<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM __________ TO _________.
Commission File No. l-6830
ORLEANS HOMEBUILDERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-0874323
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
One Greenwood Square, Suite #101
3333 Street Road
Bensalem, Pennsylvania 19020
(Address of principal executive offices)
Telephone: (215) 245-7500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (l) 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
--- ---
Number of shares outstanding as of November 6, 1998: 11,356,018
(excluding 1,342,113 shares held in Treasury).
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Orleans Homebuilders, Inc. and Subsidiaries
Index to Financial Statements
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets at September 30, 1998
and June 30, 1998 1
Consolidated Statements of Operations and Changes
in Retained Earnings for the three months ended
September 30, 1998 and 1997 2
Consolidated Statements of Cash Flows for the
three months ended September 30, 1998 and 1997 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 6
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 11
Item 6. Exhibits and Reports on Form 8-K 11
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Orleans Homebuilders, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
September 30, June 30,
1998 1998
--------- ---------
<S> <C> <C>
Assets
Cash $ 2,291 $ 2,833
Restricted cash customer deposits 4,279 3,902
Real estate held for development and sale:
Residential properties completed or under construction 48,264 47,209
Land held for development or sale and improvements 61,497 64,044
Property and equipment, at cost, less accumulated depreciation 1,936 1,892
Receivables, deferred charges and other assets 11,545 10,645
--------- ---------
Total Assets $ 129,812 $ 130,525
========= =========
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable $ 15,063 $ 15,378
Accrued expenses 10,610 9,312
Customer Deposits 4,279 3,902
Mortgage and other note obligations primarily secured by real
estate held for development and sale 62,881 65,136
Subordinated debentures 579 601
Notes payable related parties 11,774 12,052
Other notes payable 2,836 2,918
Deferred income taxes 2,961 2,961
Minority interests 84 546
--------- ---------
Total Liabilities 111,067 112,806
========= =========
Commitments and contingencies
Shareholders' equity:
Preferred stock, $1 par, 500,000 shares authorized -- --
Common stock, $.10 par, 20,000,000 shares authorized,
12,698,131 shares issued at September 30, 1998 and
June 30, 1998, respectively 1,270 1,270
Capital in excess of par value common stock 17,726 17,726
Retained earnings (deficit) 727 (299)
Treasury stock, at cost (1,342,113 shares held at
September 30, 1998 and June 30, 1998, respectively) (978) (978)
--------- ---------
Total Shareholders' Equity 18,745 17,719
--------- ---------
Total Liabilities and Shareholders' Equity $ 129,812 $ 130,525
========= =========
</TABLE>
See notes to consolidated financial statements
1
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Orleans Homebuilders, Inc. and Subsidiaries
Consolidated Statements of Operations
and Changes in Retained Earnings
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended
September 30,
1998 1997
-------- --------
Earned revenues
Residential properties $ 34,541 $ 24,841
Land sales 920 220
Other income 473 325
-------- --------
35,934 25,386
-------- --------
Costs and expenses
Residential properties 29,339 21,163
Land sales 778 180
Other 229 174
Selling, general and administrative 3,746 3,278
Interest
Incurred 2,120 1,726
Less capitalized (1,933) (1,562)
Minority interests -- (16)
-------- --------
34,279 24,943
-------- --------
Income from operations before income taxes 1,655 443
Income tax expense 629 168
-------- --------
Net income 1,026 275
Retained earnings (deficit), at beginning of period (299) (1,967)
-------- --------
Retained earnings (deficit), at end of period $ 727 $ (1,692)
======== ========
Basic earnings per share $ 0.09 $ 0.02
======== ========
Diluted earnings per share $ 0.08 $ 0.02
======== ========
See notes to consolidated financial statements
2
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Orleans Homebuilders, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended
September 30,
1998 1997
-------- --------
Cash flows from operating activities:
Net income $ 1,026 $ 275
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 79 32
Changes in operating assets and liabilities:
Restricted cash customer deposits (377) 161
Real estate held for development and sale 1,492 4,140
Receivables, deferred charges and other assets (900) (1,006)
Accounts payable and other liabilities 983 (678)
Customer deposits 377 (161)
-------- --------
Net cash used by operating activities 2,680 2,763
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (123) --
-------- --------
Net cash used in investing activities (123) --
-------- --------
Cash flows from financing activities:
Borrowings from loans secured by real estate assets 21,060 14,927
Repayment of loans secured by real estate assets (23,315) (18,169)
Repayment of subordinated debentures (22) (21)
Borrowings from other note obligations 42 1,023
Repayment of other note obligations (402) (583)
Distribution of minority interests (462) --
-------- --------
Net cash provided by financing activities (3,099) (2,823)
-------- --------
Net increase (decrease) in cash (542) (60)
Cash at beginning of year 2,833 1,582
-------- --------
Cash at end of year $ 2,291 $ 1,522
======== ========
Supplemental disclosure of cash flow activities:
Interest paid, net of amounts capitalized $ -- $ --
======== ========
Income taxes paid $ 631 $ 43
======== ========
See notes to consolidated financial statements
3
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ORLEANS HOMEBUILDERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(A) The accompanying unaudited consolidated financial statements are
presented in accordance with the requirements for Form 10-Q and do not
include all the disclosures required by generally accepted accounting
principles for complete financial statements. Reference is made to the
Form 10-K as of and for the year ended June 30, 1998 for Orleans
Homebuilders, Inc. and subsidiaries (the "Company") for additional
disclosures, including a summary of the Company's accounting policies.
In the opinion of management, the consolidated financial statements
contain all adjustments, consisting of normal recurring accruals,
necessary to present fairly the consolidated financial position of the
Company for the periods presented. The interim operating results of the
Company may not be indicative of operating results for the full year.
(B) Basic earnings per common share are computed by dividing net income by
the weighted average number of common shares outstanding. The weighted
average number of shares used to compute basic earnings per common
share were 11,356,018 shares for the three months ended September 30,
1998 and 1997. Diluted earnings per share includes additional common
shares that would have been outstanding if the dilutive potential
common shares had been issued.
The following is a reconciliation of the numerator and denominator used
in the computation of basic and diluted earnings per share for the
three months ended September 30, 1998 and 1997.
Three Months Ended
September 30,
1998 1997
---- ----
Basic EPS shares - total common shares issued
and outstanding (net of 1,342,113 treasury shares) 11,356,018 11,356,018
Effect of assumed shares issued under treasury
stock method for stock options 407,046 88,579
Effect of assumed conversion of $3 million
Convertible Subordinated 7% Note 2,000,000 --
----------- -----------
Diluted EPS shares 13,763,064 11,444,597
=========== ===========
Net income $ 1,026,000 $ 275,000
Effect of assumed conversion of $3 million
Convertible Subordinated 7% Note 32,550 --
----------- -----------
Adjusted net income for diluted EPS $ 1,058,550 $ 275,000
=========== ===========
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(c) Residential properties completed or under construction consists of
the following:
(In thousands)
September 30, 1998 June 30, 1998
------------------ -------------
Under contract for sale $ 32,820 $ 32,102
Unsold 15,444 15,107
--------- ---------
$ 48,264 $ 47,209
========= =========
(D) From time to time, the Company is named as a defendant in legal actions
arising from its normal business activities. Although the amount of any
liability that could arise with respect to currently pending actions
cannot be accurately predicted, in the opinion of the Company any such
liability will not have a material adverse effect on the financial
position or operating results of the Company.
(E) On October 20, 1998, the Company issued 100,000 shares of Series D
Preferred Stock (the "Series D Stock") to Jeffrey P. Orleans in
exchange for an aggregate amount of $3,000,000 in Company notes held by
Mr. Orleans. The Series D Stock was issued from an aggregate of 500,000
shares of Preferred Stock authorized. The Series D Stock has a
liquidation value of $3,000,000, or $30.00 per share, and requires
annual dividends of 7% of the liquidation value. The dividends are
cumulative and are payable quarterly with the first payment due
December 1, 1998. The Series D Stock may be redeemed by the Company at
any time after December 31, 2003, in whole or in part, at a cash
redemption price equal to the liquidation value plus all accrued and
unpaid dividends on such shares to the date of redemption. The Series D
Stock is convertible into 2,000,000 shares of Common Stock upon the
approval by the American Stock Exchange of a supplemental listing
application covering such shares.
5
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ORLEANS HOMEBUILDERS, INC. AND SUBSIDIARIES
Item 2. Orleans Homebuilders, Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Liquidity and Capital Resources
The Company requires capital to purchase and develop land, to construct
units, fund related carrying costs and overhead and to fund various advertising
and marketing programs to facilitate sales. These expenditures include site
preparation, roads, water and sewer lines, impact fees and earthwork, as well as
the construction costs of the homes and amenities. The Company's sources of
capital include funds derived from operations, sales of assets and various
borrowings, most of which are secured. At September 30, 1998, the Company had
approximately $54,796,000 available to be drawn under existing secured revolving
and construction loans for planned development expenditures. The Company
believes that the funds generated from operations and financing commitments from
commercial lenders will provide the Company with sufficient capital to meet its
operating needs.
Results of Operations
The following table sets forth certain details as to residential sales
activity for the three months ended September 30, 1998 and 1997, in the case of
revenues earned and new orders, and at the end of the periods indicated, in the
case of backlog.
Three Months Ended
September 30, September 30,
1998 1997
------------- -------------
(Dollars in thousands)
Revenues Earned $34,541 $24,841
Units 188 131
Average Price Per Unit $ 184 $ 191
New Orders $32,033 $28,809
Units 161 156
Average Price Per Unit $ 199 $ 185
Backlog $68,486 $42,228
Units 313 236
Average Price Per Unit $ 219 $ 179
Dollar volume of new orders for the three months ended September 30,
1998 increased by approximately 11% to $32,033,000 on 161 orders, compared to
$28,809,000 on 156 orders during the three months ended September 30, 1997. The
opening of new communities in Burlington County, New Jersey, was the primary
reason for the increase in new orders when compared to the first quarter of
fiscal 1998. The average price per unit of new orders increased due to a change
in product mix
6
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towards more townhouse and single family homes, along with fewer condominiums.
The Company expects this trend to continue.
The dollar backlog at September 30, 1998, increased approximately 62%
to $68,486,000 on 313 homes, as compared to the backlog at September 30, 1997,
of $42,228,000 on 236 homes. Included in the September 30, 1997, backlog were 26
low income units with an aggregate sales value of approximately $1,400,000 which
were subsequently acquired by Jeffrey P. Orleans, Chairman and Chief Executive
Officer of the Company, during the second quarter of fiscal 1998. These
transactions satisfied, in part, the Company's low income housing requirements
in Mount Laurel Township, New Jersey. The inclusion of these units in the
backlog at September 30, 1997, is the primary reason for the approximately 22%
increase in average price per unit of the September 30, 1998 backlog, as
compared to September 30, 1997.
Inflation
Inflation can have a significant impact on the Company's liquidity.
Rising costs of land, materials, labor, interest and administrative costs have
generally been recoverable in prior years through increased selling prices.
Historically, the Company has been able to increase prices to cover portions of
these costs. However, there is no assurance the Company will be able to continue
to increase prices to cover the effects of inflation in the future.
Year 2000
The Company began assessing its Year 2000 ("Y2K") compliance issues at
the beginning of fiscal 1998 and at that time determined that its primary
internal computer hardware and computer software were not Y2K compliant.
Subsequently, the Company determined that it would be more cost efficient to
install a new Y2K compliant software package than to modify the existing
software package. In the first quarter of fiscal 1999, the Company contracted to
purchase a new software package, including several specific enhancements to
modify the software to meet the Company's needs. As part of the Company's
contingency plan, in order to mitigate the risks associated with the possibility
that the software enhancements will not be completed on time, the Company has
required that the base software package be placed in escrow. The Company
believes that implementation of the base software package will require
substantially less time than the enhanced software package. In addition, in the
first quarter of fiscal 1999, the Company upgraded its existing primary computer
hardware system to support the new computer software package. The Company has
currently installed the new hardware and base software for the application
development stage of its Y2K computer compliance program and the Company's goal
is to complete the full implementation by June 30, 1999.
The Company is also investigating the Y2K compliance status of its
vendors, subcontractors and suppliers through the Company' s own internal vendor
compliance effort. This investigation is in its preliminary stages and the
Company's goal is to complete this investigation, as well as any corrective
efforts by March 31, 1999. Since the Company does not rely on any individual
vendor, subcontractor or supplier for a significant portion of its operations,
the potential impact of Y2K non-compliance risks in this area is not expected to
have any material effect on the Company.
7
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To date, the Company has incurred approximately $200,000 in connection
with Y2K readiness, including consulting fees, internal staff costs and other
expenses. The Company expects to incur additional expenditures of approximately
$400,000 in the next fiscal year to be Y2K compliant.
While the Company believes it is taking all appropriate steps to
achieve internal Y2K compliance, any potential future business interruptions,
costs, damages or losses related thereto, are also dependent upon the Y2K
compliance of third parties. In the event that the Company or any of the
Company's vendors, subcontractors or suppliers experience disruptions due to the
Y2K issue, the Company's operations could be adversely affected. The Y2K issue
is universal and complex, as virtually every computer operation will be affected
in some way. Consequently, no assurance can be given that complete Y2K
compliance can be achieved without significant additional costs.
Forward Looking Statement
The Company's estimates of costs and completion dates for its Y2K
readiness program represent management's best estimates. These estimates are
based upon many assumptions, including the availability of external resources to
assist with systems remediation and replacement efforts, key third party
suppliers, vendors and customers being Y2K compliant and in the event of
non-compliance, the Company's execution of its contingency plan. If any of the
assumptions ultimately prove to have been incorrect, the cost and completion
dates set forth above could be substantially and adversely affected.
Operating Revenues
Earned revenues for the first quarter of fiscal 1999 increased
$10,548,000 to $35,934,000, or 41.6%, compared to the first quarter of fiscal
1998. Revenues from the sale of residential homes included 188 homes totaling
$34,541,000 during the first quarter of fiscal 1999, as compared to 130 homes
totaling $24,841,000 during the first quarter of fiscal 1998. The increase in
revenues for the first quarter of fiscal 1999, as compared to the first quarter
of fiscal 1998, is primarily attributable to the number of units sold which is
the result of the expanding geographic scope of the Company's operations and
favorable economic conditions affecting unit sale volume and price. The average
selling price per unit has decreased to approximately $184,000 during the first
quarter of fiscal 1999, as compared to approximately $191,000 during the first
quarter of fiscal 1998. This decrease in average selling price is due to the
fact that the Company delivered more townhouses and condominiums as a percentage
of overall delivered homes for the first quarter of fiscal 1999, as compared to
the first quarter of fiscal 1998.
Costs and Expenses
Costs and expenses for the first quarter of fiscal 1999 increased
$9,336,000, or 37.4%, compared with the first quarter of fiscal 1998. The first
quarter of fiscal 1999 cost of residential properties increased $8,176,000 to
$29,339,000, or 38.6%, when compared with the first quarter of fiscal 1998. This
increase in residential property costs is comparable to the percentage increase
in residential property revenues when compared with the first quarter of fiscal
1998. Overall profit margins on residential properties improved nominally, as
the cost of residential properties as a percentage of residential property
revenues was 84.9% for the first quarter of fiscal 1999 compared with 85.2% for
the first quarter of fiscal 1998.
8
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For the first quarter of fiscal 1999, selling, general and
administrative expenses increased $468,000 to $3,746,000, or 14.3%, when
compared with the first quarter of fiscal 1998. The first quarter 1999 increase
in selling, general and administrative expenses is attributable to start-up
costs associated with the opening of new communities, along with having more
overall communities open during the first quarter of fiscal 1999 when compared
with the prior fiscal year quarter. The selling, general and administrative
expenses as a percentage of residential property revenues decreased to 10.8%
during the first quarter of fiscal 1999 compared to 13.2% for the comparable
quarter in the prior fiscal year.
Net Income
Net income for the first quarter of fiscal 1999 was $1,026,000, or $.09
basic earnings per share, compared with $275,000, or $.02 basic earnings per
share, for the first quarter of fiscal 1998. This increase in net income is
primarily attributable to an increase in residential property revenues combined
with a decrease in selling, general and administrative costs as a percentage of
residential property revenues.
9
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Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995.
The following important factors could cause Orleans Homebuilders'
actual consolidated results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, Orleans Homebuilders, Inc.:
o changes in consumer confidence due to perceived uncertainty of future
employment opportunities and other factors;
o competition from national and local homebuilders in the Company's
market areas;
o building material price fluctuations;
o changes in mortgage interest rates charged to buyers of the Company's
units;
o changes in the availability and cost of financing for the Company's
operations, including land acquisition;
o revisions in federal, state and local tax laws which provide incentives
for home ownership;
o delays in obtaining land development permits as a result of (i)
federal, state and local environmental and other land development
regulations, (ii) actions taken or failed to be taken by governmental
agencies having authority to issue such permits, and (iii) opposition
from third parties; and
o increased cost of suitable development land.
10
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
(a) On October 14, 1998, the Company filed with the Secretary
of State of the State of Delaware a Certificate of Designations, Preferences and
Rights with respect to 100,000 shares of Series D Preferred Stock. The Series D
Stock has a liquidation value of $3,000,000, or $30.00 per share, and requires
annual dividends of 7% of the liquidation value. The dividends are cumulative
and are payable quarterly with the first payment due December 1, 1998. The
Series D Stock may be redeemed by the Company at any time after December 31,
2003, in whole or in part, at a cash redemption price equal to the liquidation
value plus all accrued and unpaid dividends on such shares to the date of
redemption. The Series D Stock is convertible into 2,000,000 shares of Common
Stock upon the approval by the American Stock Exchange of a supplemental listing
application covering such shares.
(b) Series D Preferred Stock referred to above has a
cumulative preference on liquidation of $30.00 per share ($3,000,000 in the
aggregate), plus any dividends which have accrued and remain unpaid on the
liquidation date. Dividends, at the rate of $2.10 per share, per annum, payable
quarterly, are payable on the Series D Preferred Stock; such dividends are
cumulative and no dividends may be paid on the Common Stock when dividends have
accrued and remain unpaid on the Series D Preferred Stock.
(c) Reference is made to the issuance described in Note (E) on
page 5 hereof.
(d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 3.1 - Certificate of Designations, Preferences and Rights
of Series D Preferred Stock of Orleans Homebuilders, Inc. filed October 14,
1998.
(b) Exhibit 10.1 - Exchange Agreement dated as of October 14, 1998
between Orleans Homebuilders, Inc. and Jeffrey P. Orleans.
(c) Exhibit 27 - Financial Data Schedule (included in electronic filing
format only).
(d) Reports on Form 8-K.
On July 13, 1998, the Company filed a Form 8-K indicating that the
Company filed an Amendment to its Certificate of Incorporation
changing its name from "FPA Corporation" to "Orleans Homebuilders,
Inc." In addition, the Company announced that its ticker symbol on
the American Stock Exchange was changed to "OHB" and the CUSIP
number for its common stock is 686688 10 4.
11
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ORLEANS HOMEBUILDERS, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ORLEANS HOMEBUILDERS, INC.
(Registrant)
November 13, 1998 /s/ Michael T. Vesey
--------------------------------------
Michael T. Vesey
President and Chief Operating Officer
November 13, 1998 /s/ Joseph A. Santangelo
--------------------------------------
Joseph A. Santangelo
Treasurer, Secretary and
Chief Financial Officer
12
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EXHIBIT 3.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES D PREFERRED STOCK
OF ORLEANS HOMEBUILDERS, INC.
ORLEANS HOMEBUILDERS, INC., a corporation organized and existing under
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
That, pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation (as amended) of said corporation, and
pursuant to the provisions of Section 151 of Title 8 of the Delaware Code of
1953, said Board of Directors, at a meeting duly held on September 24, 1998,
adopted resolutions providing for the issuance of One Hundred Thousand (100,000)
shares of "Series D Preferred Stock", which resolutions are as follows:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of the
Certificate of Incorporation and Section 151 of the Delaware General Corporation
Law, a series of Preferred Stock of the Corporation be and hereby is created,
and that the designation and amount thereof and the preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof are as follows:
1. Designation and Amount. Of the 500,000 shares of Preferred Stock,
$1.00 par value per share, authorized by ARTICLE FOURTH of the Certificate of
Incorporation, there is hereby designated a series of Preferred Stock consisting
of 100,000 shares to be designated "Series D Preferred Stock" (the "Series D
Preferred Stock").
2. Ranking. The Series D Preferred Stock shall rank senior to the
Common Stock and senior to or on a pari passu basis with all other series of the
Preferred Stock hereafter authorized as to the distribution of assets (all of
such stock as to which the Series D Preferred Stock ranks senior, including the
Common Stock, being hereinafter sometimes referred to collectively as the
"Junior Securities").
3. Voting Rights. The Series D Preferred Stock shall have no voting
rights except as provided in Section 8 hereof and as otherwise provided by law.
4. Dividends. The holders of shares of Series D Preferred Stock shall
be entitled to receive, out of funds legally available for the purpose or as
otherwise permitted by applicable law, quarterly dividends payable in cash at
the rate of seven percent (7%) of the "Series D Liquidation Preference"
(hereinafter defined) per share per annum, in equal quarterly installments of
one and three quarters percent (1.75%) each on the first day of each December,
March, June and September (collectively, the "Dividend Payment Dates"),
commencing December 1, 1998 (the "Dividend Commencement Date"), before any
<PAGE>
dividends shall be declared, paid or set apart for or paid upon any Junior
Securities. As long as any share of Series D Preferred Stock shall remain
outstanding, no dividend (other than a dividend payable solely in shares of
Common Stock) shall be declared or paid on Common Stock or Junior Securities
prior to the Dividend Commencement Date. Holders of Series D Preferred Stock
shall not be entitled to any dividends with respect to the Series D Preferred
Stock other than as aforesaid. Dividends on each share of Series D Preferred
Stock shall be cumulative from the Dividend Commencement Date. The Corporation
shall not purchase, redeem, or otherwise retire or acquire for value (otherwise
than for Junior Securities) any Junior Securities except to the extent that
dividends on such Junior Securities could be paid as aforesaid. The Series D
Liquidation Preference shall be Thirty Dollars ($30.00), as such amount may be
adjusted as herein provided.
5. Redemption.
(a) The Corporation may redeem the Series D Preferred Stock at
any time after December 31, 2003, in whole or in part, at a cash redemption
price (the "Series D Redemption Price") equal to (A) the Series D Liquidation
Preference on the shares so redeemed plus (B) all accrued and unpaid dividends
on such shares to the date of redemption (the "Series D Redemption Date").
(b) (i) In the event that fewer than all of the outstanding
shares of the Series D Preferred Stock are to be redeemed, the shares to be
redeemed shall be done on a pro rata basis in accordance with the respective
number of shares of Series D Preferred Stock held by each holder of record.
(ii) In the event the Corporation shall redeem shares of
the Series D Preferred Stock, notice (the "Series D Notice") of such redemption
shall be given by first class mail, postage prepaid, mailed not less than 30
days nor more than 60 days prior to the Series D Redemption Date, to each holder
of record of the shares to be redeemed, at such holder's address as the same
appears on the register of the Corporation maintained for the Series D Preferred
Stock. Each such Series D Notice shall state: (1) the Series D Redemption Date;
(2) the number of shares of the Series D Preferred Stock to be redeemed and, if
fewer than all of the shares held by such holder are to be redeemed, the number
of such shares to be redeemed from such holder; (3) the Series D Redemption
Price; (4) the place or places where certificates for such shares are to be
surrendered for payment of the Series D Redemption Price; and (5) the date as of
which the conversion right set forth in Section 7 hereof, if any, shall expire
(which shall not be earlier than 30 days after such Series D Notice is mailed).
(iii) A Series D Notice having been mailed as aforesaid,
from and after the Series D Redemption Date (unless the Corporation shall be in
default in providing money for the payment of the Series D Redemption Price of
the shares called for redemption), dividends on the shares of Series D Preferred
Stock so called for redemption shall cease to accrue, and from and after the
Series D Redemption Date (unless the Corporation shall be in default in
providing money for the payment of the Series D Redemption Price of the shares
called for redemption when such shares have been duly tendered for redemption),
said shares shall no longer be deemed to be outstanding, and all rights of the
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holders thereof as stockholders of the Corporation (except the right to receive
from the Corporation the Series D Redemption Price and the right to exercise any
privilege of conversion not theretofore expiring) shall cease. Upon surrender in
accordance with said Series D Notice of the certificates for any shares so
redeemed (properly endorsed or assigned for transfer, if the Board of Directors
of the Corporation shall so require and the Series D Notice shall so state),
such shares shall be redeemed by the Corporation at the Series D Redemption
Price aforesaid. In the event that fewer than all of the shares represented by
any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares without cost to the holder thereof.
(c) The Series D Preferred Stock shall not be subject to any
sinking fund provisions for the redemption or purchase of shares.
6. Liquidation or Dissolution. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of shares of the Series D Preferred Stock then
outstanding shall be entitled to receive out of the assets of the Corporation
available for distribution to its stockholders an amount in money or money's
worth for each share outstanding equal to the Series D Redemption Price as of
the date fixed for liquidation, dissolution or winding up of the affairs of the
Corporation (utilizing the date fixed for liquidation, dissolution or winding up
of the affairs of the Corporation as the Series D Redemption Date and the shares
so redeemed as all the shares of Series D Preferred Stock then outstanding) and
no more, before any assets are distributed to the holders of any of the Junior
Securities. Any distribution of assets to the Junior Securities shall include
cash, in whole or in part, only if the distribution to holders of the Series D
Preferred Stock has been made entirely in cash. If the assets of the Corporation
are not sufficient to satisfy the liquidation preference of outstanding shares
of the Series D Preferred Stock, then the holders of all such shares shall share
ratably in such distribution of assets in proportion to the full amounts to
which they are respectively entitled. The consolidation or merger of the
Corporation with another entity or any other corporate action having the effect
of the foregoing, shall not be deemed a voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation and shall not give
rise to any rights provided in this Section 6.
7. Conversion of Series D Preferred Stock.
(a) Each share of Series D Preferred Stock is convertible, at
any time and at the option of the holder thereof, into fully-paid and
non-assessable shares of Common Stock (A) at the rate of twenty (20) shares of
Common Stock for each share of Series D Preferred Stock converted or (B) upon
the occurrence of any of the events described in paragraph 7(e) hereof, at the
rate determined pursuant to such paragraph 7(e) (in either such case, the
"Series D Conversion Rate"). The Series D Conversion Rate shall be subject to
adjustment from time to time in certain instances as hereinafter provided. Each
adjustment of the Series D Conversion Rate shall be rounded to the nearest four
decimal places. The Series D Conversion Rate shall be subject to adjustment from
time to time as follows:
(i) If the Corporation shall at any time pay a
dividend or distribution on Common Stock in Common Stock, subdivide its
outstanding shares of Common Stock into a larger number of shares, or combine
3
<PAGE>
its outstanding shares of Common Stock into a smaller number of shares, the
Series D Conversion Rate in effect immediately prior thereto shall be adjusted
so that each share of Series D Preferred Stock shall thereafter be convertible
into the number of shares of Common Stock which the holder of a share of Series
D Preferred Stock would have been entitled to receive after the happening of any
of the events described above had such share been converted immediately prior to
the happening of such event. An adjustment made pursuant to this subparagraph
shall become effective retroactively to the record date in the case of a
dividend and shall become effective on the effective date in the case of
subdivision or combination.
(ii) If the Corporation shall distribute to all or
substantially all holders of shares of Common Stock any rights to subscribe for
Common Stock, then in each such case the number of shares of Common Stock into
which each share of Series D Preferred Stock shall thereafter be convertible
shall be determined by multiplying the number of shares of Common Stock into
which each share of Series D Preferred Stock was theretofore convertible on the
day immediately preceding the record date for the determination of the
stockholders entitled to receive such distribution by a fraction, the numerator
of which shall be the Market Price Per Share (as defined in the immediately
succeeding sentence) of the Common Stock on such record date, and the
denominator of which shall be such Market Price per Share less the then fair
market value (as determined in a resolution adopted by the Board of Directors of
the Corporation) of such subscription rights applicable to one share of Common
Stock. The "Market Price Per Share" of the Common Stock shall be, as of the date
of determination, (i) the last sale price per share of the Common Stock prior to
such date on the principal securities exchange on which the Common Stock is
listed, or (ii) if the Common stock is not so listed, the last reported sale
price per share of the Common Stock on NASDAQ prior to such date, or (iii) if
the Common Stock is not so reported, the mean of the last reported bid and asked
prices per share of the Common Stock in the over-the-counter market prior to
such date, or (iv) if none of (i), (ii) or (iii) of this sentence is applicable,
as determined in a resolution adopted by the Board of Directors. Such adjustment
shall become effective retroactively immediately after such record date.
(iii) In case of any capital reorganization or any
reclassification of the capital stock of the Corporation or in case of the
consolidation or merger of the Corporation with another corporation or in the
case of any sale or conveyance of all or substantially all of the property of
the Corporation, each share of Series D Preferred Stock shall thereafter be
convertible into the number of shares of stock or other securities or property
(including cash) receivable upon such capital reorganization, reclassification
of capital stock, consolidation, merger, sale or conveyance, as the case may be,
by a holder of the number of shares of Common Stock into which such share of
Series D Preferred Stock was convertible immediately prior to such capital
reorganization, reclassification of capital stock, consolidation, merger, sale
or conveyance; and, in any case, appropriate adjustment (as determined by the
Board of Directors) shall be made in the application of the provisions herein
set forth with respect to rights and interests thereafter of the holders of
Series D Preferred Stock to the end that the provisions set forth herein
(including the specified changes in and other adjustments of the Series D
Conversion Rate) shall thereafter be applicable, as nearly as may be reasonably
4
<PAGE>
possible, in relation to any shares of capital stock or other securities or
other property thereafter deliverable upon the conversion of the Series D
Preferred Stock.
(b) The Corporation shall at all times reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Series D Preferred Stock as provided
herein, such number of shares as shall from time to time be sufficient to effect
the conversions of all shares of Series D Preferred Stock from time to time
outstanding. If the Common Stock of the Corporation is listed on one or more
securities exchanges, the shares so reserved shall be listed (or shall be listed
upon notice of issuance) on the principal securities exchange.
(c) (i) Before any holder of Series D Preferred Stock shall be
entitled to convert the same into Common Stock, such holder shall surrender the
certificate or certificates for such Series D Preferred Stock at the office
appointed as aforesaid, which certificate or certificates, if the Corporation
shall so request, shall be duly endorsed to the Corporation or in blank, or
accompanied by proper instruments of transfer to the Corporation or in blank,
and shall give written notice to the Corporation that such holder elects to
convert such Series D Preferred Stock.
(ii) The Corporation will, as soon as practicable after
such surrender of certificates for Series D Preferred Stock accompanied by the
written notice, issue and deliver at the office appointed as aforesaid, to the
person for whose account such Series D Preferred Stock was so surrendered,
certificates for the number of full shares of Common Stock to which such person
shall be entitled as aforesaid, together with a cash adjustment for any fraction
of a share as hereinafter stated, if not evenly convertible. Subject to the
following provisions of this paragraph, such conversion shall be deemed to have
been made as of the date of such surrender of the Series D Preferred Stock to be
converted, and the person or persons entitled to receive the Common Stock
issuable upon conversion of such Series D Preferred Stock shall be treated for
all purposes as the record holder or holders of such Common Stock on such date.
The Corporation shall not be required to convert, and no surrender of Series D
Preferred Stock shall be effective for that purpose, while the stock transfer
books of the Corporation are closed for any purpose; but the surrender of Series
D Preferred Stock for conversion during any period while such books are so
closed shall become effective for conversion immediately upon the reopening of
such books, as if the conversion had been made on the date such Series D
Preferred Stock was surrendered, and at the conversion rate in effect at the
date of such surrender.
(d) No fractions of shares of Common Stock are to be issued
upon conversion, but in lieu thereof the Corporation will pay therefor in cash a
sum based on the Market Price Per Share.
(e) (i) Adjustments of Series D Conversion Rate. The Series D
Conversion Rate shall be subject to adjustments from time to time upon the
happening of the events hereinafter specified. No adjustments shall be made for
any cash dividends on the Common Stock. The Corporation hereby covenants that,
to the extent permitted by law, the par value of each share of Common Stock will
5
<PAGE>
not be increased so long as any share of Series D Preferred Stock is
outstanding.
(ii) Conversion Rate. If, at any time the Corporation
issues or sells any shares of Common Stock for a consideration per share less
than the Market Price Per Share on the date of such issue or sale (as reasonably
determined in good faith by the Board of Directors of the Corporation), the
Series D Conversion Rate in effect immediately prior to such issue or sale shall
thereupon be increased to the number (calculated to four decimal places)
determined by multiplying the Series D Conversion Rate in effect immediately
prior to the time of such issue or sale by a fraction, the denominator of which
shall be the sum of (A) the number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the Market Price Per Share
immediately prior to such issue or sale, and (B) the consideration received by
the Corporation upon such issue or sale, and the numerator of which shall be the
total number of shares of Common Stock outstanding immediately after such issue
or sale multiplied by the Market Price Per Share immediately prior to such issue
or sale.
(iii) Special Rules for Adjusting the Series D Conversion
Rate. For the purposes of Section (ii) above, the following paragraphs (A) to
(D), inclusive, shall also be applicable:
(A) Treatment of Options, Rights, etc. At
any time the Corporation grants any rights to
subscribe for, or any rights or options to purchase,
Common Stock or any securities convertible into or
exchangeable for Common Stock (such convertible or
exchangeable securities being herein called
"Convertible Securities), whether or not such rights
or options or the right to convert or exchange any
such Convertible Securities are immediately
exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such rights or
options or upon conversion or exchange of such
Convertible Securities, such total amount being
herein collectively referred to as the "Section 7(e)
Exercise Price" (determined by dividing (1) the total
amount, if any, received or receivable by the
Corporation as consideration for the granting of such
rights or options, plus the minimum aggregate amount
of additional consideration payable to the
Corporation upon the exercise of such rights or
options, plus, in the case of any such rights or
options which relate to such Convertible Securities,
the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale
of such Convertible Securities and upon the
conversion or exchange thereof, by (2) the total
maximum number of shares of Common Stock issuable
upon the exercise of such rights or options or upon
the conversion or exchange of all such rights or
options), is less than the Market Price in effect
immediately prior to the granting of such rights or
options, then the maximum number of shares of Common
Stock issuable upon the exercise of such rights or
options or upon conversion or exchange of the maximum
number of such Convertible Securities issuable upon
the exercise of such rights or options shall (as of
the date of granting of such rights or options) be
6
<PAGE>
deemed to be outstanding and to have been issued for
such price per share. Except as provided in paragraph
7(f), no further adjustments of the Series D
Conversion Rate shall be made upon the actual issue
of such Common Stock or of such Convertible
Securities upon exercise of such rights or options or
upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible
Securities. Such adjustment shall become effective
retroactively immediately after such record date.
(B) Treatment of Convertible Securities. At
any time the Corporation issues or sells any
Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately
exercisable, and the price per share for which Common
Stock is issuable upon such conversion or exchange,
such total amount being herein collectively referred
to as the "Section 7(e) Exchange Rate" (determined by
dividing (1) the total amount received or receivable
by the Corporation as consideration for the issue or
sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any,
payable to the Corporation upon the conversion or
exchange thereof, by (2) the total maximum number of
shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities), is
less than the Market Price in effect immediately
prior to the time of such issue or sale, then the
maximum number of shares of Common Stock issuable
upon conversion or exchange of all such Convertible
Securities shall (as of the date of the issue or sale
of such Convertible Securities) be deemed to be
outstanding and to have been issued for such price
per share, provided that (x) except as provided in
paragraph 7(f), no further adjustments of the Series
D Conversion Rate shall be made upon the actual issue
of such Common Stock upon conversion or exchange of
such Convertible Securities and (y) if any such issue
or sale of such Convertible Securities is made upon
exercise of any rights to subscribe for or to
purchase or any option to purchase any such
Convertible Securities for which adjustments of the
Series D Conversion Rate have been or are to be made
pursuant to other provisions of this paragraph 7(e),
no further adjustments of the Series D Conversion
Rate shall be made by reason of such issue or sale.
(C) Computation of Consideration. For
purposes of this paragraph 7(e): (1) the
consideration received for any shares of Common Stock
or Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible
Securities issued or sold for cash shall be deemed to
be the amount received by the Corporation therefor,
without deduction therefrom of any expenses incurred
or any underwriting commissions or concessions or
discounts paid or allowed by the Corporation in
connection therewith; (2) if any shares of Common
Stock or Convertible Securities or any rights or
options to purchase any such Common Stock or
7
<PAGE>
Convertible Securities are issued or sold for a
consideration other than cash, the amount of the
consideration other than cash, received by the
Corporation shall be deemed to be the fair value of
such consideration as reasonably determined in good
faith by the Board of Directors of the Corporation,
without deduction therefrom of any expenses incurred
or any underwriting commissions or concessions or
discounts paid or allowed by the Corporation in
connection therewith; and (3) the consideration for
any shares of Common Stock or Convertible Securities
issued by the Corporation in connection with any
merger or consolidation of another corporation into
the Corporation shall be deemed to be the fair value
of the assets of such merged or consolidated
corporation as reasonably determined in good faith by
the Board of Directors of the Corporation after
deducting therefrom all cash and other consideration
(if any) paid by the Corporation in connection with
such merger.
(D) Record Date. At any time the Corporation
takes a record of the holders of Common Stock for the
purpose of entitling them (1) to receive a dividend
or other distribution payable in Convertible
Securities, or (2) to subscribe for or purchase
Common Stock or Convertible Securities then such
record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to
have been issued or sold upon the declaration of such
dividend or the making of such other distribution or
the date of the granting of such right of
subscription or purchase, as the case may be.
(f) Readjustments of Section 7(e) Exercise Price and Exchange
Rate. If the Section 7(e) Exercise Price or Section 7(e) Exchange Rate shall
change or a different Section 7(e) Exercise Price or Section 7(e) Exchange Rate
shall become effective at any time or from time to time (other than under or by
reason of provisions designed to protect against dilution), then, upon such
change becoming effective, the Series D Conversion Rate then in effect hereunder
shall thereupon be increased or decreased to such Series D Conversion Rate as
would have obtained had the adjustments made upon the granting or issuance of
such rights or options or Convertible Securities been made upon the basis of (1)
the issuance of the number of shares of Common Stock theretofore actually
delivered upon the exercise of such options or rights or upon the conversion or
exchange of such Convertible Securities, and the total consideration received
therefor, and (2) the granting or issuance at the time of such change of any
such options, rights, or Convertible Securities then still outstanding for the
consideration, if any, received by the Corporation therefor and to be received
on the basis of such changed price. On the expiration of any right or option
referred to in paragraph 7(e)(iii)(A), or on the termination of any right to
convert or exchange any Convertible Securities referred to in paragraph
7(e)(iii)(B), the Series D Conversion Rate shall thereupon be readjusted to such
amount as would have obtained had the adjustment made upon the granting or
issuance of such rights or options or Convertible Securities been made upon the
basis of the issuance or sale of only the number of shares of Common Stock
actually issued upon the exercise of such options or rights or upon the
conversion or exchange of such Convertible Securities. If the Section 7(e)
8
<PAGE>
Exercise Price or Section 7(e) Exchange Rate shall change at any time under or
by reason of provisions with respect thereto designed to protect against
dilution, then in case of the delivery of Common Stock upon the exercise of any
such right or option or upon conversion or exchange of any such Convertible
Securities, the Series D Conversion Rate then in effect hereunder shall
forthwith be decreased to such Series D Conversion Rate as would have obtained
had the adjustments made upon the issuance of such right or option or
Convertible Securities been made upon the basis of the issuance of (and the
total consideration received for) the shares of Common Stock delivered as
aforesaid.
(g) Notice of Adjustment. When the Series D Conversion Rate is
adjusted pursuant to this Section 7, the Corporation shall promptly cause a
notice setting forth the adjusted Series D Conversion Rate to be mailed to each
holder of Series D Preferred Stock at such holder's last address.
(h) Reflection of Adjustments on Certificates. Notwithstanding
any adjustments in the Series D Conversion Rate, any Certificate for Series D
Preferred Stock theretofore or thereafter issued may continue to express the
same price and number and kind of shares as stated in the certificate initially
issuable pursuant to this Resolution.
(i) Notwithstanding any other provision to the contrary
contained in this Section 7, for so long as the Common Stock is listed on the
American Stock Exchange (the "Exchange"), no shares of Series D Preferred Stock
shall be converted into shares of Common Stock unless the shares of Common Stock
underlying the Series D Preferred Stock are listed on the Exchange.
8. Voting on Specified Matters. Except as otherwise provided by law,
the affirmative vote of the holders of more than 50% of the outstanding shares
of Series D Preferred Stock, voting as a single class, either at a duly
organized meeting of holders of Series D Preferred Stock or given in writing, in
person or by proxy, shall be necessary for the following actions:
(a) the authorization of any capital stock of the Corporation
senior to the Series D Preferred Stock in terms of dividends, redemption or
preference or priority in any circumstances (the "Senior Securities");
(b) the reclassification of any shares of the Corporation into
shares of Senior Securities; and
(c) the authorization of any security exchangeable for,
convertible into, or evidencing the right to purchase shares of Senior
Securities.
For the purpose of this Section 8, each share of Series D
Preferred Stock shall entitle the holder thereof to one (1) vote on matters
referred to in this Section 8.
9. Restrictions on Transfer. The shares of Series D Preferred Stock
authorized hereby together with the shares of Common Stock into which such
shares of Series D Preferred Stock may be converted as provide in Section 7
hereof (collectively, the "Restricted Shares"), have not been registered under
9
<PAGE>
the Securities Act of 1933, as amended (the "Securities Act"), and such
Restricted Shares are being and will be (as applicable) issued pursuant to an
exemption from registration contained in the Securities Act. No transfer of the
Restricted Shares shall be effected unless an opinion of counsel experienced in
securities law matters and reasonably satisfactory to the Corporation shall be
delivered to the Corporation to the effect that such contemplated transfer may
be effected without registration under the Securities Act and any applicable
state securities laws. The certificates representing the series D Preferred
Stock shall bear a legend evidencing such restriction, and a stop transfer order
with respect thereto shall be placed in effect.
IN WITNESS WHEREOF, Orleans Homebuilders, Inc. has caused this
Certificate to be executed by its President and attested by its Secretary this
13th day of October, 1998.
ORLEANS HOMEBUILDERS, INC.
By: /s/ Michael T. Vesey
------------------------------------
Name: Michael T. Vesey
Title: President and Chief Operating Officer
ATTEST:
By: /s/ Joseph A. Santangelo
- ---------------------------------------
Name: Joseph A. Santangelo
Title: Secretary-Treasurer and Chief Financial Officer
10
<PAGE>
EXHIBIT 10.1
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (the "Agreement") is dated as of
October 13, 1998 between Jeffrey P. Orleans ("Shareholder") and Orleans
Homebuilders, Inc., a Delaware corporation ("Company").
1. Exchange. On the terms and subject to the conditions contained
herein, Shareholder agrees to deliver to Company for cancellation the notes of
Company, in the principal aggregate amount of $3,000,000, listed on Exhibit A
hereto (the "Notes"), and Company agrees to exchange (the "Exchange") for the
Notes, and transfer to Shareholder, 100,000 shares of Company's Series D
Preferred Stock as set forth in the Certificate of Designations, Preferences and
Rights therefor (the "Shares").
2. Consummation of Exchange. The Exchange shall take place in
accordance with the following:
2.1 Upon execution by each of the parties hereto of this
Agreement, Shareholder shall deliver to Company for cancellation the Notes and
Company shall immediately cancel the Notes.
2.2 Company, contemporaneously with Shareholder's performance
of his obligations hereunder, shall issue to Shareholder the Shares.
2.3 In addition to the foregoing, the parties hereto agree at
any time and from time to time, at or after the date hereof, upon request of
either party, to do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged and delivered all such further acts, deeds, assignments,
transfers, conveyances and assurances as may be reasonably required to
consummate the transactions provided for in this Agreement.
3. Representations and Warranties of Shareholder. Shareholder
represents and warrants to Company that:
3.1 Shareholder has good and marketable title to the Notes,
free and clear of all liens, pledges and encumbrances of any kind, nature and
description.
3.2 Shareholder has the absolute and unrestricted right,
power, authority and capacity to execute and deliver this Agreement and to
transfer and convey the Notes as contemplated by this Agreement.
3.3 Shareholder acknowledges that neither the Shares nor the
shares of Company's common stock, par value $0.10, issuable upon conversion of
the Shares (the "Conversion Shares") have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), and that the Shares are being
<PAGE>
issued to Shareholder and, if the Shares are converted in whole or any part, the
Conversion Shares will be issued to Shareholder, pursuant to an exemption from
registration contained in the Securities Act based in part upon Shareholder's
representations and covenants contained in this section. Shareholder is
acquiring the Shares and any Conversion Shares solely for his own account and
with no intention of distributing or reselling said securities or any part
thereof, or interest therein, in any transaction which would be in violation of
the securities laws of the United States or any state thereof. Shareholder is an
"accredited investor" (as such term is defined in Rule 501 of Regulation D under
the Securities Act). Shareholder acknowledges and agrees that (i) the Shares and
the Conversion Shares are subject to limitations on transferability under the
Securities Act and applicable state securities laws, (ii) Company has no
obligation to effect registration of the Shares or the Conversion Shares under
the Securities Act or any applicable state securities laws or otherwise to
comply with any requirements necessary for transfer or assignment of the Shares
or the Conversion Shares to be exempt from such registration, and (iii) no
transfer of the Shares or the Conversion Shares shall be effected unless an
opinion of counsel acceptable to Company shall be delivered to Company to the
effect that such contemplated transfer may be effected without registration
under the Securities Act and any applicable state securities laws.
4. Representation and Warranty of Company. Company has the absolute and
unrestricted right, power and authority to issue the Shares and the Conversion
Shares. Upon issuance, the Shares shall be duly and validly issued, fully paid
and nonassessable. Upon issuance in accordance with the provisions of the
Certificate of Designations, Preferences and Rights of the Shares, the
Conversion Shares will be duly and validly issued, fully paid and nonassessable.
5. Survival of Representation and Warranties. All of the
representations, warranties and agreements made by each party hereto in this
Agreement shall be continuing and shall survive the closing and the transfers
made hereunder, notwithstanding any investigation made by or on behalf of any
party hereto.
6. Miscellaneous.
6.1 Counterparts. This Agreement may be executed in one or
more counterparts and all such counterparts will constitute one and the same
instrument.
6.2 Entire Agreement. This Agreement sets forth the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior arrangements or understandings with respect thereto.
6.3 Successors and Assigns; Parties in Interest. This
Agreement and the rights or obligations of any party hereunder may not be
assigned or delegated without the prior written consent of the other party
hereto. Subject to the preceding sentence, this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and assigns.
2
<PAGE>
6.4 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania without giving effect to otherwise applicable principles of
conflicts of laws.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
ORLEANS HOMEBUILDERS, INC.
By: /s/ Michael T. Vesey
-----------------------------------------------
Name: Michael T. Vesey
Title: President and Chief Operating Officer
/s/ Jeffrey P. Orleans
----------------------------------------------------
Jeffrey P. Orleans
4
<PAGE>
EXHIBIT A
Variable Rate Note due December 31, 2000 in the principal amount of $2,000,000.
Demand Note dated March 27, 1998 in the principal amount of $700,000.
Demand Note dated April 6, 1998 in the principal amount of $300,000.
5
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,291
<SECURITIES> 0
<RECEIVABLES> 4,279
<ALLOWANCES> 0
<INVENTORY> 109,761
<CURRENT-ASSETS> 0
<PP&E> 2,704
<DEPRECIATION> 768
<TOTAL-ASSETS> 129,812
<CURRENT-LIABILITIES> 0
<BONDS> 78,070
0
0
<COMMON> 1,270
<OTHER-SE> 17,475
<TOTAL-LIABILITY-AND-EQUITY> 129,812
<SALES> 35,461
<TOTAL-REVENUES> 35,934
<CGS> 30,117
<TOTAL-COSTS> 34,279
<OTHER-EXPENSES> 229
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 187
<INCOME-PRETAX> 1,655
<INCOME-TAX> 629
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,026
<EPS-PRIMARY> .09
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