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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
-
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO ____
COMMISSION FILE NUMBER 33-89076
WEITZER HOMEBUILDERS INCORPORATED
(Exact name of registrant as specified in its charter)
FLORIDA 65-0502494
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5901 N.W. 151ST STREET
SUITE 120
MIAMI LAKES, FLORIDA 33014
(Address of principal executive offices)
(305) 819-4663
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: CLASS A COMMON
STOCK, $.01 PAR VALUE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of December 16, 1998 was approximately $842,131 based on the $0.36
closing price for the Class A Common Stock as reported on the over-the-counter
market on such date.
As of December 16, 1998, Weitzer Homebuilders Incorporated had 4,145,968
shares of Class A Common Stock, $.01 par value, and 1,500,000 shares of Class B
Common Stock, $.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
CERTAIN EXHIBITS LISTED IN PART IV ARE INCORPORATED BY REFERENCE TO CERTAIN OF
THE COMPANY PUBLIC FILINGS MADE PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934,
INCLUDING THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER
30, 1996, THE COMPANY'S QUARTERLY REPORTS ON FORM 10-Q FOR THE QUARTERS ENDED
MARCH 31, 1996, JUNE 30, 1996, DECEMBER 31, 1996 AND MARCH 31, 1997, REPORT ON
FORM 8-K FILED ON AUGUST 3, 1998, AND THE COMPANY'S REGISTRATION STATEMENT ON
FORM S-1 FILED PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1933, AS AMENDED.
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PART I
ITEM 1. BUSINESS
GENERAL
Weitzer Homebuilders Incorporated (the "Company"), organized in Florida in
1994, is engaged, through its subsidiaries, primarily in the design,
construction and sale of single-family homes and townhomes in Miami-Dade and
Broward Counties located in Southeast Florida. The Company offers a wide
variety of moderately priced homes that are designed to appeal to the entry
level and first time move-up buyers. Since inception, the Company has
delivered over 2,300 homes, including 440 in the fiscal year ended September
30, 1998. Base sales prices of the Company's homes range from approximately
$84,000 to $260,000 and the average sales price of homes delivered during the
fiscal year ended September 30, 1998 was approximately $115,000. At present,
the Company is offering homes for sale in seven communities. At September 30,
1998, the Company had 980 available lots for sale. There is no assurance that
all lots available for home construction will in fact be used for construction
of homes since construction and sales of homes are subject to a variety of
factors, including, without limitation, general and local economic conditions,
availability of financing, interest rates and government regulation.
The Company's principal executive offices are located at 5901 N.W. 151st
Street, Suite 120, Miami Lakes, Florida 33014, (305) 819-4663.
OPERATING STRATEGY
The current operating strategy of the Company currently emphasizes the
following elements:
AFFORDABLE HOUSING AND VALUE PRICING. The Company offers a wide variety of
affordable to moderately priced homes that are designed to appeal to the
entry-level and first time move-up buyers. The Company strives to price its
homes competitively, while providing perceived innovative designs, including
architectural details and amenities in several of its projects typically found
in more expensive homes, such as cathedral ceilings, recessed lighting, glass
block, security and intercom systems. The Company's models afford prospective
homebuyers a variety of options and features so that they may customize their
designs to suit their needs. In 1998, Weitzer built both detached single
family homes and townhomes, each of which was offered in three different
product types.
CONSTRUCTION WARRANTY. The Company acts as the general contractor for its
projects and requires that its subcontractors and suppliers use quality,
durable materials in the construction of its homes. The Company generally
provides home buyers with at least a one-year warranty on workmanship and
building materials and a ten-year structural warranty.
COST CONTROLS. In general, the Company attempts to reduce certain risks in
the homebuilding industry and maximize its financial resources by: (i)
acquiring land for development through seller financing (which generally
allows for more favorable payment terms and lower closing costs); (ii)
utilizing options and other similar agreements whereby the Company provides a
relatively small deposit to obtain the right to purchase a specified number of
lots over some period of time so long as
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it exercises a certain number of options pursuant to a periodic takedown
schedule; (iii) obtaining required zoning entitlements prior to purchasing
land; (iv) for the most part, beginning construction of a home only after
execution of a sales contract, receipt of a down payment and, where
applicable, the buyer's receipt of mortgage approval; (v) using subcontractors
on a fixed price basis; and (vi) obtaining volume discounts on construction
materials.
SOUTH FLORIDA MARKET. Although the Company is continuously evaluating
locations for new residential communities, the Company anticipates that in the
near term its business and earnings will continue to be derived principally
from the South Florida market. Based on the Company's knowledge of the South
Florida homebuilding market, the Company believes it has certain competitive
advantages in such market, including understanding of and experience with, the
local market; controls and cost savings that result from the Company's
centralized operations; and an experienced sales force that is generally
employed on a long-term rather than project-by-project basis.
LAND ACQUISITION AND DEVELOPMENT
The Company acquires both improved building lots ready for construction,
and tracts of land that require site improvements prior to construction.
Generally, the Company attempts to acquire or control at least 100 lots in a
development to achieve economies of scale in its marketing activities. When
contemplating the purchase of land for development, the Company considers the
cost of the land, the desirability of the proposed project to targeted
homebuyers, population growth patterns, competitive conditions and available
financing. The Company's land purchase agreements are typically subject to
numerous conditions, including, but not limited to, the Company's ability to
obtain or verify the necessary zoning and other governmental approvals for the
proposed subdivision. During the investigation period, the Company also
confirms the availability of utilities, conducts hazardous waste and other
environmental analyses, arranges construction financing and completes its
marketing feasibility studies. As a result, the Company is generally able to
begin development activities immediately after closing the land purchase.
The Company attempts to reduce the financial risks and capital requirements
associated with maintaining its own inventory of lots by utilizing options and
other similar agreements pursuant to which the Company provides a deposit and
obtains the right to purchase a specified number of lots over a period of time
so long as it exercises a certain number of its options pursuant to a periodic
takedown schedule. These agreements generally are on a nonrecourse basis, so
that if the Company does not meet the takedown schedule, its only financial
risk is forfeiture of a deposit. Generally, the options are exercised only
after prospective home buyers have executed a sales contract and made a down
payment; however, the options may be exercised without having pre-sold the
lots in order for the Company to preserve its option to purchase the remaining
lots.
The Company devotes time and effort in developing a design and marketing
concept for each of its subdivisions, which includes a determination of size,
style and price range of the homes, layout of streets, layout of individual
lots and overall community design. The product line offered in a particular
subdivision depends upon many factors, including the housing generally
available in the area, the needs of the particular market and the Company's
cost of lots in the subdivision. The
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Company then undertakes development activities that include site planning,
engineering and construction of roads, sewer, water and drainage
facilities.
Summary of Residential Projects
The following information concerns the projects currently being
developed as of September 30, 1998:
Current Projects
<TABLE>
<CAPTION>
Homes
Delivered Range of Base
Number Since Lot Year Home Prices
Name Location of Homes Inception Inventory Opened (000s)
---- -------- -------- --------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Malibu Bay Pembroke Pines (Broward)
500 143 357 1997 $ 86 - 107
Serena Lakes II Miami-Dade 376 375 1 1993 $ 86 - 107
Serena Lakes Townhomes Miami-Dade 264 264 0 1994 $ 80 - 85
Harmony Lakes Davie (Broward) 407 291 116 1995 $ 120 - 176
Hammocks Deerfield Beach (Broward)
151 147 4 1995 $ 120 - 144
Tesoro at Forest Lakes Miami-Dade 251 155 96 1996 $ 107 - 130
Lago Del Sol Miami-Dade 284 49 235 1997 $ 84 - 87
Fiesta Miami-Dade 70 0 70 1998 $ 100 - 130
Los Castillos at Windsor
Palms Miramar (Broward) 102 1 101 1998 $ 210 - 260
</TABLE>
Descriptions of the Company's projects follow:
Malibu Bay. Located in Pembroke Pines, Broward County, Florida, this
townhome community of 500 lots is offered to the first time homebuyer.
Community amenities include a clubhouse and recreation facility, pool/sun
deck, tennis courts and basketball court.
Harmony Lakes. Located in the Town of Davie, in Broward County, Florida,
this community has 236 single-family homes targeted to first-time move-up
buyers and 171 townhomes targeted to entry level buyers, retirees and
first-time move-up buyers as well. The community contains a recreation
facility complete with community pool.
Hammocks. Located in the City of Deerfield Beach, in Broward County,
Florida, includes 151 single-family homes. This lakeside community targets
both the entry-level buyer and the first-time move-up buyer. Units in this
community are effectively sold out.
Tesoro at Forest Lakes. Located in West Kendall, Miami-Dade County Florida,
this townhome/villa community of 251 lots is located in the master planned
community of Forest Lakes. Tesoro at Forest Lakes targets the entry-level
homebuyer.
Lago del Sol. Located in Southwest Miami-Dade County, Florida, this
townhome community of 284 lots is offered to first time homebuyers.
Community amenities include a cabana, pool and sun deck.
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Fiesta. Located in Southwest Miami-Dade County, Florida, this community is
near the Serena Lakes community and includes 70 single-family homes.
Targeting first-time homebuyers, the homes range from 1,300 to 1,900 square
feet and are priced from $100,000 to $130,000. Sales commenced in February
1998.
Los Castillos at Windsor Palms. This community of 102 upscale homes located
in Miramar, Southwest Broward County, Florida, targets move-up buyers and
provides larger homes ranging from 2,500 to 3,600 square feet at base selling
prices ranging from $210,000 to $260,000. Sales commenced in February 1998.
CONSTRUCTION
The Company, directly or indirectly through an affiliate, acts as the
general contractor for the construction of its residential developments. The
general contractor's functions include monitoring the construction of each
project (including monitoring compliance with zoning and building codes),
participating in all significant design and building decisions, coordinating
the activities of subcontractors and suppliers and controlling the quality and
cost of the work. Subcontractors and material suppliers typically are retained
after competitive bidding at a fixed price for a specific project, and the
Company does not have any long-term contracts with any of its subcontractors.
The Company generally requires that its subcontractors agree to its standard
terms regarding matters such as frequency of payments, standards or work and
materials and maintenance of insurance. The Company generally utilizes more
than one subcontractor for each type of work to minimize increased costs and
delays that might result if one of its subcontractors experiences financial or
other difficulties.
The Company has a fully integrated construction and accounting software
package that utilizes the critical path method as the basis of the system. The
critical path method details the integral steps necessary for the complete
construction of a home and sets forth specific milestones and the timing
necessary to achieve the milestones so that the Company can track the progress
of the construction on each of its homes. All data is updated on a daily basis
resulting in current information by project and by individual unit to increase
the likelihood of, among other things, timely completion of homes under
construction.
The Company does not maintain significant inventories of construction
materials except for materials for homes under construction and a limited
amount of other materials. Generally, the construction materials used in the
Company's operations are readily available from numerous sources, but prices
can fluctuate due to various factors, including increased demand or supply
shortages. Whenever possible, the Company negotiates agreements for price and
volume discounts with national, regional or local suppliers of materials,
which either the Company or its subcontractors will purchase. The Company does
not have any long-term contractual commitments with suppliers of building
materials. Homebuilders from time to time may experience industry-wide
shortages of certain raw materials, and as a result, prices of materials can
fluctuate. In addition, stringent building codes which were adopted in Miami-
Dade County and Broward County have increased costs of homes. The Company
generally has been able to pass along cost increases to the prospective
buyers,
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but there is no assurance that increased costs will not have a material
adverse effect on the Company's operations.
MARKETING AND SALES
The Company sells substantially all of its homes through employees who work
from sales offices located at the model homes in each project. The Company
also sells its homes through independent real estate brokers. Sales personnel
assist prospective homebuyers by providing them with floor plans, information
on prices, options and custom features and tours of model homes. Sales
personnel are trained by the Company and are periodically updated on the
availability of financing, construction schedules, marketing and advertising
plans. Most of the sales personnel are employed on a long-term rather than on
a project-by-project basis, which the Company believes results in reduced
training costs and a more motivated and experienced sales force.
Each model complex consists of three to five models. Most models are fully
merchandised to accentuate the design and size of the home. The merchandising
is based upon the demographics and lifestyles of the target buyer. Upgrades in
many of the Company's current homes include ceramic tiles, oversized kitchens
and a separate shower and roman tub in master baths, Spanish tile roofs, brick
paved driveways and walkways, security systems, and an upgraded designer
appliance package. Each project's sales center contains graphic displays of
the floor plans and a community site plan, as well as information on the
history of the Company.
The Company's advertising program encompasses various media. Signage is a
primary medium, which is implemented when land is acquired. Upon the
completion of the models, a full advertising campaign typically begins using
newspaper, radio and direct mail. In addition, the Company provides incentives
to independent real estate brokers as a means of ensuring broker
participation.
The volume and timing of the Company's home sales are substantially
affected by the opening of new residential developments. Generally, a
residential development will generate a high sales volume in the early period
of its existence (due primarily to the wide choice of available lots), with
sales activity decreasing as the project matures. In addition, the Company's
ability to sell its homes is dependent, in large part, upon the ability of its
buyers to obtain mortgage financing. The Company does not finance the purchase
of homes in its communities but rather refers customers to a variety of
mortgage lenders for their financing needs. The Company has experienced
significant variability in sales on a quarterly basis as a result of, among
other things, the timing of home closings, the cyclical nature of the
homebuilding industry, changes in prevailing interest rates and other economic
factors and changes in the costs of materials and labor.
The Company's home closings are also dependent on the availability of
homeowner's insurance. Primarily as a result of Hurricane Andrew, there is a
widespread shortage of available private insurance for homeowners in the State
of Florida. The State of Florida has created a joint underwriting association
to provide insurance coverages to homeowners who cannot obtain private
insurance; however, such State provided insurance affords homeowners less
protection than is typically provided by private insurance carriers at greater
costs and may not be purchased during periods in which there is a tropical
storm which could threaten the State.
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Through its relationships with mortgage companies, the Company monitors the
availability of governmental programs offering low interest mortgage financing
to prospective home buyers as a means to market and increase the Company's
demand for its homes. When programs become available, the Company reviews the
terms of the program and the requisite commitment fee to determine whether it
will submit a bid for the Company to obtain low interest financing for
qualified homebuyers.
CUSTOMER SERVICE AND QUALITY CONTROL
The Company's customer service personnel are responsible for pre-closing,
quality control home inspections with the buyer and responding to post-closing
customer needs. The active participation of customer service personnel, in
management's opinion, reduces post-closing repair costs, fosters the Company's
reputation for quality and service and leads to repeat and referral business.
The Company provides homebuyers with a limited warranty program which, in
general, provides home buyers with at least a one-year warranty on workmanship
and building materials through the Bonded Builders Home Warranty program, a
privately insured program that establishes standards for the acceptable
condition of a home and resolution of disputes. Historically, the Company has
not incurred any material costs relating to warranty claims or defects in
construction.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
In developing a project, the Company must obtain the approval of numerous
governmental authorities regulating such matters as permitted land uses and
levels of density, the installation of utility services such as water and
waste disposal and the dedication of acreage for open space, parks, schools
and other community purposes. Several authorities in Florida have imposed
impact fees as a means of defraying the cost of providing certain governmental
services to developing areas, and the amount of these fees has increased
significantly during recent years. Other Florida and local laws require the
use of specific construction materials, which reduce the need for energy-
consuming heating and cooling systems, or are expected to withstand certain
wind speeds. Miami-Dade County and Broward County have enacted more stringent
building codes as a result of Hurricane Andrew, which have resulted in
increased costs of construction. The State of Florida and counties and cities
within the State have also, at times, declared moratoriums on the issuance of
building permits and imposed other restrictions in areas where the
infrastructure (e.g., roads, schools, parks, water and sewage treatment
facilities and other public facilities) does not reach minimum standards, all
of which could have a material adverse effect on the Company's business. To
date, the governmental approval processes and the restrictive zoning,
moratoriums and allocation systems have not had a material adverse effect on
the Company's development activities.
The Company is subject to a variety of federal, state and local statutes,
ordinances, rules and regulations concerning protection of health and the
environment. The particular environmental laws, which apply to any given
community, vary greatly according to the community site, the site's
environmental conditions and the present and former uses of the site. These
environmental laws may result in delays, cause the Company to incur
substantial compliance and other costs and prohibit or severely restrict
development in certain environmentally sensitive regions or areas. Prior to
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consummating the purchase of land, the Company engages independent
environmental engineers to evaluate such land for the presence of hazardous or
toxic materials, wastes or substances. The Company has not been materially
adversely affected to date by the presence or potential presence of such
materials.
To varying degrees, certain permits and approvals may be required to
complete the residential developments currently being planned by the Company,
including land development permits (water, sewer, paving and drainage), sales
center permits, model home permits and building permits. The process of
obtaining permits and approvals is an ongoing process in the ordinary course
of business that the Company is engaged in as it develops and constructs homes
for its current and future planned projects. The ability of the Company to
obtain necessary approvals and permits for these projects is often beyond the
Company's control, and could restrict or prevent the development of otherwise
desirable property. The length of time necessary to obtain permits and
approvals increases the carrying costs of unimproved property acquired for the
purpose of development and construction. In addition, the continued
effectiveness of permits already granted is subject to factors such as changes
in policies, rules and regulations and their interpretation and application.
To minimize these risks, the Company generally restricts land purchases to
tracts that have or will have zoning and all other related entitlements. To
date, the Company has not encountered any material difficulties in obtaining
permits and does not currently anticipate any material difficulties in
obtaining permits in the future.
COMPETITION
The homebuilding industry is highly competitive and fragmented. The Company
competes on the basis of a number of interrelated factors, including location,
reputation, amenities, design, quality and price, with numerous large and
small builders, including some builders with nationwide operations and greater
financial, marketing, sales and other resources. At times competitors may
offer homes at discounted prices for financial reasons. The Company also
competes for residential sales with individual resales of existing homes and
condominiums, including sales of homes at deeply discounted prices by lenders,
banks and other similar institutions. Based on its knowledge and analysis of
the homebuilding market and its knowledge of its competitors, Management
believes that the Company's primary competitive strengths have been (i) its
ability to offer quality residences at affordable prices; (ii) the location of
its communities; and (iii) its reputation for service, innovative design and
value pricing.
The Company also competes with other homebuilders for the acquisition of
lots. Competition for available lots varies from market to market depending on
supply and is based primarily on price, reputation and ability to build,
market and sell homes. In this regard, Management believes that the Company's
history of meeting lot takedown schedules and making timely payments has
enhanced its competitive position with local area land developers.
WARRANTIES, BONDS AND OTHER OBLIGATIONS
The Company is often required, in connection with the development of its
projects, to obtain performance or maintenance bonds or letters of credit in
favor of governmental authorities and
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others. The amount of such obligations outstanding at any time varies in
accordance with the Company's pending construction activities. In the event
any such obligations are drawn upon because of the Company's failure to build
required infrastructure, the Company would be obligated to reimburse the
issuing surety company or bank. At September 30, 1998, the Company had
approximately $1,645,000 in letters of credit and performance bonds
outstanding in connection with its development and construction activities.
The Company generally provides homebuyers with at least a one-year warranty
on workmanship and building materials and, in certain instances such as when
financing is provided through a government loan or where city codes require, a
ten-year structural warranty. The cost of providing extended warranties and
warranty services was not material during the fiscal year ended September 30,
1998. The subcontractors who perform most of the actual construction in turn
provide warranties of workmanship to the Company typically of one year in
duration following completion of their work and perform substantially all of
the warranty work at no cost to the Company. The Company has not sustained any
material claims for warranty services under its ten-year structural warranty
program.
The Company also has obligations to subsidize homeowners' associations in
certain of its residential developments up to a pro rata portion of expenses
based on the number of lots which have not been closed in such developments.
To date, the Company has incurred minimal costs to subsidize homeowners'
associations
EMPLOYEES: LEASING ARRANGEMENT
At September 30, 1998, the Company leased the services of approximately 56
persons, including sales and marketing, construction, executive,
administrative and clerical personnel. All of the personnel of the Company
are employees of Paychex Business Solutions, Inc. ("PBS"), which has an
agreement for services with the Company. PBS is a vehicle for small
businesses to obtain workers' compensation and health care coverage at a
discounted large group rate. PBS is the employer of record and assumes all
payroll obligations and certain employee benefits administration (such as
payroll preparation, payment and reporting of payroll taxes and workers'
compensation, maintaining employee health insurance and related benefits) with
respect to the personnel of the Company, while allowing the Company to retain
management control of these persons, including supervision, job description
and salary determinations. The Company determines changes in staffing levels
and makes recommendations to PBS with respect to the hiring and firing of
personnel. Although PBS has the right to do so, PBS has never failed to accept
the recommendation of the Company with respect to hiring and firing of
personnel. The Company prepays PBS for any payroll taxes, workers'
compensation and health insurance and receives a report each quarter from PBS
as to whether such payroll taxes were filed and paid in a timely manner.
Should PBS fail to pay payroll taxes, workers' compensation or health
insurance, the Company may be liable for such obligations. References to
employees of the Company contained herein will include individuals whose
services are leased from PBS. The Company believes that its relations with
its personnel and subcontractors are satisfactory.
Directors and Executive Officers of the Registrant
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The following table sets forth information, with respect to each person who
is currently an executive officer or director of the Company, as indicated
below.
NAME AGE POSITION
Harry Weitzer 57 Chairman of the Board, President
and Chief Executive Officer
Peter Kleinerman 46 Executive Vice President
Sheryl Rice 32 Vice President - Controller
James Rosewater 32 Vice President - Sales and Marketing
Joseph B. Rose 64 Director
Lawrence Hellring 51 Director
Michael Ambrosio 51 Director
Alan Litt 38 Director
HARRY WEITZER has served as Chairman of the Board and Chief Executive
Officer of the Company since its formation in June 1994 and as President since
December 1994. Mr. Weitzer has also served as President and Chief Executive
Officer of each of the Company's subsidiaries since their respective inception
more than five years ago. Mr. Weitzer has over 27 years of experience in the
homebuilding industry, being actively engaged as a homebuilder in Michigan
(from 1968 to 1976) as well as in Southeast Florida (since 1976). Mr. Weitzer
is a limited partner of Chai Capital, Ltd., an affiliate of the Company, and
an officer and director of Chai Capital Corp., the General Partner of Chai
Capital, Ltd.
Peter Kleinerman has served as Executive Vice President of the Company
since March 1997. From November 1995 to March 1997, Mr. Kleinerman served as
the President of Jadan Capital Corp., which provided operational, financial
and strategic advisory services. From February 1993 to November 1995, Mr.
Kleinerman served primarily as Executive Vice President at Atlantic Gulf
Communities Corp., a publicly traded real estate development company.
SHERYL RICE was appointed as Vice President and Controller of the Company
on October 28, 1998. Ms. Rice served as a controller of the Company since
November 1997. From October 1996 to November 1997, she served as Controller
for The Cornerstone Group and from September 1988 to October 1996, as
Assistant Controller for Landstar Development Corporation, both of which are
real estate development and construction companies.
JAMES ROSEWATER has served as Vice President-Marketing since May 1995. From
December 1993 to April 1995, Mr. Rosewater served as Director of Marketing for
Johnson Group Management, Inc./Dry Clean USA, Inc. From December 1989 to
December 1993, Mr. Rosewater served as Director of Marketing for Dry Clean
USA, Inc. Mr. Rosewater is Mr. Weitzer's son-in-law.
JOSEPH B. ROSE has served as a Director of the Company since May 1995. Mr.
Rose has been the sole proprietor of Joseph B. Rose Construction Company
since 1957 and the sole proprietor of
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M.R. Management Company since 1967. These companies are engaged in the
development and management of commercial and multiple occupancy properties in
the Detroit, Michigan metropolitan area.
LAWRENCE HELLRING has served as a Director of the Company since March 1996.
Mr. Hellring is president and owner of Superior Windows, Corp. Mr. Hellring
has been associated with Superior Windows, Corp., a privately held
manufacturing company for the past eleven years.
MICHAEL AMBROSIO has served as a Director of the Company since May 1996.
Mr. Ambrosio is vice president of Simkins Industries, Inc. and executive vice
president of Westfield Financial Corp., the real estate investment division of
Simkins Industries, Inc. Mr. Ambrosio has been associated with Simkins
Industries, Inc. for the past five years. Mr. Ambrosio is an officer and
director of Chai Capital Corp., the General Partner of Chai Capital, Ltd. A
trust for the benefit of Mr. Ambrosio's wife is a limited partner of Chai
Capital, Ltd., an affiliate of the Company.
Alan Litt was elected as a Director of the Company in October 1998. Mr.
Litt has served as President of Castle American Construction for the past five
years. He brings over fifteen years of experience as a real estate developer,
specializing in residential dwellings and the construction of institutional
facilities. Mr. Litt is a limited partner of Chai Capital, Ltd.
Compliance with Section 16(a)
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) under the Securities
Exchange Act of 1934 (the "Exchange Act"), during the Company's fiscal year
ended September 30, 1998 and any Forms 5 and amendments thereto furnished to
the Company with respect to its most recent fiscal year, and any written
representations referred to in subparagraph (b)(2)(i) of Item 405 of
Regulation S-K, except as set forth below, no person who at any time during
the fiscal year ended September 30, 1998 was a director, officer or to the
knowledge of the Company, a beneficial owner of more than 10% of any class of
equity securities of the Company registered pursuant to Section 12 of the
Exchange Act failed to file on a timely basis, as disclosed in Forms 3, 4 and
5, reports required by Section 16(a) of the Exchange Act during the fiscal
years ended September 30, 1997 or September 30, 1998. Larry Hellring and
Michael Ambrosio, who became directors of the Company in fiscal year 1996, did
not file a Form 3 during fiscal year 1996. These Forms 3 will be filed as
soon as possible after the date hereof. Harry Speizer and Peter Kleinerman,
who became executive officers of the Company in fiscal year 1997, did not file
a Form 3 during fiscal year 1997. These Forms 3 will be filed as soon as
possible after the date hereof. Joseph B. Rose, a director of the Company who
purchased 5,000 shares of Class A Common Stock during fiscal year 1998, did
not file a Form 4 during fiscal year 1998. This Form 4 will be filed as soon
as possible after the date hereof.
ITEM 2. PROPERTIES
The Company's principal business offices are in Miami Lakes in Miami-Dade
County, Florida and consist of 9,000 square feet that are being leased from an
unaffiliated third party through 1999.
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Management is exploring opportunities to locate alternative office space at a
more suitable location and at reduced cost.
ITEM 3. LEGAL PROCEEDINGS
The Company has been involved from time to time in litigation arising in the
ordinary course of business. The Company is not currently a party to any
litigation that the Company believes could have a material adverse effect on
the financial position or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended September 30, 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's Class A Common Stock has been trading on the over-the-counter
Bulletin Board ("OTC") since June 9, 1998 under the symbol "WTZRA". The
Company's Class A Common Stock had been traded on Nasdaq from April 26, 1995
to June 8, 1998. Prior to that time, there was no public market for the Class
A Common Stock. There is no established public trading market for the
Company's Class B Common Stock. The following sets forth the range of high
and low bid prices for the Class A Common Stock during each of the quarters
presented. The quotations set forth below are inter-dealer quotations,
without retail mark-ups, markdowns or commissions and do not necessarily
represent actual transactions.
CLASS A COMMON STOCK
--------------------
QUARTERLY PERIOD ENDED HIGH BID LOW BID
---------------------- -------- -------
September 30, 1998 $0.438 $0.406
June 30, 1998 $0.594 $0.438
March 31, 1998 $0.938 $0.906
December 31, 1997 $0.875 $0.719
September 30, 1997 $1.562 $1.000
June 30, 1997 $2.125 $1.000
March 31, 1997 $2.250 $1.437
December 31, 1996 $2.625 $1.250
12
<PAGE>
As of December 16, 1998, there were approximately 72 holders of record of
the Company's Class A Common Stock. This number does not include
approximately 1,050 beneficial owners of the Common Stock whose shares are
held in the names of various dealers, clearing agencies, banks, brokers and
other fiduciaries.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" for a description of
securities sold by the Company in July 1998.
DIVIDENDS
Prior to the Earnings Achievement Date (as hereinafter defined), the
holders of the Common Stock are entitled to receive, if, when and as declared
by the Board of Directors of the Company to the extent funds are legally
available therefor, dividends at the rate of (i) $.325 per share per annum,
with respect to the Class A Common Stock, and (ii) $.001 per share per annum,
with respect to the Class B Common Stock, payable quarterly on the fifteenth
day of February, May, August and November of each year. For periods following
the Earnings Achievement Date, holders of the Class A Common Stock and the
Class B Common Stock are entitled to receive such dividends, in equal amounts
per share, as may be declared from time to time by the Board of Directors out
of funds legally available therefor.
The "Earnings Achievement Date" is a date which is 10 business days
following the filing by the Company with the Securities and Exchange
Commission of the first Form 10-Q or Form 10-K, as the case may be (the "SEC
Report"), which reflects that, as of the last day of the period to which such
SEC Report relates, the Company has had an aggregate of $7,500,000 of
Operating Income earned since April 1, 1995 (the "Earnings Achievement").
"Operating Income" of the Company for any fiscal period means the Consolidated
Net Income for such period, (x) increased or decreased by all income tax
expense or benefit for such period, and (y) decreased by all dividends paid or
accrued during such period. "Consolidated Net Income" of the Company for any
period means the consolidated income or loss of the Company and its
subsidiaries as set forth on the Company's consolidated statement of income
for any such fiscal period and as determined in accordance with generally
accepted accounting principles consistently applied, provided that (i) the
results of operations of any person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded, and (ii) (a) any gains or losses from assets sales or reserves
related thereto (other than a disposition of housing inventory in the ordinary
course of business), (b) any gains or losses upon the extinguishment of
indebtedness, including the write-off of unamortized deferred loan costs and
unamortized original issue discount in connection with the retirement of the
Company's 10% Bonds (as discussed below), or any amortization relating to
original issue discount and deferred loan costs in connection with such 10%
Bonds, and (c) any extraordinary gains or losses, shall be excluded. No later
than (i) 45 days after the end of the Company's fiscal quarter which is not
the year-end or (ii) 90 days after the fiscal year-end, as the case may be,
the Chief Financial Officer of the Company shall determine if the Earnings
Achievement has occurred.
13
<PAGE>
The Company is also restricted under the terms of its existing loan
agreements from declaring or paying any dividends or making any other
distributions on any shares of capital stock of the Company.
The Company's Board of Directors had determined that it is in the best
interests of the Company and its shareholders to retain all earnings and to
forego the cash dividend payments on its outstanding shares of Class A and
Class B Common Stock since August 1996. The Company's determination to forego
such payments was based in part, on the Board of Directors' continued
determination that such cash was necessary to maintain the Company's then
current level of operations and, would be better used to facilitate the
Company's growth. Cash dividends on the Class A and Class B Common Stock are
cumulative, and accordingly, the amount of such dividends would inure for the
benefit of the Company's shareholders. The Company accrues such dividends on
its financial statements only if and when the Company's Board of Directors
declared such dividends. The Company will continue to evaluate future cash
dividend payments depending upon then current business conditions,
opportunities for growth and on the then current financial condition of the
Company. Accordingly, no assurance can be given as to when the Company plans
on resuming, if at all, the declaration of such cash dividends and/or the
payment of such cash dividends.
Each share of Class B Common Stock can be converted into one share of Class
A Common Stock if the Earnings Achievement Date (as defined) has occurred and
all accumulated and unpaid dividends on the Class A Common Stock have been
declared and paid in full.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the
Company. As of September 30, 1994, Harry Weitzer contributed all of the
outstanding shares of capital stock of certain corporations which were general
partners of the Weitzer Homebuilding Partnerships (the "Weitzer Subsidiaries")
to the Company in exchange for 1,500,000 shares of Class B Common Stock (the
"Weitzer Entities Exchange"). The selected consolidated financial data give
effect to the Weitzer Entities Exchange for each of the relevant periods, and
treats the Weitzer Entities Exchange on a basis similar to a pooling of
interests, which has the effect of combining all companies as if the
combination had been effective for the periods presented. Prior to May 1995,
the Company conducted substantially all of its operations through the Weitzer
Homebuilding Partnerships. During that time, the Company used the equity
method to account for its investment in the Weitzer Homebuilding Partnerships
and, accordingly, the selected consolidated financial data of the Company
during this time do not include the revenues, assets or equity of the Weitzer
Homebuilding Partnerships. Subsequent to May 1995, the Company consolidated
the operations of the Weitzer Homebuilding Partnerships with the financial
statements of the Company. The selected consolidated financial data should be
read in conjunction with the consolidated financial statements of the Company
and the notes thereto included elsewhere herein. The selected consolidated
financial data of the Company for the five fiscal years ended September 30,
1998 have been derived from the Company's audited consolidated financial
statements.
14
<PAGE>
Selected Financial Information for the Company
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------------------------------------------------------
1994 1995 1996 1997 1998
----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Equity in earnings of 50%-owned
affiliated partnerships (1) $ 1,847,738 $ 686,711 $ -- $ -- $ --
Sales of homes 998,849 13,450,684 37,391,780 55,419,763 50,599,859
Net income (loss) 1,647,149 68,814 (2,962,046) (3,168,279) (784,858)
Net income (loss) per share -- $ 0.03 $ (0.81) $ (0.82) $ (0.19)
Pro forma net income (2) 966,597 -- -- -- --
Pro forma net income per share $ 0.54 -- -- -- --
Average number of shares
Outstanding (3) 1,801,300 2,277,950 3,649,204 3,860,254 4,158,688
Dividends declared per share -- $ 0.08 $ 0.24 -- --
<CAPTION>
September 30,
----------------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Land and construction-in progress $ -- $30,167,295 $31,505,383 $39,181,888 $40,023,538
Total assets 2,228,209 36,922,360 39,673,788 41,446,861 43,100,283
Total liabilities 13,74,257 26,867,489 32,379,779 37,321,131 38,759,411
Shareholders' equity 853,952 10,054,871 7,294,009 4,125,730 4,340,872
</TABLE>
(1) Equity in earnings of 50%-owned affiliated partnerships represents the
Company's share of the income of the Weitzer Homebuilding Partnerships.
Each partnership's income was allocated to the partners first as a
preferred return on partners' capital, with the balance of income shared
equally; all losses were shared equally. Selected combined financial
information of the Weitzer Homebuilding Partnerships is set forth below.
(2) 1994 pro forma net income includes a charge of approximately $262,000
relating to the write-off of costs incurred in connection with a terminated
merger agreement.
(3) For 1994, based upon (i) 1,500,000 shares of Class B Common Stock
presently outstanding, and (ii) 301,300 shares of Class A Common Stock
(based on an initial public offering price of $6.50 per share and net of
Class A Common Stock assumed to have been repurchased at such initial
public offering price per share under the treasury stock method) assumed to
be outstanding upon the exercise for $.10 per share of warrants then
outstanding.
<PAGE>
Selected Combined Financial Information of the Company and the Weitzer
Homebuilding Partnerships
Years Ended September 30,
------------------------------------
1994 1995
---- ----
(unaudited)
INCOME STATEMENT DATA:
Sales of homes $53,320,277 $37,669,019
Cost of homes sold 45,710,767 31,876,433
Other costs and expenses 3,497,209 3,531,052
Net income 4,454,170 2,261,534
September 30,
------------------
1994
----
BALANCE SHEET DATA/(1)/:
Real estate inventories $16,802,444
Total assets 21,187,373
Total liabilities 14,594,117
Partners' equity:
Weitzer Entities 1,089,911
Financial Partner 5,503,345
(1) Following the Partnership Acquisition in May 1995, the Company
consolidates the operations of the Weitzer Homebuilding Partnerships
with the consolidated financial statements of the Company.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the matters
discussed in this Form 10-K are forward looking statements which involve
risks and uncertainties, including, but not limited to, economic,
competitive, governmental, and technological factors affecting the
Company's operations, markets, products, services, and prices and other
factors discussed in the Company's other filings with the Securities and
Exchange Commission.
Results of Operations
General
-------
Backlog and Available Lots for Sale or Under Option or Contract. The
following table sets forth the Company's backlog, the available lots for
sale and the available lots for construction for the periods presented. The
backlog consists of homes under sales contracts and includes homes under
construction, as well as homes that have been sold but not started. At
September 30, 1998, approximately 75% of the homes in backlog were under
construction. The available lots for sale refer to the number of lots the
Company has acquired on which it plans to construct homes and
16
<PAGE>
exclude homes under sales contracts included in backlog. The available lots
under option or contract refer to the number of lots as to which the Company
has an option or a contract to acquire, but whose acquisition has not closed.
The available lots under option or contract reflect the lots in projects that
are currently being developed or are currently planned for future development.
There can be no assurances that settlements of homes subject to sales
contracts will occur or that all of the available lots for sale will be built
on, or that the available lots under option or contract will be acquired or
built on. The Company estimates that the cancellation rate on homes for which
a sales contract was signed for the fiscal year ended September 30, 1998 was
approximately 15% to 20%.
Backlog of Homes, Available Lots for Sale and Available Lots Under Option or
----------------------------------------------------------------------------
Contract
--------
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------------
1998 1997
---- ----
<S> <C> <C>
Number of homes in backlog 237 239
Aggregate sales value of homes in backlog $30,652,000 $26,865,000
Available lots for sale 743 806
Available lots under option or contract 0 375
</TABLE>
Comparison of the Years Ended September 30, 1998 and 1997
- ---------------------------------------------------------
Revenues from home sales decreased 9% from approximately $55.4 million for
the year ended September 30, 1997 to approximately $50.6 million for the year
ended September 30, 1998. This change is directly attributable to a 9%
decrease in the number of homes delivered, from 484 to 440. The average
selling price of homes delivered in fiscal 1998 of approximately $115,000 was
equivalent to the average selling price in fiscal 1997.
Cost of homes sold decreased from approximately $51.7 million for the year
ended September 30, 1997 to approximately $44.5 million for the year ended
September 30, 1998, primarily as a result of the decrease in the number of
homes delivered. Cost of homes sold, as a percentage of homes sales,
decreased from 93.4% for the year ended September 30, 1997 to 87.8% for the
year ended September 30, 1998. The 5.6% decrease of cost of homes sold as a
percentage of sales is primarily attributable to the inclusion of $2,652,000
of impairment charges in the cost of homes sold for the year ended September
30, 1997. The impairment charges incurred related to the Company's assessment
of the recoverability of certain project costs.
Selling, general and administrative ("SG&A") expenses increased from
approximately $6.2 million for the year ended September 30, 1997 to
approximately $6.5 million for the year ended September 30, 1998. SG&A
expenses, as a percentage of total revenues, increased from 11.1% for the year
ended September 30, 1997 to 12.7% for the year ended September 30, 1998. The
increase is primarily a result of additional loan fees incurred pursuant to a
loan agreement. Such additional loan fees have been eliminated for future
periods due to the refinancing of the related loans, as discussed below in
"Liquidity and Capital Resources".
17
<PAGE>
Total operating costs and expenses decreased from approximately $59.0
million for the year ended September 30, 1997 to $51.7 million for the year
ended September 30, 1998. The decrease is attributed primarily to the
decrease in the cost of homes sold as discussed above.
Net loss decreased from approximately $3.2 million for the year ended
September 30, 1997 to a loss of approximately $785,000 for the year ended
September 30, 1998 primarily due to the inclusion of the aforementioned
impairment charges in fiscal 1997.
Comparison of the Years Ended September 30, 1997 and 1996
---------------------------------------------------------
Revenues from home sales increased from approximately $37.4 million for the
year ended September 30, 1996 to approximately $55.4 million for the year
ended September 30, 1997. This change reflects a 5.4% decrease in the average
selling price of homes delivered (from $121,009 to $114,503) due to changes in
product mix offset by a 56.6% increase in the number of homes delivered (from
309 to 484).
Cost of homes sold increased from approximately $35.4 million for the year
ended September 30, 1996 to approximately $51.7 million for the year ended
September 30, 1997, primarily as a result of the increase in the number of
homes delivered. Cost of homes sold as a percentage of homes sales decreased
from 94.7% during the year ended September 30, 1996 to 93.4% for the year
ended September 30, 1997. Cost of homes sold also includes impairment charges
of $2,652,000 in fiscal 1997 and $1,050,000 in fiscal 1996 related to the
Company's assessment of the recoverability of certain costs of real estate
projects performed in the respective year ends.
Selling, general and administrative ("SG&A") expenses increased from
approximately $4.8 million for the year ended September 30, 1996 to
approximately $6.2 million for the year ended September 30, 1997 due to the
increase in sales volume. SG&A expenses as a percentage of total revenues
decreased from 12.7% for the year ended September 30, 1996 to 11.1% for the
year ended September 30, 1997.
Total operating costs and expenses increased from approximately $40.7
million for the year ended September 30, 1996 to approximately $59.0 million
for the year ended September 30, 1997. The increase is attributed primarily
to the increase in the cost of homes sold as discussed above. The increase
also included a charge for the impairment of goodwill of approximately
$331,000. Based on a review performed at fiscal year end 1997, the Company
determined that the goodwill had no continuing value and, accordingly,
recorded an impairment charge.
Net loss increased from approximately $3.0 million for the year ended
September 30, 1996 to a loss of approximately $3.2 million for the year ended
September 30, 1997, primarily as a result of the impairment charges previously
discussed.
LIQUIDITY AND CAPITAL RESOURCES
As is typical in the homebuilding industry, the Company will require both
short-term and long-term financing. Such needs will depend upon the Company's
construction volume, asset turnover
18
<PAGE>
and land acquisitions. The Company's most significant sources of funds are
proceeds realized from home closings; proceeds from acquisition, development
and construction financing provided by financial institutions or other
lenders; and seller financing for land purchases. The Company will continue
seeking to procure additional outside financing in both the short-and long-
term, as more fully described below, for its future projects and on-going
capital requirements. There can be no assurance that the Company can obtain
such additional financing.
The proceeds of the financing described below were principally used to
repay in August 1998 the then outstanding $3.75 million principal and accrued
interest of the Company's 10% bonds ("10% Bonds") which upon repayment were
cancelled.
On July 28, 1998, the Company received subscriptions from Chai Capital,
Ltd., a Florida limited partnership (the "Partnership") for an aggregate of $5
million to purchase an aggregate $4 million principal amount of 14%
Convertible Subordinated Debentures (the "Debentures") of the Company and
1,785,714 shares of the Company's authorized and unissued Class A Common
Stock, $.01 par value per share, valued at $.56 per share. The Debentures are
for a term of three years and bear interest at the rate of 14% per annum and
are convertible at the option of the holder into shares of the Company's Class
A Common Stock at a conversion price of $.56 per share. The conversion price
of the Debentures and the purchase price per share for the Company's Class A
Common Stock was based upon a 30-day average of the market price of the
Company's Class A Common Stock. The proceeds of the financing were used by
the Company primarily to repay the outstanding principal amount plus accrued
interest of the Company's 10% Bonds. The balance of the proceeds so raised
was used by the Company for working capital purposes, including satisfaction
of the expenses of the offering. The private financing was effectuated in
three tranches with the first tranche being consummated on July 29, 1998, the
second tranche on July 30, 1998, and the third tranche on July 31, 1998.
These securities were offered in accordance with the exemption from the
registration requirements under the Securities Act of 1933, as amended,
afforded by Section 4(2) under such Act. The consummation of each tranche
represented the date that the Company received cleared funds from the
Partnership in accordance with the terms of the executed subscription for the
investment described above.
In addition, pursuant to the terms of the Debentures, the Company may not
incur debt in excess of $200,000 per annum and may not issue any securities in
the future (other than securities issuable upon exercise and/or conversion of
currently outstanding derivative securities) without the prior consent of the
Partnership.
In the event dividends are declared by the Board of Directors of the
Company on the current number of shares of Class A Common Stock outstanding,
to the extent funds are legally available therefor, annual dividends
approximate $1.35 million. The Company's Board of Directors had determined
that it is in the best interests of the Company and its shareholders to retain
all earnings and to forego the cash dividend payments on its outstanding
shares of Class A and Class B Common Stock since August 1996. The Company's
determination to forego such payments was based in part, on the Board of
Directors' continued determination that such cash was necessary to maintain
the Company's then current level of operations and, would be better used to
facilitate the Company's growth. Cash dividends on the Class A and Class B
Common Stock are cumulative, and accordingly,
19
<PAGE>
the amount of such dividends would inure for the benefit of the Company's
shareholders. The Company accrues such dividends on its financial statements
only if and when the Company's Board of Directors declares such dividends. The
Company will continue to evaluate future cash dividend payments depending upon
then current business conditions, opportunities for growth and on the then
current financial condition of the Company. Accordingly, no assurance can be
given as to when the Company plans on resuming, if at all, the declaration of
such cash dividends and/or the payment of such cash dividends (see
"Dividends"). As of September 30, 1998, dividends in arrears amounted to $1.87
million. The Company would accrue such dividends on its financial statements
only if and when declared by the Company's Board of Directors.
At September 30, 1998, the Company had borrowings from banks and third
parties aggregating approximately $32.3 million. Scheduled and estimated
maturities of the Company's borrowings for the years ended September 30, 1999,
2000 and 2001 are expected to be approximately $9.6 million, $9.8 million and
$12.9 million, respectively. Included in the scheduled maturities is the $4
million principal amount of Debentures which are convertible at the option of
the holder into shares of the Company's Class A Common Stock. The Company
anticipates that within the next twelve months it will fund, in part, its debt
and required expenditures relating to its existing communities, including
certain development costs, primarily with cash flow from home sales and
construction/development financing. To the extent cash flow from operations
is not sufficient to satisfy such obligations or maintain its current level of
operations based on its current volume of home sales at such time, the Company
will attempt to procure additional equity or debt financing; although, no
assurance can be given that such financing can be obtained on terms deemed
favorable to the Company. To the extent the Company is unable to procure such
financing on terms deemed favorable to the Company, the Company may be forced
to curtail its then current level of operations.
In August 1998, the Company consummated the refinancing of several of its
land and construction loans with Ohio Savings Bank. The Company consolidated
all of its loans with another lender into one new facility with Ohio Savings
Bank totaling approximately $32 million. Ohio Savings Bank is an existing
lender to the Company and the terms of the new loan facility are similar to
those of preexisting loan agreements and contain certain affirmative, negative
and/or restrictive covenants.
In May 1998 the Company exercised its option to purchase the undeveloped
land for Phase 2 of Malibu Bay which consists of 251 lots. The purchase price
of the land was $2.57 million. Seller financing was obtained for $1.24
million which is payable $7,000 per lot plus accrued interest when title to
the constructed unit is transferred to the purchaser. The purchase money
mortgage, due on May 1, 2000, accrues interest at the prime interest rate and
is secured by the property, although it is subordinated to the bank
acquisition/development and construction loans. The Company obtained a $4.1
million acquisition and development loan and a $3.5 million construction loan
from one of its existing lenders. Both loans accrue interest at prime plus
1.5% and are secured by the property. The acquisition and development loan
matures on May 5, 2000 and the construction loan matures on May 5, 2001.
The Company is continually exploring opportunities to purchase parcels of
land for its homebuilding operations and is, at any given time, in various
stages of proposing, making offers for,
20
<PAGE>
and negotiating the acquisition of various parcels, whether outright or
through options. The closing of the contemplated purchases are, in most cases,
subject to a number of conditions, including the Company's completion of a
satisfactory due diligence investigation and obtaining certain required
regulatory approvals for development, and procurement of necessary financing
on terms deemed favorable by the Company.
The Company's loan agreements require the Company to maintain certain
financial ratios. In order to satisfy certain of these covenants for fiscal
1998 and 1999, the Company procured a waiver of compliance from the relevant
lending institution. At September 30, 1998, the Company was in compliance
with its loan covenants, as modified.
Year 2000 Compliance. As the year 2000 approaches, an issue has
generically emerged regarding how existing application software programs and
operating systems can accommodate this date. In brief, many existing
application software products in the market place were designed only to
accommodate a two-digit date position that represents the year (e.g., `97' is
stored on the system and represents the year 1997). As a result, the year
1999 (i.e., `99') could be the maximum date value these systems will be able
to accurately process. Management is in the process of working with its
software vendors and providers of service to the Company, such as banks and
subcontractors, to ensure that the Company is prepared for the year 2000.
Management does not anticipate that the Company will incur significant
operating expenses or be required to invest heavily in computer system
improvements to be year 2000 compliant.
Cash Flows. During the year ended September 30, 1998, the Company had
approximately $1.5 million of net cash provided from operating activities,
primarily resulting from an increased volume of construction-in-progress and
an increase in accounts payable due to year-end accruals for which most
related payments were made subsequent to year-end. The Company opened and
furnished new model centers at Fiesta, Lago del Sol, Los Castillos at Windsor
Palms and Harmony Lakes during fiscal 1998, which required an investment of
approximately $0.5 million. Based on the timing of construction loan draws
and the repayment of outstanding construction loans on sold homes during the
fiscal year, the Company reduced construction financing by approximately $1.5
million. As described above, the Company consummated a private financing
during fiscal 1998 pursuant to which the Company received subscriptions from
Chai Capital, Ltd for an aggregate of $5 million to purchase an aggregate $4
million principal amount of Debentures and 1,785,714 shares of the Company's
Class A Common Stock. The proceeds of the financing were used by the Company
primarily to repay the $3.75 million outstanding principal amount plus accrued
interest of the Company's 10% Bonds. The balance of the proceeds so raised
was used by the Company for working capital purposes, including satisfaction
of the expenses of the offering.
During the year ended September 30, 1997, the Company had 9.8 million of
net cash used in operating activities, primarily as a result of the net loss
from operations and an increase in construction in progress at Forest Lakes,
Malibu Bay and Los Castillos at Windsor Palms. During that period the Company
had net cash provided by financing activities of $5.0 primarily from the
financing of the three aforementioned communities and partially offset by the
repayment of the 5% debentures. During the year ended September 30, 1996 the
Company had $2.3 million of net cash used in operating activities primarily as
a result of the net loss from operations and a decrease in
21
<PAGE>
accounts payable and accrued liabilities. During that same period the Company
had net cash provided by financing activities of $5.7 million arising
principally from the financing for the Weitzer at Forest Lakes and Deerfield
projects.
VARIABILITY OF OPERATING RESULTS; FACTORS AFFECTING FUTURE RESULTS OF
OPERATIONS AND LIQUIDITY
The Company has experienced and expects to continue to experience,
significant variability in sales and net income as a result of, among other
things, the stage of development of its projects, the timing of home closings,
the cyclical nature of the homebuilding industry, changes in the costs of
materials and labor, and the changes in prevailing interest rates and other
economic factors. The Company's new sales contracts and home closings typically
vary from period to period depending primarily on the stages of development of
its projects. In the early stages of a project's development, the Company
incurs significant start-up costs associated with, among other things, project
design, land acquisition and development, zoning and permitting, construction
and marketing expenses. Since revenues are recognized only upon the transfer of
title at the closing of a sale of a home, there are no revenues during the early
stages of a project. During the later stages of a project, however, costs are
lower in relation to the revenues recognized. Accordingly, the Company's
historical financial performance is not necessarily a meaningful indicator of
future results and, in general, management expects that financial results may
vary significantly from period to period. The Company's results of operations
and liquidity could be affected by prevailing interest rates. Lower interest
rates may result in increased demand for homes, increased sales, lower financing
costs and lower costs of homes sold, while higher interest rates may result in
lower demand for homes, lower sales, higher financing costs and higher costs of
homes sold and, subsequently, reduced profitability. Although the Company has
not experienced a sharp decline in the demand for its homes during recent
periods in which interest rates have risen, any increases in interest rates
could result in such a decline and have a material adverse effect on the
Company's future results of operations and liquidity.
INFLATION
The Company, as well as the homebuilding industry in general, may be
adversely affected during periods of high inflation, primarily because of higher
land and construction costs. In addition, higher mortgage interest rates may
significantly affect the affordability of permanent mortgage financing to
prospective purchasers. Inflation also increases the Company's interest costs
and costs of labor and materials. The Company attempts to pass through to its
homebuyers any increases in costs through increased selling prices and, for the
past three fiscal years, inflation has not had a material adverse effect on the
Company's results of operations. There is no assurance, however, that inflation
will not have a material adverse impact on the Company's future results of
operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
22
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO
FINANCIAL STATEMENTS AND SCHEDULES
Reports of Independent Accountants
Consolidated Balance Sheets at September 30, 1998 and 1997
Consolidated Statements of Operations for the Years Ended September 30, 1998,
1997 and 1996
Consolidated Statements of Shareholders' Equity for the Years Ended September
30, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended September 30, 1998,
1997 and 1996
Notes to Consolidated Financial Statements
23
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Weitzer Homebuilders Incorporated:
We have audited the accompanying consolidated balance sheet of Weitzer
Homebuilders Incorporated and Subsidiaries as of September 30, 1998, and the
related consolidated statements of operations, shareholders' equity and cash
flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Weitzer
Homebuilders Incorporated and Subsidiaries as of September 30, 1998, and the
consolidated results of their operations and their consolidated cash flows for
the year then ended in conformity with generally accepted accounting principles.
We have also audited Schedule II for the year ended September 30, 1998. In our
opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.
McKEAN, PAUL, CHRYCY, FLETCHER & CO.
Miami, Florida
November 25, 1998
24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Weitzer Homebuilders Incorporated and Subsidiaries
We have audited the accompanying consolidated balance sheet of Weitzer
Homebuilders Incorporated and Subsidiaries as of September 30, 1997, and the
related consolidated statements of operations, shareholder's equity, and cash
flows for each of the two years in the period ended September 30, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Weitzer
Homebuilders Incorporated and Subsidiaries as of September 30, 1997, and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended September 30, 1997, in conformity with generally
accepted accounting principles.
The financial statements referred to above have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 6 to the
financial statements, the Company has bonds payable in the amount of $3.75
million, which have a scheduled maturity in June 1998. Management's plans to
restructure or refinance the bonds payable are also discussed in Note 6. If the
Company is unable to achieve any of the alternatives discussed in Note 6, there
is substantial doubt about the Company's ability to continue as a going concern.
The accompanying consolidated financial statements do not include any
adjustments relating to the recoverability of asset carrying amounts or the
amount of liabilities that might result should the Company be unable to continue
as a going concern.
PricewaterhouseCoopers LLP
Miami, Florida
December 12, 1997
25
<PAGE>
WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
ASSETS
------
<S> <C> <C>
Cash $ 482,879 $ 236,523
Restricted escrow funds -- 82,105
Land and land development costs 22,773,115 23,348,773
Construction-in-progress 17,250,423 15,833,115
Model furnishings, net of accumulated
depreciation of $573,352 and $246,806 695,031 502,920
Deferred loan costs, net of accumulated
amortization of $32,520 and $611,646
690,352 348,383
Other assets 1,208,483 1,095,042
----------- -----------
$43,100,283 $41,446,861
=========== ===========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Customer deposits $ 1,334,428 $ 1,173,742
Accounts payable and accrued liabilities 5,189,413 3,006,640
Acquisition, development, and construction
loans payable 27,814,542 29,170,513
10% bonds payable, net of discount of $68,657 -- 3,681,343
14% convertible subordinated debentures 4,000,000 --
Notes and loans payable 421,028 288,893
------------ ------------
38,759,411 37,321,131
------------ ------------
Commitments and contingencies (Note 10)
Shareholders' equity:
Preferred Stock, $.01 par, 5,000,000
shares authorized, none issued -- --
Class A Common Stock, $.01 par, 40,000,000
shares authorized, 4,145,968 and
2,360,254 shares issued and outstanding
in 1998 and 1997 41,460 23,603
Class B Common Stock, $.01 par, 1,500,000
shares authorized, issued and outstanding 15,000 15,000
Additional paid-in capital 11,313,093 10,330,950
Accumulated deficit (7,028,681) (6,243,823)
------------ ------------
4,340,872 4,125,730
------------ ------------
$ 43,100,283 $ 41,446,861
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
26
<PAGE>
WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Sales of homes $ 50,599,859 $ 55,419,763 $ 37,391,780
Interest income 125,122 159,142 149,459
Other income 235,285 285,313 231,858
------------ ------------ ------------
50,960,266 55,864,218 37,773,097
------------ ------------ ------------
Operating costs and expenses:
Costs of homes sold 44,451,097 51,743,605 35,425,713
Selling expenses 4,352,620 4,349,641 2,527,568
General and administrative expenses 2,107,037 1,825,403 2,234,404
Depreciation and amortization 776,432 591,866 449,368
Goodwill write-off -- 331,570 --
Discontinued land acquisition expense -- 92,215 32,254
Interest expense 57,938 98,197 65,836
------------ ------------ ------------
51,745,124 59,032,497 40,735,143
------------ ------------ ------------
Loss before income taxes (784,858) (3,168,279) (2,962,046)
Provision for income taxes -- -- --
------------ ------------ ------------
Net loss $ (784,858) $ (3,168,279) $ (2,962,046)
============ ============ ============
Net loss per common share $ (0.19) $ (0.82) $ (0.81)
============ ============ ============
Weighted average number of common
shares outstanding 4,158,688 3,860,254 3,649,204
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
27
<PAGE>
WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Class A Common Stock Class B Common Stock
-------------------- -------------------- Additional
Number Number Paid-in Accumulated
of shares Amount of shares Amount Capital Deficit Total
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 1, 1995 2,032,663 $ 20,327 1,500,000 $ 15,000 $ 10,133,042 $ (113,498) $ 10,054,871
Conversion of 5% debentures 327,591 3,276 -- -- 693,370 -- 696,646
Dividends-$0.24375 per share -- -- -- -- (495,462) --
(495,462)
Net loss -- -- -- -- -- (2,962,046) (2,962,046)
--------- -------- --------- -------- ------------ ------------ ------------
Balance at September 30, 1996 2,360,254 23,603 1,500,000 15,000 10,330,950 (3,075,544) 7,294,009
Net loss -- -- -- -- -- (3,168,279) (3,168,279)
--------- -------- --------- -------- ------------ ------------ ------------
Balance at September 30, 1997 2,360,254 23,603 1,500,000 15,000 10,330,950 (6,243,823) 4,125,730
Proceeds from issuance of common
stock at $.56 per share 1,785,714 17,857 -- -- 982,143 -- 1,000,000
Net loss -- -- -- -- -- (784,858) (784,858)
--------- -------- --------- -------- ------------ ------------ ------------
Balance at September 30, 1998 4,145,968 $ 41,460 1,500,000 $ 15,000 $ 11,313,093 $ (7,028,681) $ 4,340,872
========= ======== ========= ======== ============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
28
<PAGE>
WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (784,858) $ (3,168,279) $ (2,962,046)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization and other non cash charges 776,432 821,341 607,747
Changes in assets and liabilities:
Restricted escrow funds 82,105 206,767 1,526,987
Land, land development costs, and construction-in-progress (841,605) (7,676,505) (888,720)
Other assets (44,784) 57,175 51,242
Customer deposits 160,686 (492,379) 700,462
Accounts payable and accrued liabilities 2,182,773 431,325 (1,316,634)
------------ ------------ ------------
2,315,562 (6,652,276) 681,084
------------ ------------ ------------
Net cash provided by (used in) operating activities 1,530,704 (9,820,555) (2,280,962)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,404) (148,780) --
Proceeds from sale (purchase of) model furnishings (586,236) 359,128 (461,254)
Advances of future projects -- 1,945,277 (1,664,987)
Net cash provided by (used in) investing activities (587,640) 2,155,625 (2,126,241)
CASH FLOWS FROM FINANCING ACTIVITIES:
Acquisition, development, and construction loan borrowings 54,595,585 47,399,418 39,433,675
Payments on acquisition, development, and construction loans (55,951,556) (41,393,413) (34,563,730)
10% bonds payable borrowings -- 309,693 --
Payments of 10% bonds payable (3,750,000) -- --
Payment on 5% debentures -- (1,185,000) --
Proceeds from issuance of 5% debentures -- -- 1,743,451
Deferred loan cost payments (722,873) -- (291,882)
Proceeds from issuance of common stock 1,000,000 -- --
Proceeds from issuance of 14% debentures 4,000,000 -- --
Notes payable borrowings 425,000 99,002 58,976
Payments on notes payable borrowings (292,864) (227,295) (201,659)
Dividends and distributions to shareholders -- -- (495,462)
------------ ------------ ------------
Net cash provided by (used in) financing activities (696,708) 5,002,405 5,683,369
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH 246,356 (2,662,525) 1,276,166
CASH BEGINNING OF PERIOD 236,523 2,899,048 1,622,882
------------ ------------ ------------
CASH END OF PERIOD $ 482,879 $ 236,523 $ 2,899,048
============ ============ ============
Supplemental disclosures:
Cash paid for interest, net of amounts capitalized $ 57,938 $ 98,197 $ 103,336
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
<PAGE>
WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
Weitzer Homebuilders Incorporated ("the Company") was incorporated under
the laws of the State of Florida in June 1994, and engages, through its
wholly-owned subsidiaries, in the design, construction and sale of
moderately-priced single-family residences and townhouses in Dade and
Broward counties in South Florida.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
-------------
The consolidated financial statements include the accounts of the Company
and all of its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated.
Accounting Estimates
--------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those
estimates.
Revenue Recognition
-------------------
Sales of homes and all related costs are recognized as revenue and costs of
homes sold, respectively, when title is transferred at closing.
Restricted Escrow Funds
-----------------------
The Company's restricted escrow funds at September 30, 1997 are comprised
of customer deposits not eligible for use by the Company. There were no
restricted escrow funds at September 30, 1998.
Land and Construction-in-Progress
---------------------------------
Land and construction-in-progress are stated at the lower of cost or
estimated net realizable value and consists of land and land development
costs, direct construction costs, and other costs. Land and land
development costs are allocated to housing units based on their
anticipated relative sales value. Direct construction costs are assigned
to housing units based on specific identification. All other costs are
allocated to housing units based on a pro rata basis. The Company
capitalizes interest, real estate taxes and similar development costs
incurred during the development and construction period. Interest
capitalized during fiscal
30
<PAGE>
year 1998, 1997 and 1996 amounted to $3,472,035, $2,522,984 and $2,020,985,
respectively.
The Company periodically evaluates the carrying value of individual real
estate projects based on estimated fair value less cost to complete and
sell. Certain of the key assumptions used in the evaluation include sales
price history, absorption history and cost of construction, which includes
estimates and an interest factor. During the fiscal years ending September
30, 1997 and 1996, the Company recorded an adjustment to carrying value of
approximately $2,652,000 and $1,050,000, respectively. These amounts have
been included in costs of homes sold in the accompanying consolidated
financial statements.
Model Furnishings
-----------------
Model furnishings are stated at cost. Depreciation is being provided on
the straight-line method over the estimated useful lives of the
furnishings.
Deferred Loan Costs
-------------------
Costs incurred in connection with borrowings and the issuance of bonds and
debentures of the Company are deferred and amortized over the term of the
related debt.
Goodwill
--------
Based on a review performed at September 30, 1997, the Company determined
that goodwill could not be realized and, accordingly, recorded a charge for
the remaining balance of $331,570.
Fair Value of Financial Instruments
-----------------------------------
Carrying amounts of certain of the Company's financial instruments
including cash, accrued payroll, accrued liabilities, and borrowings
approximate fair value because of their short term maturities or adjustable
rates fixed to market rates for borrowings. The Company has not obtained
an independent valuation of its 10% bonds.
Warranties
----------
The Company subcontracts virtually all segments of construction to others
and its contracts require the subcontractors to repair or replace any
deficient items related to their trade. Accordingly, no warranty accrual
has been provided.
Income Taxes
------------
Deferred tax assets and liabilities are recorded based on the differences
between financial statement and income tax bases of the Company's assets
and liabilities using enacted tax rates in effect for the year in which
these differences are expected to reverse. The Company establishes
valuation allowances against its deferred tax asset accounts, when
31
<PAGE>
necessary, to more accurately reflect tax benefits that are expected to be
realized by the Company in the future.
Loss Per Share
--------------
Basic loss per common share is computed by dividing net loss attributable
to common stockholders by the weighted average number of shares of common
stock outstanding during the year. Diluted loss per share, which assumes
that the stock options and warrants (see Note 8) are exercised, is not
presented because the effect would be anti-dilutive. The Company's
reported loss per share for 1997 and 1996 have been revised to comply with
the new earnings per share requirements of SFAS No. 128; however, there was
no change to the amount previously reported. The weighted average shares
outstanding used in the computation of net loss attributable to common
shares are as follows:
Weighted Average Shares Outstanding
For the Years Ended
------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Class A Common Stock 2,658,688 2,360,254 2,149,204
Class B Common Stock 1,500,000 1,500,000 1,500,000
--------- --------- ---------
4,158,688 3,860,254 3,649,204
========= ========= =========
</TABLE>
Recent Accounting Pronouncements
--------------------------------
In June 1997, the FASB issued Statement No. 130, ("SFAS No.103") "Reporting
Comprehensive Income", which establishes standards for reporting and
display of comprehensive income and its components (revenue, expenses,
gains, and losses) in a full set of general-purpose financial statements.
SFAS No. 130 is effective for fiscal years beginning after December 15,
1997. The Company will adopt this statement in fiscal year 1999.
In June 1997, the FASB issued Statement No. 131, ("SFAS No. 131")
"Disclosures about Segments of an Enterprise and Related Information",
which establishes standards for reporting information about a company's
operating segments and related disclosures about its products, services,
geographic areas and major customers in annual and interim financial
statement, SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997. The Company will adopt this statement in fiscal year
1999. The adoption of this statement will not impact the Company's results
of operations, cash flows or financial position.
32
<PAGE>
3. CONSTRUCTION IN PROGRESS
Construction in progress consists of the following at September 30, 1998
and 1997:
1998 1997
---- ----
Direct construction costs $11,839,713 9,162,547
Construction period interest, property
taxes, overhead and other
5,410,710 6, 670,568
----------- -----------
$17,250,423 $15,833,115
=========== ===========
4. ACQUISITION, DEVELOPMENT, AND CONSTRUCTION LOANS PAYABLE
Acquisition, development, and construction loans payable consist of the
following at September 30, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Land acquisition and development loans with specified
principal payments due as underlying lots, which
collateralize the loans, are sold:
Required principal payments aggregating $5,790,000 through March
1999 and $8,960,000 through September 1999, interest payable
monthly at prime plus 1%, remaining principal due August 2000. $10,403,401 $ -
Interest payable monthly at prime plus 1%, paid in August 1998. - 10,438,529
Interest payable monthly at prime plus 1.5%, remaining principal
due January 2000. 3,006,116 3,026,949
Interest payable monthly at prime plus 1%, remaining principal
due May 2000. 2,120,992 -
Interest payable monthly at prime plus 1%, remaining principal
due July 2000. 1,701,260 1,385,850
Interest payable monthly at prime plus 1%, remaining principal
due July 1999. 300,000 300,000
Other 125,594 126,686
---------- ----------
17,657,363 15,278,014
---------- ----------
</TABLE>
33
<PAGE>
Revolving construction loans with principal payments equal to the
outstanding loan balance of each dwelling unit due when sold,
collateralized by the dwelling unit and related lot:
<TABLE>
<S> <C> <C>
Interest payable monthly at prime plus 1%, remaining principal
due August 2001. 7,403,518 -
Interest payable monthly at prime plus 1%, paid in August 1998. - 11,335.228
Interest payable monthly at prime plus .875%, remaining principal
due July 2000. 1,174,228 -
Interest payable monthly at prime plus 1.5%, remaining principal
due January 2000. 262,652 942,069
----------- -----------
8,840,398 12,277,297
----------- -----------
Purchase money mortgage note, principal payments of $7,000 due as
each underlying lots is sold, interest added monthly to the
principal balance of the loan at prime, remaining principal due May
2000. The note is secured by a second mortgage on the property. 1,316,781 -
Revolving mortgage note, interest payable monthly at prime plus
1.5%, collateralize by a first mortgage on all properties for which
funds have been disbursed, paid in August 1998. - 1,215,202
Revolving line of credit, paid in August 1998 - 400,000
----------- -----------
$27,814,542 $29,170,513
=========== ===========
</TABLE>
Until August 1998, the Company maintained loan agreements with one of its
lenders that included a revolving credit facility of $50 million used for
the acquisition, development, and construction of certain residential
projects, including a revolving line of credit for working capital
purposes. In August 1998, the Company consummated a refinancing of the
loans under new credit facilities, repaid the outstanding balance and
terminated the credit facility. The Company's new credit facilities include
a land acquisition and development loan, and a revolving construction loan.
During May 1998, the Company entered into a $3.5 million revolving
construction loan that matures on May 5, 2001 and bears interest at prime
plus 1%. There were no outstanding borrowings under this loan at September
30, 1998.
34
<PAGE>
The following are the scheduled and estimated maturities of acquisition,
development and construction loan payable at September 30, 1998:
1999 $ 9,385,594
2000 9,582,030
2001 8,846,918
-------------
$ 27,814,542
=============
One of the loan agreements require the Company to maintain a minimum
tangible net worth, and a certain ratio of liabilities to shareholders'
equity. In order to satisfy certain of these covenants for fiscal years
1997 and 1998, the Company procured waivers of compliance from the relevant
lending institution through September 30, 1999. At September 30, 1998, the
Company was in compliance with its loan covenants, as modified. In
addition, the loan agreements restrict the Company from declaring or paying
any dividends or make any other distributions on any shares of capital
stock of the Company.
5. NOTES AND LOANS PAYABLE
Notes and loans payable consist of the following at September 30, 1998 and
1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Capital lease obligation with interest imputed at 9.5%, payments of
$13,515 due monthly through December 2000, collateralized by certain
furnishings. $330,556 $ -
Notes payable to bank, bearing interest at prime rate plus 1%,
principal payments of $4,000 due monthly with interest through
January 2000. 63,107 143,495
Notes payable to bank, bearing interest at 8.25%, principal and
interest payments of $1,108 due monthly through April 2000,
collateralized by vehicles. 27,365 37,476
Capital lease obligation with interest imputed at 13.44%, payments
of $8,857 due monthly through August 1998 with a balloon payment of
$29,024 due September 1998, collateralized by certain furnishings. - 94,467
Other - 13,455
-------- --------
$421,028 $288,893
======== ========
</TABLE>
35
<PAGE>
The following are the scheduled maturities of notes and loans payable as of
September 30, 1998.
1999 $196,014
2000 177,688
2001 47,326
---------
$421,028
=========
6. 14% COVERTIBLE SUBORDINATED DEBENTURES AND 10% BONDS PAYABLE
On July 28, 1998, the Company sold $4,000,000 of 14% Convertible
Subordinated Debentures ("the Debentures") and 1,784,714 shares of the
Company's authorized and unissued $.01 par value per share Class A Common
Stock at $.56 per share ($1,000,000 in aggregate) to a Florida limited
partnership, of which the President of the Company is among the limited
partners. In addition, the President contributed 1,500,000 shares of Class
B Common Stock of the Company (which he owned) to the partnership. The
Debentures are due in July 2001 and are convertible at the option of the
holder into shares of the Company's Class A Common Stock at a conversion
price of $ .56 per share, and are subordinate to any senior debt of the
Company. The proceeds of the financing were used by the Company primarily
to repay the outstanding principal amount plus accrued interest of the
Company's outstanding 10% bonds in June 1998. In addition, pursuant to the
terms of the Debentures, the Company may not incur any new debt in excess
of $200,000 per annum and may not issue any securities in the future (other
than securities issuable upon exercise and/or conversion of currently
outstanding derivative securities) without the prior consent of the
Partnership.
At September 30, 1997, the Company had bonds payable of $3,681,343
($3,750,000 principal amount of 10% bonds due on June 30, 1998, net of
$68,657 original issue discount). During fiscal 1997, the Company was
exploring alternatives related to the repayment of the 10% bonds. There was
no assurance that the Company's efforts to repay or refinance such
obligations at maturity would be successful. Under these circumstances, the
Company's ability to continue as a going concern depended upon the
successful restructuring or refinancing of the bond obligations in fiscal
1998. The consolidated financial statements at September 30, 1997 did not
include any adjustments that might have resulted from the outcome of this
uncertainty. As described above, the 10% bonds were repaid during fiscal
1998.
36
<PAGE>
7. INCOME TAXES
The components of net deferred taxes at September 30, 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets
Net operating loss carryfowards $ 2,148,000 $ 1,092,500
Accrued expenses 56,000 56,000
Deferred writedown of assets 459,000 1,219,500
Deferred contributions 8,500 8,500
----------- -----------
2,671,500 2,376,500
Less valuation allowance (2,671,500) (2,376,500)
----------- -----------
Net deferred tax assets $ - $ -
=========== ===========
</TABLE>
Reconciliation of the differences between income taxes (benefit) computed
at federal statutory tax rates and the Company's recorded provision
(benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Expected tax benefit at Federal statutory rate (34.0)% (34.0)% (34.0)%
State income tax (benefit), net ( 3.6)% ( 3.6)% ( 3.6)%
Valuation allowance 37.6 % 37.6 % 37.6 %
---- ---- ----
Income tax expense (benefit) 0.0 % 0.0 % 0.0 %
==== ==== ====
</TABLE>
As of September 30, 1998, the Company had net operating losses of
approximately $5,700,000, which have been offset by a valuation allowance.
Due to the convertibility feature of certain debt and common stock issued
during fiscal year 1998, the net operating losses incurred through July
1998 could be limited in the future. The carryforwards will expire through
the year 2013. During the year ended September 30, 1998, the Company
recorded an additional valuation allowance of $295,000 on the deferred tax
assets to reduce the total to an amount that management believes will
ultimately be realized. SFAS No. 109 requires a valuation allowance be
recorded against tax assets which are not likely to be realized. Based upon
past performance and the uncertain nature of their ultimate realization,
the Company established a valuation allowance against these carryforward
items and will be recognizing the benefits only as reassessment
demonstrates they are realizable.
8. STOCK-BASED COMPENSATION
In connection with its initial public offering, the Company sold to certain
lead underwriters, for nominal consideration, warrants to purchase from the
Company's 160,000 shares of Class A Common Stock. The warrants are
exercisable at a price of $7.80 per share of Class A Common Stock through
April 26, 2000. The warrants also provide for adjustment in the number of
shares of Class A Common Stock issuable upon the exercise thereof as a
result of certain subdivisions and combinations of the Class A
37
<PAGE>
Common Stock. The warrants grant to the holders thereof certain rights of
registration of the securities issuable upon the exercise of the warrants.
In March 1995 the Company granted, to the Company's President, options to
purchase 150,000 shares of Class A Common Stock exercisable at $7.80 per
share for a period of four years commencing April 26, 1996. In February
1997, the Company granted to directors and certain employees options to
purchase 620,000 shares of Class A Common Stock exercisable at $1.75 per
share for a period of 10 years. The options vest ratably over a 5 year
period except for options to purchase 65,000 shares, which vested
immediately.
In October 1995, SFAS No. 123 was issued by the FASB and, if fully adopted,
changes the methods for recognition of compensation expense for stock-based
compensation. Adoption of SFAS No. 123 is optional with respect to
stock-based awards of employees; however, SFAS No. 123 requires pro forma
disclosures as if the Company adopted the cost recognition principles. Had
compensation cost been determined based on the fair market value at the
grant dates for awards consistent with the methods prescribed by SFAS No.
123, the Company's net loss and net loss per share per in fiscal 1998 and
1997 would have been increased to the pro forma amounts indicated below:
1998 1997
---- ----
Pro forma net loss:
As reported $(784,858) $(3,168,279)
========= ===========
Pro forma $(916,378) $(3,281,532)
========= ===========
Pro forma loss per share:
As reported $ (0.19) $ (0.82)
======= =======
Pro forma $ (0.22) $ (0.85)
======= =======
The fair value of the fiscal year 1997 option grants was estimated on the
date of grant using the Black-Scholes option-pricing model with the
following assumptions: risk free interest rates of 6.75%, dividend yield of
0%, expected lives of 0 years and volatility of 78%. The weighted average
fair value of options granted was $1.37.
A summary of the status of the Company's stock-based option awards during
September 30, 1998, 1997 and 1996, and changes during the years ending on
those dates is presented below:
<TABLE>
<CAPTION>
1998 1997 1996
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 905,000 3.82 310,000 7.80 310,000 7.80
Granted - - 620,000 1.75 - -
Exercised - - - - - -
Forfeited (55,000) (1.75) (25,000) (1.75) - -
------- ----- ------- ----- ------- -----
Outstanding at year end 850,000 3.95 905,000 3.82 310,000 7.80
======= ===== ======= ===== ======= =====
Exercisable at end of year 475,000 375,000 310,000
======= ======= =======
</TABLE>
38
<PAGE>
9. CAPITAL STOCK
The Class A Common Stock and the Class B Common Stock vote together as a
single class and are entitled to one vote per share.
Prior to the Company having earned an aggregate of $7.5 million of adjusted
operating income (as defined), the holders of Common Stock are entitled to
receive dividends, to the extent funds are legally available, at the rate
of $0.325 per share per annum for Class A Common Stock and $0.001 per share
per annum for Class B Common Stock, payable on a quarterly basis. Since
August 1996, the Board of Directors of the Company has elected to forego
the regularly scheduled cash dividend payments on its outstanding shares of
Class A Common Stock and Class B Common Stock. Cash dividends on the Class
A and Class B Common Stock are cumulative, and accordingly, the amount of
such dividends would inure for the benefit of the Company's shareholders.
The Company accrues such dividends on its financial statements only if and
when the Company's Board of Directors declares such dividends (see Note 4
for restrictions on dividends). As of September 30, 1998, dividends in
arrears amounted to approximately $1,874,000.
Each share of Class B Common Stock can be converted into one share of Class
A Common Stock if the Earnings Achievements Date (as defined) has occurred
and all accumulated and unpaid dividends on the Class A Common Stock have
been declared and paid in full.
10. COMMITMENTS AND CONTINGENCIES
Performance Bonds
-----------------
In accordance with certain governmental requirements, the Company has
caused performance bonds and letters of credit aggregating $1,645,000, to
be issued to governmental agencies for certain of the projects to secure
the completion of required improvements as of September 30, 1998.
Litigation
----------
The Company is involved from time to time in litigation arising in the
ordinary course of its business none of which is expected to have a
material adverse effect on the Company's consolidated financial position or
results of operations.
11. RELATED PARTY TRANSACTION
39
<PAGE>
In fiscal year 1997, a director of the Company was also the managing
director of a company ("the Consulting Company") that provided financial
services to the Company. During fiscal year 1997, the Consulting Company
was paid a fee of $163,000 and received 200,000 warrants to purchase stock
at $2.25 per share and 150,000 stock appreciation rights relating to the
potential conversion of Class B Common Stock into Class A Common Stock. The
warrants and stock appreciation rights were cancelled in 1998 when the
director resigned.
WEITZER HOMEBUILDER INCORPORTED AND SUBSIDIARES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Charged to Charged to
Beginning Cost and Other Balance at
of Year Expenses Accounts Deduction End of Year
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1998
Allowances deducted from assets for
Deferred taxes 2,376,500 $ 295,000 $ - $ - $2,671,500
========= ========== ======== ========== ==========
YEAR ENDED SEPTEMBER 30, 1997
Allowances deducted from assets for
Deferred taxes $1,130,400 $1,246,100 $ - $ - $2,376,500
========= ========== ======== ========== ==========
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
As previously reported by the Company on Form 8-K, filed on October 7,
1998, effective October 5, 1998, the Company engaged McKean, Paul, Chrycy,
Fletcher & Co. as the independent accountants to audit the financial statements
of the Company and its subsidiaries for the fiscal year ended September 30,
1998, replacing PricewaterhouseCoopers LLP (formerly Coopers & Lybrand LLP), who
was dismissed as of October 5, 1998.
In connection with the audits of the Company's financial statements for
each of the two fiscal years ended September 30, 1997 and 1996, respectively,
and in the subsequent interim periods preceding PricewaterhouseCoopers LLP's
dismissal, there were no disagreements on any matters of accounting principles
or practices, financial statement disclosure or auditing scope or procedure
which, if not resolved to their satisfaction, would have caused them to make
reference to the matter in their report.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<PAGE>
The information regarding the Company's Directors and Executive Officers is
included in Part I under "Directors and Executive Officers of the
Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning all
cash and noncash compensation paid or accrued for services rendered to the
Company during the fiscal years ended September 30, 1996, 1997 and 1998 to the
Company's Chief Executive Officer and each of the Company's other most highly
compensated executive officers. All executive officers of the Company are
currently employees of an employee leasing company, Paychex Business Solutions,
Inc., which has an Agreement for Services with the Company.
<TABLE>
<CAPTION>
Summary Compensation Table (1)
Long Term Compensation
----------------------------------------------------
Annual Compensation Awards Payouts
------------------------------------------------- -------------------------- ------------------------
Other Restricted Securities All
Annual Stock Underlying LTIP Other
Fiscal Salary Bonus Compensation Awards Options/ Payouts Compensation
Name and Principal Position Year ($) ($) ($) (#) SARs (#) ($) ($)
- --------------------------- ---------- ---------- ---------- ------------ ------------- ----------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Harry Weitzer 1998 323,000 0 0 0 0 0 0
Chairman of the Board and 1997 319,000 0 0 0 250,000 0 0
Chief Executive Officer 1996 295,000 0 0 0 150,000 0 0
Peter Kleinerman(2) 1998 174,000 25,000 0 0 0 0 0
Executive Vice President and 1997 105,000 0 0 0 125,000 0 0
Chief Operating Officer 1996 0 0 0 0 0 0 0
James Rosewater 1998 120,000 0 0 0 0 0 0
Vice President-Marketing 1997 110,000 0 0 0 50,000 0 0
1996 95,000 0 0 0 0 0 0
Leigh Feldsteen (3) 1998 94,000 0 0 0 0 0 0
Vice President-Sales 1997 131,000 0 0 0 50,000 0 0
1996 12,000 0 0 0 0 0 0
Harry Speizer(2) (3) 1998 149,000 25,000 0 0 0 0
Vice President-Real Estate 1997 92,000 0 0 0 100,000 0 0
1996 0 0 0 0 0 0 0
</TABLE>
(1) The amounts reflected in the above table do not include any amounts
for perquisites and other personal benefits extended to the named
executive officers. All of the personnel of the Company are leased to
the Company through Paychex Business Solutions, Inc., which has an
agreement for services with the Company.
(2) Mr. Kleinerman and Mr. Speizer joined the Company in March 1997.
(3) Mr. Speizer and Mr. Feldsteen left the employ of the Company in
October 1998 and May 1998, respectively. Mr. Speizer and the Company
entered into a consulting agreement for real estate consulting
services through February 28, 1999, as described below.
41
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
<TABLE>
<CAPTION>
Shares
Acquired Number of Securities Underlying Value of Unexercised
on Value Unexercised Options/SARs In-the-Money Options/SARs
Name(2) Exercise Received at September 30, 1998(#) at September 30, 1998($)(1)
- ------- -------- -------- ------------------------ ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harry Weitzer - - 200,000 200,000 - -
Peter Kleinerman - - 50,000 75,000 - -
Harry Speizer - - 40,000 0 - -
Jim Rosewater - - 10,000 40,000 - -
</TABLE>
(1) The closing price for the Class A Common Stock as reported by the OTC
Bulletin Board on September 30, 1998 was $0.406, which is less than the
option exercise price at the Company's fiscal year end.
(2) Does not include Leigh Feldsteen, who left the employ of the Company in May
1998, and who does not own any options at September 30, 1998.
Compensation of Directors
Directors who are not employees and who do not otherwise receive
compensation from the Company are entitled to $2,000 per Board meeting attended
in addition to the reimbursement of reasonable expenses incurred in attending
meetings. Directors who are officers or employees of the Company receive no
additional compensation for service as directors, other than reimbursement of
reasonable expenses incurred in attending meetings. During the fiscal year ended
September 30, 1998, the Company made no other payments to directors with respect
to participation on Board committees. See "Certain Relationships and Related
Transactions" for compensation paid by the Company to certain directors for
consulting services and relationships of several directors with Chai Capital,
Ltd, an affiliate of the Company.
Employment Contracts and Termination of Employment and Change in Control
Arrangements
Effective as of November 1, 1995, the Company entered into a five-year
employment agreement (the "Employment Agreement") with Harry Weitzer, its
Chairman, President and Chief Executive Officer, whereby he agreed to devote
substantially all of his business time to the affairs of the Company. The
Employment Agreement provides for a salary of $300,000, with annual cost of
living adjustments. In addition, the Employment Agreement provides for bonuses,
reimbursement of business expenses, provision of an automobile, health insurance
and related benefits. The Employment Agreement provides that if Mr. Weitzer is
terminated other than for "cause" (which is defined as gross negligence in the
performance of his duties, fraud, embezzlement or breach of trust), dissolution
of the Company or his death, he will be entitled to receive the scheduled
compensation for the full remaining term of the Employment Agreement. Any
bonuses or other forms of compensation that Mr. Weitzer may receive in the
future fiscal
42
<PAGE>
years will be determined by the Compensation Committee of the Board of Directors
based on criteria established by the Committee.
Effective as of March 1, 1997, the Company entered into a two-year employment
agreement (the "Kleinerman Agreement") with Peter Kleinerman, the Company's
Executive Vice President and Chief Operating officer, whereby Mr. Kleinerman
agreed to devote substantially all of his business time to the affairs of the
Company. The Kleinerman Agreement provides for an annual salary of $175,000.
In addition, the Kleinerman Agreement provides for bonuses, reimbursement of
business expenses, provision of an automobile, health insurance and related
benefits. The Kleinerman Agreement provides that if Mr. Kleinerman is
terminated other than for "cause" (which is defined as gross negligence in the
performance of his duties, fraud, embezzlement or breach of trust), dissolution
of the company or his death, he will be entitled to receive the scheduled
compensation for a period of nine months. Any bonuses or other forms of
compensation that Mr. Kleinerman may receive in the future fiscal years will be
determined by the Compensation Committee of the Board of Directors based on
criteria established by the Committee.
Effective as of March 1, 1997, the Company entered into a two-year employment
agreement (the "Speizer Agreement") with Harry Speizer, the Company's Senior
Vice President of Real Estate, whereby Mr. Speizer agreed to devote
substantially all of his business time to the affairs of the Company. The
Speizer Agreement provides for an annual salary of $150,000. In addition, the
Speizer Agreement provides for bonuses, reimbursement of business expenses,
provision of an automobile, health insurance and related benefits. The Speizer
Agreement provides that if Mr. Speizer is terminated other than for "cause"
(which is defined as gross negligence in the performance of his duties, fraud,
embezzlement or breach of trust), dissolution of the Company or his death, he
will be entitled to receive the scheduled compensation for a period of nine
months. Any bonuses or other forms of compensation that Mr. Speizer may receive
in the future fiscal years will be determined by the Compensation Committee of
the Board of Directors based on criteria established by the Committee. The
Speizer Agreement was terminated in October 1998 and the Company entered into a
consulting agreement with Mr. Speizer for real estate consulting services, at a
monthly fee of $12,500, through February 28, 1999.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation for the fiscal year ended September 30,
1998 consisted of three primary components: base salary, bonus and grants of
stock options. Fiscal 1998 salary and bonus for the Company's executive
officers was determined by the Compensation Committee and approved by the
Company's Board of Directors.
The components of the Company's Executive Compensation (salary, bonus and
stock options) are designed to facilitate fulfillment of the compensation
objectives of the Company, which objectives include (i) attracting and retaining
competent management, (ii) rewarding management for short and long term
accomplishments, (iii) aligning the interests of management with those of the
Company's shareholders, and (iv) relating management compensation to the
achievement of Company goals and the Company's performance.
43
<PAGE>
The Board's determination of fiscal 1998 salary for the Company's executive
officers was made after reviewing and considering a number of factors, including
job responsibility, level of performance, achievement of Company goals, Company
performance, compensation levels at competitive companies and the Company's
historical compensation levels. Although Company performance was one of the
factors considered, the Board's compensation decisions were based upon an
overall review of the relevant factors and compensation was not tied to Company
performance by any specific relationship or formula.
The determination of fiscal 1998 salary for Harry Weitzer, the Chairman of the
Board, President and Chief Executive Officer of the Company, was based upon his
existing employment agreement and a stock option agreement between the Company
and Mr. Weitzer.
Joseph Rose, Chairman
Larry Hellring
PERFORMANCE GRAPH
The graph below compares the cumulative total returns of the Class A Common
Stock with the companies in the NASDAQ Stock Market (U.S.) Index and with six
peer group companies which include Engle Homes, Inc, Oriole Homes Corp.,
Rottlund Homes Inc., Sundance Homes, Inc., Washington Homes, Inc. and Zaring
Homes, Inc. (the "Peer Group"). The Peer Group consists of Homebuilders who
either (i) concentrate their operations primarily within one geographical area
of the country and have a market capitalization of less than $50 million, or
(ii) concentrate their operations primarily in Florida and have a market
capitalization of less than $100 million. The comparison covers a period from
April 26, 1995 to September 30, 1998, and is based on an assumed $100 investment
on April 26, 1995 (the date of the initial public offering of Class A Common
Stock) in the Nasdaq Stock Market (U.S.) Index, the Peer Group and in the Class
A Common Stock. Comparison with the Nasdaq Stock Market is included to be
consistent with the Company's previous filings, although the Company's Class A
Common Stock is currently traded on the OTC Bulletin Board. See "Item 5 Market
for Registrant's Common Equity and Related Stockholder Matters."
[LINE GRAPH APPEARS HERE]
Cumulative Total Return
--------------------------------------
4/26/95 9/95 9/96 9/97 9/98
WEITZER HOMEBUILDERS INCORPORATED $100.00 $101.25 $ 33.01 $ 16.51 $ 6.71
PEER GROUP 100.00 115.34 119.51 120.42 107.83
NASDAQ STOCK MARKET (U.S.) 100.00 125.35 148.71 204.13 208.65
*$100 INVESTED ON 4/26/95 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
44
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of December 16, 1998, the number and
percentage of outstanding shares of Common Stock owned beneficially by (i)
each shareholder known by the Company to own more than 5% of the
outstanding shares of Class A Common Stock or Class B Common Stock; (ii)
each director of the Company; (iii) each executive officer named in the
Summary Compensation Table under "Executive Compensation" and (iv) all
directors and executive officers as a group.
<TABLE>
<CAPTION>
Class A Common Stock Class B Common Stock
-------------------- --------------------
Amount and Amount and
Nature of Nature of
Name and Address Beneficial Percent Beneficial Percent
of Beneficial Owner Ownership(1) of Class Ownership(1) of Class
- ------------------ ------------ -------- ------------ --------
<S> <C> <C> <C> <C> <C>
Harry Weitzer (2) (6) 400,000 8.8% -- --
5901 N.W. 151st Street,
Suite 120, Miami Lakes, FL 33014
Larry Hellring (3) 15,000 (11) -- --
Joseph B. Rose (4) 15,000 (11) -- --
Mike Ambrosio (5) (6) 5,000 (11) -- --
Alan Litt -- -- -- --
Peter Kleinerman (7) 125,000 2.9% -- --
Harry Speizer (8) 40,000 (11) -- --
James Rosewater (9) 51,000 1.2% -- --
All directors and executive
Officers as a group (9 persons) 651,000 13.6% -- --
Chai Capital, Ltd. (6) (10) 8,928,571 79.1% 1,500,000 100.0%
11900 Biscayne Blvd., Suite 801
Miami, FL 33181
</TABLE>
(1) Unless otherwise indicated, the ownership reflected in this table is direct
and beneficial.
(2) Includes 150,000 shares of Class A Common Stock issuable upon the exercise
of a like number of options at an exercise price of $7.80 which expire
April 20, 2000 and 250,000 shares of Class A Common Stock issuable upon the
exercise of a like number of options at an exercise price of $1.75 which
expire March 12, 2006.
(3) Includes 5,000 shares of Class A Common Stock issuable upon the exercise of
a like number of options at an exercise price of $1.75 and which options
expire March 12, 2006.
(4) Includes 5,000 shares of Class A Common Stock issuable upon the exercise of
a like number of options at an exercise price of $1.75 and which options
expire March 12, 2006.
(5) Includes 5,000 shares of Class A Common Stock issuable upon the exercise of
a like number of options at an exercise price of $1.75 and which options
expire March 12, 2006.
45
<PAGE>
(6) Includes 1,785,714 shares of Class A Common Stock owned and 7,142,857
shares of Class A Common Stock issuable upon conversion of $4 million of
the Company's Convertible Subordinated Debentures at a conversion price of
$.56 per share. Among the limited partners of Chai Capital, Ltd.
("Partnership") are Harry Weitzer and a trust ("Trust") for the benefit of
the wife of Michael Ambrosio. Mr. Ambrosio disclaims beneficial ownership
of the limited partnership interest held by the Trust. In addition, Mr.
Weitzer contributed 1.5 million shares of the Company's Class B Common
Stock owned of record by him to Chai Capital, Ltd. The general partner of
the Partnership is Chai Capital Corp. of which Messrs. Weitzer and Ambrosio
are officers and directors. Mr. Weitzer owns 49.5% and the Trust owns 1% of
the issued and outstanding shares of the capital stock of Chai Capital
Corp.
(7) Includes 125,000 shares of Class A Common Stock issuable upon the exercise
of a like number of options at an exercise price of $1.75 and which options
expire March 1, 2007.
(8) Includes 40,000 shares of Class A Common Stock issuable upon the exercise
of a like number of options at an exercise price of $1.75 and which options
expire October 31, 1999. Mr. Speizer left the employ of the Company in
October 1998 and entered into a consulting agreement with the Company for
real estate consulting services through February 28, 1999.
(9) Includes 50,000 shares of Class A Common Stock issuable upon the exercise
of a like number of options at an exercise price of $1.75 and which options
expire March 12, 2006.
(10) Each share of Class B Common Stock can be converted into one share of Class
A Common Stock if the Earnings Achievement Date (as defined) has occurred
and all accumulated and unpaid dividends on the Class A Common Stock have
been declared and paid in full.
(11) Represents less than one percent.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Michael Ambrosio, a Director of the Company, entered into an agreement with
the Company in September 1998 to furnish consulting services. The agreement
provides that Mr. Ambrosio will be paid a monthly fee of $3,000, on a month-to-
month basis, cancelable at any time by either party. For the fiscal year ended
September 30, 1998, Mr. Ambrosio was paid $3,000. A trust for the benefit of
Mr. Ambrosio's wife is a limited partner of Chai Capital, Ltd. Mr. Ambrosio is
an officer and director of Chai Capital Corp., the general partner of Chai
Capital, Ltd.
Harry Weitzer and Alan Litt are limited partners of Chai Capital, Ltd. and Mr.
Weitzer is an officer and director of Chai Capital Corp., the general partner of
Chai Capital, Ltd.
PART IV
- -------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1. The following exhibits, including those incorporated by
reference.
EXHIBIT
NUMBER DESCRIPTION
-----------
3.1** Amended and Restated Articles of Incorporation of the Company
3.2* By-Laws of the Company
46
<PAGE>
4.1*** Loan Agreement dated as of June 30, 1995, between the Company and
Residential Funding Corporation
4.2*** Construction Loan Agreement dated as of June 30, 1995, between
Weitzer at Deerfield Beach, Inc., and Residential Funding
Corporation and related Promissory Note and Guaranty of the
Company
4.3***** First Amendment Agreement dated as of January 24, 1996 by and
between the Company, Residential Funding Corporation and Webster
Grant Land Company
4.4****** Construction Loan Agreement dated February 28, 1996, between
Weitzer Forest Lakes Villas, Inc. and Residential Funding
Corporation and related Promissory Note and Guaranty of the
Company
4.4****** Construction Mortgage, Security Agreement and Fixture Filing with
Assignment of Rents, Proceeds and Agreements dated as of February
28, 1996 between Weitzer Forest Lakes Villas, Inc. and Residential
Funding Corporation
10.1* Employment Agreement dated as of November 1, 1994, between the
Company and Harry Weitzer
10.2* Indemnification Agreement dated as of September 30, 1994, between
the Company and Harry Weitzer
10.3* Option Agreement for the Purchase of Common Stock dated as of
March 22, 1994 between the Company and Harry Weitzer
10.4* Letter Agreement dated January 31, 1995, among the Company, Harry
Weitzer, Weitzer Chapel Trail Homes, Inc., and Ohio Savings Bank
10.5* Pledge Agreement dated as of October 25, 1994, between the Company
and Josephthal, as agent on behalf of the holders of the 10%
Bonds, of the stock of Weitzer at Harmony Lakes, Inc. relating to
the Company's October 1994 private placement
10.6* Agreement dated as of January 30, 1992, between Broward Management
Company and Webster Grant Land Company, as amended
10.7*** Agreement for Purchase and Sale dated June 14, 1995, between Dade
Residential Developers, Inc. and Webster Grant Land Company
10.8**** Agreement for Services dated as of November 30, 1995, between the
Company and Paychex Business Solutions, Inc.
10.9 First Amendment To First Amended And Restated Agreement For
Purchase And Sale dated January 30, 1998 between Chapel Trail
Associates, Ltd. and Webster Grant Land Company.
10.10******* Form of 14% Convertible Subordinated Debenture
47
<PAGE>
10.11 Unconditional And Continuing Guaranty Agreement And Indemnity
Agreement dated May 6, 1998 between Weitzer Homebuilders
Incorporated and Ohio Savings Bank
10.12 Unconditional And Continuing Guaranty Agreement And Indemnity
Agreement dated August 20, 1998 between Weitzer Homebuilders
Incorporated and Ohio Savings Bank
21.1**** Subsidiaries of the Company
* Incorporated herein by reference to the exhibit bearing the same number
and filed as a part of the Company's Registration Statement on Form S-1
filed on April 26, 1995 (File No. 33-89076).
** Incorporated herein by reference to the exhibit filed as a part of the
Company's report on Form 10-Q for the three months ended March 31, 1996.
*** Incorporated herein by reference to the exhibit filed as a part of the
Company's report on Form 10-Q for the three months ended June 30, 1996.
**** Incorporated herein by reference to the exhibit filed as a part of the
Company's report on Form 10-K for the fiscal year ended September 30,
1996.
***** Incorporated herein by reference to the exhibit filed as a part of the
Company's report on Form 10-Q for the three months ended December 31,
1996.
****** Incorporated herein by reference to the exhibit filed as a part of the
Company's report on Form 10-Q for the three months ended March 31, 1997.
******* Incorporated herein by reference to the exhibit filed as a part of the
Company's report on Form 8-K filed on August 3, 1998.
48
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, as of the 17th day of
December, 1998.
WEITZER HOMEBUILDERS INCORPORATED
By: S\HARRY WEITZER
---------------
Harry Weitzer
Chairman of the Board, and Chief Executive
Officer (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
S\SHERYL RICE
-------------
Sheryl Rice Vice President / Controller December 17, 1998
(Principal Financial and
Accounting Officer)
S\JOSEPH ROSE
-------------
Joseph Rose Director December 17, 1998
S\LARRY HELLRING
----------------
Larry Hellring Director December 17, 1998
S\MICHAEL AMBROSIO
------------------
Michael Ambrosio Director December 17, 1998
S\ALAN LITT
-----------
Alan Litt Director December 17, 1998
49
<PAGE>
Exhibit 10.9
FIRST AMENDMENT TO FIRST AMENDED AND RESTATED AGREEMENT
-------------------------------------------------------
FOR PURCHASE AND SALE
---------------------
THIS FIRST AMENDMENT TO FIRST AMENDED AND RESTATED AGREEMENT FOR PURCHASE
AND SALE (the "Amendment") is made and entered into as of the 30th day of
January, 1998 by and between CHAPEL TRAIL ASSOCIATES, LTD., a Florida limited
partnership (the "Seller"), and WEBSTER GRANT LAND COMPANY, a Florida
corporation (the "Purchaser").
R E C I T A L S:
----------------
1. The Seller and Purchaser entered into a First Amended and Restated Agreement
for Purchase and Sale (the "Agreement") on the 9th day of April, 1997, which
amended and restated that certain Agreement for Purchase and Sale dated June
14, 1995 (the "First Agreement") previously entered into by and between the
Seller and the Purchaser.
2. One hundred twenty-five (125) of the Phase One Lots have previously been
purchased in accordance with the terms and provisions of the Agreement and there
remains to be purchased one hundred twenty-four (124) Phase One Lots (the
"Remaining Lots") in accordance with the terms and provisions of the Agreement.
3. Seller and Purchaser desire to modify the terms and conditions set forth in
the Agreement as herein set forth.
NOW, THEREFORE, for and in consideration of the sum of TEN AND NO/100
($10.00) DOLLARS and for other good and valuable considerations in hand paid by
Purchaser to Seller, the receipt and sufficiency of which is hereby acknowledged
by Seller, it is hereby agreed as follows:
1. Recitals. The recitals above are true and correct and are incorporated
--------
herein by this reference.
2. Purchase and Sale: Notwithstanding any other term, covenant and/or
------------------
condition to the contrary contained in the Agreement, Seller agrees to sell the
Remaining Lots to Purchaser and Purchaser agrees to purchase the Remaining Lots
from Seller, in accordance with the purchase price, terms and conditions herein
set forth. As a result thereof, the provisions contained within paragraph 3,
subparagraph b, and paragraph 11, subparagraphs d, f and g of the Agreement
shall no longer be applicable to the purchase price to be tendered for the
Remaining Lots as the purchase price to be tendered for the Remaining Lots, as
provided for in this Amendment, is all inclusive. All other provisions of the
Agreement dealing with closing expenses including, but not limited to,
subparagraph 11c-1 of the Agreement shall not be affected by this Amendment.
2.1 Purchase of Fifty (50) of the Remaining Lots: Purchaser shall close
--------------------------------------------
upon the purchase of fifty (50) of the Remaining Lots (the "First Takedown
Remaining Lots") on or before
50
<PAGE>
February 12,1998, at a purchase price of EIGHT HUNDRED SEVENTEEN THOUSAND THREE
HUNDRED FIFTY THREE AND NO/100 ($817,353.00) DOLLARS (the "First Takedown
Price").
2.2. Purchase of the Balance of the Remaining Lots. Purchaser shall be
----------------------------------------------
obligated to close upon the purchase of the seventy-four (74) Remaining Lots
which are not included within the First Takedown Remaining Lots (the "Second
Takedown Remaining Lots") on April 2, 1998, at a purchase price of ONE MILLION
TWO HUNDRED THIRTY NINE THOUSAND ONE HUNDRED TWELVE AND NO/100 DOLLARS
($1,239,112.00) DOLLARS.
2.3. Purchase of Phase Two Lots
--------------------------
2.3.1 Purchaser shall be obligated to close upon the purchase of the
Phase Two Lots (as said term is defined in the Agreement) on May 1, 1998
(the "Phase Two Lots Closing Date"), at a purchase price (the "Phase Two
Purchase Price") of TWO MILLION FIVE HUNDRED SEVENTY TWO THOUSAND TWO
HUNDRED AND NO/100 ($2,572,200.00) DOLLARS. The Purchaser shall only
have the right to purchase the Phase Two Lots if Purchaser has
previously acquired all of the Remaining Lots from the Seller. The
Phase Two Purchase Price shall be payable at the Phase Two Lots Closing
Date as follows:
2.3.1.1. Purchaser shall execute a Purchase Money Mortgage and
Promissory Note (collectively, the APMM@) in favor of Seller in the
amount of ONE MILLION SEVENTY TWO THOUSAND TWO HUNDRED AND NO/100
($1,072,200.00) DOLLARS. Seller shall subordinate the lien of the PMM
to the mortgage lien created, in favor of the lender (the "ADC Lender")
providing acquisition, development and construction loan financing with
respect to the Phase Two Lots (the "ADC Loan"). The PMM shall not be
subordinate to the lien of the ADC Loan in the event the Phase Two Lots
constitute security for any other loan and/or indebtedness due the ADC
Lender. The ADC Loan documents shall provide that to the extent
Purchaser receives a notice of default from the ADC Lender, the ADC
Lender shall also provide a copy of such notice of default to Seller.
Purchaser shall pay the cost to record the Purchase Money Mortgage, the
cost of the documentary stamp taxes to be affixed to the Promissory Note
and the cost of the intangible tax due in connection with the Purchase
Money Mortgage. The form of Promissory Note and Purchase Money Mortgage
are attached hereto as Exhibit AA@ and Exhibit AB" respectively, to form
a part hereof, as if herein fully recited; and
2.3.1.2. Purchaser shall tender to Seller, by cashier's check or by
wire transfer the balance of the Phase Two Lot Purchase Price in the
amount of ONE MILLION FIVE HUNDRED THOUSAND AND NO/100 ($1,500,000.00)
DOLLARS.
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<PAGE>
2.4. Notwithstanding anything to the contrary contained within the
Agreement, with respect to the Phase Two Lots only; Paragraphs 3, 7, 9 and 12 of
the Agreement and subparagraph 11c-1 of the Agreement shall not be applicable
and shall be deemed to be null and void. Any provisions of the Agreement which
are contingent upon Seller's or Purchaser's compliance with Paragraphs 3, 7, 9
and/or 12 of the Agreement and/or subparagraph 11c-1 of the Agreement shall be
construed as not requiring compliance by Seller or by Purchaser of said
paragraphs.
2.5 Provided that the proceeds of the ADC Loan are used solely for the
acquisition of the Phase Two Lots, the development and construction thereon of
residential housing (collectively the "Project") and to fund all hard costs and
soft costs specifically associated with the Project and what are normally and
customarily considered to be Project costs, Seller shall execute a Subordination
Agreement subordinating the lien of the PMM to the ADC Loan substantially in the
form of the Subordination Agreement attached hereto as Exhibit "C" to form a
part hereof.
2.6 At closing, Purchaser shall cause Weitzer Homebuilders, Inc. to
guarantee the Promissory Note. The form of the Guaranty to be executed is
attached hereto as Exhibit AD@ to form a part hereof.
2.7 Encumbered Property. It is understood and agreed by and between
-------------------
Seller and Purchaser that if the ADC Loan only encumbers the Phase Two Lots (and
does not encumber any common areas) then the PMM shall only encumber the Phase
Two Lots.
3. Real Estate Taxes. For the purposes of this Amendment, in relation to the
-----------------
purchase by the Purchaser of the Remaining Lots and the Phase Two Lots, all real
estate taxes for the calendar year 1997 and before shall be paid by Seller: (i)
as to the Remaining Lots, by not later than the date the Purchaser closes upon
the purchase of the First Takedown Remaining Lots; and (ii) as to the Phase Two
Lots, by not later than the Phase Two Lots Closing Date.. Purchaser shall
purchase the Remaining Lots and the Phase Two Lots subject only to calendar year
1998 and subsequent years real estate taxes. The purchase price for the
Remaining Lots and the purchase price for the Phase Two Lots have been based
upon the following assumptions: (i) that the 1997 Tax Bill for 449 Lots are
listed on Exhibit "E" attached hereto and are in the aggregate amount of
$81,119.57 (the "Aggregate Taxes"). The purchase price for the Remaining Lots
and for the Phase Two Lots includes Purchaser paying the real estate taxes on
same from April 1, 1997. If the Aggregate Taxes are incorrect, upon ten (10)
days written demand therefor, by either party to the other party, the Seller and
Purchaser shall make the appropriate adjustments to the purchase prices of the
Remaining Lots and Phase Two Lots and the readjusted payments, if any, shall be
paid in such ten (10) day period; and (ii) that the 1997 Pembroke Pines School
Impact Fees, for all of the Phase One Lots and for all of the Phase Two Lots,
are in the amount of $108,670.66.
4. Construction. Each party hereto hereby acknowledges that all parties hereto
------------
have participated equally in the drafting of this Amendment and that,
accordingly, no court construing this Amendment shall construe it more
stringently against one party than the other. This Amendment may be executed in
counterparts, each of which shall be deemed an original and all such
counterparts together shall constitute one and the same instrument.
52
<PAGE>
5. Full Performance. Except for the Purchaser Open Items (hereinafter
----------------
defined) and except for all obligations of the Seller and the Purchaser set
forth within this Amendment, Seller and Purchaser acknowledge that all
contingencies specified in Agreement have been met and satisfied and that Seller
and Purchaser have each performed each and every one of their respective
obligations pursuant to the Agreement and, as of the date hereof, neither Seller
nor Purchaser is in default under the Agreement.
6. Waiver. Except for the Purchaser Open Items, Purchaser and Seller hereby
------
waive and release each other from any claims and/or obligations required of
either party prior to the date of this Amendment.
7. Seller's Performance of Requirements with respect to the Phase One Lots.
-----------------------------------------------------------------------
Except for the Purchaser Open Items, Purchaser hereby acknowledges that Seller
has fully performed all Requirements (as said term is defined in the Agreement)
and has fully complied with all other obligations to be performed by the Seller
with respect to the Phase One Lots. Accordingly, the Purchaser affirmatively
states that the Seller, other than the obligation to convey good and marketable
title to the Remaining Lots and other than the Purchaser Open Items, has no
further work to be done and no further obligations with respect to the Phase One
Lots.
8. Purchaser Open Items. The Purchaser shall have the right to deliver a
--------------------
written list (the "List") to the Seller, by not later than 5:00 p.m. on February
16, 1998, which List shall specify any issues (the "Purchaser Open Items")
relating to the Phase One Lots only which the Purchaser believes have not been
fully performed and complied with by the Seller in accordance with the Seller's
obligations under the Agreement. In the event the Purchaser fails to timely
deliver the List to the Seller, by 5:00 p.m. on February 16, 1998, then it shall
be deemed that the Purchaser has fully accepted the Seller's performance with
respect to the Phase One Lots including, but not limited to, the obligation to
perform the Requirements relating to the Phase One Lots. As to the Purchaser
Open Items, the following shall be applicable:
8.1. The dollar liability of the Seller to comply with the Purchaser Open
Items which the Seller is contractually obligated to perform shall not be
greater than $100,000.00;
8.2. As to any of the Purchaser Open Items which the Seller agrees are
within Seller's contractual obligation to perform (the "Agreed Upon Purchaser
Open Item"), the Seller shall either perform and/or remedy, as may be
applicable, the Agreed Upon Purchaser Open Item or, in the alternative, provide
the Purchaser with a credit (in an amount equal to the agreed upon cost to
perform the Agreed Upon Purchaser Open Item) against the cash portion of the
Phase Two Lot Purchase Price; and
8.3 As to any of the Purchaser Open Items which the Seller does not agree
are within the Seller's contractual obligation to perform, the Purchaser shall
have the rights and remedies afforded to the Purchaser in accordance with the
terms and provisions contained within the Agreement; subject to the dollar
limitation contained within subparagraph 8.1 of this Amendment (reduced by the
dollars expended by the Seller in accordance with the provisions contained
within subparagraph 8.2 of this Amendment).
53
<PAGE>
9. City of Pembroke Pines School Impact Fees and Special Assessments. The
-----------------------------------------------------------------
Purchaser acknowledges its responsibility to reimburse the Seller for all City
of Pembroke Pines School Impact Fees and Special Assessments (collectively the
"School Impact Fees") which have been paid by the Seller or which will be paid
by the Seller, as to the Phase One Lots and as to the Phase Two Lots purchased
and to be purchased by the Purchaser. The Purchaser shall reimburse the Seller
for all School Impact Fees paid or to be paid by the Seller, in the following
manner:
9.1. The Seller shall pay the School Impact Fees due for the 1997 calendar
year by not later than March 31, 1998, and the Purchaser shall, on the Phase Two
Lots Closing Date, reimburse the Seller, by cashier's check or by wire transfer,
the amount of the 1997 School Impact Fees; and
9.2 The PMM shall be increased by an amount equal to the School Impact
Fees paid by the Seller, for the calendar years 1995 and 1996, reduced by the
sum of $25,000.00.
Alternatively, in the event the Purchaser does not purchase the Phase Two Lots
from the Seller on the Phase Two Lots Closing Date then the Purchaser, on May 1,
1998, shall tender to the Seller, by cashier's check, an amount equal to the
School Impact Fees, attributable to the Phase One Lots purchased by the
Purchaser, and which have been paid by the Seller for the 1995, 1996 and 1997
calendar years.
10. Delivery of Documents. The Seller, on the Phase Two Lots Closing Date,
---------------------
shall provide to the Purchaser copies of all surveys, soil test borings and
other examinations, engineering plans and reports, in Seller's possession (such
documents are collectively referred to herein as the "Additional Documents"),
relating to the Phase Two Lots. Upon request from the Purchaser, the Seller
shall execute an appropriate document, in favor of the Purchaser, thereby
assigning and transferring to the Purchaser all of the right, title and interest
of the Seller in and to the Additional Documents.
11. Conflicting Provisions. The terms of this Amendment shall supersede and
----------------------
shall prevail over any conflicting provisions contained within the Agreement or
the First Agreement and to the extent not in conflict, all of the terms,
covenants and conditions of the Agreement are incorporated herein by reference.
12. Lender's Approval. Seller represents and warrants that First Union
-----------------
National Bank (the "Existing Lender") shall, by 5:00 p.m., on Wednesday,
February 18, 1998, provide written consent (the "Consent") to the terms and
provisions of this Amendment and acknowledge that the previously executed
Subordination and Non-Disturbance Agreement shall remain in full force and
effect and shall be deemed to encompass this Amendment. Seller represents,
warrants, covenants and agrees to pay all considerations, if any, required to
obtain the Consent.
13. Joinder by Weitzer Malibu Bay, Inc. Weitzer Malibu Bay, Inc., a Florida
----------------------------------
corporation, acknowledges having reviewed this Amendment and joins into,
acknowledges, covenants and agrees to be bound by the terms and provisions of
Paragraphs 5, 6 and 7 of the Amendment.
14. Phase Two Deposit. Pursuant to the provisions contained within Paragraph
-----------------
12 of the Agreement, Weitzer Homebuilders Incorporated, a Florida corporation
("Weitzer") was to have
54
<PAGE>
executed and delivered, to the Seller, a Promissory Note (the "Phase Two Deposit
Note") in favor of the Seller in the original principal amount of TWO HUNDRED
FIFTY THOUSAND AND NO/100 ($250,000.00) DOLLARS. However, the Seller and the
Purchaser both acknowledge and agree that the Phase Two Deposit Note may never
have been executed and delivered by Weitzer. Accordingly, simultaneously with
the execution of this Amendment, the Purchaser has caused Weitzer to execute and
deliver, into escrow with the Escrow Agent, the Phase Two Deposit Note. The
Phase Two Deposit Note executed simultaneously herewith by Weitzer shall be
deemed to be in replacement of the Phase Two Deposit Note intended to have been
executed at the Initial Closing (as said term is defined within the Agreement)
by Weitzer.
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
set forth herein above.
SELLER:
CHAPEL TRAIL ASSOCIATES, LTD., a Florida limited
partnership
By: CHAPEL TRAIL LTD., a Florida limited partnership,
its General Partner
By: SAJIK CORP., a Florida corporation,
its General Partner
By:_______________________________________________
MICHAEL KOENIG, Vice-President
PURCHASER:
WEBSTER GRANT LAND COMPANY, A FLORIDA CORPORATION
By:_______________________________________________
HARRY WEITZER, President
JOINDER AS TO PARAGRAPH 13 ONLY
-------------------------------
WEITZER AT MALIBU BAY, INC., A FLORIDA CORPORATION
By:_______________________________________________
HARRY WEITZER, President
WEITZER HOMEBUILDERS INCORPORATED, a Florida corporation joins into this
Amendment for the purposes of: (i) guaranteeing the performance by the Purchaser
of the obligations of the Purchaser contained within Paragraph 2 (including its
subparagraphs) of this
55
<PAGE>
Amendment; and (ii) guaranteeing the timely and complete
payment of the obligations of the Purchaser contained within Paragraph 9
(including its subparagraphs) of this Amendment.
WEITZER HOMEBUILDERS INCORPORATED,
a Florida corporation
By:_______________________________________________
HARRY WEITZER, President
56
<PAGE>
Exhibit 10.11
UNCONDITIONAL AND CONTINUING GUARANTY
------------- -----------------------
AND INDEMNITY AGREEMENT
-----------------------
This Unconditional and Continuing Guaranty and Indemnity Agreement (the
"Guaranty") is made and entered into as of May 6 1998 by and between WEITZER
HOMEBUILDERS INCORPORATED, 8 Florida corporation (hereinafter referred to as the
"Guarantor") and OHIO SAVINGS BANK, a federal savings bank, 200 Ohio Savings
Plaza, 1801 East Ninth Street, Cleveland, Ohio 44114 (hereinafter referred to as
the "Bank").
WITNESSETH
----------
WHEREAS, the Bank has agreed to loan to Weitzer Malibu Bay, Inc., a Florida
corporation (the "Borrower"), in one or more loans for the construction of
single family attached (townhouse) residential dwellings within the residential
Subdivision or Project known as "Malibu Bay Phase II", and located on the north
side of Pines Boulevard between Northwest 208th Avenue and proposed Northwest
209th Avenue, in the City of Pembroke Pines, Broward County, Florida, an amount
not to exceed Seven Million Six Hundred Thousand and no/100 Dollars
($7,600,000.00) (U.S.) in the aggregate outstanding at any one time, pursuant to
one or more promissory notes (collectively referred to as the "Loan"), and the
Borrower has executed and delivered or will execute and deliver to the Bank one
or more Mortgage Notes in an aggregate principal amount not exceeding the amount
of the Loan (collectively the "Notes" and individually a "Note") and has also
executed and delivered or will execute and deliver to the Bank in connection
therewith certain Loan Agreements (collectively the "Agreement':" and
individually an "Agreement") and has also executed and delivered or will execute
and deliver to the Bank certain Mortgage and Security Agreements for the purpose
of securing said Notes and Agreements (collectively the "Mortgages" and
individually a "Mortgage");
WHEREAS, the Bank has conditioned the making of the Loan upon receipt of
this Guaranty, and the Guarantor desires that the Bank make the aforesaid Loan
and is willing to enter into this Guaranty as an inducement to the Bank to make
the Loan and in order to achieve interest and other savings to the Borrower,
which will be of financial benefit to the Guarantor;
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the Guarantor does hereby covenant and
agree with the Bank as follows:
ARTICLE I
Representations and Warranties of the Guarantor
-----------------------------------------------
Guarantor hereby represents and warrants that:
(a) it (i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida, (ii) has full power and
authority to enter into, execute, deliver and perform its obligations
hereunder, (iii) is duly qualified and authorized to do business in every
jurisdiction in which the nature of its business or its properties makes
such qualification necessary, (iv) has duly authorized the execution,
delivery and performance of this Guaranty,
57
<PAGE>
and (v) is not in violation of any law, statute, regulation, ordinance,
judgment, decree, order, rule or regulation of any court or governmental
authority applicable to it if such noncompliance would have a material
adverse effect upon the Guarantor, this Guaranty, any of the transactions
contemplated hereby, or the Guarantor's ability to perform its obligations
hereunder;
(b) this Guaranty has been duly executed and delivered on behalf of the
Guarantor and constitutes the legal, valid and binding obligation of the
Guarantor enforceable in accordance with its terms, subject only to
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the rights of creditors generally, and except that the
availability of equitable remedies is subject to applicable equitable
principles;
(c) the execution and delivery by the Guarantor of this Guaranty and the
consummation of the transactions contemplated thereby do not, and the
performance of the Guarantor's obligations hereunder will not (i) conflict
with or result in a violation or breach of or a default under (a) the
Articles of Incorporation, By-laws or similar organizational documents of
Guarantor, (b) any agreement, lease, mortgage, indenture or any other
contract or instrument to which Guarantor is a party or by which it or any
of its property is bound, or (c) any law, statute, ordinance, rule,
regulation, writ, order, judgment or decree to which it is a party or by
which it or any of its property is bound, nor (ii) result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon
any of its properties or assets;
(d) there are no actions, suits, restraining orders, injunctions,
investigations, proceedings or inquiries at law or in equity, pending or
threatened, by or before any judicial, quasi-judicial, legislative or
administrative court, agency or authority, or any arbitrator, nor to the
best of its knowledge any basis for any of the foregoing, wherein an
unfavorable determination, ruling or finding would materially adversely
affect the validity or enforceability of the Guaranty, or any of the
transactions contemplated hereby, or the business, financial condition or
assets of Guarantor;
(e) the assumption by Guarantor of its obligations hereunder will result in
direct financial benefit to Guarantor; and
(f) the Borrower shall make full and prompt payment of the principal, interest,
premiums, penalties and late charges, if any, and other amounts required to
be paid by Borrower pursuant to each Note, Agreement and/or Mortgage1 and
all renewals, replacements, extensions and/or modifications thereof, when
and as the same shall become due, whether at the stated maturity thereof, by
acceleration or otherwise, and the Borrower shall fully and promptly perform
all other obligations, if any, required to be performed by the Borrower
pursuant to each Note, Agreement and/or Mortgage, and all renewals,
replacements, extensions and/or modifications thereof, when the same shall
become due, including any such amounts thereafter paid by the Bank to any
trustee, receiver or any other person pursuant to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or conveyance or
similar statute, common law or equitable doctrine.
ARTICLE II
Covenants and Warranties
------------------------
58
<PAGE>
Section 2.1. The Guarantor hereby absolutely and unconditionally guarantees
to the Bank (a) the full and prompt payment of the principal, interest,
premiums, penalties and late charges, if any, and other amounts required to be
paid by Borrower pursuant to each Note, Agreement and/or Mortgage, and all
renewals1 replacements, extensions and/or modifications thereof, when and as the
same shall become due, whether at the stated maturity thereof, by acceleration
or otherwise, and (b) the full and prompt performance of all other obligations,
if any, required to be performed by the Borrower pursuant to each Note,
Agreement and/or Mortgage, and all renewals, replacements, extensions and/or
modifications thereof, as and when the same shall become due, including any such
amounts thereafter paid by the Bank to any trustee, receiver or any other person
pursuant to any bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or conveyance or similar statute, common law or equitable doctrine.
Section 2.2. If any obligation of Guarantor under the guarantee in Section
2.1 above is at any time and for any reason void or unenforceable, the
Guarantor, as an additional and independent obligation, hereby agrees to
indemnify and hold harmless Bank against and from any and all loss, cost, damage
or expense (including attorneys' fees in all trial, bankruptcy and appellate
proceedings, and whether or not litigation has been commenced) suffered or
incurred by Bank as a result of any such obligation being void or unenforceable
against Guarantor, and the Guarantor expressly agrees that in such event the
Guarantor shall be liable to the Bank as principal obligor on each Note, the
Agreement and Mortgage to the same extent as if Guarantor had been the original
signer and obligor thereof and said instruments were fully enforceable as
written against said Guarantor.
Section 2.3. The obligations of Guarantor under this Guaranty shall be
absolute and unconditional and shall remain in full force and effect and shall
not be discharged, affected, modified or impaired upon the happening from time
to time of any event, including, without limitation, any of the following,
whether or not with notice to or the consent of the Guarantor:
(a) the waiver, compromise, settlement, release, termination, modification or
amendment (including extending the time for payment or performance) of any
or all of the obligations, covenants or agreements of the Borrower or any
obligor under any Note, Agreement or Mortgage or of any or all of the
obligations, covenants or agreements of any other guarantor of the Loan;
(b) the failure to give notice to Guarantor of the occurrence of a default under
the terms and provisions of any Note, Agreement or Mortgage;
(c) the release by the holder of any Note of any security held by it for the
payment of any amount due pursuant thereto or to this Guaranty, or of the
liabilities or obligations of the Borrower with respect thereto (whether
with or without consideration), or the acceptance by the holder of any Note
of any additional security for any such payments or obligations or the
availability or claimed availability of any other security, collateral or
source of payment therefor;
(d) the voluntary or involuntary liquidation, dissolution, sale or other
disposition of all or substantially all the assets, marshalling of assets
and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition with
creditors or readjustment of or other similar proceedings affecting the
Guarantor or the
59
<PAGE>
Borrower or any of their assets;
(e) Any merger or consolidation involving Borrower, any sale, assignment,
transfer, conveyance or issuance of any stock or any other equity interest
by Borrower, or any sale, assignment, transfer or conveyance by Guarantor or
any other person of all or any part of his interest in Borrower or any
affiliate of Borrower;
(f) any failure, omission or delay by the Bank in enforcing, asserting or
exercising any right, power or remedy under any Note, Agreement or Mortgage,
this Guaranty, or at law or in equity;
(g) to the extent permitted by law, any event or action that would, in the
absence of this clause, result in the release or discharge of the Guarantor
from the performance or observance of any obligation covenant or agreement
contained in this Guaranty;
(h) any assignment or transfer by the Bank or any other person entitled to the
benefit of this Guaranty of all or any interest in any Note without the
express assignment of this Guaranty; or
(i) the invalidity or unenforceability of any term or provision in any Note,
Agreement, Mortgage or this Guaranty.
Without limiting the foregoing, it is the intention of the parties that any
modification, limitation, or discharge of the obligations of the Guarantor
arising out of or by virtue of any bankruptcy, reorganization or similar
proceeding for relief of debtors under Federal or state law shall not affect,
modify, limit, or discharge the liability of any other guarantor of the Loan in
any manner whatsoever, and this Guaranty shall remain and continue in full force
and effect and shall be enforceable against Guarantor to the same extent and
with the same force and effect as if any such proceedings had not been
instituted; and the Guarantor shall be liable to the Bank under this Guaranty
for the full amount payable hereunder irrespective of any modification,
limitation, or discharge of the liability of any other guarantor that may result
from any such proceeding. The Guarantor's obligations to Bank pursuant hereto
include and apply to any payment or payments received by Bank on account of the
liabilities guaranteed hereby, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be paid to a trustee, receiver, or any other person or entity
under any bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or conveyance or similar law, common law or equitable doctrine. The
Guarantor's obligations to Bank and this Guaranty, and any security therefor,
shall remain in full force and effect (or be reinstated) until Bank has received
payment in full of all amounts payable to it pursuant to the Notes, Agreements,
Mortgages and this Guaranty and the expiration of any applicable preference or
similar period pursuant to any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or conveyance or similar law, or at law or
equity, without any claim to all or any part of any such payment being made
before the expiration of such period. If any action or proceeding seeking such
repayment is pending or, in Bank's sole judgment, threatened, this Guaranty and
any security interest therefor shall remain in full force and effect
notwithstanding that Borrower or Guarantor may not then be otherwise obligated
to Bank.
Section 2.4. No set-off, counterclaim, reduction or diminution of any
obligation, or any defense of any kind or nature which Guarantor has or may have
against the Borrower shall affect
60
<PAGE>
modify or impair its obligations hereunder.
Section 2.5. In the event of a default in the payment of the principal,
penalties and late charges, if any, or interest on any Note when and as the same
shall become due, whether at the stated maturity thereof1 by acceleration or
otherwise, or in the event of any Event of default under any Mortgage or
Agreement or any instrument collateral or supplemental thereto, the Bank may
proceed first and directly against the Guarantor without proceeding first or
concurrently against the Borrower or exercising, pursuing or exhausting any
other rights, powers or remedies which it may have and without resorting to any
other security held or available to it.
Section 2.6. This Guaranty shall constitute a continuing guarantee, and the
Bank may continue, without notice to the Guarantor, to make loans to the
Borrower subsequent to the date of this Guaranty. The Guarantor hereby expressly
waives notice in writing, or otherwise, from the Bank at any time or from time
to time of its acceptance and reliance on this Guaranty. The Guarantor also
waives presentment, demand for payment, protest and notice of nonpayment or
dishonor relating to any Note or this Guaranty and all other notices to which
the undersigned might otherwise be entitled by law. The Guarantor agrees to pay
all costs, expenses and fees, including all reasonable attorneys' fees (whether
in trial, appellate, bankruptcy or other proceedings), which may be incurred in
enforcing or attempting to enforce this Guaranty, whether the same shall be
enforced by suit or otherwise.
Section 2.7. All rights and claims of Guarantor (collectively the "Guarantor
Claims") against Borrower or any of Borrower's property, now or hereafter
existing, shall be subordinate and subject in right of payment to the prior
payment in full of Borrower's and Guarantor's obligations to Bank. Until such
obligations have been paid in full and Guarantor shall have performed all of its
obligations hereunder, Guarantor shall not receive or collect, directly or
indirectly, from Borrower or any other party any payment upon the Guarantor
Claims nor seek to realize upon any collateral securing any such Guarantor
Claim. Notwithstanding the foregoing, if Guarantor should receive any such
payment, Guarantor agrees to hold same in trust for Bank, and agrees that it
shall have absolutely no rights in or to such payments except to pay them
promptly to Bank, and Guarantor hereby covenants to do so. Guarantor will not
assert any right to which it may be or may become entitled, whether by
subrogation, contribution or otherwise, against the Borrower or against its
properties, by reason of the performance by the Guarantor of its obligations
under this Guaranty, except after satisfaction and discharge in full of the
obligations to Bank under the Notes, the Agreement, Mortgage and this Guaranty.
Section 2.8. Guarantor shall at all times during the term of the Loan (i)
own all of the outstanding stock of the Borrower; (ii) maintain its common stock
effectively registered under the Securities Exchange Act of 1 934; (iii)
maintain at all times a tangible net worth as hereinafter defined ("Tangible Net
Worth") of not less than $3,800,000.00 (which requirement may be adjusted by
Bank twelve (12) months after the date hereof and each anniversary thereafter);
and iv) have thirty five percent (35%) of its common stock issued and
outstanding individually owned of record by Harry Weitzer. Bank agrees to reduce
the ownership requirement in clause (iv) to thirty percent (30%), provided all
of Guarantor's other lenders also reduce the ownership covenants in their
lending agreements to thirty percent (30%).
Tangible Net Worth is defined as the excess of the consolidated net book
value (after deducting all amounts due from subsidiaries and affiliates, if any
all applicable reserves and any
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value attributable to the re-appraisal or write-up of any asset) of assets of
Guarantor and its subsidiaries (other that patents, copyrights, trademarks,
franchises, licenses, goodwill, customer lists, employees1 and similar
intangibles, treasury stock and amounts due from directors, stockholders or
affiliates) over all their liabilities (other than (i) any liabilities or
indebtedness subordinated by written agreement in form and substance
satisfactory to Bank in favor of the prior payment in full of the Loan, (ii) non
recourse purchase money financing to Borrower for the Subdivision or Project,
and (iii) other nonrecourse financing to Guarantor not to exceed $2,000,000.00
in the aggregate) as determined on an accrual basis and in accordance with
generally accepted accounting principles consistently applied.
Section 2.9. Not later than ninety (90) days after the close of each fiscal
year of Guarantor, Guarantor shall furnish to Bank a Certificate from the
auditors of Guarantor, (i) briefly setting forth the scope of their review which
shall include a review of the relevant provisions of Guarantor's Agreements with
its lenders and stating that in their judgment such review is sufficient to
enable them to give the Certificate, and (ii) stating whether or not their
review has disclosed the existence of any condition or event which constitutes
an Event of Default under any such Agreements, or which, with the passage of
time or service of notice or both, would constitute such an Event of Default,
and, if their review has disclosed such a condition or event, specifying the
nature and period of the existence thereof.
Section 2.10. Guarantor shall deliver to Bank complete copies (with all
schedules and exhibits) of each of the Form 10-K Annual Reports and Form 10-Q
Quarterly Reports filed by Guarantor with the United States Securities and
Exchange Commission (the "SEC") no later than five (5) business days following
the earlier of actual delivery to the SEC or the last date of timely filing
thereof with the SEC or within any legally permitted unconditional extension up
to a maximum of thirty (30) days.
Section 2.11. Guarantor shall pay no cash dividends without the prior
written consent of Bank.
Section 2.12. Harry Weitzer shall remain chief executive officer of
Guarantor at all times during the term of the Loan.
ARTICLE III
Miscellaneous
- -------------
Section 3.1. Guarantor will keep complete, accurate and proper books of
record and account in accordance with generally accepted accounting principles
consistently applied and will promptly furnish to the Bank such information
respecting its business affairs, operations and financial condition as Bank may
reasonably request.
Section 3.2. This Guaranty shall be binding upon the Guarantor, and its
successors and assigns, and shall inure to the benefit of the Bank1 its
successors and assigns, all of whom shall be entitled to enforce performance and
observance of this Guaranty and of the guarantees and other provisions herein
contained to the same extent as if they were parties signatory hereto. All
references herein to the Bank shall apply to its successors and assigns.
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Section 3.3. The terms of this Guaranty may be enforced as to any one or
more breaches either separately or cumulatively. Each and every default
hereunder shall give rise to a specific cause of action hereunder and separate
suits may be brought hereunder as each cause of action arises.
Section 3.4. All notices, demands and requests which are permitted or
required pursuant hereto, shall be in writing and shall be deemed effective at
the earliest of (a) when actually delivered to the address of the party to
receive such notice set forth below, (b) at 2:00 P.M. on the next business day
after deposit with a nationally recognized overnight courier service for next
day delivery, with all charges prepaid, or (c) at 6:00 P.M., Eastern Time, on
the second business day after deposit in any post office or mail receptacle
regularly maintained by the United States government for such purposes,
certified or registered mail, return receipt requested, postage prepaid,
addressed as follows:
If to Bank: Ohio Savings Bank
200 Ohio Savings Plaza
1801 East Ninth Street
Cleveland, Ohio 44114
Attn: Frank J. Bolognia
Senior Vice President
If to Guarantor: Weitzer Homebuilders Incorporated
5901 Northwest 151st Street, Suite 120
Miami Lakes, Florida 33014
Attn: Harry Weitzer, President
or other such place in the continental United States as Bank or Guarantor,
respectively, may from time to time designate by written notice to the other as
provided below.
Section 3.5. No remedy herein conferred upon or reserved to the Bank
hereunder is intended to be exclusive of any other available remedy or remedies,
but each and every such remedy shall, to the extent permitted by law, be
cumulative and in addition to every other remedy given under this Guaranty or
now or hereafter existing at law or in equity or by statute. No delay, failure
or omission to exercise any right, power or remedy accruing upon any default,
omission or failure of performance hereunder shall impair any such right, power
or remedy or shall be construed to be a waiver thereof, and any such right,
power or remedy may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the Bank to exercise any remedy reserved to it in
this Guaranty, it shall not be necessary to give any notice, other than such
notice as may be herein expressly required. In the event any provision contained
in this Guaranty shall be breached by any party and thereafter duly waived by
the other party so empowered to act\\1\\ such waiver shall be limited to the
particular breach so waived and shalt not be deemed to waive any other or
subsequent breach hereunder. No waiver\\1\\ amendment, release or modification
of this Guaranty shall be established by conduct, custom, or course of dealing,
but solely by an instrument in writing duly executed by the parties hereto.
Section 3.6. This Guaranty, together with the Notes, the Agreements, the
Mortgages, and
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all other agreements collateral thereto, constitutes the entire agreement and
understanding and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
Section 3.7. If any clause, provision or section of this Guaranty be
determined illegal, invalid or unenforceable by any court, the illegality or
unenforceability of such clause, provision, or section shall not affect any of
the remaining clauses, provisions or sections hereof, and this Guaranty shall be
construed and enforced as if such illegal, invalid or unenforceable clause,
provision or section had not been contained herein. If any obligation, covenant
or agreement contained in this Guaranty be held to be in violation of law, then
such obligation, covenant or agreement shall be deemed to be the obligation,
covenant or agreement of the Guarantor to the full extent permitted by law.
Section 3.8. This Guaranty shall be deemed to be a contract made under the
laws of the State of Florida and for all purposes shall be governed by and
construed in accordance with the laws of said State, and the undersigned hereby
submits and consents to personal jurisdiction in any state or federal court in
the State of Florida in connection with any claim, allegation, cause of action
or proceeding relating in any way to this Guaranty.
Section 3.9. Whenever any pronoun is used herein, it shall be construed to
include the masculine pronoun, the feminine pronoun or the neuter pronoun as
shall be appropriate.
Section 3.10. THE UNDERSIGNED WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, OR RELATED TO, ANY ASPECT OF THE TRANSACTION IN
CONNECTION WITH WHICH THIS DOCUMENT IS BEING GIVEN OR ANY DOCUMENT EXECUTED OR
DELIVERED IN CONNECTION WITH SUCH TRANSACTION, THIS WAIVER IS KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY MADE BY THE UNDERSIGNED AND THE UNDERSIGNED
ACKNOWLEDGES THAT NO ONE HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS
WAIVER OF TRIAL BY JURY OR IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE
UNDERSIGNED FURTHER ACKNOWLEDGES HAVING BEEN REPRESENTED IN CONNECTION WITH THE
TRANSACTION WITH RESPECT TO WHICH THIS DOCUMENT IS BEING GIVEN AND IN THE MAKING
OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED BY THE UNDERSIGNED'S OWN
FREE WILL, AND THAT THE UNDERSIGNED HAS HAD THE OPPORTUNITY TO DISCUSS THIS
WAIVER WITH SUCH COUNSEL. THE UNDERSIGNED FURTHER ACKNOWLEDGES HAVING READ AND
UNDERSTOOD THE MEANING AND RAMIFICATION OF THIS WAIVER PROVISION.
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed to
be effective as of the date first above written.
WITNESSED: GUARANTOR:
Signed: /s/ Karen Kordell WEITZER HOMEBUILDERS INCORPORATED
a Florida Corporation
By: /s/ Harry Weitzer, President
Accepted as of the date first above written
OHIO SAVINGS BANK
By: /s/ Frank J. Bolognia, Senior Vice President
STATE OF FLORIDA
COUNTY OF DADE
Before me, a Notary Public in and for said County and State, on this 6th day
of May, 1998, personally appeared the above named Weitzer Homebuilders
Incorporated, a Florida corporation, by Harry Weitzer, its President, who
acknowledged to me that he did sign the foregoing instrument, on behalf of said
corporation, and that such signing was his free act and deed as such officer,
and the free act and deed of said corporation. Harry Weitzer is personally
known to me.
(SEAL) Signed: /s/ Elena M. Acosta
Notary Public State of Florida
Commission No. CC649482
My Commission Expires June 4, 2001
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Exhibit 10.12
UNCONDITIONAL AND CONTINUING GUARANTY
AND INDEMNITY AGREEMENT
This Unconditional and Continuing Guaranty and Indemnity Agreement (the
"Guaranty") is made and entered into as of August 20, 1998 by and between
WEITZER HOMEBUILDERS INCORPORATED, a Florida corporation (hereinafter referred
to as the "Guarantor") and OHIO SAVINGS BANK, a federal savings bank, 200 Ohio
Savings Plaza, 1801 East Ninth Street, Cleveland, Ohio 44114 (hereinafter
referred to as the "Bank").
W I T N E S S E T H
-------------------
WHEREAS, the Bank has agreed to loan to Weitzer Malibu Bay, Inc., a Florida
corporation, Weitzer at Deerfield Beach, Inc., a Florida corporation, Weitzer
Forest Lakes Villas, Inc., a Florida corporation, Weitzer at Harmony Lakes,
Inc., a Florida corporation, and Weitzer at Windsor Palms, Inc., a Florida
corporation (collectively, the "Borrower"), in one or more loans for the
construction of single family attached (townhouse) residential dwellings within
the residential Subdivisions or Projects described in Exhibit "A" attached
hereto and incorporated herein, in the aggregate amount of Thirty Two Million
Eighty Thousand Four Hundred Thirteen and no/100 Dollars ($32,080,413.00) (U.S.)
in the aggregate outstanding at any one time, pursuant to one or more promissory
notes (collectively referred to as the "Loan"), and the Borrower has executed
and delivered or will execute and deliver to the Bank one or more Mortgage Notes
in an aggregate principal amount not exceeding the amount of the Loan
(collectively the "Notes" and individually a "Note") and has also executed and
delivered or will execute and deliver to the Bank in connection therewith
certain Loan Agreements (collectively the "Agreements" and individually an
"Agreement") and has also executed and delivered or will execute and deliver to
the Bank certain Mortgage and Security Agreements for the purpose of securing
said Notes and Agreements (collectively the "Mortgages" and individually a
"Mortgage");
WHEREAS, the Bank has conditioned the making of the Loan upon receipt of this
Guaranty, and the Guarantor desires that the Bank make the aforesaid Loan and is
willing to enter into this Guaranty as an inducement to the Bank to make the
Loan and in order to achieve interest and other savings to the Borrower, which
will be of financial benefit to the Guarantor;
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the Guarantor does hereby covenant and
agree with the Bank as follows:
ARTICLE I
Representations and Warranties of the Guarantor
-----------------------------------------------
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Guarantor hereby represents and warrants that:
(a) it (i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida, (ii) has full power and
authority to enter into, execute, deliver and perform its obligations
hereunder, (iii) is duly qualified and authorized to do business in every
jurisdiction in which the nature of its business or its properties makes
such qualification necessary, (iv) has duly authorized the execution,
delivery and performance of this Guaranty, and (v) is not in violation of
any law, statute, regulation, ordinance, judgment, decree, order, rule or
regulation of any court or governmental authority applicable to it if
such noncompliance would have a material adverse effect upon the
Guarantor, this Guaranty, any of the transactions contemplated hereby, or
the Guarantor's ability to perform its obligations hereunder;
(b) this Guaranty has been duly executed and delivered on behalf of the
Guarantor and constitutes the legal, valid and binding obligation of the
Guarantor enforceable in accordance with its terms, subject only to
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the rights of creditors generally, and except that the
availability of equitable remedies is subject to applicable equitable
principles;
(c) the execution and delivery by the Guarantor of this Guaranty and the
consummation of the transactions contemplated thereby do not, and the
performance of the Guarantor's obligations hereunder will not (i)
conflict with or result in a violation or breach of or a default under
(a) the Articles of Incorporation, By-laws or similar organizational
documents of Guarantor, (b) any agreement, lease, mortgage, indenture or
any other contract or instrument to which Guarantor is a party or by
which it or any of its property is bound, or (c) any law, statute,
ordinance, rule, regulation, writ, order, judgment or decree to which it
is a party or by which it or any of its property is bound, nor (ii)
result in the creation or imposition of any lien, charge or encumbrance
of any nature whatsoever upon any of its properties or assets;
(d) there are no actions, suits, restraining orders, injunctions,
investigations, proceedings or inquiries at law or in equity, pending or
threatened, by or before any judicial, quasi-judicial, legislative or
administrative court, agency or authority, or any arbitrator, nor to the
best of its knowledge any basis for any of the foregoing, wherein an
unfavorable determination, ruling or finding would materially adversely
affect the validity or enforceability of the Guaranty, or any of the
transactions contemplated hereby, or the business, financial condition or
assets of Guarantor;
(e) the assumption by Guarantor of its obligations hereunder will result in
direct financial benefit to Guarantor; and
(f) the Borrower shall make full and prompt payment of the principal,
interest, premiums, penalties and late charges, if any, and other amounts
required to be paid by Borrower pursuant to each Note, Agreement and/or
Mortgage, and all renewals, replacements, extensions and/or modifications
thereof, when and as the same shall become due, whether at the stated
maturity thereof, by acceleration or otherwise, and the Borrower
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shall fully and promptly perform all other obligations, if any, required
to be performed by the Borrower pursuant to each Note, Agreement and/or
Mortgage, and all renewals, replacements, extensions and/or modifications
thereof, when the same shall become due, including any such amounts
thereafter paid by the Bank to any trustee, receiver or any other person
pursuant to any bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or conveyance or similar statute, common law or
equitable doctrine.
ARTICLE II
Covenants and Warranties
------------------------
Section 2.1. The Guarantor hereby absolutely and unconditionally guarantees
to the Bank (a) the full and prompt payment of the principal, interest,
premiums, penalties and late charges, if any, and other amounts required to be
paid by Borrower pursuant to each Note, Agreement and/or Mortgage, and all
renewals, replacements, extensions and/or modifications thereof, when and as the
same shall become due, whether at the stated maturity thereof, by acceleration
or otherwise, and (b) the full and prompt performance of all other obligations,
if any, required to be performed by the Borrower pursuant to each Note,
Agreement and/or Mortgage, and all renewals, replacements, extensions and/or
modifications thereof, as and when the same shall become due, including any such
amounts thereafter paid by the Bank to any trustee, receiver or any other person
pursuant to any bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or conveyance or similar statute, common law or equitable doctrine.
Section 2.2. If any obligation of Guarantor under the guarantee in Section
2.1 above is at any time and for any reason void or unenforceable, the
Guarantor, as an additional and independent obligation, hereby agrees to
indemnify and hold harmless Bank against and from any and all loss, cost, damage
or expense (including attorneys' fees in all trial, bankruptcy and appellate
proceedings, and whether or not litigation has been commenced) suffered or
incurred by Bank as a result of any such obligation being void or unenforceable
against Guarantor, and the Guarantor expressly agrees that in such event the
Guarantor shall be liable to the Bank as principal obligor on each Note, the
Agreement and Mortgage to the same extent as if Guarantor had been the original
signer and obligor thereof and said instruments were fully enforceable as
written against said Guarantor.
Section 2.3. The obligations of Guarantor under this Guaranty shall be
absolute and unconditional and shall remain in full force and effect and shall
not be discharged, affected, modified or impaired upon the happening from time
to time of any event, including, without limitation, any of the following,
whether or not with notice to or the consent of the Guarantor:
(a) the waiver, compromise, settlement, release, termination, modification or
amendment (including extending the time for payment or performance) of
any or all of the obligations, covenants or agreements of the Borrower or
any obligor under any Note, Agreement or Mortgage or of any or all of the
obligations, covenants or agreements of any other guarantor of the Loan;
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(b) the failure to give notice to Guarantor of the occurrence of a default
under the terms and provisions of any Note, Agreement or Mortgage;
(c) the release by the holder of any Note of any security held by it for the
payment of any amount due pursuant thereto or to this Guaranty, or of the
liabilities or obligations of the Borrower with respect thereto (whether
with or without consideration), or the acceptance by the holder of any
Note of any additional security for any such payments or obligations or
the availability or claimed availability of any other security,
collateral or source of payment therefor;
(d) the voluntary or involuntary liquidation, dissolution, sale or other
disposition of all or substantially all the assets, marshalling of assets
and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition with
creditors or readjustment of, or other similar proceedings affecting the
Guarantor or the Borrower or any of their assets;
(e) Any merger or consolidation involving Borrower, any sale, assignment,
transfer, conveyance or issuance of any stock or any other equity
interest by Borrower, or any sale, assignment, transfer or conveyance by
Guarantor or any other person of all or any part of his interest in
Borrower or any affiliate of Borrower;
(f) any failure, omission or delay by the Bank in enforcing, asserting or
exercising any right, power or remedy under any Note, Agreement or
Mortgage, this Guaranty, or at law or in equity;
(g) to the extent permitted by law, any event or action that would, in the
absence of this clause, result in the release or discharge of the
Guarantor from the performance or observance of any obligation, covenant
or agreement contained in this Guaranty;
(h) any assignment or transfer by the Bank or any other person entitled to
the benefit of this Guaranty of all or any interest in any Note without
the express assignment of this Guaranty; or
(i) the invalidity or unenforceability of any term or provision in any Note,
Agreement, Mortgage or this Guaranty.
Without limiting the foregoing, it is the intention of the parties that any
modification, limitation, or discharge of the obligations of the Guarantor
arising out of or by virtue of any bankruptcy, reorganization or similar
proceeding for relief of debtors under Federal or state law shall not affect,
modify, limit, or discharge the liability of any other guarantor of the Loan in
any manner whatsoever, and this Guaranty shall remain and continue in full force
and effect and shall be enforceable against Guarantor to the same extent and
with the same force and effect as if any such proceedings had not been
instituted; and the Guarantor shall be liable to the Bank under this Guaranty
for the full amount payable hereunder irrespective of any modification,
limitation, or discharge of the liability of any other guarantor that may result
from any such proceeding. The Guarantor's obligations to Bank pursuant hereto
include and apply to any payment or payments received by Bank on account of the
liabilities guaranteed hereby, which payment or payments or
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any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be paid to a trustee, receiver, or
any other person or entity under any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or conveyance or similar law, common law or
equitable doctrine. The Guarantor's obligations to Bank and this Guaranty, and
any security therefor, shall remain in full force and effect (or be reinstated)
until Bank has received payment in full of all amounts payable to it pursuant to
the Notes, Agreements, Mortgages and this Guaranty and the expiration of any
applicable preference or similar period pursuant to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or conveyance or similar law, or
at law or equity, without any claim to all or any part of any such payment being
made before the expiration of such period. If any action or proceeding seeking
such repayment is pending or, in Bank's sole judgment, threatened, this Guaranty
and any security interest therefor shall remain in full force and effect
notwithstanding that Borrower or Guarantor may not then be otherwise obligated
to Bank.
Section 2.4. No set-off, counterclaim, reduction or diminution of any
obligation, or any defense of any kind or nature which Guarantor has or may have
against the Borrower shall affect, modify or impair its obligations hereunder.
Section 2.5. In the event of a default in the payment of the principal,
penalties and late charges, if any, or interest on any Note when and as the same
shall become due, whether at the stated maturity thereof, by acceleration or
otherwise, or in the event of any Event of Default under any Mortgage or
Agreement or any instrument collateral or supplemental thereto, the Bank may
proceed first and directly against the Guarantor without proceeding first or
concurrently against the Borrower or exercising, pursuing or exhausting any
other rights, powers or remedies which it may have and without resorting to any
other security held or available to it.
Section 2.6. This Guaranty shall constitute a continuing guarantee, and the
Bank may continue, without notice to the Guarantor, to make loans to the
Borrower subsequent to the date of this Guaranty. The Guarantor hereby
expressly waives notice in writing, or otherwise, from the Bank at any time or
from time to time of its acceptance and reliance on this Guaranty. The
Guarantor also waives presentment, demand for payment, protest and notice of
nonpayment or dishonor relating to any Note or this Guaranty and all other
notices to which the undersigned might otherwise be entitled by law. The
Guarantor agrees to pay all costs, expenses and fees, including all reasonable
attorneys' fees (whether in trial, appellate, bankruptcy or other proceedings),
which may be incurred in enforcing or attempting to enforce this Guaranty,
whether the same shall be enforced by suit or otherwise.
Section 2.7. All rights and claims of Guarantor (collectively the "Guarantor
Claims") against Borrower or any of Borrower's property, now or hereafter
existing, shall be subordinate and subject in right of payment to the prior
payment in full of Borrower's and Guarantor's obligations to Bank. Until such
obligations have been paid in full and Guarantor shall have performed all of its
obligations hereunder, Guarantor shall not receive or collect, directly or
indirectly, from Borrower or any other party any payment upon the Guarantor
Claims nor seek to realize upon any collateral securing any such Guarantor
Claim. Notwithstanding the foregoing, if Guarantor should receive any such
payment, Guarantor agrees to hold same in trust for Bank, and agrees that it
shall have absolutely no rights in or to such payments except to pay them
promptly to Bank, and Guarantor hereby covenants to do so. Guarantor will not
assert any right to which it
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may be or may become entitled, whether by subrogation, contribution or
otherwise, against the Borrower or against its properties, by reason of the
performance by the Guarantor of its obligations under this Guaranty, except
after satisfaction and discharge in full of the obligations to Bank under the
Notes, the Agreement, Mortgage and this Guaranty.
Section 2.8. Guarantor shall at all times during the term of the Loan (i)
own all of the outstanding stock of the Borrower; (ii) maintain its common stock
effectively registered under the Securities Exchange Act of 1934; (iii) maintain
at all times a tangible net worth as hereinafter defined ("Tangible Net Worth")
of not less than $3,500,000.00 (which requirement may be adjusted by Bank twelve
(12) months after the date hereof and each anniversary thereafter); and (iv)
have thirty five percent (35%) of its common stock issued and outstanding
individually owned of record by Harry Weitzer, including shares owned by Harry
Weitzer indirectly through his ownership interest in HAI Capital, Ltd. Bank
agrees to reduce the ownership requirement in clause (iv) to thirty percent
(30%), provided all of Guarantor's other lenders also reduce the ownership
covenants in their lending agreements to thirty percent (30%).
Tangible Net Worth is defined as the excess of the consolidated net book
value (after deducting all amounts due from subsidiaries and affiliates, if any,
all applicable reserves and any value attributable to the re-appraisal or write-
up of any asset) of assets of Guarantor and its subsidiaries (other that
patents, copyrights, trademarks, franchises, licenses, goodwill, customer lists,
employees, and similar intangibles, treasury stock and amounts due from
directors, stockholders or affiliates) over all their liabilities (other than
nonrecourse financing to Guarantor not to exceed $2,000,000.00 in the aggregate)
as determined on an accrual basis and in accordance with generally accepted
accounting principles consistently applied.
Within thirty (30) days after the close of each fiscal quarter of Guarantor,
Guarantor shall deliver to Bank a Certificate in a form reasonably acceptable to
Bank and substantially similar to the form of Certificate attached hereto as
Exhibit "A", signed by the chief executive or chief financial officer of
Guarantor, certifying Guarantor's compliance with the financial covenants
contained in this Section 2.8 as of the end of such fiscal quarter, and
containing the data (dollar amounts, ratios, identity and equity interest in
each subsidiary of Guarantor).
Section 2.9. Not later than ninety (90) days after the close of each fiscal
year of Guarantor, Guarantor shall furnish to Bank a Certificate from the
auditors of Guarantor, (i) briefly setting forth the scope of their review which
shall include a review of the relevant provisions of Guarantor's Agreements with
its lenders and stating that in their judgment such review is sufficient to
enable them to give the Certificate, and (ii) stating whether or not their
review has disclosed the existence of any condition or event which constitutes
an Event of Default under any such Agreements, or which, with the passage of
time or service of notice or both, would constitute such an Event of Default,
and, if their review has disclosed such a condition or event, specifying the
nature and period of the existence thereof.
Section 2.10. Guarantor shall deliver to Bank complete copies (with all
schedules and exhibits) of each of the Form 10-K Annual Reports and Form 10-Q
Quarterly Reports filed by Guarantor with the United States Securities and
Exchange Commission (the "SEC") no later than five (5) business days following
the earlier of actual delivery to the SEC or the last date of timely
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filing thereof with the SEC or within any legally permitted unconditional
extension up to a maximum of thirty (30) days.
Section 2.11. Guarantor shall pay no cash dividends without the prior
written consent of Bank.
Section 2.12. Harry Weitzer shall remain chief executive officer of
Guarantor at all times during the term of the Loan.
ARTICLE III
Miscellaneous
-------------
Section 3.1. Guarantor will keep complete, accurate and proper books of
record and account in accordance with generally accepted accounting principles
consistently applied and will promptly furnish to the Bank such information
respecting its business affairs, operations and financial condition as Bank may
reasonably request.
Section 3.2. This Guaranty shall be binding upon the Guarantor, and its
successors and assigns, and shall inure to the benefit of the Bank, its
successors and assigns, all of whom shall be entitled to enforce performance and
observance of this Guaranty and of the guarantees and other provisions herein
contained to the same extent as if they were parties signatory hereto. All
references herein to the Bank shall apply to its successors and assigns.
Section 3.3. The terms of this Guaranty may be enforced as to any one or
more breaches either separately or cumulatively. Each and every default
hereunder shall give rise to a specific cause of action hereunder and separate
suits may be brought hereunder as each cause of action arises.
Section 3.4. All notices, demands and requests which are permitted or
required pursuant hereto, shall be in writing and shall be deemed effective at
the earliest of (a) when actually delivered to the address of the party to
receive such notice set forth below, (b) at 2:00 P.M. on the next business day
after deposit with a nationally recognized overnight courier service for next
day delivery, with all charges prepaid, or (c) at 6:00 P.M., Eastern Time, on
the second business day after deposit in any post office or mail receptacle
regularly maintained by the United States government for such purposes,
certified or registered mail, return receipt requested, postage prepaid,
addressed as follows:
If to Bank: Ohio Savings Bank
200 Ohio Savings Plaza
1801 East Ninth Street
Cleveland, Ohio 44114
72
<PAGE>
Attn: Frank J. Bolognia,
Senior Vice President
If to Guarantor: Weitzer Homebuilders Incorporated
5901 Northwest 151st Street, Suite 120
Miami Lakes, Florida 33014
Attn: Harry Weitzer, President
or other such place in the continental United States as Bank or Guarantor,
respectively, may from time to time designate by written notice to the other as
provided below.
Section 3.5. No remedy herein conferred upon or reserved to the Bank
hereunder is intended to be exclusive of any other available remedy or remedies,
but each and every such remedy shall, to the extent permitted by law, be
cumulative and in addition to every other remedy given under this Guaranty or
now or hereafter existing at law or in equity or by statute. No delay, failure
or omission to exercise any right, power or remedy accruing upon any default,
omission or failure of performance hereunder shall impair any such right, power
or remedy or shall be construed to be a waiver thereof, and any such right,
power or remedy may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the Bank to exercise any remedy reserved to it
in this Guaranty, it shall not be necessary to give any notice, other than such
notice as may be herein expressly required. In the event any provision
contained in this Guaranty shall be breached by any party and thereafter duly
waived by the other party so empowered to act, such waiver shall be limited to
the particular breach so waived and shall not be deemed to waive any other or
subsequent breach hereunder. No waiver, amendment, release or modification of
this Guaranty shall be established by conduct, custom, or course of dealing, but
solely by an instrument in writing duly executed by the parties hereto.
Section 3.6. This Guaranty, together with the Notes, the Agreements, the
Mortgages, and all other agreements collateral thereto, constitutes the entire
agreement and understanding and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
Section 3.7. If any clause, provision or section of this Guaranty be
determined illegal, invalid or unenforceable by any court, the illegality or
unenforceability of such clause, provision, or section shall not affect any of
the remaining clauses, provisions or sections hereof, and this Guaranty shall be
construed and enforced as if such illegal, invalid or unenforceable clause,
provision or section had not been contained herein. If any obligation, covenant
or agreement contained in this Guaranty be held to be in violation of law, then
such obligation, covenant or agreement shall be deemed to be the obligation,
covenant or agreement of the Guarantor to the full extent permitted by law.
Section 3.8. This Guaranty shall be deemed to be a contract made under the
laws of the State of Florida and for all purposes shall be governed by and
construed in accordance with the laws of said State, and the undersigned hereby
submits and consents to personal jurisdiction in any state or federal court in
the State of Florida in connection with any claim, allegation, cause of action
or proceeding relating in any way to this Guaranty.
73
<PAGE>
Section 3.9. Whenever any pronoun is used herein, it shall be construed to
include the masculine pronoun, the feminine pronoun or the neuter pronoun as
shall be appropriate.
Section 3.10. THE UNDERSIGNED WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, OR RELATED TO, ANY ASPECT OF THE TRANSACTION IN
CONNECTION WITH WHICH THIS DOCUMENT IS BEING GIVEN OR ANY DOCUMENT EXECUTED OR
DELIVERED IN CONNECTION WITH SUCH TRANSACTION. THIS WAIVER IS KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY MADE BY THE UNDERSIGNED AND THE UNDERSIGNED
ACKNOWLEDGES THAT NO ONE HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS
WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THE
UNDERSIGNED FURTHER ACKNOWLEDGES HAVING BEEN REPRESENTED IN CONNECTION WITH THE
TRANSACTION WITH RESPECT TO WHICH THIS DOCUMENT IS BEING GIVEN AND IN THE MAKING
OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED BY THE UNDERSIGNED'S OWN
FREE WILL, AND THAT THE UNDERSIGNED HAS HAD THE OPPORTUNITY TO DISCUSS THIS
WAIVER WITH SUCH COUNSEL. THE UNDERSIGNED FURTHER ACKNOWLEDGES HAVING READ AND
UNDERSTOOD THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed to
be effective as of the date first above written.
WITNESSED: GUARANTOR:
WEITZERHOMEBUILDERSINCORPORATED
a Florida corporation
- ---------------------------
Name Printed:
-------------------
By:
------------------------------
Harry Weitzer, President
- ---------------------------
Name Printed:
-------------------
Accepted as of the date first above written
OHIO SAVINGS BANK
By:
Frank J. Bolognia
Senior Vice President
STATE OF FLORIDA )
74
<PAGE>
)
COUNTY OF MIAMI-DADE )
BEFORE ME, a Notary Public in and for said County and State, on this
_______ day of August, 1998, personally appeared the above-named Weitzer
Homebuilders Incorporated, a Florida corporation, by Harry Weitzer, its
President, who acknowledged that he did sign the foregoing instrument on behalf
of said corporation, and that such signing was his free act and deed,
individually and as such officer, and the free act and deed of said corporation.
He is personally known to me or has produced ___________________________________
as identification.
-----------------------------------------------
Print Name:
------------------------------------
(SEAL) Notary Public, State of Florida at Large
My Commission Expires:
-------------------------
75
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<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1997
<PERIOD-START> OCT-01-1997 OCT-01-1996
<PERIOD-END> SEP-30-1998 SEP-30-1997
<CASH> 482,879 318,628
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 40,023,538 39,181,888
<CURRENT-ASSETS> 1,898,835 1,443,425
<PP&E> 1,268,383 749,726
<DEPRECIATION> (573,352) (246,806)
<TOTAL-ASSETS> 43,100,283 41,446,861
<CURRENT-LIABILITIES> 38,759,411 33,639,788
<BONDS> 0 3,681,343
0 0
0 0
<COMMON> 56,460 38,603
<OTHER-SE> 4,284,412 4,087,127
<TOTAL-LIABILITY-AND-EQUITY> 43,100,283 41,446,861
<SALES> 50,599,859 55,419,763
<TOTAL-REVENUES> 50,960,266 55,864,218
<CGS> 44,451,097 51,743,605
<TOTAL-COSTS> 44,451,097 51,743,605
<OTHER-EXPENSES> 7,236,089 7,190,695
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 57,938 98,197
<INCOME-PRETAX> (784,858) (3,168,279)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (784,858) (3,168,279)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (784,858) (3,168,279)
<EPS-PRIMARY> (0.19) (0.82)
<EPS-DILUTED> (0.19) (0.82)
</TABLE>
