<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[Fee Required]
For the fiscal year ended December 31, 1995
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[No Fee Required]
For the transition period from __________ to __________
Commission file number 1-6736
STARRETT CORPORATION
(Formerly Starrett Housing Corporation)
(Exact name of Registrant as specified in its charter)
NEW YORK 13-5411123
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
909 THIRD AVENUE, NEW YORK, NEW YORK 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)751-3100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock - par value $1.00 per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 recipient's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Aggregate market value of the Common Stock held by non-affiliates of the
Registrant, based on the closing price on the American Stock Exchange on March
18, 1996: $24,764,000 (For this purpose, all outstanding shares of Common Stock
have been considered held by non-affiliates, other than the shares owned by
directors, officers and 5% shareholders of the Registrant; certain of such
persons disclaim that they are affiliates of the Registrant.)
Number of shares of Common Stock outstanding at December 31, 1995: 6,566,402
Documents incorporated by reference: Portions of the definitive proxy statement
of Registrant in connection with its 1995 Meeting of Shareholders incorporated
by reference in Part III.
<PAGE> 2
PART I
Item 1. Business
Starrett Corporation was organized in New York in 1922.
Through its subsidiary Levitt Corporation ("Levitt"), the Company engages in the
construction and sale of single-family homes and garden apartments in the United
States and Puerto Rico. See "Levitt Corporation." Over the years Starrett and
its subsidiaries have constructed a wide range of office, industrial, public and
institutional buildings, among the most notable being the Empire State Building,
the Rockefeller Research Laboratories at Memorial Sloan Kettering Cancer Center,
Whitney Museum, Citicorp Center and Chemical Bank World Headquarters, and many
well-known residential communities and developments, including Starrett at
Spring Creek, Manhattan Park at Roosevelt Island, Trump Tower and the Trump
International Hotel in New York City. The Company today is actively engaged in
all fields of construction, development, management and technical services.
Unless the context otherwise requires, references to the
"Company," the "Registrant" or "Starrett" include Starrett Corporation and/or
one or more of its subsidiaries.
Levitt Corporation
Levitt's operations include sales of single family homes and
condominium garden apartments, development and sale of rental apartment
complexes and mortgage banking.
Housing
Levitt's residential housing operations are concentrated in
Florida and Puerto Rico. In Puerto Rico, Levitt is the largest home builder and
has been building on the island since 1960. It's Florida operations were started
in 1978 and are currently conducted on Florida's southeast and southwest coasts.
During 1994, several new sites were acquired and opened in
Florida. These projects are under full development, and have received favorable
responses from home-buyers. During 1995, Levitt and a joint venture partner
acquired a parcel of land located adjacent to an existing project, which opened
for sale in December, 1995. The excellent sales results at the existing site are
expected to benefit the new development. Additionally, new properties are under
contract for future developments and should provide steady growth for the next
several years.
Levitt has concentrated its significant Puerto Rico
homebuilding activities in the greater San Juan area. In recent years, Puerto
Rico operations have provided a major portion of revenue and profits for Levitt.
Levitt has a large scale planned unit development called Encantada and several
other subdivisions under development in the San Juan metropolitan area which
will provide a steady inventory of houses for the next several years.
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Encantada is planned for approximately 2,600 homes of which
more than 1,800 homes have been contracted for sale with over 1,600 deliveries
as of February 28, 1996. Both single family homes and garden apartments are
offered for sale at various prices in the community. The Company believes that
Encantada's success can be attributed to the excellent quality of the community,
the housing and the family lifestyle it provides. With approximately 800 more
homes to be sold, Encantada, together with the region's other projects, is
expected to continue as an important source of revenues and profits for the
Company. During 1995, the Company has contracted under option to acquire
additional sites for future development.
Levitt's business is affected by several factors such as
housing affordability, increased land costs, legislative growth restrictions,
sewer and water moratoriums, possible changes in the Internal Revenue Code,
including changes in Section 936 of the Internal Revenue Code relating to the
taxability of corporations doing business in Puerto Rico, and infrastructure
requirements.
Levitt's backlog of homes contracted for sale at December 31,
1995 was $86,104,000 compared to $80,523,000 at December 31, 1994. Included in
Levitt's sales backlog at December 31, 1995 and 1994 is $41,040,000 and
$39,490,000, respectively, which constitutes the full backlog from joint
ventures in which Levitt has 50% interests. Backlog consists of units which are
under sales contract but where title has not yet passed, and comprises completed
and uncompleted houses as well as houses where construction has not yet begun.
The following table sets forth information concerning homes
contracted for sale (net of cancellations during each period), housing units
delivered (construction completed and title passed), and backlog:
<TABLE>
<CAPTION>
Wholly-Owned Projects Year Ended December 31
- - --------------------- ----------------------
1995 1994 1993
---- ---- ----
(000's omitted from dollar amounts)
<S> <C> <C> <C>
Homes contracted (net of cancellations)
for sale during period:
Units 557 729 626
Dollar amount (estimated) $96,166 $113,973 $88,089
Homes delivered during period:
Units 550 714 666
Revenues $92,135 $105,260 $89,534
Backlog at end of period:
Units 254 247 232
Dollar amount (estimated) $45,064 $41,033 $32,320
</TABLE>
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Joint Venture Projects
(Reported at 100% of
Joint Venture Backlog)
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Homes contracted (net of cancellations)
for sale during period:
Units 302 241 None
Dollar amount (estimated) $53,298 $39,490
Homes delivered during period:
Units 303 None None
Revenues $51,748
Backlog at end of period:
Units 240 241 None
Dollar amount (estimated) $41,040 $39,490
</TABLE>
After the initial contract has been received, contracts for
the sale of houses may be canceled at or prior to closing for various reasons,
including failure of the buyer to make the remainder of the required contract
deposit, or qualify for mortgage financing, or a default by the buyer. Levitt
retains the buyer's deposit only if cancellation results from default by the
buyer, except in Puerto Rico where under local law Levitt can retain only a
portion of the deposit. When computing homes contracted for sale and backlog,
Levitt makes no deduction for future cancellations, but nets cancellations as
they occur against sales contracts. Levitt generally estimates that of the sales
contracts entered into by buyers, approximately 70% have historically resulted
in delivered homes. Contracts for sale are not recorded as revenues until the
houses have been completed and title delivered.
Levitt generally builds subdivisions on undeveloped suburban
land having access to water and sewer services, although it does occasionally
purchase fully developed land. Development plans must be approved by local
authorities, which may take two years or more after the signing of a purchase
contract. See "Regulation of the Company's Activities," page 8.
Levitt provides home purchasers with warranties against
construction defects for a period of up to two years from the date of purchase.
In Puerto Rico there is a statutory warranty for certain construction defects
which appear generally within ten years after completion.
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Rental Apartment Development
During 1991 through 1994, Levitt, in joint venture with an
established apartment developer, constructed, leased and sold two rental
apartment complexes totaling 424 units. During 1995, a third rental apartment
community comprising 200 units was sold. The three rental apartment complexes
were sold at a substantial profit. A new fourth site is under contract and is
being evaluated for future development.
Levitt's current policy is to develop, lease and sell the
apartment projects and not hold them for investment. The apartment development
program is an integral part of Levitt's business and is anticipated to provide
it with a continuous source of income. It is the Company's plan to develop at
least one apartment project every eighteen months.
Mortgage Banking
Levitt Mortgage Corp. ("Mortgage") is a full service mortgage
lender that processes and originates loans in Puerto Rico and processes mortgage
loans domestically. Fees are earned on mortgage placements and processing.
Mortgage is a designated approved direct endorser of FHA loans in Puerto Rico
but does not service loans.
In Puerto Rico, Mortgage also acts as a mortgage banker for
third parties and processes and issues the mortgages it underwrites. These
mortgages are sold to investors in accordance with firm purchase commitments
with the investors. Mortgages are solicited through four offices in the San Juan
area. Mortgage is the sixth largest mortgage banker in Puerto Rico based on
mortgage commitments.
Starrett's Development Activities
In its development activities, the Company's services, in
addition to those of a construction manager or general contractor, may include
initial planning and development, acquisition of the property, arranging for
financing and ownership of the project typically through general or limited
partnerships, and providing management, consulting and related services. The
Company anticipates marketing its development projects to investors or other
purchasers, based principally on cash flow, capital appreciation and other
non-tax considerations, and may in some instances retain ownership of such
projects. In connection with its sale of projects, the Company may provide
guarantees of completion and cash flow for varying periods.
The Company is proceeding with certain development projects.
While the Company has generally been successful in developing such projects,
these projects are in various stages of development, and there can be no
assurance that any particular project will be completed.
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Pursuant to a Memorandum of Understanding between the Company
and the City of New York, the Company has been designated as the developer of a
mixed use project known as Gateway Estates in Brooklyn, New York, currently
anticipated to consist of a shopping center, housing and related components. The
project is in the plan development stage and requires various government agency
approvals. Milstein Properties, in which Paul Milstein, and members of his
family are the principal owners, is the Company's 35% joint venture partner in
the project.
Ownership of Partnership Interests
The Company reviews from time to time projects in which it
acts as a general partner or in which it has an equity interest (which for the
most part have a low income tenancy subsidized in whole or in part by
government-assistance programs) to determine the possibility of refinancing,
resyndicating, selling, converting to condominiums, or co-oping such projects to
obtain fees and other economic benefits.
On December 14, 1995, a limited partnership in which the
Company is a general partner owning a HUD financed housing project on the upper
West Side of Manhattan refinanced the project. At the closing, the Company
received approximately $3,000,000 most of which represents fees, with the
remainder attributable to repayment of sums owed, return of capital, and
partnership distributive share of refinancing proceeds.
Starrett's Construction Activities
Through its HRH Construction Corporation subsidiary ("HRH"),
the Company primarily acts as construction manager in the construction of
hospital and medical research facilities, institutional, office and residential
projects, most of which are located in the New York City Metropolitan area. HRH
builds projects either as a construction manager on a cost plus fee basis or a
general contractor in which case it assumes the construction risk. The
construction management and general contracting fees and other income earned by
HRH during 1995, 1994 and 1993 were $8,917,000, $4,278,000 and $4,000,000,
respectively. See "Segment Information," page 9.
HRH has focused its activities on institutional construction
and construction funded by City, State and Federal governments and is seeking to
diversify into new areas of construction.
In the case of projects where HRH acts as general contractor
rather than construction manager (which has included projects in which the
Company acts as a developer
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or has an ownership interest), the Company is required from time to time, as is
customary in projects of this kind, to furnish payment and performance bonds
assuring payment to subcontractors. The Company believes its bonding capacity is
adequate for both present and projected requirements. The aggregate amount of
bonds or other security the Company can obtain at any one time is dependent upon
its overall financial strength.
HRH's estimated backlog of fees including fees for projects
where development work has begun but contracts have not yet been executed, was
$16,304,000 at December 31, 1995 as compared to $8,950,000 and $8,151,000 at the
end of 1994 and 1993, respectively. HRH is actively seeking to increase its
backlog of business, particularly in the hospital and medical research
facilities, as well as, the governmental and institutional sectors.
In August 1995 HRH expanded its business into interior work
for office buildings, retail stores, hotels, etc., by creating HRH Construction
Interiors, Inc. ("HRHI").
This type of work is performed under various forms of
contract, such as construction management, lump sum, and guaranteed maximum
price. HRHI is currently performing construction and renovation work for clients
such as Nordstrom Stores, Smith Barney and Gucci.
Management Services
Grenadier Realty Corp. ("Grenadier") is one of the largest and
most diverse full service real estate management firms in the New York
metropolitan area. Its management portfolio includes 60 developments containing
more than 28,000 housing units. The types of properties include
government-assisted housing, low income tax credit developments, high-rise
luxury rentals, cooperatives and condominiums. The portfolio also includes in
excess of one million square feet of commercial space and 10,000 garage spaces.
In 1995, Grenadier was named Property Management Company of the Year in the
Assisted Housing Category by the National Association of Home Builders'
Multi-Family Council. It is the 20th largest property management firm in the
United States based on units under management, and one of the largest managers
of affordable housing in the New York City Metropolitan area.
Grenadier and its subsidiaries provide a variety of real
estate management services, ranging from full service-management to back office
services in specific areas such as budgeting and accounting, rent collection,
recertification and energy management. Prominent developments in Grenadier's
full-service management portfolio include Starrett at Spring Creek in Brooklyn,
New York, the nation's largest government-assisted housing development and
Manhattan Park, a luxury high-rise development with a 20% affordable housing
segment on New York City's Roosevelt Island. Developments that utilize
Grenadier's back-office services include the 4,000-unit Parkchester North
Condominium Development in the Bronx, New York.
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In the latter half of 1994, Grenadier entered the field of
public housing management when it was named to oversee the Chester Housing
Authority (CHA), a distressed housing authority in Chester, Pennsylvania.
Grenadier has overseen a complete reorganization of CHA's
operations and staff, initiated or restarted long-stalled plans for the
modernization and physical rehabilitation of CHA developments, and established
programs aimed at encouraging financial independence and social, cultural and
intellectual growth among the public housing residents. Based on its success in
Chester, Grenadier is now actively pursuing opportunities to provide management
or consulting services to a number of other distressed public housing
authorities around the United States.
Grenadier's subsidiary Security Plus Service Inc. (SPS)
provides security services for 55 residential properties and public institutions
throughout the New York metropolitan area. Its client portfolio has increased
steadily over the last few years. SPS believes that it has established an
excellent reputation in the industry by setting stringent standards for
recruitment, training and on-the-job supervision. These standards far exceed
requirements for security guard companies mandated by the New York Security
Guard Act of 1992.
Regulation of the Company's Activities
The development business and home building industry in which
the Company is engaged have, in the last several years, become subject to
increased environmental, building, land use, zoning and sales regulations
administered by various federal, state and local authorities, which affect
construction activities as well as sales activities and other dealings with
customers. Additionally, sewer moratoriums have been imposed from time to time
in Puerto Rico which have caused delays in the delivery of homes to customers.
The Company must obtain for its development and housing activities the approval
of numerous governmental authorities which often have wide discretion in such
matters. Changes in local circumstances or applicable law may necessitate
applications for additional approvals or the modification of existing approvals.
Compliance with these regulations has extended the time required to market
projects by prolonging the time between the initiation of projects and the
commencement and completion of construction. The Company is currently in various
stages of securing governmental approvals for its development and homebuilding
projects. Delay or inability to obtain all required approvals for a project
could have a materially adverse effect on the marketability or profitability of
a project.
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Segment Information
The Company's operations consist of (i) the development,
management and ownership of real estate properties; (ii) the single-family home
and garden apartment business conducted through its Levitt subsidiary; and (iii)
the supplying of construction services through its HRH subsidiary. The Company
groups its business into these three segments. The following table sets forth
the Company's revenues and operating profit attributable to the respective
segments of its operations for each of the years 1993 through 1995, and the
identifiable assets attributable to the respective segments as at the end of
each of those years:
<TABLE>
<CAPTION>
(Dollars in Thousands)
Development HRH
Management and Levitt Construction
1995 Ownership Corporation Corporation
- - ---- --------- ----------- -----------
<S> <C> <C> <C>
Revenues $26,647 $102,768 $8,917
Operating Profit 1,533 10,823 3,241
Identifiable Assets 17,373 95,631 13,341
1994
- - ----
Revenues $25,635 $111,422 $4,278
Operating Profit 2,575 10,085 309
Identifiable Assets 20,539 85,423 10,305
1993
- - ----
Revenues $24,504 $93,678 $4,000
Operating Profit (loss) 2,600 4,257 (372)
Identifiable Assets 25,797 86,300 8,187
</TABLE>
Operating profit comprises revenues less operating expenses.
In computing operating profit, general corporate expenses and income taxes have
not been deducted.
There were no individual customers from which the Company
derived 10% or more of its revenues in 1993, 1994 or 1995.
Competition
The construction, development and home building industries in
all of the areas in which the Company operates are highly competitive, and the
Company competes with major concerns as well as with smaller contractors or
builders.
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Raw Materials and Equipment
Substantially all the materials used by the Company in
projects now under construction, including fixtures, appliances and systems, are
readily available from many sources. The Company has from time to time
experienced some shortages, delays and increased costs in connection with
material shortages and increases in material prices but the Company does not
believe the effect to have been significant.
Employees--Labor Relations
The Company directly employed, at December 31, 1995, a total
of approximately 1,486 persons. Where the Company has union members working, it
believes that it has satisfactory relations with them.
Item 2. Properties
The Company leases 25,000 square feet of space located at 909
Third Avenue in New York City for the construction management and interiors
business and its development and corporate offices. The lease for such space,
which it occupied in 1973, expires in 1997. The Company also maintains field
offices at each of its construction sites.
Levitt leases approximately 8,800 square feet of office space
which it uses for its executive office and main office for its Florida
homebuilding operation in Boca Raton, Florida, and also leases 10,000 square
feet of office space in San Juan, Puerto Rico.
Item 3. Legal Proceedings
The Company is involved in litigation and claims incident to
the normal conduct of its business. Management believes that such litigation and
claims will not have a materially adverse effect on the Company's business
operations.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Executive Officers of the Company
The following table sets forth the names and ages of all
executive officers of the Company, the positions and offices with the Company
held by each such person, and the period during which each such person has
served as an executive officer.
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<TABLE>
<CAPTION>
Has Served as
Offices and an Executive
Name Age Positions Held Officer Since
- - ---- --- -------------- -------------
<S> <C> <C> <C>
Paul Milstein 73 Chairman of the 1994
Board
Irving R. Fischer 64 President and Chief 1977
Operating Officer
Lewis A. Weinfeld 53 Executive Vice President, 1974
Chief Financial Officer
Elliott M. Wiener 61 Chairman of the Board 1982
and Chief Executive Officer
of Levitt Corporation,
a subsidiary of the Company
Robert C. Rosenberg 61 Chairman of the Board and 1976
Chief Executive Officer
of Grenadier Realty Corp.,
a subsidiary of the Company
Frank Ross, Sr. 62 Chairman of the Board and 1990
Chief Executive Officer
of HRH Construction
Corporation, a subsidiary
of the Company
</TABLE>
The term of office of each executive officer continues until
the first meeting of the Board of Directors of the Company following the next
annual meeting of shareholders, and until the election and qualification of such
officer's successor. There is no family relationship between the executive
officers listed above, or between such executive officers and directors. All of
the executive officers except Paul Milstein and Frank Ross, Sr. have been
principally engaged in his present employment for more than five years. Mr.
Milstein became Chairman on January 1, 1994, and for more than five years has
been active as a real estate developer and investor. Mr. Ross has been employed
by HRH since 1976 and has been President of Construction operations for HRH
Construction Corporation since 1990.
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PART II
Item 5. Market for the Company's Common Equity and Related
Stockholder Matters
On March 18, 1996, there were 710 record holders of the
Company's common stock and approximately 1460 additional persons whose shares of
Common Stock were held in street name. Such common stock is listed on the
American Stock Exchange, which is the principal market on which such stock is
traded. High and low sales prices on the American Stock Exchange for the
Company's common stock during the last two years have been as follows:
<TABLE>
<CAPTION>
1996 High Low
---- ---- ---
<S> <C> <C>
First Quarter 15-1/4 8
</TABLE>
<TABLE>
<CAPTION>
1995 High Low
---- ---- ---
<S> <C> <C>
First Quarter 8 6-5/8
Second Quarter 10-5/8 7-7/8
Third Quarter 10-1/2 8-3/8
Fourth Quarter 8-7/8 7
</TABLE>
<TABLE>
<CAPTION>
1994 High Low
---- ---- ---
<S> <C> <C>
First Quarter 10-1/4 7-1/4
Second Quarter 8-1/4 6-1/4
Third Quarter 7-3/4 6-5/8
Fourth Quarter 8-1/2 6-1/2
</TABLE>
The Company established a program of regular annual cash
dividends of $.25 per share of common stock, payable $.0625 per quarter.
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Item 6. Selected Financial Data
Starrett Corporation and Subsidiaries
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $138,332 $141,335 $122,182 $111,855 $111,089
Income before income
taxes 12,377 10,306 4,588 1,045 2,283
Income before
extraordinary item and
cumulative effect of
accounting change 7,365 6,159 2,140 284 1,384
Extraordinary item 824
Cumulative effect of
accounting change 1,287
Net income 7,365 6,159 2,140 2,395 1,384
Earnings per share:
Income before
extraordinary item
and cumulative effect
of accounting change 1.18 .98 .34 .04 .21
Extraordinary item .13
Cumulative effect of
accounting change .20
Net income 1.18 .98 .34 .37 .21
Total assets 126,345 116,267 120,284 136,738 150,290
Long-term obligations 34,459 36,066 41,033 32,603 60,922
Common
Stockholders' Equity 52,138 47,117 41,819 41,139 40,408
Cash dividends
(per share) .25 .125 None .25 None
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
1995 Compared to 1994
During the year ended December 31, 1995 the Company had income
from operations of $12,377,000 compared to $10,306,000 for the year ended
December 31, 1994 and net income of $7,365,000 ($1.18 per share) as compared to
$6,159,000 ($.98 per share). Earnings per share were based on average shares
outstanding of 6,261,000 in 1995 and 1994, respectively.
The Company's revenues decreased $3,003,000 compared with the
similar period in 1994. This decrease was primarily attributable to Levitt
Corporation. Revenues from house sales in the Company's Puerto Rico region
decreased significantly as production was disrupted by heavy rain storms and
several hurricane warnings. Despite this decrease in revenues, Levitt's
operating income increased to $10,823,000 from $10,085,000 in 1994. This
increase was the result of significantly higher average net sales prices on
homes delivered in the Company's domestic region, the increase in equity
earnings from joint ventures, and the expansion of the mortgage banking business
in Puerto Rico.
Levitt's backlog of homes contracted for sale at December 31,
1995 was $86,104,000 compared to $80,523,000 at December 31, 1994, which
includes $41,040,000 and $39,490,000, respectively, which constitutes the full
backlog from joint ventures in which Levitt has a 50% interest.
Levitt's gross profit from house sales remained steady in
1995, with increases in domestic gross profit margins offset by a modest
decrease in Puerto Rico's margins .
Mortgage operation costs increased due to the continued
expansion of the mortgage operation business both domestically and in Puerto
Rico.
Interest incurred, real estate taxes, and sales costs incurred
in connection with certain properties are capitalized in order to achieve better
matching of costs with revenues. Interest incurred on loans was $3,778,000 in
1995 and $3,435,000 in 1994, of which $3,327,000 in 1995 and $2,775,000 in 1994
was capitalized. Amortization of capitalized interest of $3,726,000 in 1995 and
$4,941,000 in 1994 was charged to construction costs.
HRH Construction continued to operate at a profit while
significantly increasing its backlog of fees. HRH's estimated backlog of fees
for development work and uncompleted construction in connection with
construction projects, including fees for projects where development work has
begun but contracts have not yet been executed increased to $16,304,000 at
December 31, 1995 as compared to $8,950,000 at December 31, 1994. The increase
in backlog of fees is primarily attributable to HRH's expansion of business into
interiors work for office buildings, retail stores, hotels, etc., through its
subsidiary HRHI. HRH is actively seeking to increase its backlog of business,
particularly in the hospital and medical research facilities, as well as,
governmental and institutional sectors.
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Grenadier continued its steady profitability in 1995 and has
expanded its management services to private owners and institutional property
owners as well as the public housing sectors.
General and administrative expenses increased $2,883,000 in
1995 principally due to the expansion of operations in all segments of the
Company's business. The significant increases were attributable to personnel and
general office overhead.
Security service labor and other costs increased $1,323,000 in
1995 as a result of an increase in the Company's security protection operation.
On December 14, 1995, a limited partnership in which the
Company is a general partner owning a HUD financed housing project on the Upper
West Side of Manhattan refinanced the project. At the closing, the Company
received approximately $3,000,000 most of which represents fees, with the
remainder attributable to repayment of sums owed, return of capital, and
partnership distributive share of refinancing proceeds. The fees earned on this
transaction are included in the Company's 1995 earnings.
During 1995 the Company wrote down certain investments in
partnerships which were previously recorded at cost. The Company contracted for
sale, and recorded the loss on sale, of a self-storage mini-warehouse. Inclusive
of these losses, the Company recorded approximately $2,200,000 of non-recurring
losses during 1995. The Company does not anticipate any additional writedowns
of this nature in 1996.
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1994 Compared to 1993
During the year ended December 31, 1994 the Company had income
from operations of $10,306,000 compared to $4,588,000 for the year ended
December 31, 1993 and net income of $6,159,000 ($.98 per share) as compared to
$2,140,000 ($.34 per share). Earnings per share were based on average shares
outstanding of 6,261,000 and 6,356,000 in 1994 and 1993, respectively.
The Company's revenues increased by $19,153,000 in 1994
compared with the similar period in 1993. This increase was primarily
attributable to Levitt Corporation. Levitt's net income increased to $10,085,000
from $4,257,000 in 1993, including income in 1994 from the sale of its interest
in a rental apartment project. Levitt's backlog of homes contracted for sale at
December 31, 1994 was $80,523,000 compared to $32,320,000 at December 31, 1993.
The December 31, 1994 backlog includes $39,490,000 relating to joint ventures in
which Levitt has a 50% interest. Levitt's revenues were greater because of an
increase in the number of houses delivered, coupled with a higher average
selling price. The increase in the average selling prices are attributable to
various factors, including product mix, lot premiums, and sale of optional
items.
Levitt's gross profit from house sales increased in 1994 as
compared to 1993. This increase in gross profit is due to the Florida region's
significantly improving domestic gross profit margins, as well as, the Puerto
Rico region having an increase in gross profit margin.
Security service labor and other costs increased by $1,471,000
as a result of an increase in the security service operations and the
discontinuance of Levitt's life care management operations requiring 1995 costs
to be accrued in 1994.
Mortgage and closing costs increased due to local taxing
authorities in Puerto Rico assessing significant increased taxes related to
construction activity. Mortgage operation costs increased due to an expansion of
business in Levitt's Puerto Rico operation and the recent addition of branch
offices.
Levitt's interest, real estate taxes and sales costs incurred
with certain properties are capitalized in order to achieve better matching of
costs with revenues. The Company's interest incurred on loans was $3,435,000 in
1994 and $3,893,000 in 1993, of which $2,775,000 in 1994 and $2,959,000 in 1993
was capitalized by Levitt in its operations. Levitt amortized capitalized
interest of $4,941,000 in 1994 and $5,802,000 in 1993 to construction and
related costs.
HRH's estimated backlog of fees for development work and
uncompleted construction in connection with construction projects, including
fees for projects where development work has begun but contracts have not yet
been executed, was $8,950,000 at December 31, 1994 as compared to $8,151,000 at
the end of 1993. HRH is actively seeking to increase its backlog of business,
particularly in the hospital and medical research facilities, as well as,
governmental and institutional sectors.
16
<PAGE> 17
Grenadier continued its steady profitability in 1994 and has
expanded its management services to private owners and institutional property
owners as well as banks and thrift institutions.
Financial Condition and Capital Resources
The Company meets its short-term financing needs with cash
generated from operations and funds available under several unsecured credit
agreements. On January 31, 1996, Levitt satisfied a $14,400,000 unsecured credit
facility through a $4,400,000 payment from working capital and a $10,000,000
payment from an unsecured term loan. The new loan requires semi-annual principal
payments of $1,000,000 and $1,500,000 in July and January, respectively, through
January 2000.
Homebuilding Operations
The Company generally meets its land acquisition, development
and construction needs through mortgage loans and unsecured revolving credit
facilities. During March 1996, the Company renewed and extended its $15,000,000
revolving unsecured credit agreement used to finance its Puerto Rico
homebuilding operation for an additional year.
Mortgage Operations
During 1995 the Company entered into a credit agreement with a Puerto Rico bank
to provide an unsecured revolving line of credit of $3,000,000 to finance the
working capital needs of the expanding Puerto Rico mortgage banking operation.
Development/Construction Management
During 1995 the Company entered into a credit agreement with a
New York bank to provide a $3,000,000 unsecured line of credit to finance
development, construction and other operating activities.
1995 Cash Flows
Cash used in operating activities comprised (1) an increase in
receivables of $6,672,000, (2) an increase in inventories of $6,457,000, (3) an
increase in other assets of $6,451,000, (4) net adjustments for non-cash items
of $866,000, and (5) a net change in other operating assets and liabilities of
$1,231,000, offset by net income of $7,365,000.
The increase in receivables reflects the continued growth in
construction activity. Inventories increased due to the timing of titling homes
in Puerto Rico and domestically. The increase in other assets is directly
attributable to the expansion of development projects and pre-acquisitioned land
costs.
Net cash provided by investing activities of $4,376,000
comprised net proceeds from joint ventures of $4,206,000 and other net investing
activities of $170,000.
17
<PAGE> 18
Net cash used in financing activities of $312,000 comprised
net proceeds from notes and mortgages payable of $1,253,000 offset by dividends
paid to stockholders of $1,565,000.
1994 Cash Flows
Cash provided by operating activities comprised (1) net income
of $6,159,000, (2) an increase in receivables of $3,194,000, (3) a decrease in
inventories of $8,536,000, (4) net adjustments for non-cash items of $1,761,000
and (5) a net change in other operating assets and liabilities of $4,389,000.
The increase in receivables resulted from the growth in
construction activity. Inventories decreased due to the timing of titling homes
both in Puerto Rico and domestically.
Net cash used in investing activities of $3,796,000 comprised
net investments in joint ventures of $2,949,000 and other net investing
activities of $847,000.
Net cash used in financing activities of $7,328,000 comprised
net principal payments on notes and mortgages payable of $6,937,000 plus
dividends paid to stockholders of $391,000.
Seasonality
The timing of introducing Levitt's new projects to the market,
weather conditions in certain of Levitt's regions, and traditional periods of
greater customer activity have tended to create seasonal trends in Levitt's
residential home building activities. Historically, the number of homes
delivered has been greater in the second half of the calendar year.
Except as discussed above, management is not aware of any
trends or events, commitments or uncertainties that will impact liquidity in a
material way.
Net Operating Loss Carryforwards
At December 31, 1995 the Company had net tax operating loss
carryforwards which can be utilized against future taxable income of
approximately $8,937,000 expiring in 2005 through 2009. Under current tax laws,
if the aggregate voting stock owned by the Company's 5% shareholders increases
over the lowest percentage owned by such shareholders during a three-year period
by an amount exceeding 50% of Starrett's total voting stock, then Starrett's
utilization of the net tax operating loss carryforwards could be limited to an
amount per year equal to the market value of all Starrett equity securities
multiplied by an adjusted federal long-term interest rate. In general, all
non-5% shareholders are treated as a single 5% shareholder for the purpose of
such calculations. Such an ownership change might be caused by sales of shares
by the Company's shareholders, repurchases of shares by the Company, certain
reorganizations, or certain other transactions.
18
<PAGE> 19
Inflation
The Company believes that inflation has not had a material
adverse effect upon its construction, development and management business.
Levitt has from time to time been adversely affected by high interest costs and
increases in material and labor costs which it has not been able to pass through
entirely to home purchasers.
Item 8. Consolidated Financial Statements and Supplementary Data
See "Table of Contents to Consolidated Financial Statements
and Financial Statement Schedules," page 21.
Item 9. Disagreements on Accounting and Financial Disclosure
None
PART III
The information called for by Items 10, 11, 12 and 13 is
incorporated herein by reference from the following portions of the definitive
proxy statement to be filed by the Company in connection with its 1996 Meeting
of Shareholders.
<TABLE>
<CAPTION>
Item Incorporated from
---- -----------------
<S> <C> <C>
Item 10. Directors and Executive "Election of Directors"
Officers of the Company
Item 11. Executive Compensation "Compensation and
Certain Transactions"
Item 12. Security Ownership of "Information as to
Certain Beneficial Stock Ownership"
Owners and Management
Item 13. Certain Relationships "Compensation and
and Related Transactions Certain Transactions"
</TABLE>
PART IV
Item 13. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) See the accompanying Table of Contents to Consolidated
Financial Statements and Schedules and the accompanying Exhibit Index.
19
<PAGE> 20
(b) Reports on Form 8-K: The Registrant did not file any
report on Form 8-K during the quarter ended December 31, 1995.
20
<PAGE> 21
TABLE OF CONTENTS
TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report...................................................................... 22
Statements of Consolidated Financial Position at December 31, 1995 and 1994....................... 23
Statements of Consolidated Operations for the Years Ended December 31, 1995,
1994 and 1993.................................................................................... 24
Statements of Consolidated Stockholders' Equity for the Years Ended
December 31, 1995, 1994 and 1993.................................................................. 25
Statements of Consolidated Cash Flows for the Years Ended December 31, 1995,
1994 and 1993.................................................................................... 26
Notes to Consolidated Financial Statements......................................................... 27-41
Financial Statement Schedule of Condensed Financial Information of Registrant at
December 31, 1995 and 1994 and for the Years Ended December 31, 1995,
1994 and 1993..................................................................................... 42-43
</TABLE>
Financial Statement Schedules, other than that listed above, are omitted because
of the absence of the conditions under which they are required, or because the
information required therein is set forth in the financial statements or the
notes thereto.
21
<PAGE> 22
[DELOITTE & TOUCHE LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
Starrett Corporation
We have audited the consolidated financial statements and the related financial
statement schedule of Starrett Corporation and consolidated subsidiaries, listed
in the foregoing table of contents. These consolidated financial statements and
the financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and its consolidated
subsidiaries at December 31, 1995 and 1994 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
March 18, 1996
22
<PAGE> 23
STARRETT CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
December 31, 1995 and 1994
(In Thousands)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS:
Cash and Cash Equivalents .................... $ 10,762 $ 16,816
Receivables .................................. 32,590 25,918
Inventory of Real Estate ..................... 59,052 52,332
Investments in Joint Ventures ................ 6,527 6,701
Property and Equipment-Net ................... 3,622 3,251
Land Held for Investment ..................... 1,734 1,997
Other Assets ................................. 12,058 9,252
--------- ---------
Total ................................... $ 126,345 $ 116,267
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Payable Within One Year:
Accounts payable ........................... $ 11,332 $ 10,874
Current portion of long-term obligations ... 7,387 4,526
Accrued liabilities ........................ 13,326 11,268
--------- ---------
Total Liabilities Payable Within One Year 32,045 26,668
Deferred Income Taxes ........................ 6,377 4,565
Other Liabilities ............................ 1,326 1,851
Long-Term Obligations ........................ 34,459 36,066
--------- ---------
Total ................................... 74,207 69,150
--------- ---------
Commitments and Contingencies
Stockholders' Equity:
Common stock-par value, $1.00; authorized,
18,000 shares ............................. 6,566 6,566
Capital in excess of par value ............. 23,933 23,933
Retained earnings .......................... 24,822 19,022
Pension liability adjustment ............... (1,593) (814)
Shares held in treasury-at cost ............ (1,590) (1,590)
--------- ---------
Stockholders' Equity ......................... 52,138 47,117
--------- ---------
Total ................................... $ 126,345 $ 116,267
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
23
<PAGE> 24
STARRETT CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
For the Years Ended December 31, 1995, 1994 and 1993
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues ..................................................... $138,332 $141,335 $122,182
-------- -------- --------
Construction Costs............................................ 73,090 82,859 73,015
-------- -------- --------
Income from Construction Contracts and
Related Revenues............................................. 65,242 58,476 49,167
-------- -------- --------
Expenses:
General and Administrative................................... 28,212 25,329 23,951
Security Service Labor and Other Costs....................... 12,232 10,909 9,438
Selling...................................................... 6,050 5,853 5,725
Mortgage and Closing Costs................................... 5,920 5,419 4,039
Interest..................................................... 451 660 880
Loss from Rental Operations-Net.............................. 546
-------- -------- --------
Total.................................................... 52,865 48,170 44,579
-------- -------- --------
Income before Income Taxes.................................... 12,377 10,306 4,588
Income Taxes ................................................. 5,012 4,147 2,448
Net Income.................................................... $ 7,365 $ 6,159 $ 2,140
======== ======== ========
Earnings per Common Share:
Net Income.................................................... $ 1.18 $ .98 $ .34
======== ======== ========
Weighted Average Number of Shares............................. 6,261 6,261 6,356
======== ======== ========
Cash Dividends per Share...................................... $ .25 $ .125 None
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
24
<PAGE> 25
STARRETT CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1995, 1994 and 1993
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
CAPITAL IN PENSION SHARES STOCK-
COMMON EXCESS OF RETAINED LIABILITY HELD IN HOLDERS'
STOCK PAR VALUE EARNINGS ADJUSTMENT TREASURY EQUITY
----- --------- -------- ---------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992
(6,566,402 common shares
issued and 167,227 shares
in Treasury)............................... $6,566 $23,933 $11,506 $ (866) $41,139
Net Income.................................. 2,140 2,140
Pension Liability
Adjustment................................. $ (736) (736)
Purchase of Treasury Shares................. (724) (724)
------ ------- ------- ------- ------- -------
Balance, December 31, 1993
(6,566,402 common shares
issued and 305,427 shares
in Treasury)............................... 6,566 23,933 13,646 (736) (1,590) 41,819
Net Income.................................. 6,159 6,159
Dividends to common
stockholders ($.125 per share)............. (783) (783)
Pension Liability
Adjustment................................. (78) (78)
------ ------- ------- ------- ------- -------
Balance, December 31, 1994
(6,566,402 common shares
issued and 305,427 shares
in Treasury)............................... 6,566 23,933 19,022 (814) (1,590) 47,117
Net Income.................................. 7,365 7,365
Dividends to common.........................
stockholders ($.25 per share).............. (1,565) (1,565)
Pension Liability
Adjustment................................. (779) (779)
------ ------- ------- ------- ------- -------
Balance, December 31, 1995
(6,566,402 common shares
issued and 305,442 shares
in Treasury)............................... $6,566 $23,933 $24,822 $(1,593) $(1,590) $52,138
====== ======= ======= ======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements
25
<PAGE> 26
STARRETT CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
(In Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income ....................................................... $ 7,365 $ 6,159 $ 2,140
Adjustments to Reconcile Net Income to Net Cash (Used In) Provided
by Operating Activities:
Depreciation and Amortization ................................. 3,086 2,978 3,013
Deferred Income Taxes ......................................... 1,812 519 (1,087)
Equity in (Earnings) Losses in Joint Ventures ................. (4,032) (1,736) 595
Changes in Operating Assets and Liabilities:
Receivables ................................................. (6,672) (3,194) 5,088
Inventories ................................................. (6,457) 8,536 2,444
Accounts Payable ............................................ 458 (1,979) 1,290
Other Assets ................................................ (6,451) (1,702) (854)
Accrued Liabilities ......................................... 1,279 (299) 955
Deferred Revenue ............................................ (506) (409) (708)
-------- -------- --------
Net Cash (Used in) Provided by Operating Activities .............. (10,118) 8,873 12,876
-------- -------- --------
INVESTING ACTIVITIES:
Investment in Joint Ventures ..................................... (2,740) (6,466) (1,828)
Distributions from Joint Ventures ................................ 6,946 3,517 22
Purchase of Property and Equipment ............................... (1,389) (853) (1,002)
Proceeds and Payments Relating to Sale of Rental and
Property and Equipment, Net ..................................... 1,559 6 4,260
-------- -------- --------
Net Cash (Used in) Provided by Investing Activities .............. 4,376 (3,796) 1,452
-------- -------- --------
FINANCING ACTIVITIES:
Repayment of Long-Term Obligations ............................... (18,310) (16,460) (22,099)
Proceeds from Long-Term Obligations .............................. 19,563 9,523 3,769
Payment of Cash Dividend to Common Stockholders .................. (1,565) (391)
Purchase of Treasury Shares ...................................... (724)
-------- -------- --------
Net Cash Used In Financing Activities ............................ (312) (7,328) (19,054)
-------- -------- --------
Net (Decrease) in Cash and Cash Equivalents ...................... (6,054) (2,251) (4,726)
Cash and Cash Equivalents Beginning of Year ...................... 16,816 19,067 23,793
-------- -------- --------
Cash and Cash Equivalents End of Year ............................ $ 10,762 $ 16,816 $ 19,067
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
26
<PAGE> 27
STARRETT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company:
The Company's operations consist of (i) the development,
management and ownership of real estate properties principally in the
New York City Metropolitan area; (ii) the single-family home and garden
apartment business conducted through its Levitt subsidiary in Florida
and Puerto Rico; and (iii) the supplying of construction services
through its HRH subsidiary principally in the New York City
Metropolitan area.
Principles of Consolidation:
The consolidated financial statements include the accounts of
Starrett Corporation and subsidiaries (the "Company"). Intercompany
accounts and transactions have been eliminated in the consolidated
financial statements.
Recognition of Income:
The Company follows the percentage-of-completion method of
recording revenues and related costs from construction contracts using
the cost-to-cost method and provides currently for estimated losses on
uncompleted contracts. Profits relating to sales of limited partnership
interests and development fees are recognized on the
percentage-of-completion method and full accrual method as appropriate.
Revenues from house sales and all related costs and expenses
are recognized upon passage of title to the buyer and receipt of an
adequate down payment.
Mortgage operations include loan origination and other fees
received for the processing and closing of mortgage loans. Revenues
from mortgage operations are primarily for houses constructed and sold
by the Company and are recorded when the transfer of the corresponding
mortgages to third parties has been consummated.
Revenues from cost-plus fee contracts are recognized on the
basis of costs incurred during the period plus the fee earned.
Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
27
<PAGE> 28
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Fair Value of Financial Instruments:
Statement of Financial Accounting Standards ("SFAS") No. 107,
"Disclosure about Fair Value of Financial Instruments," requires
disclosure of the fair value of financial instruments, both assets and
liabilities, recognized and not recognized in the consolidated
statement of financial position of the Company, for which it is
practicable to estimate fair value. The estimated fair values of
financial instruments which are presented herein have been determined
by the Company using available market information and appropriate
valuation methodologies. However, considerable judgment is required in
interpreting market data to develop estimates of fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of amounts the Company could realize in a current market
exchange.
The following methods and assumptions were used to estimate fair value:
- The carrying amounts of cash and cash equivalents,
receivables, accounts payable and accrued liabilities
approximate fair value due to their short term nature.
- The carrying amounts of notes and mortgages payable
approximate fair value as the terms of the credit facilities
generally require periodic market adjustment of interest
rates.
Inventory of Real Estate:
Inventory of real estate is stated at the lower of cost or
estimated net realizable value. Cost includes direct acquisition,
development and construction costs, interest and other indirect
construction costs. Estimated net realizable value is defined as an
estimate of sales proceeds less all estimated costs of carrying,
completing and disposing of the property. Interest is capitalized at
the effective interest rates paid on borrowings for interest costs
incurred on real estate inventory components during the preconstruction
and planning stage and the periods that projects are under development.
Capitalization of interest is discontinued if development ceases at a
project.
Land and land development, are accumulated by specific area
and allocated proportionately to homes within the respective area.
Construction costs are charged to individual homesites based on
specific identification.
Land Held for Investment:
Land parcels for which the Company has no formal plans to
develop or sell are classified as land held for investment. Land
purchased for investment is carried at cost. Land parcels previously
included in inventory of real estate and reclassified to land held for
investment are carried at the lower of acquisition cost or fair value
at
28
<PAGE> 29
the time of transfer. The carrying value of land held for investment is
evaluated for other than temporary declines in value. For the years
1995, 1994 and 1993, no adjustments for other than temporary declines
were recorded.
Property and Equipment:
Property and equipment are carried at cost less accumulated
depreciation and are depreciated using the straight-line method over
the estimated useful lives of the assets which range from three to five
years. Expenditures for maintenance and repairs are charged to expense
as incurred. Costs of major renewals and betterments which extend
useful lives are capitalized.
Capitalized Costs:
Interest incurred, real estate taxes, and sales costs incurred
in connection with certain properties are capitalized in order to
achieve better matching of costs with revenues. Interest incurred on
loans was $3,778,000 in 1995, $3,435,000 in 1994 and $3,893,000 in
1993, of which $3,327,000 in 1995, $2,775,000 in 1994 and $2,959,000 in
1993 was capitalized. Amortization of capitalized interest of
$3,789,000 in 1995, $4,941,000 in 1994 and $5,802,000 in 1993 was
charged to construction costs.
Costs related to predevelopment activities associated with the
Company's various development projects, such as architect and
engineering fees, legal costs, etc., are capitalized to the extent that
management believes such costs are recoverable from the estimated
earnings of the project.
Certain costs incurred that are used directly throughout the
selling period to aid in the sale of units, such as model furnishings
and decorations, sales office furnishings and facilities, exhibits,
displays and signage, are capitalized as deferred selling costs and
amortized over the number of units to be delivered. Costs incurred
during the initial and due diligence phases of a project, such as land
deposits and studies, are capitalized as preacquisition costs. The
unrecovered preacquisition costs are written off in the period the
Company ceases development of the project.
Investments in Partnerships and Joint Ventures:
Investments in partnerships and joint ventures in which the
Company does not have a controlling interest are accounted for at cost
and investments in partnerships in which the Company does have a
controlling interest are accounted for on the equity method. Under the
equity method, the Company's initial investment is recorded at cost and
is subsequently adjusted to recognize its share of the earnings or
losses. Distributions received reduce the carrying amount of the
investment.
29
<PAGE> 30
Cash and Cash Equivalents:
The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
Income Taxes:
As required by Statement of Financial Accounting Standard No.
109, "Accounting for Income Taxes", deferred taxes are provided for the
temporary differences between the tax bases of the assets and
liabilities and the amounts reported in the financial statements.
Recently Issued Accounting Pronouncement:
In March 1995, The Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of", (SFAS 121), which is effective January 1, 1996. This
standard specifies when assets should be reviewed for impairment, how
to determine if an asset is impaired, how to measure an impairment
loss, and what disclosures are necessary in the financial statements.
SFAS No. 121 will apply to the Company for the year ended December 31,
1996. The Company does not believe that this statement would have had a
material effect on its financial position or the results of its
operations had it been applied in 1995.
Reclassifications:
Certain prior year amounts have been reclassified in the
financial statements and segment information to conform with the 1995
presentation.
2. RECEIVABLES
Receivables are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(Dollars in Thousands)
<S> <C> <C>
Accounts............................................. $ 18,011 $12,787
Mortgage notes....................................... 11,392 9,893
Notes................................................ 3,663 3,714
-------- -------
Total........................................... 33,066 26,394
Less allowance for doubtful
accounts............................................ 476 476
-------- -------
Net............................................. $ 32,590 $25,918
======== =======
</TABLE>
30
<PAGE> 31
It is expected that the receivables at December 31, 1995 as
set forth above will be realized as follows: $24,957,000 in 1996,
$2,978,000 in 1997, $37,000 in 1998, $41,000 in 1999, $46,000 in 2000
and $4,531,000 thereafter. At December 31, 1995, approximately
$1,600,000 ($1,700,000 at December 31, 1994) of these mortgage notes
receivable have been pooled into GNMA certificates, which have been
guaranteed by the United States Government. The Company has pledged
these mortgage notes as collateral to borrow funds from institutions at
interest rates lower than those earned on the mortgage notes receivable
and as collateral for GNMA matched payment serial notes (Note 8). The
remaining mortgage notes receivable have been originated by the Company
under firm commitments for sale to various third parties. The Company
receives certain fees for the origination and processing of these
mortgages.
The mortgage notes receivable, which result primarily from
sales of homes in Puerto Rico, are payable in monthly installments and
earned interest at stated interest rates which ranged from 6.75% to
9.88% in 1995 and 1994.
3. INVENTORY OF REAL ESTATE
Inventory of real estate is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(Dollars in Thousands)
<S> <C> <C>
Land and land development costs...................... $43,815 $41,508
Construction costs - houses.......................... 15,237 10,824
------- -------
Total............................................. $59,052 $52,332
======= =======
</TABLE>
31
<PAGE> 32
4. INVESTMENTS IN JOINT VENTURES
The Company owns investments in joint ventures
that are engaged in homebuilding and development of residential rental
apartments. Condensed financial information is as follows:
Combined Balance Sheets
<TABLE>
<CAPTION>
1995 1994
---- ----
(Dollars in Thousands)
<S> <C> <C>
Combined Assets
Current Assets .......................... $ 4,104 $ 1,247
Inventory of real estate ................ 32,815 29,281
Other assets ............................ 1,590 1,574
------- -------
$38,509 $32,102
======= =======
Combined Liabilities and Partner's Capital
Current liabilities ..................... $ 2,709 $ 2,607
Customer deposits on house sales ........ 4,794 3,097
Mortgage notes payable .................. 20,593 19,070
Partners' capital accounts .............. 10,413 7,328
------- -------
$38,509 $32,102
======= =======
</TABLE>
During 1995 and 1994, in accordance with the partnership
agreements, the Company made capital contributions to the joint
ventures in excess of its proportionate ownership interests. The
Partnership agreements provide for the Company to receive preferential
income and cash distributions until the Company's invested capital is
proportionate to its ownership interests.
Combined Statements of Operations
<TABLE>
<CAPTION>
1995 1994
---- ----
(Dollars in Thousands)
<S> <C> <C>
Revenues
House sales .................. $51,748
Sale of rental apartment
property .................... 15,205 $14,650
Other Income ................. 1,153 425
------- -------
68,106 15,075
Cost and Expenses
Cost of house sales .......... 42,871
Cost of sale of rental
apartment property........... 12,570 10,822
Other expenses ............... 5,048 808
------- -------
60,489 11,630
------- -------
Net Income .................... $ 7,617 $ 3,445
======= =======
</TABLE>
32
<PAGE> 33
The Company's equity in earnings of joint ventures is included in
Revenues in the Statements of Consolidated Operations.
During 1994, the Company's homebuilding joint ventures acquired land,
commenced land development and home construction activity. Through December 31,
1994, no homes were delivered and, accordingly, no revenues from house sales
were recognized.
In addition, the Company had an ownership interest in a joint venture
that owns a self-storage warehouse in New York. The joint venture had $8,943,000
and $9,138,000 in assets with $8,183,000 and $8,627,000 in liabilities at
December 31, 1995 and 1994, respectively. The Company sold the warehouse on
March 15, 1996. The loss on sale of the warehouse is included in the Statement
of Operations for the year ended December 31, 1995.
5. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(Dollars in Thousands)
<S> <C> <C>
Machinery and equipment ......... $ 2,103 $ 1,905
Furniture, fixtures and leasehold
improvements .................... 9,347 8,586
------- -------
Total ....................... 11,450 10,491
Less accumulated depreciation .... 7,828 7,240
------- -------
Net ......................... $ 3,622 $ 3,251
======= =======
</TABLE>
33
<PAGE> 34
6. OTHER ASSETS
Other assets are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(Dollars in Thousands)
<S> <C> <C>
Investments in and advances to
partnerships ................. $ 52 $ 1,287
Prepaid development costs .... 4,938 2,704
Deferred selling costs ....... 1,738 2,208
Preacquisition costs ......... 1,751 407
Other ........................ 3,579 2,646
------- -------
Total ..................... $12,058 $ 9,252
======= =======
</TABLE>
On December 14, 1995, a limited partnership in which the
Company is a general partner owning a HUD financed housing project on
the upper West Side of Manhattan refinanced the project. At the
closing, the Company received approximately $3,000,000 most of which
represents fees, with the remainder attributable to repayment of sums
owed, return of capital, and partnership distributive share of
refinancing proceeds.
7. INCOME TAXES
The Company and its domestic subsidiaries file a consolidated
federal income tax return. The provision for income taxes consists of
the following:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Federal taxes:
Current ............... $ 108
Deferred .............. 2,272 $ 161 $(1,302)
State and foreign taxes:
Current ............... 2,568 3,628 3,535
Deferred .............. 64 358 215
------- ------- -------
Total ............... $ 5,012 $ 4,147 $ 2,448
======= ======= =======
</TABLE>
At December 31, 1995 the Company had a net tax operating loss
carryforward, which can be utilized against future taxable income, of
approximately $8,937,000 expiring in 2005 through 2009. There is no net
operating loss carryforward for financial statement reporting purposes.
Cash payments for income taxes during the years ended December
31, 1995, 1994 and 1993 were $2,630,000, $5,195,000 and $2,251,000,
respectively.
34
<PAGE> 35
The effective tax rate was different from the statutory
Federal tax rate for the following reasons:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory Federal tax rate............................ 34.0% 34.0% 34.0%
Increase in taxes resulting
from state and foreign
taxes, net of Federal tax benefit.................... 6.5 6.2 19.3
--- --- ----
Effective tax rate.................................... 40.5% 40.2% 53.3%
==== ==== ====
</TABLE>
Deferred income taxes result from temporary differences in the
recognition of revenue and expense for tax and financial reporting
purposes. The tax effect of each type of temporary difference that gave
rise to the Company's net deferred tax liability is as follows:
<TABLE>
<CAPTION>
December 31 December 31
1995 1994
---- ----
Asset (Liability)
(In Thousands)
<S> <C> <C>
Investments in and sales of limited
partnership interests.................................. $(11,576) $(10,043)
Net tax operating loss carryforward..................... 3,107 5,337
Capitalized interest and overhead....................... (838) (802)
Alternative minimum tax and other
miscellaneous Federal tax credits...................... 2,712 2,558
Deferred selling costs.................................. (831) (1,063)
Pension liability adjustment............................ 1,073 548
Other................................................... (24) (1,100)
-------- ---------
Net deferred income tax liability....................... $ (6,377) $ (4,565)
======== =========
</TABLE>
Total deferred tax assets and liabilities were $10,288,000 and
$16,665,000, respectively, at December 31, 1995 and $11,942,000 and
$16,507,000, respectively, at December 31, 1994. No valuation allowance
was required for deferred tax assets.
35
<PAGE> 36
8. DEBT
Notes, mortgages payable and long-term obligations are
summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(Dollars in Thousands)
<S> <C> <C>
Subordinated promissory notes, at a
rate of 15% per annum, payable 1996
through 1997 (A) ................................................. $ 2,934 $ 4,400
Note payable under credit facility
agreement, 1.3/4% over LIBOR (interest rate
of 7.5% at December 31, 1995) (B) ................................ 14,400 16,400
Notes payable under credit facility
agreement, interest rate that approximates
1% under prime, (interest rate of 7.67% at
December 31, 1995)(C) ............................................ 10,000 14,550
GNMA matched payments serial notes
at rates between 9% and 10% with
remaining maturities up to 20
years (D) ........................................................ 1,571 1,732
Mortgage notes payable, interest rate of 1%
over prime (interest rate of 9.5% at
December 31, 1995) (E) ........................................... 6,000
Mortgage notes payable, interest rate of 1%
over prime (interest rate of 9.5% at
December 31, 1995) (F) ........................................... 3,516 2,212
Note payable under credit facility agreement,
interest rate that approximates 1% under
prime (interest rate of 7.67% at
December 31, 1995) (G) ........................................... 2,500
Other mortgage notes payable at interest rates
between 6.75% and 9.5% due in installments
through April, 1997 .............................................. 925 1,298
------- -------
Total .......................................................... $41,846 $40,592
======= =======
Classified in statements of consolidated
financial position as:
Current portion of long-term
obligations ..................................................... $ 7,387 $ 4,526
</TABLE>
36
<PAGE> 37
<TABLE>
<S> <C> <C>
Long-term obligations..................................... 34,459 36,066
------- -------
Total................................................... $41,846 $40,592
======= =======
</TABLE>
(A) On December 31, 1990, the Company redeemed all of its $5.81
cumulative convertible preferred stock and issued to the preferred
shareholders six equal subordinated promissory notes in the aggregate
principal amount of $8,800,000, maturing 1992 through 1997. The notes
bear simple interest at the rate of 15% per annum. In January 1996 the
fifth promissory note in the amount of $1,466,667 was paid.
(B) In January 1996, a subsidiary of the Company repaid this note from
proceeds of a $10,000,000 unsecured term note and from working capital.
The unsecured term note requires semi-annual principal payments of
$1,000,000 and $1,500,000 in July and January, respectively, through
January 2000. The term note credit agreement requires the Company to
maintain certain financial covenants during the term of the loan.
(C) In March 1996 the Company renewed its unsecured revolving credit
agreement through March 31, 1997 to finance its Puerto Rico
homebuilding operations. The credit agreement provides for available
loans up to $15,000,000. The credit agreement requires the Company's
Puerto Rico subsidiary to maintain certain financial covenants during
the term of the agreement. As of December 31, 1995 and 1994,
$10,000,000 and $13,000,000 respectively, were outstanding under this
facility.
In June 1994, the previous credit agreement was amended to provide
for an additional short-term $7,000,000 secured facility. This facility
was secured by certain developed and undeveloped lots. The Company has
drawn and repaid $5,000,000 under this facility through December 31,
1995. As of December 31, 1994, $1,550,000 was outstanding under this
facility. The facility expires in March 1996.
(D) On December 31, 1995, the Company had loans totaling $1,600,000
(secured by a pledge of GNMA certificates in the same amount) through
the issuance of long-term debentures by a subsidiary of a non-profit
community development corporation in Puerto Rico. Both the short-term
loans and debentures, which are secured by mortgage notes receivable
pooled into GNMA certificates, bear interest at rates lower than the
interest rates on such mortgage receivables.
(E) During 1995, the Company entered into a loan agreement to provide
financing for the acquisition and site improvement of property and
financing for construction of residential units. The loan agreement
provides for advances on a revolving loan basis up to a maximum
outstanding balance of $11,250,000 and is secured by a mortgage on the
property including all improvements. Principal payments are required as
homes are delivered. The loan matures in September 1998.
(F) During 1994, the Company entered into a loan agreement to provide
financing for the acquisition and site improvement of property and
financing for
37
<PAGE> 38
construction of residential units. The loan agreement provides for
advances on a revolving loan basis up to a maximum outstanding balance
of $6,300,000 and is secured by a mortgage on the property including
all improvements. Principal payments are required as homes are
delivered. The loan matures in April 1998.
(G) During 1995, the Company entered into a credit agreement to provide
an unsecured revolving line of credit of $3,000,000 to finance its
Puerto Rico mortgage operations. The credit agreement requires the
Company's Puerto Rico subsidiary to maintain certain financial ratios
and provides other restrictions. The loan matures in October 1997.
Notes and mortgages payable were collateralized by real estate and
mortgage notes receivable with net carrying values aggregating
$33,851,000 and $23,240,000 at December 31, 1995 and 1994,
respectively.
Certain of the debt instruments associated with joint ventures
require guarantees of the related indebtedness by the Company. At
December 31, 1995 and 1994, the Company's guarantees on outstanding
joint venture indebtedness were $2,405,000 and $300,000, respectively.
Debt obligations are scheduled to mature as follows: $7,387,000 in
1996, $16,942,000 in 1997, $2,057,000 in 1998, $12,546,000 in 1999,
$1,550,000 in 2000 and $1,364,000 thereafter. Certain mortgage notes
contain provisions for reducing the principal as individual homes are
sold by the Company.
Interest paid for the years ended December 31, 1995, 1994 and 1993
was $3,722,000, $3,402,000 and $4,321,000, respectively. The weighted
average interest rate on the Company's debt was 9.22% and 7.93% for the
years ended December 31, 1995 and 1994, respectively.
As of December 31, 1995, the Company had outstanding letters of
credit totalling approximately $140,000 on which there are service
charges ranging from 0.5% to 1% on the outstanding balances. The
Company in the normal course of business obtains payment and
performance bonds and financial security bonds in connection with its
construction and development activities.
9. PENSION PLAN
The Company and certain of its subsidiaries have a noncontributory
defined benefit pension plan (the "Plan") covering employees not
represented by a union. The benefits are based on years of service and
the employees' compensation over the last five years.
Effective July 31, 1992, the Board of Directors amended the Plan to
freeze accrued benefits for all participants. The Company will continue
to fund the Plan as required, including any interest at the assumed
average rate of return on Plan assets.
38
<PAGE> 39
As of December 31, 1995, the Plan held equity
securities, fixed income securities, life insurance policies and
short-term investments. Assumed average future rate of return on Plan
assets was 8.75% for the years ended December 31, 1995 and 1994,
respectively, and the projected benefit obligation was based on 7.25%
and 8.75% assumed discount rates at December 31, 1995 and 1994,
respectively.
The net periodic pension benefit was $2,000 for the
year ended December 31, 1993. The components of net periodic pension
cost for the years ended December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Cost component: 1995 1994
---- ----
<S> <C> <C>
Interest cost........................................... $548,000 $601,000
Actual return on plan assets............................ (714,000) 124,000
Net amortization and deferral........................... 270,000 (584,000)
------- --------
Net periodic pension cost............................... $104,000 $141,000
======== ========
</TABLE>
The following table sets forth the Plan's funded
status as of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Actuarial present value accumulated benefit obligation:
Vested.................................................. $8,204,000 $6,376,000
Nonvested............................................... 16,000 46,000
---------- ----------
Total................................................ $8,220,000 $6,422,000
========== ==========
Projected benefit obligation for service
rendered to date................................................ $8,220,000 $6,422,000
Plan assets at fair value........................................ 6,197,000 5,250,000
---------- ----------
Projected benefit obligation in excess
of plan assets.................................................. 2,023,000 1,172,000
Unrecognized net loss............................................ (2,833,000) (1,573,000)
Unrecognized net asset at date of transition..................... 167,000 211,000
Additional minimum liability..................................... 2,666,000 1,362,000
---------- ----------
Accrued pension cost............................................. $2,023,000 $1,172,000
========== ==========
</TABLE>
In accordance with Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions," an additional
minimum pension liability, representing the excess of accumulated
benefits over plan assets and accrued pension costs, was recognized at
December 31, 1995 and 1994. A corresponding amount, net of income tax
benefit of $548,000 and $525,000 was recorded as a separate reduction
to stockholders' equity in 1995 and 1994, respectively.
39
<PAGE> 40
The significant increase in accrued pension cost is
directly attributable to the use of a lower discount rate in
calculating the projected benefit obligation due to the dramatic drop
in interest rates during 1995.
The Plan made significant lump sum distributions
during 1994 resulting in a settlement of the Plan as defined by
Statement of Financial Accounting Standards No. 88, "Employers'
Accounting for Settlements and Curtailments of Defined Benefit Pension
Plans and for Termination of Benefits". As a result, the Company
recorded an additional expense of $451,000 for the year ended December
31, 1994.
The Company does not provide postretirement or
postemployment benefits other than pensions to employees. Therefore,
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions" and SFAS No. 112, "Employers' Accounting for
Postemployment Benefits" have no impact on the Company's financial
statements.
10. SEGMENT INFORMATION
The Company's operations consist of (i) the
development, management and ownership of real estate properties; (ii)
the single-family home and garden apartment business conducted through
its Levitt subsidiary; and (iii) the supplying of construction services
through its HRH subsidiary. The Company groups its business into these
three segments. The following table sets forth the Company's revenues
and operating profit attributable to the respective segments of its
operations for each of the years 1993 through 1995, and the
identifiable assets attributable to the respective segments as at the
end of each of those years:
<TABLE>
<CAPTION>
DEVELOPMENT HRH
MANAGEMENT AND LEVITT CONSTRUCTION
OWNERSHIP CORPORATION CORPORATION CONSOLIDATED
--------- ----------- ----------- ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
1995
- - ----
Revenues ................... $ 26,647 $102,768 $ 8,917 $138,332
======== ======== ======== ========
Operating profit (1) ....... $ 1,533 $ 10,823 $ 3,241 $ 15,597
======== ======== ======== ========
General corporate expenses.. 3,220
--------
Income from operations
before income taxes ....... $ 12,377
========
Identifiable assets ........ $ 17,373 $ 95,631 $ 13,341 $126,345
======== ======== ======== ========
</TABLE>
40
<PAGE> 41
<TABLE>
1994
- - ----
<S> <C> <C> <C> <C>
Revenues .................. $ 25,635 $111,422 $ 4,278 $141,335
======== ======== ======== ========
Operating profit (1) ...... $ 2,575 $ 10,085 $ 309 $ 12,969
======== ======== ======== ========
General corporate expenses 2,663
--------
Income from operations
before income taxes ...... $ 10,306
--------
Identifiable assets ....... $ 20,539 $ 85,423 $ 10,305 $116,267
======== ======== ======== ========
1993
- - ----
Revenues .................. $ 24,504 $ 93,678 $ 4,000 $122,182
-------- -------- -------- --------
Operating profit (loss) (1) $ 2,600 $ 4,257 $ (372) $ 6,485
-------- -------- -------- --------
General corporate expenses 1,897
--------
Income from operations
before income taxes ...... $ 4,588
========
Identifiable assets ....... $ 25,797 $ 86,300 $ 8,187 $120,284
======== ======== ======== ========
</TABLE>
(1) Operating profit is comprised of revenues less operating expenses. In
computing operating profit, general corporate expenses and income
taxes have not been deducted.
(2) There were no customers from which the Company derived more than 10%
of its revenues in 1995, 1994 or 1993.
11. COMMITMENTS AND CONTINGENCIES
Roosevelt Island Associates ("RIA"), a partnership in
which a Company subsidiary is one of several partners, has provided
guaranteed payments to the investor partner. The Company's share of
such guarantees is approximately $100,000 each year until 2005, which
will be paid by the Company if project cash flow is insufficient to
cover these amounts. In connection with this project, the Company also
provided cash flow guarantees from which it will be released if the
project achieves a certain cash flow level over a specified period of
time. The Company believes it has adequately provided for any future
obligations under this guarantee.
The Company's Levitt subsidiary provides for
estimated warranty costs when homes are sold and continuously monitors
its warranty exposure and service program.
Rent expense for the years ended December 31, 1995,
1994 and 1993 was $1,336,000, $1,133,000 and $1,004,000, respectively.
At December 31, 1995 the Company and its subsidiaries are committed
under long-term leases expiring at various dates through 2000. The
minimum rentals are $1,280,000 in 1996, $637,000
41
<PAGE> 42
in 1997, $557,000 in 1998, $401,000 in 1999, and $210,000 in 2000, or
an aggregate of $3,085,000.
The Company is involved in litigation and claims
incident to the normal conduct of its business. Management believes
that such litigation and claims will not have a materially adverse
effect on the Company's consolidated financial position or results of
operations.
12. QUARTERLY FINANCIAL DATA (Unaudited)
The quarterly financial data are set forth below
(dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
1995 1995 1995 1995 Annual
March 31 June 30 Sept. 30 Dec. 31 Amount
-------- ------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
Revenues ............................................ $ 30,281 $ 23,401 $ 32,805 $ 51,845 $138,332
Income from construction
contracts and related revenues ..................... 13,379 13,356 15,751 22,756 65,242
Income before income
taxes .............................................. 1,735 1,955 3,017 5,670 12,377
Net income .......................................... 989 1,114 1,796 3,466 7,365
Earnings per common and
common equivalent share - Net
income ............................................. $ .16 $ .18 $ .28 $ .56 $ 1.18
</TABLE>
<TABLE>
<CAPTION>
1994 1994 1994 1994 Annual
March 31 June 30 Sept. 30 Dec. 31 Amount
-------- ------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
Revenues ............................................ $ 27,395 $ 28,042 $ 32,868 $ 53,030 $141,335
Income from construction
contracts and related revenues ..................... 11,980 13,436 14,382 18,678 58,476
Income before income
taxes .............................................. 1,300 1,906 2,481 4,619 10,306
Net income .......................................... 695 1,031 1,488 2,945 6,159
Earnings per common and
common equivalent share - Net
income ............................................. $ .11 $ .17 $ .23 $ .47 $ .98
</TABLE>
Certain quarterly amounts have been reclassified to
conform with the annual presentation.
42
<PAGE> 43
Schedule III
STARRETT CORPORATION
(Parent Company Only)
CONDENSED STATEMENTS OF FINANCIAL POSITION
December 31, 1995 and 1994
(In Thousands)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Assets:
- - -------
Cash and cash equivalents ......... $ 2,162 $ 6,137
Investments in subsidiaries, at
equity in underlying net assets .. 84,800 77,592
Other assets ...................... 8,689 8,097
------- -------
TOTAL ..................... $95,651 $91,826
------- -------
Liabilities and Stockholders' Equity:
Liabilities payable within one year $ 3,682 $ 6,403
Advances from subsidiaries ........ 31,539 30,276
Deferred income taxes ............. 5,499 3,246
Other liabilities ................. 1,326 1,851
Long-term obligations ............. 1,467 2,933
Stockholders' equity .............. 52,138 47,117
------- -------
TOTAL ..................... $95,651 $91,826
======= =======
</TABLE>
STARRETT CORPORATION
(Parent Company Only)
CONDENSED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1995, 1994 and 1993
(In Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues .......................... $ 1,053 $ 1,046 $ 2,035
General and administrative expenses (3,220) (2,663) (1,897)
Other costs ....................... (899) (33) (104)
Interest .......................... (451) (660) (880)
Income taxes ...................... 1,455 1,111 132
------- ------- -------
Loss before equity in earnings
of subsidiaries .................. (2,062) (1,199) (714)
Equity in earnings of subsidiaries 9,427 7,358 2,854
------- ------- -------
Net Income .............. $ 7,365 $ 6,159 $ 2,140
======= ======= =======
</TABLE>
43
<PAGE> 44
Schedule III
STARRETT CORPORATION
(Parent Company Only)
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income ................................. $ 7,365 $ 6,159 $ 2,140
Adjustments to Reconcile Net Income to
Net Cash (Used In) Provided by
Operating Activities:
Changes not affecting cash ................ (8,340) (7,488) (2,484)
Changes in Operating Assets and Liabilities:
Liabilities payable within one year ....... (2,333) 228 (995)
Advances from subsidiaries ................ 1,263 (1,242) 2,176
Other assets .............................. (592) 106 314
Other liabilities ......................... (525) (1,089) (709)
-------- -------- --------
Net Cash (Used In) Provided by
Operating Activities ...................... (3,162) (3,326) 442
-------- -------- --------
FINANCING ACTIVITIES:
Payment of Promissory Notes ................ (1,466) (1,467) (5,846)
Payment of Cash Dividend to Common
Stockholders .............................. (1,565) (391)
Distributions from subsidiaries ............ 2,218 540
Purchase of Treasury Stock ................. (724)
-------- -------- --------
Net Cash used in Financing Activities ...... (813) (1,858) (6,030)
-------- -------- --------
Net (Decrease) in Cash and
Cash Equivalents .......................... (3,975) (5,184) (5,588)
Cash and Cash Equivalents Beginning of Year 6,137 11,321 16,909
-------- -------- --------
Cash and Cash Equivalents End of Year ...... $ 2,162 $ 6,137 $ 11,321
======== ======== ========
</TABLE>
44
<PAGE> 45
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.
STARRETT CORPORATION
Date: March 18, 1996 By /s/ Paul Milstein
-------------------------------------
Paul Milstein
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Date: March 18, 1996 By /s/ Paul Milstein
-------------------------------------
Paul Milstein, Principal
Director
Date: March 18, 1996 By /s/ Lewis A. Weinfeld
-------------------------------------
Lewis A. Weinfeld, Principal
Financial and Accounting Officer
Date: March 18, 1996 By /s/ Henry Benach
-------------------------------------
Henry Benach, Director
Date: March 18, 1996 By /s/ John Zuccotti
-------------------------------------
John Zuccotti, Director
Date: March 18, 1996 By /s/ Robert Berne
-------------------------------------
Robert Berne, Director
Date: March 18, 1996 By /s/ Irving Fischer
-------------------------------------
Irving Fischer, Director
Date: March 18, 1996 By /s/ Robert C. Rosenberg
-------------------------------------
Robert C. Rosenberg, Director
Date: March 18, 1996 By /s/ Elliott M. Wiener
-------------------------------------
Elliott M. Wiener, Director
45
<PAGE> 46
STARRETT CORPORATION
EXHIBITS
DECEMBER 31, 1995
COMMISSION FILE NUMBER 1-6736
<PAGE> 47
STARRETT HOUSING CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C> <C>
3(a)(1) Restated Certificate of Incorporation of the Registrant (filed as
Exhibit 3(a)(1) to Registrant's Registration Statement on Form S-4
dated September 16, 1988 and incorporated herein by reference).
3(a)(2) Certificate of Amendment of the Restated Certificate of Incorporation
of the Registrant relating to $5.08 Cumulative Preferred Shares
and $5.00 Cumulative Preferred Shares (filed as Exhibit 10 to the
Registrant's Form 8-K dated June 5, 1981 and incorporated herein
by reference).
3(b) By-laws of the Registrant, as amended to January 1, 1987 (filed as
Exhibit 3(b) to Registrant's Registration Statement on Form S-4
dated September 16, 1988 and incorporated herein by reference).
4(a) Amended and Restated Credit Agreement and Guarantee among Levitt Homes
Incorporated, Levitt Corporation, various subsidiary guarantors
and Manufacturers Hanover Trust Company dated as of August 29,
1988 (filed as Exhibit 4(a) to Registrant's Registration Statement
on Form S-4 dated September 16, 1988 and incorporated herein by
reference).
4(b) First Amendment dated as of March 6, 1990 to Amended and Restated
Credit Agreement and Guarantee (filed as Exhibit 4(b) to Registrant's
Form 10-K for 1989 and incorporated herein by reference).
4(c) Amendment dated as of April 30, 1990 to Amended and Restated Credit
Agreement and Guarantee (filed as Exhibit 4(c) to Registrant's Form 10-K
for 1990 and incorporated herein by reference).
10(a) Form of Starrett Housing Corporation warrant for the purchase of 151,546
shares of Common Stock dated May 24, 1984, and subsequently extended to
June 2, 1986 (filed as Exhibit 10(o) to the Registrant's Form 10-K
for 1984 and incorporated herein by reference).
10(b) Stock Purchase Agreement dated March 1, 1985 between the Registrant and
the purchasers listed in Schedule 1 to the Agreement (filed as Exhibit 10(p)
to the Registrant's Form 10-K for 1985 and incorporated herein by
reference).
10(c)(1) Amended and Restated Agreement, dated as of January 5, 1992, between Henry
Benach and the Registrant (filed as Exhibit 10(c)(1) to
</TABLE>
47
<PAGE> 48
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C> <C>
the Registrant's Form 10-K for 1991 and incorporated herein by reference).
10(c)(2) Incentive Compensation Agreement, dated as of January 5, 1989, between
Henry Benach and the Registrant (filed as Exhibit 10(c)(2) to Registrant's
Form 10-K for 1989 and incorporated herein by reference).
10(d)(1) Employment Agreement, dated as of June 1, 1981, between Irving R. Fischer and
the Registrant (filed as Exhibit 10(f)(2) to the Registrant's Form
10-K for 1981 and incorporated herein by reference).
10(d)(2) Amendment, dated as of January 3, 1986, to the Employment Agreement between
Irving R. Fischer and the Registrant (filed as Exhibit 10(d)(5) to Registrant's
Registration Statement on Form S-4 dated September 16, 1988 and incorporated
herein by reference).
10(d)(3) Incentive Compensation Agreement, dated as of January 3, 1986, between Irving R.
Fischer and the Registrant (filed as Exhibit 10(d)(6) to Registrant's
Registration Statement on Form S-4 dated September 16, 1988 and incorporated
herein by reference).
10(d)(4) Restricted Stock Agreement, dated as of October 27, 1987, between Irving R.
Fischer and the Registrant (filed as Exhibit 10(d)(4) to Registrant's Form 10-K
for 1987 and incorporated herein by reference).
10(d)(5) Extension dated December 30, 1991 to Employment and Incentive Compensation
Agreements of Irving R. Fischer (filed as Exhibit 10(e)(5) to the Registrant's
Form 10-K for 1991 and incorporated herein by reference).
10(e)(1) Employment Agreement, dated as June 1, 1981, between Richard Bassuk and the
Registrant (filed as Exhibit 10(k) to the Registrant's Form 10-K for 1981 and
incorporated herein by reference).
10(e)(2) Amendment, dated as of January 3, 1986, to the Employment Agreement between
Richard Bassuk and the Registrant (filed as Exhibit 10(g)(4) to Registrant's Form
10-K for 1985 and incorporated herein by reference).
10(e)(3) Incentive Compensation Agreement, dated as of January 3, 1986, between Richard
Bassuk and the Registrant (filed as Exhibit 10(g)(5) to the Registrant's Form 10-
K for 1985 and incorporated herein by reference).
</TABLE>
48
<PAGE> 49
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C> <C>
10(e)(4) Restricted Stock Agreement, dated as of October 27, 1987, between Richard Bassuk
and the Registrant (filed as Exhibit 10(e)(7) to Registrant's Form 10-K for 1987
and incorporated herein by reference).
10(e)(5) Extension dated December 30, 1991 to Employment and Incentive Compensation
Agreements of Richard Bassuk (filed as Exhibit 10(d)(5) to the Registrant's Form
10-K for 1991 and incorporated herein by reference).
10(e)(6) Extension dated January 5, 1993 to Employment
and Incentive Compensation Agreements of Richard Bassuk (filed as Exhibit
10(d)(6) to the Registrant's Form 10-K for 1993 and incorporated herein by
reference).
10(f) Restricted Stock Agreement, dated as of October 27, 1987, between Stephen Salup
and the Registrant (filed as Exhibit 10(f) to Registrant's Form 10-K for 1987 and
incorporated herein by reference).
10(g)(1) Employment Agreement, dated as of January 1, 1987 between Lewis A. Weinfeld and
the Registrant (filed as Exhibit 10(g)(1) to Registrant's Form 10-K for 1987 and
incorporated herein by reference).
10(g)(2) Incentive Compensation Agreement, dated as of January 1, 1987, between Lewis A.
Weinfeld and the Registrant (filed as Exhibit 10(g)(2) to Registrant's Form 10-K
for 1987 and incorporated herein by reference).
10(g)(3) Restricted Stock Agreement, dated as of October 27, 1987, between Lewis A.
Weinfeld and the Registrant (filed as Exhibit 10(g)(3) to Registrant's Form 10-K
for 1987 and incorporated herein by reference).
10(g)(4) Letter Agreement dated June 9, 1989 between Lewis A. Weinfeld and Starrett
Housing Corporation (filed as Exhibit 10(g)(4) to Registrant's Form 10-K for 1989
and incorporated herein by reference).
10(h)(i) Employment Agreement dated as of July 1, 1983 between Elliott M. Wiener and
Levitt (filed as Exhibit 10(h)(i) to Registrant's Registration Statement on Form
S-4 dated September 16, 1988 and incorporated herein by reference).
10(h)(ii) First Amendment to Employment Agreement dated as of January 1, 1987 between
Elliott M. Wiener and Levitt (filed as Exhibit 10(h)(ii) to
</TABLE>
49
<PAGE> 50
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C> <C>
Registrant's Registration Statement on Form S-4 dated September 16, 1988 and
incorporated herein by reference).
10(h)(iii) Second Amendment to Employment Agreement dated as of July 1, 1988 between Elliott
M. Wiener and Levitt (filed as Exhibit 10(h)(iii) to Registrant's Registration
Statement on Form S-4 dated September 16, 1988 and incorporated herein by
reference).
10(h)(iv) Third Amendment to Employment Agreement dated as of January 1, 1990 between
Elliott M. Wiener and Levitt (filed as Exhibit 10(h)(iv) to Registrant's Form 10-
K for 1989 and incorporated herein by reference).
10(i)(i) Letter Agreement, dated December 2, 1988, between American Financial Corporation
and Starrett Housing Corporation, with Form of Note attached thereto (filed as
Exhibit 10(j)(i) to Amendment No. 1 to the Registrants' Registration Statement on
Form S-4 dated December 13, 1988 and incorporated herein by reference).
10(i)(ii) Letter Agreement, dated December 2, 1988, between American Financial Corporation
and Henry Benach (filed as Exhibit 10(j)(ii) to Amendment No. 1 to the
Registrant's Registration Statement on Form S-4 dated December 13, 1988 and
incorporated herein by reference).
10(i)(iii) Letter Agreement, dated December 2, 1988, between American Financial Corporation
and Builtland Partners (filed as Exhibit 10(j)(iii) to Amendment No. 1 to the
Registrant's Registration Statement on Form S-4 dated December 13, 1988 and
incorporated herein by reference).
10(i)(iv) Letter Agreement, dated December 2, 1988, between American Financial Corporation
and Oded Aboodi (filed as Exhibit 10(j)(iv) to Amendment No. 1 to the
Registrant's Registration Statement on Form S-4 dated December 13, 1988 and
incorporated herein by reference).
10(i)(v) Letter, dated December 2, 1988, from Starrett Housing Corporation to Henry Benach
(filed as Exhibit 10(j)(v) to Amendment No. 1 to the Registrant's Registration
Statement on Form S-4 dated December 13, 1988 and incorporated herein by
reference).
10(i)(vi) Letter, dated December 2, 1988, from Starrett Housing Corporation to Builtland
Partners (filed as Exhibit 10(j)(vi) to Amendment No. 1 to the Registrant's
Registration Statement on Form S-4 dated December 13, 1988 and incorporated
herein by reference).
</TABLE>
50
<PAGE> 51
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C> <C>
10(i)(vii) Letter, dated December 2, 1988, from Starrett Housing Corporation to Oded Aboodi
(filed as Exhibit 10(j)(vii) to Amendment No. 1 to the Registrant's Registration
Statement on Form S-4 dated December 13, 1988 and incorporated herein by
reference).
10(j)(i) Second Amended and Restated Partnership Agreement of Roosevelt Island Associates
dated February 28, 1989 (filed as Exhibit 10(j)(i) to Registrant's Current Report
on Form 8-K dated March 3, 1989 and incorporated herein by reference).
10(j)(ii) Participation Agreement dated February 28, 1989 by and among Roosevelt Island
Associates, Manhattan Park Leasing Corporation, HRH Construction Corporation, RIA
Construction Company, Starrett Housing Corporation, Grenadier Realty Corporation,
Manhattan Park, Inc., Cohen Roosevelt Associates and NCC RIA Company (Schedules
are omitted, and are available from the Registrant upon request (filed as Exhibit
10(j)(ii) to Registrant's Current Report on Form 8-K dated March 3, 1989 and
incorporated herein by reference).
10(j)(iii) Capital Adjustment Agreement dated February 28, 1989 between Starrett Housing
Corporation, Manhattan Park, Inc., Cohen Roosevelt Associates and NCC RIA Company
(filed as Exhibit 10(j)(iii) to Registrant's Current Report on Form 8-K dated
March 3, 1989 and incorporated herein by reference).
10(j)(iv) No-Negative Guaranty Agreement dated February 28, 1989 by and among Starrett
Housing Corporation, Cohen Roosevelt Associates, Grenadier Realty Corporation,
Manhattan Park Leasing Corporation and Roosevelt Island Associates (filed as
Exhibit 10(j)(iv) to Registrant's Current Report on Form 8-K dated March 3, 1989
and incorporated herein by reference).
10(j)(v) First Amendment to No-Negative Guaranty Agreement dated as of January 15, 1993 by
and among Starrett Housing Corporation, Cohen Roosevelt Associates, Grenadier
Realty Corporation, Manhattan Park Leasing Corporation and Roosevelt Island
Associates.
10(j)(vi) Construction Completion Guaranty Agreement dated February 28, 1989 by and among
Roosevelt Island Associates, Starrett Housing Corporation, and Cohen Roosevelt
Associates (filed as Exhibit 10(j)(v) to Registrant's Current Report on Form 8-K
dated March 3, 1989 and incorporated herein by reference).
</TABLE>
51
<PAGE> 52
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C> <C>
10(j)(vii) Payment Allocation, Contribution and Indemnification Agreement made as of
February 28, 1989 by and among Starrett Housing Corporation, Manhattan Park,
Inc., HRH Construction Corporation, Grenadier Realty Corp.; and Roosevelt
Associates, RIA Construction Company, Charles Steven Cohen and Sherman Cohen
(filed as Exhibit 10(k)(vi) to Registrant's Form 10-K for 1988 and incorporated
herein by reference).
10(j)(viii) Amendment to Payment Allocation, Contribution and Indemnification Agreement,
dated as of February 28, 1989, a Second Amendment thereto dated October 30, 1992
and a Third Amendment thereto made as of February 28, 1989.
10(j)(ix) Master Refunding Agreement dated January 13, 1993 by and among Manhattan Park,
Inc., Cohen Roosevelt Associates, NCC RIA Company, Starrett Housing Corporation,
Charles Steven Cohen, Sherman Cohen and Roosevelt Island Associates.
10(k)(i) Letter Agreement dated August 26, 1988 between ITT Corporation and Starrett
Housing Corporation (filed as Exhibit 10(l) to Registrant's Form 10-K for 1988
and incorporated herein by reference).
10(k)(ii) Letter Agreement dated November 20, 1990 between ITT Corporation and Starrett
Housing Corporation and related forms of promissory notes (filed as Exhibit
10(k)(ii) to Registrant's Form 10-K for 1990 and incorporated herein by
reference).
10(l)(i) Agreement between Levitt Retirement Communities No. 1., Inc. and Resources
Funding Corporation, dated January 11, 1989 (filed as Exhibit 10(m)(i) to
Registrant's Current Report on Form 8-K dated April 20, 1989 and incorporated
herein by reference).
10(l)(ii) Guaranty and Undertaking, dated March 15, 1989 among Levitt Corporation,
Northpark Associates Limited Partnership, Resources Funding Corporation, Special
Housing for America's Retired and Elderly, L.P. and Northpark Corp. (filed as
Exhibit 10(m)(ii) to Registrant's Current Report on Form 8-K dated April 20, 1989
and incorporated herein by reference).
10(l)(iii) First, Second, Third and Fourth Promissory Notes, dated March 15, 1989, issued by
Special Housing for America's Retired and Elderly, L.P. to Levitt Retirement
Communities No. I, Inc. and Levitt Retirement Communities No. II, Inc. (filed as
Exhibit 10(m)(iii) to Registrant's Current Report on Form 8-K dated April 20,
1989 and incorporated herein by reference).
</TABLE>
52
<PAGE> 53
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C> <C>
10(l)(iv) Management Agreement among Northpark Associates Limited Partnership, Resources
Property Management Corp. and Levitt Care Corporation (filed as Exhibit 10(m)(iv)
to Registrant's Current Report Form 8-K dated April 20, 1989 and incorporated
herein by reference).
10(l)(v) Master Agreement among Levitt Retirement Communities No. I, Inc., Levitt
Retirement Communities No. II, Inc., Levitt Corporation, Special Housing for
America's Retired and Elderly, L.P., Integrated Resources, Inc. and Manufacturers
Hanover Trust Company (filed as Exhibit 10(m)(v) to Registrant's Current Report
on Form 8-K dated April 20, 1989 and incorporated herein by reference).
10(l)(vi) Note Repurchase Agreement between Levitt Corporation and Manufacturers Hanover
Trust Company (filed as Exhibit 10(m)(vi) to Registrant's Current Report on Form
8-K dated April 20, 1989 and incorporated herein by reference).
10(l)(vii) Credit Agreement and Guarantee - Levitt Homes Incorporated,
Levitt Corporation, Et Al., and Ohio Savings Bank, F.S.B.* 54-99
11(a) Exhibit Setting Forth the Computation of 102
Primary Earnings Per Share Information.*
11(b) Exhibit Setting Forth the Computation of 103
Fully Diluted Earnings Per Share Information.*
22 List of Subsidiaries of the Registrant (filed as Exhibit 22 to Registrant's Form
10-K for 1987 and incorporated herein by reference).
27 Financial Data Schedule.* 104
</TABLE>
Note: The Exhibits which have not previously been
filed are marked with an asterisk (*).
53
<PAGE> 1
This Credit Agreement and Guarantee dated as of January 31, 1996 is
entered into by and among OHIO SAVINGS BANK, F.S.B. (the "Bank") and LEVITT
HOMES INCORPORATED, a Delaware corporation (the "Company"), LEVITT CORPORATION,
a Maryland corporation (the "Guarantor") and LEVITT PROPERTY MANAGEMENT, INC.,
LEVITT REALTY SERVICES, INC., LEVITT AT ST. ANDREWS PLACE, INC., LEVITT AT BEAR
LAKES, INC., LEVITT CONSTRUCTION CORP.-EAST, LEVITT CONSTRUCTION CORP.-WEST,
L.D. CORPORATION OF BROWARD, INC., SECURITY SHIELD, INC., LEVITT HOMES PUERTO
RICO INCORPORATED, HAMPSHIRE HOMES, LTD., LEVITT HOMES AT WATER'S EDGE, INC.,
LEVITT AT HUNTINGTON LAKES, INC., LEVITT AT WESTCHESTER, INC., LEVITT HOMES AT
EMERALD LAKES, INC., THE VILLAGES AT EMERALD LAKES, INC., WOODMERE HOMES, INC.,
LEVITT AT WESTCHESTER WEST, INC., LEVITT AT TWIN ACRES, INC., LEVITT RETIREMENT
COMMUNITIES NO. I, INC., LEVITT CARE CORPORATION, LEVITT MORTGAGE CORP., and
U.F.C. TITLE INSURANCE, INC. (collectively the "Subsidiary Guarantors" and
individually a "Subsidiary Guarantor").
RECITALS
The Company desires to obtain a term loan in the amount of Ten Million
Dollars ($10,000,000.00) to refinance certain of its existing obligations to
Chemical Bank (the "Chemical Bank Term Loan"). The Bank is willing to make
such a loan provided that it is guaranteed by Guarantor and the Subsidiary
Guarantors and upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the above described parties hereby
agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms: as used in this Agreement, the following terms have
the following meanings: "Affiliate"
: as to any Person (a) any Person (not a Subsidiary of such
Person) which, directly or indirectly, controls, is controlled by or is under
common control with such Person or (b) any Person who is a director or
executive officer of such Person, any Subsidiary of such Person or any
54
<PAGE> 2
Person described in clause (a) of this definition. For purposes of
this definition, "control" of a Person means the power, direct or
indirect, to vote 50% or more of the securities having voting power for
the election of directors of such Person or otherwise to direct or
cause the direction of the management and policies of such Person,
whether by contract or otherwise.
"Agreement" : this Credit Agreement and Guarantee, supplemented or
modified from time to time.
"Business Day": A day other than a Saturday, Sunday or other day on
which federally chartered savings banks are authorized or required by
law to close.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with the Guarantor or the Company within
the meaning of Section 414 (b) and (c) of the Code.
"Consolidated Liabilities": as of the date of any determination
thereof, the aggregate sum of all liabilities of the Guarantor and its
consolidated Subsidiaries which in accordance with GAAP would be
included in determining total liabilities as presented on the liability
side of a consolidated balance sheet of the Guarantor and its
consolidated Subsidiaries; provided, that for the purposes of this
Agreement, Consolidated Liabilities shall exclude (a) all Non-Recourse
Liabilities of the Guarantor and its consolidated Subsidiaries and (b)
Indebtedness of the Guarantor and its consolidated Subsidiaries which
has been secured by mortgage notes receivable which have been pooled
into FNMA or GNMA certificates.
"Consolidated Net Worth" : at a particular date, the excess of the net
book value (after deduction of all applicable reserves and excluding
any re-appraisal or write-up of assets) of the assets (other than
patents, good will, and treasury stock) of the Guarantor and its
consolidated Subsidiaries over all of the liabilities of Guarantor and
its consolidated Subsidiaries (other than any liabilities subordinated
by writing in form and substance satisfactory to the Bank, in favor of
all of the "Obligations" (as defined in subsection 3.1 hereof) and the
Indebtedness of Guarantor and its
55
<PAGE> 3
Subsidiaries to Bank) as determined on a consolidated basis in
accordance with GAAP (as hereinafter defined) applied on a basis not
inconsistent with its present accounting procedures.
"Contingent Obligation": as to any Person, any obligation of such
Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other
Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such
person, whether or not contingent, (a) to purchase any such primary
obligation or any property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the purchase or
payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (d)
otherwise to assure or hold harmless the owner of such primary
obligation against loss in respect thereof; provided, however, that the
term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to
perform thereunder) as determined by such Person on good faith.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of
its property is bound.
"Default" : any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both,
or any other condition, has been satisfied.
"Dollars" and "$": shall mean dollars in lawful currency of the
United States of America.
"Effective Date": as defined in subsection 5.1.
56
<PAGE> 4
"ERISA" : the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" : any of the events specified in Section 8,
provided that any requirements for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled (through stock or capital ownership or otherwise) by any of
the foregoing.
"Indebtedness" : as to any Person, at a particular time, (a)
indebtedness for borrowed money or for the deferred purchase price of
property or services which purchase price is (i) due more than six
months from the date of incurrence of the obligation in respect
thereof, or (ii) evidenced by a note or other written instrument or
document (including, without limitation, any such indebtedness which is
non-recourse to the credit of such Person but is secured by assets of
such Person, provided that the amount of such indebtedness shall be
limited to the fair market value of such assets at such time) in
respect of which such Person is liable, (b) obligations under leases
which shall have been or should be, in accordance with GAAP, recorded
as capital leases in respect of which obligations such Person is liable
(the amount of Indebtedness incurred in connection with any capital
lease being deemed to be the liability therefor required to be set
forth in accordance with GAAP on the consolidated financial statements
of the Guarantor) and (c) the face amount of all outstanding letters of
credit issued for the account of such Person and, without duplication,
all drafts drawn thereunder.
"Installment Payment Date" : as defined in subsection 2.2.
"Interest Payment Date" : The first day of each month, in arrears.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement or preferential
57
<PAGE> 5
arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement,
any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction).
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Ohio Savings Bank Rate" : the rate of interest publicly announced by
the Bank as its reference rate ("Prime Rate"). The reference rate is
not intended to be the lowest rate of interest charged by the Bank in
connection with extensions of credit to debtors.
"Non-Recourse Liabilities": of any Person means, at any date, any
Indebtedness of such Person as to which the sole recourse of the
obligee of such Indebtedness is to the assets securing such
Indebtedness and shall also mean any Indebtedness for the purchase or
acquisition of, secured by mortgages or deeds of trust on, specified
real property for which a Person without material assets (other than
the property which was so purchased or acquired and which secures such
Indebtedness) is liable and in respect of which neither the Guarantor,
the Company nor any other Subsidiary is liable directly or under any
Contingent Obligation.
"Obligations": as defined in subsection 3.1.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"Person": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
limited liability company, Governmental Authority or other entity of
whatever nature.
"Plan": any employee benefit plan as defined in Section 3(3) of ERISA,
other than a Multiemployer Plan, in respect of which the Company or a
Commonly Controlled Entity is an "employer" as defined in Section 3(5)
of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
ERISA or the regulations
58
<PAGE> 6
thereunder in respect of which the thirty day notice of requirement has
not been waived pursuant to regulations promulgated by the PBGC.
"Requirement of Law": as to any Person, the certificate or articles of
incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator of a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
"Residential Housing Operations": all business activities now or
hereafter conducted by the Company and/or any of its Subsidiaries that
relate to the development, construction and sales of single and
multifamily residential housing units and the development of rental
housing projects which are intended to be sold, not held long term.
"Responsible Officer": the President or the Vice President-Finance of
the Company, the Guarantor or any Subsidiary Guarantor, as the case may
be or, with respect to financial matters, the chief financial officer
of the Guarantor, the Company or any Subsidiary Guarantor, as the case
may be.
"Starrett": Starrett Corporation, a New York corporation, which owns
all the issued and outstanding shares of the capital stock of the
Guarantor.
"Subsidiary" : as to any Person, a corporation of which shares of
stock having ordinary voting power (other than stock having such power
only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation are at
the time owned, or the management of which is otherwise controlled,
directly, or indirectly through one or more intermediaries, or both, by
such person or any majority owned partnership or joint venture.
"Subsidiary Guarantors": Levitt Property Management., Inc., Levitt
Realty Services, Inc., Levitt at St. Andrews Place, Inc., Levitt at
Bear Lakes, Inc., Levitt Construction Corp. - East, Levitt Construction
Corp. - West, L.D. Corporation of Broward, Inc., Security Shield, Inc.,
Levitt Homes Puerto Rico Incorporated, Hampshire Homes, Ltd., Levitt
Homes at Water's Edge, Inc., Levitt at
59
<PAGE> 7
Huntington Lakes, Inc., Levitt at Westchester, Inc., Levitt Homes at
Emerald Lakes, Inc., The Villages at Emerald Lakes, Inc., Woodmere
Homes, Inc., Levitt at Westchester West, Inc., Levitt at Twin Acres,
Inc., Levitt Retirement Communities No. 1, Inc., Levitt Care
Corporation, Levitt Mortgage Corp., U.F.C. Title Insurance, Inc., and
such other Subsidiaries of the Company or the Guarantor as may, from
time to time, become parties to this Agreement.
"Term Note": as defined in subsection 2.2.
1.2 Other Definitional Provisions. (a) All terms defined in this
Agreement shall have the defined meanings when used in the Note or any
certificate or other document made or delivered pursuant hereto; (b)
as used herein and in the Note, and any certificate or other document
made or delivered pursuant hereto, accounting terms relating to the
Guarantor and its Subsidiaries not defined in subsection 1.1, and
accounting terms partly defined in subsection 1.1 to the extent not
defined, shall have the respective meanings given to them under GAAP;
and (c) the words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and section, subsection, schedule and exhibit references
are to this Agreement unless otherwise specified.
SECTION 2. AMOUNT AND TERMS OF COMMITMENT
2.1 Term Loan Subject to the terms and conditions hereof, the Bank
agrees to advance to the Company in an aggregate principal amount not
to exceed Ten Million Dollars ($10,000,000).
2.2 Term Note. The Term Loan made by the Bank shall be evidenced by a
promissory note of the Company, substantially in the form of Exhibit A
(the "Note"), payable to the order of the Bank. The Bank is hereby
authorized to record the date and amount of the Term Loan and the date
and amount of each payment or prepayment of principal thereof.
The Term Note shall (a) be dated the Effective Date, (b) be stated to
mature on January 1, 2000, payable in eight (8) consecutive
semi-annual installments, on such dates as specified below (each such
payment date shall herein be referred to as an "Installment Payment
Date") and in the
60
<PAGE> 8
amount set forth opposite each such Installment Payment Date as
follows:
<TABLE>
<S> <C>
July 31, 1996 $1,000,000
January 31, 1997 $1,500,000
July 31, 1997 $1,000,000
January 31, 1998 $1,500,000
July 31, 1998 $1,000,000
January 31, 1999 $1,500,000
July 31, 1999 $1,000,000
January 31, 2000 $1,500,000
</TABLE>
and (c) bear interest for the period from the date thereof on the
unpaid principal amount thereof at the applicable interest rates per
annum specified in subsection 2.4, which interest shall be payable as
specified in subsection 2.4.
2.3 Optional Prepayments. The Company may prepay the Term Loan, in whole
or in part, with payment of a penalty of 5% during the first year, 4%
during the second year and 3% of the amount prepaid during the next
succeeding thirty five (35) months of the Loan term and with no
penalty if such prepayment occurs during the final calendar month of
the Loan term.
2.4 Interest Rate and Payment Dates. The Term Loan shall bear interest
for the period from the Effective Date until the payment in full
thereof on the unpaid principal amount thereof at a fluctuating rate
per annum equal to the Ohio Savings Bank Rate plus one percent (1%),
subject to adjustment as set forth in the Note.
Interest shall be payable on each Interest Payment Date and, after the
occurrence of any Event of Default, shall be payable on demand.
2.5 Use of Proceeds. The proceeds of the Loan hereunder shall be used by
the Company to pay the Chemical Bank Term Loan.
SECTION 3. GUARANTEE
3.1 Guarantee. Each of the Guarantor and the Subsidiary Guarantors,
jointly and severally, hereby
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unconditionally and irrevocably guarantees to the Bank and its
successors, indorsees, transferees and assigns, the prompt and
complete payment when due (whether at the stated maturity, by
acceleration or otherwise) of the Term Loan, whether as drawer, maker,
endorser, guarantor, surety or otherwise, including, without
limitation, all indebtedness, obligations and liabilities of the
Company arising under or out of or in connection with (a) the unpaid
principal of and interest on the Note, or any other amount payable to
the Bank under this or any other agreement relating to the Term Loan,
(b) due and punctual payment and performance by the Company and each
of the Guarantor and the Subsidiary Guarantors of all their respective
obligations and liabilities under, arising out of and in connection
with this Agreement and (c) any and all reasonable expenses which may
be paid or incurred by the Bank in the collection of any and all
amounts owed under the Term Note or this Agreement and/or enforcing
any rights or remedies under the Note or the guarantee provisions or
otherwise under this Agreement (all of the foregoing being hereinafter
called the "Obligations"). The obligations of the Guarantor and the
Subsidiary Guarantors under this subsection 3.1 are and shall be joint
and several.
3.2 Subrogation. Notwithstanding any payment or payments made by each of
the Guarantor and the Subsidiary Guarantors hereunder or any set-off
or application of funds of each of the Guarantor and the Subsidiary
Guarantors by the Bank, neither the Guarantor nor any of the
Subsidiary Guarantors shall be entitled to be subrogated to any of the
rights of Bank against the Company or guarantee or right of offset
held by the Bank for the payment of the Obligations, nor shall any of
the Guarantor and the Subsidiary Guarantors seek any reimbursement
from the Company in respect of payments made by any of the Guarantor
and the Subsidiary Guarantors hereunder, until all amounts owing to
the Bank by the Company for or on account of the Obligations are paid
in full.
3.3 Variation of the Risk. Each of the Guarantor and the Subsidiary
Guarantors, hereby consents that, without the necessity of any
reservation of rights against it and without notice of further assent
by the Guarantor or such Subsidiary Guarantor:
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(a) The obligations and liabilities of the Company or any other party
or parties for or upon the Obligations (and/or promissory notes
evidencing the same) may, from time to time, in whole or in part, be
renewed, extended, modified, prematured, compromised or released by the
Bank;
(b) Any and all security and/or Lien or Liens (legal or equitable) at
any time, present or future, held, given or intended to be given for
the Obligations and any rights of offset of the Bank in respect thereof
under this Agreement or any security document or in law or in equity or
otherwise, may, from time to time, in whole or it part, be exchanged,
sold surrendered, released, modified, subordinated, waived or extended
by the Bank, and the Bank may permit or consent to any such action or
the result of any such action;
(c) The Bank may extend the time of payment of, compromise, settle for
cash, credit or otherwise, and upon any terms or conditions, any part
of any collateral security for the Obligations, and thereby discharge
or release the Person or Persons liable for the payment of all or any
part thereof, and the Bank may permit or consent to any such action or
any result of such action, and the Bank shall not be obligated to
demand or realize upon any of the collateral, nor shall the Bank be
liable to the Guarantor or any Subsidiary Guarantor for its failure to
collect or enforce payments thereof or for the negligence of its
agents or attorneys with respect thereto;
(d) The Bank may exercise or refrain from exercising any right, remedy
or power (including, without limitation, any power of sale) granted by
any security instrument or in law or in equity or otherwise, with
respect to the Obligations or any security or Lien (legal or equitable)
held, given or intended to be given therefor, and
(e) Any balance or balances of funds with the Bank at any time
standing to the credit of the Company or the Guarantor or any
Subsidiary Guarantor in any collateral or special account maintained
pursuant to the Agreement (but not including any escrow fund deposits
relating to purchase contracts for the sale of houses or sublots to
bona fide third parties) may, from time to time, in whole or in part,
be surrendered or released by the Bank; all as the Bank may deem
advisable, and all without impairing, abridging, releasing or affecting
the guarantee provided for
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herein.
3.4 Waiver of Notice, Reliance, etc. Each of the Guarantor and the
Subsidiary Guarantors waives any and all notice of the creation,
renewal, extension or accrual of any of the Obligations and notice of
or proof of reliance by the Bank upon this guarantee or acceptance of
this guarantee, and the Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred in
reliance upon this guarantee, and all dealings among the Company and
the Bank shall likewise be conclusively presumed to have been had or
consummated in reliance upon this guarantee. Each of the Guarantor
and the Subsidiary Guarantors waives diligence, presentment, protest,
demand for payment and notice of default or nonpayment to or upon the
Company or the Guarantor or any Subsidiary Guarantor with respect to
the Obligations. This guarantee shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to the
validity, regularity or enforceability of any of the documents and
instruments evidencing or creating obligations with respect to this
Agreement, the Note, any of the Obligations or any collateral security
or guarantee therefor or right of offset with respect thereto at any
time or from time to time held by the Bank and without regard to any
defense, set-off or counterclaim which may at any time be available to
or be asserted by the Company against the Bank, or by any other
circumstance whatsoever (with or without notice to or knowledge of the
Company or the Guarantor or any Subsidiary Guarantor) which
constitutes, or might be construed to constitute, an equitable or
legal discharge of the Company for the Obligations, or of the
Guarantor or any Subsidiary Guarantor under this guarantee, in
bankruptcy or in any other instance. The Obligations and the
liabilities of the Guarantor or any Subsidiary Guarantor hereunder
shall not be conditioned or contingent upon the pursuit by the Bank or
any other Person at any time of any right or remedy against the
Company or against any other Person which may be or become liable in
respect of all or any part of the Obligations or against any
collateral security or guarantee therefor or right of offset with
respect thereto. The obligations of Guarantor and the Subsidiary
Guarantors hereunder shall continue, and not be affected by, any
merger or consolidation involving the
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Company, the Guarantor or any Subsidiary Guarantor, any sale,
assignment, transfer, conveyance, or issuance of any stock or other
equity interest in the Company or any Subsidiary Guarantor by the
Guarantor, or as applicable, by the Company or any other Person. This
guarantee shall remain in full force and effect of its terms upon each
of the Guarantor and the Subsidiary Guarantors and their respective
successors and assigns, and shall inure to the benefit of the Bank,
and it successors, indorsees, transferees and assigns, until the
Obligations and the obligations of each of the Guarantor and
Subsidiary Guarantors under this guarantee shall have been satisfied
by payment in full.
3.5 Bankruptcy of the Company. This guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is rescinded
or must otherwise be restored or returned by the Bank upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of
the Company, the Guarantor or any Subsidiary Guarantor, or upon or as
a result of the appointment of a receiver, intervenor or conservator
of, or trustee, custodian, or similar officer for the Company, the
Guarantor or any Subsidiary Guarantor, or any substantial part of
their respective property, or otherwise, all as though such payments
had not been made.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and to make the loan
herein provided for, the Company and the Guarantor each hereby jointly
and severally covenants, represents and warrants to the Bank that:
4.1 Financial Condition. The consolidated statements of financial
position of the Guarantor and its consolidated Subsidiaries as at
December 31, 1994 and 1993 and the related consolidated statements of
consolidated operations and retained earnings and consolidated
statements of cash flows for the fiscal years ended on such dates,
accompanied by an opinion thereon of Deloitte & Touche, copies of
which have heretofore been furnished to the Bank, are complete and
correct in all material respects and present fairly the consolidated
financial condition of the Guarantor and its
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consolidated Subsidiaries as at such dates, and the consolidated
results of their operations and at such dates, and the consolidated
results of their operations and cash flows for the fiscal years then
ended. The unaudited consolidated statements of financial position of
the Guarantor and its consolidated Subsidiaries as at September 30,
1995 and the related unaudited consolidated statements of operations
and retained earnings and consolidated statements of cash flows for
the nine months period ended on such date, certified by a Responsible
Officer, copies of which have heretofore been furnished to the Bank,
are complete and correct in all material respects and present fairly
the consolidated financial condition of the Guarantor and its
consolidated Subsidiaries as at such date in all material respects,
and the consolidated results of their operations and cash flows for
the nine months period then ended (subject to normal year-end audit
adjustments) in all material respects. All such financial statements,
including the related schedules and the notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the
periods involved. Neither the Guarantor nor any of its Subsidiaries
has any material Contingent Obligations, contingent liabilities or
liability for taxes, long-term leases or unusual forward or long-term
commitments, which are not reflected in the foregoing statements or in
the notes thereto.
4.2 No Change. Since December 31, 1994, (a) there has been no material
adverse change in the business, operations, assets or financial or
other condition of the Guarantor and its Subsidiaries taken as a whole
and (b) except for dividends and other payments permitted pursuant to
subsection 7.5 hereof, no dividends or other distributions have been
declared, paid or made upon any shares of capital stock of the Company
or the Guarantor nor have any shares of capital stock of the Company
or the Guarantor been redeemed, retired, purchased or otherwise
acquired for value by the Guarantor, the Company or any of their
respective Subsidiaries.
4.3 Corporate Existences; Compliance with Law. The Guarantor and each of
its Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (b)
has the corporate power and authority and the legal right to own and
operate its
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property, to lease the property it operates and to conduct the
business in which it is currently engaged, (c) is duly qualified as a
foreign corporation and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification except where a
failure to qualify could not have a material adverse effect upon the
business, operations, properties or financial or other condition of
the Guarantor and its Subsidiaries taken as a whole and could not
materially adversely affect the ability of the Company to perform its
obligations under this Agreement or the Note or of the Guarantor or
the Subsidiary Guarantors to perform their respective obligations
under this Agreement, and (d) is in compliance with all Requirements
of Law except to the extent that the failure to comply therewith could
not, in the aggregate, have a material adverse effect on the business,
operations, property or financial or other condition of the Guarantor
and its Subsidiaries taken as a whole, and could not materially
adversely affect the ability of the Company, to perform its
obligations under this Agreement or the Note or of the Guarantor or
the Subsidiary Guarantors to perform their respective obligations
under this Agreement. Schedule I hereto sets forth for the Guarantor
and each of its Subsidiaries their respective parents, jurisdictions
of incorporation and certain of the respective jurisdictions in which
each of them is qualified to do business, as such facts exist on the
date of this Agreement.
4.4 Corporate Power; Authorization; Enforceable Obligations. The Company
has the corporate power and authority and the legal right to make,
deliver and perform this Agreement and the Note, and to borrow
hereunder and has taken all necessary corporate action to authorize
the borrowing on the terms and conditions of this Agreement and the
Note, and to authorize the execution, delivery and performance of this
Agreement and the Note. Each of the Guarantor and the Subsidiary
Guarantors has the corporate power and authority and the legal right
to make, deliver and perform this Agreement and to guarantee the
Obligations and has taken all necessary corporate action to authorize
the execution, delivery and performance of this Agreement. No consent
or authorization of, filing with, or other act by or in respect of any
Governmental Authority, is required in
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connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of this Agreement
and the Note. This Agreement has been, and the Note will be, duly
executed and delivered on behalf of the Company, the Guarantor and/or
the Subsidiary Guarantors, as the case may be, and this Agreement
constitutes, and the Note when executed and delivered will constitute,
a legal, valid and binding obligation of the Company, the Guarantor
and/or the Subsidiary Guarantors, as the case may be, enforceable
against the Company, the Guarantor and/or the Subsidiary Guarantors,
as the case may be, in accordance with its terms, except as
enforceability may be limited by (as against that one of them which is
itself the object of a proceeding under) applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or
similar laws affecting the enforcement of creditors' rights generally.
4.5 No Legal Bar. The execution, delivery and performance of this
Agreement and the Note, the borrowing hereunder and the use of the
proceeds thereof, will not conflict with or result in a violation of
the Articles of Incorporation or By-Laws of the Company, the Guarantor
or any Subsidiary Guarantor, will not violate any Requirement of Law
or any Contractual Obligation of the Guarantor or any of its
Subsidiaries, and will not result in, or require, the creation or
imposition of any Lien on any of its or their respective properties or
revenues pursuant to any Requirement of Law or Contractual Obligation.
4.6 No Material Litigation. Except as described in Schedule II hereto
(which summarizes pending litigation involving potential liability of
Five Hundred Thousand Dollars ($500,000.00) or more in each instance),
no litigation, investigation or proceeding of or before any arbitrator
or Governmental Authority is pending or, to the knowledge of the
Company, the Subsidiary Guarantors or the Guarantor, threatened by or
against the Guarantor or any of its Subsidiaries or against any of its
or their respective properties or revenues (a) with respect to this
Agreement and the Note, or any of the transactions contemplated
hereby, or (b) which could have a material adverse effect on the
business, operations, property or financial or other condition of the
Guarantor and its Subsidiaries taken as a whole, or (c) which could
have a material adverse effect
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on the ability of the Company to perform its obligations under the
Agreement or the Note or of the Guarantor or the Subsidiary Guarantors
to perform their respective obligations under this Agreement.
4.7 No Default. None of the Guarantor or any of its Subsidiaries is in
default under or with respect to any Contractual Obligation in any
respect which could be materially adverse to the business, operations,
property or financial or other condition of the Guarantor and its
Subsidiaries taken as a whole, or which could materially adversely
affect the ability of the Company to perform its obligations under
this Agreement or the Note or the Guarantor or the Subsidiary
Guarantors to perform their respective obligations under this
Agreement. No Default or Event of Default has occurred and is
continuing.
4.8 Ownership of Property; Liens. The Guarantor and each of its
Subsidiaries has good record and marketable title in fee simple to or
valid and subsisting leasehold interests in all its real property, and
good title to all its other property, and none of such property is
subject to any Lien, except for liens arising in the ordinary course
of the business of developing property which are not material (e.g.,
liens in favor of municipal or county governments to secure completion
of improvements) and except as reflected in the financial statements
referred to in subsection 4.1 or as permitted in subsection 7.2
4.9 No Burdensome Restrictions. No Contractual Obligation of the
Guarantor or any of its Subsidiaries and no Requirement of Law
materially adversely affects, or insofar as the Guarantor, any
Subsidiary Guarantor or the Company may reasonably foresee may so
affect, the business, operations, property or financial or other
condition of the Guarantor and its Subsidiaries taken as a whole or
the ability of the Company to perform its obligations under this
Agreement or the Note or of the Guarantor or the Subsidiary Guarantors
to perform their respective obligations under this Agreement.
4.10 Taxes. The Guarantor and each of its Subsidiaries has filed or caused
to be filed all tax returns which to the knowledge of the Guarantor,
any Subsidiary Guarantor or the Company are required
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to be filed, subject to applicable extensions, and has paid all taxes
shown to be due and payable on said returns or on any assessments made
against it or any of its property and all other taxes, fees or other
charges imposed on it or any of its property by any Governmental
Authority (other than those the amount or validity of which is
currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been
provided on the books of the Guarantor or its Subsidiaries, as the
case may be); and no tax liens have been filed and, to the knowledge
of the Guarantor, any Subsidiary Guarantor and the Company, no claims
are being asserted with respect to any such taxes, fees or other
charges.
4.11 Federal Regulations. Neither the Guarantor, nor any of its
Subsidiaries is engaged or will engage, principally or as one of its
important activities, in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation U of
the Board of Governors of the Federal Reserve System as now and from
time to time hereinafter in effect. No part of the proceeds of the
Term Loan hereunder or any other extension of credit by Bank to the
Company will be used for "purchasing" or "carrying margin stock" as so
defined or for any purpose which violates, or which would be
inconsistent with, the provisions of the Regulations of such Board of
Governors.
4.12 ERISA. No prohibited transaction or accumulated funding deficiency
(each as defined in Section 8) or Reportable Event has occurred since
July 1, 1974 with respect to any Plan. The present value of all
accrued benefits vested under all Plans (determined under the same
actuarial assumptions used for funding and contributions to each Plan)
did not, as of the last annual valuation date, exceed the value of the
assets of the Plan allocable to such vested benefits as of such date.
To the best knowledge of the Company and the Guarantor after due
inquiry, the liability to which the Company or any Commonly Controlled
Entity would become subject under ERISA if the Company or such
Commonly Controlled Entity were to withdraw completely from all
Multiemployer Plans with respect to which the Company or any Commonly
Controlled Entity contributes or has contributed, or if such
Multiemployer Plans were to be terminated, as of the
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valuation date most closely preceding the date hereof would not have a
material adverse effect on the business, operations, property or
financial or other condition of the Guarantor and its Subsidiaries
taken as a whole. Such Multiemployer Plans are neither in
Reorganization as defined in Section 4241 of ERISA nor Insolvent as
defined in Section 4245 of ERISA where such Reorganization or
Insolvency would have a material adverse affect on the business,
operations, property or financial or other condition of the Guarantor
and its Subsidiaries taken as a whole.
4.13 Guarantors' Benefit. The assumption by Guarantor and the Subsidiary
Guarantors of their obligations hereunder will result in direct
financial benefit to said Persons.
4.14 Investment Company Act. None of the Guarantor, the Subsidiary
Guarantors or the Company is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions of The Loan. This Agreement shall become effective on the
date (the "Effective Date") on which the following conditions
precedent shall be fulfilled to the satisfaction of the Bank:
(a) Note. The Bank shall have received the Note conforming to the
requirements hereof and executed by a duly authorized officer of the
Company.
(b) Legal Opinion. The Bank shall have received, an opinion of
Messrs. Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
counsel to the Company, the Subsidiary Guarantors, and the Guarantor,
dated the Effective Date and addressed to the Bank, substantially in
the form of Exhibit C.
(c) Company's Certificate. The Bank shall have received a
Certificate dated the Effective Date, substantially in the form of
Exhibit D. with appropriate insertions and attachments satisfactory in
form and substance to the Bank and its counsel, executed by the
President or Vice President and Secretary or Assistant Secretary of
the Company.
(d) Guarantor's Certificate. The Bank shall have received a
Guarantor's Certificate for each of
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the Guarantor and the Subsidiary Guarantors dated the Effective Date,
substantially in the form of Exhibit E with appropriate insertions and
attachments satisfactory in form and substance to the Bank and its
counsel, executed by the President or Vice President and Secretary or
Assistant Secretary of the Guarantor or a Subsidiary Guarantor, as the
case may be.
(e) Additional Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement shall
be satisfactory in form and substance to the Bank and its counsel.
SECTION 6. AFFIRMATIVE COVENANTS
The Company and the Guarantor, and, in the case of subsection 6.4 each
Subsidiary Guarantor, each hereby jointly and severally covenants and agrees
that, so long as the Note remains outstanding and unpaid or any other amount is
owning to the Bank hereunder, the Company and the Guarantor shall, and in the
case of the agreements set forth in subsections 6.3, 6.4, 6.5 and 6.6 shall
cause each of their respective Subsidiaries to:
6.1 Financial Statements. Furnish to the Bank:
(a) as soon as possible, but in any event within one hundred twenty
(120) days after the end of each fiscal year of the Guarantor, a copy
of (i) the consolidated statements of financial position of the
Company and of the Guarantor and their respective consolidated
Subsidiaries as at the end of such year and the related consolidated
statements of consolidated operations and retained earnings and
consolidated statements of cash flows of the Company and of the
Guarantor and their respective consolidated Subsidiaries for such
year, setting forth in each case in comparative form the figures for
the previous year, certified without a "going concern" or like
qualification or exception, or qualification arising out of the scope
of the audit, by any independent certified public accountants of
nationally recognized standing, and (ii) the consolidating statement
of financial position of the Guarantor and its Subsidiaries as at the
end of such fiscal year, showing inter-company eliminations, and the
related consolidating statements of operations and retained earnings,
and consolidating statements of cash flows of the Guarantor and its
consolidating
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Subsidiaries for such year, showing inter-company eliminations,
setting forth in each case in comparative form the figures for the
previous year, certified by a Responsible Officer as being fairly
stated in all material respects when considered in relation to the
consolidated financial statements of the Guarantor and its
consolidated Subsidiaries; and
(b) as soon as available, but in any event not later than sixty (60)
days after the end of each of the first three (3) quarterly periods of
each fiscal year of the Guarantor, the unaudited consolidating
statements of financial position of the Guarantor and its consolidated
Subsidiaries as at the end of each such quarter and the related
unaudited consolidating statements of operations and retained
earnings, and consolidated statements of cash flows of the Guarantor
and its consolidated Subsidiaries for such quarterly period and the
portion of the fiscal year through such date, setting forth in each
case in comparative form on a consolidated basis the figures for the
previous year certified by a Responsible Officer (subject to normal
year-end audit adjustments); all such financial statements to be
complete and correct in all material respects and to be prepared in
reasonable detail and in accordance with GAAP applied consistently
throughout the periods reflected therein (except as approved by such
accountants or officer, as the case may be, and disclosed therein).
6.2 Certificates; Other Information. Furnish to the Bank:
(a) concurrently with the delivery of each of the financial
statements referred to in subsection 6.1(a) above, a certificate of
the independent certified public accountants certifying such financial
statements stating that in making the examination necessary therefor
no knowledge was obtained of any Default or Event of Default, except
as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and (b) above, a certificate of a
Responsible Officer of each of the Guarantor and the Company (i)
stating that during such period, to the best of such Officer's
knowledge, the Company and the Guarantor have each observed or
performed all of its covenants and other agreements, and satisfied
every condition, contained in this Agreement and the Note to be
observed, performed or
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satisfied by it, and that such officer has obtained no knowledge of
any Default or Event of Default except as specified in such
certificate, and (ii) showing in detail the calculations supporting
such statement in respect of subsections 7.1(c), 7.5, 7.7, 7.8 and
7.9;
(c) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and (b) above, a certificate of a
Responsible Officer of each of the Company and the Guarantor
identifying "Other Investments" (as defined in subsection 7.6(d))
which existed at the beginning of the applicable fiscal quarter, new
Other Investments made during such fiscal quarter and any such Other
Investments which have been terminated (because of completion or
repayment) during said fiscal quarter, in each case showing the value
of the Other Investment at cost;
(d) promptly, such additional financial and other information as the
Bank may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be,
all its Indebtedness and other monetary obligations of whatever nature
except for (i) Non-Recourse Liabilities which in the aggregate do not
exceed Six Million Dollars ($6,000,000); (ii) Indebtedness and
obligations, other than for borrowed money or in respect of
Non-Recourse Liabilities or owing to contractors which is related to
the construction or the development of land, as to which the portion
more than sixty (60) days delinquent does not exceed Five Hundred
Thousand Dollars ($500,000); and (iii) Indebtedness and other
obligations of whatever nature, the amount or validity of which is
currently being contested in good faith by appropriate proceedings and
reserves in conformity with GAAP with respect thereto have been
provided on the books of the Company, the Guarantor or any of their
respective Subsidiaries, as the case may be.
6.4. Conduct of Business and Maintenance of Existence. Except as permitted
by subsection 7.4 of this Agreement, continue to engage in business
only of the same general type as now conducted by it, and preserve,
renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the
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normal conduct of its business and comply with all Contractual
Obligations and Requirements and Law except to the extent that the
failure to comply therewith could not, in the aggregate, have a
material adverse effect on the business, operations, property or
financial or other condition of the Company, the Guarantor and their
respective Subsidiaries taken as a whole.
6.5 Maintenance of Property, Insurance. (a) Keep all property useful and
necessary in its business in good working order and condition,
reasonable wear and tear excepted; maintain with financially sound and
reputable insurance companies, insurance on all its property in at
least such amounts and against at least such risks (but including in
any event public liability and product liability) as are usually
insured against in the same general area by companies engaged in the
same or a similar business; and (b) furnish to the Bank, upon written
request, full information as to the insurance carried.
6.6 Inspection of Property; Books and Records; Discussions. Keep proper
books of record and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business activities; and
upon receipt of prior reasonable notice from Bank, permit
representatives of the Bank to visit and inspect any of its properties
and examine and make abstracts from any of its books and records at
any reasonable time and as often as may reasonably be desired, and to
discuss the business, operations, properties and financial and other
condition of the Company, the Guarantor and their respective
Subsidiaries with officers of the Guarantor and its Subsidiaries and
with its independent certified public accountants.
6.7 Notices. Promptly give notice to the Bank:
(a) of the occurrence of any Event of Default;
(b) of any (i) default or event of default under any Contractual
Obligation of the Company, the Guarantor, or any of their respective
Subsidiaries (including any Default or Event of Default with respect
to any Non-Recourse Liabilities) involving a financial loss or penalty
to the Company, the Guarantor and/or any of their respective
Subsidiaries equal to ten percent (10%) or more of their
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Consolidated Net Worth at the time of the applicable occurrence, or
(ii) litigation, investigation or proceeding which may exist at any
time between the Guarantor or any of its Subsidiaries and any
Governmental Authority, which in either case could, if adversely
determined, have a material adverse effect on the business,
operations, property or financial or other condition of the Company,
the Guarantor and their respective Subsidiaries taken as a whole;
(c) of any litigation or proceeding affecting the Company, the
Guarantor or any of their respective Subsidiaries in which the amount
involved is Two Hundred Fifty Thousand Dollars ($250,000) or more and
not covered by insurance or in which injunctive or similar relief is
sought;
(d) of the following events, as soon as possible and in any event
within thirty (30) days after the Company or the Guarantor knows or
has reason to know thereof: (i) the occurrence or expected occurrence
of any Reportable Event with respect to any Plan, or (ii) the
institution of proceedings or the taking or expected taking of any
other action by PBGC or the Guarantor or any Commonly Controlled
Entity to terminate or withdraw from any Plan, and in addition to such
notice, deliver to the Bank whichever of the following may be
applicable: (A) a certificate of the chief financial officer of the
Guarantor or the Company setting forth details as to such Reportable
Event and the action that the Guarantor or Commonly Controlled Entity
proposes to take with respect thereto, together with a copy of any
notice of such Reportable Event that may be required to be filed with
PBGC, or (B) any notice delivered by PBGC evidencing its intent to
institute such proceedings or any notice to PBGC that such Plan is to
be terminated, as the case may be; and
(e) of a material adverse change in the business, operations,
property or financial or other condition of the Company, the Guarantor
and their respective Subsidiaries taken as a whole.
Each notice pursuant to this subsection shall be accompanied by a
statement of the chief executive officer or chief financial officer of
the Company or the Guarantor setting forth details of the occurrence
referred to therein and stating what action the Company or the
Guarantor proposes to take with respect thereto.
6.8 Business Plan. Furnish to the Bank as soon as available but in any
event within ninety (90) days
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after the beginning of each fiscal year of the Guarantor, a copy of
the succeeding year's business plan (the "Business Plan").
6.9 Additional Subsidiaries. Cause any wholly owned Subsidiary of the
Company or the Guarantor incorporated after the date hereof to execute
an Addendum in the form attached hereto as Exhibit E and a Guarantors'
Certificate in the form attached hereto as Exhibit D.
SECTION 7. NEGATIVE COVENANTS
The Company and the Guarantor each hereby jointly and severally covenants and
agrees that, so long as the Note remains outstanding, without the prior written
consent of the Bank:
7.1 Permitted Indebtedness: the Guarantor and the Company will not, and
the Guarantor will not permit any of their respective Subsidiaries to
incur, assume or permit to exist any indebtedness except:
(a) Indebtedness in respect to Note;
(b) Indebtedness, secured or unsecured, incurred for the purpose
of financing Levitt Mortgage Corporation's operations with respect to
mortgage loans originated for homes sold or financed for others in an
amount not to exceed Three Million Dollars ($3,000,000);
(c) Indebtedness of Guarantor and its Subsidiaries on a
consolidated basis secured by Liens and incurred in connection with
land acquisitions, construction and development in an aggregate unpaid
principal amount at any one time outstanding not to exceed Forty
Million Dollars ($40,000,000), provided, that (i) no more than Fifteen
Million Dollars ($15,000,000) of such Indebtedness shall mature within
any twelve month period, exclusive of payments due for homes or lots
sold and the applicable release payments, thereof, and (ii) the amount
of such Indebtedness which is not Non-Recourse Liabilities shall not
exceed Twenty Million Dollars ($20,000,000), provided further that
where the Company is responsible for obtaining such financing the
Company shall give the Bank written notice prior to incurring
Indebtedness referred to in this clause (ii) and the Bank shall have
the right (within ten (10) business days from receipt of such notice)
to provide the Company with Indebtedness on terms and
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<PAGE> 25
conditions mutually acceptable to the Bank and the Company.
Notwithstanding the foregoing, the limitation on Indebtedness referred
to in this subparagraph (c) shall not apply to any temporary secured
term loan, in the principal amount not to exceed Seven Million Dollars
($7,000,000), from Banco Popular De Puerto Rico to Levitt Homes Puerto
Rico Incorporated which shall be used from time to time to construct
houses sold or under contract in Puerto Rico;
(d) Indebtedness under any promissory note given by the Guarantor
or any Subsidiary thereof to Starrett or any Subsidiary thereof
pursuant to that certain Tax-Sharing Agreement dated November 3, 1983
between the Guarantor and Starrett in the event that the Guarantor or
any Subsidiary thereof ceases to be a member of the Starrett
affiliated group for Federal income tax purposes;
(e) Indebtedness of the Guarantor or the Company to any Subsidiary
of either;
(f) Other Indebtedness in an aggregate amount not to exceed Five
Hundred Thousand Dollars ($500,000);
(g) Indebtedness under the Financing and Guarantee Agreement dated
as of February 2, 1987, as amended, among Levitt Homes Puerto Rico
Incorporated, Levitt Homes Incorporated and Banco Popular De Puerto
Rico (the "Banco Popular Credit Agreement"), in an aggregate principal
amount not exceeding Fifteen Million Dollars ($15,000,000) at any one
time outstanding; and
(h) Indebtedness secured by monitoring contracts relating to
security systems not to exceed One Million Dollars ($1,000,000) in the
aggregate outstanding at any time.
7.2 Limitation on Liens. The Company and the Guarantor will not, and will
not permit any of their respective Subsidiaries to, create, assume or
suffer to exist any Lien upon any of its property or assets, whether
now owned or hereafter acquired, except:
(a) Liens for taxes, assessments or other governmental charges not
yet due, or the validity of which is being contested in good faith by
appropriate proceedings diligently prosecuted and as to
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<PAGE> 26
which appropriate reserves are being maintained in accordance with
GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, workman's,
repairman's and other similar liens arising in the ordinary course of
business which are (after receipt of notice of such lien by the
Company, the Guarantor or the relevant Subsidiary of either) (i)
bonded, (ii) not of record for a period of more than thirty (30) days,
or (iii) being contested in good faith by appropriate proceedings
diligently prosecuted, and as to which appropriate reserves are being
maintained in accordance with GAAP;
(c) deposits or pledges to secure the payment of worker's
compensation, unemployment insurance or other social security
obligations or benefits;
(d) escrows and deposits to secure the performance of bids, tenders,
contracts (other than for borrowed money), leases, public or statutory
obligations, surety or appeal bonds or other obligations of a like
general nature incurred in the ordinary course of business;
(e) title defects, Liens or encumbrances (including, without
limitation, home owners association liens, easements or rights-of-way
for sewers, electric lines, telegraph and telephone lines and other
similar purposes), zoning or other restrictions as to the use of real
property, which do not, in the aggregate, materially detract from the
property or its value or materially impair the use thereof in the
operation of the business of the Guarantor and its Subsidiaries taken
as a whole or materially adversely affect the ability of the Company
to perform its obligations under the Agreement or the Note or of the
Guarantor or the Subsidiary Guarantors to perform their respective
obligations under this Agreement, and which in any event did not arise
in connection with the borrowing of money;
(f) Liens created by or resulting from any litigation or proceeding
which are discharged or bonded within sixty (60) days of the creation
thereof;
(g) Liens on mortgage note receivables securing Indebtedness
permitted by subsection 7.1(b);
(h) Liens upon residential real property used in connection with
Residential Housing Operations, provided that (i) such Liens either
existed on such property before the time of its acquisition or
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<PAGE> 27
were created solely for the purpose of securing Indebtedness
representing or incurred to finance, refinance or refund the cost of
such property, (ii) no such Lien shall extend to or cover any property
of the Guarantor or any of its Subsidiaries other than the property so
acquired, and (iii) the principal amount of the Indebtedness secured
by any such Lien shall at no time exceed the fair market value (as
determined by a bona fide appraisal or, in the case of the purchase of
the property from a Person not an Affiliate, by the purchase price) of
the property subject to such Lien at the time it is acquired;
(i) Liens securing other Indebtedness in an aggregate amount not to
exceed Five Hundred Thousand Dollars ($500,000) and;
(j) Liens securing monitoring contracts relating to security systems
not to exceed One Million Dollars ($1,000,000).
7.3 Limitation on Contingent Obligations. The Company and the Guarantor
will not, and will not permit any of their respective Subsidiaries to,
incur, assume or suffer to exist any Contingent Obligation except (i)
guarantees of Indebtedness permitted hereunder and (ii) other
guarantees entered into in the ordinary course of business of the
Guarantor or any of its Subsidiaries.
7.4 Limitation on Fundamental Changes. The Company and the Guarantor will
not, and will not permit any of their respective Subsidiaries to sell,
lease, transfer or otherwise dispose of all or substantially all its
properties and assets now owned or hereafter acquired to any other
Person or consolidate with or merge into any other Person or make any
acquisition (including acquisitions by means of merger or
consolidation) of all or substantially all the assets or equity
securities of, or any assets of any other Person constituting a
going-concern business of that Person or which is a part of, any other
Person, except that:
(a) any Subsidiary of the Guarantor (except the Company or any
Subsidiary of the Company) may be merged or consolidated with or into
the Guarantor (provided that the Guarantor shall be the surviving
corporation) or with any one or more Subsidiaries of the Guarantor
(provided that if any such transaction shall be between a Subsidiary
and a wholly owned Subsidiary, the wholly owned
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<PAGE> 28
Subsidiary shall be the continuing or surviving corporation and that
if any such transaction shall be between a Subsidiary Guarantor and a
Subsidiary other than a Subsidiary Guarantor, the Subsidiary Guarantor
shall be the continuing or surviving corporation), and the Guarantor
may be merged or consolidated with a wholly-owned domestic Subsidiary
of Starrett that, immediately prior to giving effect to such merger or
consolidation, has no material liabilities (provided that no assets of
the Guarantor, the Company or any Subsidiary of the Company shall be
payable to any other party in connection with such merger or
consolidation and that either the Guarantor shall be the surviving
corporation or, if such Subsidiary of Starrett is the surviving
corporation, such Subsidiary shall enter into an agreement, in form
and substance satisfactory to the Bank, pursuant to which such
Subsidiary shall expressly assume all the obligations and liabilities
of the Guarantor hereunder);
(b) any Subsidiary of the Guarantor (except the Company or any
Subsidiary of the Company) may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Guarantor or another wholly- owned Subsidiary of the
Guarantor:
(c) any Subsidiary of the Company may be merged or consolidated with
or into the Company (provided that the Company shall be the surviving
corporation) or with one or more Subsidiaries of the Company (provided
that if any such transaction shall be between a Subsidiary and a
wholly- owned Subsidiary, the wholly-owned Subsidiary shall be the
continuing or surviving corporation and that if any such transaction
shall be between a Subsidiary Guarantor and a Subsidiary other than a
Subsidiary Guarantor, the Subsidiary Guarantor shall be the continuing
or surviving corporation);
(d) any Subsidiary of the Company (other than a Subsidiary Guarantor)
may sell, lease, transfer or otherwise dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to the Company or
another wholly-owned Subsidiary of the Company;
(e) the Guarantor and its Subsidiaries may make any sale of assets,
in addition to those permitted by subsections 7.4(a)- (d) above,
provided that the purchase price for any such asset so
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<PAGE> 29
sold is not less than the then fair market value thereof and provided,
further, that no such sale shall be permitted pursuant to this
subsection 7.4(e) unless, (i) after giving effect thereto, the
aggregate book value of all assets sold pursuant to this subsection
7.4(e) subsequent to the date hereof would not exceed, in the
aggregate in any fiscal year, fifteen percent (15%) of the
consolidated total assets of the Guarantor and its Subsidiaries as
reflected on a consolidated balance sheet of the Guarantor and its
Subsidiaries as at the end of the fiscal quarter of the Guarantor most
recently ended prior to the date of such sale; and (ii) such a sale,
if made to a Person which is not an Affiliate of Guarantor and its
Subsidiaries, is for cash and the proceeds are not used for payment of
dividends or for prepayment of debt other than repayment of debt on
the property which has been sold or of Obligations to Bank.
7.5 Limitation on Dividends. Neither the Guarantor nor the Company shall
declare any dividends (other than dividends payable solely in the
stock of the Guarantor) on, or make any payment on account of, or set
apart assets for a sinking or other analogous fund for, the purchase,
redemption, retirement or other acquisition of any shares of any class
of stock of the Guarantor or the Company, now or hereafter
outstanding, or make any other distribution in respect thereof, either
directly or indirectly, whether in cash or property or in obligations
of the Guarantor or the Company, and shall not permit any of their
respective Subsidiaries or Affiliates to make any payment on account
of, or purchase or otherwise acquire any shares, of any class of stock
of the Guarantor or the Company to or from any Person, except:
(a) the Guarantor may declare and pay cash dividends in any fiscal
year; in an aggregate amount equal to the lesser of (x) 25% of
consolidated net income of the Guarantor and its consolidated
Subsidiaries for such fiscal year or (y) One Million Five Hundred
Thousand Dollars ($1,500,000.00); provided that in each instance there
exists no Default or Event of Default before payment of such dividend
or immediately thereafter;
(b) the Company may declare and pay cash dividends in any fiscal
year; provided that in each instance there exists no Default or Event
of Default before payment of such dividend or
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immediately thereafter.
7.6 Investments. The Guarantor will not, and will not permit any of its
Subsidiaries to make, or commit to make any advance, loan, extension
of credit or capital contribution to, or purchase any stock, bonds,
notes, debentures or other securities of, or any assets constituting a
going-concern business which is a part of, or make any other
investment in, any Person (all such transactions being herein called
"investments") except:
(a) investments in accounts, contract rights and chattel paper (as
defined in the Uniform Commercial Code), notes receivable and other
receivables owing to the Guarantor or any of its Subsidiaries, arising
or acquired in the ordinary course of business and dischargeable in
accordance with customary trade terms;
(b) investments in bank certificates of deposit (but only with the
Bank or with other banks having a combined capital and surplus in
excess of Two Billion Dollars ($2,000,000,000)), open market
commercial paper maturing within one year having the highest rating of
either Standard & Poor's Corporation or Moody's Investors Services,
inc., U.S. Treasury Bills subject to repurchase agreements and
short-term obligations issued or guaranteed by the U.S. Government or
any agency thereof;
(c) investments under interest reserve and other accounts established
in connection with Indebtedness permitted under subsection 7.1(c) and
under escrows and deposits permitted under subsection 7.2(d) and
established in the ordinary course of the Guarantor's and its
Subsidiaries' business;
(d) "Other Investment" in an aggregate amount not to exceed at any
time Fifteen Million Dollars ($15,000,000) on a consolidated basis,
which shall be reported to Bank quarterly as required in subsection
6.2(c) hereof. As used in this subsection 7.6(d), "Other Investment"
shall mean any investment in any less than majority owned joint
venture, corporation or other entity at cost and;
(e) loans and advances from any Subsidiary to the Company or the
Guarantor.
7.7 Affiliates. The Company and the Guarantor will not, and will not
permit any of their respective
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Subsidiaries to, pay any cash dividends, make any loan or advance to
or engage in any transaction (including without limitation, the
purchase, sale or exchange of property, the rendering of any service
or the payment of any management fees or administrative expenses) with
(i) the Guarantor or any Affiliate of the Guarantor (including,
without limitation, Starrett), (ii) any officer or employee of the
Guarantor, any of its Subsidiaries or any Affiliate of the Guarantor
(including, without limitation, Starrett), (iii) any trust of which
any of the foregoing is a beneficiary or (iv) any Person supported by
a Contingent Obligation issued by any of the foregoing, except:
(a) for (i) mortgage loans to officers and employees of the
Guarantor and its Subsidiaries having, in each instance, with the
maximum amount of any such loan not to exceed Two Hundred Thousand
Dollars ($200,000), to any one Person and Five Hundred Thousand
Dollars ($500,000) to all Persons in the aggregate, and (ii) other
loans or advances which are in the ordinary course of business to
officers and employees of the Guarantor and its Subsidiaries in an
aggregate amount at any one time outstanding not to exceed One Hundred
Fifty Thousand Dollars ($150,000) and in the case of any single loan
or advance not to exceed Seventy Five Thousand Dollars ($75,000) at
any one time outstanding;
(b) as permitted under subsection 7.5;
(c) as permitted under subsection 7.6;
(d) for transactions which are in the ordinary course of the
Guarantor's or such Subsidiary's business and which are upon fair and
reasonable terms no less favorable to the Guarantor or such Subsidiary
than it would obtain in a comparable arm's length transaction with a
Person not an Affiliate of the Guarantor;
(e) as permitted under subsection 7.1(f);
(f) for any payments pursuant to the Tax-Sharing Agreement dated
November 3, 1983 between the Guarantor and Starrett; and
(g) the Guarantor and the Company may charge management fees to
its Subsidiaries in the ordinary course of business.
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7.8 Maintenance of Consolidated Net Worth. The Guarantor will maintain
Consolidated Net Worth in amounts as stated below:
$36,000,000 at December 31, 1995
$37,000,000 at December 31, 1996
$38,000,000 at December 31, 1997
$39,000,000 at December 31, 1998 and on each December 31 thereafter
7.9 Maintenance of Ratio of Consolidated Liabilities to Consolidated Net
Worth. The Guarantor will not permit at any time Consolidated
Liabilities to exceed 300% of Consolidated Net Worth, provided that
the guaranty of payment of principal and interest of the Indebtedness
referred to in clauses (i) and (ii) of subsection 7.3 shall at all
times be included in any computation of Consolidated Liabilities
hereunder.
SECTION 8. EVENTS OF DEFAULT
Upon the occurrence of any of the following events:
(a) The Company shall fail to pay (i) any principal of the Note when
due in accordance with the terms thereof, or (ii) any interest on the
Note when due in accordance with the terms thereof or (iii) any other
amount payable hereunder and any such monetary default shall continue
unremedied for a period of five (5) days; or
(b) Any representation or warranty made or deemed made by the
Company, the Guarantor or any Subsidiary Guarantor or the certificate,
document or financial or other statement furnished at any time under
or in connection with this Agreement shall prove to have been
incorrect in any material respect on or as of the date made or deemed
made; or
(c) The Company, any Subsidiary Guarantor or the Guarantor shall
default in the observance or performance of any agreement contained in
Sections 3 or 7 and shall fail to give evidence to the Bank, within
fifteen (15) days after the receipt of notice from the Bank, that such
default has been cured; or
(d) The Company, any Subsidiary Guarantor or the Guarantor shall
default in the observance or
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performance of any other agreement or covenant contained in this
Agreement, and such default shall continue unremedied for a period of
thirty (30) days after the occurrence of such default, provided that
such default shall not constitute an Event of Default hereunder if
such default is incapable of being cured in thirty (30) days and the
Company, the Guarantor or the applicable Subsidiary Guarantor has
commenced to cure such default during said thirty (30) day time period
and completes such curative action within ninety (90) days after the
occurrence of such default; or
(e) The Company, the Guarantor or any of their respective
Subsidiaries shall (i) default in any payment of principal of or
interest on any Indebtedness (other than the Note), or in the payment
of any Contingent Obligation, beyond the period of grace (not to
exceed thirty (30) days), if any, provided in the instrument or
agreement under which such Indebtedness or Contingent Obligation was
created (excluding any such default with respect to (A) any
Non-Recourse Liabilities which in the aggregate do not exceed Six
Million Dollars ($6,000,000); and (B) Indebtedness and other monetary
obligations, other than for borrowed money or in respect of
Non-Recourse Liabilities as to which the portion more than sixty (60)
days delinquent does not exceed Five Hundred Thousand Dollars
($500,000)); or (ii) default in the observance or performance of any
other agreement or condition relating to any Indebtedness or
Contingent Obligation or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Contingent
Obligation (or a trustee or agent on behalf of such holder or holders
or beneficiary or beneficiaries) to cause, with the giving of notice
if required, such Indebtedness to become due prior to its stated
maturity or such Contingent Obligation to become payable (excluding
any such default with respect to (A) any Non-Recourse Liabilities
which in the aggregate do not exceed Six Million Dollars ($6,000,000);
and (B) Indebtedness and other obligations, other than for borrowed
money or in respect of Non-Recourse Liabilities as to which the
portion more than sixty (60) days
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delinquent does not exceed Five Hundred Thousand Dollars ($500,000)); or
(f) (i) The Company, the Guarantor or any of their respective
Subsidiaries shall commence any case, proceeding or other action (A)
under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief
of debtors, seeking to have an order for relief entered with respect
to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or any substantial part of
its assets, or the Company, the Guarantor or any of their respective
Subsidiaries, shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Company, the
Guarantor or any of their respective Subsidiaries any case, proceeding
or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication
or appointment or (B) remains undismissed, undischarged or unbonded
for a period of sixty (60) days; or (iii) the issuance against the
Company, the Guarantor or any of their respective Subsidiaries of an
order for a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which order
shall not have been vacated, discharged or stayed or bonded pending
appeal within sixty (60) days from the entry thereof; or (iv) the
Company, the Guarantor or any of their respective Subsidiaries shall
take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii) or (iii) above; or (v) the Company, the Guarantor or any of
their respective Subsidiaries shall generally not, or shall be unable
to, or shall admit in writing its inability to, pay its debts as they
become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving
any Plan, (ii) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect
to any Plan, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee
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appointed, or a trustee shall be appointed, to administer or to
terminate, any Plan, which Reportable Event or institution of
proceedings is, in the reasonable opinion of the Bank, likely to
result in the termination of such Plan for purposes of Title IV of
ERISA, and, in the case of a Reportable Event, the continuance of such
Reportable Event unremedied for forty five (45) days after notice of
such Reportable Event pursuant to Section 4043(a), (c) or (d) of ERISA
is given or the continuance of such proceedings for ten (10) days
after commencement thereof, as the case may be, (iv) any Plan shall
terminate for purposes of Title IV of ERISA, (v) the Company or any
Commonly Controlled Entity shall be deemed to have withdrawn (either
partially or entirely) from any Multiemployer Plan, or (vi) any other
event or condition shall occur or exist; and in each case in clauses
(I) through (vi) above, such event or condition, together with all
other such events or conditions, if any, could subject the Company or
any of its Subsidiaries to any tax, penalty or other liabilities in
the aggregate material in relation to the business, operations,
property or financial or other condition of the Company and its
Subsidiaries taken as a whole; or
(h) One or more judgments or decrees shall be entered against the
Guarantor, the Company or any of their respective Subsidiaries
involving in the aggregate a liability (not paid or fully covered by
insurance) of Five Hundred Thousand Dollars ($500,000) or more and all
such judgments or decrees shall not have been vacated, discharged or
stayed or bonded pending appeal within sixty (60) days from the entry
thereof; or
(i) Starrett shall for any reason cease to own at least sixty five
percent (65%) of the issued and outstanding shares of the capital
stock of the Guarantor (free and clear of any Lien) or the Guarantor
shall for any reason cease to own all of the issued and outstanding
capital stock of the Company (free and clear of any Lien);
then, and in any such event, if such event is an Event of Default
specified in subsections 8(a), (b), (c), (f)(i), (f)(ii) or (g) above,
the Term Loan hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the Note shall immediately
become due and payable. Except as expressly provided above in this
Section, presentment, demand, protest and all other
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notices of any kind are hereby expressly waived.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. The Bank and the Company may, from time to
time, enter into written amendments, supplements or modifications
hereto for the purpose of adding any provisions to this Agreement or
the Note or changing in any manner the rights of the Bank or of the
Company hereunder, or thereunder, and the Bank may execute and deliver
to the Company a written instrument waiving, on such terms and
conditions as the Bank may specify in such instrument, any of the
requirements of this Agreement or the Note or any Default or Event of
Default and its consequences except that there shall be no amendment
to Sections 3, 6 or 7 hereof without the consent of the Guarantor. In
the case of any waiver, the Company and the Bank shall be restored to
their former position and rights hereunder and under the outstanding
Note, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default, or impair any right
consequent thereon.
9.2 Notices. All notices, requests, consents, demands and other
communications required or permitted hereunder shall be in writing and
shall be deemed effective at the earliest of: (a) the time of personal
delivery; (b) at 5:00 P.M., Cleveland, Ohio time, on the second
business day after deposit in the U.S. certified or registered mail
return receipt requested; (c) upon receipt, if by telegram, telex or
telecopier; or (d) at noon on the next business day after delivery to a
reputable overnight courier service for next day delivery, in each case
postage and delivery charges prepaid and addressed to the appropriate
person at its address set forth below, or to such other address as any
party may notify the others as provided above. Notwithstanding the
foregoing, no notice of change of address shall be effective except
upon receipt. This provision shall not be construed to require the
giving of notice or demand to or upon any person in any situation or
for any reason.
The Company: Levitt Homes Incorporated
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
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Attention: Elliott M. Wiener, President
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<PAGE> 38
The Guarantor: Levitt Corporation
c/o Levitt Homes Incorporated
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: Elliott M. Wiener, President
Copies to: Levitt Corporation
c/o Starrett Corporation
909 Third Avenue
New York, New York 10022
The
Subsidiary
Guarantors: Levitt Homes Puerto Rico Incorporated
Galeria Building,
Tabonuco Street
B-5 Suite 207
Guaynabo, Puerto Rico 00968
Levitt Property Management, Inc.
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
Levitt Realty Services, Inc.
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
Levitt at St. Andrews Place, Inc.
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
Levitt at Bear Lakes, Inc.
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
91
<PAGE> 39
Levitt Construction Corp.-East
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
Levitt Construction Corp.-West
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
L.D. Corporation of Broward, Inc.
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
Security Shield, Inc.
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
Hampshire Homes, Ltd.
c/o Levitt Homes Incorporated
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
Levitt Homes at Water's Edge, Inc.
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
Levitt at Huntington Lakes, Inc.
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
Levitt at Westchester, Inc.
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
92
<PAGE> 40
Levitt Homes at Emerald Lakes, Inc.
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
The Villages at Emerald Lakes, Inc.
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
Woodmere Homes, Inc.
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
Levitt at Westchester West, Inc.
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
Levitt at Twin Acres, Inc.
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
Levitt Retirement Communities No. I,Inc.
7777 Glades Road, Suite
410 Boca Raton, Florida
33434 Attention: President
Levitt Care Corporation
7777 Glades Road, Suite 410
Boca Raton, Florida 33434
Attention: President
Levitt Mortgage Corp.
7777 Glades Road
Suite 410
Boca Raton, Florida 33434
Attention: President
U.F.C. Title Insurance, Inc.
7777 Glades Road
Suite 410
Boca Raton, FL 33434
Attention: President
93
<PAGE> 41
and Stearns Weaver Miller et al
150 West Flagler Drive
Museum Tower, Suite 2200
Miami, Florida 33130
Attention: E. Richard Alhadeff, Esq.
The Bank: Ohio Savings Bank, F.S.B.
Ohio Savings Plaza
1801 East Ninth Street, Suite 200
Cleveland, Ohio 44114
Attention: Vice President, Corporate
Banking Department
9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Bank, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by
law.
9.4 Survival of Representations and Warranties. All representations and
warranties made hereunder and in any document, certificate or
statement delivered pursuant hereto or in connection herewith shall
survive the execution and delivery of this Agreement and the Notes.
9.5 Payment of Expenses and Taxes. Each of the Company, the Subsidiary
Guarantors and the Guarantor jointly and severally agree (a) to pay or
reimburse the Bank for all its costs and expenses, including, without
limitation, the fees and disbursements of counsel to the Bank,
incurred in connection with the preparation and execution of this
Agreement, the Notes and any other documents evidencing or securing
the Obligations and any amendment, supplement or modification thereto,
and the consummation of the transactions contemplated hereby and
thereby, (b) to pay or reimburse the Bank for all of the Bank's costs
and expenses incurred in connection with the enforcement, preservation
or protection of any rights under this Agreement, the Note and any
such other documents, including, without limitation, fees and
disbursements of counsel to the Bank, (c) to pay, indemnify, and to
hold the Bank harmless from, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from the
imposition
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<PAGE> 42
of, failure to pay or delay in paying, documentary stamp, intangibles,
excise and other taxes, duties or impositions, if any, which may be
payable or determined to be payable in connection with the execution
and delivery of, or consummation of any of the transactions
contemplated by, or any amendment, supplement or modification of, or
any waiver or consent under or in respect of, this Agreement, the Note
and any such other documents evidencing or securing the Obligations,
and (d) to pay, indemnify, and hold the Bank harmless from and against
any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution,
delivery, recordation, enforcement, performance and administration of
this Agreement, the Note and any such other documents evidencing or
securing the Obligations (all the foregoing, collectively, the
"indemnified liabilities"), provided, that the Company, the Subsidiary
Guarantors and the Guarantor shall have no obligation hereunder with
respect to indemnified liabilities arising from (i) the gross
negligence or willful misconduct of the Bank or (ii) legal proceedings
commenced against the Bank by any security holder or creditor thereof
arising out of and based upon rights afforded any such security holder
or creditor solely in its capacity as such. The Company, the
Guarantor and the Subsidiary Guarantors shall pay such above described
sums immediately upon receipt of notice of such amounts from the
authority to which they are due and payable or from the Bank or its
assigns. In the event the Company, the Guarantor and/or the
Subsidiary Guarantors fail to pay such sums, the Bank or its assignee
may at its option pay such amounts, including taxes and/or purchase
and affix such documentary stamps. Any such payment by the Bank or
its assignee shall be added to the indebtedness evidenced by the Note
and shall bear interest from the date advanced to the date of recovery
at a rate equal to the lesser of five percent (5%) per annum higher
than the rate of interest then accruing in accordance with the
provisions of the Note or the maximum rate permissible under Florida
law. The agreements in this subsection shall survive repayment of the
Notes and all other amounts payable hereunder.
9.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the
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<PAGE> 43
Company, the Subsidiary Guarantors, the Guarantor, the Bank, all
future holders of the Note and their respective successors and
assigns, except that neither the Company, the Subsidiary Guarantors
nor the Guarantor may assign or transfer any of its rights under this
Agreement without the prior written consent of the Bank.
9.7 Governing Law. This Agreement and the Notes and the rights and
obligations of the parties under this Agreement and the Notes shall be
governed by, and construed and interpreted in accordance with, the law
of the State of Florida.
9.8 Submission To Jurisdiction; Waivers. (A) Each of the Company, the
Guarantor and the Subsidiary Guarantors hereby irrevocably and
unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive
general jurisdiction of the Courts of the State of Florida, the courts
of the United States of America for the Southern District of Florida,
and appellate courts from any thereof:
(ii) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court
or that such action or proceeding was brought in an inconvenient court
and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to
the Company at its address set forth in subsection 9.2 or at such
other address of which the Bank shall have been notified pursuant
thereto; and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction.
(B) The Company, the Guarantor and the Subsidiary Guarantors and the
Bank hereby irrevocably and unconditionally waive trial by jury in any
legal action or proceeding referred to in paragraph (A) above.
96
<PAGE> 44
9.9 Set-off. In addition to any rights or remedies of the Bank provided
by law, upon the occurrence of any Event of Default, the Bank is
hereby irrevocably authorized, at any time and from time to time
without prior notice to the Company, any Subsidiary Guarantor or the
Guarantor, any such notice being expressly waived by the Company, the
Subsidiary Guarantors and the Guarantor, to set off and appropriate
and apply any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct
or indirect or contingent or matured or unmatured, at any time held or
owing by the Bank to or for the credit or the account of the Company,
any Subsidiary Guarantor or the Guarantor, or any part thereof in such
amounts as the Bank may elect, against and on account of the
obligations and liabilities of the Company, the Subsidiary Guarantors
or the Guarantor, as the case may be, to the Bank hereunder or under
the Note or hereunder and claims of every nature and description of
the Bank against the Company, the Subsidiary Guarantors or the
Guarantor, as the case may be, whether arising hereunder, under the
Note or otherwise, as the Bank may elect, whether or not the Bank has
made any demand for payment and although such obligations, liabilities
and claims may be contingent or unmatured.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in Palm Beach County, Florida by their
proper and duly authorized officers as of the day and year first above
written.
OHIO SAVINGS BANK, F.S.B.
By:
------------------------------------
Its:
--------------------------------
LEVITT HOMES INCORPORATED
By:
------------------------------------
Jeffery Hoyos, Vice President
LEVITT CORPORATION
By:
------------------------------------
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<PAGE> 45
Jeffery Hoyos, Vice President
LEVITT HOMES PUERTO RICO INCORPORATED
By:
------------------------------------
Jeffery Hoyos, Vice President
LEVITT PROPERTY MANAGEMENT, INC.
By:
------------------------------------
Jeffery Hoyos, Vice President
LEVITT REALTY SERVICES, INC.
By:
------------------------------------
Jeffery Hoyos, Vice President
98
<PAGE> 46
LEVITT AT ST. ANDREWS PLACE, INC.
By:
------------------------------------
Jeffery Hoyos, Vice President
LEVITT AT BEAR LAKES, INC.
By:
------------------------------------
Jeffery Hoyos, Vice President
LEVITT CONSTRUCTION CORP.-EAST
By:
------------------------------------
Jeffery Hoyos, Vice President
LEVITT CONSTRUCTION CORP.-WEST
By:
------------------------------------
Jeffery Hoyos, Vice President
L.D. CORPORATION OF BROWARD, INC.
By:
------------------------------------
Jeffery Hoyos, Vice President
SECURITY SHIELD, INC.
By:
------------------------------------
Jeffery Hoyos, Vice President
HAMPSHIRE HOMES, LTD.
By:
------------------------------------
Jeffery Hoyos, Vice President
LEVITT HOMES AT WATER'S EDGE, INC.
By:
------------------------------------
Jeffery Hoyos, Vice President
99
<PAGE> 47
LEVITT AT HUNTINGTON LAKES, INC.
By:
------------------------------------
Jeffery Hoyos, Vice President
LEVITT AT WESTCHESTER, INC.
By:
------------------------------------
Jeffery Hoyos, Vice President
LEVITT HOMES AT EMERALD LAKES, INC.
By:
------------------------------------
Jeffery Hoyos, Vice President
THE VILLAGES AT EMERALD LAKES, INC.
By:
------------------------------------
Jeffery Hoyos, Vice President
WOODMERE HOMES, INC.
By:
------------------------------------
Jeffery Hoyos, Vice President
LEVITT AT WESTCHESTER WEST, INC.
By:
------------------------------------
Jeffery Hoyos, Vice President
LEVITT AT TWIN ACRES, INC.
By:
------------------------------------
Jeffery Hoyos, Vice President
LEVITT RETIREMENT COMMUNITIES NO. I, INC.
By:
------------------------------------
Jeffery Hoyos, Vice President
LEVITT CARE CORPORATION
By:
------------------------------------
Jeffery Hoyos, Vice President
100
<PAGE> 48
LEVITT MORTGAGE CORP.
By:____________________________________
Jeffery Hoyos, Vice President
U.F.C. TITLE INSURANCE, INC.
By:____________________________________
Jeffery Hoyos, Vice President
STATE OF _______________
SS
COUNTY OF_______________
Before me, a Notary Public in and for said County and State, on this _____
day of January, 1996, personally appeared Jeffery Hoyos who acknowledged to me
that he did execute the foregoing instrument as a duly authorized officer
acting on behalf of each corporation identified above, and that such signing
was his free act and deed, individually and as such officer, and the free act
and deed of each such corporation.
______________________________________
Notary Public
My Commission Expires__________________
101
<PAGE> 1
EXHIBIT A
STARRETT CORPORATION AND SUBSIDIARIES
EXHIBIT SETTING FORTH THE COMPUTATION OF PRIMARY
EARNINGS PER SHARE INFORMATION
(Dollars and number of shares in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Common and common equivalent
shares used in computing earnings
per share ................................ 6,261 6,261 6,356
====== ====== ======
Net Income ................................ $7,365 $6,159 $2,140
====== ====== ======
Net Income ................................ $ 1.18 $ .98 $ .34
====== ====== ======
</TABLE>
102
<PAGE> 1
EXHIBIT B
STARRETT CORPORATION AND SUBSIDIARIES
EXHIBIT SETTING FORTH THE COMPUTATION OF FULLY DILUTED
EARNINGS PER SHARE INFORMATION
(Dollars and number of shares in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Common and common equivalent
shares used in computing earnings
per share ................................................ 6,261 6,261 6,356
======= ======= ======
Net Income ................................................ $ 7,365 $ 6,159 $2,140
======= ======= ======
Net Income ................................................ $ 1.18 $ .98 $ .34
======= ======= ======
</TABLE>
103
<PAGE> 2
Starrett Corporation and Subsidiaries
December 31, 1995
There are no accounting changes for the year ended December 31, 1995.
105
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 10626000
<SECURITIES> 136000
<RECEIVABLES> 33066000
<ALLOWANCES> 476000
<INVENTORY> 59052000
<CURRENT-ASSETS> 96375000
<PP&E> 11450000
<DEPRECIATION> 7828000
<TOTAL-ASSETS> 126345000
<CURRENT-LIABILITIES> 32045000
<BONDS> 34459000
0
0
<COMMON> 6566000
<OTHER-SE> 45572000
<TOTAL-LIABILITY-AND-EQUITY> 126345000
<SALES> 138332000
<TOTAL-REVENUES> 138332000
<CGS> 73090000
<TOTAL-COSTS> 73090000
<OTHER-EXPENSES> 52414000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 451000
<INCOME-PRETAX> 12377000
<INCOME-TAX> 5012000
<INCOME-CONTINUING> 7365000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7365000
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>
