGC's interest costs related to homebuilding and land assets were
allocated to these assets based on book value. The portion of interest
allocated to land, finished building lots and homebuilding construction during
the development and construction period is capitalized. Remaining interest
costs are expensed. A summary of interest for 1994, 1993 and 1992 is as
follows:
Years Ended December 31,
---------------------------
1994 1993 1992
------ ------- -------
(In thousands)
Expensed $4,369 $3,158 $2,103
Capitalized 2,770 2,655 4,399
------ ------ -------
Total interest incurred $7,139 $5,813 $6,502
====== ======= =======
Investment in Residential Rental Partnerships
IGC's investment in residential rental partnerships consists of long-term
receivables, nominal capital contributions, working capital loans and IGC's
share of unconsolidated partnership income and losses. The working capital
loans are collectible from the first cash flow generated from the operations of
the partnerships. The long-term receivables represent loans to the
partnerships for payment of construction and development costs in excess of the
project mortgages. Substantially all of the long-term receivables are non-
interest bearing and have been discounted at an effective rate of 14% based on
the projected maturity date which will occur upon the refinancing, sale or
other disposition of the partnerships' properties. The discount, which
<PAGE>61
represents deferred sponsor and developer fees, is netted in the consolidated
financial statements against the long-term receivables.
For partnerships syndicated prior to December 31, 1985, IGC amortizes the
discount over the estimated holding period of the properties and begins to
recognize the discount as income at the point when the partnerships have cash
flow that reasonably assures realization of the long-term receivables. Due to
a change in generally accepted accounting principles, deferred sponsor and
developer fees on partnerships syndicated after December 31, 1985 are
recognized when the long-term receivables are collected.
Certain partnerships are accumulating cash from operations in excess of
the maximum distribution amounts permitted by U.S. Department of Housing and
Urban Development ("HUD") and other regulatory authorities. This cash,
accumulated in restricted cash accounts, will be available to pay the long-term
receivables due to IGC and to make cash distributions to IGC and the limited
partners when the partnerships' projects are refinanced or sold.
Property, Plant and Equipment
Property, plant and equipment is carried at cost, less accumulated
depreciation. Depreciation is provided principally using the straight-line
method for financial reporting purposes and using accelerated methods for tax
purposes.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of advertising costs
which include costs of printed materials, signs, displays, general marketing
costs and costs associated with model homes. Advertising costs are expensed as
incurred except for capitalized model home costs which are depreciated over
periods ranging from ten to forty years. Model homes are carried at the lower
of cost less depreciation, or net realizable value.
Income Taxes
IGC is not subject to U.S. income taxes under current law. Its partners
are taxed directly on their share of IGC's income without regard to
distributions, and the partners may generally deduct their share of losses.
The corporate subsidiaries of IGC are subject to tax at the applicable
corporate rates. Furthermore, IGC is subject to Puerto Rico income tax on its
Puerto Rico source income and District of Columbia income tax on its District
of Columbia source income.
Accounting Change
On January 1, 1993, the Company implemented Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." SFAS No.
109 changes the method of accounting for income taxes under generally accepted
accounting principles and requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of differences between
financial reporting and tax reporting bases of assets and liabilities, and for
net operating loss and tax credit carry forwards. As a result of adopting this
statement, the Company recognized a cumulative benefit due to the change in
accounting principle of $1,500,000 or $.15 per unit as of January 1, 1993.
This benefit is included under the caption "Cumulative Effect of Accounting
Change" in the Consolidated Statement of Income for the year ended December 31,
1993.
<PAGE>62
In 1991, the Financial Accounting Standards Board issued SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments." This statement is
effective for financial statements issued for fiscal years ending after
December 15, 1992, except for entities with less than $150,000,000 in total
assets. For these entities, the effective date is financial statements issued
for fiscal years ending after December 15, 1995.
SFAS No. 107 requires disclosure of the fair value of certain financial
instruments, including cash, evidence of ownership interests in other entities
and contracts that impose either an obligation to deliver a financial
instrument or cash such as loans or notes payable, or a right to receive a
financial instrument or cash such as loans or notes receivable. The Company's
ownership interests in other entities are accounted for under the equity method
of accounting or are consolidated. Investments accounted for under both of
these accounting methods are specifically excluded from SFAS No. 107 fair value
disclosure requirements. The Company's total assets are less than
$150,000,000. Therefore, fair value disclosures by the Company are not
required until fiscal years ending after December 15, 1995. The Company
intends to adopt SFAS No. 107 by its required effective date and does not
expect adoption to have a material affect on its financial statements.
Reclassifications
Certain amounts presented for 1993 in the Consolidated Balance Sheet and
for 1993 and 1992 in the Consolidated Statements of Income and Cash Flows have
been reclassified to conform with the 1994 presentation.
(2) LIQUIDITY AND RELATED MATTERS
The Company has historically met its liquidity requirements principally
from cash flow generated from home and land sales, property management fees,
distributions from HDA and from bank financing providing funds for development
and working capital. In response to the decline in the real estate markets and
the decline in the availability of financing, the Company undertook a financial
restructuring in 1992. During 1994, the Company continued to make progress in
completing the objectives it set forth in its 1992 restructuring plan. New or
amended loan agreements have been executed for all loans which required
restructuring. Under the terms of IGC's loans, most of the cash flow generated
by U.S. home and lot sales and distributions from partnerships, including
distributions from partnership refinancings, will be used to further reduce
bank loans and to meet debt service requirements. During 1994, debt
curtailments net of debt financings totaled $14,927,000. Scheduled loan
curtailments during 1995 include payments of $2,400,000 in May, a $1,000,000
payment in September and payments totaling $2,200,000 in November. These
curtailments are expected to be made with proceeds from the sale of commercial
and business park land which secures the loans, proceeds from new project
financings, or proceeds from the sale of investment properties. In addition to
these scheduled curtailments, a loan which had a balance at December 31, 1994
of approximately $6,533,000 that is being curtailed with the proceeds from the
sale of residential lots, matures in September of 1995. This loan, if not
fully paid, will be significantly reduced prior to its maturity date and it is
anticipated that the remaining balance will be extended, although there are no
current contractural extensions on the loan. In addition, as a result of the
Company's distribution of Equus Units representing a 99% limited partnership
interest in Equus to IGC Unitholders in February, 1995, as furthur discussed in
Note 5, the Company will no longer receive cash distributions from HDA. Given
these factors, the Company's ability to generate cash for overhead, development
and other uses is limited and it may become necessary for the Company to
<PAGE>63
negotiate with its lenders to reschedule future payments. In addition, project
financing will be necessary to fund the continued development of the land
inventory to generate the necessary lot sales to meet the Company's operating
obligations. Pending legal proceedings may also adversely affect the Company's
liquidity, including the timing and/or terms of any financing.
In addition to its traditional sources of liquidity, the Company is
currently investigating opportunities in the capital markets for longer term
debt or possible equity financings.
A potential source of liquidity in late 1995 includes cash from four
projects in Puerto Rico which applied in March of 1993 for economic incentives
under the 1990 Low-Income Housing Preservation and Resident Homeownership Act
("LIHPRHA"). Under LIHPRHA the partnerships have the option of obtaining
additional HUD insured financing and additional subsidy funds, and distributing
net refinancing proceeds to partners, or selling the projects to non-profit
organizations which would continue the projects under HUD's low income housing
program. Management believes that the economic benefit to the Company and the
partners will be greater from a sale of the projects, in which event the
Company will endeavor to retain the right to manage the properties. It is
anticipated that the first closings pursuant to LIHPRHA will be accomplished in
the fourth quarter of 1995 in which event the Company expects that its share of
the cash proceeds will be approximately $9.0 million net of taxes, subject to
proposed changes to LIHPRHA. The decision to sell the projects under LIHPRHA
is largely dependent on the outcome of proposed legislation to be considered by
Congress in 1995. Management expects that the Clinton Administration will
submit a bill to Congress during 1995 which will dramatically impact subsidized
housing programs and which could significantly reduce the proceeds available to
the Company. If this occurs, management will need to reconsider its decision
to sell the projects under the LIHPRHA program. It is not possible at the
present time to predict the outcome of the proposed changes to the LIHPRHA
program. Should management decide not to sell the projects under the LIHPRHA
program, an alternative exit strategy may be to convert the projects to
condominiums and sell the individual units. If this alternative is pursued,
the conversion and subsequent sale of the units is expected to take
approximately three years. The proceeds of any sales of the projects have been
assigned to the FDIC and NationsBank for repayment of debt.
A LIHPRHA application was filed for a fifth project in Puerto Rico in
March 1994. The timetable for completing the LIHPRHA processing is
approximately two years. However, if proposed legislation is enacted,
management may withdraw the application.
(3) RESTRUCTURING
During 1992, in response to the decline in the real estate markets and
significant liquidity concerns, IGC developed a comprehensive business plan to
restructure its operations. IGC's management performed a detailed review of
the profit potential of its homebuilding and land development operations on a
project-by-project basis, and decisions were made as to the extent and manner
in which IGC should continue to conduct operations in each market. The plan
emphasized the generation of cash flow as rapidly as possible and the reduction
of expenses. In addition, the Company performed a review of the net realizable
value of its non-real estate related assets in light of its liquidity
constraints and the financial restructuring undertaken.
<PAGE>
<PAGE>64
This plan was presented to various financial institutions and new or
amended loan agreements have been executed for all loans which required
restructuring. The overall plan called for certain concessions from lenders
and changes in the business strategy of IGC as follows:
Financial Institution Concessions - IGC requested deferral of interest,
loan fees and principal payments, extension of loan maturity dates,
reduction of collateral release prices, new financing and waivers of
certain restrictive covenants on substantially all of its loans. IGC has
been successful in extending bank debt in accordance with the Company's
restructuring plans, with the last loan restructuring completed during the
fourth quarter of 1994. During 1994 and 1993, IGC's bank debt (excluding
apartment mortgages) was reduced by over $14 million and $23 million,
respectively.
Homebuilding - IGC discontinued expansion in less profitable markets and
exited certain other markets. The mix of homes offered by IGC has been
adjusted toward lower priced homes, believed by management to possess the
strongest sales potential.
Land Development and Acquisition - IGC reduced land development operations
until it disposed of its existing developable inventory and discontinued
certain development efforts. Certain land holdings have been offered for
sale as undeveloped or semi-developed parcels, shifting the risk of
development to third parties.
Investment in Partnerships - Management has refinanced several apartment
properties to enhance current and future cash distributions to IGC.
Four projects containing 855 apartments owned by one partnership in Puerto
Rico were refinanced in December 1993, and three other partnerships owning
696 apartments refinanced their projects in March 1994. These
refinancings provided approximately $7.4 million to IGC which was used
primarily to reduce debt. In addition, two projects containing 340
apartments owned by two partnerships in the United States were refinanced
in February 1993 and one project containing 104 apartments owned by one
United States partnership was refinanced in December 1994. IGC received
approximately $129,000 as a result of these refinancings. Additionally,
future cash flow will increase as the interest rates on the new mortgage
notes were reduced from 10.85% to 7.28% and from 10.3% to 6.85%,
respectively.
Five other Puerto Rico projects containing 1,102 apartments are being
processed through HUD's LIHPRHA program. As discussed in Note 2, certain
proposed legislation to be considered by Congress in 1995 could alter
management's decision to sell the projects under this program and require
management to pursue alternative exit strategies.
In December 1993, HDA, a 49% owned partnership that owns the El Comandante
Race Track in Puerto Rico, completed a $68 million mortgage note offering,
coupled with warrants aggregating the right to purchase a 15% equity
interest in HDA. IGC received approximately $13 million as a result of
this refinancing, most of which was used to reduce bank debt and other IGC
obligations.
Management Services - IGC continues to offer management services.
<PAGE>
<PAGE>65
General and Administrative - IGC reduced the number of employees in 1992
and additional staff has been added only when warranted as IGC continues
to monitor corporate expenses closely.
Certain new terms resulting from the loan restructure negotiations require
an accelerated sales pace for the disposition of homebuilding and land
development assets. Management also evaluated its investments, deferred
project costs, notes receivable and non-real estate assets for any potential
losses. In 1992, IGC recorded a provision for various net realizable value
reductions and restructuring costs as set forth below:
Reserve for land and homebuilding inventory,
notes receivable and investment in partnerships $13,279,000
Reserves against other assets and expenses
related to the restructuring 2,516,000
-----------
$15,795,000
===========
During 1993, in response to improving conditions with certain of its real
estate assets and reductions in its estimates of expenses related to the
restructuring as well as its decision to abandon certain development efforts
with respect to its waste technology investment as discussed in Note 6,
management reallocated $420,000 of reserves from the land and homebuilding
category to the reserve for other assets and expenses related to the
restructuring.
As a part of its ongoing determination of the realizable value of its
assets, management continually monitors the need for additional adjustments to
the carrying value of its assets. During 1994, the real estate market
continued to show signs of improvement. As of December 31, 1994, management
has concluded that additional reserves are not required.
(4) INVESTMENT IN RESIDENTIAL RENTAL PARTNERSHIPS
As of December 31, 1994, IGC manages and is a general partner in 28 real
estate partnerships which own 31 apartment projects in Puerto Rico, Maryland,
Virginia and Washington, D.C. The apartment projects are financed by non-
recourse mortgages. Of the 6,503 rental units in the various partnerships, the
Federal Housing Administration ("FHA") provides subsidies for low and moderate
income tenants in 5,371 units.
During 1991, IGC entered into an agreement with the limited partners of
Lancaster Associates L.P., the owner of Lancaster Apartments, to purchase their
99% limited partnership interest over a five-year period, payable in five
annual installments of $170,000 which commenced in 1991. In 1993 and 1994, the
Company's limited partnership interest in Lancaster Apartments Limited
Partnership ("Lancaster") increased by 19.8% each year as a result of this
agreement, increasing IGC's ownership interest to 60.4% and 80.2% at December
31, 1993 and 1994, respectively. As a result of this agreement, the accounts
of Lancaster are consolidated by IGC as of December 31, 1993 and 1994 and for
the years then ended.
IGC, IBC and the Resolution Trust Corporation ("RTC") as Receiver for
Perpetual Savings Bank F.S.B. were general partners in New Forest General
Partnership ("New Forest") and Fox Chase General Partnership ("Fox Chase").
New Forest and Fox Chase each own an apartment project in St. Charles,
<PAGE>66
Maryland. During August, 1993 New Forest and Fox Chase bought the RTC's
general partner interest for $200,000. The buy-out was funded by surplus cash
in the partnerships and an additional capital contribution from IGC. As a
result of this transaction, IGC became a 90% general partner in both New Forest
and Fox Chase, and accordingly, the Company's December 31, 1993 consolidated
financial statements reflect the operations of Fox Chase and New Forest from
August 20, 1993. Prior to these purchases, the Company accounted for these two
partnerships using the equity method.
On December 30, 1994, IGC executed a purchase and sale agreement with IBC
which provided for the transfer of 9.9% general partnership interests in New
Forest and Fox Chase and 49.9% limited partnership interests in four other
partnerships to IGC in satisfaction of $3,722,000 of accounts and notes
receivable due from IBC. The partnerships in which IGC received a 49.9%
limited partnership interest included Wakefield Terrace Associates Limited
Partnership ("Terrace"), Wakefield Third Age Limited Partnership ("Third Age"),
Palmer Apartments Limited Partnership ("Palmer") and Headen House Associates
Limited Partnership ("Headen"). The amount of IBC receivables satisfied via
this transaction was based on the fair market value of the apartment projects
as determined by a third party independent appraisal. As a result of this
transaction, IGC became a 99.9% general partner in Fox Chase and New Forest and
a 49.9% limited partner in Terrace, Third Age, Palmer and Headen. Fox Chase
and New Forest continue to be consolidated by IGC. IGC's interests in Terrace,
Third Age, Palmer and Headen are accounted for using the equity method at
December 31, 1994, since IGC does not control these entities. Because IBC and
IGC are under common control, the partnership interests received by IGC were
recorded at IBC's basis in the partnerships prior to the transfer which was
$626,000. The $1.8 million charge to partner's capital represents the
difference between IBC's basis in the partnership interests transferred and
IGC's book basis for the receivables from IBC which were satisfied via this
transaction of $2,446,000, net of reserves.
IGC, the 1% general partner, and St. Charles Associates ("SCA"), the 99%
limited partner, formed Lakeside Limited Partnership "Lakeside" on December 22,
1994 for the purpose of acquiring 1.23 acres of land and developing and
operating a 54 unit retirement rental project. IGC holds a 99% general
partnership interest in SCA and IBC holds the 1% limited partnership interest.
Lakeside purchased the land for $440,000 from IBC by paying $88,000 in cash and
issuing a note for the remaining $352,000. Lakeside has been awarded low
income housing tax credits to assist with costs of developing the property.
Investors will purchase the tax credits in exchange for SCA's 99% interest. At
December 31, 1994, the Company's consolidated financial statements include the
assets and liabilities of Lakeside.
<PAGE>
<PAGE>67
The following table summarizes IGC's investment in residential rental
partnerships accounted for using the equity method of accounting:
DECEMBER 31,
---------------------------
1994 1993
------------ -----------
(In thousands)
Long-term receivables, net of deferred
income of $3,778 and $4,101
at December 31, 1994 and 1993,
respectively $ 3,368 $ 4,255
Other receivables, net of reserves of
$953 as of December 31, 1993 -- 1,377
Investment in residential rental partnerships 6,608 9,321
------- -------
$ 9,976 $14,953
======= =======
For the years ended December 31, 1994, 1993 and 1992, IGC recognized
$4,250,000, $1,668,000 and $1,030,000, respectively, of equity in earnings from
these investments. In January and March of 1994, the Company collected
approximately $7.4 million of funds from partnerships in Puerto Rico which
refinanced seven apartment projects. These receipts represented the collection
of long-term receivables and distributions. In addition, the Company
recognized the remaining unamortized sponsor and developer fees of $555,000
from the apartment projects that were refinanced.
The combined condensed statements of income and the combined condensed
statements of cash flow for the years ended December 31, 1994, 1993 and 1992,
and the combined condensed balance sheets as of December 31, 1994 and 1993 are
shown below for the partnerships owning residential rental properties:
HOUSING PARTNERSHIPS'
COMBINED CONDENSED STATEMENTS OF INCOME
(Unaudited)
YEARS ENDED DECEMBER 31,
--------------------------------------
1994 (1) 1993 (1) 1992
------------ ----------- -----------
(In thousands)
Revenues $41,066 $44,767 $44,618
------- ------- -------
Operating expenses
Depreciation 6,501 6,637 6,830
Other 33,437 36,677 37,141
------- ------- -------
39,938 43,314 43,971
------- ------- -------
Net income $ 1,128 $ 1,453 $ 647
======= ======= =======
<PAGE>68
(1) The income and expenses of Fox Chase and New Forest after August 20,
1993 and the income and expenses of Lancaster after December 31, 1992
are excluded from these statements. The income and expenses for
these partnerships were $2,068,000 and $2,176,000, respectively for
these 1993 periods and $4,538,000 and $4,526,000, respectively, for
the year ended December 31, 1994. The operations of these
partnerships are consolidated in the Company's consolidated
statements of income for these periods during the year ended December
31, 1993 and for the year ended December 31, 1994.
HOUSING PARTNERSHIPS'
COMBINED CONDENSED BALANCE SHEETS
(Unaudited)
A S S E T S
DECEMBER 31,
--------------------------
1994 (1) 1993 (1)
---------- ----------
(In thousands)
Rental apartments, at cost $244,169 $240,554
Accumulated depreciation (81,772) (75,493)
-------- --------
162,397 165,061
-------- --------
Restricted cash and marketable securities:
Residual receipt accounts 6,286 18,781
Replacement reserves and escrows 10,209 10,320
-------- --------
Total restricted cash and marketable securities 16,495 29,101
Cash and certificates of deposit 4,264 18,862
-------- --------
Total cash and marketable securities 20,759 47,963
-------- --------
Other assets 4,284 4,084
-------- --------
Total assets $187,440 $217,108
======== ========
<PAGE>
<PAGE>69
LIABILITIES AND PARTNERS' CAPITAL
DECEMBER 31,
--------------------------
1994 (1) 1993 (1)
---------- ----------
(In thousands)
Non-recourse mortgage notes and accrued interest $172,561 $185,099
Loans and interest payable to the Company 19,390 19,660
Other liabilities 3,633 3,949
-------- --------
Total liabilities 195,584 208,708
-------- --------
Partners' capital
Capital contributions, net of distributions 236 17,908
Accumulated deficit (8,380) (9,508)
-------- --------
Total partners' capital (8,144) 8,400
-------- --------
Total liabilities and partners' capital $187,440 $217,108
======== ========
(1) The assets, liabilities and partners' capital of Lancaster, Fox Chase
and New Forest at December 31, 1993 and 1994 are excluded as they are
consolidated in the Company's December 31, 1993 and 1994 financial
statements. The total assets and liabilities of these entities were
$22,641,000 and $22,532,000, respectively, at December 31, 1993 and
$23,153,000 and $26,180,000, respectively, at December 31, 1994.
HOUSING PARTNERSHIPS'
COMBINED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
YEARS ENDED DECEMBER 31,
--------------------------------------
1994 (2) 1993 (1) 1992
------------ ----------- -----------
(In thousands)
Revenues $41,066 $44,767 $44,618
------- ------- -------
Cash expenditures
Total expenses 39,938 43,314 43,971
Less - Depreciation (6,501) (6,637) (6,830)
Other non-cash expenses (470) (706) (679)
------- ------- -------
32,967 35,971 36,462
Mortgage principal and capital
additions 3,696 2,232 2,533
------- ------- -------
Total cash expenditures 36,663 38,203 38,995
------- ------- -------
Cash flow before distributions $ 4,403 $ 6,564 $ 5,623
======= ======= =======
<PAGE>
<PAGE>70
(1) The cash flow activity for Lancaster during the period January 1,
1993 to December 31, 1993 and for Fox Chase and New Forest from
August 20, 1993 to December 31, 1993 are excluded from these
statements. These activities are reflected on IGC's Consolidated
Statement of Cash Flow for the year ended December 31, 1993.
(2) Excludes the cash flow activity for Lancaster, Fox Chase and New
Forest for the year ended December 31, 1994. This activity is
reflected in IGC's Consolidated Statement of Cash Flow for the year
ended December 31, 1994.
The FHA, Puerto Rico Housing Finance Corporation ("PRHFC"), State and
District of Columbia housing agencies and the partnership agreements require
that the accumulation of cash in the partnerships be sufficient to liquidate
all current liabilities before distributions to partners are permitted. Most
of the partnership agreements provide that IGC, as general partner, receive a
zero to 5% interest in profits, losses and cash flow from operations until such
time as the limited partners have received cash distributions equal to their
capital contributions. Thereafter, IGC, as general partner, generally shares
in 50% of cash distributions from operations. During 1994, seven partnerships
were released from these restrictions as part of mortgage refinancings.
(5) INVESTMENT IN REAL ESTATE VENTURES RELATING TO HORSE RACING
On December 14, 1989, HDA, a subsidiary of IGC, purchased the El
Comandante Race Track ("Race Track"), the only licensed thoroughbred horse
racing facility in Puerto Rico, and Land Development Associates S.E. ("LDA"),
another subsidiary of IGC, purchased 975 acres of land from San Juan Racing
Association, Inc. ("SJRA"). Pursuant to a lease agreement, El Comandante
Operating Company, Inc. ("ECOC") maintains the Race Track and manages El
Comandante's racing operations. Live thoroughbred horse racing has been
conducted continuously at El Comandante since 1976 and at a predecessor
facility since 1957.
The purchases of properties from SJRA by HDA and LDA were financed by a
$50 million loan to HDA and LDA from Chase Manhattan Bank N.A. (the "Chase
Loan") and $21.9 million of loans to HDA and LDA from IGC and Supra in respect
to their percentage ownership interests. The Chase Loan proceeds were
allocated $42 million to HDA for the purchase of the Race Track and related
assets (the "El Comandante Loan") and $8 million to LDA for the purchase of the
975 acres of undeveloped land (the "Land Loan").
On December 15, 1993, HDA refinanced the El Comandante Loan through a
private placement of 68,000 units (the "Private Placement"), each unit
consisting of (i) $1,000 principal amount of 11.75% First Mortgage Notes due
2003 (the "Mortgage Notes") and (ii) one warrant (the "Warrants") to purchase
one share of the Class A Common Stock ("Class A Stock") of HDA Management
Corporation ("HDAMC"). Following approval by the Puerto Rico Racing Board on
July 21, 1994, HDA issued additional partnership interests so that HDAMC became
the owner of a 15% partnership interest, and could serve as a conduit for
payments to warrantholders. As a result, IGC's and IBC's interests in HDA were
diluted to 41.65% and 26.35%, respectively. The Warrants, together with
HDAMC's Class A Stock, gave the warrantholders an indirect 15% interest in HDA.
<PAGE>
<PAGE>71
Equus Gaming Company L.P. ("Equus") was formed on September 17, 1993 as a
general partnership between IGC and IBC to hold their interests in HDA and to
hold all of the stock of Virginia Jockey Club, Inc. ("VJC"). VJC was formed in
April of 1993 to apply for licenses from the Commonwealth of Virginia to
construct, own and operate Virginia's first thoroughbred racing and pari-mutuel
wagering facility.
Through a series of transactions completed in August 1994, Equus was
restructured as a limited partnership between IGC and a wholly-owned subsidiary
of IGC, Equus Management Company ("EMC"), for the purpose of holding all of
IGC's ownership interests in real estate assets employed in thoroughbred racing
and related wagering businesses.
In connection with the August 1994 restructuring of Equus as a limited
partnership, HDA's partnership agreement was amended to permit IBC to transfer
its entire 26.35% HDA interest in profits and capital to Equus and to permit
IGC to transfer a 40.65% profits interest to Equus. A transfer of 50% of the
profits and capital interests in HDA within any 12-month period would result in
a termination of HDA as a partnership for federal tax purposes. IGC retained a
1% profits interest and 41.65% capital interest in HDA and Equus has replaced
IGC as managing partner of HDA. Equus then admitted IGC's wholly-owned
subsidiary, EMC, as a partner with a .99% general partnership and .01% limited
partnership interest and IBC contributed to IGC its 38.75% interest in Equus.
These transactions resulted in IGC and EMC owning the entire partnership
interest in Equus and Equus owning 67% of the profits interests and 26.35% of
the capital interests in HDA.
Coincident with the acquisition in August by Equus of interests in HDA,
HDA distributed to its partners, excluding HDAMC, approximately $13.3 million
of notes receivable from LDA. IGC and IBC received $6.5 million and $4.1
million, respectively, of the notes distributed. IGC recognized the portion
which they received as revenue from investments in partnerships and the IBC
portion was subsequently contributed to Equus who reflected it as a capital
contribution. Equus subsequently transferred its portion of the LDA notes
receivable to IGC. The initial notes receivable from LDA to HDA arose from
HDA's funding of debt service on the Land Loan, and from loans made by HDA to
LDA from the proceeds of the Private Placement. LDA used the funds to pay
loans made by IGC and Supra upon LDA's acquisition of land parcels from SJRA.
A Registration Statement was filed with the Securities and Exchange
Commission ("SEC") for the distribution of Equus limited partnership units
("Equus Units") representing a 99% limited partnership interest in Equus on
August 12, 1994, and arrangements were made to list Equus Units on NASDAQ. The
Registration Statement was declared effective by the SEC on January 10, 1995
and the distribution of the Equus Units ("Distribution") took place on February
6, 1995 when IGC distributed 5,128,372 Equus Units to IGC Unitholders. The
Distribution was made on the basis of one Equus Unit for every two IGC Units
outstanding on the record date of January 25, 1995.
IGC, through EMC, will continue to manage Equus following the
Distribution. Certain directors and officers of EMC, including EMC's chief
executive officer, will continue to serve as officers and directors of IGC's
managing general partner, IGMC. IGC and EMC will together retain a 1% general
partnership interest in Equus.
Equus has agreed to make available to IGC, for no consideration, up to
100,000 additional Equus Units for distribution by IGC to the warrant holders
and a limited number of employees upon exercise of outstanding IGC Unit options
<PAGE>72
and Unit appreciation rights. The 100,000 additional Equus Units would be
issued with "piggyback" registration rights exercisable, at IGC's expense, in
the event Equus undertakes a registered offering of its Units within three
years following the Distribution.
For a transitional period following completion of the Distribution, IGC
will provide certain administrative services and support to Equus pursuant to a
Master Support and Services Agreement (the "Support Agreement"). Equus will
reimburse IGC for costs incurred in providing these services. An IGC
subsidiary, Interstate General Properties Limited Partnership S.E., will
continue to provide management services to HDA pursuant to an existing
management agreement.
Prior to the Distribution, during the first quarter of 1995, IGC agreed to
transfer to Equus a 40.65% capital interest in HDA for no additional
consideration. The transfer is required to take place on February 7, 1996,
unless prior to that date HDA dissolves, liquidates or adopts a plan of
liquidation, or sells or enters into a definitive agreement to sell the Race
Track. If any of the foregoing occurs before February 7, 1996, IGC's
obligation to transfer the capital interest will be cancelled.
Equus, including its investments in VJC, is consolidated in the Company's
financial statements at December 31, 1994 and 1993. As noted above, VJC, a
subsidiary of Equus, was formed for the purpose of applying for licenses from
the Commonwealth of Virginia to own and operate Virginia's first thoroughbred
racing and pari-mutuel wagering facility. On October 12, 1994, the Virginia
Racing Commission denied VJC's application for such licenses and awarded
Virginia licenses to another applicant. VJC filed a notice of appeal with the
Circuit Court of the City of Richmond on November 10, 1994 with respect to the
decision of the Virginia Racing Commission. However, at the present time, the
final outcome of the appeal is uncertain. As a result of the Racing
Commission's unfavorable decision in 1994, the Company wrote off $1.8 million
of deferred project costs associated with VJC's application.
The Company's financial statements reflect the equity method of accounting
for its investment in HDA. This method was utilized throughout 1994 because
HDAMC had the right to approve any sale or disposition of HDA's assets in
excess of $500,000, the incurrence of any debt in excess of $1.0 million and
certain other operating decisions. As a result, Equus and correspondingly, the
Company did not have control of HDA and did not consolidate the accounts of
HDA. During 1994, HDA had net income of $4,073,000, however, no equity in
earnings of HDA was recorded by IGC. Because HDA is a limited liability
partnership, IBC and IGC did not record equity in losses of HDA in excess of
their investment in HDA. HDA had an accumulated deficit at the time of their
capital contributions to Equus in August of 1994. As a result, the Company
could not recognize equity in earnings of HDA until the accumulated deficit was
eliminated by future earnings. IGC did, however, recognize as earnings from
investments in gaming properties $763,000 of cash distributions from HDA and
$6.5 million from LDA notes receivable distributed to IGC by HDA.
In 1993, HDA had income of $2,622,000 before a prepayment penalty on a
mortgage note and write-off of deferred financing costs of $7,157,000 for a net
loss of $4,535,000. HDA made cash distributions of $2,000,000 to the Company
in 1993. Earnings from investment in gaming properties in the accompanying
consolidated statements of income for 1993 includes equity in earnings of HDA
and is comprised of (1) the Company's $2.2 million share of earnings before the
prepayment penalty, (2) the Company's share of the prepayment penalty of $.6
million which reduced the Company's investment in HDA to zero, (3) a cash
<PAGE>73
distribution of $800,000 received after the investment in HDA had been reduced
to zero and (4) by previous cash distributions of $1,200,000.
HDA's condensed statements of income (loss) for the periods ended December
31, 1994, 1993 and 1992 and the condensed balance sheets as of December 31,
1994 and 1993 are as follows:
HDA
CONDENSED STATEMENT OF INCOME (LOSS)
(Unaudited)
YEARS ENDED DECEMBER 31,
--------------------------------------
1994 1993 1992
------------ ----------- -----------
(In thousands)
Revenues
Rental income $14,774 $12,258 $ 9,954
Equity in earnings (losses) of ECOC -- 135 (356)
Interest income 786 440 297
------- ------- -------
15,560 12,833 9,895
------- ------- -------
Expenses
General and administrative 453 795 574
Depreciation and amortization 1,581 3,618 2,313
Interest 8,616 5,669 5,648
Other expenses 836 -- --
------- ------- -------
Total expenses 11,486 10,082 8,535
------- ------- -------
Net income before provision
for income tax 4,074 2,751 1,360
Provision for income tax 1 129 303
------- ------- -------
Income before extraordinary item 4,073 2,622 1,057
Extraordinary item - prepayment
penalty on mortgage note and write-
off of deferred financing costs -- (7,157) --
------- ------- -------
Net income (loss) 4,073 $(4,535) $ 1,057
======= ======= =======
<PAGE>
<PAGE>74
HDA
CONDENSED BALANCE SHEETS
(Unaudited)
DECEMBER 31,
---------------------------
1994 1993
------------ -----------
(In thousands)
Assets
Cash $ 2,455 $ 1,886
Leased property, less accumulated
depreciation of $7,717 and $6,157 at
December 31, 1994 and 1993, respectively 41,800 42,267
Receivables from LDA -- 12,690
Other assets 7,487 4,308
------- -------
$51,742 $61,151
======= =======
Liabilities and partners' deficit
Accounts payable and accrued liabilities $ 1,881 $ 669
Debt-third parties 66,094 65,960
Partners' deficit (16,233) (5,478)
------- -------
$51,742 $61,151
======= =======
ECOC leases the race track facilities from HDA under a 15 year lease which
expires December 14, 2004. The terms of the lease agreement require ECOC to
pay annual rent equal to the greater of 25% of the race track commissions
("Basic Rent") or $7,500,000 with annual adjustments based on any increase in
the Consumer Price Index from the 1989 level ("Minimum Basic Rent"). ECOC is
also responsible for payment of all insurance, taxes and other costs to operate
and to maintain the race track, and HDA is responsible for capital
improvements, if any, up to certain specified limits. In December 1993, the
Lease Agreement was amended to modify the rent and provide certain other
covenants. Under the revised terms, ECOC is obligated to pay additional fixed
rent ("Fixed Rent") of $150,000 in 1994, $400,000 annually in 1995 through 1998
and $1.3 million in 1999.
On August 1, 1994, ECOC, which was a 29.4% owned non-consolidated
affiliate of IGC, was reorganized as a non-stock corporation. As a result,
IGC's ownership interest in ECOC was terminated. Because ECOC was an
unconsolidated affiliate of IGC, the transaction had no financial statement
impact to the Company.
(6) INTERSTATE WASTE TECHNOLOGIES, INC.
IGC formed a wholly-owned corporation, Interstate Waste Technologies, Inc.
("IWT"), to pursue contracts with municipalities regarding waste treatment
facilities. IWT's first project (in the pre-development stage) was a sludge
reduction facility in Carteret, New Jersey for the Passaic Valley Sewerage
Commissioners ("PVSC"). IWT located a site and entered into a contract with
the Borough of Carteret to serve, for a fee, as a host community. However, on
December 30, 1991, the Borough Council passed a resolution rescinding the
Carteret Mayor's authority to enter into the agreement. IWT commenced legal
action seeking a declaratory judgment that the contract is valid and
<PAGE>75
enforceable. In February 1993, the contract was ruled valid and enforceable.
In May 1994, IWT accepted a cash settlement of $750,000 from the Borough of
Carteret and its insurers which was recorded as a recovery of deferred costs.
The attempt to invalidate the contract and the lawsuit has required IWT to
discontinue its plans to develop the Carteret project.
IWT responded to a Request for Proposals from Bridgeport, Connecticut for
a regional sludge management facility to dispose of the city's sludge as well
as sludge from other communities. In February 1994, IWT was notified that it
was identified by the city as the preferred vendor for the regional sludge
management facility. In June 1994, IWT and the city executed a host community
agreement. The agreement affirms the willingness of Bridgeport to allow the
sludge management facility to be built in the city. Before construction can
begin on the facility, IWT must acquire long-term sludge disposal service
agreements with sludge generators in the New Jersey-New York-New England
service region of the facility. Negotiation of a sludge disposal service
agreement with the city's wastewater authority is pending the acquisition of
other sludge disposal contracts for the facility. IWT holds an option on the
site described in the host community agreement.
Three individuals representing IWT have filed for patent protection for a
process which converts sludge into three useful and saleable products:
methanol, sulfur and an aggregate material. An amended patent application was
filed in February 1995 in response to additional information requests from the
U.S. Patent Office. The issuance of such patents is currently pending and
there is no assurance that patents for such process will be issued. IWT
utilized the methanol production process for the conversion of sludge in its
Statement of Qualifications response to a public Request for Qualifications
issued by PVSC. Accordingly, original plans for incineration facilities at
various sites have been abandoned in favor of this new process.
In September 1994, PVSC issued a Request for Proposals to IWT and several
other companies. IWT submitted its proposal in January 1995, which was based
on preparing the sludge at a site in Newark, New Jersey and converting the
prepared sludge to methanol at the facility in Bridgeport. IWT holds a long
term lease option on the site in Newark.
IWT has abandoned its development efforts for contracts with certain other
municipalities as well as the incineration technology, and provided a reserve
as part of the restructuring provision in 1992 of approximately $1,000,000 for
deferred costs related to these efforts. During 1993, as a result of the legal
action discussed above and its decision to abandon another site, IGC reserved
an additional amount of approximately $1,000,000 against the investment. At
December 31, 1994 and 1993, deferred costs regarding waste technology, net of
reserves, were $1,798,000 and $1,863,000, respectively.
<PAGE>
<PAGE>76
(7) FEES FROM SALE OF CABLE TELEVISION SYSTEM
IGC was the general and a limited partner in a partnership that owned a
cable television system serving Charles County, Maryland. The assets of this
partnership were sold on January 6, 1988. IGC earned fees of $345,000,
$508,000 and $456,000 during the years ended December 31, 1994, 1993 and 1992,
respectively. An additional $2.3 million of fees is expected to be paid to IGC
over the next five years. These fees are generally earned as collected and are
comprised of the following:
Consulting services for a period of five years, 1988
through 1993, at $250,000 per year with no remaining
balance at December 31, 1993. Services for this fee
included rendering advice and consultation regarding
operations and marketing.
Non-compete fees for a period of 10 years at $115,000 per
year with a remaining balance at December 31, 1994 of
$345,000.
Construction management fees and payment for easements in
St. Charles, Maryland of $3,660,000 based on payments of
$732 per dwelling unit for the first 5,000 dwelling units
where cable is placed, and limited to a 12-year period that
began January 6, 1988. The remaining expected balance at
December 31, 1994 was $1,958,000.
These fees are pledged as security for a loan with Citibank.
<PAGE>
<PAGE>77
(8) DEBT
The Company's outstanding debt is collateralized primarily by land,
housing and other land improvements, receivables, and investments in
partnerships. The following table summarizes the indebtedness of IGC at
December 31, 1994 and 1993:
Stated Outstanding Balance at:
Maturity Interest December 31, December 31,
Description by Lender Date Rate 1994 1993
- ------------------------- -------------- -------- ------------ ------------
(In thousands)
Non-recourse debt:
Purchase money
mortgage (5) (15) 9% $ -- $ 670
Community Development
Administration (11) 12-29-24 6.85% 4,438 4,055
Community Development
Administration (9) 10-01-27 9.575% 6,390 6,417
Community Development
Administration (9) 10-01-28 9.875% 11,943 11,985
Supra & Co. (13) None Prime 1,514 2,092
+ 2.5%
Supra & Co. (13) 08-02-09 Prime 2,372 --
+ 1.5% (3)
Supra & Co. (13) 08-02-09 None (3) 382 --
------- -------
Total non-recourse 27,039 25,219
------- -------
Recourse debt:
Banco Popular de P.R. Paid 1-94 (1) -- 5,420
(5,7,12)
Branch Banking & Paid 3-94 Prime -- 56
Trust (8) + 1.75%
Citibank (10) Demand (2) 1,559 1,857
NationsBank (5,7,12,16) 05-31-95 Prime 608 1,353
+ 1.5%
NationsBank (5,7,12,16) 05-31-95 Prime 5,146 6,013
+ 1.5%
NationsBank (5,7,12,16) 05-01-95 Prime 7,719 7,774
+ 1%
Purchase money Various from 9%-12% 2,081 2,362
mortgages (5) 09-24-95 to
04-01-98
Washington Savings (5,6) 12-27-95 8% 1,153 656
1st National Paid 6-94 Prime -- 150
St. Mary's (6) + 1.5%
Signet Bank (6,12) 09-01-95 Prime 6,533 11,508
+ 2%
Wachovia Bank & Trust 11-30-95 Prime 337 347
(5,7) + .5%
FDIC (5,7,12) 09-30-96 Prime 8,995 10,993
+ 1%
1st National Bank of 12-29-97 Prime 460 --
St. Mary's (6) + 1.5%
1st National Bank of 09-21-95 9% 120 --
St. Mary's (6)
<PAGE>78
Stated
Maturity Interest December 31, December 31,
Description by Lender Date Rate 1994 1993
- ------------------------- -------------- -------- ------------ ------------
Banco Central
Hispano (5) 12-31-97 (4) 5,175 6,400
Wachovia Bank & Trust Various from 7-1/2% 91 95
(7) 04-26-00 to
10-25-00
Various (5,7,8,14) Various from Various 1,011 758
03-27-95 to
02-28-98
------- -------
Total recourse 40,988 55,742
------- -------
Total debt $68,027 $80,961
======= =======
Balance Sheet Classification
- ----------------------------
Mortgages and notes payable - Recourse debt $ 370 $ 428
Related to community development -
Recourse debt 36,661 50,137
Non-recourse debt 4,268 2,762
Related to homebuilding projects - Recourse debt 2,398 3,320
Related to investment properties -
Recourse debt 1,559 1,857
Non-recourse debt 22,771 22,457
------- -------
Total debt $68,027 $80,961
======= =======
(1) Interest rate is 936 rate plus 3% which was 6.321% at December 31, 1993.
The Banco Popular de Puerto Rico loan was repaid in January 1994.
(2) The interest rate is not fixed to maturity and is renegotiated on a
periodic basis. The interest rate was 6.70% and 5.15% at December 31,
1994 and 1993, respectively.
(3) On August 2, 1994, HDA distributed a receivable from LDA to Supra & Co.
which included principal and accrued interest. The accrued interest was
distributed as a non-interest bearing note. The interest bearing note
has an interest rate of prime plus 1.5% with a floor of 6% and a ceiling
of 9%. At December 31, 1994 the interest rate was 9.0%.
(4) Interest rate is 936 rate plus 3%, with minimum of 6% and maximum of 9%.
The rate at December 31, 1994 and 1993 was 8.57% and 6.55%, respectively.
(5) These facilities are collateralized by land and improvements.
(6) These facilities are collateralized by land and housing.
(7) These facilities are collateralized by receivables.
(8) These facilities are collateralized by land and building.
<PAGE>79
(9) These facilities are FHA mortgages on apartment projects.
(10) This loan is collateralized by a letter of credit.
(11) This facility is a mortgage on an apartment project insured by the
Maryland Housing Fund.
(12) These facilities are collateralized by investments in partnerships.
(13) This entity is a minority partner in LDA.
(14) These facilities are collateralized by vehicles.
(15) The property securing this debt was transferred to the lender in
December, 1994 in satisfaction of the outstanding loan balance.
(16) These facilities are cross-collateralized and cross-defaulted.
Information regarding short-term borrowings is summarized as follows:
1994 1993 1992
------------ ----------- -----------
(In thousands)
Principal outstanding
At year end $25,659 $39,347 $36,316
Weighted average during the year $26,092 $35,338 $31,962
Maximum during the year $50,062 $53,840 $54,145
Interest
Weighted average rate at year end 9.63% 7.20% 6.97%
Weighted average rate during the year 8.66% 7.12% 7.42%
Debt matures as follows based upon renewal or expiration date:
December 31,
1994
--------------
(In thousands)
Year of maturity:
1995 $25,659
1996 9,260
1997 2,745
1998 3,807
1999 and thereafter 26,556
-------
$68,027
=======
<PAGE>
<PAGE>80
(9) COMMITMENTS AND CONTINGENCIES
IGC is guarantor of letters of credit of $4,569,000, on behalf of
Chastleton (see Note 10), and $3,044,000 for completion guarantees regarding
land and homebuilding development. The letters of credit related to Chastleton
serve as collateral for public and private borrowing arrangements undertaken by
the respective investment property partnerships. Likewise, the letters of
credit related to the land development and homebuilding operations serve as
collateral for IGC's performance guarantee and support borrowing arrangements.
In addition to the letters of credit, IGC shares the general partner
interests in two investment property partnerships with IBC which are currently
experiencing negative cash flow. Under the terms of the partnership agree-
ments, IBC is the primary obligor for funding operating advances. However,
should IBC fail to fulfill its funding obligations, IGC is obligated as a
general partner to provide financial support. This obligation involves varying
degrees of financial exposure in excess of amounts recognized in the
consolidated financial statements.
The National Association of Home Builders has issued a warning that
certain fire-retardant treated plywood commonly used in the roof construction
of multi-family homes may contain a product defect causing accelerated
deterioration of the plywood. Since 1991, the homeowners association of three
projects that IGC had built notified IGC of roof problems that they suspected
were related to such fire-retardant plywood. IGC has completed the replacement
of roofs at one project of 60 units and at another project of 203 units. IGC
is currently working with the third homeowners association to determine the
nature and extent of their roofing problem. At this time, the extent of IGC's
share of the cost for these projects is estimated to be approximately $50,000.
Also, management has notified the supplier of the plywood to determine the type
of treatment used. Furthermore, IGC is reviewing its records and inspecting
the plywood that had been used in the construction of other IGC projects to
determine the nature of the plywood treatment and the extent of such use. At
this time, the extent of additional loss is considered to be minimal. IGC
believes that if the plywood used in any of its projects had been defectively
treated, then the liability for repair or replacement rests primarily with the
insurance company, manufacturer or the provider of the chemical treatment and
others involved in the manufacturing process.
In March 1990, the Company received a notice (the "Notice") from the U.S.
Army Corps of Engineers (the "Corps") asserting that unauthorized fill
materials had been placed in portions of an approximately five-acre parcel in
Charles County, Maryland (the "Site") owned by the Company and claimed by the
Corps to constitute wetlands subject to regulation pursuant to the Clean Water
Act. Following receipt of the Notice, the Company ceased development of the
Site and remediated a portion of the Site in accordance with instructions
issued by the Corps. The Company also commenced discussions with the Corps
regarding mitigation plans that would preserve some commercial value for the
Site. The Company took the position that a prohibition of development on the
entire Site would constitute a governmental taking for which the Company would
be entitled to compensation. In November 1993, the Company believed it had an
agreement in principle with the Corps that would permit commercial development
of a portion of the Site. However, in early 1994, the Company became aware
that this matter had been referred to the U.S. Attorney for the District of
Maryland who has convened a grand jury and is now conducting an investigation
of the Company's wetlands practices in St. Charles including the Site. A
representative of the U.S. Attorney has advised the Company that the
investigation is expected to be completed during the second quarter of 1995 at
<PAGE>81
which time the U.S. Attorney will determine whether to charge the Company with
a violation of the Clean Water Act or other laws. Management believes the
Company has complied with applicable laws and regulations governing wetlands
practices, and therefore intends to defend vigorously if charged by the U.S.
Attorney with any violation relating to wetlands practices. Nonetheless, the
Company is not presently in a position to determine whether it will be charged
with a violation of any laws, or if charged, what the outcome will be.
(10) RELATED PARTY TRANSACTIONS
James J. Wilson, Chief Executive Officer of the Company has an ownership
interest in various entities to which IGC provides management services. These
entities and their relationships to IGC are as follows:
IBC or Affiliate IGC
-------------------- --------------------
Limited Limited
and Limited and Limited
General Liability General Liability
Partner Partner Partner Partner
------- ----------- ------- -----------
Chastleton .99% -- .01% --
Coachman's Land
("Coachman's") 1.00% 49% 1.00% 49%
Santa Maria Associates,
S.E. ("Santa Maria") -- 99% -- 1%
El Monte Properties, S.E.
("El Monte") -- 99% -- 1%
Rolling Hills Associates,
Limited Partnership
("Rolling Hills") 1.00% 49% -- --
Village Lake Associates
Limited Partnership
("Village Lake") .99% -- -- --
Capital Park Associates
("Capital Park") (a)
Smallwood Village Associates,
Limited Partnership ("SVA") 1.00% 51% -- --
Smallwood Village Office
Building Associates Limited
Partnership ("SVOBA") 25.00% -- -- --
IBC, General Partner of IGC 25.00% -- -- --
(a) An affiliate of IBC holds notes receivable that are secured by the
existing general partners' interest in the partnership.
<PAGE>
<PAGE>82
Transactions between the above entities and IGC are described in the
following tables. The maximum aggregate outstanding balance due from these
entities at any one time during 1994 and 1993, excluding the SVA receivable
described in (h) below, was $2,636,000 and $2,806,000, respectively.
REVENUE FOR THE YEAR ENDED DECEMBER 31, 1994
(In thousands)
-------------------------------------------------------
Income Earned
-----------------------------------
Management Developer
Fees Fees (a) Interest Total Reserved Collected
---------- --------- -------- ----- -------- ----------
Chastleton (b),(d) $ 75 $-- $ -- $ 75 $ (67) $ 8
Coachman's (b) 24 -- 20 44 (44) --
Santa Maria 60 -- -- 60 -- 60
El Monte 99 -- -- 99 -- 99
Rolling Hills (c) 101 -- -- 101 (53) 48
Village Lake (b) 18 -- -- 18 68 86
Capital Park 282 -- -- 282 -- 282
SVA 55 -- 154 209 -- 209
SVOBA 10 -- -- 10 -- 10
IBC 28 -- 26 54 -- 54
---- --- ---- ---- ----- ----
$752 $-- $200 $952 $ (96) $856
==== === ==== ==== ===== ====
RECEIVABLES AT DECEMBER 31, 1994
(In thousands)
--------------------------------------------------------------
Outstanding Balance
---------------------------------------------
Working
Manage- Capital Land/
ment Developer Loans Asset Book
Fees Fees (a) (f) Sales Interest Total Reserved Balance
------ --------- ------- ----- -------- ----- -------- -------
Chastleton (i) $277 $-- $ 30 $ -- $ -- $ 307 $ (277) $ 30
Coachman's (g) 93 -- 211 -- 160 464 (315) 149
Santa Maria 4 -- -- -- -- 4 -- 4
El Monte 13 -- -- -- -- 13 -- 13
Rolling Hills 352 -- 3 -- -- 355 (352) 3
Village Lake 26 -- 1 -- -- 27 (26) 1
Capital Park 18 -- 7 -- -- 25 -- 25
SVA (h) 3 -- -- -- -- 3 (3) --
SVOBA 1 -- -- -- -- 1 -- 1
IBC (e,j,k) 2 -- -- 302 -- 304 -- 304
---- --- ---- ---- ---- ------ ----- ----
$789 $-- $252 $302 $160 $1,503 $(973) $530
==== === ==== ==== ==== ====== ===== ====
<PAGE>83
REVENUE FOR THE YEAR ENDED DECEMBER 31, 1993
(In thousands)
-------------------------------------------------------
Income Earned
-----------------------------------
Management Developer
Fees Fees (a) Interest Total Reserved Collected
---------- --------- -------- ----- -------- ----------
Chastleton (b),(d) $ 70 $ -- $ -- $ 70 $ (60) $ 10
Coachman's (b) 22 -- 141 163 (163) --
Santa Maria 54 35 -- 89 -- 89
El Monte 93 102 -- 195 -- 195
Rolling Hills (c) 90 -- -- 90 (90) --
Village Lake (b) 8 64 -- 72 (64) 8
Capital Park 238 -- -- 238 -- 238
SVA 54 -- 154 208 (158) 50
SVOBA 10 -- -- 10 -- 10
IBC 28 -- 63 91 (27) 64
---- ---- ---- ------ ----- ----
$667 $201 $358 $1,226 $(562) $664
==== ==== ==== ====== ===== ====
RECEIVABLES AT DECEMBER 31, 1993
(In thousands)
--------------------------------------------------------------
Outstanding Balance
---------------------------------------------
Working
Manage- Capital Land/
ment Developer Loans Asset
Fees Fees (a) (f) Sales Interest Total Reserved Balance
------ --------- ------- ----- -------- ----- -------- -------
Chastleton (i) $211 $-- $ 100 $ -- $ -- $ 311 $ (214) $ 97
Coachman's (g) 69 -- 207 -- 141 417 (272) 145
Santa Maria 5 -- -- --- -- 5 -- 5
El Monte 35 -- -- -- -- 35 -- 35
Rolling Hills 299 -- 2 -- -- 301 (299) 2
Village Lake 8 86 1 -- -- 95 (94) 1
Capital Park 21 -- 10 -- -- 31 (2) 29
SVA (h) 5 -- 3,769 -- 467 4,241 (2,409) 1,832
SVOBA 1 -- -- -- -- 1 -- 1
IBC (d,e,j,k) 17 -- 2 1,140 317 1,476 (317) 1,159
---- --- ------ ------ ---- ------ ------- ------
$671 $86 $4,091 $1,140 $925 $6,913 $(3,607) $3,306
==== === ====== ====== ==== ====== ======= ======
<PAGE>
<PAGE>84
REVENUE FOR THE YEAR ENDED DECEMBER 31, 1992
(In thousands)
-------------------------------------------------------
Income Earned
-----------------------------------
Management Developer
Fees Fees (a) Interest Total Reserved Collected
---------- --------- -------- ----- -------- ----------
Chastleton (b),(d) $ 64 $ -- $ -- $ 64 $ 106 $170
Coachman's (b) 45 -- -- 45 (45) --
Santa Maria 47 80 -- 127 -- 127
El Monte 72 61 -- 133 -- 133
Rolling Hills (c) 149 -- -- 149 (149) --
Village Lake (b) -- 88 -- 88 (22) 66
Capital Park 210 -- -- 210 -- 210
SVA 52 -- 154 206 (154) 52
SVOBA 10 -- -- 10 -- 10
IBC 29 -- 92 121 (41) 80
---- ---- ---- ------ ----- ----
$678 $ 229 $246 $1,153 $(305) $848
==== ==== ==== ====== ===== ====
(a) Includes developer and refinancing fees.
(b) The management fee was reduced from 5% to 2.5% until the project has
positive cash flow.
(c) The management fee was reduced from 4.5% to 2.5% until the project has
positive operating cash flow.
(d) Management agreed that it would defer all management fees until Chastleton
had sufficient cash flow to fund operations and to subordinate 50% of its
management fee until IBC has recovered its operating advances.
(e) During 1990, IBC purchased IGC's general partner interest in and notes
receivable from Chastleton. The unpaid portion of this purchase was
satisfied on December 30, 1994 as described below.
(f) Working capital loans include operating advances and reimbursements due
for common expenses.
(g) IBC has the funding obligation for operating deficits. IGC equally shares
the general and limited partnership interest with IBC, since IGC funded
these deficits.
(h) During 1990, in satisfaction of outstanding advances of $1.7 million due
IGC from IBC, IBC transferred to IGC a $3.8 million note receivable due
from SVA. This note was purchased back from IBC on December 30, 1994, as
described below.
(i) IBC has the funding obligation for operating deficits. IGC, also a
general partner, funded $69,000 of 1993 cash deficits.
(j) IGC is contingently liable under $4.6 million of letters of credit issued
by NationsBank collateralized by land, which secure additional bonds
issued for Chastleton.
(k) During 1989, IBC purchased 5.01 acres of commercial land. IGC accepted a
note receivable for 80% of the $1,092,000 purchase price. The note is
collateralized by IBC's ownership interest in Santa Maria and Village
Lake. On December 23, 1994, Lakeside, a wholly owned subsidiary of the
Company purchasd the remaining 1.23 acres of this land from IBC for the
development of elderly rental units, for its appraised value of $440,000.
Lakeside paid $88,000 to IBC and issued a note payable for the remaining
$352,000. The note is payable upon the earlier of final closing of
permanent financing of the rental project or December 31, 1996. IBC will
use the note proceeds to repay the Company the $302,000 balance of the
original note.
<PAGE>85
On December 30, 1994, IGC executed a purchase and sale agreement with IBC
which provided for the transfer of 9.9% general partnership interests in New
Forest and Fox Chase and 49.9% limited partnership interests in four other
partnerships to IGC in satisfaction of $3,722,000 of accounts and notes
receivable due from IBC. The partnerships in which IGC received a 49.9%
limited partnership interest included Wakefield Terrace Associates Limited
Partnership ("Terrace"), Wakefield Third Age Limited Partnership ("Third Age"),
Palmer Apartments Limited Partnership ("Palmer") and Headen House Associates
Limited Partnership ("Headen"). IBC retained a 0.1% interest in Fox Chase and
New Forest and a 1.1% interest in Terrace, Third Age, Palmer and Headen. The
amount of IBC receivables satisfied via this transaction was based on the fair
market value of the apartment projects as determined by a third party
independent appraisal. As a result of this transaction, IGC became a 99.9%
general partner in Fox Chase and New Forest and a 49.9% limited partner in
Terrace, Third Age, Palmer and Headen. Fox Chase and New Forest continue to be
consolidated by IGC. IGC's interests in Terrace, Third Age, Palmer and Headen
are accounted for using the equity method at December 31, 1994, since IGC does
not control these entities. Because IBC and IGC are under common control, the
partnership interests received by IGC were recorded at IBC's basis in the
partnerships prior to the transfer. The $1.8 million charge to partner's
capital represents the difference between IBC's basis in the partnership
interests transferred and IGC's book basis for the receivables from IBC which
were satisfied via this transaction.
IGC provides management services to HDA pursuant to a management agreement
which has a term of 15 years ending in December 2004. The management agreement
was amended in December 1993 upon closing of an HDA refinancing to reduce the
management fee to an annual fee of $250,000, adjusted annually beginning in
1994 by the percentage increase in the Consumer Price Index ("CPI"). Prior to
such amendment, IGC received a management fee equal to 5% of the HDA's rental
income. The HDA management fees earned in 1994, 1993 and 1992 were $257,000,
$593,000 and $498,000, respectively. Pursuant to an agreement with HDA's
previous lender, collection of 50% of the fees earned from March 1992 was
deferred. Unpaid fees of $499,000 at December 15, 1993 were paid to IGC from
the proceeds of the HDA refinancing discussed in Note 5.
Pursuant to a consulting agreement effective December 15, 1993, ECOC has
retained as executive management three racing consultants employed by IGC.
ECOC reimburses all of IGC's payroll, bonus, fringe benefits and out-of-pocket
expenses associated with the employment of the consultants, and reimburses IGC
for other personnel who from time to time provide services to ECOC. Such
reimbursements are subject to certain limitations on increases in reimbursable
costs during the term of the consulting agreement. ECOC uses certain land
owned by LDA for a sanitary landfill in connection with its operation of the El
Comandante Race Track. LDA has authorized this use, but has reserved the right
to terminate such use if it conflicts with future development by LDA.
James J. Wilson, as a general partner of IGP, is entitled to priority
distributions made by each housing partnership in which IGP is the general
partner. If IGP receives a distribution which represents 1% or less of a
partnership's total distribution, Mr. Wilson receives the entire distribution.
If IGP receives a distribution which represents more than 1% of a partnership's
total distribution, Mr. Wilson receives the first 1% of such total.
IGC's Puerto Rico executive office has been located in the Doral Building
since November 1991 under a five-year lease providing for a first-year payment
of rent of approximately $187,000 and certain escalations for increases in the
CPI and pro-rata share of operating expenses in years two through five. Rental
<PAGE>86
expense for the executive office and certain other property in Puerto Rico
leased from affiliates was $228,000, $206,000 and $187,000 in 1994, 1993 and
1992, respectively. All leases with affiliated persons are on terms at least
as favorable to IGC as that generally available from unaffiliated persons for
comparable property.
IGC and affiliates lease office space from Smallwood Village Associates
Limited Partnership ("SVA"), one of IBC's commercial properties in which IGC's
principal executive offices are located. A total of 23,400 square feet of
office space is leased by IGC and affiliates at approximately $282,000 per year
(subject to adjustment for inflation). The lease expires in the year 2001. In
1994, 1993 and 1992, IGC's annual rentals from its share of the leases are
approximately $180,000, $181,000 and $193,000, respectively.
American Family Homes, Inc., a wholly owned subsidiary of IGC, leases from
IBC, 3,000 square feet of commercial space which is used for one of its sales
centers. The lease term of six months expired February 1, 1995 and is in the
process of being extended. Rent expense associated with this lease totaled
$13,000 during 1994.
In 1994, 1993 and 1992, IGC paid or accrued $76,000, $94,000 and $104,000,
respectively, to reimburse the managing general partner for director's meeting
fees and expenses. At December 31, 1994 and 1993, $66,000 and $72,000,
respectively, of directors fees were accrued and unpaid.
In March of 1995, IGC executed an agreement for the sale of a commercial
parcel located in the Parque Escorial project in Puerto Rico to an entity
controlled by Jorge Colon Nevares, a director of the Company's managing general
partner, for use in its operations. The terms of the agreement provided for a
purchase price of $3,453,000, of which $693,000 is payable in cash and the
remainder by an interest bearing note, collateralized by the land parcel. The
terms of the note provide for interest to commence at the earlier of
infrastructure completion or December 15, 1995, at a fixed rate of prime plus
1% at the closing date. Payments of principal and interest of $27,000 are due
monthly commencing May 1, 1995 with the balance of the note payable at maturity
on April 1, 1998.
(11) PROFIT SHARING AND RETIREMENT PLANS
IGC established a retirement plan (the "Retirement Plan") effective
January 1, 1988 for non-union employees of IGC. In 1992, the union employees
were added to the plan. Employees are eligible to participate in the
Retirement Plan when they have completed a minimum employment period of
generally one year. IGC's contributions to the Retirement Plan and U.S. Social
Security Plan for eligible employees were equal to 11.65% of basic salaries and
wages for 1994, 1993 and 1992 that were not in excess of the U.S. Social
Security taxable wage base, plus 8% of salaries which exceeded the U.S. Social
Security taxable wage base. Employees' salaries in excess of $150,000,
$236,000 and $229,000, for 1994, 1993 and 1992, respectively, were excluded
from the calculation of contributions. Payments are also made to the
Retirement Plan from IGC contributions to a profit sharing plan, as described
below, and from voluntary contributions by employees.
In 1987, IGC established an incentive compensation plan (the "Profit
Sharing Plan") based on net income of the Company. No contributions were made
for 1994, 1993 or 1992.
<PAGE>87
(12) UNIT OPTIONS, WARRANTS AND APPRECIATION RIGHTS
IGC maintains Unit option plans for Directors (the "Directors Plan") and
employees (the "Employees Plan"). The Directors Plan is for directors of the
Managing General Partner who are not officers or employees of the Company or of
any General Partner or affiliate of the Company. The Employees Plan is for
employees of IGC, including employees who are Directors of any general partner
of IGC or of any affiliate of IGC. Activity during 1994 and 1993 is summarized
below:
Directors
----------------------
Plan Plan
Exercise Exercise
Price $9 Price $4
-------- --------
Options outstanding, December 31, 1992 30,000 15,000
Awarded (1) -- 30,000
Cancelled (1) (30,000) --
------- --------
Options outstanding, December 31, 1993 -- 45,000
Awarded -- --
Exercised -- (15,000)
Cancelled -- --
------- --------
Options outstanding, December 31, 1994 -- 30,000
======= ========
Employees
----------------------
Plan Plan
Exercise Exercise
Price $9 Price $4
-------- --------
Options outstanding, December 31, 1992 97,800 40,000
Awarded (1) -- 147,800
Cancelled (1) (97,800) (1,750)
Exercised -- (2,500)
------- --------
Options outstanding, December 31, 1993 -- 183,550
Awarded -- --
Exercised -- (117,700)
Cancelled -- (800)
------- --------
Options outstanding, December 31, 1994 -- 65,050
======= ========
(1) In 1992, the Board of Directors of IGMC approved a change in the
exercise price of $9 to $4 for both the Employees and Directors Plan.
IGC subsequently cancelled the original $9 options and reissued the
options at $4 effective January 1, 1993. The reissued options were
exercisable in various increments beginning from July 1, 1993 to
September 1, 1994.
<PAGE>88
As of December 31, 1994, the dates that options become exercisable and the
expiration dates are as follows:
Directors Options
--------------------------
Expiring Expiring
12-1-97 2-1-00
---------- ----------
Exercisable:
As of December 31, 1994 15,000 15,000
====== ======
Employees Options
----------------------------------------
Expiring Expiring Expiring
1-1-99 8-1-01 1-1-03
---------- ---------- ----------
Exercisable:
As of December 31, 1994 19,050 -- --
January 1, 1995 -- -- 10,000
February 1, 1995 -- 8,000 --
January 1, 1996 -- -- 10,000
March 1, 1996 -- 8,000 --
January 1, 1997 -- -- 10,000
------ ------ ------
19,050 16,000 30,000
====== ====== ======
In 1993, warrants to purchase 100,000 limited partnership Units were
issued to an investment banking firm in connection with a "highly confident
letter" relating to proposed VJC financing. The warrants had an exercise price
of $5.30 per warrant and expire on September 30, 2003. The warrants were
valued at $75,000 and their costs are a component of the deferred costs of VJC.
(See additional discussion of costs associated with VJC in Note 5.) Subsequent
to the Equus Distribution, the exercise price of the warrants was reduced to
$3.60. Additionally, the warrant holders were granted 50,000 limited
partnership purchase warrants for Equus Units with an exercise price of $1.70.
During 1994 and early 1995, IGC adopted amendments to the Directors' and
Employees' Plans which provided for the issuance of Unit Appreciation Rights to
directors and employees of the Company. Under the terms of the amended plans,
directors and employees may be granted "Unit Appreciation Rights" which entitle
the holder to receive upon exercise, an amount payable in cash, Class A Units
of the Company, other property or some combination thereof, as determined by a
committee of the Directors of the Managing General Partner, which excludes
directors who are eligible to participate in that particular plan (the
"Committee"). The amount received upon exercise is determined based on the
excess of the "Current Market Price" at the date of exercise, as such term is
defined in the plan, over the base price specified in the individual rights
agreements.
During 1994, 363,800 Unit Appreciation Rights were awarded to employees of
the Company. Compensation expense recognized by the Company in connection with
such awards totalled approximately $264,000. No Unit Appreciation Rights were
exercised or cancelled during 1994. No Unit Appreciation Rights have been
issued in connection with the Director's Unit Incentive Plan.
<PAGE>89
As of December 31, 1994, the dates that Unit Appreciation Rights become
exercisable and their expiration dates are as follows:
Rights Expiring
------------------------------------------------
March 1, May 15, September 1, October 18,
Units Exercisable at: 2004 2004 2004 2004
- --------------------- -------- ------- ------------ -----------
December 31, 1994 7,000
March 1, 1995 20,000
May 15, 1995 29,760
September 1, 1995 8,000
October 18, 1995 7,000
March 1, 1996 20,000
May 15, 1996 29,760
September 1, 1996 8,000
October 18, 1996 7,000
March 1, 1997 20,000
May 15, 1997 29,760
September 1, 1997 8,000
October 18, 1997 7,000
March 1, 1998 20,000
May 15, 1998 29,760
September 1, 1998 8,000
October 18, 1998 7,000
March 1, 1999 20,000
May 15, 1999 29,760
September 1, 1999 8,000
March 1, 2000 20,000
March 1, 2001 20,000
------- ------- ------- -------
140,000 148,800 40,000 35,000
======= ======= ======= =======
As of December 31, 1994, 185,000 IGC Units are reserved for issuance under
the Director's Plan and 1,082,300 Units are reserved for issuance under the
Employees' Plan.
As a result of the Company's distribution of its 99% interest in Equus
Gaming Company L.P. to the Company's Unitholders, as further discussed in Note
5, the exercise price of options outstanding under the Directors and Employees
Plans which were exercisable, but not exercised, prior to January 22, 1995 were
reduced from $4.00 to $2.49. Such reduction was calculated based on the
percentage decrease between the average closing price of the Company's Units as
reported by the American Stock Exchange for the twenty trading days immediately
preceding the ex-dividend date of February 7, 1995, and the twenty trading days
immediately following the distribution date of February 6, 1995. The exercise
price of options that were not exercisable until after January 22, 1995 was not
adjusted. However, upon exercise, the holders of such options will receive one
Equus Unit for every two Units of the Company. The Equus Units so issued will
not be registered under the federal securities laws and thus not be freely
tradeable until three years following issuance. However, the Equus Units will
be issued with certain "piggy-back" registration rights, pursuant to which
Equus may be obligated to register the Equus units under the federal securities
laws within three years from the Distribution date.
<PAGE>
<PAGE>90
Holders of Unit Appreciation Rights under the Employees' Plan were also
affected by the Equus distribution. Holders who exercise their rights on or
after January 20, 1995 will receive for each right, an amount equal to the
excess of the fair market value of the Company's Units on the exercise date,
plus 50% of the fair market value of Equus Units on the exercise date, over the
base price of the Unit Appreciation Right. Fair market value is defined in
each individual rights agreement but is generally the average of the closing
prices of Units on the principal exchange on which they are traded for the 20
trading days beginning five trading days before the exercise date and ending on
the 14th day after the exercise date. This amount will be paid in cash, in
Units of the Company, in Equus Units, in other property or in any combination
thereof, as determined by the Committee. No adjustment was made for Unit
Appreciation Rights exercised prior to January 20, 1995, since prior to such
date, the Company's market price still reflected the value of the Company's
interest in Equus.
(13) INCOME TAXES
As a U.S. Company doing business in Puerto Rico, IGC is subject to Puerto
Rico income tax on its Puerto Rico based income. The taxes reflected below are
a result of that liability. As discussed in Note 1, the Company adopted SFAS
No. 109 as of January 1, 1993, and the cumulative effect of this change is
reported in the Consolidated Statement of Income for the year ended December
31, 1993. Prior years' financial statements have not been restated to apply
the provisions of SFAS No. 109.
The provision for income taxes amounted to 34.6%, 10.4% and 3.3% of the
income after minority interest and before taxes for the years ended December
31, 1994, 1993 and 1992, respectively. The primary reason for the differences
between these rates and the statutory federal income tax rate is due to
partnership income not being taxable at the entity level, noted as follows:
December 31,
-------------------------------------------------
1994 1993 1992
--------------- -------------- --------------
(In thousands, except amounts in %)
% of % of % of
Amount Income Amount Income Amount Income
------ ------ ------ ------ ------ ------
Provision (benefit) for
income taxes at the
statutory Federal
income tax rate $3,553 35.0% $2,226 35.0% $(4,922) (34.0%)
Reduction of (benefits)
provisions for
partnership income
not taxable to Company (1,110) (10.9%) (1,756) (27.6%) 5,735 39.6%
Net change in deferred
income tax liabilities 1,486 14.6% 275 4.3% -- --
Other items (418) (4.1%) (80) (1.3%) (342) (2.3%)
------- ----- ------ ------ ------- -----
$3,511 34.6% $ 665 10.4% $ 471 3.3%
======= ===== ====== ====== ======= =====
<PAGE>91
The provision for income taxes consists of the following:
YEARS ENDED DECEMBER 31,
--------------------------------------
1994 1993 1992
------------ ----------- -----------
(In thousands)
Currently payable
United States $ -- $ -- $ --
Puerto Rico 2,025 390 2
Deferred 1,486 275 469
------ ---- ----
$3,511 $665 $471
====== ==== ====
The components of deferred taxes payable include the following:
AT DECEMBER 31,
------------------------
1994 1993
----------- -----------
(In thousands)
Tax on amortization of deferred
income related to long-term
receivables from partnerships
operating in Puerto Rico $ 531 $ 942
Tax on equity in earnings of
partnerships operating in
Puerto Rico 1,342 1,989
Carryforward of Puerto Rico losses -- (1,941)
Changes in tax rates and other items 602 (1)
------ ------
$2,475 $ 989
====== ======
<PAGE>
<PAGE>92
The reconciliation between book income and taxable loss (excluding built-in
gain allocable to Predecessors) is as follows:
December 31,
-------------------------------------------------
1994 1993 1992
--------------- -------------- --------------
(In thousands, except per unit amounts)
Per Per Per
Total Unit Total Unit Total Unit
------ ------ ------ ------ ------ ------
Net income (loss)
per books $ 6,641 .66 $7,194 $.71 $(14,947) $(1.47)
Cumulative effect of
change in accounting
principle -- -- (1,500) (.15) -- --
Built-in gain allocable
to Predecessors:
Current (1,747) (.17) (301) (.03) (252) (.03)
Deferred (323) (.03) (900) (.09) (309) (.03)
Difference in income or
losses from subsidiary
partnerships (9,828) (.97) (5,427) (.53) (1,630) (.16)
Losses from corporation
subsidiaries not
deductible by the
partnership 2,221 .22 1,418 .14 1,631 .16
Capitalization of general
and administrative
expenses under the
Uniform Capitalization
Rules 18 -- 49 -- 162 .02
Deferred income
recognized currently
for tax purposes 417 .04 1,057 .10 1,442 .14
Difference in cost of sales
due to interest related to
the acquisition of land,
deducted for tax purposes 1,663 .16 (1,347) (.13) (1,445) (.14)
Deferred income taxes 1,486 .15 275 .03 469 .04
Losses from restructuring (1,691) (.17) (1,409) (.14) 11,527 1.14
Other book to tax
reconciling items, none
of which is individually
significant (606) (.06) (607) (.06) 128 .01
-------- ------ ------- ----- -------- -----
Net taxable loss per
partnership federal
return $(1,749) (.17) $(1,498) (.15) $(3,224) $(.32)
======== ====== ======= ===== ======== =====
<PAGE>
<PAGE>93
Deferred income taxes reflect the "temporary differences" between amounts
of assets and liabilities for financial reporting purposes as determined in
accordance with SFAS No. 109 and such amounts as measured by tax laws. In
determining the impact of SFAS No. 109, which was adopted by the Company during
1993, certain carry-forwards related to Puerto Rico operations were benefitted
as there are no existing uncertainties associated with their realization. The
benefit of implementing SFAS No. 109 has been reported as a $1.5 million
cumulative effect of a change in accounting principle in the accompanying
Consolidated Statement of Income for the year ended December 31, 1993. During
the year ended December 31, 1994, the Company realized the benefit of those
carryforward losses.
On December 22, 1987, the Omnibus Budget Reconciliation Act of 1987 ("the
1987 Act") was signed into law. It contained several provisions relating to
the tax treatment of publicly traded partnerships. Among other things, the
1987 Act provides that publicly traded partnerships will be taxed as
corporations unless at least 90% of their gross income is derived from
qualifying "passive-type" sources. Income qualifying for this purpose includes
interest, dividends, real property income and gains from the sale of real
property. IGC, as an existing partnership publicly traded as of December 17,
1987, has been grandfathered for a 10-year transition period. As such, IGC
will not be taxed as a corporation until 1998 even if it does not meet the
qualifying gross income test, unless a substantial new line of business is
added. IGC expects to be able to comply with the qualifying income test.
Proposed regulations define a new line of business as substantial if the
partnership derives more than 15% of its gross income from that line of
business or if more than 15% (by value) of the partnership's total assets are
used in that line of business. Management believes that its acquisitions
subsequent to the 1987 Act do not constitute new lines of business.
Furthermore, it is management's intention not to enter into any new lines of
business that may impair IGC's tax status as a partnership.
(14) QUARTERLY SUMMARY (UNAUDITED)
IGC's quarterly results are summarized as follows:
Year Ended December 31, 1994
----------------------------------------------
1st 2nd 3rd 4th Total for
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ---------
Revenues $12,569 $22,631 $16,687 $11,539 $63,426
Income before taxes
and minority interest 3,135 4,165 3,208 360 10,868
Net income (loss) 2,093 1,672 3,065 (189) 6,641
Per Unit:
Net income (loss) .21 .16 .30 (.02) .66
<PAGE>
<PAGE>94
Year Ended December 31, 1993
----------------------------------------------
1st 2nd 3rd 4th Total for
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ---------
Revenues $ 9,827 $13,744 $13,723 $11,475 $48,769
Income before taxes
and minority interest 1,113 1,743 2,213 1,411 6,480
Net income before cumulative
effect of accounting change 819 1,499 1,811 1,564 5,693
Net income 2,319 1,499 1,811 1,564 7,193
Per Unit:
Net income before cumulative
effect of accounting change .08 .15 .18 .15 .56
Net income .23 .15 .18 .15 .71
(15) SUPPLEMENTARY INCOME STATEMENT INFORMATION
Depreciation and amortization expense of intangible assets, pre-operating
costs and similar deferrals totalled $321,000, $358,000 and $413,000 for the
years ended December 31, 1994, 1993 and 1992, respectively.
<PAGE>
<PAGE>95
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1994
INITIAL AND SUBSEQUENT COSTS AND ENCUMBRANCES
(In thousands)
Bldgs. &
Improve- Subsequent
Description Encumbrances Land ments Costs
- -------------------- ------------ -------- ----------- ----------
Bannister Apartments 3,808 410 4,581 404
Garden Apartments
St. Charles, MD
Palmer Apartments 4,367 483 5,368 338
Garden Apartments
St. Charles, MD
Brookmont Apartments 2,412 256 2,933 164
Garden Apartments
St. Charles, MD
Brookside Gardens Apartments 1,385 156 2,457 --
Garden Shared Housing
St. Charles, MD
Headen Apartments 4,945 225 5,147 895
Garden Apartments
St. Charles, MD
Huntington Apartments 7,821 350 8,295 1,476
Garden Apartments
St. Charles, MD
Crossland Apartments 2,245 350 2,708 218
Garden Apartments
St. Charles, MD
Terrace Apartments 5,171 497 6,232 452
Garden Apartments
St. Charles, MD
Lancaster Apartments 4,438 485 4,293 362
Garden Apartments
St. Charles, MD
Fox Chase Apartments 6,390 745 7,014 43
Garden Apartments
St. Charles, MD
New Forest Apartments 11,943 1,229 12,102 216
Garden Apartments
St. Charles, MD
<PAGE>96
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1994
INITIAL AND SUBSEQUENT COSTS AND ENCUMBRANCES (continued)
(In thousands)
Bldgs. &
Improve- Subsequent
Description Encumbrances Land ments Costs
- -------------------- ------------ -------- ----------- ----------
Coachman's Landing Apt. 5,935 572 6,421 (99)
Garden Apartments
St. Charles, MD
Chastleton Apartments 22,232 2,630 23,624 1,346
High Rise Apartments
Washington, D.C.
Essex Village Apts. 16,505 2,667 21,342 555
Garden Apartments
Richmond, VA
Alturas Del Senorial 3,362 345 4,186 68
Highrise Apts.
Rio Piedras, PR
Bayamon Gardens 9,736 1,153 12,065 31
Highrise/Garden Apts.
Bayamon, PR
De Diego 6,667 601 6,719 162
Highrise Apts.
Rio Piedras, PR
Monserrate II 11,436 731 11,183 120
Highrise Apts.
Carolina, PR
Santa Juana 7,416 509 6,756 79
Highrise Apts.
Caguas, PR
Torre De Las Cumbres 5,824 466 5,960 91
Highrise Apts.
Rio Piedras, PR
Colinas De San Juan 8,677 900 10,754 74
Highrise Apts.
Carolina, PR
Jardines De Caparra 5,208 546 5,724 983
Garden Apartments
Bayamon, PR
<PAGE>97
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1994
INITIAL AND SUBSEQUENT COSTS AND ENCUMBRANCES (continued)
(In thousands)
Bldgs. &
Improve- Subsequent
Description Encumbrances Land ments Costs
- -------------------- ------------ -------- ----------- ----------
Las Lomas 1,888 344 2,726 267
Highrise Apts.
Guaynabo, PR
Monacillos Park 4,516 473 5,738 893
Highrise Apts.
Guaynabo, PR
Monserrate I 3,218 543 10,445 85
Highrise Apts.
Carolina, PR
Monte De Oro 1,401 562 5,225 762
Highrise Apts.
Rio Piedras, PR
New Center 1,421 589 5,732 204
Highrise Apts.
San Juan, PR
Piedras Americas 4,199 550 5,501 472
Highrise Apts.
San Juan, PR
Rio Piedras 4,378 571 4,825 1,144
Highrise Apts.
San Juan, PR
San Anton 3,122 313 3,537 616
Highrise Apts.
Carolina, PR
Valle Del Sol 11,201 992 14,038 69
Highrise Apts.
Bayamon, PR
Vistas Del Turabo 2,095 354 2,509 430
Highrise Apts.
Caguas, PR
Office Condo 213 0 284 0
East Whitiland Township
Pennsylvania
<PAGE>98
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1994
INITIAL AND SUBSEQUENT COSTS AND ENCUMBRANCES (continued)
(In thousands)
Bldgs. &
Improve- Subsequent
Description Encumbrances Land ments Costs
- -------------------- ------------ -------- ----------- ----------
Greensboro, NC 0 77 0 0
Model Park 2 Models
Charleston, SC 0 68 0 0
Land
Fredericksburg, VA 80 158 95 5
Model Park 1 Model
----------- ---------- ----------- ----------
Total Properties 195,655 21,900 236,519 12,925
=========== ========== =========== ==========
<PAGE>
<PAGE>99
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1994
TOTAL CAPITALIZED COSTS AND ACCUMULATED DEPRECIATION
(In thousands)
Bldgs. & Accumulated
Description Land Improvements Total Depreciation
- -------------------- ---- ------------ ----- ------------
Bannister Apartments 410 4,985 5,395 2,461
Garden Apartments
St. Charles, MD
Palmer Apartments 483 5,706 6,189 2,369
Garden Apartments
St. Charles, MD
Brookmont Apartments 256 3,097 3,353 1,353
Garden Apartments
St. Charles, MD
Brookside Gardens Apartments 156 2,457 2,613 5
Garden Shared Housing
St. Charles, MD
Headen Apartments 225 6,042 6,267 2,160
Garden Apartments
St. Charles, MD
Huntington Apartments 350 9,771 10,121 3,507
Garden Apartments
St. Charles, MD
Crossland Apartments 350 2,926 3,276 1,397
Garden Apartments
St. Charles, MD
Terrace Apartments 497 6,684 7,181 2,864
Garden Apartments
St. Charles, MD
Lancaster Apartments 485 4,655 5,140 1,331
Garden Apartments
St. Charles, MD
Fox Chase Apartments 745 7,057 7,802 1,389
Garden Apartments
St. Charles, MD
New Forest Apartments 1,229 12,318 13,547 2,025
Garden Apartments
St. Charles, MD
<PAGE>100
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1994
TOTAL CAPITALIZED COSTS AND ACCUMULATED DEPRECIATION (continued)
(In thousands)
Bldgs. & Accumulated
Description Land Improvements Total Depreciation
- -------------------- ---- ------------ ----- ------------
Coachman's Landing Apt. 572 6,322 6,894 863
Garden Apartments
St. Charles, MD
Chastleton Apartments 2,630 24,970 27,600 5,517
High Rise Apartments
Washington, D.C.
Essex Village Apts. 2,667 21,897 24,564 7,759
Garden Apartments
Richmond, VA
Alturas Del Senorial 345 4,254 4,599 1,628
Highrise Apts.
Rio Piedras, PR
Bayamon Gardens 1,153 12,096 13,249 4,119
Highrise/Garden Apts.
Bayamon, PR
De Diego 601 6,881 7,482 2,569
Highrise Apts.
Rio Piedras, PR
Monserrate II 731 11,303 12,034 4,235
Highrise Apts.
Carolina, PR
Santa Juana 509 6,835 7,344 2,569
Highrise Apts.
Caguas, PR
Torre De Las Cumbres 466 6,051 6,517 2,304
Highrise Apts.
Rio Piedras, PR
Colinas De San Juan 900 10,828 11,728 3,784
Highrise Apts.
Carolina, PR
Jardines De Caparra 546 6,707 7,253 2,509
Garden Apartments
Bayamon, PR
<PAGE>101
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1994
TOTAL CAPITALIZED COSTS AND ACCUMULATED DEPRECIATION (continued)
(In thousands)
Bldgs. & Accumulated
Description Land Improvements Total Depreciation
- -------------------- ---- ------------ ----- ------------
Las Lomas 344 2,993 3,337 1,608
Highrise Apts.
Guaynabo, PR
Monacillos Park 473 6,631 7,104 3,462
Highrise Apts.
Guaynabo, PR
Monserrate I 543 10,530 11,073 4,164
Highrise Apts.
Carolina, PR
Monte De Oro 562 5,987 6,549 2,593
Highrise Apts.
Rio Piedras, PR
New Center 589 5,936 6,525 2,547
Highrise Apts.
San Juan, PR
Piedras Americas 550 5,973 6,523 3,260
Highrise Apts.
San Juan, PR
Rio Piedras 571 5,969 6,540 3,288
Highrise Apts.
San Juan, PR
San Anton 313 4,153 4,466 1,818
Highrise Apts.
Carolina, PR
Valle Del Sol 992 14,107 15,099 4,172
Highrise Apts.
Bayamon, PR
Vistas Del Turabo 354 2,939 3,293 888
Highrise Apts.
Caguas, PR
Office Condo 0 284 284 41
East Whitiland Township
Pennsylvania
<PAGE>102
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1994
TOTAL CAPITALIZED COSTS AND ACCUMULATED DEPRECIATION (continued)
(In thousands)
Bldgs. & Accumulated
Description Land Improvements Total Depreciation
- -------------------- ---- ------------ ----- ------------
Greensboro, NC 77 0 77 0
Model Park 2 Models
Charleston, SC 68 0 68 0
Land
Fredericksburg, VA 158 100 258 14
Model Park 1 Model
---------- ----------- ----------- ----------
Total Properties 21,900 249,444 271,344 86,572
========== =========== =========== ==========
NOTE TO TOTAL CAPITALIZED COSTS:
THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES
FOR U.S. AND P.R. PROPERTIES IS 235,150
<PAGE>
<PAGE>103
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1994
DATE CONSTRUCTED OR ACQUIRED AND DEPRECIABLE LIVES
Date
Constructed
Description or Acquired Depreciable Life
- -------------------- ----------- ------------------
Bannister Apartments 11/30/76 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Palmer Apartments 3/31/80 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Brookmont Apartments 5/18/79 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Brookside Gardens Apartments 11/10/94 Bldg - 40 Yrs
Garden Shared Housing Constructed Bldg Equip - 7 Yrs
St. Charles, MD
Headen Apartments 10/30/80 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Huntington Apartments 10/7/80 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Crossland Apartments 1/13/78 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Terrace Apartments 11/1/79 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Lancaster Apartments 12/31/85 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Fox Chase Apartments 3/31/87 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 7 Yrs
St. Charles, MD
New Forest Apartments 6/28/88 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 7 Yrs
St. Charles, MD
<PAGE>104
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1994
DATE CONSTRUCTED OR ACQUIRED AND DEPRECIABLE LIVES (continued)
Date
Constructed
Description or Acquired Depreciable Life
- -------------------- ----------- ---------------------
Coachman's Landing Apt. 9/5/89 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 7 Yrs
St. Charles, MD
Chastleton Apartments 11/7/86 Bldg - 40 Yrs
High Rise Apartments Constructed Bldg Equip - 5/10 Yrs
Washington, D.C.
Essex Village Apts. 1/31/82 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
Richmond, VA
Alturas Del Senorial 11/17/79 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Rio Piedras, PR
Bayamon Gardens 7/6/81 Bldg - 40 Yrs
Highrise/Garden Apts. Constructed Bldg Equip - 5 Yrs
Bayamon, PR
De Diego 3/20/80 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Rio Piedras, PR
Monserrate II 1/30/80 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Carolina, PR
Santa Juana 2/8/80 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Caguas, PR
Torre De Las Cumbres 12/6/79 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Rio Piedras, PR
Colinas De San Juan 3/20/81 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Carolina, PR
Jardines De Caparra 4/1/80 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
Bayamon, PR
<PAGE>105
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1994
DATE CONSTRUCTED OR ACQUIRED AND DEPRECIABLE LIVES (continued)
Date
Constructed
Description or Acquired Depreciable Life
- -------------------- ----------- ------------------
Las Lomas 4/5/74 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Guaynabo, PR
Monacillos Park 8/1/74 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Guaynabo, PR
Monserrate I 5/1/79 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Carolina, PR
Monte De Oro 12/1/77 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Rio Piedras, PR
New Center 3/15/78 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
San Juan, PR
Piedras Americas 8/1/73 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
San Juan, PR
Rio Piedras 9/1/72 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
San Juan, PR
San Anton 12/10/74 Bldg - 40 Yrs
Highrise Apts. Acquired Bldg Equip - 5 Yrs
Carolina, PR
Valle Del Sol 3/15/83 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Bayamon, PR
Vistas Del Turabo 12/30/83 Bldg - 40 Yrs
Highrise Apts. Acquired Bldg Equip - 5 Yrs
Caguas, PR
Office Condo 5/14/90 31.5 Yrs
East Whitiland Township Acquired
Pennsylvania
<PAGE>106
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1994
DATE CONSTRUCTED OR ACQUIRED AND DEPRECIABLE LIVES (continued)
Date
Constructed
Description or Acquired Depreciable Life
- -------------------- ----------- ---------------------
Greensboro, NC 2/23/90 Bldg 5 - 40 Yrs
Model Park 2 Models Acquired
Charleston, SC 2/23/90 N/A
Land Acquired
Greenville, SC 2/23/90 Bldg 5 - 40 Yrs
Model Park 2 Models Acquired
Fredericksburg, VA 2/23/90 Bldg 5 - 40 Yrs
Model Park 1 Model Acquired
<PAGE>
<PAGE>107
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1994
(In thousands)
Real Estate at December 31, 1993 267,328
Additions for 1994:
Improvements 4,239
Other (Refinancing Costs) 339
-----------
Total Additions 4,578
-----------
Deductions for 1994:
Dispositions (Sold) 354
Other 208
-----------
Total Deductions 562
-----------
Real Estate at December 31, 1994 271,344
===========
<PAGE>
<PAGE>108
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1994
(In thousands)
Accumulated depreciation at December 31, 1993 79,661
Additions for 1994:
Depreciation expense 7,158
Deductions for 1994:
Dispositions (Accumulated depreciation
on assets sold) (247)
-----------
Accumulated depreciation at December 31, 1994 86,572
===========
<PAGE>
<PAGE>109
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Housing Development Associates S.E.:
We have audited the accompanying consolidated balance sheets of Housing
Development Associates S.E. (a Puerto Rico partnership) (the Partnership) and
subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of income (loss), changes in partners' deficit and cash flows for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Housing Development
Associates S.E. and subsidiaries as of December 31, 1994 and 1993, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index of
financial statements are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
San Juan, Puerto Rico,
January 30, 1995
(except for Note 10 as to which the date is March 8, 1995).
<PAGE>
<PAGE>110
HOUSING DEVELOPMENT ASSOCIATES S.E.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
YEARS ENDED DECEMBER 31,
--------------------------------------
1994 1993 1992
------------ ----------- -----------
REVENUES:
Rental income from El Comandante
Race Track $14,774,318 $12,258,494 $ 9,954,274
Interest income 785,412 439,973 296,587
Equity in earnings (losses) of
El Comandante Operating
Company ("ECOC") -- 134,729 (355,823)
----------- ----------- -----------
Total revenues 15,559,730 12,833,196 9,895,038
----------- ----------- -----------
EXPENSES:
Financial 8,615,744 5,668,952 5,647,627
Depreciation 1,580,693 1,897,556 1,761,868
General and administrative 196,640 202,010 76,481
Management fees 256,872 592,630 497,714
S & E Network Inc. and Galapagos,
S.A., net of minority interest 276,486 -- --
Deferred costs write-off -- -- 551,030
Distribution of Equus Gaming
Company L.P. units 559,018 -- --
Loss from reorganization of ECOC -- 1,720,345 --
----------- ----------- -----------
11,485,453 10,081,493 8,534,720
----------- ----------- -----------
INCOME BEFORE PROVISION (CREDIT) FOR
INCOME TAX AND EXTRAORDINARY ITEM 4,074,277 2,751,703 1,360,318
PROVISION (CREDIT) FOR INCOME TAX:
Current 777 -- 381,414
Deferred 128,567 (78,280)
----------- ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM 4,073,500 2,623,136 1,057,184
EXTRAORDINARY ITEM:
Prepayment penalty on mortgage
note and write-off of deferred
financing costs -- 7,157,474 --
----------- ----------- -----------
NET INCOME (LOSS) $ 4,073,500 ($4,534,338) $ 1,057,184
=========== =========== ===========
The accompanying notes are an integral part
of these consolidated balance sheets.
<PAGE>111
HOUSING DEVELOPMENT ASSOCIATES S.E.
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31,
---------------------------
1994 1993
------------ ------------
CASH AND CASH EQUIVALENTS $ 2,455,154 $ 1,886,076
ASSETS RELATED TO RACE TRACKS:
Property and equipment-
Land 6,393,858 $ 6,393,858
Building and improvements 42,590,903 41,691,167
Equipment 532,444 339,155
----------- -----------
49,517,205 48,424,180
Less accumulated depreciation (7,716,947) (6,156,692)
----------- -----------
41,800,258 42,267,488
Deferred costs-
Financing 4,583,671 4,095,663
Organizational and other 250,820 199,693
Other 63,224 12,844
----------- -----------
46,697,973 46,575,688
----------- -----------
ASSETS RELATED TO TV STATIONS:
TV Licenses 1,061,290 --
Property and equipment 937,466 --
Deferred costs 568,430 --
Other 22,119 --
----------- -----------
2,589,305 --
----------- -----------
RECEIVABLE FROM LAND DEVELOPMENT
ASSOCIATES S.E. ("LDA"):
Loans -- 11,859,722
Interest -- 829,883
----------- -----------
-- 12,689,605
----------- -----------
$51,742,432 $61,151,369
=========== ===========
The accompanying notes are an integral part
of these consolidated balance sheets.
<PAGE>
<PAGE>112
HOUSING DEVELOPMENT ASSOCIATES S.E.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND PARTNERS' DEFICIT
DECEMBER 31,
---------------------------
1994 1993
------------ ------------
LIABILITIES RELATED TO RACE TRACKS:
First Mortgage Notes-
Principal, net of bond discount of
$1,905,651 and $2,040,000, respectively $66,094,349 $65,960,000
Accrued interest 332,918 332,918
Accounts payables and accrued liabilities 458,008 336,901
----------- -----------
66,885,275 66,629,819
----------- -----------
LIABILITIES RELATED TO TV STATIONS:
Obligations under TV Agreements 921,730 --
Accounts payable and accrued liabilities 167,945 --
----------- -----------
1,089,675 --
----------- -----------
PARTNERS' DEFICIT:
Capital contributions 1,913,800 1,913,800
Accumulated deficit (818,750) (4,892,250)
Distributions to partners (17,327,568) (2,500,000)
----------- -----------
(16,232,518) (5,478,450)
----------- -----------
$51,742,432 $61,151,369
=========== ===========
The accompanying notes are an integral part
of these consolidated balance sheets.
<PAGE>
<PAGE>113
HOUSING DEVELOPMENT ASSOCIATES S.E.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
For each of the three years in the period ended December 31, 1994
Capital Accumulated Distributions
Contributions Deficit To Partners Total
------------- ----------- ------------- ----------
BALANCES,
December 31, 1991 $ 1,000 ($1,415,096) $ -- ($1,414,096)
Net income for the year -- 1,057,184 -- 1,057,184
---------- ----------- ----------- -----------
BALANCES,
December 31, 1992 1,000 (357,912) -- (356,912)
Net loss for the year -- (4,534,338) -- (4,534,338)
Capital contribution 1,912,800 -- -- 1,912,800
Cash distributions
to partners -- -- (2,500,000) (2,500,000)
---------- ----------- ----------- -----------
BALANCES,
December 31, 1993 $1,913,800 ($4,892,250) ($2,500,000) ($5,478,450)
Net income for the year -- 4,073,500 -- 4,073,500
Distributions to partners-
Receivables from LDA -- -- (13,318,008) (13,318,008)
Cash -- -- (1,509,560) (1,509,560)
---------- ---------- ------------ ------------
BALANCES,
December 31, 1994 $1,913,800 ($818,750) ($17,327,568) ($16,232,518)
========== ========== ============ ============
The accompanying notes are an integral part
of these consolidated balance sheets.
<PAGE>
<PAGE>114
HOUSING DEVELOPMENT ASSOCIATES S.E.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
--------------------------------------
1994 1993 1992
------------ ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,073,500 ($4,534,338) $1,057,184
----------- ---------- -----------
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities--
Extraordinary item -- 7,157,474 --
Loss from reorganization of ECOC -- 1,720,345 --
Depreciation 1,580,693 1,897,556 1,761,868
Amortization and deferred
costs write-off 636,100 192,155 824,890
Equity in (earnings) losses
of ECOC -- (134,729) 355,823
Deferred tax provision (credit) -- 128,567 (78,280)
(Increase) decrease in assets--
Rent receivable from ECOC -- 277,947 (493,845)
Interest receivable from
Land Development Associates S.E. (628,403) (397,328) (289,555)
Other (72,499) (11,811) (1,033)
Increase (decrease) in liabilities--
Accrued interest--First
Mortgage notes -- (40,248) (13,927)
Accrued interest--partners' loans -- (1,194,710) (985,905)
Accounts payable and
accrued liabilities 539,052 (585,679) 492,938
---------- ---------- ----------
Total adjustments 2,054,943 9,009,539 1,572,974
---------- ---------- ----------
Net cash provided by
operating activities 6,128,443 4,475,201 2,630,158
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans to Land Development
Associates S.E. -- (8,930,484) (1,324,655)
Capital expenditures, including
TV licenses (2,316,961) (136,401) (54,589)
Insurance proceeds received 117,830 48,170 --
Retirements from (deposits into)
Liquid Assets Reserve, net -- 610,000 (610,000)
Contributions to ECOC (250,000) (800,000) --
---------- ---------- ----------
Net cash used in investing activities (2,449,131) (9,208,715) (1,989,244)
---------- ---------- ----------
<PAGE>
<PAGE>115
HOUSING DEVELOPMENT ASSOCIATES S.E.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
YEARS ENDED DECEMBER 31,
--------------------------------------
1994 1993 1992
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from offering of First
Mortgage Notes -- 65,960,000 --
Payment of Mortgage Note -- (40,057,096) (738,439)
Prepayment penalty on mortgage note -- (6,386,000) --
Loans from partners -- -- 125,000
Payment of partners' loans -- (8,719,833) --
Payment of obligations under TV
agreements (18,357) -- --
Increase in deferred costs (1,582,317) (4,112,800) (105,319)
Capital contributions -- 1,912,800 --
Distributions to partners (1,509,560) (2,500,000) --
---------- ---------- ----------
Net cash provided by (used in)
financing activities (3,110,234) 6,097,071 (718,758)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 569,078 1,363,557 (77,844)
CASH AND CASH EQUIVALENTS,
beginning of year 1,886,076 522,519 600,363
---------- ---------- ----------
CASH AND CASH EQUIVALENTS,
end of year $2,455,154 $1,886,076 $ 522,519
========== ========== ==========
SUPPLEMENTAL INFORMATION:
Interest paid $7,990,000 $6,498,802 $6,226,876
Income tax paid -- $ 341,851 $ --
NON-CASH TRANSACTIONS:
Contributions to ECOC--
Equipment, at book value -- $ 651,585 $ --
Forgiveness of rent receivable -- $1,921,491 $ --
Distribution of the LDA Receivable $13,318,008 -- --
Acquisition of assets under
TV Agreements $ 940,087 -- --
The accompanying notes are an integral part
of these consolidated balance sheets.
<PAGE>
<PAGE>116
HOUSING DEVELOPMENT ASSOCIATES S.E.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL:
On February 14, 1989, Housing Development Associates S.E. (the
"Partnership") was formed as a Puerto Rico partnership to acquire the El
Comandante Race Track ("El Comandante"), the only licensed thoroughbred racing
facility in Puerto Rico offering pari-mutuel wagering. It was originally 80%
owned by Interstate General Properties Limited Partnership S.E. ("IGP"), a
wholly owned subsidiary of Interstate General Company L.P. ("IGC"), and 20% by
Supra & Company S.E. ("Supra"), a partnership unaffiliated with IGC. In 1991,
IGP sold a 31% interest in the Partnership to Interstate Business Corporation
("IBC"), one of the general partners of IGC, thereby reducing IGP's interest to
49%.
Simultaneously with the closing of the Private Offering (as defined below
in this Note 1 under "El Comandante Capital Corp., HDAMC and Private Offering")
on December 15, 1993, the Partnership admitted a fourth partner, HDA Management
Corporation ("HDAMC"), a Delaware corporation, to serve as an additional
managing partner. HDAMC acquired a 1% interest in the Partnership, contributed
by IGP, thereby reducing IGP's interest to 48%. IGP owns all of the
outstanding Class B common stock of HDAMC.
Following the approval of the Puerto Rico Racing Board (the "Racing
Board") on July 21, 1994, (the "Racing Board Approval"), the Partnership
issued additional partnership interests so that HDAMC became the owner of a
15% interest in the Partnership, thereby reducing the interest of IGP, IBC and
Supra in the Partnership to 41.65%, 26.35% and 17%, respectively.
On August 1, 1994, IBC transferred and IGC caused IGP to transfer
partnership interests in the Partnership to Equus Gaming Company L.P.
("Equus"), as capital contributions. IBC transferred its entire interest in
the Partnership's capital and profits, whereas IGP transferred all but 1% of
its interest in the Partnership's profits but no portion of its interest in the
Partnership's capital. As a result, as of December 31, 1994 the Partnership's
capital was owned 41.65%, 15%, 17% and 26.35% by IGP, HDAMC, Supra and Equus,
respectively, and the Partnership's profits were shared 1%, 15%, 17% and 67% by
IGP, HDAMC, Supra and Equus, respectively (see Note 10). Equus also became one
of the managing partners of the Partnership.
Acquisition of El Comandante
On December 14, 1989, the Partnership and Land Development Associates S.E.
("LDA"), an affiliate, purchased substantially all of the Puerto Rico assets of
San Juan Racing Association, Inc. ("SJRA") for approximately $68 million,
including acquisition costs of approximately $900,000. The purchase was
financed by a $42 million loan to the Partnership (the "El Comandante Loan")
and an $8 million loan to LDA (the "Land Loan") from The Chase Manhattan Bank
N.A. ("Chase"). The additional funds required for the acquisition were provided
by the original partners of the Partnership as loans in accordance with their
percentage partnership interests: 80% by IGP and 20% by Supra. The El
Comandante Loan and the partners' loans were paid in December 1993 from
proceeds of the Private Offering (as described below).
<PAGE>117
The Partnership acquired El Comandante, consisting of approximately
257 acres of land and the buildings, structures and ancillary facilities
situated thereon in Canovanas, Puerto Rico. The total purchase price was
assigned to the tangible assets acquired by the Partnership and LDA based on
their relative fair market values. The purchase price apportioned to the assets
acquired by the Partnership amounted to approximately $48 million. LDA
acquired 957 acres of undeveloped land for the remaining $20 million of total
purchase price.
Lease with ECOC and the Operating License
The Partnership leases El Comandante to El Comandante Operating Company
("ECOC") under a lease agreement (the "El Comandante Lease") for a term of
15 years ending December 14, 2004 (see Note 5). ECOC was reorganized on August
1, 1994 as a Puerto Rico nonstock corporation named El Comandante Operating
Company, Inc. (also referred to as "ECOC" or "New ECOC"). (See Note 6).
On December 15, 1989, the Racing Board granted a license to ECOC to
operate El Comandante, which will expire on December 14, 2004 (the "Operating
License"). The Operating License provided ECOC with: (1) the exclusive right
to operate a race track in the area of Puerto Rico known as the San Juan
Region, which approximates the northern half of Puerto Rico, as delineated in
maps produced by the Puerto Rico Planning Board and Government Development
Administration; (2) the exclusive right to conduct all types of authorized
betting, both at El Comandante and off-track, anywhere in Puerto Rico, based on
races held at El Comandante; and (3) the right to hold a minimum of 180 day or
night race days per year. The Operating License requires payment by ECOC of an
annual license fee, currently $250,000.
El Comandante Capital Corp., HDAMC and Private Offering
El Comandante Capital Corp. ("ECCC") was incorporated on October 27, 1993,
under the laws of Delaware as a wholly owned subsidiary of the Partnership.
ECCC was organized solely to raise funds through the issuance and sale of its
debt securities for the benefit of the Partnership. On December 15, 1993, ECCC
and the Partnership, together with HDAMC, completed the sale (the "Private
Offering") of 68,000 units, each unit consisting of $1,000 principal amount of
ECCC's 11-3/4% First Mortgage Notes due 2003, payment of which is
unconditionally guaranteed by the Partnership (the "First Mortgage Notes") and
a warrant to purchase one share of Class A Common Stock of HDAMC (the
"Warrants"). ECCC loaned the entire proceeds from the sale of the First
Mortgage Notes to the Partnership and HDAMC contributed the proceeds from the
sale of the Warrants to the Partnership in exchange for the right to receive a
15% interest in the Partnership, subject to the Racing Board Approval.
Effective July 21, 1994, HDAMC's interest in the Partnership was increased to
15%.
<PAGE>
<PAGE>118
Net proceeds of the Private Offering of $63,751,000, after offering costs
of $4,249,000, were used by the Partnership as follows:
In thousands
------------
Chase
Mortgage Note $39,304
Accrued interest 534
Prepayment premium 6,386
Partners' loans and accrued interest 7,640
Deferred management fees - IGP 499
Loans to LDA 8,388
Distributions to partners 1,000
-------
$63,751
=======
Receivable from LDA
HDA made loans to LDA from 1990 thru 1993, while the Partnership was an
obligor on the Land Loan, to pay interest and principal on the Land Loan and
certain operating costs of LDA. The Partnership made additional loans to LDA of
$8,388,000 from proceeds of the Private Offering. These loans to LDA bore
interest at 11.21% through December 31, 1993, and thereafter at a rate equal to
2.5% above the prime interest rate. On August 2, 1994, the Partnership
distributed notes to IGP, Equus and Supra, respectively, equal to a 49%, 31%
and 20% interest in its receivable from LDA (the "LDA Receivable") of
approximately $13.3 million ($11.9 million principal plus $1.4 million in
accrued interest).
S & E Network Inc. and Television Stations
S & E Network Inc. ("S&E") is a wholly-owned subsidiary of the Partnership
that was organized as a Puerto Rico corporation in September 1994 for the
purpose of owning the assets and broadcast licenses (the "TV Licenses") of
three dormant UHF television stations in Puerto Rico (the "TV Stations"). On
October 19, 1994 the Federal Communications Commission ("FCC") consented to the
assignment of the TV Licenses to S&E and on November 17, 1994 S&E acquired the
TV Stations. Under the agreements with the sellers (the "TV Agreements"), S&E
paid at or prior to closing approximately $796,000 and agreed to assume certain
rescheduled debts of, and make payments to, the sellers totalling $1,191,000.
Approximately $777,000, including interest, is payable in equal installments
over 83 months and the remaining $414,000 is payable not later than December
15, 1995.
The present value of total purchase price obligation, which also provided
for certain noncompetition and consulting services from affiliates of sellers,
was $1,736,000. This amount and acquisition costs amounting to approximately
$202,000 were assigned to the tangible and intangible assets acquired by S&E
based on their estimated relative fair market values. Certain of the assets
comprising the TV Stations remain encumbered subject to the claims of certain
creditors of the sellers.
S&E's business plan is to operate as a sports and entertainment network.
S&E commenced broadcasting six hours a day in January 1995 and expects to
increase to eighteen hours a day by September 1995. Start-up costs expensed
during 1994 amounted to $236,664.
<PAGE>119
Pursuant to an agreement with ECOC, S&E has committed to produce and
broadcast a four-hour television program for all races run at El Comandante for
a maximum of 208 race days per year (the "Television Contract"). The program
includes, among other things, presentation of all races, pari-mutuel betting
odds and results of pari-mutuel betting. The Television Contract is for ten
years to December 2004, subject to ECOC's right to cancel in December 1997 or
December 2000. The Television Contract has fixed monthly payments by ECOC to
S&E of $56,000 for the first three months and thereafter $76,000 per month.
ECOC agreed to construct and pay up to $150,000 for certain improvements to
provide facilities at El Comandante for S&E's television studio, production and
administration space. In addition, ECOC will provide certain administrative,
maintenance, security and utility services for which S&E will pay $2,000 per
month, adjusted annually by CPI.
Galapagos, S.A.
In September 1994, the Partnership formed Galapagos, S.A. ("Galapagos"), a
Dominican Republic corporation with a 94% ownership interest (see Note 10).
Galapagos was selected by the Dominican Republic Racing Commission to operate a
government owned horse race track in Santo Domingo, Dominican Republic ("the
Dominican Track").
On September 28, 1994, Galapagos entered into an agreement with the
Dominican Government pursuant to which Galapagos will lease and operate the
Dominican Track (the "Dominican Lease"). The Dominican Lease also provides
Galapagos with the right to develop off-track betting in the Dominican Republic
and the exclusive right to simulcast horse races, including El Comandante
races, into the Dominican Republic. The initial term of the Dominican Lease is
ten years and it may be renewed for additional ten year periods by mutual
agreement of the parties. Start-up costs expensed during 1994 amounted to
$39,822, net of minority interest of $2,542.
ECOC provides executive management services to Galapagos pursuant to a
management agreement effective September 28, 1994 and reimburses ECOC for out-
of-pocket expenses. Fees payable to ECOC will be 1% of amounts wagered on
races run at the Dominican Track, with a maximum amount of $250,000 annually,
adjusted by CPI commencing in January 1996. No fees were payable for 1994
since racing operations had not yet commenced at the Dominican Track.
2. BASIS OF PRESENTATION:
The accompanying consolidated financial statements include the accounts of
the Partnership, ECCC, S&E and Galapagos, after eliminating all inter-company
transactions. As of December 31, 1994 a minority interest in Galapagos of
$4,706 was recorded in the accompanying consolidated balance sheet as accrued
liabilities. The partners' deficit as reflected in the accompanying
consolidated financial statements is not segregated by class because all
classes of partners are equal.
3. SUMMARY OF ACCOUNTING POLICIES:
Rental Income
Rental income represents rent earned under the El Comandante Lease. (See
Note 6).
Distribution of Equus Units
<PAGE>120
The Partnership is bearing the legal, accounting and other costs incurred
in connection with the distribution by IGC of Equus units.
Cash Equivalents
The Partnership considers as cash equivalents the certificates of deposit
with an issuance to maturity term of six months or less.
Property and Equipment of the Race Tracks
Land, buildings and improvements, and equipment are stated at cost.
Composite depreciation is calculated using the straight-line method over the
estimated useful lives of the building and equipment; five to seven years for
machinery and equipment, 35 years for buildings and 10 to 15 years for land
improvements. Under the composite depreciation method, any gain or loss of
property retired or sold is charged against accumulated depreciation, unless
the amount involved is material. On December 15, 1993, the Partnership
contributed to ECOC certain equipment with a book value of approximately
$652,000.
TV Licenses and Property and Equipment of the TV Stations
The TV Licenses, and land and equipment to be used in the operation of the
TV Stations are stated at cost. Composite depreciation will be calculated
using the straight-line method over the estimated useful lives of the
equipment, ranging from five to 10 years. The TV Licenses will be amortized
using the straight-line method over a period of 20 years. Depreciation and
amortization will commence in 1995.
Investment in ECOC
Prior to August 1, 1994, the Partnership owned 60% of the outstanding
common stock of ECOC but only held 48% of the voting rights, as it granted
Supra an irrevocable proxy to vote an additional 12% of the ECOC shares
pursuant to a shareholders agreement. Accordingly, the Partnership accounted
for its investment in ECOC under the equity method of accounting. As described
in Note 6, in anticipation of the reorganization of ECOC as a nonstock
corporation which occurred on August 1, 1994, the Partnership reduced the
carrying value of its investment in ECOC to zero and recognized a loss of
$1,720,345 in 1993. Commencing in 1994, the Partnership did not recognize
equity in ECOC's earnings and losses.
Deferred Costs
Deferred financing costs are being amortized over the life of the loans
using the interest method, except for the write-off of the unamortized balance
as of December 15, 1993 of costs related to the loans that were paid from
proceeds of the Private Offering, as follows:
Amortization Unamortized Balance
Loan Period Commencing Written-off in 1993
--------------------- ------------ ----------------- -------------------
El Comandante Loan 10 years December 14, 1989 $698,804
Partners' loans 5 years December 14, 1989 72,670
First Mortgage Notes 10 years December 15, 1993 --
<PAGE>121
Organizational and other costs related to the Race Tracks are being
amortized over a period of five to 15 years using the straight-line method,
except for costs of $551,030 written-off in 1992 related to proposed
refinancing and equity transactions that were aborted.
Deferred costs related to TV Stations consist of a noncompetition
agreement entered in connection with the acquisition of the TV Stations and
certain organizational and other costs which will be amortized over a period
of three to seven years using the straight-line method, commencing in 1995.
4. MORTGAGE NOTES PAYABLE:
El Comandante Loan
Pursuant to a loan agreement with Chase (the "Chase Agreement"), the
Partnership obtained the El Comandante Loan of $42 million in connection with
the acquisition of El Comandante and LDA obtained the Land Loan of $8 million
in connection with the acquisition of the 957 acres of undeveloped land. The
loans were joint and several obligations of the Partnership and LDA. The El
Comandante Loan and a prepayment premium of $6,386,000 were paid in December
1993 from proceeds of the Private Offering and restricted cash held in escrow
by Chase was released to the Partnership. LDA refinanced the Land Loan in
December 1993 and the Partnership was released as an obligor on the Land Loan.
The El Comandante Loan bore interest at two different rates. That portion
of the loan that constituted "Eligible Activity" (as defined in Regulation 3582
under the Puerto Rico Industrial Incentives Act, as amended) bore interest at a
rate equal to 11.21% minus the difference between (i) the 90-day LIBOR rate and
(ii) Chase's rate for 90-day loans qualifying as Eligible Activity. At
December 15, 1993 (the loan payment date) the rate was 11.085% on $31.5 million
of the El Comandante Loan that qualified as Eligible Activity. The remaining
principal balance bore interest at a rate of 11.21%.
The Chase Agreement permitted the Partnership to make loans to LDA to pay
interest on the Land Loan through December 31, 1991, and restricted
distributions to partners and payments of partners' loans. In 1992 and 1993 the
Partnership obtained consents from Chase which, among other things, permitted
the Partnership to continue to make loans to LDA for debt service on the Land
Loan and to make payments of $4.9 million of principal and interest on
partners' loans. LDA refinanced the Land Loan on December 15, 1993 and,
accordingly, the Partnership was released from its obligation under the Chase
Agreement. The Partnership did not provide funds to LDA in 1994 and will not
provide funds to LDA in the future.
First Mortgage Notes Issued Pursuant to the Private Offering
Pursuant to the Private Offering, ECCC issued First Mortgage Notes in the
aggregate principal amount of $68 million under an indenture dated December 15,
1993 (the "Indenture") between ECCC, the Partnership and Banco Popular de
Puerto Rico, as trustee (the "Trustee"), and HDAMC issued Warrants to purchase
68,000 shares of Class A Common Stock of HDAMC. Upon issuance of the Warrants,
HDAMC and the Partnership recorded additional equity of $1,912,800, equal to
the fair value of the Warrants of $2,040,000, less offering costs of $127,200,
and recorded debt discount of $2,040,000. Such debt discount is being amortized
using the interest method over the term of the First Mortgage Notes. The First
Mortgage Notes mature on December 15, 2003 and bear interest at 11.75% from
December 15, 1993, payable semiannually commencing June 15, 1994.
<PAGE>122
Payment of the First Mortgage Notes is guaranteed by the Partnership and
the First Mortgage Notes are secured by a first mortgage on El Comandante and
by certain other security documents which together encompass a lien on (i) the
fee interests of the Partnership in the land and fixtures comprising El
Comandante, (ii) all property rights of the Partnership in and to all related
equipment, structures, machinery and other property, including intangible
property, ancillary to the operations of El Comandante, (iii) substantially all
of the other assets and property of the Partnership and ECOC, including the
capital stock of ECCC owned by the Partnership and (iv) the Rent Escrow as
defined in Note 5.
ECCC is required to redeem First Mortgage Notes in the principal amount of
$6,800,000 on December 15, 2000, $10,200,000 on December 15, 2001 and 2002, and
the balance at maturity. ECCC and the Partnership may redeem First Mortgage
Notes on or after December 15, 1998 at the following redemption prices
(expressed as percentages of principal amount), if redeemed during the 12-month
period beginning December 15 of years 1998 at 104.125%, 1999 at 102.75%, 2000
at 101.5%, 2001 at 100%, and thereafter at 100% of principal amount, in each
case together with accrued and unpaid interest. Any such redemptions would
offset the mandatory redemptions due December 15, 2000, 2001 and 2002.
ECCC also may redeem up to one-third of the principal amount of the First
Mortgage Notes from net proceeds of an equity offering by the Partnership at
any time on or before December 15, 1996 at a redemption price of 110% of the
principal amount. ECCC is required to offer to purchase First Mortgage Notes to
the extent that the Partnership has accumulated excess cash flow, asset sales,
or a total taking or casualty, or in the event of a change of control of the
Partnership.
The Indenture contains certain covenants, one of which restricts the
amount of distributions to the Partnership's partners. Permitted distributions
include amounts intended to be sufficient to provide funds for the
Partnership's partners to pay income tax on their allocable share of the
Partnership's taxable income ("Tax Distribution"). In addition, the Partnership
is permitted to make additional cash distributions to partners and other
Restricted Payments, as defined under the Indenture, equal to 44.25% of the
excess of the Partnership's consolidated net income over the amount of the Tax
Distributions, provided that the Partnership meets certain minimum debt
coverage ratios. The Partnership does not yet meet the required debt coverage
ratio. The Indenture also permitted the distribution made by the Partnership
on August 2, 1994 of the LDA Receivable to the Partnership's partners,
excluding HDAMC.
5. LEASE OF EL COMANDANTE:
El Comandante is operated pursuant to the Operating License, a 15-year
exclusive franchise ending December 2004 covering the San Juan Region of Puerto
Rico, which approximates the northern half of Puerto Rico, as delineated in
maps produced by the Puerto Rico Planning Board and Government Development
Administration.
The Partnership has leased El Comandante to ECOC for a term ending
December 14, 2004. Historically the El Comandante Lease has provided for
payment of rent consisting of 25% of the annual Race Track Commissions ("Basic
Rent"), but in no event less than $7,500,000 ("Minimum Basic Rent") adjusted
annually with a base year of 1989 by the percentage increase in the Consumer
Price Index ("CPI") for the calendar year over the CPI for the previous
calendar year. In 1992 and 1993 the rental income was based on 25% of ECOC's
<PAGE>123
Race Track Commissions, after deducting the portion of Race Track Commissions
contributed to the beneficiaries of ECOC's special race days. Race Track
Commissions consist of all payments received by ECOC on all monies wagered with
respect to horse racing occurring at El Comandante, whether wagered at El
Comandante or at other betting facilities.
On December 15, 1993, the El Comandante Lease was amended to modify the
rent and provide certain other covenants. The Basic Rent and Minimum Basic Rent
under the revised El Comandante Lease were unchanged; however, ECOC is also
obligated to pay additional fixed rent ("Fixed Rent") of $150,000 in 1994,
$400,000 annually in years 1995 through 1998 and $1,250,000 in 1999.
The amended El Comandante Lease also requires ECOC to establish and fund
with certain excess cash flow a rent escrow (the "Rent Escrow") until the Rent
Escrow equals one half of the Minimum Basic Rent for that year. For purposes of
determining the required deposits to the Rent Escrow, excess cash flow will
mean, after ECOC has a cash balance of $700,000 for working capital, all cash
flow of ECOC in excess of $300,000 per year, provided that the $300,000
threshold shall be increased by $100,000 for each $1 million by which the Rent
Escrow exceeds $3 million. Funds held in the Rent Escrow may be released to
make up any difference between rent payments made by ECOC and the rent due and
payable under the El Comandante Lease. After deposits into the Rent Escrow,
payments of Fixed Rent and donations pursuant to New ECOC's certificate of
incorporation aggregating $3 million have been made, additional deposits to the
Rent Escrow are subordinated to the obligations to Supra, Supra's majority
owner and IGP, as described in Note 6.
The El Comandante Lease provides for renegotiation of the Basic Rent,
Fixed Rent and the Rent Escrow provisions with the results of such
renegotiations to be effective on January 1, 1998.
The El Comandante Lease contains certain covenants of ECOC including
payment of all El Comandante expenses; maintenance obligations; financial
reporting requirements; insurance requirements; compliance with laws;
limitations on indebtedness; limitations on liens; limitations on other
activities; limitations on affiliate transactions; acceptance of IGP consulting
services; and acceptance of amendments necessary to maintain the Partnership's
tax status. ECOC granted a security interest in substantially all of its assets
(excluding cash, but including the Rent Escrow) to the Partnership to secure
ECOC's obligations under the El Comandante Lease, which security interest was
then assigned to the Trustee as additional security for the Partnership's
obligations under the First Mortgage Notes. If the El Comandante Lease is
terminated prior to December 2004, ECOC will assign the Operating License to
the Partnership to the extent permitted by law and sell at book value its
equipment to the Partnership. Also, the Partnership will be required to assume
up to $1.9 million of ECOC's obligations under certain agreements with Supra
and Supra's majority owner, as described in Note 6.
6. INVESTMENT IN ECOC:
Prior to August 1, 1994, the Partnership owned 60% of the outstanding
common stock of ECOC but only held 48% of the voting rights (see Note 3). On
December 13, 1993, ECOC entered into a series of agreements with Supra and its
majority owner (the "Supra Agreements") incident to a planned reorganization of
ECOC as a Puerto Rico nonstock corporation (the "ECOC Reorganization"). The
Supra Agreements provided for ECOC to pay accrued interest and principal on an
outstanding note payable to Supra in the principal amount of $200,000, to
purchase ECOC stock owned by Supra for $1,000,000, and to pay $500,000 to Supra
<PAGE>124
and Supra's majority owner as compensation for past services rendered in
connection with management of ECOC. Upon closing of the Private Offering, IGP
purchased from Supra an 80% interest in the $200,000 note. In addition, the
majority owner of Supra and former President of ECOC entered into a
Noncompetition Agreement that became effective upon the ECOC Reorganization and
prohibits him from investing or participating in horse racing operations
anywhere in the Caribbean for a period of three years. The Noncompetition
Agreement provides for payment of $750,000.
Payment of these obligations is to be made quarterly from Excess Cash Flow
of ECOC, as defined in the Supra Agreements and Noncompetiton Agreement. No
payments have been made as of December 31, 1994. Pursuant to the Supra
Agreements, until these obligations are paid in full the Partnership and ECOC
may not amend the El Comandante Lease without Supra's consent. In the event of
termination of the El Comandante Lease, the Partnership will be required to
assume up to $1.9 million of ECOC's obligation under the Supra Agreements and
Noncompetition Agreement.
The Partnership had a rent receivable from ECOC of $1,921,000 in 1993. As
one of the steps of the ECOC Reorganization, on December 15, 1993 the
Partnership contributed the receivable to the capital of ECOC, along with
personal property of approximately $652,000, and agreed to contribute cash of
$1,050,000 to ECOC. The cash was contributed in December 1993 ($800,000) and
January 1994 ($250,000).
Following the Racing Board Approval, the ECOC Reorganization was
completed on August 1, 1994, as follows: (i) ECOC assigned the rights under
the Supra Agreements and Noncompetition Agreement to a Puerto Rico nonstock
corporation, El Comandante Operating Company, Inc. ("New ECOC"), which assumed
the obligations to Supra and Supra's majority owner and became a 40% owner of
ECOC, (ii) the Partnership contributed its 60% interest in ECOC to ECOC's
capital and consequently, New ECOC became the 100% owner of ECOC, and
(iii) ECOC merged into New ECOC, which continues the same business conducted by
ECOC and assumed all the responsibilities under the El Comandante Lease and the
Operating License, subject to the primary obligation of the Partnership to
ensure compliance with all terms and provisions of the Operating License and
applicable regulations and orders of the Racing Board. In anticipation of the
ECOC Reorganization, the Partnership's investment in ECOC, including the
$250,000 capital contribution in January 1994, was written off and recognized
as a loss from reorganization of ECOC of $1,720,345 in the Partnership's
consolidated statement of loss for the year ended December 31, 1993.
7. INCOME TAXES:
Puerto Rico Income Tax
The Partnership is a partnership organized under the laws of the
Commonwealth of Puerto Rico and was subject to Puerto Rico income tax on its
taxable income through December 31, 1992. The Partnership filed an election to
operate as a special partnership effective for all taxable years commencing on
and after January 1, 1993 and received a ruling dated August 31, 1993 from the
Puerto Rico Treasury Department (the "Treasury") approving the special
partnership status. As a special partnership, the Partnership is not a taxable
entity in Puerto Rico. Instead, the Partnership's partners are taxed on their
distributive share of the Partnership's taxable income. Accordingly, no
provision for Puerto Rico income tax was recorded for all the periods
commencing on or after January 1, 1993.
<PAGE>125
The Partnership had a deferred tax receivable of $128,567 at December 31,
1992 which was expected to be realized through a reduction of Puerto Rico
income tax payable in future years. The receivable will not be realizable
since the Partnership is no longer subject to income tax and was written off in
1993 with a corresponding charge of $128,567 as provision for income tax.
Federal Income Tax
The Partnership is not a taxable entity and incurs no federal income tax
liability. Instead, each partner is required to take into account in computing
his income tax liability such partner's allocable share of the Partnership's
taxable income whether or not the Partnership makes a distribution of cash
corresponding to such income. The consolidated financial statements for 1994,
include a provision for income tax attributable to ECCC, a taxable corporation
subject to federal income tax on its taxable income.
8. MANAGEMENT AGREEMENT:
The Partnership does not have any employees. The Partnership's activities
are managed by IGP pursuant to a management agreement for a term of 15 years
ending December 31, 2004 (the "Management Agreement"). Under the Management
Agreement, IGP provides management services, including office space,
administrative and accounting support, and property management to the
Partnership.
The management fee through December 15, 1993 was equal to 5% of rental
income. Thereafter, the management fee is $250,000 per annum payable monthly in
equal installments, with annual CPI adjustments which commenced in 1994.
9. RELATED PARTY TRANSACTIONS:
During the year ended December 31, 1994, the Partnership paid $33,000 to
reimburse HDAMC for directors' meeting fees and expenses and paid $257,000 to
IGP pursuant to the Management Agreement.
10. SUBSEQUENT EVENTS:
On March 8, 1995, the Partnership's partnership agreement was amended
pursuant to which (i) HDAMC transferred to Equus its entire 15% profits
interest in the Partnership and approximately 6.1% capital interest in exchange
for units of Equus, (ii) HDAMC agreed to transfer to Equus its remaining
capital interest and, (iii) IGP agreed to transfer to Equus all but 1% of its
capital interest. These transfers are required to occur on February 7, 1996.
In February 1995 the Partnership and minority investors transferred a 45%
interest in Galapagos to Dominican Republic investors. As a result, the
Partnership now owns a 55% interest in Galapagos. A founder's agreement
between the Partnership and the Dominican Republic investors calls for an
initial investment of $2,120,000 in Galapagos for working capital and equipment
to start racing operations. The Partnership is obligated to provide $1,166,000
of the initial investment with the remainder to be provided by the Dominican
Republic investors. Galapagos began simulcasting El Comandante races on
February 27, 1995 through several sports betting agencies in the Dominican
Republic and racing operations at the Dominican Track are scheduled to commence
on April 29, 1995.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
<PAGE>126
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors and Executive Officers of IGC and the General Partners. The
table below sets forth the name, age and positions with IGC, Interstate General
Management Corporation ("IGMC" or the "Managing General Partner") and
Interstate Business Corporation ("IBC" or "General Partner") of each director
and executive officer of the Managing General Partner, and each executive
officer and certain key employees of IGC.
Positions with IGC, and
Name Age General Partners
- ---- --- -------------------------------------
James J. Wilson 61 Chairman and Chief Executive Officer
of IGC; President and Director of
Managing General Partner and Chairman
and Director of IBC
Gregory G. Kreizenbeck 48 President and Chief Operating Officer
of IGC; Director and Executive Vice
President of the Managing General
Partner
Donald G. Blakeman 62 Executive Vice President and Secretary
of IGC; Director, Executive Vice
President and Secretary of the
Managing General Partner
Edwin L. Kelly 53 Senior Vice President and Treasurer of
IGC; Director, Senior Vice President
and Treasurer of the Managing General
Partner
Jorge Colon-Nevares 59 Director of Managing General Partner
Joel H. Cowan 58 Director of Managing General Partner
John E. Hans 46 Executive Vice President and Chief
Financial Officer of IGC; Senior Vice
President of the Managing General
Partner
Francisco Arrivi Cros 49 Senior Vice President of IGC and the
Managing General Partner
Donald L. Drew 53 Senior Vice President of IGC
Paul A. Resnik 47 Senior Vice President of IGC and Vice
President of the Managing General
Partner
Carlos R. Rodriguez 49 Vice President of IGC
Jack L. Wolff 50 Vice President of IGC, President of
IGC's American Family Homes subsidiary
<PAGE>127
Under the IGC Partnership Agreement, IBC has the right to designate one-
third of the directors of the Managing General Partner so long as IBC continues
to be a General Partner. To the extent practicable, an additional one-third
must be selected from among persons who are neither affiliates of IGC nor then
existing officers or employees of IGC, any General Partner or any of their
affiliates. The remaining directors must be selected from among persons who
are officers of IGC. Directors are elected annually in April by action of the
directors then holding office. Messrs. Colon-Nevares and Cowan currently serve
as the unaffiliated directors. Mr. Wilson serves as the IBC director designee,
and Messrs. Blakeman, Kelly, and Kreizenbeck serve as the directors selected
from among the executive officers of IGC. The unaffiliated directors do not
constitute a majority of IGMC's Board of Directors.
Directors of the Managing General Partner and IBC serve for a term of one
year and thereafter until their successors have been elected. The board of
directors of the Managing General Partner is empowered to elect its successors.
Officers of the Managing General Partner and IBC are elected by their
respective boards of directors to serve at the discretion of such boards of
directors. Officers of IGC are appointed by the Managing General Partner to
serve at its discretion.
Certain additional information concerning the above persons, including
their business experience is set forth below.
James J. Wilson became Chairman and Chief Executive Officer of IGC in
April of 1994. Prior to that time, he served as President and Chief Executive
Officer of IGC. He has been President and Chairman of the Board of the
Managing General Partner since formation in 1986. He is the founder of IBC and
its predecessor companies, and served as Chairman of the Board, President and
Chief Executive Officer of those companies since 1957. Mr. Wilson is also the
Chairman and President of Equus Management Company ("EMC"), a wholly owned
subsidiary of IGC which manages Equus Gaming Company L.P. ("Equus") and serves
as a Director for EMC. Mr. Wilson has served in such capacities since
formation of EMC in 1994. Mr. Wilson is also a Director of El Comandante
Capital Corp. ("ECCC"), a wholly owned subsidiary of Housing Development
Associates, S.E. and has served in such capacity since December 1993.
Gregory G. Kreizenbeck has been President and Chief Operating Officer of
IGC and Director and Executive Vice President of the Managing General Partner
since March 1994. From 1990 to March 1994, he was founder and principal of The
Kreizenbeck Group, a real estate consulting firm. From 1986 to 1990, he was
President and Chief Executive Officer of Transcontinental Properties. From
1970 to 1986, he served in various management positions with J.A. Terteling &
Sons, a San Francisco based private investment firm, including from 1984 to
1986 as President and Chief Executive Officer of Terteling Ventures, Inc. He
is also a director of Findings, Inc., a New Hampshire based jewelry
manufacturer, sales and distribution company. Mr. Kreizenbeck is also a
Director and Senior Vice President and Secretary of EMC.
Donald G. Blakeman has been Executive Vice President of IGC and a Director
and Executive Vice President of the Managing General Partner since their
formation in 1986, and has served as Secretary of IGC and the Managing General
Partner since December 1990. He was a Director of IBC and its predecessor
companies from 1970 to 1990 and served in various executive positions in those
companies since 1968. Mr. Blakeman is also Executive Vice President and Chief
Financial Officer of EMC and serves as a Director for EMC. Mr. Blakeman has
served in such capacities since the formation of EMC in 1994. Mr. Blakeman is
<PAGE>128
also a Director and President of ECCC and has served in such capacity since
December 1993.
Edwin L. Kelly has been Senior Vice President and Treasurer of IGC and
Director, Senior Vice President and Treasurer of the Managing General Partner
since their formation in 1986. He has served in various executive positions
with IBC and its predecessor companies from 1974 to 1993.
Jorge Colon-Nevares has been a Director of the Managing General Partner
since May 1989. He has been President and Chief Executive Officer of Wendco of
Puerto Rico, Inc., the franchisee of Wendy's for Puerto Rico since 1978. He is
an officer and Director of Multisystems Restaurants Inc. and Twenty First
Century Restaurants Inc., the franchisee for Sizzler and T.G.I. Friday's in
Puerto Rico. He is a Director of the Foundation for the University of Puerto
Rico and Chairman of the Board of Trustees for Universidad Central del Caribe
School of Medicine.
Joel H. Cowan has been a Director of the Managing General Partner since
its formation in 1986. He was also a Director of predecessors of IGC from 1968
to 1986. He has been President of Cowan & Associates, a real estate investment
company owned by him since 1976. Since 1984, he has been Chairman of The
Habersham Group, an international business owned by him whose activities
include real estate development, trade and merchant banking. Since 1993, he
has been a Director of Continental Airlines, Inc. He was formerly a Director
of IRT Property Company from 1978 to 1992 and has served as a member of the
Board of Regents to the University System of Georgia from 1990 to 1995.
John E. Hans has been Executive Vice President and Chief Financial Officer
of IGC and Senior Vice President of the Managing General Partner since
September 1994. Prior to joining IGC, Mr. Hans served as Chief Operating and
Chief Financial Officer of NB Engineering. Mr. Hans also was employed by Riggs
National Bank of Washington, D.C. for 24 years, including three years as its
Chief Financial Officer, Executive Vice President and a member of its Board of
Directors.
Francisco Arrivi Cros has been Senior Vice President of IGC since October
1990 and of the Managing General Partner since February 1991. He was Vice
President of The Chase Manhattan Bank N.A. in Puerto Rico from 1977 to
September 1990, and manager of its Real Estate Finance Division from 1987 to
1990.
Donald L. Drew has been Senior Vice President of IGC since February 1992.
From 1987 to 1991, he was President of Ak-Sar-Ben Racetrack in Nebraska. He
was President of Ladbroke North American Racing Operations from 1985 to 1987.
Mr. Drew is also Senior Vice President of EMC and serves as one of its
Directors.
Paul A. Resnik has been Senior Vice President of IGC since February 1993
and Vice President of the Managing General Partner since January 1989.
Previously he served as Vice President of IGC since September 1987.
Carlos R. Rodriguez has been Vice President of IGC since February 1989.
From 1984 to 1989, he was Senior Vice President/Construction Manager of SORO
Construction Control, Inc., a construction management company in Houston,
Texas.
<PAGE>
<PAGE>129
Jack L. Wolff has been Vice President of IGC since August of 1994 and
President of IGC's American Family Homes subsidiary since February, 1995.
Prior to joining IGC in August of 1994, Mr. Wolff was employed for 19 years by
Patwil Homes, one of the nation's leading builders of homes on scattered sites.
Mr. Wolff served in various capacities during his 19 years with Patwil Homes,
including purchasing director, sales and marketing director and controller.
ITEM 11. EXECUTIVE COMPENSATION
The 1994, 1993 and 1992 compensation for the CEO and four most highly
compensated officers are summarized on the following table:
Annual Compensation
----------------------------------
Securities
Other Underlying
Annual All Other Options/
Name & Principal Year Salary Bonus Compensation Compensation SAR's
Position ($) ($) ($) (2) ($) (1) #
---------------- ---- ------- ------ ------------ ------------ ----------
1. James J. Wilson
Chairman & CEO 1994 440,240 0 0 9,576 0
1993 416,192 0 0 16,563 0
1992 416,192 0 0 16,089 0
2. Donald Drew
Senior VP 1994 347,200 98,730 90,000 9,576 0
1993 340,200 34,288 0 16,563 50,000
1992 210,200 50,000 0 N/A 0
3. Donald G. Blakeman
Exec VP, CFO & 1994 263,200 6,000 14,000 9,576 46,500
Secretary 1993 230,200 13,300 0 16,563 3,500
1992 230,200 0 0 15,170 0
4. Gregory G. Kreizenbeck
President & COO 1994 227,804 0 0 0 140,000
5. Edwin L. Kelly
Senior VP 1994 173,483 0 164,215 (3) 9,576 40,000
1993 173,200 0 0 12,228 10,000
1992 173,200 0 0 10,928 0
(1) Reflects IGC's contributions to Retirement Plan discussed below.
(2) Represents the difference between the price paid for shares of the
Company's stock obtained by exercising stock options and the fair
market value of the stock at the date of purchase.
(3) Includes $126,715 of other annual compensation expense associated
with Mr. Kelly's exercise of 22,729 IBC stock options which were
exercisable in IGC Units. These IBC options had an exercise price of
$1.30 and were satisfied in IGC Units.
Employment Agreements. Messrs. Wilson, Blakeman and Kelly entered into
employment agreements with IGC commencing as of December 31, 1986 for
successive one year terms, provided that neither party can terminate the
<PAGE>130
agreement without a 90 day written notice. Mr. Kelly's agreement was amended
in May 1994 to provide for a base annual salary of $173,000, certain fringe
benefits and severance benefits equal to six months base salary and benefits,
or in the event of certain qualifying terminations, eighteen months base salary
and benefits. Mr. Drew entered into a five year employment agreement effective
as of January 1, 1993 providing for an annual base salary of $340,000 and a
bonus based on the amount of rent received by HDA from ECOC. ECOC has
reimbursed the Company for Mr. Drew's compensation paid since July 1992. Mr.
Drew's employment agreement further provides for the termination of his
employment contract if the race track is sold. Mr. Kreizenbeck entered into a
two year employment agreement with the Company effective March 1, 1994, which
cannot be terminated by either party without 60 days prior written notice. Mr.
Kreizenbeck's agreement provides for a base annual salary of $289,500, certain
fringe benefits and severance benefits equal to the greater of his base salary
for the remainder of the agreement term or for a six month period.
Directors. Directors of the Managing General Partner who are neither
affiliates of IBC nor existing officers or employees of the Company, any
General Partner, or any of their affiliates, receive directors' fees
established by the Board of Directors of the Managing General Partner. Messrs.
Cowan and Colon-Nevares earned such directors fees during 1994.
The outside directors of the managing general partner, IGMC, are
compensated at a rate of $5,000 per quarter, $1,400 per meeting and out of
pocket travel reimbursements for meeting attendance. In 1994, the director's
fees and expenses totaled $66,000. Director fees for 1994 and prior years that
are unpaid as of December 31, 1994 totaled $66,000.
IBC indemnifies the directors of the Managing General Partner against any
liability (including legal fees and expenses) arising out of their serving in
such capacities, except for liabilities arising out of the gross negligence or
willful misconduct of such directors.
IGC maintains a retirement plan (the "Retirement Plan") for eligible
employees of the Company. Employees are generally eligible to participate when
they complete one year of service. Contributions to the Retirement Plan in
1994, 1993 and 1992 were in amounts equal to 4% of base salaries and wages not
in excess of the U.S. Social Security taxable wage base, and 8% of salaries
(limited to $150,000) that exceeded that wage base. Additional contributions
to the Retirement Plan are made pursuant to the Profit Sharing Plan described
below. Contributions to the Retirement Plan in 1994, on behalf of Wilson,
Blakeman, Drew, Kreizenbeck and Kelly were $9,576, $9,576, $9,576, $0 and
$9,576, respectively.
IGC has established an incentive compensation plan (the "Profit Sharing
Plan") pursuant to which IGC awards annual cash bonuses to officers and
employees in reasonable amounts reflecting their contributions to the Company.
The persons to receive bonuses and the amounts of such bonuses are approved by
the unaffiliated directors of IGMC. Under the Profit Sharing Plan, a portion
of each bonus, keyed by the compensation committee to a percentage of the
employees' salary, is contributed on behalf of the employee to the Retirement
Plan. No contributions have been made to the Profit Sharing Plan since 1989.
IGC's employees, including its directors and officers are eligible to
participate in the Unit Incentive Plan (the "Employees Plan"). Under the
Employees Plan, a committee composed of the independent directors of IGMC (the
"Committee") awards Unit options or Unit Appreciation Rights to employees and
officers on the basis of their performance. The Unit Appreciation Rights
<PAGE>131
entitle the holder to receive upon exercise, an amount payable in cash, Class A
units of the Company, other property or some combination thereof, as determined
by the Committee. The amount received upon exercise is determined based on the
excess of the "Current Market Price", as such term is defined in the plan, over
the base price specified in the individual rights agreements. The 1994
activity under these plans for the CEO and four most highly compensated
officers are summarized on the following tables:
OPTIONS AND UNIT APPRECIATION RIGHTS GRANTED DURING 1994
Number of Percent of
Securities Total Unit
Underlying Appreciation
Unit Rights Granted Market
Appreciation to Employees Base Price
Rights in 1994 Price on Date Expiration
Granted (%) ($) of Grant Date
------------ ------------- ----- -------- ----------
James J. Wilson -- -- -- --
Donald Drew -- -- -- --
Donald G. Blakeman (2) 46,500 12.78% 4.00 6.875 5-15-04
Edwin L. Kelly (2) 40,000 11.00% 4.00 6.875 5-15-04
Gregory G. Kreizenbeck 140,000 38.48% 4.00 7.25 3-01-04
(1,2)
Potential Realizable Value at Assumed
Annual Rate of Unit Price Appreciation
for Unit Appreciation Rights Term
--------------------------------------
0% 5% 10%
($) ($) ($)
------- --------- ---------
James J. Wilson -- -- --
Donald Drew -- -- --
Donald G. Blakeman (2) 133,688 334,737 643,187
Edwin L. Kelly (2) 115,000 287,946 553,279
Gregory G. Kreizenbeck (1,2) 455,000 1,093,328 2,072,649
(1) On March 16, 1995, Mr. Kreizenbeck's Unit Appreciation Rights
Agreement was amended and the base price of his rights was increased
to $6.33.
(2) As a result of the Equus Distribution discussed in Note 5 to the
Company's Consolidated Financial Statements included in Item 8 of
this report, holders listed above who exercise their rights after the
Distribution will receive for each right, an amount equal to the
excess of the fair market value of the Company's Units on the
exercise date, plus 50% of the fair market value of Equus Units on
the exercise date, over the base price of the Unit Appreciation
Right.
<PAGE>
<PAGE>132
AGGREGATED OPTION EXERCISES IN 1994
AND DECEMBER 31, 1994 OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-money
Options options and
and Unit Unit
Appreciation Appreciation
Rights at Rights at
December 31, December 31,
1994 1994
------------------------------
Shares Value Exercisable/ Exercisable/
Acquired On Realized Unexercisable Unexercisable
Name Exercise ($) (#) (2)(3) ($) (2)(3)
- ------------------- ----------- -------- ------------- --------------
James J. Wilson -- -- --/-- --/--
Donald Drew 20,000 90,000 --/30,000 --/82,500
Donald G. Blakeman 3,500 14,000 --/46,500 --/127,317
Edwin L. Kelly (4) 32,729 164,215 --/40,000 --/109,520
Gregory G. Kreizenbeck(1) -- -- --/140,000 --/383,320
(1) On March 16, 1995, Mr. Kreizenbeck's Unit Appreciation Rights
Agreement was amended and the base price of his rights was increased
to $6.33 from $4.00.
(2) As a result of the Equus Distribution discussed in Note 5 to the
Company's Consoldiated Financial Statements included in Item 8 of
this report, holders listed above who exercise Unit Appreciation
Rights after the Distribution will receive for each right, an amount
equal to the excess of the fair market value of the Company's Units
on the exercise date, plus 50% of the fair market value of Equus
Units on the exercise date, over the base price of the Unit
Appreciation right.
(3) As a result of the Equus distribution on February 6, 1995 discussed
in Note 5 to the Company's Consoldiated Financial Statements included
in Item 8 of this report, the exercise price of options exercisable
prior to January 22, 1995 was reduced from $4.00 to $2.49.
(4) Includes 22,729 IGC Units received upon exercise of 22,729 IBC stock
options which were exercisable in IGC Units. $126,715 of the "value
realized" reflected above related to such Units.
<PAGE>
<PAGE>133
ITEM 12. SECURITY OWNERSHIP OF CERTAIN UNITHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the Units
that were beneficially owned on February 28, 1995 (i) by each person who is
known by the general partners to beneficially own more than 5% of the
outstanding units of the Company, (ii) by each director of a general partner,
and (iii) by all executive officers of the Company and directors of the general
partners as a group.
Beneficial Ownership (1)
------------------------
Number of
IGC Units Percent
------------- -------
James J. Wilson (2) 4,061,218 39.50
Donald Drew 30,000 .29
Donald G. Blakeman (4) 377,389 3.67
Gregory G. Kreizenbeck (5) 7,000 .07
Edwin L. Kelly 111,214 1.08
Jorge Colon-Nevares 32,000 .31
Joel H. Cowan 40,256 .39
All executive officers of IGC
and directors of IGMC as a group
(12 persons) (3) 4,701,077 45.72
Bessemer Interstate Corporation 522,208 5.08
245 Peachtree Center Avenue #804
Atlanta, GA 30303
(1) IBC owns 3,331,930 IGC Units, or 32.40% of the outstanding IGC Units, as
of February 28, 1995. The beneficial ownership of IGC Units is determined
on the basis of stockholdings in IBC plus other IGC Units owned, and
options exercisable within the next 60 days to purchase IGC Units held, by
executive officers and directors of the General Partners. The beneficial
ownership of IGC Units owned by IBC is determined as if all options that
are so exercisable have been exercised to acquire IBC stock under an
existing stock option plan and to acquire IGC units from IBC under an
existing unit option plan.
(2) Includes 2,360,921 IGC Units (22.96%) attributable to IBC shares held by
Mr. Wilson and his wife, Barbara A. Wilson, as trustees of a voting trust.
Also includes 487,515 IGC units (4.74%) attributable to IBC shares held by
Mr. Wilson. The beneficiaries of the Trust are Mr. Wilson and his
children. The Trust terminates on September 30, 1997, or upon the death
of the trustees. Also includes 1,172,203 IGC Units (11.40%) held by
Wilson Securities Corporation which is owned by another voting trust in
which Mr. Wilson and his wife are trustees. The beneficiaries of this
trust are Mr. Wilson and his children. The trust terminates on June 30,
<PAGE>134
1996 or upon the death of the trustees. Does not include 1,280,971
IGC Units (12.46%) held by the children of Mr. Wilson or attributable to
IBC shares held by the children.
(3) Includes IGC Units subject to options exercisable under the IGC Employees
and Directors Plans of 8,000 Units for all twelve executive officers of
IGC and directors of IGMC as a group.
(4) Does not include 52,194 IGC Units (.51%) owned by the children of
Mr. Blakeman.
(5) Does not include IGC Units subject to 20,000 Unit appreciation rights
exercisable within the next 60 days under the IGC Employees Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information responding to this item appears in Note 10 to the
Company's Consolidated Financial Statetments included in Item 8 of this report.
<PAGE>
<PAGE>135
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) 1. Financial Statements
The following financial statements of Interstate General Company L.P.
are contained herein:
Report of Independent Public Accountants
Consolidated Statements of Income for the years ended December
31, 1994, 1993 and 1992
Consolidated Balance Sheets as of December 31, 1994 and 1993
Consolidated Statements of Changes in Partners' Capital for the
years ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements for the years ended
December 31, 1994, 1993 and 1992
The following financial statements of Housing Development Associates,
S.E. are contained herein:
Report of Independent Public Accountants
Consolidated Statements of Income for the years ended December
31, 1994, 1993 and 1992
Consolidated Balance Sheets as of December 31, 1994 and 1993
Consolidated Statements of Changes in Partners' Capital for the
years ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements for the years ended
December 31, 1994, 1993 and 1992
2. Financial Statement Schedules
The following financial statements schedules are contained herein:
Report of Independent Public Accountants
Schedule III -- Real Estate and Accumulated Depreciation
<PAGE>
<PAGE>136
3. Exhibits
Exhibits required by Securities and Exchange Commission Section 601
of Regulation S-K.
Exhibit
No. Description of Exhibit Reference
- ------- ----------------------------------------- --------------------------
3(a) Third Amended and Restated Agreement of Exhibit 3(a) to Amendment
Limited Partnership of Interstate General No. 3 to Registration
Company L.P. Statement No. 33-10636 on
Form S-1, filed February
11, 1987 (Form "S-1")
(b) First Amendment to Third Amended and Exhibit 3(b) to 1987 10-K
Restated Agreement of Limited Partnership
of Interstate General Company L.P.
(c) Second Amendment to Third Amended and Exhibit 3(c) to 1988 10-K
Restated Agreement of Limited Partnership
of Interstate General Company L.P.
(d) Amended and Restated Certificate of Exhibit 3(b) to Form S-1
Limited Partnership of Interstate
General Company L.P.
(e) Certificate of Incorporation of Exhibit 3(c) to Form S-1
Interstate General Management Corporation
(f) Bylaws of Interstate General Management Exhibits 3(d) and 3(1) to
Corporation, as amended Form S-1
(g) Certificate of Incorporation of Exhibit 3(g) to Form S-1
Interstate Business Corporation
(formerly Interstate St. Charles, Inc.)
as amended
(h) Bylaws of Interstate Business Corporation Exhibit 3(h) to Form S-1
(formerly Interstate St. Charles, Inc.)
as amended February 4, 1986
(i) Amendment to Bylaws of Interstate Exhibit 3(i) to 1988 10-K
General Management Corporation dated
November 10, 1988
4(a) Form of beneficial assignment Exhibit 4(a) to Form S-1
certificate representing Units
(b) Form of certificate evidencing limited Exhibit 4(b) to Form S-1
partnership interest
(c) Certificate of Incorporation of Exhibit 4(c) to Form S-1
Interstate Management Title Company
dated September 19, 1986
<PAGE>137
(d) Bylaws of Interstate Management Title Exhibit 4(d) to Form S-1
Company dated September 25, 1986
(e) Amendment to Certificate of Incorporation Exhibit 4(e) to Form S-1
of Interstate Management Title Company
dated December 31, 1986
10. Material Contracts
(a) Employment Agreement with James J. Wilson Exhibit 10(a) to Form S-1
(b) Employment Agreement with Exhibit 10(b) to Form S-1
Donald G. Blakeman
(c) Employment Agreement with Exhibit 10(a) to Form 10-Q
Gregory G. Kreizenbeck for the quarter ended
March 31, 1994
(d) First Amendment to Employment Agreement Filed herewith
with Gregory G. Kreizenbeck
(e) Employment Agreement with Exhibit 10(a) to Form 10-Q
John E. Hans for the quarter ended
September 30, 1994
(f) Employment Agreement with Exhibit 10(a) to Form 10-Q
Edwin L. Kelly for the quarter ended
June 30, 1994
(g) Employment Agreement with Exhibit 10(e) to 1993 10-K
Donald Drew
(h) Indemnity Agreement among Interstate Exhibit 10(f) to Form S-1
General Business Corporation, Interstate
St. Charles, Inc. and each director and
officer of Interstate General
Management Corporation
(i) Unit Incentive Plan for Directors, Filed herewith
Amended and Restated, dated
March 17, 1995
(j) Unit Incentive Plan for Employees, Filed herewith
Amended and Restated, dated
March 17, 1995
(k) Amended and Restated Certificate and Exhibit 10(11) to Form S-1
Agreement of Limited Partnership of
St. Charles Associates Limited
Partnership dated March 14, 1985
(l) Amended and Restated Certificate and Exhibit 10(j) to Form S-1
Agreement of Limited Partnership of
Interstate General Properties Limited
Partnership dated December 31, 1986
<PAGE>
<PAGE>138
(m) Second Amended and Restated Certificate Exhibit 10(kk) to Form S-1
and Agreement of Limited Partnership of
Interstate General Properties Limited
Partnership dated as of December 31, 1986
(n) Fourth Amendment to Second Amendment Exhibit 10(lll) to
and Restated Certificate and Agreement 1991 10-K
of Interstate General Properties
Limited Partnership S.P., dated
June 29, 1981
(o) Fifth Amendment to Second Amendment and Exhibit 10(mmm) to
Restated Certificate and Agreement of 1991 10-K
Interstate General Properties Limited
Partnership S.P., dated June 29, 1981
(p) Third Amended and Restated Certificate Exhibit 10(kk) to
and Agreement of Limited Partnership of 1989 10-K
Interstate General Properties Limited
Partnership dated as of December 31, 1986
(q) Partnership agreement for Fox Chase Exhibit 10(p) to Form S-1
Apartments General Partnership as
amended January 29, 1986
(r) Amendment to Partnership Agreement for Exhibit 10(mm) to Form S-1
Fox Chase Apartments General Partnership
dated February 10, 1987
(s) Withdrawal, Mutual Release and Exhibit 10(q) to 1993 10-K
Indemnification Agreement and Amendment
to Fox Chase General Partnership Agreement
dated August 20, 1993
(t) Partnership agreement for Wakefield Third Exhibit 10(r) to Form S-1
Age Associates Limited Partnership dated
July 1, 1985
(u) Partnership agreement for Wakefield Exhibit 10(t) to Form S-1
Terrace Associates Limited Partnership
dated July 1, 1985
(v) Partnership agreement for Headen House Exhibit 10(v) to Form S-1
Associates Limited Partnership dated
July 1, 1985
(w) Partnership agreement for Palmer Exhibit 10(w) to Form S-1
Apartments Associates Limited
Partnership dated July 1, 1985
(x) Partnership agreement for Chastleton Exhibit 10(dd) to Form S-1
Apartments Associates dated May 1, 1986
(y) Partnership agreement for New Forest Exhibit 10(ff) to Form S-1
Apartments General Partnership dated
November 18, 1986
<PAGE>
<PAGE>139
(z) First Amendment to the General Exhibit 10(ii) to
Partnership Agreement of New Forest 1988 10-K
Apartments General Partnership dated
February 24, 1987
(aa) Second Amendment to the General Exhibit 10(hh) to
Partnership Agreement of New Forest 1988 10-K
Apartments General Partnership dated
December 19, 1988
(bb) Withdrawal, Mutual Release and Exhibit 10(z) to 1993 10-K
Indemnification Agreement and Amendment
to New Forest Apartments General
Partnership Agreement dated
August 20, 1993
(cc) Limited Partnership Agreement and Exhibit 10(zz) to
Amended and Restated Limited Partnership 1988 10-K
Certificate of Coachman's Limited
Partnership dated June 2, 1988
(dd) Management Services Agreements between Exhibit 10(k) to Form S-1
Interstate General Properties Limited
Partnership and National General
Corporation (3 separate agreements)
(ee) Property Management Agreement between Exhibit 10(oo) to Form S-1
National General Corporation and
Interstate General Corporation and
Interstate General Properties Limited
Partnership as amended March 30, 1986
(ff) Property management agreement between Exhibit 10(n) to Form S-1
Smallwood Village Associates Limited
Partnership and Interstate General
Properties Limited Partnership as
contained in the Smallwood Village
Associates Limited Partnership Amended
and Restated Certificate and Agreement
of Limited Partnership dated July 1, 1985
(gg) Property management agreement between Exhibit 10(o) to Form S-1
Smallwood Village Office Building
Associates Limited Partnership and
Interstate General Properties and
Interstate General Properties Limited
Partnership as contained in the
Smallwood Village Office Building
Associates Amended and Restated Certificate
and Agreement of Limited Partnership
dated July 1, 1985
(hh) Management service agreement between Exhibit 10(jj) to
Interstate General Company L.P. and 1989 10-K
Coachman's Limited Partnership dated
May 2, 1988
<PAGE>
<PAGE>140
(ii) Amendment to Management Service Exhibit 10(hh) to
Agreement between Interstate General 1993 10-K
Company L.P. and Coachman's Limited
Partnership dated January 1, 1993
(jj) Management Agreement by and between Exhibit 10(zzzz) to
Interstate Properties and Interstate 1992 10-K
St. Charles, Inc. (El Monte), dated
January 5, 1987
(kk) First Amendment to Management Agreement Exhibit 10(aaaaa) to
by and between Interstate Properties and 1992 10-K
Interstate Business Corporation (El Monte),
dated January 4, 1988
(ll) Second Amendment to Management Agreement Exhibit 10(bbbbb) to
by and between Interstate Properties and 1992 10-K
Interstate Business Corporation (El Monte),
dated December 31, 1992
(mm) Management Agreement by and between Exhibit 10(ccccc) to
Interstate General Properties and 1992 10-K
Interstate St. Charles, Inc. (Santa Maria
Shopping Center), dated January 5, 1987
(nn) First Amendment to Management Agreement Exhibit 10(ddddd) to
by and between Interstate General 1992 10-K
Properties Limited Partnership and
Interstate Business Corporation (Santa
Maria Shopping Center), dated
January 4, 1988
(oo) Second Amendment to Management Agreement Exhibit 10(eeeee) to
by and between Interstate General 1992 10-K
Properties Limited Partnership S.E. and
Interstate Business Corporation and
Santa Maria Associates S.E., dated
December 28, 1990
(pp) Two (2) Property management agreements Exhibit 10(aa) to Form S-1
between Interstate General Properties
Limited Partnership and Capitol Park
Associates as amended December 31, 1984
(qq) Lease for office space between Interstate Exhibit 10(r) to Form S-1
General Business Corporation and
Smallwood Village Associates Limited
Partnership dated May 21, 1981
(rr) Lease for office space between Interstate Exhibit 10(m) to Form S-1
General Business Corporation and
Smallwood Village Associates Limited
Partnership dated June 15, 1981
(ss) Store Lease between Interstate General Exhibit 10(fff) to
Business Corporation and Smallwood 1991 10-K
Village Associates Limited Partnership
dated April 1, 1988
<PAGE>141
(tt) Fourth Amendment to Interstate General Exhibit 10(yyyy) to
Company L.P. Retirement Plan, dated 1992 10-K
July 1, 1992
(uu) Agreement Regarding Partnership Interest Exhibit 10(nn) to Form S-1
in Chastleton Apartment Associates
dated January, 1987
(vv) Stockholders Agreement among Interstate Exhibit 10(pp) to Form S-1
and certain stockholders of Interstate
St. Charles, Inc. dated as of
December 1, 1986
(ww) License Agreement between Interstate Exhibit 10(qq) to Form S-1
General Company L.P., Interstate
General Business Corporation and
Interstate St. Charles, Inc., dated
as of December 31, 1986
(xx) Amendment to License Agreement between Exhibit 10(rr) to Form S-1
Interstate General Company L.P.,
Interstate General Business Corporation
and Interstate General Company L.P.,
dated as of February 9, 1987
(yy) Unitholders Agreement among Interstate Exhibit 10(ss) to Form S-1
General Business Corporation, Interstate
St. Charles, Inc., and Interstate
Properties Trust dated as of
February 9, 1987
(zz) Agreement dated March 15, 1990 among Exhibit 10(ddd) to
Interstate General Company L.P., 1990 10-K
Interstate Business Corporation and
Interstate General Properties
(aaa) Management service agreement between Exhibit 10(ee) to Form S-1
Interstate General Business Corporation Amendment Exhibit 10(ee)
and Chastleton Apartments Associates to 1989 10-K
as amended February 26, 1987
(bbb) Amendment to February 26, 1987 Exhibit 10(bbb) to
Management Service Agreement between 1993 10-K
Interstate General Business Corporation
and Chastleton Apartment Associates
dated January 1, 1993
(ccc) Property management agreement between Exhibit 10(z) to Form S-1
Interstate General Properties Limited Amendment Exhibit 10(z) to
Partnership and G.L. Limited Partnership 1989 10-K
as amended September 30, 1985 and as
amended March 1, 1989
(ddd) Amendment to Property Management Exhibit 10(ddd) to
Agreement between Interstate General 1993 10-K
Properties Limited Partnership and
G. L. Limited Partnership dated
January 1, 1993
<PAGE>142
(eee) Second Amendment and Restatement of Exhibit 10(eee) to
Purchase Agreement by and between Land 1993 10-K
Development Associates S.E. and Wal-Mart
Puerto Rico, Inc., dated November 30, 1993
(fff) Sale and Purchase Agreement between Exhibit 10(hhhhh) to
Interstate General Company L.P. and 1992 10-K
K. Hovnanian at Montclair, Inc., dated
September 30, 1992
(ggg) First Amendment to Sale and Purchase Exhibit 10(ggg) to
Agreement by and between Interstate 1993 10-K
General Company L.P. and K. Hovnanian
at Montclair, Inc., dated
October 16, 1992
(hhh) Second Amendment to Sale and Purchase Filed herewith
Agreement by and between Interstate
General Company L.P. and K. Hovnanian
at Montclair, Inc., dated
August 18, 1994
(iii) Third Amendment to Sale and Purchase Filed herewith
Agreement by and between Interstate
General Company L.P. and K. Hovnanian
at Montclair, Inc., dated
December 16, 1994
(jjj) Amended and Restated Lease Agreement Exhibit 10.8 to the
between Housing Development Associates Registration Statement on
S.E. and El Comandante Operating Company, S-4 of El Comandante
dated December 15, 1993 Capital Corp. and Housing
Development Associates
S.E. Registration
# 33-75284 (the "S-4")
(kkk) Third Amended and Restated Partnership Exhibit 3.3 to the S-4
Agreement for Housing Development
Associates, S.E. dated December 15, 1993
(lll) Fourth Amended and Restated Partnership Exhibit 10(b) to Form 10-Q
Agreement of Housing Development for the quarter ended
Associates, S.E. dated July 21, 1994 June 30, 1994
(mmm) Fifth Amended and Restated Partnership Exhibit 10(c) to Form 10-Q
Agreement of Housing Development for the quarter ended
Associates, S.E. dated August 1, 1994 June 30, 1994
(nnn) Sixth Amended and Restated Partnership Exhibit 2.2 to the Report
Agreement of Housing Development on Form 8-K of Equus
Associates, S.E. dated March 8, 1995 Gaming Company L.P. dated
March 23, 1995,
File No. 000-25306
(the "Equus 8-K")
(ooo) Conversion Agreement dated February 3, Exhibit 2.3 to the
1995 and First Amendment thereto dated Equus 8-K
March 6, 1995
<PAGE>143
(ppp) Indenture dated December 15, 1993 among Exhibit 4.1 to the S-4
El Comandante Corp., Housing Development
Associates S.E. and Banco Popular De
Puerto Rico
(qqq) Warrant Agreement between HDA Management Exhibit 10.3 to the S-4
Corporation, Housing Development
Associates S.E. and Banco Popular De
Puerto Rico as Warrant Agent dated
December 15, 1993
(rrr) Limited Partnership Agreement of Equus Exhibit 10(d) to Form 10-Q
Gaming Company L.P. dated August 1, 1994 for the quarter ended
June 30, 1994
(sss) First Amendment to the Limited Exhibit 10(e) to Form 10-Q
Partnership Agreement of Equus Gaming for the quarter ended
Company L.P. dated August 1, 1994 June 30, 1994
(ttt) Second Amendment to the Limited Exhibit 10(f) to Form 10-Q
Partnership Agreement of Equus Gaming for the quarter ended
Company L.P. dated August 1, 1994 June 30, 1994
(uuu) Third Amendment to the Limited Exhibit 3.4 to
Partnership Agreement of Equus Gaming to Registration Statement
Company L.P. on Form S-11 of Equus
Gaming Company L.P.
Registration # 33-82750
(the "Equus S-11")
(vvv) Amended and Restated Distribution Exhibit 2.1 to the Equus
Agreement dated November 22, 1994, S-11
between Equus Gaming Company L.P.
(the "Company") and Interstate General
Company L.P. ("IGC")
(www) Registration Rights Agreement with Exhibit 10.4 to the S-4
respect to the Warrants dated
December 15, 1993, among HDAMC, HDA,
Oppenheimer & Co., Inc. and The
Argosy Securities Group L.P.
(xxx) Amended and Restated Management Exhibit 10.6 to the S-4
Agreement dated December 15, 1993,
between Interstate General Properties
Limited Partnership S.E. ("IGP") and
HDA
(yyy) Master Support and Services Agreement Exhibit 10.20 to the
dated December 9, 1994, between IGC Equus S-11
and Equus Gaming Company L.P.
(zzz) Consulting Agreement dated December 15, Exhibit 10.21 to the
1993, between El Comandate Operating Equus S-11
Company and Interstate General
Properties Limited Partnership
<PAGE>
<PAGE>144
(aaaa) First Supplemental Indenture dated Exhibit 10.27 to the
December 22, 1994, to the Indenture Equus S-11
dated December 15, 1993 among El
Comandante Corp., Housing Development
Associates S.E. and Banco Popular de
Puerto Rico
(bbbb) Second Supplemental Indenture dated Exhibit 10.28 to the
December 22, 1994, to the Indenture Equus S-11
dated December 15, 1993 among El
Comandante Corp., Housing Development
Associates S.E. and Banco Popular de
Puerto Rico
(cccc) Amended and Restated Registration Rights Exhibit 10.29 to the
Agreement with Respect to the Warrants Equus S-11
dated December 12, 1994, among HDAMC,
HDA, Oppenheimer & Co., Inc., the
Argosy Securities Group L.P. and Equus
Gaming Company L.P.
(dddd) Agreement of Purchase and Sale between Filed herewith
Interstate General Company L.P. and
Interstate Business Corporation dated
December 30, 1994 for the Partnership
Interests in:
New Forest Apartments General Partnership
Headen House Associates Limited Partnership
Fox Chase Apartments General Partnership
Palmer Apartments Associates
Wakefield Terrace Associates
Wakefield Third Age Associates
(eeee) Employment Agreement for Donald Drew Filed herewith
dated December 14, 1993
21. List of Subsidiaries of Interstate Filed herewith
General Company L.P.
(b) Reports on Form 8-K
None
(c) Exhibits
See (a) 2, above.
(d) Financial Statement Schedules
See (a) 2, above.
<PAGE>
<PAGE>145
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, there-unto duly authorized.
INTERSTATE GENERAL COMPANY L.P.
By: Interstate General Management
Corporation
Managing General Partner
Dated: March 31, 1994 By: /s/ James J. Wilson
--------------------- -----------------------------
James J. Wilson
Chairman, President and
Chief Executive Officer
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 dates indicated:
Signature Title Date
--------- ------------------------- ------
/s/ James J. Wilson March 31, 1994
- ---------------------- Chairman, President, ---------------
James J. Wilson Chief Executive Officer
and Director
/s/ Gregory G. Kreizenbeck March 31, 1994
- ---------------------- Executive Vice President ---------------
Gregory G. Kreizenbeck and Director
/s/ Donald G. Blakeman March 31, 1994
- ---------------------- Executive Vice President ---------------
Donald G. Blakeman and Director
/s/ John E. Hans March 31, 1994
- ---------------------- Senior Vice President and ---------------
John E. Hans Chief Financial Officer
/s/ Edwin L. Kelly March 31, 1994
- ---------------------- Senior Vice President ---------------
Edwin L. Kelly and Director
/s/ Jorge Colon-Nevares March 31, 1994
- ---------------------- Director ---------------
Jorge Colon-Nevares
/s/ Joel H. Cowan March 31, 1994
- ---------------------- Director ---------------
Joel H. Cowan
<PAGE>
<PAGE>146
INDEX TO EXHIBITS
Exhibit
No. Description of Exhibit Reference
- ------- ----------------------------------------- --------------------------
3(a) Third Amended and Restated Agreement of Exhibit 3(a) to Amendment
Limited Partnership of Interstate General No. 3 to Registration
Company L.P. Statement No. 33-10636 on
Form S-1, filed February
11, 1987 (Form "S-1")
(b) First Amendment to Third Amended and Exhibit 3(b) to 1987 10-K
Restated Agreement of Limited Partnership
of Interstate General Company L.P.
(c) Second Amendment to Third Amended and Exhibit 3(c) to 1988 10-K
Restated Agreement of Limited Partnership
of Interstate General Company L.P.
(d) Amended and Restated Certificate of Exhibit 3(b) to Form S-1
Limited Partnership of Interstate
General Company L.P.
(e) Certificate of Incorporation of Exhibit 3(c) to Form S-1
Interstate General Management Corporation
(f) Bylaws of Interstate General Management Exhibits 3(d) and 3(1) to
Corporation, as amended Form S-1
(g) Certificate of Incorporation of Exhibit 3(g) to Form S-1
Interstate Business Corporation
(formerly Interstate St. Charles, Inc.)
as amended
(h) Bylaws of Interstate Business Corporation Exhibit 3(h) to Form S-1
(formerly Interstate St. Charles, Inc.)
as amended February 4, 1986
(i) Amendment to Bylaws of Interstate Exhibit 3(i) to 1988 10-K
General Management Corporation dated
November 10, 1988
4(a) Form of beneficial assignment Exhibit 4(a) to Form S-1
certificate representing Units
(b) Form of certificate evidencing limited Exhibit 4(b) to Form S-1
partnership interest
(c) Certificate of Incorporation of Exhibit 4(c) to Form S-1
Interstate Management Title Company
dated September 19, 1986
(d) Bylaws of Interstate Management Title Exhibit 4(d) to Form S-1
Company dated September 25, 1986
<PAGE>147
(e) Amendment to Certificate of Incorporation Exhibit 4(e) to Form S-1
of Interstate Management Title Company
dated December 31, 1986
10. Material Contracts
(a) Employment Agreement with James J. Wilson Exhibit 10(a) to Form S-1
(b) Employment Agreement with Exhibit 10(b) to Form S-1
Donald G. Blakeman
(c) Employment Agreement with Exhibit 10(a) to Form 10-Q
Gregory G. Kreizenbeck for the quarter ended
March 31, 1994
(d) First Amendment to Employment Agreement Filed herewith
with Gregory G. Kreizenbeck
(e) Employment Agreement with Exhibit 10(a) to Form 10-Q
John E. Hans for the quarter ended
September 30, 1994
(f) Employment Agreement with Exhibit 10(a) to Form 10-Q
Edwin L. Kelly for the quarter ended
June 30, 1994
(g) Employment Agreement with Exhibit 10(e) to 1993 10-K
Donald Drew
(h) Indemnity Agreement among Interstate Exhibit 10(f) to Form S-1
General Business Corporation, Interstate
St. Charles, Inc. and each director and
officer of Interstate General
Management Corporation
(i) Unit Incentive Plan for Directors, Filed herewith
Amended and Restated, dated
March 17, 1995
(j) Unit Incentive Plan for Employees, Filed herewith
Amended and Restated, dated
March 17, 1995
(k) Amended and Restated Certificate and Exhibit 10(11) to Form S-1
Agreement of Limited Partnership of
St. Charles Associates Limited
Partnership dated March 14, 1985
(l) Amended and Restated Certificate and Exhibit 10(j) to Form S-1
Agreement of Limited Partnership of
Interstate General Properties Limited
Partnership dated December 31, 1986
(m) Second Amended and Restated Certificate Exhibit 10(kk) to Form S-1
and Agreement of Limited Partnership of
Interstate General Properties Limited
Partnership dated as of December 31, 1986
<PAGE>148
(n) Fourth Amendment to Second Amendment Exhibit 10(lll) to
and Restated Certificate and Agreement 1991 10-K
of Interstate General Properties
Limited Partnership S.P., dated
June 29, 1981
(o) Fifth Amendment to Second Amendment and Exhibit 10(mmm) to
Restated Certificate and Agreement of 1991 10-K
Interstate General Properties Limited
Partnership S.P., dated June 29, 1981
(p) Third Amended and Restated Certificate Exhibit 10(kk) to
and Agreement of Limited Partnership of 1989 10-K
Interstate General Properties Limited
Partnership dated as of December 31, 1986
(q) Partnership agreement for Fox Chase Exhibit 10(p) to Form S-1
Apartments General Partnership as
amended January 29, 1986
(r) Amendment to Partnership Agreement for Exhibit 10(mm) to Form S-1
Fox Chase Apartments General Partnership
dated February 10, 1987
(s) Withdrawal, Mutual Release and Exhibit 10(q) to 1993 10-K
Indemnification Agreement and Amendment
to Fox Chase General Partnership Agreement
dated August 20, 1993
(t) Partnership agreement for Wakefield Third Exhibit 10(r) to Form S-1
Age Associates Limited Partnership dated
July 1, 1985
(u) Partnership agreement for Wakefield Exhibit 10(t) to Form S-1
Terrace Associates Limited Partnership
dated July 1, 1985
(v) Partnership agreement for Headen House Exhibit 10(v) to Form S-1
Associates Limited Partnership dated
July 1, 1985
(w) Partnership agreement for Palmer Exhibit 10(w) to Form S-1
Apartments Associates Limited
Partnership dated July 1, 1985
(x) Partnership agreement for Chastleton Exhibit 10(dd) to Form S-1
Apartments Associates dated May 1, 1986
(y) Partnership agreement for New Forest Exhibit 10(ff) to Form S-1
Apartments General Partnership dated
November 18, 1986
(z) First Amendment to the General Exhibit 10(ii) to
Partnership Agreement of New Forest 1988 10-K
Apartments General Partnership dated
February 24, 1987
<PAGE>
<PAGE>149
(aa) Second Amendment to the General Exhibit 10(hh) to
Partnership Agreement of New Forest 1988 10-K
Apartments General Partnership dated
December 19, 1988
(bb) Withdrawal, Mutual Release and Exhibit 10(z) to 1993 10-K
Indemnification Agreement and Amendment
to New Forest Apartments General
Partnership Agreement dated
August 20, 1993
(cc) Limited Partnership Agreement and Exhibit 10(zz) to
Amended and Restated Limited Partnership 1988 10-K
Certificate of Coachman's Limited
Partnership dated June 2, 1988
(dd) Management Services Agreements between Exhibit 10(k) to Form S-1
Interstate General Properties Limited
Partnership and National General
Corporation (3 separate agreements)
(ee) Property Management Agreement between Exhibit 10(oo) to Form S-1
National General Corporation and
Interstate General Corporation and
Interstate General Properties Limited
Partnership as amended March 30, 1986
(ff) Property management agreement between Exhibit 10(n) to Form S-1
Smallwood Village Associates Limited
Partnership and Interstate General
Properties Limited Partnership as
contained in the Smallwood Village
Associates Limited Partnership Amended
and Restated Certificate and Agreement
of Limited Partnership dated July 1, 1985
(gg) Property management agreement between Exhibit 10(o) to Form S-1
Smallwood Village Office Building
Associates Limited Partnership and
Interstate General Properties and
Interstate General Properties Limited
Partnership as contained in the
Smallwood Village Office Building
Associates Amended and Restated Certificate
and Agreement of Limited Partnership
dated July 1, 1985
(hh) Management service agreement between Exhibit 10(jj) to
Interstate General Company L.P. and 1989 10-K
Coachman's Limited Partnership dated
May 2, 1988
(ii) Amendment to Management Service Exhibit 10(hh) to
Agreement between Interstate General 1993 10-K
Company L.P. and Coachman's Limited
Partnership dated January 1, 1993
<PAGE>
<PAGE>150
(jj) Management Agreement by and between Exhibit 10(zzzz) to
Interstate Properties and Interstate 1992 10-K
St. Charles, Inc. (El Monte), dated
January 5, 1987
(kk) First Amendment to Management Agreement Exhibit 10(aaaaa) to
by and between Interstate Properties and 1992 10-K
Interstate Business Corporation (El Monte),
dated January 4, 1988
(ll) Second Amendment to Management Agreement Exhibit 10(bbbbb) to
by and between Interstate Properties and 1992 10-K
Interstate Business Corporation (El Monte),
dated December 31, 1992
(mm) Management Agreement by and between Exhibit 10(ccccc) to
Interstate General Properties and 1992 10-K
Interstate St. Charles, Inc. (Santa Maria
Shopping Center), dated January 5, 1987
(nn) First Amendment to Management Agreement Exhibit 10(ddddd) to
by and between Interstate General 1992 10-K
Properties Limited Partnership and
Interstate Business Corporation (Santa
Maria Shopping Center), dated
January 4, 1988
(oo) Second Amendment to Management Agreement Exhibit 10(eeeee) to
by and between Interstate General 1992 10-K
Properties Limited Partnership S.E. and
Interstate Business Corporation and
Santa Maria Associates S.E., dated
December 28, 1990
(pp) Two (2) Property management agreements Exhibit 10(aa) to Form S-1
between Interstate General Properties
Limited Partnership and Capitol Park
Associates as amended December 31, 1984
(qq) Lease for office space between Interstate Exhibit 10(r) to Form S-1
General Business Corporation and
Smallwood Village Associates Limited
Partnership dated May 21, 1981
(rr) Lease for office space between Interstate Exhibit 10(m) to Form S-1
General Business Corporation and
Smallwood Village Associates Limited
Partnership dated June 15, 1981
(ss) Store Lease between Interstate General Exhibit 10(fff) to
Business Corporation and Smallwood 1991 10-K
Village Associates Limited Partnership
dated April 1, 1988
(tt) Fourth Amendment to Interstate General Exhibit 10(yyyy) to
Company L.P. Retirement Plan, dated 1992 10-K
July 1, 1992
<PAGE>151
(uu) Agreement Regarding Partnership Interest Exhibit 10(nn) to Form S-1
in Chastleton Apartment Associates
dated January, 1987
(vv) Stockholders Agreement among Interstate Exhibit 10(pp) to Form S-1
and certain stockholders of Interstate
St. Charles, Inc. dated as of
December 1, 1986
(ww) License Agreement between Interstate Exhibit 10(qq) to Form S-1
General Company L.P., Interstate
General Business Corporation and
Interstate St. Charles, Inc., dated
as of December 31, 1986
(xx) Amendment to License Agreement between Exhibit 10(rr) to Form S-1
Interstate General Company L.P.,
Interstate General Business Corporation
and Interstate General Company L.P.,
dated as of February 9, 1987
(yy) Unitholders Agreement among Interstate Exhibit 10(ss) to Form S-1
General Business Corporation, Interstate
St. Charles, Inc., and Interstate
Properties Trust dated as of
February 9, 1987
(zz) Agreement dated March 15, 1990 among Exhibit 10(ddd) to
Interstate General Company L.P., 1990 10-K
Interstate Business Corporation and
Interstate General Properties
(aaa) Management service agreement between Exhibit 10(ee) to Form S-1
Interstate General Business Corporation Amendment Exhibit 10(ee)
and Chastleton Apartments Associates to 1989 10-K
as amended February 26, 1987
(bbb) Amendment to February 26, 1987 Exhibit 10(bbb) to
Management Service Agreement between 1993 10-K
Interstate General Business Corporation
and Chastleton Apartment Associates
dated January 1, 1993
(ccc) Property management agreement between Exhibit 10(z) to Form S-1
Interstate General Properties Limited Amendment Exhibit 10(z) to
Partnership and G.L. Limited Partnership 1989 10-K
as amended September 30, 1985 and as
amended March 1, 1989
(ddd) Amendment to Property Management Exhibit 10(ddd) to
Agreement between Interstate General 1993 10-K
Properties Limited Partnership and
G. L. Limited Partnership dated
January 1, 1993
<PAGE>
<PAGE>152
(eee) Second Amendment and Restatement of Exhibit 10(eee) to
Purchase Agreement by and between Land 1993 10-K
Development Associates S.E. and Wal-Mart
Puerto Rico, Inc., dated November 30, 1993
(fff) Sale and Purchase Agreement between Exhibit 10(hhhhh) to
Interstate General Company L.P. and 1992 10-K
K. Hovnanian at Montclair, Inc., dated
September 30, 1992
(ggg) First Amendment to Sale and Purchase Exhibit 10(ggg) to
Agreement by and between Interstate 1993 10-K
General Company L.P. and K. Hovnanian
at Montclair, Inc., dated
October 16, 1992
(hhh) Second Amendment to Sale and Purchase Filed herewith
Agreement by and between Interstate
General Company L.P. and K. Hovnanian
at Montclair, Inc., dated
August 18, 1994
(iii) Third Amendment to Sale and Purchase Filed herewith
Agreement by and between Interstate
General Company L.P. and K. Hovnanian
at Montclair, Inc., dated
December 16, 1994
(jjj) Amended and Restated Lease Agreement Exhibit 10.8 to the
between Housing Development Associates Registration Statement on
S.E. and El Comandante Operating Company, S-4 of El Comandante
dated December 15, 1993 Capital Corp. and Housing
Development Associates
S.E. Registration
# 33-75284 (the "S-4")
(kkk) Third Amended and Restated Partnership Exhibit 3.3 to the S-4
Agreement for Housing Development
Associates, S.E. dated December 15, 1993
(lll) Fourth Amended and Restated Partnership Exhibit 10(b) to Form 10-Q
Agreement of Housing Development for the quarter ended
Associates, S.E. dated July 21, 1994 June 30, 1994
(mmm) Fifth Amended and Restated Partnership Exhibit 10(c) to Form 10-Q
Agreement of Housing Development for the quarter ended
Associates, S.E. dated August 1, 1994 June 30, 1994
(nnn) Sixth Amended and Restated Partnership Exhibit 2.2 to the Report
Agreement of Housing Development on Form 8-K of Equus
Associates, S.E. dated March 8, 1995 Gaming Company L.P. dated
March 23, 1995,
File No. 000-25306
(the "Equus 8-K")
(ooo) Conversion Agreement dated February 3, Exhibit 2.3 to the
1995 and First Amendment thereto dated Equus 8-K
March 6, 1995
<PAGE>153
(ppp) Indenture dated December 15, 1993 among Exhibit 4.1 to the S-4
El Comandante Corp., Housing Development
Associates S.E. and Banco Popular De
Puerto Rico
(qqq) Warrant Agreement between HDA Management Exhibit 10.3 to the S-4
Corporation, Housing Development
Associates S.E. and Banco Popular De
Puerto Rico as Warrant Agent dated
December 15, 1993
(rrr) Limited Partnership Agreement of Equus Exhibit 10(d) to Form 10-Q
Gaming Company L.P. dated August 1, 1994 for the quarter ended
June 30, 1994
(sss) First Amendment to the Limited Exhibit 10(e) to Form 10-Q
Partnership Agreement of Equus Gaming for the quarter ended
Company L.P. dated August 1, 1994 June 30, 1994
(ttt) Second Amendment to the Limited Exhibit 10(f) to Form 10-Q
Partnership Agreement of Equus Gaming for the quarter ended
Company L.P. dated August 1, 1994 June 30, 1994
(uuu) Third Amendment to the Limited Exhibit 3.4 to
Partnership Agreement of Equus Gaming to Registration Statement
Company L.P. on Form S-11 of Equus
Gaming Company L.P.
Registration # 33-82750
(the "Equus S-11")
(vvv) Amended and Restated Distribution Exhibit 2.1 to the Equus
Agreement dated November 22, 1994, S-11
between Equus Gaming Company L.P.
(the "Company") and Interstate General
Company L.P. ("IGC")
(www) Registration Rights Agreement with Exhibit 10.4 to the S-4
respect to the Warrants dated
December 15, 1993, among HDAMC, HDA,
Oppenheimer & Co., Inc. and The
Argosy Securities Group L.P.
(xxx) Amended and Restated Management Exhibit 10.6 to the S-4
Agreement dated December 15, 1993,
between Interstate General Properties
Limited Partnership S.E. ("IGP") and
HDA
(yyy) Master Support and Services Agreement Exhibit 10.20 to the
dated December 9, 1994, between IGC Equus S-11
and Equus Gaming Company L.P.
(zzz) Consulting Agreement dated December 15, Exhibit 10.21 to the
1993, between El Comandate Operating Equus S-11
Company and Interstate General
Properties Limited Partnership
<PAGE>
<PAGE>154
(aaaa) First Supplemental Indenture dated Exhibit 10.27 to the
December 22, 1994, to the Indenture Equus S-11
dated December 15, 1993 among El
Comandante Corp., Housing Development
Associates S.E. and Banco Popular de
Puerto Rico
(bbbb) Second Supplemental Indenture dated Exhibit 10.28 to the
December 22, 1994, to the Indenture Equus S-11
dated December 15, 1993 among El
Comandante Corp., Housing Development
Associates S.E. and Banco Popular de
Puerto Rico
(cccc) Amended and Restated Registration Rights Exhibit 10.29 to the
Agreement with Respect to the Warrants Equus S-11
dated December 12, 1994, among HDAMC,
HDA, Oppenheimer & Co., Inc., the
Argosy Securities Group L.P. and Equus
Gaming Company L.P.
(dddd) Agreement of Purchase and Sale between Filed herewith
Interstate General Company L.P. and
Interstate Business Corporation dated
December 30, 1994 for the Partnership
Interests in:
New Forest Apartments General Partnership
Headen House Associates Limited Partnership
Fox Chase Apartments General Partnership
Palmer Apartments Associates
Wakefield Terrace Associates
Wakefield Third Age Associates
(eeee) Employment Agreement for Donald Drew Filed herewith
dated December 14, 1993
21. List of Subsidiaries of Interstate Filed herewith
General Company L.P.
27. Financial Data Schedule Filed herewith
<PAGE>1
EXHIBIT 10(d)
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement (the "Amendment") is
made and entered into this 16th day of March, 1995 by and between Interstate
General Company L.P., a Delaware limited partnership (the "Company") and
Gregory G. Kreizenbeck (the "President/COO").
WHEREAS, the Company and the President/COO entered into an employment
agreement dated as of March 1, 1994 (the "Agreement") which sets forth the
terms of the President/COO's employment including his duties, responsibilities
and authority; and
WHEREAS, the Company wishes the President/COO to assume, and the
President/COO is willing to assume, certain additional duties, responsibilities
and authority; and
WHEREAS, the parties wish to amend the Agreement to reflect the
President/COO's assumption of such duties, responsibilities and authority;
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
1. Definitions. All capitalized terms used, but not defined,
herein shall have the same meanings as set forth in the Agreement.
2. Amended Delegation of Authority. The Delegation of Authority
incorporated into the Agreement by Section I thereof is hereby amended by
adding thereto the Supplemental Delegation of Authority attached hereto as
Exhibit A.
3. Amended Job Description. The Job Description incorporated into
the Agreement by Section V thereof is hereby amended by adding thereto the
Supplemental Job Description attached hereto as Exhibit B.
4. New Title. The President/COO's title is hereby revised from
"President and Chief Operating Officer - Real Estate Group" to "President and
Chief Operating Officer."
5. Effect of Amendment. Except as amended hereby, the terms and
provisions of the Agreement remain in full force and effect; provided that the
provisions of this Amendment shall supersede any conflicting provisions of the
Agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the day and year first set forth above, and the parties represent that they
have the capacity and authorization, whether it be personal or by the Board of
Directors, to execute this Amendment.
<PAGE>
<PAGE>2
INTERSTATE GENERAL COMPANY L.P.
By: Interstate General Management Corporation
Its Managing General Partner
By: /s/ James J. Wilson
_____________________________________
James J. Wilson
President
/s/ Gregory G. Kreizenbeck
___________________________________________
Gregory G. Kreizenbeck
<PAGE>
<PAGE>3
Exhibit A
INTERSTATE GENERAL COMPANY L.P.
Supplemental Delegation of Authority to
The President and Chief Operating Officer
1. General Expenditure Authority With Respect To Supplemental Job
Description. The President/COO may authorize the expenditure of any Company
funds determined by the President/COO to be necessary or appropriate in
connection with the performance of the duties and responsibilities set forth in
the Supplemental Job Description, provided that any single unbudgeted
expenditure in excess of $100,000, or aggregate unbudgeted expenditures in
excess of $250,000 per year must be approved by the CEO or the Board of
Directors.
2. General Personnel Authority With Respect To Supplemental Job
Description. The President/COO may direct, or delegate authority to, any
Company personnel under his direct or indirect supervision to perform services
determined by the President/COO to be necessary or appropriate to fulfill the
duties and responsibilities set forth in the Supplemental Job Description;
provided that such authority is limited to the extent that any employment
agreement between the Company and an employee limits the scope of such
employee's obligation to the Company, and, provided further, that any such
direction that will result in a significant alteration of duties of any officer
of the Company shall be subject to approval of the CEO and the Board of
Directors.
3. Specific Personnel Authority With Respect To Supplemental Job
Description. The President/COO shall have the authority to recommend to the
Board of Directors any changes in the terms or conditions of employment of the
employees of the Company assigned as consultants to El Comandante Operating
Company, Inc. and of the President of S&E Network Inc. including any changes to
any employment contracts, compensation arrangements, duties, authority, or
tenure.
4. Consultants. Subject to the expenditure limits set forth in
Section 1 above, the President/COO may authorize the retention of consultants
and professional advisors approved by the CEO to assist in performing the
duties and responsibilities set forth in the Supplemental Job Description.
<PAGE>
<PAGE>4
Exhibit B
INTERSTATE GENERAL COMPANY L.P.
Supplemental Job Description
President and Chief Operating Officer
1. Budgeting and Planning of Certain Operations
The President/COO shall oversee development of annual capital expenditure
and operating budgets and annual operating plans of Housing Development
Associates S.E. and its controlled subsidiaries (collectively "HDA") to
ensure that such budgets and plans are developed in a professional manner
consistent with budgets and plans of the Company's Real Estate Group. The
President/COO shall review and make recommendations to the CEO regarding
any proposed extraordinary transactions, expenditures or activities not
contemplated by such annual budgets or plans.
2. Supervision of Certain Personnel
The President/COO shall directly supervise and evaluate the performance of
the Company's employees assigned as consultants to El Comandante Operating
Company, Inc. ("ECOC"). Jointly with the Board of Directors of S&E
Network Inc. ("S&E"), the President/COO shall directly supervise and
evaluate the performance of the President of S&E. Supervision and
evaluation of the foregoing personnel shall include monitoring their
compliance with and completion of their respective businesses' budgets and
plans, including the budgets and plans described in Section 1 above.
3. Management Organization
The President/COO shall review periodically the management organization of
S&E to evaluate the capacity of the organization to manage S&E's business
in a manner consistent with business plan objectives. The President/COO
shall report any recommended changes in such organization to the CEO.
4. Administrative Oversight of Services Provided by the
Company to Equus Gaming Company L.P.
The President/COO shall coordinate the Company's performance of
administrative services to Equus Gaming Company L.P. ("Equus") including,
as appropriate (i) directing the Chief Financial Officer of the Company to
establish and maintain proper accounting systems for Equus and to prepare
records documenting the cost of services provided by the Company to Equus,
(ii) assessing the Company's personnel and information system needs with
respect to the performance of such services and recommending appropriate
changes, if any, to the CEO and Board of Directors, and (iii) directing
appropriate Company personnel to prepare, file and distribute, as
appropriate, all reports, tax returns, statements or submissions required
by Equus in connection with any governmental reporting obligations.
<PAGE>1
EXHIBIT 10(i)
INTERSTATE GENERAL COMPANY L.P.
DIRECTORS' UNIT INCENTIVE PLAN
1. Purpose
The purpose of this Directors' Unit Incentive Plan (the "Plan"), which is
an amendment and restatement of the Interstate General Company L.P. Directors'
Unit Option Plan, is to promote the growth and general prosperity of Interstate
General Company L.P., a Delaware limited partnership (the "Partnership"), by
permitting the Partnership, by grant of Awards to acquire proprietary interests
therein, to attract and retain the best available personnel to serve as outside
directors of Interstate General Management Corporation ("IGMC"), a Delaware
corporation that serves as the managing general partner of the Partnership, and
to provide certain outside directors of IGMC with an additional incentive to
contribute to the success of the Partnership.
2. Definitions
In this Plan document, unless the context clearly indicates otherwise,
words in the masculine gender shall be deemed to refer to females as well as
males, any term in the singular also shall refer to the plural, and the
following capitalized terms shall have the following meanings set forth in this
Section 2:
(a) "Affiliate" means, with respect to a designated person, (i) any
person directly or indirectly controlling, controlled by, or under
common control with the designated person; (ii) any person directly
or indirectly owning, controlling, or holding power to vote ten
percent (10%) or more of the outstanding voting securities of the
designated person; (iii) any officer, director, partner, or trustee
of the designated person or of any entity controlling the designated
person; and (iv) if the designated person is an officer, director,
partner, or trustee, any entity for which such person acts in any
such capacity. As used in this definition of "Affiliate," the term
"control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by
contract, or otherwise, and the term "voting securities" includes,
without limitation, limited partnership interests in any partnership.
(b) "Agreement" means an agreement entered into between the Partnership
and a Grantee, setting forth the terms and conditions applicable to
the Award granted to the Grantee.
(c) "Award" means an Option (including an Option granted under the
Directors' Unit Option Plan), a Right, or an award of a type
authorized by Section 9 hereof.
(d) "Committee" means the board of directors of IGMC, not including
directors who are eligible to participate in the Plan.
<PAGE>2
(e) "Director" means a director of IGMC, who is not (i) an Affiliate of
Interstate Business Corporation, a Delaware corporation, or (ii) a
present officer or employee of (A) the Partnership, (B) any general
partner of the Partnership, or (C) any Affiliate of the Partnership
or of a general partner of the Partnership.
(f) "Exercise Date" means a date on which some or all of the Units
subject to an Exercise Date Unit Option may be purchased.
(g) "Exercise Date Unit Option" means an Option that, pursuant to Section
7(d) hereof, is exercisable only on specified Exercise Dates.
(h) "General Unit Option" means an Option with respect to which available
Installments are, pursuant to Section 7(c) hereof, exercisable at any
time and from time to time.
(i) "Grantee" means an individual to whom an Award is granted under the
Plan.
(j) "Installment" means the portion of the total number of Units subject
to an Option that the Grantee may purchase during each of the several
periods of the term of a General Unit Option or on each of the
Exercise Dates of an Exercise Date Unit Option.
(k) "Legal Representative" means the executor, administrator, guardian or
other legal representative of a Grantee who dies or becomes
incapacitated.
(l) "Option" means a right granted under the Plan to purchase Units.
Unless the context clearly indicates otherwise, the term "Option"
shall include both Exercise Date Unit Options and General Unit
Options.
(m) "Partnership Agreement" means the Third Amended and Restated Limited
Partnership Agreement of Interstate General Company L.P., dated as of
February 6, 1987, as amended.
(n) "Plan" means the Interstate General Company L.P. Directors' Unit
Incentive Plan, as amended and restated, as set forth herein and as
amended from time to time.
(o) "Right" means a right granted under the Plan to receive payment in
accordance with Section 8 hereof.
(p) "Unit" means a "Class A Unit," as that term is defined in the Third
Amended and Restated Limited Partnership Agreement of Interstate
General Company L.P., as amended.
3. Administration
The Plan shall be administered by the Committee. Subject to the
provisions of the Plan, the Committee shall have sole authority, in its
absolute discretion, to determine which eligible Directors shall receive
Awards, the time when Awards shall be granted, the type of each Award, the
terms of such Awards (which may differ from one another), the number of Units
subject to each Award and the exercise price or purchase price (if any) of each
Award per Unit (which may be less than, equal to, or greater than the fair
market value of a Unit on the date of grant), and shall have authority to do
<PAGE>3
everything necessary or appropriate to administer the Plan including, without
limitation, interpreting the Plan. All decisions, determinations, and
interpretations of the Committee shall be final and binding for all purposes
and upon all persons. Any action that the Committee may take through a written
instrument signed by all of its members then in office shall be as effective as
though taken at a meeting duly called and held.
4. Eligibility
The Committee may grant Awards to any Director. All determinations by the
Committee as to the identity of the persons to whom Awards may be granted
hereunder shall be conclusive. An individual Grantee may receive more than one
Award.
5. Units Subject to the Plan
(a) Subject to the provisions of subsection (b), below, the Partnership
may grant Awards under the Plan, as amended and restated, with
respect to not more than the least of the following number of Units:
(i) the remaining number of Units with respect to which additional
Options were authorized to be granted under the Directors' Unit
Option Plan immediately prior to its amendment and restatement as the
Directors' Unit Incentive Plan (subject to adjustment as provided in
Section 15 hereof); (ii) the number of Units authorized under the
Partnership Agreement; or (iii) the number of Units specified by any
other limit upon the issuance of Units as compensation imposed by the
rules of any securities exchange on which Units are listed.
(b) If an Award (including an Option granted under the Directors' Unit
Option Plan) is cancelled, surrendered, lapses, or is terminated, in
whole or in part, without being exercised, for any reason other than
the exercise of a related Award or of another portion of the Award,
in such manner that all or some of the Units subject to the Award are
not issued to a Grantee (and cash, Units, or any other form of
payment is not paid in lieu thereof), the Units subject to the Award
shall be restored to the aggregate maximum number of Units (specified
in subsection (a), above) with respect to which Awards may be granted
under the Plan.
6. Term
This amendment and restatement of the Plan shall become effective as of
March 16, 1995. It shall continue in effect for the remainder of the term of
ten (10) years from the date of the adoption of the Directors' Unit Option Plan
by the Partnership, unless it is sooner terminated in accordance with Section
13 hereof. Awards may be granted at any time prior to the earlier of the
expiration of the ten-year term of the Plan, as described above, or the
termination of the Plan pursuant to Section 13 hereof.
<PAGE>
<PAGE>4
7. Options
(a) Duration of Option
No Option shall be exercisable before the expiration of six (6)
months from the date it was granted or such longer period as the
Committee may establish as to any and all Units subject to any
Option. No Option shall be exercisable after the expiration of ten
(10) years from the date it is granted or such shorter period as the
Committee may establish as to any and all Units subject to any
Option.
(b) Exercise of Option
(i) The Units subject to an Option shall be exercisable in
Installments, as may be determined by the Committee.
(ii) In the event that the Partnership or the partners of the
Partnership enter into an agreement to dispose of all or
substantially all of the assets of the Partnership, or the
interests therein, by means of a sale, a reorganization, a
liquidation, or otherwise, an Option shall become immediately
exercisable with respect to the full number of Units subject to
that Option, notwithstanding any other provision of the Plan,
during the period commencing as of the date of such agreement
and ending immediately prior to the closing contemplated by the
agreement or when the agreement is terminated, and, notwith-
standing any other provision of the Plan, all Options shall
terminate and cease to be exercisable from and after such
closing.
(iii) An Option shall be exercised when written notice of such
exercise has been given to the Partnership at its principal
business office by the person entitled to exercise the
Option and full payment for the Units with respect to which
the Option is exercised has been received by the
Partnership.
(c) General Unit Options
(i) The Committee may grant General Unit Options with respect to
which the Grantee may purchase an available Installment or any
portion thereof at any time and from time to time. Installments
or portions thereof not purchased in earlier periods shall
accumulate and shall be available for purchase in later periods
within the term of the Option.
(ii) If the Grantee dies or becomes incapacitated while a director of
IGMC, the Grantee's Legal Representatives shall have the right
to exercise, to the extent the Option was exercisable on the
date that the Grantee died or became incapacitated, a General
Unit Option for six (6) months after such date as the
Partnership shall have notified the Grantee's Legal
Representatives of their right (if any) to exercise the Option,
or such shorter period as the Committee may establish.
<PAGE>
<PAGE>5
(iii) If the Grantee ceases to be a director of IGMC for any
reason other than death or incapacity, the Grantee shall
have the right to exercise, to the extent the Option was
exercisable on the date that the Grantee ceased to be a
director of IGMC, a General Unit Option for thirty (30)
days after such date, or such shorter period as the
Committee may establish.
(iv) Notwithstanding any other provision of this subsection (c), in
no event shall any General Unit Option be exercisable after the
expiration of ten (10) years from the date that the Option was
granted.
(d) Exercise Date Unit Options
(i) The Committee may grant Exercise Date Unit Options, which are
exercisable only on Exercise Dates designated by the Committee.
The Committee shall designate Exercise Dates at the time of the
grant of an Exercise Date Unit Option and may designate
additional Exercise Dates at any time and from time to time.
The Grantee may purchase less than the full Installment
available under the Option on any Exercise Date. Installments
or portions thereof not purchased on earlier Exercise Dates
shall accumulate and shall be available for purchase on later
Exercise Dates within the term of the Option.
(ii) If the Grantee ceases to be a director of IGMC for any reason
other than death or incapacity, an Exercise Date Unit Option may
be exercised, to the extent the Option could be exercised on the
last Exercise Date on which the Grantee was a director of IGMC.
The Option may not be exercised on any other Exercise Date. For
example, assume that the Committee has designated July 1, 1993,
and August 1, 1994, as Exercise Dates with respect to an
Exercise Date Unit Option granted to a Grantee. Assume further
that the Grantee ceases to be a director of IGMC on September
30, 1993, that he had had the right to exercise the Option with
respect to 2,000 Units on July 1, 1993, and that he had not
exercised his Option on that date. Then such Grantee may
exercise the Option with respect to these 2,000 Units on
August 1, 1994.
(iii) If the Grantee dies or becomes incapacitated, while a
director of IGMC, his Legal Representatives shall have the
right to elect to exercise his Option, to the extent the
Option would have been exercisable on the Exercise Date
immediately subsequent to the termination of his status as
a director of IGMC, for a period of ninety (90) days
following the delivery of notice by the Partnership to the
Legal Representatives. In the event that the Grantee's
Legal Representatives elect pursuant to the preceding
sentence to exercise the Grantee's Option, the Option shall
be deemed exercised on the Exercise Date next following the
date of the election.
<PAGE>
<PAGE>6
(iv) Notwithstanding any other provision of this Plan, an Exercise
Date Unit Option shall not be exercisable after the earliest of
(1) the expiration of ten (10) years from the date the Option
was granted, (2) the final Exercise Date with respect to the
Option, (3) six (6) months after the Grantee ceases to serve as
a director of IGMC, or (4) such shorter period as the Committee
may have established.
8. Rights
(a) General
The Committee shall have authority, in its sole discretion, to
provide for the grant of Rights either (i) in tandem with all or a
portion of an Option granted under the Plan or (ii) independent of
any Option granted under the Plan. A Right shall permit the Grantee
to receive, upon exercise of the Right, an amount (to be paid in
cash, in Units, in property or in any combination thereof, as
specified in the Agreement or, if not, as determined by the Committee
in its sole discretion at any time prior to or after exercise) equal
in value to the excess of (i) the fair market value of the Units with
respect to which the Right is exercised on the date of exercise,
determined as specified in the Agreement, over (ii) either (A) the
Option price of the related Option in the case of a tandem Right, or
(B) the base price specified in the Agreement in the case of an
independent Right, whichever is applicable. A tandem Right shall be
exercisable only at such times, and to such extent, as the related
Option is exercisable. An independent Right shall be exercisable at
such time and to such extent as the Committee shall determine. A
tandem Right may be granted coincident with or after the grant of any
related Option.
(b) Exercise of Rights
(i) With respect to Rights, the Committee may establish such waiting
periods, exercise dates and other limitations (including
restrictions on any Units received upon the exercise of a Right)
as it shall deem appropriate in its sole discretion. Unless the
Committee provides otherwise, a Right shall remain exercisable,
to the extent the Right was exercisable on the date the Grantee
ceased to be a director of IGMC (1) for six (6) months after the
Partnership delivers notice to the Grantee's Legal
Representative, if the Grantee ceased to be a director of IGMC
due to death or incapacity or (2) for thirty (30) days after the
Grantee ceased to be a director if the cessation was due to any
other reason.
(ii) A Right shall be exercised when written notice of such exercise
has been given to the Partnership at its principal business
office by the person entitled to exercise the Right.
(iii) The right of a Grantee to exercise a tandem Right shall be
canceled if and to the extent that the Units subject to the
Right are purchased upon the exercise of the related
Option, and the right of a Grantee to exercise an Option
shall be canceled if and to the extent that the Units
subject to the Option are used to calculate the amount to
be received upon the exercise of a tandem Right.
<PAGE>7
(iv) Until the issuance of Unit certificates therefor, if any, no
right to direct the vote or receive distributions or any other
rights as a unitholder shall exist with respect to Units subject
to the Right notwithstanding the exercise of a Right. No
adjustment shall be made for distribution or other rights for
which the record date is prior to the date a Unit certificate is
issued except as provided in Section 14 hereof.
9. Other Unit-Based Awards
The Committee may, from time to time, grant Awards (in addition to Options
and Rights) under the Plan that consist of, are denominated in or payable in,
are valued in whole or in part by reference to, or otherwise are based on or
related to, Units, provided that such grants comply with applicable law. The
Committee may subject such Awards to such vesting or earnout provisions,
restrictions on transfer, and/or other restrictions on incidents of ownership
as the Committee may determine, provided that such restrictions are not
inconsistent with the terms of the Plan. The Committee may grant Awards under
this Section 9 that require no payment of consideration by the Grantee (other
than services previously rendered or, as may be permitted by applicable law,
services to be rendered), either on the date of grant or the date any
restriction(s) thereon are removed. Awards granted under this Section 9 may
include, by way of example, restricted Units, phantom Units, performance Units,
performance bonus awards, and other awards that are payable in cash, or that
are payable in cash or Units or other property (at the election of the
Committee or, if the Committee so provides, at the election of the Grantee),
provided that such Awards are denominated in Units, valued in whole or in part
by reference to Units, or otherwise based on or related to Units.
10. Tax Withholding
The Partnership shall have the right to collect an amount sufficient to
satisfy any federal, state, Puerto Rico and/or local withholding tax
requirements that may apply with respect to any Award granted to a Grantee.
The Partnership shall have the right to require Grantees to remit to the
Partnership an amount sufficient to satisfy any such withholding tax
requirements. The Partnership also shall, to the extent permitted by law, have
the right to deduct from any payment of any kind (whether or not related to the
Plan) otherwise due to a Grantee any such taxes required to be withheld.
11. Nonassignability
An Award may be exercised only by the Grantee and an Award may not be
assignable or transferable by him other than by will or the laws of descent and
distribution.
12. Cancellation and Reissuance
The Committee, at any time and from time to time, in its discretion, may
offer Grantees the opportunity to elect to surrender, or to have the
Partnership cancel and terminate, any outstanding Award (or any portion
thereof), and may grant in substitution for the cancelled and terminated Award
(or portion thereof) a new Award under the Plan. The type, the terms and
magnitude of the new Award may be similar to or different from the original
Award.
<PAGE>
<PAGE>8
13. Amendment or Termination of the Plan
(a) Amendment
The Partnership, acting through IGMC, may amend the Plan from time to
time in such respects as the Partnership, acting through IGMC, may
deem advisable. Any such amendment shall apply to any outstanding
Awards that were granted before the date such amendment is adopted,
provided that no such amendment shall adversely affect any right
acquired by any Grantee, under the terms of any Award granted before
the date of such amendment, unless such Grantee shall consent; but it
shall be conclusively presumed that any adjustment for changes in
capitalization in accordance with Section 14 hereof shall not
adversely affect such right. No such amendment shall affect any
Award that has been exercised or earned before the date such
amendment is adopted.
(b) Termination
The Partnership, acting through IGMC, may at any time terminate the
Plan. Any such termination of the Plan shall not affect Awards
previously granted and such Awards shall remain in full force and
effect as if the Plan had not been terminated.
14. Adjustments Upon Changes in Capitalization
In the event of any Unit distribution, split-up, recapitalization,
combination, exchange of interests in the Partnership or any other entity,
merger, consolidation, acquisition of property, separation,
reorganization, or liquidation, as a result of which interests of any
class in the Partnership or any other entity shall be issued in respect of
outstanding Units, or if Units shall be changed into the same or a
different number of the same or another class or classes of interests in
the Partnership or any other entity ("interests") prior to a distribution
to a Grantee under an Award, the Committee shall adjust, as it deems
equitable in its sole and absolute discretion, the aggregate number and
type of Units (or other interests) available for Awards under Section 5,
the number of Units or interests (or, if applicable, the amount of cash or
other property) to be distributed to the Grantee and/or the exercise price
or purchase price of Units subject to an Award, to avoid any significant
dilution or enlargement of the benefits intended to be made available
under the Plan.
15. Agreement and Representations of Grantee
(a) As a condition to receiving Units under the Plan, the Partnership may
require the person receiving such Units to represent and warrant at
that time that the Units are being acquired only for investment and
without any present intention to sell or distribute such Units. The
Units shall not be offered, sold, transferred, or otherwise disposed
of in the absence of registration, or the availability of an exemp-
tion from registration, under the Securities Act of 1933. No such
offer, sale, transfer, or other disposition may be made without the
prior written opinion of counsel for the Partnership that such offer,
sale, transfer, or other disposition will not violate the Securities
Act of 1933 or other applicable securities law, rule, or regulation
of any jurisdiction. The foregoing restriction may be indicated by
legend on the Unit certificates representing such Units.
<PAGE>9
(b) Any Units received under the Plan shall be subject to such
restrictions as may be contained in any agreement previously entered
into by the Partnership with respect to Units and applicable to such
Units. The foregoing restrictions, if any, shall be indicated by
legend on the Unit certificates representing such Units.
(c) IGMC shall execute and deliver to each Grantee a written Agreement
that shall contain such provisions as the Committee in each instance
shall deem appropriate and not inconsistent with any of the
provisions of the Plan.
(d) The initial "Capital Account" (as defined in the Partnership
Agreement) of each Grantee shall be established in accordance with
the second paragraph of the definition of "Capital Account" set forth
in the Partnership Agreement.
16. Reservation of Units
The Partnership, during the term of this Plan, shall at all times reserve
and keep available, and shall seek or obtain from any regulatory body having
jurisdiction any requisite authority in order to issue and sell, such number of
Units as shall be sufficient to satisfy the requirements of the Plan.
Inability of the Partnership to obtain from any regulatory body having
jurisdiction the authority deemed by the Partnership's counsel to be necessary
for the lawful issuance and sale of any Units hereunder shall relieve the
Partnership of any liability in respect of the non-issuance or sale of such
Units as to which such requisite authority shall not have been obtained.
17. Use of Funds
The proceeds of the sale of Units, whether newly issued or previously
acquired, shall be added to and administered as a part of the general assets of
the Partnership.
18. Notice
All notices delivered pursuant to the Plan shall be in writing, delivered
by hand, by facsimile or by first class certified mail, return receipt
requested, postage prepaid. If notice is delivered to the Partnership, it
shall be delivered to the Partnership, in care of the President of IGMC, at the
Partnership's principal place of business. If notice is delivered to the
Grantee, it shall be delivered at the most recent address of Grantee shown on
the records of the Partnership. The Partnership and/or the Grantee may change
by notice (delivered in accordance with this Section 18) the address for
delivery set forth in this Section 18. The date of notice for all purposes
under the Plan shall be the date of delivery of the notice. As soon as
practicable after the Partnership has learned of the death or incapacity of a
Grantee and the identity of the Grantee's Legal Representatives, the
Partnership shall notify, in accordance with this Section 18, the Legal
Representatives of their right (if any) to exercise any Award granted
hereunder, provided that notice to any of Grantee's Legal Representatives shall
be deemed to be notice to all of Grantee's Legal Representatives.
<PAGE>
<PAGE>10
19. Unitholder Rights
Until the issuance of Unit certificates therefor, no right to direct the
vote or receive distributions or any other rights as a unitholder shall exist
with respect to any Units subject to an Award even if the Grantee has exercised
the Award. No adjustment shall be made for distribution or other rights for
which the record date is prior to the date a Unit certificate is issued except
as provided in Section 14 hereof.
20. Governing Law
The Plan shall be construed and its provisions enforced and administered
in accordance with the laws of the State of Delaware except to the extent that
such laws may be preempted by any Federal law.
<PAGE>1
EXHIBIT 10(j)
INTERSTATE GENERAL COMPANY L.P.
EMPLOYEES' UNIT INCENTIVE PLAN
1. Purpose
The purpose of this Employees' Unit Incentive Plan, which is an
amendment and restatement of the Interstate General Company L.P. Employees Unit
Option Plan, is to promote the growth and general prosperity of Interstate
General Company L.P., a Delaware limited partnership (the "Partnership"), by
permitting the Partnership, by grant of Awards to acquire proprietary interests
therein, to attract and retain the best available personnel for the Partnership
and its Affiliates for positions of substantial responsibility and to provide
certain key employees with an additional incentive to contribute to the success
of the Partnership and its Affiliates.
2. Definitions
In this Plan document, unless the context clearly indicates
otherwise, words in the masculine gender shall be deemed to refer to females as
well as males, any term in the singular also shall refer to the plural, and the
following capitalized terms shall have the following meanings set forth in this
Section 2:
(a) "Affiliate" means, with respect to a designated person, any other
person controlled by the designated person. As used in this
definition of "Affiliate," "control" of a person means the ownership,
directly or indirectly, of fifty percent (50%) or more of the voting
securities or general partnership interests of the person or fifty
percent (50%) or more of the value of the equity interests in the
person.
(b) "Agreement" means an agreement entered into between the Partnership
and a Grantee, setting forth the terms and conditions applicable to
the Award granted to the Grantee.
(c) "Award" means an Option (including an Option granted under the
Employee's Unit Option Plan), a Right, or an award of a type
authorized by Section 9 hereof.
(d) "Committee" means the board of directors of Interstate General
Management Corporation ("IGMC"), a Delaware corporation, not
including directors who are eligible to participate in the Plan.
(e) "Employee" means an employee of the Partnership or an Affiliate of
the Partnership.
(f) "Exercise Date" means a date on which some or all of the Units
subject to an Exercise Date Unit Option may be purchased.
(g) "Exercise Date Unit Option" means an Option that, pursuant to Section
7(d) hereof is exercisable only on specified Exercise Dates.
<PAGE>2
(h) "General Unit Option" means an Option with respect to which available
Installments are, pursuant to Section 7(c) hereof, exercisable at any
time and from time to time.
(i) "Grantee" means an individual to whom an Award is granted under the
Plan.
(j) "Installment" means the portion of the total number of Units subject
to an Option that the Grantee may purchase during each of the several
periods of the term of a General Unit Option or on each of the
Exercise Dates of an Exercise Date Unit Option.
(k) "Legal Representative" means the executor, administrator, guardian or
other legal representative of a Grantee who dies or becomes
incapacitated.
(l) "Option" means a right granted under the Plan to purchase Units.
Unless the context clearly indicates otherwise, the term "Option"
shall include both Exercise Date Unit Options and General Unit
Options.
(m) "Partnership Agreement" means the Third Amended and Restated Limited
Partnership Agreement of Interstate General Company L.P., dated as of
February 6, 1987, as amended.
(n) "Plan" means the Interstate General Company L.P. Employees' Unit
Incentive Plan, as amended and restated, as set forth herein and as
amended from time to time.
(o) "Right" means a right granted under the Plan to receive payment in
accordance with Section 8 hereof.
(p) "Unit" means a "Class A Unit," as that term is defined in the
Partnership Agreement.
3. Administration
The Plan shall be administered by the Committee. Subject to the
provisions of the Plan, the Committee shall have sole authority, in its
absolute discretion, to determine which eligible Employees shall receive
Awards, the time when Awards shall be granted, the type of each Award, the
terms of such Awards (which may differ from one another), the number of Units
subject to each Award and the exercise price or purchase price of an Award (if
any) per Unit (which may be less than, equal to, or greater than the fair
market value of a Unit on the date of grant), and shall have authority to do
everything necessary or appropriate to administer the Plan including, without
limitation, interpreting the Plan. All decisions, determinations, and
interpretations of the Committee shall be final and binding for all purposes
and upon all persons. Any action that the Committee may take through a written
instrument signed by all of its members then in office shall be as effective as
though taken at a meeting duly called and held.
4. Eligibility
The Committee may grant Awards to any key Employee, including an
Employee who is a director of the managing general partner of the Partnership
or of any Affiliate of the Partnership presently existing or hereinafter
organized or acquired. All determinations by the Committee as to the identity
<PAGE>3
of the persons to whom Awards may be granted hereunder shall be conclusive. An
individual Grantee may receive more than one Award.
5. Units Subject to the Plan
(a) Subject to the provisions of subsection (b), below, the Partnership
may grant Awards under the Plan, as amended and restated, with
respect to not more than the least of the following numbers of Units:
(i) the remaining number of Units with respect to which additional
Options were authorized to be granted under the Employees' Unit
Option Plan immediately prior to its amendment and restatement as the
Employees' Unit Incentive Plan; (ii) the number of Units authorized
under the Partnership Agreement; or (iii) the number of Units
specified by any other limit upon the issuance of Units as
compensation imposed by the rules of any securities exchange on which
Units are listed.
(b) If an Award (including an Option granted under the Employees' Unit
Option Plan) is cancelled, surrendered, lapses, or is terminated, in
whole or in part, without being exercised (if applicable), for any
reason other than the exercise of a related Award or of another
portion of the Award, in such manner that all or some of the Units
subject to the Award are not issued to a Grantee (and cash, Units, or
any other form of payment is not paid in lieu thereof), the Units
subject to the Award shall be restored to the aggregate maximum
number of Units (specified in subsection (a), above) with respect to
which Awards may be granted under the Plan.
6. Term
This amendment and restatement of the Plan shall become effective as
of March 16, 1995. It shall continue in effect for the remainder of the term
of ten (10) years from the date of the adoption of the Employees' Unit Option
Plan by the Partnership, unless it is sooner terminated in accordance with
Section 13 hereof. Awards may be granted at any time prior to the earlier of
the expiration of the ten-year term of the Plan, as described above, or the
termination of the Plan pursuant to Section 13 hereof.
7. Options
(a) Duration of Option
No Option shall be exercisable before the expiration of six (6)
months from the date it was granted or such longer period as the
Committee may establish as to any and all Units subject to any
Option. Subject to extension as provided in subsection (d)(iv),
below, no Option shall be exercisable after the expiration of ten
(10) years from the date it is granted or such shorter period as the
Committee may establish as to any and all Units subject to any
Option, and, subject to the provisions of subsections (c) and (d)
hereof, each Option shall terminate on the date on which the Grantee
ceases to be an Employee.
(b) Exercise of Option
(i) The Units subject to an Option shall be exercisable in
Installments, as may be determined by the Committee.
<PAGE>4
(ii) In the event that the Partnership or the partners of the
Partnership enter into an agreement to dispose of all or
substantially all of the assets of the Partnership, or the
interests therein, by means of a sale, a reorganization, a
liquidation, or otherwise, an Option shall become immediately
exercisable with respect to the full number of Units subject to
that Option, notwithstanding any other provision of the Plan,
during the period commencing as of the date of such agreement
and ending immediately prior to the closing contemplated by the
agreement or when the agreement is terminated, and,
notwithstanding any other provision of the Plan, all Options
shall terminate and cease to be exercisable from and after such
closing. The Partnership shall provide each Grantee with notice
of the contemplated closing promptly after the agreement to
dispose of all or substantially all of the assets of the
Partnership, or the interests therein, is reached, but in no
event less than forty-eight (48) hours prior to the closing.
(iii) An Option shall be exercised when written notice of such
exercise has been given to the Partnership at its principal
business office by the person entitled to exercise the
Option and full payment for the Units with respect to which
the Option is exercised has been received by the
Partnership.
(iv) Until the issuance of Unit certificates therefor, no right to
direct the vote or receive distributions or any other rights as
a unitholder shall exist with respect to optioned Units
notwithstanding the exercise of an Option. No adjustment shall
be made for distribution or other rights for which the record
date is prior to the date a Unit certificate is issued except as
provided in Section 14 hereof.
(c) General Unit Options
(i) The Committee may grant General Unit Options with respect to
which the Grantee may purchase an available Installment or any
portion thereof at any time and from time to time. Installments
or portions thereof not purchased in earlier periods shall
accumulate and shall be available for purchase in later periods
within the term of the Option.
(ii) If the Grantee dies or becomes incapacitated while an Employee,
the Grantee's Legal Representatives shall have the right to
exercise, to the extent the Option was exercisable on the date
that the Grantee died or became incapacitated, a General Unit
Option for six (6) months after such date as the Partnership
shall have notified the Grantee's Legal Representatives of their
right (if any) to exercise the Option, or such shorter period as
the Committee may establish. As soon as practicable after the
Partnership has learned of the death or incapacity of a Grantee
and the identity of the Grantee's Legal Representatives, the
Partnership shall notify the Legal Representatives of their
right (if any) to exercise the Option.
(iii) If the Grantee ceases to be an Employee for any reason
other than death or incapacity, the Grantee shall have the
right to exercise, to the extent the Option was exercisable
<PAGE>5
on the date the Grantee ceased to be an Employee, a General
Unit Option for thirty (30) days after such date, or such
shorter period as the Committee may establish.
(iv) Notwithstanding any other provision of this subsection (c), in
no event shall any General Unit Option be exercisable after the
term of the Option.
(d) Exercise Date Unit Options
(i) The Committee may grant Exercise Date Unit Options, which are
exercisable only on Exercise Dates designated by the Committee.
The Committee shall designate Exercise Dates at the time of the
grant of an Exercise Date Unit Option and may designate
additional Exercise Dates at any time and from time to time.
The Grantee may purchase less than the full Installment
available under the Option on any Exercise Date. Installments
or portions thereof not purchased on earlier Exercise Dates
shall accumulate and shall be available for purchase on later
Exercise Dates within the term of the Option.
(ii) If the Grantee ceases to be an Employee, for any reason other
than death or incapacity, on a day that is not an Exercise Date,
an Exercise Date Unit Option may be exercised, to the extent the
Option could be exercised on the Exercise Date immediately
preceding the termination of his status as an Employee, on the
Exercise Date immediately following the termination of his
status as an Employee. The Option may not be exercised on any
other Exercise Date. For example, assume that the Committee has
designated July 1, 1993, and August 1, 1994, as Exercise Dates
with respect to an Exercise Date Unit Option granted to a
Grantee. Assume further that the Grantee ceases to be an
Employee on September 30, 1993, he had the right to exercise the
Option with respect to 2,000 Units on July 1, 1993, and had not
exercised his Option on that date. Then such Grantee may
exercise the Option with respect to these 2,000 Units on August
1, 1994.
(iii) If the Grantee ceases to be an Employee on a day that is an
Exercise Date, an Exercise Date Unit Option may not be
exercised after the Grantee ceases to be an Employee.
(iv) If the Grantee dies or becomes incapacitated while an Employee
or while all or a portion of an Exercise Date Unit Option could
have been exercised pursuant to paragraph (ii), above, his Legal
Representatives shall have the right to elect to exercise, to
the extent the Option would have been exercisable on the
Exercise Date immediately subsequent to the Grantee's death or
incapacity, the Option on the first Exercise Date occurring
after such death or incapacity, provided that there is a Legal
Representative appointed to represent such Grantee or his estate
and if not, on the first Exercise Date thereafter on which there
is then a Legal Representative to act for such Grantee or his
estate. Provided, further, in all events such Legal
Representative shall have the right to exercise such Option for
a period of ninety (90) days following the delivery of notice by
the Partnership to the Legal Representatives.
<PAGE>6
8. Rights
(a) General
The Committee shall have authority, in its sole discretion, to
provide for the grant of Rights either (i) in tandem with all or a
portion of an Option granted under the Plan or (ii) independent of
any Option granted under the Plan. A Right shall permit the Grantee
to receive, upon exercise of the Right, an amount (to be paid in
cash, in Units in property or in any combination thereof, as
specified in the Agreement or, if not, as determined by the Committee
in its sole discretion at any time prior to or after exercise) equal
in value to the excess of (i) the fair market value of the Units with
respect to which the Right is exercised on the date of exercise,
determined as specified in the Agreement, over (ii) either (A) the
Option price of the related Option in the case of a tandem Right, or
(B) the base price specified in the Agreement in the case of an
independent Right, whichever is applicable. A tandem Right shall be
exercisable only at such times, and to such extent, as the related
Option is exercisable. An independent Right shall be exercisable at
such time and to such extent as the Committee shall determine. A
tandem Right may be granted coincident with or after the grant of any
related Option.
(b) Exercise of Rights
(i) With respect to Rights, the Committee may establish such waiting
periods, exercise dates and other limitations (including
restrictions on any Units received upon the exercise of a Right)
as it shall deem appropriate in its sole discretion.
(ii) A Right shall be exercised when written notice of such exercise
has been given to the Partnership at its principal business
office by the person entitled to exercise the Right.
(iii) The right of a Grantee to exercise a tandem Right shall be
canceled if and to the extent that the Units subject to the
Right are purchased upon the exercise of the related
Option, and the right of a Grantee to exercise an Option
shall be canceled if and to the extent that the Units
subject to the Option are used to calculate the amount to
be received upon the exercise of a tandem Right.
(iv) Until the issuance of Unit certificates therefor, if any, no
right to direct the vote or receive distributions or any other
rights as a unitholder shall exist with respect to Units subject
to the Right notwithstanding the exercise of a Right. No
adjustment shall be made for distribution or other rights for
which the record date is prior to the date a Unit certificate is
issued except as provided in Section 14 hereof.
9. Other Unit-Based Awards
The Committee may, from time to time, grant Awards (in addition to
Options and Rights) under the Plan that consist of, are denominated in or
payable in, are valued in whole or in part by reference to, or otherwise are
based on or related to, Units, provided that such grants comply with applicable
law. The Committee may subject such Awards to such vesting or earnout
provisions, restrictions on transfer, and/or other restrictions on incidents of
<PAGE>7
ownership as the Committee may determine, provided that such restrictions are
not inconsistent with the terms of the Plan. The Committee may grant Awards
under this Section 9 that require no payment of consideration by the Grantee
(other than services previously rendered or, as may be permitted by applicable
law, services to be rendered), either on the date of grant or the date any
restriction(s) thereon are removed. Awards granted under this Section 9 may
include, by way of example, restricted Units, phantom Units, performance Units,
performance bonus awards, and other awards that are payable in cash, or that
are payable in cash or Units or other property (at the election of the
Committee or, if the Committee so provides, at the election of the Grantee),
provided that such Awards are denominated in Units, valued in whole or in part
by reference to Units, or otherwise based on or related to Units.
10. Tax Withholding
The Partnership shall have the right to collect an amount sufficient
to satisfy any federal, state, Puerto Rico and/or local withholding tax
requirements that may apply with respect to any Award granted to a Grantee.
The Partnership shall have the right to require Grantees to remit to the
Partnership an amount sufficient to satisfy any such withholding tax
requirements. The Partnership also shall, to the extent permitted by law, have
the right to deduct from any payment of any kind (whether or not related to the
Plan) otherwise due to a Grantee any such taxes required to be withheld.
11. Nonassignability
An Award may be exercised only by the Grantee and an Award may not be
assignable or transferable by him other than by will or the laws of descent and
distribution.
12. Cancellation and Reissuance
The Committee, at any time and from time to time, in its discretion,
may offer Grantees the opportunity to elect to surrender, or to have the
Partnership cancel and terminate, any outstanding Award (or any portion
thereof), and may grant in substitution for the cancelled and terminated Award
(or portion thereof) a new Award under the Plan. The type, terms and magnitude
of the new Award may be similar to or different from the original Award.
13. Amendment or Termination of the Plan
(a) Amendment
The Partnership, acting through IGMC, may amend the Plan from time to
time in such respects as the Partnership, acting through IGMC, may
deem advisable. Any such amendment shall apply to any outstanding
Awards that were granted before the date such amendment is adopted,
provided that no such amendment shall adversely affect any right
acquired by any Grantee, under the terms of any Award granted before
the date of such amendment, unless such Grantee shall consent; but it
shall be conclusively presumed that any adjustment for changes in
capitalization in accordance with Section 14 hereof shall not
adversely affect such right. No such amendment shall affect any
Award that has been exercised or earned before the date such
amendment is adopted.
<PAGE>8
(b) Termination
The Partnership, acting through IGMC, may at any time terminate the
Plan. Any such termination of the Plan shall not affect Awards
previously granted and such Awards shall remain in full force and
effect as if the Plan had not been terminated.
14. Adjustments Upon Changes in Capitalization
(a) Adjustments to Award Amounts
In the event of any Unit distribution, split-up, recapitalization,
combination, exchange of interests in the Partnership or any other
entity, merger, consolidation, acquisition of property, separation,
reorganization, or liquidation, as a result of which interests of any
class in the Partnership or any other entity shall be issued in
respect of outstanding Units, or if Units shall be changed into the
same or a different number of the same or another class or classes of
interests in the Partnership or any other entity ("interests") prior
to a distribution to a Grantee under an Award, the Committee shall
adjust, as it deems equitable in its sole and absolute discretion,
the aggregate number and type of Units (or other interests) available
for Awards under Section 5, the number of Units or interests (or, if
applicable, the amount of cash (or other property) to be distributed
to the Grantee and/or the exercise price or purchase price of Units
subject to an Award, to avoid any significant dilution or enlargement
of the benefits intended to be made available under the Plan.
(b) Adjustments to Units Subject to Plan
In the event of any change in the outstanding Units of the
Partnership as described in subsection (a), above, the aggregate
number and class of interests remaining available under the Plan
shall be that number and class that a person would be holding if:
the person had been granted an Option on the date preceding such
change for all of the available Units under the Plan, all such Units
had been purchased at the date of the grant of the Award and had not
been disposed of, and a change in the outstanding Units as described
in subsection (a), above, had occurred.
15. Agreement and Representations of Grantee
(a) As a condition to receiving Units under the Plan, the Partnership may
require the person receiving such Units to represent and warrant at
the time of any such exercise that the Units are being acquired only
for investment and without any present intention to sell or
distribute such Units. The Units shall not be offered, sold,
transferred, or otherwise disposed of in the absence of registration,
or the availability of an exemption from registration, under the
Securities Act of 1933. No such offer, sale, transfer, or other
disposition may be made without the prior written opinion of counsel
for the Partnership that such offer, sale, transfer, or other
disposition will not violate the Securities Act of 1933 or other
applicable securities law, rule, or regulation of any jurisdiction.
The foregoing restriction may be indicated by legend on the Unit
certificates representing such Units.
<PAGE>9
(b) Any Units received under the Plan shall be subject to such
restrictions as may be contained in any agreement previously entered
into by the Partnership with respect to Units and applicable to such
Units. The foregoing restrictions, if any, shall be indicated by
legend on the Unit certificates representing such Units.
(c) IGMC shall execute and deliver to each Grantee a written Agreement
that shall contain such provisions as the Committee in each instance
shall deem appropriate and not inconsistent with any of the
provisions of the Plan.
(d) The initial "Capital Account" (as defined in the Partnership
Agreement) of each Grantee shall be established in accordance with
the second paragraph of the definition of "Capital Account" set forth
in the Partnership Agreement.
16. Reservation of Units
The Partnership, during the term of this Plan, shall at all times
reserve and keep available, and shall seek or obtain from any regulatory body
having jurisdiction any requisite authority in order to issue and sell, such
number of Units as shall be sufficient to satisfy the requirements of the Plan.
Inability of the Partnership to obtain from any regulatory body having
jurisdiction the authority deemed by the Partnership's counsel to be necessary
for the lawful issuance and sale of any Units hereunder shall relieve the
Partnership of any liability in respect of the non-issuance or sale of such
Units as to which such requisite authority shall not have been obtained.
17. Use of Funds
The proceeds of the sale of Units, whether newly issued or previously
acquired, shall be added to and administered as a part of the general assets of
the Partnership.
18. Notice
All notices delivered pursuant to the Plan shall be in writing,
delivered by hand, by facsimile or by first class certified mail, return
receipt requested, postage prepaid. If notice is delivered to the Partnership,
it shall be delivered to the Partnership, in care of the President of IGMC, at
the Partnership's principal place of business. If notice is delivered to the
Grantee, it shall be delivered at the most recent address of Grantee shown on
the records of the Partnership. The Partnership and/or the Grantee may change
by notice (delivered in accordance with this Section 18) the address for
delivery set forth in this Section 18. The date of notice for all purposes
under the Plan shall be the date of delivery of the notice. As soon as
practicable after the Partnership has learned of the death or incapacity of a
Grantee and the identity of the Grantee's Legal Representatives, the
Partnership shall notify, in accordance with this Section 18, the Legal
Representatives of their right (if any) to exercise any Award granted
hereunder, provided that notice to any of Grantee's Legal Representatives shall
be deemed to be notice to all of Grantee's Legal Representatives.
19. Governing Law
The Plan shall be construed and its provisions enforced and
administered in accordance with the laws of the State of Delaware except to the
extent that such laws may be preempted by any Federal law.
<PAGE>1
EXHIBIT 10(hhh)
SECOND AMENDMENT TO SALE AND PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO SALE AND PURCHASE AGREEMENT ("Second Amendment")
is made and entered into this 18th day of August, 1994, by and between
INTERSTATE GENERAL COMPANY L.P., a Delaware limited partnership ("Seller"); and
K. HOVNANIAN AT MONTCLAIR, INC. ("Purchaser").
RECITALS:
A. Seller and Purchaser entered into a Sale and Purchase Agreement dated
as of September 30, 1992 for the sale and purchase of certain real property in
Southlake at Montclair, Phase III, Prince William County, Virginia, as such
real property is more particularly described therein. Said Sale and Purchase
Agreement was amended by that certain First Amendment to Sale and Purchase
Agreement dated October 16, 1992. Said documents are referred to together
herein as the "Contract" and are incorporated herein by this reference.
B. Seller and Purchaser agree to further amend the Contract as set forth
herein. Unless otherwise specified, each capitalized term herein shall have
the same definition set forth in the Contract.
THIS SECOND AMENDMENT WITNESSETH, THEREFORE, that in consideration of the
foregoing recitals, each of which is hereby incorporated by this reference, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Seller and Purchaser hereby agree to amend the Contract as
follows:
1. REVISED S6 SETTLEMENT SCHEDULE.
The settlement schedule for the remaining TH Lots in S6 is hereby
changed as follows: Purchaser has settled on the purchase of nine (9) S6 Lots
on May 5, 1994 and subject to the contingencies set forth in Paragraph 4 of the
Contract, shall be required to settle on 1) nine (9) more S6 Lots on or before
August 1, 1994, and 2) all remaining S6 Lots on or before January 31, 1995.
2. CONVERSION OF S4 CONDO UNITS TO FEE SIMPLE TOWNHOUSES.
A. Conversion and Purchase Price.
Seller acknowledges and agrees that Purchaser will develop the
S4 Condo Units into one hundred seventeen (117) fee simple townhouses instead
of the one hundred thirty-two (132) S4 Condo Units described in the Contract.
Notwithstanding, the parties have agreed that the purchase price for such
property (the "Former S4 Condo Units") shall be calculated as if the Former S4
Condo Units were to be developed as one hundred thirty-two (132) Condo Units,
i.e. EIGHT THOUSAND DOLLARS ($8,000.00), plus the escalator (8% annual simple
interest commencing October 16, 1992) applicable to each settlement, multiplied
by one hundred thirty-two (132) units, of which forty-five (45) Former S4 Condo
Units (since converted to forty (40) fee simple townhouse lots) have been
purchased.
<PAGE>2
B. Payment of Purchase Price.
Subject to the contingencies set forth in Paragraph 4 of the
Contract, Purchaser shall be required to pay the purchase price for the
remaining Former S4 Condo Units as follows:
(i) thirty-five (35) Former S4 Condo Units not later than November
30, 1994;
(ii) forty (40) Former S4 Condo Units not later than May 31, 1995;
and
(iii) twelve (12) Former S4 Condo Units not later than December 31,
1995.
(iv) Consistent with Paragraph 5A(v) of the Contract, the purchase
price paid for any Former S4 Condo Units which is paid for in advance of the
foregoing semi-annual minimum shall be credited to the minimum purchase
requirement, that Purchaser is required to purchase in the next succeeding
semi-annual period.
3. S4 TH LOT SETTLEMENT SCHEDULE.
Seller acknowledges and agrees that Purchaser has contracted to sell
the portion of the Property described in the Contract as the S4 TH Lots (i.e.,
not the Former S4 Condo Units) to a third-party builder. Notwithstanding
Paragraph 5A(iii) of the Contract, which provides that Purchaser will settle on
a minimum of forty-five (45) S4 TH Lots not later than eighteen (18) months
after the date of the initial S6 settlement (i.e., not later than April 16,
1994), settlement on forty-four (44) S4 TH Lots occurred on January 14, 1994
and, subject to the contingencies set forth in Paragraph 4 of the Contract,
settlement on the remaining forty-six S4 TH Lots shall occur not later than
December 31, 1994. Consistent with the January 14, 1994 settlement, and at no
cost to Seller, Seller shall deed such S4 TH Lots directly to said third-arty
builder by special warranty deed which is in all respects but the identity of
the Grantee identical to the deed Seller would otherwise grant to Purchaser.
4. CONVERSION OF S5 CONDO UNITS TO FEE SIMPLE TOWNHOUSES.
A. Conversion and Price.
Seller acknowledges and agrees that Purchaser will develop the
S5 Condo Units into one hundred seventy-four (174) fee simple townhouses (the
"S5 TH Lots") instead of the four hundred forty-eight (448) S5 Condo Units
described in the Contract. The purchase price for each S5 TH Lot shall be
eleven per cent (11%) of Purchaser's gross sales price for such lot, together
with a completed home thereon, to a third party purchaser (the "Retail Price").
Notwithstanding, the "Minimum Purchase Price" for each S5 townhouse Lot shall
be SIXTEEN THOUSAND DOLLARS ($16,000.00). The Minimum Purchase Price for each
S5 TH Lot, plus six per cent (6%) per annum from September 1, 1994, prorated to
the date of each settlement, shall be paid to Seller at settlement by cashier's
check or wire fund transfer. Purchaser's obligation to pay an additional
amount (for each lot where the Minimum Purchase Price paid is less than eleven
per cent (11%) of the Retail Price) shall be a covenant running with the land.
Such additional amount for each lot, if any, shall be due and payable without
interest from Purchaser's proceeds of settlement on the sale of such lot and
the completed house thereon to a third party buyer.
<PAGE>3
B. Settlement Schedule.
Purchaser shall be required to settle on a minimum of nine (9)
S5 TH Lots per quarter, with the first S5 TH Lot settlement to occur on May 1,
1995. Each S5 settlement shall be subject to the contingencies set forth in
Paragraph 4 of the Contract. The take down of the initial S5 TH Lot settlement
shall be subject to the additional contingency that Purchaser shall have
obtained final site plan approval from Prince William County for the applicable
portion of S5, so that such portion of S5 is ready for bonding. Purchaser
shall diligently seek such site plan approval.
5. INDUSTRIAL SITE.
A. Property Description.
Seller hereby agrees to sell and Purchaser hereby agrees to buy
the approximately 13.1888 acres of land shown on the boundary survey titled
"BOUNDARY SURVEY OF A PORTION OF THE LAND OF INTERSTATE GENERAL DEVELOPMENT
INC.", prepared by Greenhorne & O'Mara, Inc. and dated December 1, 1988, which
is attached hereto and incorporated herein by this reference as Exhibit "2-A".
Said property is considered to be a part of the Property but shall be
identified as the "Industrial Site". All relevant terms and conditions of the
Contract shall apply to the Industrial Site except as set forth in this Second
Amendment.
B. Rezoning.
With Seller's consent, Purchaser has obtained approval, subject
to appeal, of its application to the Prince William County Board of Supervisors
to rezone the Industrial Site from its current zoning (RPC-Industrial) to RPC
Low Density Residential (the "Rezoning"), yielding approval for a density of
fifty-three (53) single family detached lots.
C. Purchase Price and Method of Payment.
The following purchase price shall apply to each single family
detached lot in the Industrial Site shown on a subdivision record plat which
has been approved by all applicable Prince William County authorities (an
"Approved Plat"). Purchaser shall pay Seller thirteen and one-half per cent
(13 1/2%) of Purchaser's gross sales price for each such lot, together with a
completed house thereon, to a third party purchaser (the "Retail Price").
Notwithstanding, the "Minimum Purchase Price" for each Industrial site lot
shall be TWENTY-FIVE THOUSAND DOLLARS ($25,000.00),k and the "Maximum Purchase
Price" for each Industrial Site lot shall be THIRTY-TWO THOUSAND DOLLARS
($32,000.00). The Minimum Purchase Price for each Industrial Site lot, plus
six per cent (6%) per annum from August 31, 1994, prorated to the date of each
settlement, shall be paid to Seller at settlement by cashier's check or wire
fund transfer. Purchaser's obligation to pay an additional amount (for each
lot where the Minimum Purchase Price paid is less than thirteen and one-half
per cent (13 1/2%) of the Retail Price) shall be a covenant running with the
land. Such additional amount for each lot, if any, shall be due and payable
without interest from Purchaser's proceeds of settlement on the sale of such
lot and completed house thereon to a third party buyer.
<PAGE>4
D. Industrial Site Settlement Schedule.
Purchaser shall settle on twenty-seven (27) of the Industrial
site lots within fifteen (15) days after final Prince William County approval,
subject only to the posting of normally required bonds and escrows, of a final
site plan for the Industrial Site (the "Approved Site Plan"), and the remaining
Industrial Site lots within six (6) months thereafter. Purchaser shall be
entitled to more than one (1) settlement during any six (6) month period. The
exact number of lots to be purchased at any settlement shall depend upon the
phasing of the Approved Site Plan and Approved Plat.
E. Contingencies.
1. The obligation of Purchaser to purchase any portion of the
Industrial Site shall be contingent upon each and all of the contingencies set
forth in Paragraphs 4A, B, E and F of the Contract, and such contingencies are
modified as the context would require as follows:
(a) The contingencies described in Paragraph 4A are hereby
modified to also apply to the dwellings Purchaser intends to construct on each
single family detached lot approved in the Rezoning.
(b) Purchaser shall have the same rights and Seller shall have
the same obligations with respect to title to the Industrial Site as apply to
the rest of the Property as described in Paragraph 4B, except that Purchaser
shall be required to obtain a current ALTA standard coverage title insurance
commitment which pertains to the Industrial Site (the "Industrial Site
Commitment") within thirty (30) days after this Second Amendment is executed by
the last party to do so (the "Effective Date"). Purchaser shall notify Seller
of objections to any matter disclosed by the Industrial Site Commitment within
forty (40) days after the Effective Date.
(c) The Stand Still Agreement shall be modified by Seller to
include the Industrial Site and executed by all parties thereto.
(d) Each of Seller's warranties and representations set forth
in the Contract are hereby restated with respect to this Second Amendment and
the Industrial Site.
2. In addition, Purchaser's obligation to purchase any portion
of the Industrial Site shall be contingent upon the statutory period for
appealing the Rezoning having expired without appeal having been duly filed and
Purchaser having obtained an Approved Site Plan and Approved Plat for the
applicable portion of the Industrial Site at each settlement. Purchaser shall
diligently pursue the Approved Site Plan(s) and Approved Plat(s) at its sole
expense.
F. Default.
The notice and cure provisions set forth in Paragraphs 11A and B
of the Contract shall also apply with respect to default by either Seller or
Purchaser with respect to the Industrial Site. Seller and Purchaser further
agree that the Deposit shall be reduced by ONE HUNDRED THOUSAND DOLLARS
($100,000.00) upon consummation of the first S5 TH Lot settlement.
<PAGE>5
6. NO OTHER TERMS CHANGED.
No other terms and conditions of the Contract, as previously amended,
are amended hereby. To the extent this Second Amendment conflicts or is
inconsistent with the Contract, as previously amended, this Second Amendment
shall control. The Contract, as modified by this Second Amendment, remains in
full force and effect and is binding upon the parties.
WITNESS the following signatures and seals:
SELLER:
INTERSTATE GENERAL COMPANY L.P.
A Delaware Limited Partnership
By: INTERSTATE MANAGEMENT CORP.
A Delaware Corporation
General Partner
By: /s/ Edwin L. Kelly
------------------------(Seal)
Edwin L. Kelly
Senior Vice President
PURCHASER:
K. HOVNANIAN AT MONTCLAIR, INC.
A Virginia Corporation
By: /s/ Brian McGregor
------------------------(Seal)
Brian McGregor
President
<PAGE>1
EXHIBIT 10(iii)
THIRD AMENDMENT TO SALE AND PURCHASE AGREEMENT
THIS THIRD AMENDMENT TO SALE AND PURCHASE AGREEMENT ("Third Amendment") is
made and entered into this 16th day of December, 1994, by and between
INTERSTATE GENERAL COMPANY L.P., a Delaware limited partnership ("Seller"); and
K. HOVNANIAN AT MONTCLAIR, INC. ("Purchaser").
RECITALS:
A. Seller and Purchaser entered into a Sale and Purchase Agreement dated
as of September 30, 1992 for the sale and purchase of certain real property in
Southlake at Montclair, Phase III, Prince William County, Virginia, as such
real property is more particularly described therein. Said Sale and Purchase
Agreement was amended by that certain First Amendment to Sale and Purchase
Agreement dated October 16, 1992 and that certain Second Amendment to Sale and
Purchase Agreement dated August 18, 1994. Said documents are referred to
together herein as the "Contract" and are incorporated herein by this
reference.
B. Seller and Purchaser agree to further amend the Contract as set forth
herein. Unless otherwise specified, each capitalized term herein shall have
the same definition set forth in the Contract.
THIS THIRD AMENDMENT WITNESSETH, THEREFORE, that in consideration of the
foregoing recitals, each of which is hereby incorporated by this reference, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Seller and Purchaser hereby agree to amend the Contract as
follows:
1. REVISED SETTLEMENT SCHEDULE FOR S6, S4 AND S4 KNOLLS.
Subject in each case to the contingencies set forth in Paragraph 4 of
said Sale and Purchase Agreement, settlement on the remaining S6 TH Lots and
Former S4 Condo Units (the "S4 Knolls") shall proceed in accordance with the
following schedule:
A. Settlement on all seventeen (17) remaining S6 TH Lots shall
occur on or before December 30, 1994.
B. Settlement on the twenty-five (25) S4 TH Lots designated Lots
118 through 135, inclusive, and 142 through 148, inclusive, Southlake at
Montclair, Section S4, shall occur on or before December 30, 1994. Settlement
on the remaining twenty-one (21) S4 TH Lots shall occur on or before June 30,
1995.
C. Seller acknowledges and agrees that Purchaser shall replan the
product mix of the S4 Knolls. Such replanning may result in a reduction in the
lot yield from the S4 Knolls. Any such loss of lot yield will not change the
purchase price, which shall be calculated as set forth in Paragraph 2A of said
Second Amendment to Sale and Purchase Agreement. Settlement on the S4 Knolls
shall occur by the payment by Purchaser of the price for the remaining eighty-
seven (87) Former S4 Condo Units as follows:
<PAGE>2
(i) settlement on thirty (30) Former S4 condo Units on or
before June 30, 1996;
(ii) settlement on thirty (30) more Former S4 condo Units on or
before December 31, 1996; and
(iii) settlement on the remaining twenty-seven (27) Former S4
condo Units on or before June 30, 1997.
2. INDUSTRIAL SITE ("S7" SINGLE FAMILY DETACHED LOTS).
A. If, and only if, Purchaser settles on twenty-five (25) S7 lots
on or before December 30, 1994, the purchase price shall be SEVENTEEN THOUSAND
DOLLARS ($17,000.00) for each such lot. In such event, subject to the
contingencies set forth in Paragraph 5E of said Second Amendment to Sale and
Purchase Agreement, Purchaser would be required to settle on all remaining lots
in S7 on or before December 15, 1995, at a purchase price of SEVENTEEN THOUSAND
DOLLARS ($17,000.00) for each such lot plus simple interest at the rate of ten
per cent (10%) per annum prorated from the date of the first S7 settlement
through the date of the subsequent S7 settlement(s).
B. If Purchaser fails to settle on twenty-five (25) S7 lots on or
before December 30, 1994, then the parties shall be mutually released from all
obligations one to the other with regard to S7. Provided, however, in such
event Seller shall be entitled, at no cost to Seller, to retain the benefit of
Purchaser's legal work in Rezoning S7 and any and all engineering work
performed by or for Purchaser with respect to S7. It is the express intent of
the parties that Purchaser's failure to purchase S7 shall not be considered a
default under the Contract and shall not entitle Seller to any portion of the
Deposit.
3. SECTION S5.
Purchaser has determined that it is likely to be infeasible,
considering Purchaser's lot inventory and sales pace, to purchase lots in S5
during the foreseeable future. Accordingly, the parties are hereby mutually
released from all obligations one to the other with regard to S5. Provided,
however, that Seller is hereby entitled, at no cost to Seller, to retain the
benefit of any and all engineering work performed by or for Purchaser with
respect to S5. It is the express intent of the parties that Purchaser's
failure to purchase S5 shall not be considered a default under the Contract and
shall not entitle Seller to any portion of the Deposit.
4. DEPOSIT
Seller and Purchaser hereby agree to prorate the Deposit, currently
in the amount of THREE HUNDRED THOUSAND DOLLARS ($300,000.00). That is, TWO
THOUSAND DOLLARS ($2,000.00) of the Deposit is allocated to each of the one
hundred fifty (150) unpurchased lots in S6, S4 and the S4 Knolls. Accordingly,
at each settlement, Seller shall deliver a letter to the settlement agent,
addressed to the Escrow Agent (Premier Title, Inc., 8221 Old Courthouse Road,
Suite 300, Vienna, Virginia 22182, Attn: James C. Pope, Managing Attorney),
authorizing the reduction of Purchaser's letter of credit, issued by Chemical
Bank, held as the Deposit, by TWO THOUSAND DOLLARS ($2,000.00) for each lot
purchased at such settlement.
<PAGE>3
5. NO OTHER TERMS CHANGED.
No other terms and conditions of the Contract, as previously amended,
are amended hereby. To the extent this Third Amendment conflicts or is
inconsistent with the Contract, as previously amended, this Third Amendment
shall control. The Contract, as modified by this Third Amendment, remains in
full force and effect and is binding upon the parties.
WITNESS the following signatures and seals:
SELLER:
INTERSTATE GENERAL COMPANY L.P.
A Delaware Limited Partnership
By: INTERSTATE MANAGEMENT CORP.
A Delaware Corporation
General Partner
By: /s/ Edwin L. Kelly
------------------------(Seal)
Edwin L. Kelly
Senior Vice President
PURCHASER:
K. HOVNANIAN AT MONTCLAIR, INC.
A Virginia Corporation
By: /s/ Brian S. Buchanan
------------------------(Seal)
Name: Brian S. Buchanan
Title: Vice President
<PAGE>1
EXHIBIT 10(dddd)
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT is made as of the 30th day of December, 1994, by and
between Seller and Purchaser (such parties being hereinafter defined).
ARTICLE I
Definitions
As used in this Agreement, unless the context otherwise requires or it is
otherwise herein expressly provided, the following terms shall have the
following meanings:
1.1 IBC PROPERTY:
(a) A forty-nine and nine-tenths percent (49.9%)
share of the limited partnership interests in
Wakefield Terrace Associates limited partnership,
a Maryland limited partnership;
(b) A forty-nine and nine-tenths percent (49.9%)
share of the limited partnership interests in
Wakefield Third Age Associates limited
partnership, a Maryland limited partnership;
(c) A forty-nine and nine-tenths percent (49.9%)
share of the limited partnership interests in
Palmer Apartments Associates limited partnership,
a Maryland limited partnership;
(d) A forty-nine and nine-tenths percent (49.9%)
share of the limited partnership interests in
Headen House Associates limited partnership, a
Maryland limited partnership;
(e) A nine and nine-tenths percent (9.9%) interest as
a general partner in Fox Chase Apartments general
partnership; and
(f) A nine and nine-tenths percent (9.9%) interest as
a general partner in New Forest Apartments
general partnership.
1.2 PURCHASER: Interstate General Company, L.P., a Delaware limited
partnership, its assignees, designees or nominees,
with an address at:
222 Smallwood Village Center
St. Charles, MD 20602
<PAGE>2
1.3 SELLER: Interstate Business Corporation, a corporation
organized and existing under the laws of Delaware,
with an address at:
222 Smallwood Village Center
St. Charles, MD 20602
1.4 SETTLEMENT: The consummation of the sale and purchase provided for
in this Agreement to occur as provided in Article VII
hereof.
1.5 IBC PARTNERSHIPS: Each of Wakefield Terrace Associates Limited
Partnership, Wakefield Third Age Associates Limited
Partnership, Palmer Apartments Associates Limited
Partnership, Headen House Associates Limited
Partnership, Fox Chase Apartments General Partnership,
and New Forest General Partnership.
1.6 IBC PARTNERSHIP
AGREEMENTS: Each of the Partnership Agreements under which each of
the IBC Partnerships is currently organized.
1.7 EXISTING IBC
INDEBTEDNESS: The outstanding principal and accrued interest payable
by Seller to Purchaser as of the date of the
Settlement in the amount of $5,136,114 identified on
Exhibit A hereto as adjusted at the Post Settlement
Date by any unrecorded transactions not included in
Exhibit A as of the date of Settlement.
1.8 PRELIMINARY VALUE: In respect of the IBC Property means $4,139,505, the
preliminary estimate of Fair Market Value of the IBC
Property as determined by the Appraiser.
1.9 APPRAISED VALUE: In respect of the IBC Property means the Fair Market
Value of such property as determined by the Appraiser
in accordance with Section 2.3 hereof and set forth in
a final appraisal report delivered by the Appraiser to
Purchaser and Seller.
1.10 APPRAISER: Legg Mason Realty Group, Inc. or such other
experienced, independent property appraiser
selected by Seller and Purchaser.
1.11 FAIR MARKET VALUE: The price that unrelated parties would be willing to
pay for an asset in an arms length transaction.
ARTICLE II
Sale and Purchase
2.1 Purchase. For and in consideration of the mutual promises,
covenants, representations, warranties, and agreements contained herein:
(a) Seller shall sell and convey and Purchaser shall purchase the IBC
Property; and
<PAGE>3
(b) in consideration therefor, Purchaser shall release and discharge
that portion of the Existing IBC Indebtedness equal to the Preliminary Value.
2.2 Effect of Settlement on Existing IBC Indebtedness. Subject to the
condition that Seller complies with all of its obligations hereunder, upon
Settlement, the Existing IBC Indebtedness shall be discharged to the extent of
the Preliminary Value.
2.3 Appraisals. The Appraiser shall determine the Appraised Value of the
IBC Property using any appraisal methods selected by the Appraiser, provided
that such methods are commonly used in commercial appraisals of similar assets.
The Appraiser shall itemize the Appraised Value of each IBC Partnership
interest included in the IBC Property.
2.4 Post-Settlement Adjustment. Within ten (10) days following receipt
by Seller and Purchaser of the final appraisal report setting forth the
Appraised Value of the IBC Property in accordance with Section 2.3 hereof
("Post-Settlement Date"), the balance of the Existing IBC Indebtedness shall be
adjusted by the difference between the Preliminary Value and the Appraised
Value. In the event that the Appraised Value exceeds the Preliminary Value,
Purchaser will promptly deliver to Seller an instrument cancelling Existing IBC
Indebtedness in the amount of such excess, provided however, that in no event
shall Seller receive consideration in excess of the aggregate amount of
Existing IBC Indebtedness. In the event that the Appraised Value is less than
the Preliminary Value, Existing IBC Indebtedness shall be reinstated by the
amount of the differences in values. Purchaser, at its sole discretion, shall
determine how any adjustment amounts shall be allocated among the various debts
comprising the Existing IBC Indebtedness.
2.5 Collateral. Purchaser presently holds a deed of trust issued by
Seller as collateral for the Village Lake Apartment Land Note shown on Exhibit
A as collateral for the Existing IBC Indebtedness. Purchaser shall continue to
hold this deed of trust as collateral for the balance, if any, of the Existing
IBC Indebtedness. Seller has sold the remaining Village Lake property to
Lakeside Apartments Limited Partnership and presently holds Note dated
December 23, 1994 from Lakeside Apartments Limited Partnership in the amount of
$352,000 (the "Note"). Seller hereby agrees to pay Existing IBC Indebtedness,
from any and all net proceeds received by Seller in payment of the Note.
Purchaser, at its sole discretion, shall determine how any such net proceeds
shall be allocated to discharge Existing IBC Indebtedness.
ARTICLE III
Representations and Warranties of Seller
Seller represents and warrants to Purchaser that as of the date of the
execution of this Agreement, and as of the date of Settlement:
3.1 Legal Status. Seller is a corporation organized, validly existing,
and in good standing under the laws of Delaware and subject to the performance
by Seller of its obligations under Section 6.1 hereof, (i) Seller has the power
to enter into this Agreement and to consummate the transactions provided for
herein; (ii) the undersigned officers of Seller have full power, authority and
legal right to enter into this Agreement on behalf of Seller; and (iii) no
other party has any right, title or interest in any of the IBC Property.
<PAGE>4
3.2 Compliance with Other Instruments, etc. Neither the entering into of
this Agreement nor the consummation of the transactions contemplated hereby
will constitute or result in a violation or breach by Seller of its Articles of
Incorporation, by-laws and other corporate documents, or, subject to the
performance by Seller of its obligations under Section 6.1 hereof, of any
contract or other instrument to which it is a party, or to which it is subject
or by which it or any of its assets or properties may be bound.
3.3 Compliance with Laws, etc. Neither the entering into of this
Agreement nor the consummation of the transactions contemplated hereby will
constitute or result in a violation or breach by Seller of any judgment, order,
writ, injunction or decree issued against or imposed upon it, or result,
subject to the performance by Seller of its obligations under Section 6.1
hereof, in a violation of any applicable law, order, rule or regulation of any
governmental authority. There is no action, suit, proceeding or investigation
pending in any court or before or by any federal, district, county, or
municipal department, commission, board, bureau, agency or other governmental
instrumentality. which would prevent the consummation of the transactions
contemplated by this Agreement or which would become a cloud on the title to
the IBC Property or any portion thereof or which questions the validity or
enforceability of the transactions contemplated by this Agreement or any action
taken pursuant hereto. No approval, consent, order or authorization of, or
designation, registration or filing (other than for recording purposes) with
any governmental authority is required in connection with the due and valid
execution and delivery of this Agreement by Seller and its compliance with the
provisions hereof and the consummation of the transactions contemplated hereby
except as provided in Section 6.1 hereof.
3.4 The IBC Property.
(a) The percentages of partnership interests of each of the IBC
Partnerships and the persons or entities owning the same are, and shall be
immediately prior to Settlement, as set forth on Exhibit B hereto.
(b) Seller shall have delivered to the Purchaser at or prior to
Settlement copies of all of the documents, agreements and other items and
materials required to be delivered by Seller hereunder and there have not been
and will not be pending as of Settlement any changes thereto or amendments
thereof without the prior written approval of Purchaser.
(c) The partnership interests as shown on Exhibit B are fully paid
and non-assessable. Seller has good and marketable title to the IBC Property
and, subject to performance by Seller of its obligations under Section 6.1
hereof, has the sole and entire right, power, capacity and authority to
(i) enter into this Agreement and to sell, deliver, convey, assign and transfer
all right, title and interest in and to the IBC Property, free and clear of any
option, call, contract, commitment, demand, lien, claim, pledge, charge,
security interest, or encumbrance whatsoever, and (ii) to vest in Purchaser
good and marketable title to the IBC Property, free and clear of all liens,
encumbrances and adverse claims whatsoever. Seller has not granted any option
or otherwise made any commitment to any person to sell, exchange, transfer or
dispose of any of the IBC Property, other than as set forth in this Agreement.
(d) There will not be pending or threatened on the Settlement date
any litigation, proceeding or investigation which may result in any material
adverse change in the financial condition, assets, liabilities or business of
the Seller, or in the final valuation of the IBC Property, and Seller does not
know of any basis for any such litigation, proceeding or investigation.
<PAGE>5
(e) To the best of Seller's knowledge, Seller is not in violation of
any order, judgment, law, statute, regulation or ordinance.
(f) Neither the execution and delivery of this Agreement nor the
sale of the IBC Property hereunder will, subject to the performance by Seller
of its obligations under Section 6.1 hereof, violate any provision of, or
result in the acceleration of any obligation under, any security, mortgage,
note, debenture, loan, lease, agreement, instrument, order, judgment or decree
to which either the Seller or any of the IBC Partnerships is a party or by
which either the Sellers or any of the IBC Partnerships is bound.
(g) The board of directors of Seller has duly approved the
transactions contemplated by this Agreement and has authorized the execution
and delivery of this Agreement by the officers of Seller who are executing this
Agreement and have all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions provided for herein.
(h) There are no actions or proceedings pending or threatened to
liquidate, reorganize or dissolve the Seller or of any of the IBC Partnerships.
(i) Between the date hereof and Settlement, Purchaser or its agents
shall be given complete and unlimited access to the records of Seller relating
to the IBC Property.
(j) All federal, state and local income, withholding, sales,
franchise and other taxes due or payable by the Seller with respect to the IBC
Property have been paid by the Seller and all returns due with respect thereto
have been filed. Seller does hereby indemnify and hold harmless Purchaser
against any loss, cost, damage or expense arising from nonpayment of any taxes
whatsoever owed by the Seller or which may be assessed against the Seller for
periods prior to Settlement.
(k) No representation, warranty or covenant by Seller or in this
Agreement, or any statement, certificate or schedule made, furnished or to be
furnished to Purchaser pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to make
the statements contained therein not misleading.
(l) Notwithstanding any investigation or audit conducted before or
after Settlement, and notwithstanding any facts or circumstances which any
party may have obtained or discovered as a result of such investigation, audit
or otherwise, the parties shall be entitled to rely upon the representations
and warranties set forth herein.
3.5 Violations. To the best of Seller's knowledge, there are no
violations of, and Seller has received no notice or other record of any
violations of, any federal, district or municipal laws, ordinances, orders,
regulations and requirements affecting the IBC Property or any portion thereof.
3.6 Full Disclosure. Seller knows of no materially adverse fact
affecting or threatening to affect the IBC Property which has not been
disclosed to Purchaser in this Agreement.
3.7 Completeness of Representations. No representation or warranty made
by Seller in this Agreement or as provided herein contains any untrue statement
of a material fact or omits to state any material fact necessary to make the
statements contained herein not false or misleading.
<PAGE>6
ARTICLE IV
Representations and Warranties of Purchaser
Purchaser represents and warrants to Seller that as of the date of the
execution of this Agreement, and as of the date of Settlement:
4.1 Legal Status. (i) Purchaser is a limited partnership organized,
validly existing, and in good standing under the laws of Delaware;
(ii) Purchaser has the power to enter into this Agreement and to perform its
obligations as provided for herein; and (iii) the undersigned have full power,
authority and legal right to enter into this Agreement on behalf of Purchaser,
and to consummate the transaction provided for herein.
4.2 Compliance with Other Instruments, etc. Neither the entering into of
this Agreement nor the consummation of the transactions contemplated hereby
will constitute or result in a violation or breach by Purchaser of its limited
partnership agreement or other corporate documents, or, subject to the
performance by Seller of its obligations under Section 6.1 hereof, of any
contract or other instrument to which it is a party, or to which it is subject
or by which it or any of its assets or properties may be bound.
4.3 Compliance with Laws, etc. Neither the entering into of this
Agreement nor the consummation of the transactions contemplated hereby will
constitute or result in a violation or breach by Purchaser of any judgment,
order, writ, injunction or decree issued against or imposed upon it, or will
result, subject to the performance by Seller of its obligations under Section
6.1 hereof, in a violation of any applicable law, order, rule or regulation of
any governmental authority. There is no action, suit, proceeding or
investigation pending in any court or before or by any federal, district,
county, or municipal department, commission, board, bureau, agency or other
governmental instrumentality which would prevent the consummation of the
transactions contemplated by this Agreement or which questions the validity or
enforceability of the transaction contemplated by this Agreement or any action
taken pursuant hereto. No approval, consent, order or authorization of, or
designation, registration or filing (other than for recording purposes) with
any governmental authority is required in connection with the due and valid
execution and delivery of this Agreement by Purchaser and its compliance with
the provisions hereof and consummation of the transactions contemplated hereby
except as provided in Section 6.1 hereof.
4.4 No violation. The Purchaser is not in violation of any order,
judgment, law, statute, regulation or ordinance.
4.5 Authorization. The general partners of Purchaser have duly approved
the transactions contemplated by this Agreement and have authorized the
execution and delivery of this Agreement by the undersigned on behalf of
Purchaser.
4.6 No Liquidation. There are no actions or proceedings pending or
threatened to liquidate, reorganize or dissolve the Purchaser.
<PAGE>
<PAGE>7
ARTICLE V
Survival of Representations and Warranties; Further Assurances
5.1 Survival and Merger. The representations and warranties set forth in
Article III and IV of this Agreement shall be deemed to have been made again on
and as of the date of Settlement and shall then be true and correct and shall
remain operative and shall survive the Settlement and the execution, delivery
and recordation of the Instruments of Conveyance and shall not be merged
therein. Purchaser shall have the right to exercise any and all legal and
equitable rights and remedies for any breach of Seller's representations and
warranties hereunder which are disclosed after Settlement.
5.2 Further assurances; Hold Harmless.
(a) Seller agrees that, upon request of Purchaser, it shall (or
direct its officers and employees to, if applicable) execute and deliver all
documents, and take any other actions which may in the reasonable opinion of
Purchaser be necessary or desirable to protect or record the right or title of
Purchaser to the IBC Property, or to aid in the prosecution or defense of any
rights arising therefrom, all without further consideration.
(b) Seller agrees to indemnify and hold harmless Purchaser at all
times after the Settlement against and with respect to: (i) any breach by
Seller of any of its obligations, representations or warranties hereunder,
(ii) any cost, expense or damages incurred by Purchaser in connection with
perfecting its right and title to the IBC Property, (iii) any claim asserted by
any of the IBC Partnerships against Purchaser for any unsatisfied obligation of
Seller to any such IBC Partnership, (iv) any loss or claim arising from any act
or failure to act by Seller in its capacity as general partner of Fox Chase
Apartments or New Forest Apartments, (v) any failure to obtain the consents the
approvals or to complete the refinancing referred to in Section 6.1 hereof or
(vi) any claim asserted by HUD (defined below), other government agency or any
lending institution arising from consummation of the transactions contemplated
hereby.
ARTICLE VI
Covenants and Conditions of Settlement
The obligations of the Purchaser hereunder shall be subject to the
fulfillment of the following conditions, and the Seller agrees to fulfill such
conditions:
6.1 Instruments of Conveyance. Seller shall execute and deliver to the
Purchaser appropriate assignments of the IBC Property. Such assignments shall
be substantially in form and substance equivalent to the Assignment and
Assumption Agreements attached hereto as Exhibit C. The assignments
contemplated herein shall be expressly subject, if required, (i) to the
approval of the U.S. Department of Housing and Urban Development ("HUD), or
other applicable regulatory agency or lending institution (provided, however,
that such approval need not be received prior to Settlement hereunder), and
shall, as required, require that the assignee thereunder expressly assume any
applicable Regulatory Agreement or similar instrument; and (ii) to the
completion of the refinancing of Seller's indebtedness to NationsBank
<PAGE>8
affiliates and the release of all interests in each of the IBC Partnerships
from all liens and restrictions related to said indebtedness, all pursuant to
the existing loan commitment from Compass Bank. Seller shall obtain all such
approvals and complete such refinancing by January 31, 1995.
6.2 Property Information. Promptly upon execution and delivery of this
Agreement, Seller shall deliver to Purchaser such information as is requested
by Purchaser with respect to the IBC Property.
6.3 Original Documents. At Settlement, Seller shall deliver to Purchaser
all original documents pertaining to the IBC Property which it has in its
possession.
6.4 Certification. In the event Seller shall have complied with any of
the foregoing provisions relating to furnishing information to Purchaser
relating to the IBC Property, a certification by Seller that such documentation
is true, correct, and complete as of the date of Settlement shall be deemed to
satisfy such requirements.
6.5 Satisfaction of Liens. Except as contemplated in Section 6.1, any
and all liens, of any type whatsoever, with respect to the IBC Property, or as
to which it may be subject, shall have been satisfied or otherwise released of
record by Seller, prior to Settlement, or provision satisfactory to Purchaser
shall have been made by Seller for its full and complete release.
6.6 Settlement Representations and Warranties. At Settlement, each of
the representations and warranties of the Seller contained in this Agreement is
deemed to have been made again on and as at the Settlement and shall be true
and correct in all material respects as at the Settlement. Seller shall
indemnify and hold harmless Purchaser from and against all loss, damages, costs
or expenses (including reasonable attorney's fees) resulting from or in any way
related to any breach thereof.
6.7 Purchaser Consents. To the extent required under the IBC Partnership
Agreements, but subject to performance by Seller of its obligations under
Section 6.1 hereof, upon Settlement, Purchaser, in its capacity a general
partner of the IBC Partnerships (or, as the case may be, in its capacity as
general partner of Interstate Properties Limited Partnership S.E. which, in
turn, is general partner of certain of the IBC Partnerships) shall be deemed
hereby to have consented to the transfers of the IBC Property.
ARTICLE VII
Settlement
7.1 Settlement. Settlement shall take place in the office of the
Purchaser's designated legal counsel at 10:00 a.m. on the day established by
this Agreement. Settlement hereunder shall occur no later than December 31,
1994.
<PAGE>
<PAGE>9
ARTICLE VIII
Default and Termination
8.1 Purchaser's Default. If the transaction herein contemplated shall
not be consummated on the date of Settlement because of the Purchaser's
default, then Seller may exercise any and all legal and equitable rights or
remedies available to it, including, without limitation, the right to specific
performance and/or recovery of damages.
8.2 Seller's Default. If the transactions herein contemplated shall not
be consummated on the date of Settlement because of Seller's default, then
Purchaser may exercise any and all legal and equitable rights or remedies
available to it, including, without limitation, the right to specific
performance and/or recovery of damages.
ARTICLE IX
Recision and Reformation
9.1 Reformation in Certain Events. If (i) any of the approvals referred
to in Section 6.1 hereof with respect to any portion of the IBC Property is not
obtained or (ii) the refinancing referred to in Section 6.1 has not been
completed before January 31, 1995, or (iii) in the opinion of counsel to
Purchaser, any such approvals that are obtained are insufficient to vest in
Purchaser free and clear title to any portion of the IBC Property, or (iv) HUD
or any governmental agency or lending institution commences or threatens to
commence a legal proceeding arising from the consummation of the transactions
contemplated hereby in which HUD or such other agency or institution either
asserts rights in any portion of the IBC Property or claims which, in the
reasonable opinion of Purchaser, may materially reduce the value of any portion
of the IBC Property (any such event being referred to herein as a "Transfer
Defect"), then Purchaser, at its option, may rescind to purchase the sale of
such portion of the IBC Property. Promptly upon receipt of notice of such
recision, the Existing IBC Indebtedness shall be reinstated in the principal
amount equal to the Appraised Value of such portion of the IBC Property.
9.2 Recision. If, as a result of one or more Transfer Defects, Purchaser
determines that it is unable to obtain substantially all of the benefits of
ownership of the IBC Property or otherwise is deprived of any material
inducement to its willingness to enter into and perform this Agreement,
Purchaser, by notice to Seller, may rescind the purchase and sale of the IBC
Property. In such event the Existing IBC Indebtedness shall no longer be
deemed to be discharged and Seller shall remain obligated to pay the Existing
IBC Indebtedness and any interest accrued thereon from the date of Settlement.
9.3 Procedures. Upon any recision in accordance with Section 9.1 or 9.2
hereof, Purchaser and Seller shall execute any such documents and take any such
action as shall be determined by either to be necessary or desirable to restore
the benefits of ownership of any affected portion of the IBC Property to the
status quo immediately preceding the Settlement. Seller shall bear all costs
and expenses of any such recision.
<PAGE>10
ARTICLE X
General Provisions
10.1 Modifications and Waivers. No modification, waiver, amendment,
discharge or change of this Agreement, except as otherwise provided herein,
shall be valid unless the same is in writing and signed by the party against
which the enforcement of such modification, waiver, amendment, discharge or
change is sought. This Agreement contains the entire agreement between the
parties relating to the transactions contemplated hereby, and all prior or
contemporaneous agreements, understandings, representations and statements,
oral or written, are merged herein.
10.2 Successors and Assigns. All terms of this Agreement shall be binding
upon, and inure to the benefit of and be enforceable by the parties hereto and
their respective legal representatives, successors and assigns.
10.3 Governing Law. This Agreement is intended to be performed in the
State of Maryland and shall be construed and enforced in accordance with the
internal laws thereof.
10.4 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, or by recognized air courier, or if sent by registered or
certified mail, return receipt requested, and postage prepaid, to a party at
its address set forth above, or at such other address as such party may specify
from time to time by written notice to the other party.
10.5 Exhibits. All exhibits and schedules referred to herein and attached
hereto are incorporated by reference into this Agreement.
10.6 Severability. If any provision of this Agreement or any application
thereof shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions hereof and
any other application thereof shall not in any way be affected or impaired, and
such remaining provisions shall continue in full force and effect.
10.7 Construction. Each party hereto and its counsel has reviewed and
revised (or requested revisions of) this Agreement, and the normal rule of
construction that any ambiguities are to be resolved against the drafting party
shall not be applicable in the construction and interpretation of this
Agreement.
10.8 Time Periods. Any time period hereunder which expires on, or any
date hereunder which occurs on, a Saturday, Sunday or legal United States
holiday, shall be deemed to be postponed to the next business day. The first
day of any time period hereunder which runs "from" or "after" a given day shall
be deemed to occur on the day subsequent to that given day.
10.9 Captions. The captions of this Agreement are inserted for
convenience of reference only and do not define, describe or limit the scope or
the intent of this Agreement or any term hereof.
10.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
<PAGE>11
10.11 Remedies Cumulative. Notwithstanding anything else herein to
the contrary, the remedies of each party provided for herein shall be
cumulative. The existence of any one remedy shall not impair the right of any
party to seek and obtain any other remedy available to such party hereunder or
otherwise under applicable law or equity.
10.12 Broker's Fees. Purchaser and Seller each hereby warrant and
represent to the each other that they have not dealt with any broker or agent
in connection with the transactions contemplated herein. Each party hereto
hereby indemnifies and holds harmless the other party from and against any and
all claims, demands, causes of action, loss, damage, liabilities, costs and
expenses (including reasonable attorney's fees) arising from any inaccuracy or
breach of the foregoing warranty and representation.
10.13 Expenses. Seller shall bear all costs of the transactions
contemplated by this Agreement including the cost of the Appraisals, except for
the fees and expenses of Purchaser's counsel in negotiating this Agreement,
which shall be borne by Purchaser.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
SELLER:
ATTEST INTERSTATE BUSINESS CORPORATION
/s/ Martha Haupt By: /s/ James M. Wilson
- ---------------------------- ----------------------------
Name: Martha Haupt Name: James M. Wilson
Its: Assistant Secretary Its: President
PURCHASER:
INTERSTATE GENERAL COMPANY, L.P.
ATTEST By: Interstate General
Management Corporation,
General Partner
/s/ Paul Resnik By: /s/ John E. Hans
- --------------------------- ----------------------------
Name: Paul Resnik Name: John E. Hans
Its: Vice President Its: Senior Vice President and
Assistant Secretary
<PAGE>
<PAGE>12
Exhibit A
IGC RECEIVABLES FROM IBC
DECEMBER 30, 1994
Balance
Existing IBC Preliminary Subject to
Indebtedness Value Adjustment
------------ ----------- ----------
RECEIVABLES FROM IBC:
Village Lake Apartment Land Note $ 301,780 $ (301,780) $ --
Note receivable - Partnership
interest in Chastleton 706,771 (706,771) --
Letter of credit fees - Chastleton 68,534 ( 68,534) --
Deferred long-term management
fee - Chastleton 108,784 (108,784) --
Put Option - SVA Note receivable 2,942,669 (2,942,669) --
---------- ----------- ---------
$4,128,538 (4,128,538) --
RECEIVABLES FROM PARTNERSHIPS IN
WHICH IBC HAS FUNDING
RESPONSIBILITIES:
Rolling Hills - Management fees
and reimbursables $ 344,918 -- $ 344,918
Chastleton - Reimbursables 28,440 -- 28,440
Management fee 170,336 -- 170,336
Coachman's Landing - Management
fees, working capital loans,
accrued interest and
reimbursables 463,882 (10,967) 452,915
---------- ----------- ---------
$5,136,114 $(4,139,505) $ 996,609
========== =========== =========
<PAGE>
<PAGE>13
Exhibit B
SUMMARY OF PARTNERSHIP OWNERSHIP INTERESTS
Wakefield Wakefield
Terrace Third Age
-------------- --------------
% of GP % of Total % of GP % of Total
Interest Ptshp Interest Interest Ptshp Interest
-------- -------------- -------- --------------
General Partners
IGC, L.P. 0.000% 0.000% 0.000% 0.000%
IBC
% of LP % of LP
Interest Interest
-------- --------
Limited Partners
IBC 51.000% 51.000% 51.000% 51.000%
Overlook Trust 11.025% 11.025% 11.025% 11.025%
Intramuros 11.025% 11.025% 11.025% 11.025%
Little Moose Trust 11.025% 11.025% 11.025% 11.025%
William Chardack 11.025% 11.025% 11.025% 11.025%
Peter Van Dyk Berg 1.960% 1.960% 1.960% 1.960%
Michael Monier 0.980% 0.980% 0.980% 0.980%
Earl A. Samson 0.980% 0.980% 0.980% 0.980%
Howard D. Wolfe, Jr. 0.980% 0.980% 0.980% 0.980%
-------- -------- -------- --------
100.000% 100.000% 100.000% 100.000%
Headen
Palmer House
-------------- --------------
% of GP % of Total % of GP % of Total
Interest Ptshp Interest Interest Ptshp Interest
-------- -------------- -------- --------------
General Partners
IGC, L.P. 100.000% 50.000% 100.000% 50.000%
IBC
% of LP % of LP
Interest Interest
-------- --------
Limited Partners
IBC 51.000% 25.500% 51.000% 25.500%
Overlook Trust 11.025% 5.5125% 11.025% 5.5125%
Intramuros 11.025% 5.5125% 11.025% 5.5125%
Little Moose Trust 11.025% 5.5125% 11.025% 5.5125%
William Chardack 11.025% 5.5125% 11.025% 5.5125%
Peter Van Dyk Berg 1.960% 0.980% 1.960% 0.980%
Michael Monier 0.980% 0.490% 0.980% 0.490%
Earl A. Samson 0.980% 0.490% 0.980% 0.490%
Howard D. Wolfe, Jr. 0.980% 0.490% 0.980% 0.490%
-------- -------- -------- --------
100.000% 100.000% 100.000% 100.000%
<PAGE>14
SUMMARY OF PARTNERSHIP OWNERSHIP INTERESTS
(Continued)
Fox Chase New Forest
-------------- --------------
% of GP % of Total % of GP % of Total
Interest Ptshp Interest Interest Ptshp Interest
-------- -------------- -------- --------------
General Partners
IGC, L.P. 90.000% 90.000% 90.000% 90.000%
IBC 10.000% 10.000% 10.000% 10.000%
-------- -------- -------- --------
100.000% 100.000% 100.000% 100.000%
% of LP % of LP
Interest Interest
-------- --------
Limited Partners
IBC 0.000% 0.000% 0.000% 0.000%
Overlook Trust 0.000% 0.000% 0.000% 0.000%
Intramuros 0.000% 0.000% 0.000% 0.000%
Little Moose Trust 0.000% 0.000% 0.000% 0.000%
William Chardack 0.000% 0.000% 0.000% 0.000%
Peter Van Dyk Berg 0.000% 0.000% 0.000% 0.000%
Michael Monier 0.000% 0.000% 0.000% 0.000%
Earl A. Samson 0.000% 0.000% 0.000% 0.000%
Howard D. Wolfe, Jr. 0.000% 0.000% 0.000% 0.000%
-------- -------- -------- --------
0.000% 0.000% 0.000% 100.000%
<PAGE>
<PAGE>15
Exhibit C
ASSIGNMENT OF PARTNERSHIP INTEREST
AND AMENDMENT TO THE
GENERAL PARTNERSHIP AGREEMENT OF
NEW FOREST APARTMENTS GENERAL PARTNERSHIP
This Agreement is made as of the 30th day of December, 1994, by and
between Interstate Business Corporation, a Delaware corporation ("IBC") and
Interstate General Company L.P., a Delaware Limited Partnership ("IGC").
WHEREAS, IGC owns a 90% partnership interest as a general partner in
the New Forest Apartments General Partnership, a Maryland general partnership,
(the "Partnership"); and
WHEREAS, IBC owns a 10% partnership interest as a general partner in
the Partnership; and
WHEREAS, IBC wishes to assign a 9.9% general partnership interest in
the Partnership to IGC and to amend the General Partnership Agreement of the
Partnership as amended (the "Partnership Agreement") to reflect the assignment
of general partnership interest from IBC to IGC.
W I T N E S S E T H :
In consideration of the mutual promises of the parties hereto and of
other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, the parties hereto intending legally to be bound hereby
agree as follows:
1. Assignment. IBC does hereby sell, transfer, assign, and convey
to IGC all of its right, title and interest in and to a 9.9% general
partnership interest including but not limited to IBC's interest in the capital
or income of the Partnership attributable to that 9.9% general partnership
interest in the Partnership.
2. Acceptance of Assignment. IGC does hereby accept the assignment
as provided for in Section 1 and by this agreement becomes the owner of an
additional 9.9% general partnership interest in the Partnership.
3. Amendment of Partnership Agreement. The Partnership Agreement
is hereby amended to substitute IGC for IBC as the owner of the additional 9.9%
general partnership interest in the Partnership so that after the assignment
the respective interests of partners shall be as follows:
Percentage of Partnership Interest
----------------------------------
Partner Pre- Assignment Post Assignment
------- --------------- ---------------
IGCLP 90% 99.9%
IBC 10% 0.1%
<PAGE>
<PAGE>16
4. Effective Date. This agreement shall be effective as of
December 30, 1994 subject to the following: (i) the completion of the
refinancing of the outstanding IBC loans from NationsBank affiliates pursuant
to a commitment letter dated December 14, 1994, from Compass Bank, Birmingham,
Alabama, and the release of interests in the Partnership from restrictions and
liens with respect to such loans; and (ii) the receipt of final HUD approval of
the assignment of the partnership interest, being conveyed hereby, to the
extent HUD determines that its approval is required. IBC will complete the
refinancing and obtain the final HUD consent by January 31, 1995. In the event
of any Partnership distributions, IBC will make payments to IGC in amounts
necessary to afford to IGC economic benefits equivalent to full ownership of
the partnership interests being conveyed hereby. This assignment is given
pursuant to and is subject to the provisions of the Agreement of Purchase and
Sale of even date herewith between IGC and IBC (the "Sales Agreement").
5. Representations and Warranties of the IBC.
(a) IBC represents and warrants that it is a corporation in
good standing, duly organized, and existing under the laws of the State of
Delaware, that it has the lawful authority to enter into and perform this
agreement and by proper action has duly authorized the execution, delivery and
performance of this agreement, and that upon execution and delivery of this
agreement by IBC and IGC, this agreement will be valid and binding on IBC and
enforceable against IBC in accordance with its terms. IBC also represents and
warrants that it has made no assignment or attempted assignment of the 9.9%
general partnership interest in the Partnership other than the assignment
contemplated by this agreement and that, on December 30, 1994, provided this
agreement has been executed by IBC and IGC, good and marketable title to the
9.9% general partnership interest in the Partnership will be assigned in
accordance with the terms of this agreement to IGC.
(b) IGC represents and warrants that it is a limited
partnership in good standing, duly organized, and existing under the laws of
the State of Delaware, that it has the lawful authority to enter into and
perform this agreement and by proper action has duly authorized the execution
and delivery of this agreement, and that upon execution and delivery of this
agreement by IBC and IGC, this agreement will be valid and binding on IGC and
enforceable against IGC in accordance with its terms.
6. Governing Law. This agreement shall be construed in accordance
with and governed by the laws of the State of Maryland.
7. Counterparts. This agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute a single agreement.
8. Headings. The headings in this agreement are for convenience
only and do not constitute a part of the agreement.
9. Agreement Entire. Except as provided in the Sales Agreement,
this agreement sets forth all (and it is intended by the parties hereto to be
an integration of all) of the promises, agreements, conditions, understandings,
warranties and representations among the parties hereto with respect to the
matters contained herein, and there are no promises, agreements, conditions,
understandings, warranties or representations, oral or written, expressed or
implied, among them other than as set forth herein.
<PAGE>17
10. Binding Effect. This agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, personal and legal representatives, successors and assigns.
Any conflict between this agreement and the Sales Agreement shall be resolved
in favor of the Sales Agreement.
11. Notices. All notices pertaining to the matters covered by this
agreement shall be sent by certified or registered mail, with return receipt
requested, and first class postage prepaid, (1) if to IGC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602, (2) if to IBC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602. Notices shall be deemed given on
the date they are mailed.
12. Gender and Number. Use of any gender herein shall be deemed to
be or include the other genders and the use of the singular shall be deemed to
be or include the plural (and vice versa) where appropriate.
13. Severability. If any provisions of this agreement, or the
application thereof to any person or circumstance, shall for any reason and to
any extent be invalid and unenforceable, the remainder of this agreement and
the application of such provision to other persons or circumstances shall not
be affected thereby, and shall be enforced.
IN WITNESS WHEREOF the parties hereto have signed this agreement under
seal as of the 30th day of December, 1994.
Attest Interstate Business Corporation
/s/ Martha Haupt By: /s/ James M. Wilson
- -------------------------- ----------------------------
Name: Martha Haupt Name: James M. Wilson
Its: Assistant Secretary Its: President
Interstate General Company, L.P.
By: Interstate General
Management Corporation
Attest General Partner
/s/ Paul Resnik By: /s/ John E. Hans
- -------------------------- ---------------------------
Name: Paul Resnik Name: John E. Hans
Its: Vice President Its: Senior Vice President and
Assistant Secretary
<PAGE>
<PAGE>18
Exhibit C
ASSIGNMENT OF PARTNERSHIP INTEREST
OF
HEADON HOUSE ASSOCIATES, LIMITED PARTNERSHIP
This Agreement is made as of the 30th day of December, 1994, by and
between Interstate Business Corporation, a Delaware corporation ("IBC") and
Interstate General Company L.P., a Delaware Limited Partnership ("IGC").
WHEREAS, IGC is the successor in interest of Interstate General
Properties Limited Partnership S.E., and as such is the sole general partner of
Headon House Associates Limited Partnership a Maryland Limited Partnership,
(the "Partnership"); and
WHEREAS, IBC is the successor in interest to King Charles, Inc. and
is the owner of a 51% share of the limited partnership interests in the
Partnership; and
WHEREAS, IBC wishes to assign a 49.9% share of the limited
partnership interests in the Partnership to IGC.
W I T N E S S E T H :
In consideration of the mutual promises of the parties hereto and of
other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, the parties hereto intending legally to be bound hereby
agree as follows:
1. Assignment. IBC does hereby sell, transfer, assign, and convey
to IGC all of its right, title and interest in and to a 49.9% share of the
limited partnership interests including but not limited to IBC's interest in
the capital or income of the Partnership attributable to that 49.9% share of
the limited partnership interests in the Partnership.
2. Acceptance of Assignment. IGC does hereby accept the assignment
as provided for in Section 1 and in addition to its position as general partner
of the partnership, does hereby agree to serve as a limited partner of the
Partnership and assume all liabilities of a limited partner under the Headon
House Associates Limited Partnership partnership agreement, as amended and
restated, (the "Partnership Agreement") as if it had been named a limited
partner in such Partnership Agreement.
3. Effective Date. This agreement shall be effective as of
December 30, 1994, subject to the following: (i) the completion of the
refinancing of the outstanding IBC loans from NationsBank affiliates pursuant
to a commitment letter dated December 14, 1994, from Compass Bank, Birmingham,
Alabama, and the release of interests in the Partnership from restrictions and
liens with respect to such loans; and (ii) the receipt of final HUD approval of
the assignment of the partnership interest, being conveyed hereby, to the
extent HUD determines that its approval is required. IBC will complete the
refinancing and obtain the final HUD consent by January 31, 1995. In the event
of any Partnership distributions, IBC will make payments to IGC in amounts
necessary to afford to IGC economic benefits equivalent to full ownership of
the partnership interests being conveyed hereby. This assignment is given
pursuant to and is subject to the provisions of the Agreement of Purchase and
Sale of even date herewith between IGC and IBC (the "Sales Agreement").
<PAGE>19
4. Representations and Warranties of the IBC.
(a) IBC represents and warrants that it is a corporation in
good standing, duly organized, and existing under the laws of the State of
Delaware, that it has the lawful authority to enter into and perform this
agreement and by proper action has duly authorized the execution, delivery and
performance of this agreement, and that upon execution and delivery of this
agreement by IBC and IGC, this agreement will be valid and binding on IBC and
enforceable against IBC in accordance with its terms. IBC also represents and
warrants that it has made no assignment or attempted assignment of the 49.9%
share of the limited partnership interests in the Partnership other than the
assignment contemplated by this agreement and that, on December 30, 1994,
provided this agreement has been executed by IBC and IGC, good and marketable
title to the 49.9% share of the limited partnership interests in the
Partnership will be assigned in accordance with the terms of this agreement to
IGC.
(b) IGC represents and warrants that it is a limited
partnership in good standing, duly organized, and existing under the laws of
the State of Delaware, that it has the lawful authority to enter into and
perform this agreement and by proper action has duly authorized the execution
and delivery of this agreement, and that upon execution and delivery of this
agreement by IBC and IGC, this agreement will be valid and binding on IGC and
enforceable against IGC in accordance with its terms.
5. Governing Law. This agreement shall be construed in accordance
with and governed by the laws of the State of Maryland.
6. Counterparts. This agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute a single agreement.
7. Headings. The headings in this agreement are for convenience
only and do not constitute a part of the agreement.
8. Agreement Entire. Except as provided in the Sales Agreement,
this agreement sets forth all (and it is intended by the parties hereto to be
an integration of all) of the promises, agreements, conditions, understandings,
warranties and representations among the parties hereto with respect to the
matters contained herein, and there are no promises, agreements, conditions,
understandings, warranties or representations, oral or written, expressed or
implied, among them other than as set forth herein.
9. Binding Effect. Except as provided in the Sales Agreement, this
agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, executors, administrators, personal and legal
representatives, successors and assigns. Any conflict between this agreement
and the Sales Agreement shall be resolved in favor of the Sales Agreement.
10. Notices. All notices pertaining to the matters covered by this
agreement shall be sent by certified or registered mail, with return receipt
requested, and first class postage prepaid, (1) if to IGC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602, (2) if to IBC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602. Notices shall be deemed given on
the date they are mailed.
<PAGE>
<PAGE>20
11. Gender and Number. Use of any gender herein shall be deemed to
be or include the other genders and the use of the singular shall be deemed to
be or include the plural (and vice versa) where appropriate.
12. Severability. If any provisions of this agreement, or the
application thereof to any person or circumstance, shall for any reason and to
any extent be invalid and unenforceable, the remainder of this agreement and
the application of such provision to other persons or circumstances shall not
be affected thereby, and shall be enforced.
IN WITNESS WHEREOF the parties hereto have signed this agreement under
seal as of the 30th day of December, 1994.
Attest Interstate Business Corporation
/s/ Martha Haupt By: /s/ James M. Wilson
- -------------------------- ----------------------------
Name: Martha Haupt Name: James M. Wilson
Its: Assistant Secretary Its: President
Interstate General Company, L.P.
By: Interstate General
Management Corporation
Attest General Partner
/s/ Paul Resnik By: /s/ John E. Hans
- -------------------------- ---------------------------
Name: Paul Resnik Name: John E. Hans
Its: Vice President Its: Senior Vice President and
Assistant Secretary
<PAGE>
<PAGE>21
Exhibit C
ASSIGNMENT OF PARTNERSHIP INTEREST
AND AMENDMENT TO THE
GENERAL PARTNERSHIP AGREEMENT OF
FOX CHASE APARTMENTS GENERAL PARTNERSHIP
This Agreement is made as of the 30th day of December, 1994, by and
between Interstate Business Corporation, a Delaware corporation ("IBC") and
Interstate General Company L.P., a Delaware Limited Partnership ("IGC").
WHEREAS, IGC owns a 90% partnership interest as a general partner in
the Fox Chase Apartments General Partnership, a Maryland general partnership,
(the "Partnership"); and
WHEREAS, IBC owns a 10% partnership interest as a general partner in
the Partnership, and
WHEREAS, IBC wishes to assign a 9.9% general partnership interest in
the Partnership to IGC and to amend the General Partnership Agreement of the
Partnership as amended (the "Partnership Agreement") to reflect the assignment
of general partnership interest from IBC to IGC.
W I T N E S S E T H :
In consideration of the mutual promises of the parties hereto and of
other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, the parties hereto intending legally to be bound hereby
agree as follows:
1. Assignment. IBC does hereby sell, transfer, assign, and convey
to IGC all of its right, title and interest in and to a 9.9% general
partnership interest including but not limited to IBC's interest in the capital
or income of the Partnership attributable to that 9.9% general partnership
interest in the Partnership.
2. Acceptance of Assignment. IGC does hereby accept the assignment
as provided for in Section 1 and by this agreement becomes the owner of the
additional 9.9% general partnership interest in the Partnership.
3. Amendment of Partnership Agreement. The Partnership Agreement
is hereby amended to substitute IGC for IBC as the owner of the additional 9.9%
general partnership interest in the Partnership so that after the assignment
the respective interests of partners shall be as follows:
Percentage of Partnership Interest
----------------------------------
Partner Pre- Assignment Post Assignment
------- --------------- ---------------
IGCLP 90% 99.9%
IBC 10% 0.1%
<PAGE>
<PAGE>22
4. Effective Date. This agreement shall be effective as of
December 30, 1994, subject to the following: (i) the completion of the
refinancing of the outstanding IBC loans from NationsBank affiliates pursuant
to a commitment letter dated December 14, 1994, from Compass Bank, Birmingham,
Alabama, and the release of interests in the Partnership from restrictions and
liens with respect to such loans; and (ii) the receipt of final HUD approval of
the assignment of the partnership interest, being conveyed hereby, to the
extent HUD determines that its approval is required. IBC will complete the
refinancing and obtain the final HUD consent by January 31, 1995. In the event
of any Partnership distributions, IBC will make payments to IGC in amounts
necessary to afford to IGC economic benefits equivalent to full ownership of
the partnership interests being conveyed hereby. This assignment is given
pursuant to and is subject to the provisions of the Agreement of Purchase and
Sale of even date herewith between IGC and IBC (the "Sales Agreement").
5. Representations and Warranties of the IBC.
(a) IBC represents and warrants that it is a corporation in
good standing, duly organized, and existing under the laws of the State of
Delaware, that it has the lawful authority to enter into and perform this
agreement and by proper action has duly authorized the execution, delivery and
performance of this agreement, and that upon execution and delivery of this
agreement by IBC and IGC, this agreement will be valid and binding on IBC and
enforceable against IBC in accordance with its terms. IBC also represents and
warrants that it has made no assignment or attempted assignment of the 9.9%
general partnership interest in the Partnership other than the assignment
contemplated by this agreement and that, on December 30, 1994, provided this
agreement has been executed by IBC and IGC, good and marketable title to the
9.9% general partnership interest in the Partnership will be assigned in
accordance with the terms of this agreement to IGC.
(b) IGC represents and warrants that it is a limited
partnership in good standing, duly organized, and existing under the laws of
the State of Delaware, that it has the lawful authority to enter into and
perform this agreement and by proper action has duly authorized the execution
and delivery of this agreement, and that upon execution and delivery of this
agreement by IBC and IGC, this agreement will be valid and binding on IGC and
enforceable against IGC in accordance with its terms.
6. Governing Law. This agreement shall be construed in accordance
with and governed by the laws of the State of Maryland.
7. Counterparts. This agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute a single agreement.
8. Headings. The headings in this agreement are for convenience
only and do not constitute a part of the agreement.
9. Agreement Entire. Except as provided in the Sales Agreement,
this agreement sets forth all (and it is intended by the parties hereto to be
an integration of all) of the promises, agreements, conditions, understandings,
warranties and representations among the parties hereto with respect to the
matters contained herein, and there are no promises, agreements, conditions,
understandings, warranties or representations, oral or written, expressed or
implied, among them other than as set forth herein.
<PAGE>23
10. Binding Effect. This agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, personal and legal representatives, successors and assigns.
Any conflict between this agreement and the Sales Agreement shall be resolved
in favor of the Sales Agreement.
11. Notices. All notices pertaining to the matters covered by this
agreement shall be sent by certified or registered mail, with return receipt
requested, and first class postage prepaid, (1) if to IGC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602, (2) if to IBC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602. Notices shall be deemed given on
the date they are mailed.
12. Gender and Number. Use of any gender herein shall be deemed to
be or include the other genders and the use of the singular shall be deemed to
be or include the plural (and vice versa) where appropriate.
13. Severability. If any provisions of this agreement, or the
application thereof to any person or circumstance, shall for any reason and to
any extent be invalid and unenforceable, the remainder of this agreement and
the application of such provision to other persons or circumstances shall not
be affected thereby, and shall be enforced.
IN WITNESS WHEREOF the parties hereto have signed this agreement under
seal as of the 30th day of December, 1994.
Attest Interstate Business Corporation
/s/ Martha Haupt By: /s/ James M. Wilson
- -------------------------- ----------------------------
Name: Martha Haupt Name: James M. Wilson
Its: Assistant Secretary Its: President
Interstate General Company, L.P.
By: Interstate General
Management Corporation
Attest General Partner
/s/ Paul Resnik By: /s/ John E. Hans
- -------------------------- ---------------------------
Name: Paul Resnik Name: John E. Hans
Its: Vice President Its: Senior Vice President and
Assistant Secretary
<PAGE>
<PAGE>24
Exhibit C
ASSIGNMENT OF PARTNERSHIP INTEREST
AND AMENDMENT TO THE AGREEMENT OF
LIMITED PARTNERSHIP OF
PALMER APARTMENTS ASSOCIATES
This Agreement is made as of the 30th day of December, 1994, by and
between Interstate Business Corporation, a Delaware corporation ("IBC") and
Interstate General Company L.P., a Delaware Limited Partnership ("IGC") and
Interstate General Properties Limited Partnership S.E., a Maryland Limited
Partnership ("IGP").
WHEREAS, IGP is the sole general partner of Palmer Apartments
Associates, a Maryland Limited Partnership, (the "Partnership"); and
WHEREAS, IBC is the successor in interest to King Charles, Inc. and
is the owner of a 51% share of the limited partnership interests in the
Partnership; and
WHEREAS, IBC wishes to assign a 49.9% share of the limited
partnership interests in the Partnership to IGC and IGP wishes to amend the
Agreement of Limited Partnership of the Partnership as amended (the
"Partnership Agreement") to reflect the assignment of limited partnership
interests from IBC to IGC.
W I T N E S S E T H :
In consideration of the mutual promises of the parties hereto and of
other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, the parties hereto intending legally to be bound hereby
agree as follows:
1. Assignment. IBC does hereby sell, transfer, assign, and convey
to IGC all of its right, title and interest in and to a 49.9% share of the
limited partnership interests including but not limited to IBC's interest in
the capital or income of the Partnership attributable to that 49.9% share of
the limited partnership interests in the Partnership.
2. Acceptance of Assignment. IGC does hereby accept the assignment
as provided for in Section 1 and in addition to its position as general partner
of the partnership, does hereby agree to serve as a limited partner of the
Partnership and assume all liabilities of a limited partner under the
Partnership Agreement, as if it had been named a limited partner in such
Partnership Agreement and agrees to be, and by this agreement is, admitted to
the Partnership as a limited partner of the Partnership, as an owner of a 49.9%
share of the limited partnership interests in the Partnership.
3. Amendment of Partnership Agreement. The Partnership Agreement
is hereby amended to substitute IGC for IBC as the owner of a 49.9% share of
the limited partnership interests in the Partnership.
4. Effective Date. This agreement shall be effective as of
December 30, 1994, subject to the following: (i) the completion of the
refinancing of the outstanding IBC loans from NationsBank affiliates pursuant
to a commitment letter dated December 14, 1994, from Compass Bank, Birmingham,
Alabama, and the release of interests in the Partnership from restrictions and
<PAGE>25
liens with respect to such loans; and (ii) the receipt of final HUD approval of
the assignment of the partnership interest, being conveyed hereby, to the
extent HUD determines that its approval is required. IBC will complete the
refinancing and obtain the final HUD consent by January 31, 1995. In the event
of any Partnership distributions, IBC will make payments to IGC in amounts
necessary to afford to IGC economic benefits equivalent to full ownership of
the partnership interests being conveyed hereby. This assignment is given
pursuant to and is subject to the provisions of the Agreement of Purchase and
Sale of even date herewith between IGC and IBC (the "Sales Agreement").
5. Representations and Warranties of the IBC.
(a) IBC represents and warrants that it is a corporation in
good standing, duly organized, and existing under the laws of the State of
Delaware, that it has the lawful authority to enter into and perform this
agreement and by proper action has duly authorized the execution, delivery and
performance of this agreement, and that upon execution and delivery of this
agreement by IBC and IGC, this agreement will be valid and binding on IBC and
enforceable against IBC in accordance with its terms. IBC also represents and
warrants that it has made no assignment or attempted assignment of the 49.9%
share of the limited partnership interests in the Partnership other than the
assignment contemplated by this agreement and that, on December 30, 1994,
provided this agreement has been executed by IBC and IGC, good and marketable
title to the 49.9% share of the limited partnership interests in the
Partnership will be assigned in accordance with the terms of this agreement to
IGC.
(b) IGC represents and warrants that it is a limited
partnership in good standing, duly organized, and existing under the laws of
the State of Delaware, that it has the lawful authority to enter into and
perform this agreement and by proper action has duly authorized the execution
and delivery of this agreement, and that upon execution and delivery of this
agreement by IBC and IGC, this agreement will be valid and binding on IGC and
enforceable against IGC in accordance with its terms.
6. Governing Law. This agreement shall be construed in accordance
with and governed by the laws of the State of Maryland.
7. Counterparts. This agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute a single agreement.
8. Headings. The headings in this agreement are for convenience
only and do not constitute a part of the agreement.
9. Agreement Entire. Except as provided in the Sales Agreement,
this agreement sets forth all (and it is intended by the parties hereto to be
an integration of all) of the promises, agreements, conditions, understandings,
warranties and representations among the parties hereto with respect to the
matters contained herein, and there are no promises, agreements, conditions,
understandings, warranties or representations, oral or written, expressed or
implied, among them other than as set forth herein.
10. Binding Effect. This agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, personal and legal representatives, successors and assigns.
Any conflict between this agreement and the Sales Agreement shall be resolved
in favor of the Sales Agreement.
<PAGE>26
11. Notices. All notices pertaining to the matters covered by this
agreement shall be sent by certified or registered mail, with return receipt
requested, and first class postage prepaid, (1) if to IGC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602, (2) if to IBC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602. (3) if to IGP, to 222 Smallwood
Village Center, St. Charles, Maryland 20602. Notices shall be deemed given
on the date they are mailed.
12. Gender and Number. Use of any gender herein shall be deemed to
be or include the other genders and the use of the singular shall be deemed to
be or include the plural (and vice versa) where appropriate.
13. Severability. If any provisions of this agreement, or the
application thereof to any person or circumstance, shall for any reason and to
any extent be invalid and unenforceable, the remainder of this agreement and
the application of such provision to other persons or circumstances shall not
be affected thereby, and shall be enforced.
IN WITNESS WHEREOF the parties hereto have signed this agreement under
seal as of the 30th day of December, 1994.
Attest Interstate Business Corporation
/s/ Martha Haupt By: /s/ James M. Wilson
- -------------------------- ----------------------------
Name: Martha Haupt Name: James M. Wilson
Its: Assistant Secretary Its: President
Interstate General Company, L.P.
By: Interstate General
Management Corporation
Attest General Partner
/s/ Paul Resnik By: /s/ John E. Hans
- -------------------------- ---------------------------
Name: Paul Resnik Name: John E. Hans
Its: Vice President Its: Senior Vice President and
Assistant Secretary
General Partner:
----------------
INTERSTATE GENERAL PROPERTIES
LIMITED PARTNERSHIP S.E.
By: INTERSTATE GENERAL COMPANY L.P.
General Partner
By: INTERSTATE GENERAL
MANAGEMENT CORPORATION
Attest General Partner
/s/ Paul Resnik By: /s/ John E. Hans
- -------------------------- ---------------------------
Name: Paul Resnik Name: John E. Hans
Its: Vice President Its: Senior Vice President and
Assistant Secretary
<PAGE>27
Exhibit C
ASSIGNMENT OF PARTNERSHIP INTEREST
AND AMENDMENT TO THE AGREEMENT OF
LIMITED PARTNERSHIP OF
WAKEFIELD TERRACE ASSOCIATES
This Agreement is made as of the 30th day of December, 1994, by and
between Interstate Business Corporation, a Delaware corporation ("IBC") and
Interstate General Company L.P., a Delaware Limited Partnership ("IGC") and
Interstate General Properties Limited Partnership S.E., a Maryland Limited
Partnership ("IGP").
WHEREAS, IGP is the sole general partner of Wakefield Terrace
Associates, a Maryland Limited Partnership, (the "Partnership"); and
WHEREAS, IBC is the successor in interest to King Charles, Inc. and
is the owner of a 51% share of the limited partnership interests in the
Partnership; and
WHEREAS, IBC wishes to assign a 49.9% share of the limited
partnership interests in the Partnership to IGC and IGP wishes to amend the
Agreement of Limited Partnership of the Partnership as amended (the
"Partnership Agreement") to reflect the assignment of limited partnership
interest from IBC to IGC.
W I T N E S S E T H :
In consideration of the mutual promises of the parties hereto and of
other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, the parties hereto intending legally to be bound hereby
agree as follows:
1. Assignment. IBC does hereby sell, transfer, assign, and convey
to IGC all of its right, title and interest in and to a 49.9% share of the
limited partnership interests including but not limited to IBC's interest in
the capital or income of the Partnership attributable to that 49.9% share of
the limited partnership interests in the Partnership.
2. Acceptance of Assignment. IGC does hereby accept the assignment
as provided for in Section 1 and in addition to its position as general partner
of the partnership, does hereby agree to serve as a limited partner of the
Partnership and assume all liabilities of a limited partner under the
Partnership Agreement, as if it had been named a limited partner in such
Partnership Agreement and agrees to be, and by this agreement is, admitted to
the Partnership as a limited partner of the Partnership, as an owner of a 49.9%
share of the limited partnership interests in the Partnership.
3. Amendment of Partnership Agreement. The Partnership Agreement
is hereby amended to substitute IGC for IBC as the owner of a 49.9% share of
the limited partnership interests in the Partnership.
4. Effective Date. This agreement shall be effective as of
December 30, 1994, subject to the following: (i) the completion of the
refinancing of the outstanding IBC loans from NationsBank affiliates pursuant
to a commitment letter dated December 14, 1994, from Compass Bank, Birmingham,
Alabama, and the release of interests in the Partnership from restrictions and
<PAGE>28
liens with respect to such loans; and (ii) the receipt of final HUD approval of
the assignment of the partnership interest, being conveyed hereby, to the
extent HUD determines that its approval is required. IBC will complete the
refinancing and obtain the final HUD consent by January 31, 1995. In the event
of any Partnership distributions, IBC will make payments to IGC in amounts
necessary to afford to IGC economic benefits equivalent to full ownership of
the partnership interests being conveyed hereby. This assignment is given
pursuant to and is subject to the provisions of the Agreement of Purchase and
Sale of even date herewith between IGC and IBC (the "Sales Agreement").
5. Representations and Warranties of the IBC.
(a) IBC represents and warrants that it is a corporation in
good standing, duly organized, and existing under the laws of the State of
Delaware, that it has the lawful authority to enter into and perform this
agreement and by proper action has duly authorized the execution, delivery and
performance of this agreement, and that upon execution and delivery of this
agreement by IBC and IGC, this agreement will be valid and binding on IBC and
enforceable against IBC in accordance with its terms. IBC also represents and
warrants that it has made no assignment or attempted assignment of the 49.9%
share of the limited partnership interests in the Partnership other than the
assignment contemplated by this agreement and that, on December 30, 1994,
provided this agreement has been executed by IBC and IGC, good and marketable
title to the 49.9% share of the limited partnership interests in the
Partnership will be assigned in accordance with the terms of this agreement to
IGC.
(b) IGC represents and warrants that it is a limited
partnership in good standing, duly organized, and existing under the laws of
the State of Delaware, that it has the lawful authority to enter into and
perform this agreement and by proper action has duly authorized the execution
and delivery of this agreement, and that upon execution and delivery of this
agreement by IBC and IGC, this agreement will be valid and binding on IGC and
enforceable against IGC in accordance with its terms.
6. Governing Law. This agreement shall be construed in accordance
with and governed by the laws of the State of Maryland.
7. Counterparts. This agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute a single agreement.
8. Headings. The headings in this agreement are for convenience
only and do not constitute a part of the agreement.
9. Agreement Entire. Except as provided in the Sales Agreement,
this agreement sets forth all (and it is intended by the parties hereto to be
an integration of all) of the promises, agreements, conditions, understandings,
warranties and representations among the parties hereto with respect to the
matters contained herein, and there are no promises, agreements, conditions,
understandings, warranties or representations, oral or written, expressed or
implied, among them other than as set forth herein.
10. Binding Effect. This agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, personal and legal representatives, successors and assigns.
Any conflict between this agreement and the Sales Agreement shall be resolved
in favor of the Sales Agreement.
<PAGE>29
11. Notices. All notices pertaining to the matters covered by this
agreement shall be sent by certified or registered mail, with return receipt
requested, and first class postage prepaid, (1) if to IGC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602, (2) if to IBC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602. (3) if to IGP, to 222 Smallwood
Village Center, St. Charles, Maryland 20602. Notices shall be deemed given on
the date they are mailed.
12. Gender and Number. Use of any gender herein shall be deemed to
be or include the other genders and the use of the singular shall be deemed to
be or include the plural (and vice versa) where appropriate.
13. Severability. If any provisions of this agreement, or the
application thereof to any person or circumstance, shall for any reason and to
any extent be invalid and unenforceable, the remainder of this agreement and
the application of such provision to other persons or circumstances shall not
be affected thereby, and shall be enforced.
IN WITNESS WHEREOF the parties hereto have signed this agreement under
seal as of the 30th day of December, 1994.
Attest Interstate Business Corporation
/s/ Martha Haupt By: /s/ James M. Wilson
- -------------------------- ----------------------------
Name: Martha Haupt Name: James M. Wilson
Its: Assistant Secretary Its: President
Interstate General Company, L.P.
By: Interstate General
Management Corporation
Attest General Partner
/s/ Paul Resnik By: /s/ John E. Hans
- -------------------------- ---------------------------
Name: Paul Resnik Name: John E. Hans
Its: Vice President Its: Senior Vice President and
Assistant Secretary
General Partner:
----------------
INTERSTATE GENERAL PROPERTIES
LIMITED PARTNERSHIP S.E.
By: INTERSTATE GENERAL COMPANY L.P.
General Partner
By: INTERSTATE GENERAL
MANAGEMENT CORPORATION
Attest General Partner
/s/ Paul Resnik By: /s/ John E. Hans
- -------------------------- ---------------------------
Name: Paul Resnik Name: John E. Hans
Its: Vice President Its: Senior Vice President and
Assistant Secretary
<PAGE>30
Exhibit C
ASSIGNMENT OF PARTNERSHIP INTEREST
AND AMENDMENT TO THE AGREEMENT OF
LIMITED PARTNERSHIP OF
WAKEFIELD THIRD AGE ASSOCIATES
This Agreement is made as of the 30th day of December, 1994, by and
between Interstate Business Corporation, a Delaware corporation ("IBC") and
Interstate General Company L.P., a Delaware Limited Partnership ("IGC") and
Interstate General Properties Limited Partnership S.E., a Maryland Limited
Partnership ("IGP").
WHEREAS, IGP is the sole general partner of Wakefield Third Age
Associates, a Maryland Limited Partnership, (the "Partnership"); and
WHEREAS, IBC is the successor in interest to King Charles, Inc. and
is the owner of a 51% share of the limited partnership interests in the
Partnership; and
WHEREAS, IBC wishes to assign a 49.9% share of the limited
partnership interests in the Partnership to IGC and IGP wishes to amend the
Partnership Agreement of the Partnership (the "Partnership Agreement") to
reflect the assignment of limited partnership interest from IBC to IGC.
W I T N E S S E T H :
In consideration of the mutual promises of the parties hereto and of
other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, the parties hereto intending legally to be bound hereby
agree as follows:
1. Assignment. IBC does hereby sell, transfer, assign, and convey
to IGC all of its right, title and interest in and to a 49.9% share of the
limited partnership interests including but not limited to IBC's interest in
the capital or income of the Partnership attributable to that 49.9% share of
the limited partnership interests in the Partnership.
2. Acceptance of Assignment. IGC does hereby accept the assignment
as provided for in Section 1 and in addition to its position as general partner
of the partnership, does hereby agree to serve as a limited partner of the
Partnership and assume all liabilities of a limited partner under the
Partnership Agreement, as if it had been named a limited partner in such
Partnership Agreement and agrees to be, and by this agreement is, admitted to
the Partnership as a limited partner of the Partnership, as an owner of a 49.9%
share of the limited partnership interests in the Partnership.
3. Amendment of Partnership Agreement. The Partnership Agreement
is hereby amended to substitute IGC for IBC as the owner of a 49.9% share of
the limited partnership interests in the Partnership.
4. Effective Date. This agreement shall be effective as of
December 30, 1994, subject to the following: (i) the completion of the
refinancing of the outstanding IBC loans from NationsBank affiliates pursuant
to a commitment letter dated December 14, 1994, from Compass Bank, Birmingham,
Alabama, and the release of interests in the Partnership from restrictions and
liens with respect to such loans; and (ii) the receipt of final HUD approval of
<PAGE>31
the assignment of the partnership interest, being conveyed hereby, to the
extent HUD determines that its approval is required. IBC will complete the
refinancing and obtain the final HUD consent by January 31, 1995. In the event
of any Partnership distributions, IBC will make payments to IGC in amounts
necessary to afford to IGC economic benefits equivalent to full ownership of
the partnership interests being conveyed hereby. This assignment is given
pursuant to and is subject to the provisions of the Agreement of Purchase and
Sale of even date herewith between IGC and IBC (the "Sales Agreement").
5. Representations and Warranties of the IBC.
(a) IBC represents and warrants that it is a corporation in
good standing, duly organized, and existing under the laws of the State of
Delaware, that it has the lawful authority to enter into and perform this
agreement and by proper action has duly authorized the execution, delivery and
performance of this agreement, and that upon execution and delivery of this
agreement by IBC and IGC, this agreement will be valid and binding on IBC and
enforceable against IBC in accordance with its terms. IBC also represents and
warrants that it has made no assignment or attempted assignment of the 49.9%
share of the limited partnership interests in the Partnership other than the
assignment contemplated by this agreement and that, on December 30, 1994,
provided this agreement has been executed by IBC and IGC, good and marketable
title to the 49.9% share of the limited partnership interests in the
Partnership will be transferred in accordance with the terms of this agreement
to IGC.
(b) IGC represents and warrants that it is a limited
partnership in good standing, duly organized, and existing under the laws of
the State of Delaware, that it has the lawful authority to enter into and
perform this agreement and by proper action has duly authorized the execution
and delivery of this agreement, and that upon execution and delivery of this
agreement by IBC and IGC, this agreement will be valid and binding on IGC and
enforceable against IGC in accordance with its terms.
6. Governing Law. This agreement shall be construed in accordance
with and governed by the laws of the State of Maryland.
7. Counterparts. This agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute a single agreement.
8. Headings. The headings in this agreement are for convenience
only and do not constitute a part of the agreement.
9. Agreement Entire. Except as provided in the Sales Agreement,
this agreement sets forth all (and it is intended by the parties hereto to be
an integration of all) of the promises, agreements, conditions, understandings,
warranties and representations among the parties hereto with respect to the
matters contained herein, and there are no promises, agreements, conditions,
understandings, warranties or representations, oral or written, expressed or
implied, among them other than as set forth herein.
10. Binding Effect. This agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, personal and legal representatives, successors and assigns.
Any conflict between this agreement and the Sales Agreement shall be resolved
in favor of the Sales Agreement.
<PAGE>32
11. Notices. All notices pertaining to the matters covered by this
agreement shall be sent by certified or registered mail, with return receipt
requested, and first class postage prepaid, (1) if to IGC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602, (2) if to IBC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602. (3) If to IGP, to 222 Smallwood
Village Center, St. Charles, Maryland 20602. Notices shall be deemed given on
the date they are mailed.
12. Gender and Number. Use of any gender herein shall be deemed to
be or include the other genders and the use of the singular shall be deemed to
be or include the plural (and vice versa) where appropriate.
13. Severability. If any provisions of this agreement, or the
application thereof to any person or circumstance, shall for any reason and to
any extent be invalid and unenforceable, the remainder of this agreement and
the application of such provision to other persons or circumstances shall not
be affected thereby, and shall be enforced.
IN WITNESS WHEREOF the parties hereto have signed this agreement under
seal as of the 30th day of December, 1994.
Attest Interstate Business Corporation
/s/ Martha Haupt By: /s/ James M. Wilson
- -------------------------- ----------------------------
Name: Martha Haupt Name: James M. Wilson
Its: Assistant Secretary Its: President
Interstate General Company, L.P.
By: Interstate General
Management Corporation
Attest General Partner
/s/ Paul Resnik By: /s/ John E. Hans
- -------------------------- ---------------------------
Name: Paul Resnik Name: John E. Hans
Its: Vice President Its: Senior Vice President and
Assistant Secretary
General Partner:
----------------
INTERSTATE GENERAL PROPERTIES
LIMITED PARTNERSHIP S.E.
By: INTERSTATE GENERAL COMPANY L.P.
General Partner
By: INTERSTATE GENERAL
MANAGEMENT CORPORATION
Attest General Partner
/s/ Paul Resnik By: /s/ John E. Hans
- -------------------------- ---------------------------
Name: Paul Resnik Name: John E. Hans
Its: Vice President Its: Senior Vice President and
Assistant Secretary
<PAGE>1
EXHIBIT 10(eeee)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered this 14th day of
December, 1993 between INTERSTATE GENERAL PROPERTIES LIMITED PARTNERSHIP S.E.,
a Maryland partnership (the "Company") and MR. DONALD DREW, a resident of San
Juan, Puerto Rico (the "Executive").
Background
The Company and Executive desire to enter into this Agreement to evidence
the employment of Executive as Senior Vice President of the Company, and to set
forth the respective rights and duties hereto. This Agreement also sets forth
certain covenants and agreements by Executive regarding post-employment
competition with the Company, and the disclosure of confidential information
and trade secrets of the Company.
NOW THEREFORE, the parties agree as follows:
1. EMPLOYMENT.
(a) The Company hereby employs Executive as Senior Vice President and
Executive hereby accepts such employment on the terms and conditions
set forth herein. Subject to the general supervision and authority
of the managing general partner of the Company, Executive will
perform such duties and exercise such authority as is customarily
performed and exercised by such officer of a substantial business
enterprise, in good faith and in accordance with standards of
reasonable commercial judgment.
(b) At all times during the term hereof, Executive will devote his best
efforts to his employment hereunder. Executive's major area of
responsibility during the term hereof is to serve as the chief
executive consultant to El Comandante Operating Company ("ECOC"), the
operator of the El Comandante Race Track in Canovanas, Puerto Rico
(the "Race Track"), under a consulting agreement between the Company
and ECOC, and to provide, senior management services in connection
with gaming industry business conducted by the Company of its
affiliates.
(c) Except for travel as required in connection with such duties,
Executive's duties will be performed in Puerto Rico during the term
of this Agreement. Executive will devote his full working time and
attention to the business of the Company (including at least eighty-
five percent of his working time in performing services for ECOC) and
his services hereunder will be at all times on behalf of and for the
benefit of the Company.
(d) Executive shall not, without the prior written consent of the
Company, directly or indirectly, during the term of this employment:
(i) other than in the performance of duties naturally inherent to
the business of the Company, its affiliates or ECOC in and
furtherance thereof, devote any appreciable amount of his
business time, energies, and attention to the business of any
<PAGE>2
other person or firm, whether for compensation or otherwise;
provided, however, that Executive may accept directorships
approved by the managing general partner of the Company, which
approval shall not be unreasonably withheld, and invest his
assets in such form and manner as will not violate subparagraph
(ii) below; or
(ii) engage in any activity competitive with or adverse to the
business and welfare of the Company, its affiliates or ECOC
whether alone, as a partner, or an officer, director, employee,
or shareholder of any other corporation or otherwise, directly
or indirectly. Notwithstanding anything contained in this
paragraph 1 to the contrary, the ownership of not more than five
percent (5%) of the stock or other interest of any publicly-
traded corporation or other entity shall not be deemed violative
of this subparagraph (ii).
(e) The agreement between Housing Development Associates S.E. ("HDA") and
Executive, attached hereto and marked "Attachment A", in no way
violates this Agreement.
2. TERM.
(a) This Agreement shall begin as of January 1, 1993 ("the Commencement
Date") and shall remain in effect through December 31, 1997 (the
"Termination Date").
(b) This Agreement may be extended by the Company and the Executive for a
mutually agreeable period, subject to the concurrence of HDA, the
owner of the Race Track, or its successor.
3. COMPENSATION.
(a) For all services which Executive may render to the Company, the
Company agrees to pay the Executive, and Executive agrees to accept,
a salary (the "Annual Salary") of Three Hundred Forty Thousand
Dollars ($340,000) per year, and remain at that level during the term
of this Agreement. The Annual Salary for each calendar year or
portion thereof during the term hereof shall be paid to Executive on
the regularly-recurring pay periods established by the Company, but
in no event in less than equal semi-monthly installments, less
required payroll deductions.
(b) In addition to the Annual Salary, the Company shall provide Executive
with a Company car suitable to his position, and will pay the cost of
his membership and dues at the Dorado Beach Country Club.
4. VACATION AND OTHER BENEFITS.
(a) Executive shall be entitled to four weeks vacation each year, as well
as other employment benefits, including medical, dental and
hospitalization and life insurance, which benefits will not be less
than the benefits and coverage provided by the Company to other
Senior Vice Presidents.
(b) The Executive will participate in the Company's pension plan.
<PAGE>3
(c) The Company will pay to Executive, on an annual basis, within one
hundred twenty (120) days after the closing of books for the
corresponding fiscal year, a Bonus equal to (a) 3% of Basic Rent (as
defined in the Lease Agreement between ECOC and HDA) payable by ECOC
for the calendar year, less (b) $340,000 and less (c) any amounts
paid or payable by the Company for such calendar year pursuant to the
Company's profit sharing plan.
Except as otherwise provided herein, nothing herein is intended
or shall be construed to require the Company to institute or continue
in effect any particular plan or benefit. Expenditures for the
purposes of satisfying the obligations set forth in this paragraph
are to be borne by the Company to the extent so provided by any plan
described herein or so determined with respect to any benefit
described herein. Such expenditures in the aggregate, shall, in all
events, be reasonable.
5. EXPENSES.
The Company or ECOC shall pay all reasonable expenses incurred by
Executive in the performance of his responsibilities and duties hereunder,
all in accordance with the respective policies of the Company or ECOC in
effect from time to time during the term hereof. Executive shall submit
periodic statements to the Company or ECOC of all expenses so incurred.
6. NON-COMPETITION.
Executive expressly covenants and agrees that, during the term of
his employment hereunder and for a period of two (2) years thereafter, he
will not, directly or indirectly either himself or for any other person,
partnership, corporation, company or entity, participate (as defined
below) in any enterprise involved in the horse racing or gaming industries
in Puerto Rico, Virginia or any territory where the Company or any
affiliate for whom Executive has performed services is engaged in the
gaming business (collectively "Prohibited Activities"). For purposes of
this agreement, the term "participate" means acting as a consultant or
advisor to, or acquiring any direct or indirect interest in any
enterprises, whether as a stockholder, partner, officer, director,
employee or otherwise (other than by ownership of less than five percent
of the stock of a publicly-held corporation).
Executive hereby acknowledges and agrees that the injury and damage
to the Company arising out of his participation in Prohibited Activities
will be immediate and irrevocable. Accordingly, Executive hereby agrees
that the restrictions upon him under this paragraph 6 are reasonable in
scope, duration, and geographic territory.
7. NON-DISCLOSURE.
(a) Executive specifically acknowledges that, in his fiduciary capacity
hereunder, he will become aware of:
(i) valuable and sensitive information relative to the business of
ECOC, the Company, its affiliates, and their respective clients,
including technical information, designs, systems, processes,
procedures, and improvements, whether patentable or not, which
is of value to the Company (Trade Secrets") and
<PAGE>4
(ii) proprietary and confidential data or information that is
valuable to ECOC, the Company, its affiliates, and their
respective clients, and that is unknown to the general public,
including such information as financial, marketing, and
distribution plans and projections, and the services supplied to
same.
(b) Executive agrees that, except as required and authorized by the
Company in the conduct of its business or by subpoena, or other
court or governmental order, during his employment with the Company
and for a period of two (2) years thereafter, he will not, in any
manner, directly or indirectly, divulge, disclose, or communicate to
any competitor or any other person any Confidential Information.
Executive understands and acknowledges that all such information is
confidential in nature and that it is essential to the success of the
Company that such Confidential Information be kept secret and not
revealed to any Competitor or other person whatsoever.
(c) Executive agrees that all Trade Secrets of the Company shall remain
the exclusive property of the Company, and Executive expressly
covenants that such Trade Secrets shall be kept secret and shall not
be disclosed by him to any Competitor of the Company or any other
person or entity.
8. NON-SOLICITATION.
During the period of his employment with the Company and for a
period of two (2) years after the termination thereof for any reason
whatsoever, Executive shall not, directly or indirectly, solicit divert,
induce, or take away (a) any employees of the Company or (b) any business
or business opportunity of ECOC, the Company of any other affiliate of
which he became aware in connection with his employment hereunder.
9. REMEDIES, DAMAGES, INJUNCTIONS, AND SPECIFIC PERFORMANCE.
(a) The parties agree that any of the covenants, agreements, and services
to be rendered by Executive hereunder shall survive any termination
of this Agreement and are special, unique, and of an extraordinary
character. In the event of the breach or threatened breach by
Executive of any term or provision hereof to be performed by him
hereunder, including without limitation paragraphs 6., 7., or 8., the
Company may institute and prosecute proceedings in any court of
competent jurisdiction, at law, or in equity, to (i) obtain damages
for any breach of this Agreement, (ii) order the specific performance
hereof by Executive, (iii) enjoin Executive from breaching such
provision(s), and (iv) obtain any other remedies available at law or
in equity.
(b) If any legal proceeding is initiated by the Company to enforce any of
the provisions of paragraph 6, 7 or 8, the period of time set forth
in the provision(s) under which such proceedings arose, during which
Executive is prohibited from taking certain actions or from engaging
in certain activities, shall be extended by the period of time
beginning with the date any such action or proceeding is dismissed,
with or without prejudice. If the Company seeks to enjoin Executive
from breaching any provision(s), Executive hereby waives the defense
that the Company has, or will then have, an adequate remedy at law.
<PAGE>5
10. ILLNESS, INCAPACITY, OR DEATH DURING EMPLOYMENT.
(a) If, by reason of illness or incapacity, Executive is unable to
perform his services or discharge his duties hereunder for ninety
(90) or more consecutive days, then, upon sixty (60) days prior
notice, the Company may terminate the employment of Executive. In
the event of such termination, Executive shall have the right to
assume payment obligations for an continue coverage with any and all
insurance policies or health protection plans previously afforded by
the Company, to the extend permitted under the terms of any such
policies or plan.
(b) In the vent of Executive's death, all obligations of the Company
under this Agreement shall terminate, except that Executive's legal
heirs shall be paid all salaries and other accrued benefits and shall
receive reimbursement of all expenses reasonably incurred by
Executive in performing his responsibilities and duties for the
Company prior to and including such date.
11. TERMINATION OF EMPLOYMENT.
(a) The employment of Executive under this Agreement and the term hereof
may be terminated by the Company by reason of Executive's:
(i) failure to perform his responsibilities in accordance with the
standards described in paragraph 1(a) and (b), or
(ii) negligence or willful misconduct of Executive, or
(iii) commission of a fraud or felony during the term of this
Agreement, or any extension, renewal, modification or amendment
of same; or
(iv) breach of any material provision hereof.
(b) If HDA sells the Race Track, this Agreement will be deemed terminated on
sale closing date.
(c) In the event that the employment of Executive under this Agreement is
terminated by the Company pursuant to paragraph 10, 11(a) or 11(b) or if
Executive's employment under this Agreement is voluntarily terminated by
the parties for any reason whatsoever, then, in any such event, Executive
shall forfeit all rights Executive might otherwise have to any Annual
Salary, or incentive compensation past the effective date of termination.
12. SEPARABILITY AND REFORMATION.
All provisions of this Agreement shall be considered as separate
terms and conditions and in the event any one shall be held illegal, invalid,
or unenforceable, all other provisions shall be enforced as if the illegal,
invalid, or unenforceable provision were not a part of this Agreement. If the
scope of any provision contained in this Agreement is too broad to permit
enforcement of such provision to its full extent, then such provision shall be
enforced to the maximum extend permitted by law, and the Executive hereby
consents that such scope may be modified accordingly in any proceeding brought
to enforce such provision.
<PAGE>6
13. ASSIGNMENT; BINDING AGREEMENT.
The rights and obligations of the Company shall inure to the benefit
of and shall be binding upon the successors and assigns of the Company. This
Agreement may be assigned by the Company to any entity that will employ
Executive in the capacity described in paragraph 1 hereof and that will assume
the obligations of the Company hereunder, and such assignment shall be binding
upon Executive.
14. NOTICES.
Any notice to be given to the Company shall be addressed to such
party at the address of its principal place of business, and any notice to be
given to Executive shall be addressed to him at his home address last shown on
the records of the Company, or to such other address as a party may hereafter
designate in writing to the other. Any such notice have been duly given or
hand delivered or enclosed in a properly sealed envelope, addressed as
aforesaid, postage prepaid, registered or certified mail, return receipt
requested, and deposited in a post office or branch post office regularly
maintained by the United States Government.
15. WAIVER.
Either party's failure to enforce any provision hereof shall not in
any way be construed as a waiver of any such provision or provisions as to the
future violation thereof, nor prevent that party from thereafter enforcing any
other provision of this Agreement. The rights granted the parties herein are
cumulative, and the waiver by a party of any single remedy shall not
constitute a waiver of such party's right to assert all other remedies
available to him or it under the circumstances.
16. GOVERNING LAW.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Puerto Rico and the parties bind themselves to submit to the
jurisdiction of the courts of the Commonwealth of Puerto Rico for the
resolution of any and all disputes concerning this Agreement.
17. CAPTIONS AND PARAGRAPH HEADING.
Captions and paragraph headings used herein are for convenience only
and are not a part of this Agreement and shall not be used in construing it.
18. COUNTERPARTS.
This Agreement may be executed in several counterparts, each of
which shall be an original but all of which, when taken together, shall
constitute one and the same instrument.
19. ENTIRE AGREEMENT; MODIFICATION.
This Agreement constitutes the entire Agreement of the parties with
respect to the subject matter hereof and may not be changed orally, but only
by an agreement in writing signed by the party against whom the enforcement of
any waiver, change modification, extension, or discharge is sought.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
<PAGE>7
INTERSTATE GENERAL PROPERTIES DONALD DREW
LIMITED PARTNERSHIP S.E.
By: /s/ Donald G. Blakeman /s/ Donald Drew
------------------------- ---------------------------------
Donald G. Blakeman
Executive Vice President<PAGE>
<PAGE>8
Attachment A
December 14, 1993
Mr. Donald Drew
1485 Ashford Avenue
Apt. 1703 N
Condado, Puerto Rico 00907
Dear Don:
This will serve to confirm our agreement regarding the terms under which you
will be compensated by Housing Development Associates S.E. (hereinafter "HDA")
for your participation in the sale or any of the other contemplated
transactions described below involving El Comandante Race Track (hereinafter
"the Race Track") during the term of your employment agreement dated December
14, 1993, ("Employment Agreement") with Interstate General Properties Limited
Partnership S.E., which expires December 31, 1997 unless terminated earlier
pursuant to the terms of the Employment Agreement.
If the Race Track is sold, you will receive $500,000. If a portion of
HDA's interest is sold in connection with a refinancing or otherwise, you
will receive a prorate portion of $500,000 (i.e. if 25% sold, you receive
$125,000). If the balance of HDA's interest or the Race Track is later
sold, you will be paid an additional portion of the $500,000.
If HDA becomes a publicly traded partnership or corporation and sells
interest to third party investors, you will receive a prorate share of
the $500,000 (i.e. if 25% sold to public, you receive $125,000). If you
so desire, you may take the amount received (i.e. $125,000) or any
portion thereof and invest it at the time of the public offering in the
publicly traded partnership or corporation thus created at the public
issue price, and HDA will reimburse you for 25% of the public issue
price. The total compensation paid pursuant to this paragraph and the
preceding paragraph will never exceed $500,000 in the aggregate.
In addition, HDA will give you options to purchase units or shares equal
to the number of shares you purchase pursuant to the above paragraph, at
the original issue price to third parties. The options will contain the
same terms and conditions as any other options issued by HDA. If no
other options are issued by HDA, the vesting provisions commencing on the
date the options are granted and termination terms will be on the same
basis as set forth in the IGC Unit Option Plan, as amended and restated
as of December 14, 1992.
This letter agreement shall automatically terminate upon the termination of the
Employment Agreement.
<PAGE>
<PAGE>9
We trust the foregoing reflects our complete agreement on this matter. If you
concur, please sign the copy of this letter which is enclosed for this purpose.
Very truly yours,
HOUSING DEVELOPMENT ASSOCIATES S.E.
By: Interstate General Properties Limited
Partnership S.E., its Managing Partner
By: Interstate General Company L.P.,
its General Partner
By: Interstate General Management Corporation,
its Managing General Partner
By: /s/ Donald G. Blakeman
---------------------------------------
Donald G. Blakeman
Executive Vice President
AGREED:
/s/ Donald Drew December 14, 1993
- ------------------------------ -----------------
Donald Drew Date
<PAGE>1
EXHIBIT 21
List of Subsidiaries of Registrant
----------------------------------
St. Charles Associates Limited Partnership, a Maryland limited partnership
Interstate General Properties Limited Partnership S.E., a Maryland limited
partnership
Astoria Inc., a Pennsylvania corporation
Brandywine Investment Associates Limited Partnership, a Maryland limited
partnership
Interstate Acceptance Corporation I, a Delaware corporation
Maryland Cable Limited Partnership, a Maryland limited partnership
Crossland Associates Limited Partnership, a Maryland limited partnership
Wakefield Third Age Associates Limited Partnership, a Maryland limited
partnership
Wakefield Terrace Associates Limited Partnership, a Maryland limited
partnership
Headen House Associates Limited Partnership, a Maryland limited partnership
Palmer Apartments Associates Limited Partnership, a Maryland limited
partnership
Huntington Associates Limited Partnership, a Maryland limited partnership
Essex Apartments Associates, a Virginia limited partnership
Bannister Associates Limited Partnership, a Maryland limited partnership
Rio Piedras Associates Limited Partnership, a New York limited partnership
Piedras Americas Limited Partnership, a New York limited partnership
Monacillos Associates Limited Partnership, an Illinois limited partnership
Las Lomas Associates Limited Partnership, an Illinois limited partnership
San Anton Associates Limited Partnership, a Massachusetts limited partnership
Monte de Oro Associates Limited Partnership, a Maryland limited partnership
Interstate General Realty, Inc., a Delaware corporation
New Center Associates Limited Partnership, a Maryland limited partnership
<PAGE>2
Monserrate Associates Limited Partnership, a Maryland limited partnership
Carolina Associates Limited Partnership, a Maryland limited partnership
Alturas del Senorial Associates Limited Partnership, a Maryland limited
partnership
Jardines de Camparra Associates Limited Partnership, a Maryland limited
partnership
Colinas de San Juan Associates Limited Partnership, a Maryland limited
partnership
Bayamon Gardens Associates Limited Partnership, a Maryland limited partnership
Turabo Limited Dividend Partnership, a Massachusetts limited partnership
Valle del Sol Limited Partnership, a Maryland limited partnership
Lancaster Apartments Limited Partnership, a Maryland limited partnership
Chastleton Apartments Associates, a District of Columbia limited partnership
Fox Chase Apartments General Partnership, a Virginia general partnership
New Forest Apartments General Partnership, a Maryland general partnership
Coachman's Limited Partnership, a Maryland limited partnership
Housing Development Associates S.E., a Puerto Rico partnership
Land Development Associates S.E., a Puerto Rico partnership
Interstate Waste Technologies, Inc., a Delaware corporation
Brookside Gardens Limited Partnership, a Maryland limited partnership
IWT Freehold, Inc., a Delaware corporation
IWT Bridgeport, Inc., a Delaware corporation
Sports Realty, Inc., a Delaware corporation
Virginia Jockey Club, Inc., a Virginia corporation
Equus Gaming Company, a Virginia general partnership
Darby Station Apartments Limited Partnership, a Maryland limited partnership
American Family Homes, Inc., a Delaware corporation
Equus Management Corporation, a Delaware corporation
Lakeside Apartments Limited Partnership, a Maryland limited partnership
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 6,833<F1>
<SECURITIES> 0
<RECEIVABLES> 4,840
<ALLOWANCES> 1,957
<INVENTORY> 72,927
<CURRENT-ASSETS> 0
<PP&E> 3,535
<DEPRECIATION> 1,947
<TOTAL-ASSETS> 123,513
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 40,705
<TOTAL-LIABILITY-AND-EQUITY> 123,513
<SALES> 42,561
<TOTAL-REVENUES> 63,426
<CGS> 33,478
<TOTAL-COSTS> 39,560
<OTHER-EXPENSES> 10,966
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,032
<INCOME-PRETAX> 10,868
<INCOME-TAX> 3,511
<INCOME-CONTINUING> 6,641
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,641
<EPS-PRIMARY> .66
<EPS-DILUTED> .66
<FN>
<F1>Balance includes $5,713 of restricted cash.
</FN>
</TABLE>
