SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended November 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission file no. 1-8846
CALTON, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-2433361
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 Craig Road
Manalapan, New Jersey 07726-8790
(Addresses of principal Zip Code
executive offices)
Registrant's telephone number,
including area code: (908) 780-1800
Securities registered pursuant to Section 12(b) of the Act:
Title of Class
Name of each exchange
Title of each class on which registered
Common Stock, $.01
par value per share American Stock Exchange
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K X.
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes X No
The aggregate market value (based upon the last sales price
reported by the American Stock Exchange) of voting shares held by
non-affiliates of the registrant as of February 1, 1996 was
$8,456,000.
As of February 1, 1996, 26,445,000 shares of Common Stock were
outstanding.
Certain items in Parts I and II incorporate information by
reference from the 1995 Annual Report to Shareholders and Part
III is incorporated by reference from the Proxy Statement for the
annual meeting of shareholders to be held on April 23, 1996.
Except for portions which are expressly incorporated by reference
herein, the Annual Report is not deemed filed a part hereof.
PART I
Item 1. BUSINESS
(a) General Development of Business
General
Calton, Inc. (the "Company" or "Calton") and its
subsidiaries design, construct and sell single family
detached homes and townhomes primarily in central New
Jersey, central Florida and eastern Pennsylvania. The
Company markets primarily to first and second time move-up
buyers with the 749 homes delivered in fiscal 1995 having an
average sales price of approximately $229,000.
The Company's current homebuilding activities are
conducted primarily through two divisions: Calton Homes
Northeast and Florida division. The Company decided to wind
down the Chicago division due to unfavorable results and
prospects.
Calton was incorporated in 1981 for the purpose of
acquiring all of the issued and outstanding capital stock of
Kaufman and Broad of New Jersey, Inc., a New Jersey
corporation, from Kaufman and Broad, Inc., a Maryland
corporation. After the acquisition, the name of Kaufman and
Broad of New Jersey, Inc. was changed to Calton Homes, Inc.
("Calton Homes") which continues as a wholly owned
subsidiary of Calton. Calton maintains its executive offices
at 500 Craig Road, Manalapan, New Jersey 07726 and its
telephone number is (908) 780-1800. As used herein, the
terms "Company" and "Calton" refer to Calton, Inc. and its
subsidiaries, unless the context indicates otherwise.
On March 9, 1993, Calton and certain of its
subsidiaries filed petitions under Chapter 11 of the United
States Bankruptcy Code. The United States Bankruptcy Court
confirmed the Plan of Reorganization (the "Reorganization")
on May 6, 1993 and the Reorganization was consummated on May
28, 1993. The Reorganization resulted in the discharge of
approximately $61.5 million of indebtedness and $22.8
million of interest payments owed to certain creditors. In
exchange for the discharge of these obligations, these
creditors were issued a combination of cash, equity
securities and short-term debt instruments which were
retired in September 1993. The equity securities issued to
the creditors represented approximately 93.5% of the voting
power of the Company's capital stock.
On November 21, 1995, the Company had a significant
shift in stock ownership and voting rights. In addition,
changes occurred on the Board of Directors and in the
Company's management.
Since 1969, the Company and its predecessor have
constructed and sold approximately 16,650 units in 138
residential developments in New Jersey, Florida,
Pennsylvania, California and Chicago. At November 30, 1995,
the Company had 20 communities under development and open
for sales. The Company builds single-family detached homes
and townhomes ranging in base price from $97,000 to
$473,000. The average base selling price of homes to be
built on unsold lots, as of November 30, 1995, was
approximately $207,000. Because of the timing of home
deliveries, the average base selling price of homes under
development may not be indicative of the average revenue per
home sold in any fiscal year. See Item 1(c), "Residential
Development".
(b) Financial Information About Industry Segments
Substantially all revenues and equity in earnings,
operating profits and assets of the Company and its
subsidiaries are attributable to one line of business, the
development and sale of residential housing and the
acquisition and sale of real property.
(c) Description of Business
General
The Company designs, constructs and sells single family
attached and detached homes, primarily in central New
Jersey, central Florida and eastern Pennsylvania. The
Company markets primarily to first time buyers and first and
second time move-up buyers with the 749 homes delivered in
fiscal 1995 having an average sales price of approximately
$229,000.
Corporate Operations
The Company operates through separate divisions, which
are located within or near the markets in which they
operate. Each division is managed by an executive with
substantial experience in the markets served. In addition,
each division is staffed with personnel equipped with the
skills to complete the functions of land acquisition,
entitlement processing, land development, construction,
marketing, sales and product service.
The Company's corporate staff is responsible for: (i)
evaluating the suitability of and selecting geographic
markets; (ii) allocating capital resources among divisions;
(iii) maintaining the Company's relations with its lenders
to regulate the flow of financial resources; and (iv)
monitoring the divisional operations. Capital commitments
are determined through consultation among senior management
and division managers. Centralized financial controls are
also maintained through the standardization of accounting
and financial policies and procedures, which are applied
uniformly throughout the Company.
The Company's operating strategy generally consists of:
(i) targeting the first time homebuyer and the first and
second time move-up buyer; (ii) conducting homebuilding
activities in markets that, based on economic and
demographic trends, demonstrate strong growth potential;
(iii) designing each residential community to meet the needs
of the particular market based on local conditions and
demographic factors; (iv) minimizing land risks by
purchasing entitled tracts of well-located property through
options or contingent purchase contracts and limiting land
holdings to those which can be developed within two years
from the date of purchase; (v) developing residential
communities in phases which enables the Company to reduce
financial exposure, control construction and operating
expenses and adapt quickly to changes in customer demands
and other market conditions; (vi) utilizing subcontractors
to perform land development and home construction on a fixed
price basis; and (vii) emphasizing the quality and value of
its homes.
Geographic Markets
The Company's current business operations are
principally located in central New Jersey, the greater
Orlando area, and eastern Pennsylvania. Generally, the
Company has organized divisions that are located in markets
that demonstrate a strong growth profile. The Company
selects locations within these markets for its residential
housing communities that have ready access to metropolitan
areas by public transportation and major arterial highways
and which have experienced industrial or commercial growth.
In March 1995, the Company consolidated its New Jersey-
North and New Jersey-South divisions into the Northeast
division. The Northeast division conducts homebuilding
activities in Burlington, Monmouth, Middlesex and Mercer
counties in New Jersey and Bucks county in Pennsylvania. The
Company's Florida division conducts homebuilding activities
in the Orange and Seminole County areas, concentrating in
the suburban Orlando area.
The Company recently decided to wind down the Chicago
division by disposing of the remaining inventory by a
combination of sale and buildout of homes, and sale of the
remaining lots.
The Company does not anticipate that it will expand
into any new markets in fiscal 1996 and, therefore, plans to
focus its operating locations and available capital in the
Northeast and Florida divisions.
Products
The Company offers a variety of homestyles tailored to
meet the specific needs of the particular geographic and
demographic markets served, including the first-time and
second-time move-up buyer and, to a lesser extent, the
first-time buyer. The Company believes that this diversified
product strategy enables it to mitigate some of the risks
inherent in the homebuilding industry by providing it with
the flexibility to adjust its product mix to suit particular
markets and changing market conditions. Homestyles, prices
and sizes vary from community to community based upon the
Company's assessment of specific market conditions and the
restrictions imposed by local jurisdictions. In certain
projects, recreational amenities such as tennis courts and
playground areas are constructed by the Company.
The Company generally standardizes its product line
within geographic markets it serves. This standardization
improves the quality of construction and permits efficient
production techniques and bulk purchasing of materials and
components, thus reducing construction costs and the time
required to build a home. The Company has recently
introduced a customization program that offers major
modifications to the standard design beyond the options and
extra features typically offered. See "Sales and Marketing".
Land Acquisition, Planning and Development
Substantially all of the land acquired by the Company
is purchased only after necessary entitlements have been
obtained so that the Company has certain rights to begin
development or construction as market conditions dictate.
The term "entitlements" refers to developmental approvals,
tentative maps or recorded plats, depending on the
jurisdiction within which the land is located. Entitlements
generally give a developer the right to obtain building
permits upon compliance with certain conditions that are
usually within the developer's control. Although
entitlements are ordinarily obtained prior to the Company's
purchase of the land, the Company is still required to
obtain a variety of other governmental approvals and permits
during the development process. The Company primarily buys
finished lots that are ready for construction in the Florida
market while finished lots are generally not available in the
Northeast market.
The Company's general policy has been to control land
for future development through the use of purchase options
or contingent purchase contracts whenever practicable and
where market conditions permit. The Company endeavors to
acquire property either on an installment method, with
closings on a portion of a project on a periodic basis, or
subject to purchase money mortgages. These policies enable
the Company to limit its financial commitments, including
cash expenditures and interest and other carrying costs, and
avoid large land inventories which exceed the Company's near
term development needs. At the same time, the Company
retains any appreciation in the value of the parcel prior to
exercising the option or closing the contingent purchase
contract. During the option or contingency period, the
Company performs feasibility studies, technical, engineering
and environmental surveys and obtains the entitlements.
In making land acquisitions, the Company considers such
factors as: (i) current market conditions; (ii) internal and
external demographic and marketing studies; (iii)
environmental conditions; (iv) proximity to developed and
recreational areas; (v) availability of mass transportation
and ready access to metropolitan areas and other employment
centers; (vi) industrial and commercial growth patterns;
(vii) financial review as to the feasibility of the proposed
community, including projected profit margins, returns on
capital employed and payback periods; (viii) the ability to
secure governmental approvals and entitlements; (ix)
customer preferences; (x) access to materials and
subcontractors; and (xi) management's judgement as to the
real estate market, economic trends and the Company's
experience in a particular market. The Company's development
activities include land planning and securing entitlements.
These activities are performed by the Company's employees,
together with independent engineers, architects and other
consultants. The Company's employees also develop long-term
planning of future communities.
Construction
The Company employs production managers who are
responsible for coordinating all functions pertaining to the
construction process. All construction work for the Company
is performed by subcontractors on a fixed price basis, with
the Company acting as general contractor. In order to
maintain control over costs, quality and work schedules, the
Company employs an on-site superintendent for each project
who is responsible for supervising subcontractor work.
The Company's housing is constructed according to
standardized design plans that are then customized to each
individual contract preference. Generally, the Company seeks
to develop communities having a minimum number of lots to
absorb deliveries over at least a two year period in order
to reduce the per unit cost of the housing products which it
sells. Advantages achieved by volume building include lower
unit prices paid to subcontractors and reduced material
costs per unit. From time to time, the Company purchases
smaller size communities in order to more efficiently deploy
the Company's resources.
Generally, the Company's policy is to commence
construction of: (i) a detached housing unit beyond the
foundation after a sales contract for that unit has been
signed; and (ii) a multi-unit townhome building beyond the
foundation after 50% of the units in that building are under
sales contracts. The Company does, however, ordinarily
attempt to maintain a predetermined inventory of homes in-
process in order to match the construction times of homes
with the mortgage application process and to accommodate
customers who require immediate occupancy, such as
relocation buyers. In addition, in order to permit
construction and delivery of housing units on a year round
basis, the Company, in anticipation of winter, will start
construction of foundations prior to having signed sales
contracts in affected market locations.
Materials and Subcontractors
The Company attempts to maintain efficient operations
by utilizing standardized material available from a variety
of sources. Prices for materials may fluctuate due to
various factors, including demand levels or supply
shortages. During 1995, major building material prices for
lumber, asphalt and appliances remained flat while prices
for concrete and plastic increased modestly. The price of
gypsum increased sharply during the first half of the year
and decreased gradually during the second half of the year.
The Company contracts with numerous subcontractors
representing all building trades in connection with the
construction of its homes, and has established long-term
relationships with a number of subcontractors. These
subcontractors bid competitively for each phase of the work
at each project and are selected based on quality, price and
reliability. Subcontractor bids are solicited after an
internal job cost budget estimate has been prepared based on
estimated material quantities. These internal estimates
serve as the formal baseline budget against which job cost
performance is measured. Each division is responsible for
contracting all work for each of its communities. Production
costs are monitored monthly to assess variances from
contracted amounts. The Company closely monitors
subcontractor performance and expenditures on each community
to assess project profitability. Additionally, the Company
is generally able to obtain reduced prices from many of its
subcontractors due to the high volume of work it provides to
its subcontractors. Agreements with subcontractors are
generally short-term, running from six to twelve months, and
provide a fixed price for labor and materials.
The Company has, from time to time, experienced minor
temporary construction delays due to shortages of materials
or availability of subcontractors. Such construction delays
may extend the period of time between the signing of a
purchase contract and the receipt of revenues by the Company
at the time of delivery of the home to the buyer. To date,
the Company has experienced no material adverse financial
effects as a result of construction delays. Currently,
sufficient materials and subcontractors are available to
meet the Company's demands; however, the Company cannot
predict the extent to which shortages in necessary materials
or labor may occur in the future.
Sales and Marketing
Each division establishes marketing objectives,
determines retail pricing, formulates sales strategies and
develops advertising programs, which in each case, are
subject to periodic market analyses conducted by the
division. The Company typically constructs, furnishes and
landscapes model homes for each community and maintains an
on-site sales office staffed with its own sales personnel.
The Company makes use of newspaper, billboard and direct
mail advertising, special promotional events and illustrated
brochures in a comprehensive marketing program. In marketing
its products, the Company emphases quality and value, and
provides a 15 year limited warranty on its homes.
During the fourth quarter of 1995, the "Your Home Your
Way" customization program was introduced in order to make
the products the Company builds more attractive to
homebuyers by tailoring them to individual customer needs.
The Company's sales personnel participate in an
intensive sales training program to develop their skills and
knowledge. The Company consults with these personnel in the
product development process to obtain and consider feedback
from customers and information with respect to the Company's
competitors.
Sales of the Company's homes are made pursuant to
standard sales contracts that are customary in the markets
served by the Company. Such contracts require a customer
deposit (generally up to 5% of the base selling price unless
limited by local law) at time of contract signing and
provide the customer with a mortgage contingency. The
contingency period typically is sixty (60) days following
execution of the contract. In certain instances, contracts
are contingent on the sale of a purchaser's existing home.
In such cases, the Company retains the right to sell the
home to a different buyer during the period in which the
"house-to-sell" condition is not satisfied. The cancellation
rate for new contracts signed was approximately 23% for
fiscal 1995. Cancellation rates may vary from year to year.
The Company attempts to limit cancellations by training its
sales force to determine at the sales office the
qualifications of potential homebuyers and by obtaining
financial information about the prospective purchaser.
At February 1, 1996, the Company employed 43 full-time
and part-time sales personnel who are paid on a salary
and/or sales commission basis. The Company also utilizes the
services of independent real estate brokers through a
cooperative broker referral plan.
Customer Financing
The Company sells its homes to customers who generally
finance their purchase through conventional and government
insured mortgages. The Company provides its customers with
information on a wide selection of conventional mortgage
products and various mortgage lenders to assist the
homebuyer through the mortgage process. Mortgages arranged
by mortgage providers in recent years have been mortgage
loans underwritten and made directly by a lending
institution to the customer. The Company is not liable for
repayment of any mortgage loans.
Backlog
At November 30, 1995, the Company had a backlog of
signed contracts for 166 homes with an aggregate sales price
of $36.0 million as compared to a backlog of signed
contracts for 419 homes with an aggregate sales price of
$98.5 million at November 30, 1994. All of the November 30,
1995 backlog is expected to be completed and delivered by
November 30, 1996. Backlog includes contracts containing
financing and certain other contingencies, including, in
certain instances, contracts which are contingent on the
buyer selling their homes. Due to changes in product
offerings, the uncertainty of future market conditions and
the general economic environment, the sales backlog achieved
in the current period may not be indicative of those to be
realized in succeeding periods. See "Management's Discussion
and Analysis of Financial Condition and Results of
Operations" incorporated herein by reference to the 1995
Annual Report to Shareholders.
Residential Development
The Company markets and sells varying types of
residential homes ranging in base selling prices from
$97,000 to $473,000. Current average base selling prices for
the Company's homes are approximately $256,000 in New
Jersey, $146,000 in Florida, and $229,000 in Chicago.
Average base selling prices of homes sold in any period or
unsold at any point in time will vary depending on the
specific projects and style of homes under development. The
Company continually monitors prevailing market conditions,
including interest rates and the level of resale activity in
the markets in which it operates. The Company may, from time
to time, sell all or a portion of a residential project
prior to its development by the Company.
As of November 30, 1995, the Company had 20 residential
communities open for sales which include an aggregate of
1,078 single family detached homes to be delivered. The
following sets forth certain information as of November 30,
1995 with respect to communities being developed by each of
the Company's operating divisions:
<TABLE>
<CAPTION>
Homes
Delivered Homes
Year of Lots Homes Yr. Ended Under
First Ap- Deliv- November Contract Unsold Sales
Delivery proved ered 30, 1995 (Backlog) Lots Price Range
<S> <C> <C> <C> <C> <C> <C> <C>
Northeast (a) (b)
Belmont at Steeplechase (Burlington) 1995 382 24 24 10 348 $169,990-$221,990
Burlington (Burlington Twp) 1990 433 394 73 6 33 $138,990-$164,990
Four Maples (Freehold) 1995 56 33 33 6 17 $303,990-$396,990
Jockey Club at Steeplechase (Burl.) 1995 177 47 47 21 109 $137,990-$161,990
Manalapan Chase (Manalapan) 1996 52 0 0 4 48 $311,990-$415,990
Monmouth Ridings (Howell) 1994 144 87 56 17 40 $179,990-$243,990
Oakleigh Farm (Buckingham PA) 1994 48 37 35 3 8 $269,990-$370,990
Regency Oaks (Marlboro) 1995 39 17 17 3 19 $333,990-$472,990
Sagewood (Mt. Laurel) 1994 50 42 19 3 5 $253,990-$367,990
Waterford Estates (W. Windsor) 1994 66 46 41 7 13 $344,990-$408,990
Woodside (Washington) 1994 68 54 45 9 5 $245,990-$308,990
Total 1,515 781 390 89 645
Orlando, Florida
Beechwoods (Altamonte Springs) 1995 57 11 11 9 37 $131,990-$156,990
Cambridge Commons (Apopka) 1995 87 23 23 8 56 $ 96,990-$122,990
Churchill Downs (Orange) 1995 32 3 3 8 21 $121,990-$172,990
Crescent Park (Orlando) 1995 108 12 12 10 86 $153,990-$196,990
The Meadows (Oricho) 1995 30 9 9 5 16 $140,990-$176,990
Saddlebrook (Ocoee/Windmere) 1995 32 18 18 10 4 $129,990-$183,990
Wekiva Park B (Apopka) 1994 42 31 15 1 10 $ 99,990-$120,990
Total 388 107 91 51 230
Chicago, Illinois
Braeburn (Crystal Lake) 1995 41 10 10 14 17 $192,990-$227,990
Delaware Crossing (Gurnee) 1995 65 33 33 6 26 $195,000-$232,990
Total 106 43 43 20 43
Other (Communities with less than
5 unsold homes each)(c) 216 209 42 6 1
TOTAL 2,225 1,140 566 166 919
</TABLE>
(a) Includes dwelling units completed and delivered, units under
construction and units designated on subdivision or site plans where
preliminary and final subdivision or site plan approvals, which in
certain instances may be subject to the fulfillment of certain
conditions imposed thereby, have been received. Also includes
approximately 385 planned homes under option in 5 communities in New
Jersey and Florida currently being developed and marketed by the
Company, and will require cash of $3.1 million in 1996, $1.2 million in
1997 and $850,000 in 1998.
(b) Does not include 183 deliveries in 1995 from communities that have been
fully delivered.
(c) Represents communities open with less than five homes unsold as of
November 30, 1995.
Land Inventory
The Company acquires options or contingent purchase
contracts on land where practicable and where market
conditions and lending availability permit. In other
instances, the Company has endeavored to acquire property
either subject to purchase money mortgages, or on an
installment method, with closings on a portion of a project
on a periodic basis. In order to ensure the availability of
land for future development, the Company believes it is
necessary to control land in New Jersey at an earlier point
in time than in other markets. As of November 30, 1995, if
all of the options held by the Company were exercised and
all of the contingent purchase contracts to which the
Company is a party were closed, the Company would have
sufficient land to maintain its anticipated level of
deliveries for the next five years in the Northeast market.
The Company believes that additional acquisitions will be
required for anticipated deliveries in 1997 and beyond in
the Florida market. The Company's revolving credit facility
(the "Facility") contains provisions limiting the amount of
land which the Company may acquire in any one year (other
than land acquisitions utilizing proceeds of purchase money
mortgages) to $18.8 million in 1996. In addition, the
Facility provides that total expenditures with respect to
projects which have not received all requisite development
approvals cannot exceed $2 million without the consent of
its lenders.
The following table sets forth certain information, as
of November 30, 1995, with respect to: (i) options held by
the Company and contingent purchase contracts to which the
Company is a party; and (ii) land owned by the Company with
respect to which construction of homes has not commenced.
Number of
Proposed
Residential Planned
Northeast Communities Homes (1)
Under option. . . . . . . . . . . . . . 10 1,517
Owned . . . . . . . . . . . . . . . . . -- --
Total. . . . . . . . . . . . . . . . 10 1,517
Orlando, Florida
Under option. . . . . . . . . . . . . . 3 293
Owned . . . . . . . . . . . . . . . . . 2 106
Total. . . . . . . . . . . . . . . . 5 399
Combined Total . . . . . . . . . . . . . 15 1,916
(1) Final development approvals have not been obtained
with respect to certain properties included in the
above table. Accordingly, the number of units approved
for development, if any, may differ from the number of
planned units reflected in the table. In addition,
prior to exercising an option or closing a contingent
purchase contract, the Company conducts feasibility
studies and other analyses with respect to a proposed
community. In certain instances, a determination may
be made by the Company not to proceed with certain
communities. Accordingly, no assurance can be given
that the Company will ultimately pursue the
development of every community reflected in the table
above.
During the second quarter of fiscal 1995, as a result
of the consolidation of the New Jersey-North and New Jersey-
South divisions and economic and market conditions, the
Company decided not to incur further preacquisition costs on
nine properties controlled under option. These actions
resulted in a pre-tax charge of approximately $1.1 million.
As of November 30, 1995, the Company held options or
was a party to contingent contracts to purchase 13 parcels
of land in New Jersey and Florida for which it has paid
options fees and earnest money aggregating $2.2 million as
of November 30, 1995. A total of 1,810 homes, of which 1,446
homes are single family and 364 are townhomes, are planned
for these parcels. Through November 30, 1995, the Company
has spent an additional $1.2 million in predevelopment costs
on such land, which costs would not be recoverable in the
event these options were not exercised or the contracts were
not closed, as the case may be. Assuming that in each year
the Company makes payments with respect to either options or
contingent contracts, exercises options, or closes such
contracts with respect to the minimum amount of land
necessary to retain its rights to acquire the remainder of
the subject properties, the aggregate amount required to
retain or exercise such options or close or extend such
contingent contracts in periods subsequent to November 30,
1995 is approximately $17.7 million in 1996, $12.4 million
in 1997, $8.3 million in 1998, $2.3 million in 1999,
$718,000 in 2000, and $1.5 million thereafter. In addition,
the acquisition of two of such parcels will be financed
through purchase money mortgages. The terms of payment call
for mortgage releases as homes close in the communities with
a minimum of: $1.2 million due in 1997, $1.1 million due in
1998, $450,000 due in 1999 and $450,000 due in 2000.
Assuming the Company exercises such options and contingent
contracts, the Company will be in a position to acquire
title to approximately 554, 386, 393, 189, and 251 lots
during fiscal years 1996 through 2000 respectively, and 37
lots thereafter.
Commercial Land and Buildings
The Company currently owns a 12,800 square foot office
building in Manalapan, Monmouth County, New Jersey.
Pursuant to management's continued focus on it's core
homebuilding business, the Company sold two of its
commercial properties in 1995 for approximately $8.1 million
which reduced related mortgages payable of $6.9 million. The
sales resulted in an aggregate pre-tax gain of approximately
$500,000 and provided approximately $850,000 of additional
cash for operations after retirement of the mortgage debt.
In addition, the Company owns certain undeveloped
properties in New Jersey, Florida, California and
Pennsylvania. These properties include 60 acres of
commercial property in Manalapan, New Jersey, 27 acres
consisting of three parcels in Orange County, Florida and
five other properties, two in Pennsylvania, two in New
Jersey and one in California. Each of these properties are
currently available for sale.
Joint Ventures
The Company has historically participated in joint
ventures engaged in land and residential housing
development. The Company currently has a 50% equity interest
in one joint venture formed to develop and market an 80 unit
townhouse project in Maryland which delivered 75 homes
through November 30, 1995. In addition, $550,000 of the
amount reflected on the Company's Consolidated Balance Sheet
at November 30, 1995 as Investments in Joint Ventures is
held as collateral to secure letters of credit issued for
the benefit of this joint venture.
Talcon, L.P., a Delaware limited partnership
("Talcon") was formed by the Company in 1987 to succeed to
its interest in certain joint ventures. In January 1994,
Calton Capital, Inc. (a wholly owned subsidiary of Calton
and the general partner of Talcon) determined that it was no
longer in the best interest of Talcon or its partners to
continue Talcon's business and dissolved the partnership. In
1995, the Company received $890,000 of payments in full
satisfaction of Talcon's debt obligations to the Company.
Competition
The Company's business is highly competitive.
Homebuilders compete for desirable properties, financing,
raw materials and skilled labor among other things. The
Company competes in each of the geographic areas in which it
operates with numerous real estate developers, ranging from
small local to larger regional and national builders and
developers, some of which have greater sales and financial
resources than the Company. Resales of housing provide
additional competition. The Company competes primarily on
the basis of value, reputation, price, location, design,
quality and amenities.
Regulation and Environmental Matters
The Company is subject to various local state and
federal statutes, ordinances, rules and regulations
concerning zoning, building design, construction and similar
matters, including local regulation which imposes
restrictive zoning and density requirements in order to
limit the number of homes that can eventually be built
within the boundaries of a particular locality. In addition,
the Company is subject to registration and filing
requirements in connection with the construction,
advertisement and sale of its communities in certain states
and localities in which it operates even if any or all
necessary government approvals have been obtained.
Generally, the Company must obtain numerous government
approvals, licenses, permits, and agreements before it can
commence development and construction. Certain governmental
authorities impose fees as a means of defraying the cost of
providing certain governmental services to developing areas,
or have required developers to donate land to the
municipality or make certain off-site land improvements. The
Company may also be subject to periodic delays or may be
precluded entirely from developing communities due to
building moratoriums that could be implemented in the future
in the states in which it operates. Generally, such
moratoriums relate to insufficient water or sewage
facilities or inadequate road capacity.
The Company is also subject to a variety of local,
state and federal statutes, ordinances, rules and
regulations concerning protection of health and the
environment ("environmental laws"). The particular
environmental laws which apply to any given community vary
greatly according to the community site, the site's
environmental conditions and the present and former uses of
the site. These environmental laws may result in delays, may
cause the Company to incur substantial compliance and other
costs, and can prohibit or severely restrict development in
certain environmentally sensitive regions or areas. For
example, in July 1987, New Jersey adopted the Fresh Water
Wetlands Protection Act which restricts building in or near
certain protected geographic areas designated as fresh water
wetlands. The preservation of wetlands located within a
project may lessen the number of units that may be built in
a particular project. The Company has planned all of its
projects containing wetlands to comply with the regulations
adopted under the Fresh Water Wetlands Protection Act and
does not believe that this legislation will adversely affect
its present development activities in New Jersey.
The State of Florida has adopted a wide variety of
other environmental protection laws. The laws regulate
developments of substantial size and developments in or near
certain specified geographic areas within the State of
Florida, including the Big Cypress, Green Swamp and Florida
Keys areas, imposing requirements for development approvals
which are more stringent than those which the Company would
have to meet in Florida for development outside of these
geographic areas. Further, the State of Florida regulates
certain types of developments located in or near certain
types of geographic areas, plant life or animal life. The
Company does not believe that any land owned by it that is
planned for development is the site of any protected plant
or animal life. Although the Company owns land in or near
certain protected types of geographic areas, the Company
designs its various communities to avoid disturbing such
areas so that certain regulations with respect to these
areas are not applicable. When the Company undertakes
development activity in or near or which may have an impact
on any protected areas, it is required to satisfy more
stringent requirements for developmental approval than would
otherwise be applicable. In addition, the laws of the State
of Florida require the use of construction materials which
reduce the energy consumption required for heating and
cooling.
The Florida Growth Management Act of 1985 requires
that an infrastructure, including roads, sewer and water
lines, must be in existence concurrently with the
construction of the development. If such infrastructure will
not be concurrently available, then the project cannot be
developed. This will have an effect on limiting the amount
of land available for development and may delay construction
and completion of some developments.
In July 1985, New Jersey adopted the Fair Housing Act
which established an administrative agency to adopt criteria
by which municipalities will determine and provide for their
fair share of low and moderate income housing ("Mt. Laurel"
housing). This agency promulgated regulations with respect
to such criteria effective August 1986. The Fair Housing Act
could result in the reduction in the number of homes
available for future New Jersey properties acquired.
The Company may be required to set aside Mt. Laurel
housing in certain municipalities in which it owns or has
the right to acquire land. In order to comply with such
requirements, the Company may be required to (i) sell some
homes at prices which would result in no gain or loss and an
operating margin less than would have resulted otherwise, or
(ii) contribute to public funding of affordable housing,
which contribution will increase the costs of homes to be
developed in a community. The Company attempts to recover
some of these potential losses or reduced margins through
increased density, certain cost saving construction and land
development measures and reduced land prices for the sellers
of property.
Despite the Company's past ability to obtain necessary
permits and development approvals for its communities, it
can be anticipated that increasingly stringent requirements
will be imposed on developers and homebuilders in the
future. Although the Company cannot predict the effect of
these requirements, they could result in time consuming and
expensive compliance programs and substantial expenditures
for pollution and water quality control, which could
materially adversely affect the Company. In addition, the
continued effectiveness of permits already granted or
development approvals already obtained is dependent upon
many factors, some of which are beyond the Company's
control, such as changes in policies, rules and regulations
and their interpretation and application.
The foregoing does not purport to be a full
description of all of the legislation and regulations
impacting the business of the Company. The Company may be
subject to numerous other governmental rules and regulations
regarding building standards, labor practices, environmental
matters and other aspects of real estate development in each
jurisdiction in which it does business.
Employees
As of February 1, 1996, the Company employed
approximately 112 full-time personnel, including 15
corporate employees, 58 employees in the Northeast Division,
32 employees in the Florida Division and 7 employees in the
Chicago Division. The Company also employs approximately 23
part-time employees in various locations. The Company
believes its employee relations are satisfactory.
Item 2. COMPANY FACILITIES
The Company leases approximately 19,413 square feet of
office space (of which 3,629 square feet are sublet to
tenants) and 6,200 square feet of storage space in a two-
story office building in Manalapan, New Jersey, which houses
the Company's corporate headquarters and its Northeast
division. In addition, the Company leases 7,200 square feet
of office space in Florida and 2,400 square feet of office
space in Illinois. Management believes that these
arrangements provide adequate space for the Company to
conduct its operations.
The Company also has remote sales offices and
construction offices on each of its project sites, some of
which include mobile units which are leased for terms
varying from one month to one year. From time to time the
Company also leases model homes in some of its communities
which the Company has previously sold to third parties under
a lease-back arrangement. The current leases on model homes
do not obligate the Company beyond six months.
Item 3. LEGAL PROCEEDINGS
In July 1994, an action was filed against Calton
Homes, Inc., the Township of Plainsboro, New Jersey and its
planning board, certain real estate brokers and certain
unnamed officers of Calton Homes, Inc., by approximately 60
purchasers in the Company's Princeton Manor development
seeking compensatory and punitive damages arising out of an
alleged failure to disclose that a portion of the property
adjacent to the community could be developed by Plainsboro
Township as a public works site. The Company is vigorously
contesting this matter and, although there can be no
assurances, does not believe that the case will have any
material effect on the financial condition or results of
operations of the Company. In addition, the Company believes
that it is contractually entitled to indemnification from
Plainsboro Township in the event that any liability should
arise.
Calton and its subsidiaries are involved from time to
time in routine litigation. Management does not believes
that any of this litigation is material to the financial
condition or results of operations of Calton and its
subsidiaries on a combined basis.
Calton's by-laws contain provisions which provide
indemnification rights to officers, directors and employees
under certain circumstances with respect to liabilities and
damages incurred in connection with any proceedings brought
against such persons by reason of their being officers,
directors or employees of Calton.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1995, no matter was
submitted to a vote of security holders through the
solicitation of proxies or otherwise.
Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive officers of the Company as of February
1, 1996 are listed below and brief summaries of their
business experience and certain other information with
respect to them is set forth in the following table and in
the information which follows the table.
Name Age Position
Anthony J. Caldarone 58 Chairman, President and Chief
Executive Officer
Robert A. Fourniadis 38 Senior Vice President-Legal
and Secretary
Bradley A. Little 44 Senior Vice President-Finance,
Treasurer and Chief
Financial Officer
Mr. Caldarone was reappointed as Chairman, President
and Chief Executive Officer of Calton in November 1995,
having previously served in such capacities from the
inception of the Company in 1981 through May 1993 when the
Company consummated the Reorganization. From June 1993
through October 1995, Mr. Caldarone served as a Director of
the Company.
Mr. Fourniadis was named Senior Vice President,
Secretary and Corporate Counsel of Calton in June 1993
following the consummation of the Reorganization. Prior
thereto, Mr. Fourniadis served as Vice President and
Corporate Counsel of Calton Homes from 1988 to 1993.
Mr. Little was named Senior Vice President, Treasurer
and Chief Financial Officer of Calton in June 1993 following
the consummation of the Reorganization. Prior thereto, Mr.
Little had served as Vice President of Accounting of Calton
from 1989 to June 1993.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Information pertaining to the market for the
Registrant's Common Stock, high and low sales prices of the
Common Stock in 1995 and 1994 and the number of holders of
Common Stock is presented on page 24 of the 1995 Annual
Report to Shareholders, which information is incorporated
herein by reference.
The Company has not paid dividends on its capital
stock in the past. In addition, the terms of the Facility
prohibits the payment of dividends.
Item 6. SELECTED FINANCIAL DATA
The financial highlights data is presented on page one
of the 1995 Annual Report to Shareholders, which information
is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item is presented on
pages 5 through 11 of the 1995 Annual Report to
Shareholders, which information is incorporated herein by
reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, including the
Report of Independent Accountants thereon and the unaudited
Quarterly Financial Results, are presented on pages 12
through 24 of the 1995 Annual Report to Shareholders, which
information is incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to Directors is incorporated
herein by reference to "Election of Directors" contained in
the Registrant's definitive proxy statement for the annual
meeting of shareholders to be held on April 23, 1996.
Certain information relating to executive officers of the
Company is set forth in Item 4A of Part I of this Form 10-K
under the caption "Executive Officers of the Registrant."
Item 11. EXECUTIVE COMPENSATION
Information pertaining to executive compensation is
incorporated herein by reference to "Election of Directors-
Executive Compensation" contained in the Registrant's
definitive proxy statement for the annual meeting of
shareholders to be held on April 23, 1996.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information pertaining to security ownership of
certain beneficial owners and management is incorporated
herein by reference to "Principal Shareholders" and
"Security Ownership of Management" from the Registrant's
definitive proxy statement for the annual meeting of
shareholders to be held on April 23, 1996.
Item 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Information relating to this item is incorporated
herein by reference to "Talcon, L.P. Transactions" and
"Certain Relationships and Related Party Transactions"
contained in the Registrant's definitive proxy statement for
the annual meeting of shareholders to be held on April 23,
1996.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
Page
(a) 1. and 2. Financial statements and financial statement schedules
Reference is made to the Index of
Financial Statements and Financial
Statement Schedules hereinafter contained F-1
3. Exhibits
Reference is made to the Index of
Exhibits hereinafter contained F-5
and
F-6
(b) Reports on Form 8-K
(i) On October 25, 1995, the Company filed a
report on Form 8-K to report the resignation
of Anthony J. Caldarone, as a Director of
Calton, Inc. effective October 24, 1995.
(ii) On November 21, 1995, the Company filed
a report on Form 8-K to report (a) a
material change in stock ownership and
voting rights of the Company; (b) the
election of Anthony J. Caldarone to
President, Chief Executive Officer and
Chairman of the Board of Directors of
the Company; (c) the resignation of
Douglas T. Noakes as President, Chief
Executive Officer and Director of the
Company; and (d) the resignation of
certain Board Members and the election
of one Board Member.
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.
CALTON, INC.
(Registrant)
By: /s/ Bradley A. Little
BRADLEY A. LITTLE,
Senior Vice President-Finance
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the date indicated.
Signature Title Date
/s/ Anthony J. Caldarone Chairman, Chief February 28, 1996
(Anthony J. Caldarone) Executive Officer
and President
(Principal Executive
Officer)
/s/ Bradley A. Little Senior Vice President February 28, 1996
(Bradley A. Little) Finance & Treasurer
(Principal Financial
& Accounting Officer)
/s/ J. Ernest Brophy Director February 28, 1996
(J. Ernest Brophy)
/s/ Mark N. Fessel Director February 28, 1996
(Mark N. Fessel)
/s/ Frank Cavell Smith, Jr. Director February 28, 1996
(Frank Cavell Smith, Jr.)
CALTON, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
Page
Number
Consolidated Balance Sheet at November 30, 1995 and 1994. . . . . . . . . . *
Consolidated Statement of Income for the years ended
November 30, 1995 and 1994, and the six month
periods ended November 30, 1993 and May 31, 1993 . . . . . . . . . . . . *
Consolidated Statement of Cash Flows for the years
ended November 30, 1995 and 1994, and the six
month periods ended November 30, 1993 and May 31, 1993 . . . . . . . . . *
Consolidated Statement of Shareholders' Equity for the
years ended November 30, 1995 and 1994, and the six
month periods ended November 30, 1993 and May 31, 1993 . . . . . . . . . *
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . *
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . *,F-2
Consent of Independent Accountants . . . . . . . . . . . . . . . . . . . . F-3
Schedules**
II-Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . F-4
* The financial statements and notes thereto together
with the Report of Independent Accountants on pages 12
through 24 of the 1995 Annual Report to Shareholders
are incorporated herein by reference.
** Schedules other than the schedule listed above have
been omitted because of the absence of the conditions
under which they are required or because the required
information is presented in the financial statements or
the notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the consolidated financial statements of Calton,
Inc. and Subsidiaries, dated January 12, 1996, on our audits of
the consolidated financial statements which includes an
explanatory paragraph regarding the financial statements at May
31, 1993 being reflected at estimated fair market value in
accordance with the American Institute of Certified Public
Accountants Statement of Position 90-7 and the financial
statements for the years ended November 30, 1995 and 1994 and the
six month period ended November 30, 1993 are not comparable to
May 31, 1993 and prior thereto, has been incorporated by
reference in this Form 10-K from page 24 of the 1995 Annual
Report to Shareholders of Calton, Inc. In connection with our
audits of such financial statements, we have also audited the
related financial statement schedules listed in the Index on page
F-1 of this Form 10-K.
In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
Coopers & Lybrand L.L.P.
/s/Coopers & Lybrand
Princeton, New Jersey
January 12, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statements of Calton, Inc. and Subsidiaries on Form S-8 (Nos. 33-
35176 and 33-75184) of our report which includes an explanatory
paragraph regarding the financial statements at May 31, 1993
being reflected at estimated fair market value in accordance with
the American Institute of Certified Public Accountants Statement
of Position 90-7 and the financial statements for the years ended
November 30, 1995 and 1994 and the six month period ended
November 30, 1993 are not comparable to May 31, 1993 and prior
thereto, dated January 12, 1996 on our audits of the consolidated
financial statements and financial statement schedules of Calton,
Inc. and Subsidiaries as of November 30, 1995 and 1994 and for
the years ended November 30, 1995 and 1994 and the six month
periods ended November 30, 1993 and May 31, 1993 which report has
been incorporated by reference in this Annual Report on Form 10-
K.
Coopers & Lybrand L.L.P.
/s/Coopers & Lybrand
Princeton, New Jersey
February 27, 1996
SCHEDULE II
<TABLE>
CALTON, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Amounts in Thousands)
<CAPTION>
Additions
Balance at Charged to Charge to Balance
Beginning Costs and Other At End
Description of Period Expenses Accounts Deductions of Period
<S> <C> <C> <C> <C> <C>
Six month period ended
May 31, 1993:
Net realizable value
reserves for inventory $12,884 $ 2,200 $23,517 (A) $38,601 (B) $ --
Valuation allowance for net
deferred tax asset $21,798 $18,722 (C) $ -- $ -- $40,520
Six month period ended
November 30, 1993:
Net realizable value
reserves for inventory $ -- $ -- $ -- $ -- $ --
Valuation allowance for net
deferred tax asset $40,520 $ -- $ 1,451 $ 2,606 $39,365
Year ended November 30, 1994:
Net realizable value
reserves for inventory $ -- $ 400 $ -- $ -- $ 400
Valuation allowance for net
deferred tax asset $39,365 $ -- $ -- $ 2,473 $36,892
Year ended November 30, 1995:
Net realizable value
reserves for inventory $ 400 $ 1,593 $ -- $ -- $ 1,993
Valuation allowance for net
deferred tax asset $36,892 $ -- $ -- $18,245 (D) $18,647
</TABLE>
(A) Represents $23,517,000 of fresh-start reserves charged to Reorganization
Costs.
(B) Represents the revaluation of inventory to reflect estimated fair market
value in accordance with the American Institute of Certified Public
Accountants Statement of Position 90-7.
(C) Represents amounts attributable to pre-reorganization deductible
temporary differences.
(D) Represents the impact of the recalculation of the Section 382 limitation
and the utilization against taxable income attributable to Talcon, L.P.
INDEX TO EXHIBITS
2. Plan of Reorganization of the Registrant and Subsidiaries
incorporated by reference to Exhibit 2 to Amendment No. 1 to
Form S-1 Registration Statement under the
Securities act of 1933, Registration No. 33-60022.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant filed with the Secretary of State, State of New Jersey
on May 28, 1993, incorporated by reference to Exhibit 3.2 to
Amendment No. 1 to Form S-1 Registration Statement under the
Securities Act of 1933, Registration No. 33-60022 and Certificate
Amendment to Amended and Restated Certificate of Incorporation of
Registrant filed with the Secretary of State, State of New Jersey
on April 27, 1994, incorporated by reference to Exhibit
3(b) to Form S-1 Registration Statement under the Securities
Act of 1933, Registration No. 33-76312.
3.2 By Laws of Registrant, as amended, incorporated by reference to
Exhibit 3.1 of Form 10-K of Registrant for the fiscal year ended
November 30, 1990.
4. Amended and Restated Loan and Security Agreement dated as of May 28,
1993, among the Registrant, Calton Funding, Inc. and a group of
financial institutions, incorporated by reference to Exhibit 4 to
Amendment No. 1 to Form S-1 Registration Statement under
the Securities Act of 1933, Registration No. 33-60022, the First,
Second and Third Amendments to such Amended and Restated Loan and
Security Agreement, incorporated by reference to Exhibit 4 to
Form 10-K of Registrant for the fiscal year ended November
30, 1993, Fourth Amendment to such Amended and Restated Loan
Agreement, incorporated by reference to Exhibit 10.7(b) to Amendment
No. 2 to Form S-1 Registration Statement under the Securities Act of
1933, Registration No. 33-76312,Fifth Amendment to such Amended and
Restated Loan and Security Agreement incorporated by reference to
Exhibit 4 to Form 10-K of Registrant for the fiscal year ended November
30, 1994, Sixth Amendment to such Loan and Security Agreement and
Seventh Amendment to such Loan and Security Agreement.
10.1 Registration Rights Agreement dated as of May 28, 1993 between
the Registrant and certain securityholders, incorporated by reference
to Exhibit 10.1 to Amendment No. 1 to Form S-1 Registration Statement
under the Securities Act of 1933, Registration No. 33-60022.
(*)10.3 Registrant's Amended and Restated 1993 Non-Qualified Stock Option Plan.
(*)10.4 Incentive Compensation Plan of Registrant incorporated by
reference to Exhibit 10.4 of Form 10-K of Registrant for the fiscal
year ended November 30, 1994.
(**)10.5 Executive Employment Agreement dated as of January 26, 1994
between Registrant and Douglas T. Noakes incorporated by reference
to Exhibit 10.6 of Form 10-K of Registrant for the fiscal year ended
November 30, 1993 and Amendment thereto dated November 21, 1995.
(*)10.6 Severance Policy for Senior Executives of Registrant
incorporated by reference to Exhibit 10.6 of Form 10-K of
Registrant for the fiscal year ended November 30, 1994.
(**)10.7 Executive Employment Agreement dated as of November 21, 1995
between Registrant and Anthony J. Caldarone.
(**)10.8 Supplemental Executive Compensation Agreement dated as of May
12, 1995 between the Registrant and Douglas T. Noakes.
(**)10.9 Supplemental Executive Compensation Agreement dated as of May
12, 1995 between the Registrant and Bradley A. Little. An agreement
substantially identical in term and content and executed by the
Registrant and Robert A. Fourniadis has not been reproduced herein.
13. Certain pages of Registrant's 1995 Annual Report to Shareholders which,
except for those portions expressly incorporated herein by
reference, are not deemed filed a part hereof.
21. Subsidiaries of the Registrant.
27. Financial Data Schedule.
(*) Constitutes a compensatory plan required to be filed as an
exhibit pursuant to Item 14(c) of Form 10-K.
(**) Constitutes a management contract required to be filed pursuant
to Item 14(c) of Form
10-K SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
filed with
ANNUAL REPORT
on
FORM 10-K
CALTON, INC.
1995
CALTON, INC.
FORM 10-K
FOR FISCAL YEAR ENDED NOVEMBER 30, 1995
EXHIBIT 4
SIXTH AND SEVENTH AMENDMENT TO AMENDED AND RESTATED LOAN
AND SECURITY AGREEMENT DATED MAY 31, 1995 AND
FEBRUARY 23, 1996, RESPECTIVELY
SIXTH AMENDMENT TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This SIXTH AMENDMENT TO AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT (this "Sixth Amendment") is dated as of May
31, 1995 and entered into by and among Calton, Inc., a New Jersey
corporation ("Company"), Calton Funding, Inc., a New Jersey
corporation (together with Company, the "Borrowers"), the
subsidiaries of Company listed on the signature pages hereof as
guarantors (the "Guarantors"), the financial institutions listed
on the signature pages hereof ("Lenders") and Chemical Bank, as
agent for Lenders ("Agent") and as collateral agent for Lenders
("Collateral Agent") and is made with reference to that certain
Amended and Restated Loan and Security Agreement dated as of May
28, 1993 (such agreement, as amended through the date hereof and
as it may hereafter be amended from time to time, the "Amended
Loan Agreement"), by and among Borrowers, Guarantors, Lenders,
Agent and Collateral Agent. Capitalized terms used herein
without definition shall have the same meanings herein as set
forth in the Amended Loan Agreement.
RECITALS
WHEREAS, the Amended Loan Agreement has heretofore been
amended by the First Amendment to Amended and Restated Loan and
Security Agreement dated as of September 27, 1993, the Second
Amendment to Amended and Restated Loan and Security Agreement
dated as of October 14, 1993, the Limited Waiver, Release and
Consent Regarding Sale of Lancot Mortgage Co., Inc., dated as of
October 14, 1993, the Third Amendment to Amended and Restated
Loan and Security Agreement dated as of January 19, 1994, the
Fourth Amendment to Amended and Restated Loan and Security
Agreement dated as of February 28, 1994, the Joinder Agreement
dated as of June 1, 1994 entered into by Pennway Joint Venture,
L.P. in favor of the Collateral Agent (for the benefit of the
Lenders), the Joinder Agreement, Amendment and Limited Waiver
(Calton Homes of Chicago, Inc.) dated as of September 12, 1994,
and the Amendment to Amended and Restated Loan and Security
Agreement dated as of February 23, 1995; and
WHEREAS, Credit Parties and Lenders now desire to amend the
Amended Loan Agreement to (i) modify certain financial covenants,
and (ii) make certain other amendments as set forth below, all in
accordance with the terms hereof;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the
parties hereto agree as follows:
Section 1. AMENDMENTS TO THE AMENDED LOAN AGREEMENT
1.1. Amendments to Section 1: Provisions Relating to
Defined Terms.
Subsection 1.1 of the Amended Loan Agreement is
hereby amended by adding the following definitions thereto in
alphabetical order:
"Consolidated Cash Interest Expense" means, for
any person, Consolidated Interest Expense but excluding, however,
amortization of discount, deferred financing costs and interest
expense not payable in cash.
"Sixth Amendment" means the Sixth Amendment to
Amended and Restated Loan and Security Agreement dated
as of June 30, 1995 by and among Borrowers, Guarantors,
Lenders, Agent and Collateral Agent.
"Sixth Amendment Effective Date" means the date on
which the Sixth Amendment has become effective in
accordance with its terms.
1.2. Amendments to Section 7; Negative Covenants.
A. Subsection 7.4 of the Amended Loan Agreement
is hereby amended by deleting clause (vii) of subsection 7.4 and
replacing it with the following:
"(vii) the Credit Parties may become liable with
respect to Contingent Obligations in respect of
performance and surety bonds incurred in the ordinary
course of business and customary indemnification
obligations to bonding companies incurred in connection
with the issuance of such bonds; provided that the
aggregate amount of such Contingent Obligations does
not at any time exceed $45,000,000."
B. Subsection 7.6A of the Amended Loan Agreement
is amended by deleting such subsection and replacing it with the
following:
"A. Minimum Consolidated Adjusted EBITDA. The
Credit Parties shall not permit Consolidated Adjusted
EBITDA for the four quarter periods ending on the dates
set forth below to be less than the correlative amount
indicated:
Minimum Consolidated
DATE Adjusted EBITDA
May 31, 1995 $9,000,000
August 31, 1995 $9,000,000
November 30, 1995 $8,500,000
February 28, 1996 $9,000,000
May 31, 1996 $9,500,000
August 31, 1996 $9,000,000
November 30, 1996 $9,500,000
C. Subsection 7.6B of the Amended Loan Agreement
is hereby amended by deleting such subsection and replacing it
with the following:
"B. Minimum Consolidated Adjusted Tangible Net
Worth. The Credit Parties shall not permit
Consolidated Adjusted Tangible Net Worth as of each of
the dates set forth below to be less than the
correlative amount indicated:
Minimum Consolidated
Date Adjusted Tangible Net Worth
May 31, 1995 $22,056,000
August 31, 1995 $22,657,000
November 30, 1995 $23,179,000
February 28, 1996 $23,206,000
May 31, 1996 $23,386,000
August 31, 1996 $23,800,000
November 30, 1996 $24,694,000
D. Subsection 7.6C of the Amended Loan Agreement
is hereby amended by deleting such subsection and replacing it
with the following:
"C. Minimum Consolidated Interest Expense
Coverage Ratio. The Credit Parties shall not permit
the ratio of (i) Consolidated Adjusted EBITDA to (ii)
Consolidated Cash Interest Expense for the four fiscal
quarter periods ending on the dates set forth below to
be less than the correlative amount indicated:
Period Minimum Interest Coverage
May 31, 1995 1.40
August 31, 1995 1.20
November 30, 1995 1.10
February 28, 1996 1.10
May 31, 1996 1.15
August 31, 1996 1.15
November 30, 1996 1.25
E. Subsection 7.8C of the Amended Loan Agreement
is hereby amended by deleting the table set forth therein and
substituting the following therefor:
Maximum Consolidated Land
"Fiscal Year Acquisition Costs
1995 $20,000,000
1996 $20,000,000
1997 (first quarter) $ 6,000,000
F. Subsection 7.8D of the Amended Loan Agreement
is hereby amended by deleting the table set forth therein and
substituting the following therefor:
Maximum Consolidated Land
"Fiscal Year Development Costs
1995 $22,000,000
1996 $12,000,000
1997 (first quarter) $ 4,000,000
1.3. Amendment to Schedule 2.1: Lender Commitments.
A. Schedule 2.1 of the Amended Loan Agreement is
hereby amended by deleting "Altus Finance" from the list of
Tranche B Lenders and replacing it with "Artemis America
Partnership."
B. This Amendment to Schedule 2.1 shall become
effective on the later of (i) the effective date as determined by
Section 2 of this Sixth Amendment, below, or (ii) the date that
an assignment and assumption from Altus Finance to Artemis
America Partnership becomes effective, as provided by any
Assignment and Assumption Agreement substantially in the form of
Exhibit C of the Amended Loan Agreement, which is accepted by the
Agent as provided by Section 11.1 of the Amended Loan Agreement.
Section 2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Sixth Amendment shall become
effective only upon the satisfaction of all of the following
conditions precedent (the date of satisfaction of such conditions
being referred to herein as the "Sixth Amendment Effective
Date"):
A. On or before the Sixth Amendment Effective
Date, Credit Parties shall deliver to Lenders (or to Agent for
Lenders with sufficient originally executed copies, where
appropriate, for each Lender and its counsel) the following,
each, unless otherwise noted, dated the Sixth Amendment Effective
Date:
1. For each of the Borrowers, Calton Homes, Inc.,
Calton Homes of Florida, Inc., Calton Homes of
Pennsylvania, Inc. and Calton Homes of Chicago, Inc.,
(a) certified copies of its Certificate of
Incorporation, and (b) good standing certificates from
the state of its organization and each other state
where it owns assets or otherwise conducts business,
each dated a recent date prior to the Sixth Amendment
Effective Date;
2. For each of the Borrowers, Calton Homes, Inc.,
Calton Homes of Florida, Inc., Calton Homes of
Pennsylvania, Inc. and Calton Homes of Chicago, Inc.,
copies of its Bylaws, certified as of the Sixth
Amendment Effective Date by its corporate secretary or
an assistant secretary;
3. Resolutions of its Board of Directors or, in
the case of a Credit Party which is not a corporation,
resolutions of the Board of Directors of the general
partner or other Person authorized to act on its
behalf, approving and authorizing the execution,
delivery and performance of this Sixth Amendment,
certified as of the Sixth Amendment Effective Date by
its corporate secretary or an assistant secretary as
being in full force and effect without modification or
amendment; and
4. Signature and incumbency certificates of its
officers executing this Sixth Amendment, certified as
of the Sixth Amendment Effective Date by its corporate
secretary or assistant secretary;
5. Executed copies of this Sixth Amendment.
B. Borrowers shall have paid an amendment fee to
Agent (for the ratable benefit of the Lenders) in an amount equal
to $25,000, as compensation to the Lenders in connection with the
Sixth Amendment, and all other fees, costs and expenses of Agent
(including fees and expenses of counsel for Agent) and Lenders
accrued and unpaid as of the Sixth Amendment Effective Date.
C. On or before the Sixth Amendment Effective
Date, all corporate and other proceedings taken or to be taken in
connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by
Agent, acting on behalf of Lenders, and its counsel shall be
satisfactory in form and substance to Agent and such counsel, and
Agent and such counsel shall have received all such counterpart
originals or certified copies of such documents as Agent may
reasonable request.
Section 3. CREDIT PARTIES' REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Sixth
Amendment and to amend the Amended Loan Agreement in the manner
provided herein, each Credit Party represents and warrants to
each Lender that the following statements are true, correct and
complete:
A. Corporate Power and Authority. Such Credit
Party has all requisite corporate or partnership power and
authority to enter into this Sixth Amendment and to carry out the
transactions contemplated by, and perform its obligations under,
the Amended Loan Agreement as amended by this Sixth Amendment
(the "Amended Agreement").
B. Authorization of Agreements. The execution
and delivery by such Credit Party of this Sixth Amendment and the
performance by such Credit Party of the Amended Agreement have
been duly authorized by all necessary corporate or partnership
action on the past of such Credit Party, as the case may be.
C. No Conflict. The execution and delivery by
such Credit Party of this Sixth Amendment and the performance by
such Credit Party of the Amended Agreement do not and will not
(i) violate any provision of any law or any governmental rule or
regulation applicable to such Credit Party or any of its
Subsidiaries, or any order, judgment or decree of any court or
other agency of government binding on such Credit Party or any of
its Subsidiaries, (ii) violate any provision of the Certificate
or Articles of Incorporation or Bylaws of such Credit Party if it
is a corporation or of its general partner or such other person
or persons authorized to act on its behalf if it is not a
corporation, (iii) violate any provision of its partnership,
joint venture or similar organizational agreement if it is not a
corporation, (iv) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default
under any Contractual Obligation of such Credit Party or any of
its Subsidiaries, (v) result in or require the creation or
imposition of any Lien upon any of the properties or assets of
such Credit Party or any of its Subsidiaries (other than any
Liens created under any of the Loan Documents in favor of
Collateral Agent on behalf of Lenders), or (vi) require any
approval of stockholders or partners or any approval or consent
of any Person under any Contractual Obligation of such Credit
Party or any of its Subsidiaries, except for such approvals or
consents which have been obtained on or before the Sixth
Amendment Effective Date and disclosed in writing to Lenders.
D. Governmental Consents. The execution and
delivery by such Credit Party of this Sixth Amendment and the
performance by such Credit Party of the Amended Agreement do not
and will not require any registration with, consent or approval
of, or notice to, or other action to, with or by, any federal,
state or other governmental authority or regulatory body.
E. Binding Obligation. This Sixth Amendment, the
Amended Agreement have been duly executed and delivered by each
of the Credit Parties party thereto and are the legally valid and
binding obligations of each such Credit Party, enforceable
against such Credit Party in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or
limiting creditors' rights generally or by equitable principles
relating to enforceability.
F. Incorporation of Representations and
Warranties From Amended Loan Agreement. The representations and
warranties contained in Section 5 of the Amended Loan Agreement
are and will be true, correct and complete in all material
respects on and as of the Sixth Amendment Effective Date to the
same extent as though made on and as of that date, except to the
extent such representations and warranties specifically relate to
an earlier date, in which case they were true, correct and
complete in all material respects on and as of such earlier date.
G. Absence of Default. No event has occurred and
is continuing or will result from the consummation of the
transactions contemplated by this Sixth Amendment that would
constitute an Event of Default or a Potential Event of Default.
Section 4. ACKNOWLEDGEMENT AND CONSENT
Borrowers are each party to the Borrower Security
Agreement, the Borrower Pledge Agreement, the Account Collateral
Security Agreement and certain other Security Documents, in each
case as amended through the Sixth Amendment Effective Date,
pursuant to which Borrowers have created Liens in favor of
Collateral Agent on certain Collateral to secure the Obligations
of the Borrowers. Each Guarantor is a party to the Amended
Guaranty Agreement and certain Guarantors are parties to the
Guarantor Security Agreement, the Guarantor Pledge Agreement, the
Account Collateral Security Agreement certain Mortgages, and/or
certain other Security Documents, in each case as amended through
the Sixth Amendment Effective Date, pursuant to which such
Guarantor has (i) guaranteed the Obligations of the Borrowers and
(ii) created Liens in favor of Collateral Agent on certain
Collateral to secure the Obligations of such Guarantor under the
Amended Guaranty Agreement. Borrowers and Guarantors are
collectively referred to herein as the "Credit Support Parties",
and the Amended Guaranty Agreement and the Security Documents are
collectively referred to herein as the "Credit Support
Documents".
Each Credit Support Party hereby acknowledges that it
has reviewed the terms and provisions of this Sixth Amendment and
consents to the amendments effected pursuant to this Sixth
Amendment. Each Credit Support Party hereby confirms that each
Credit Support Document to which it is a party or otherwise bound
and all Collateral encumbered thereby will continue to guaranty
or secure, as the case may be, to the fullest extent possible the
payment and performance of all "Obligations," "Guarantied
Obligations" and "Secured Obligations," as the case may be (in
each case as such terms are defined in the applicable Credit
Support Document), including without limitation the payment and
performance of all such "Obligations," "Guarantied Obligations"
or "Secured Obligations," as the case may be, in respect of the
Obligations of Borrowers now or hereafter existing under or in
respect of the Amended Agreement and the other Loan Documents.
Each Credit Support Party acknowledges and agrees that
each of the Credit Support Documents to which it is a party or
otherwise bound shall continue in full force and effect and that
all of its obligations thereunder shall be valid and enforceable
and shall not be impaired or limited by the execution or
effectiveness of this Sixth Amendment.
Section 5. MISCELLANEOUS
A. Reference to and Effect on the Amended Loan
Agreement and the Other Loan Documents.
(i) On and after the Sixth Amendment Effective
Date, each reference in the Amended Loan Agreement to
"this Agreement", "hereunder", "hereof", "herein" or
words of like import referring to the Amended Loan
Agreement, and each reference in the other Loan
Documents to the "Amended Loan Agreement",
"thereunder", "thereof" or words of like import
referring to the Amended Loan Agreement shall mean and
be a reference to the Amended Agreement.
(ii) Except as specifically amended by this Sixth
Amendment, the Amended Loan Agreement and the other
Loan Documents shall remain in full force and effect
and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of
this Sixth Amendment shall not constitute a waiver of
any provision of, or operate as a waiver of any right,
power or remedy of Agent, Collateral Agent or any
Lender under, the Amended Loan Agreement or any of the
other Loan Documents.
B. Fees and Expenses. Borrowers acknowledge that all
costs, fees and expenses as described in subsection 11.2 of the
Amended Loan Agreement incurred by Agent, Collateral Agent,
Lenders and their counsel with respect to this Sixth Amendment
and the documents and transactions contemplated hereby shall be
for the account of Borrowers.
C. Headings. Section and subsection headings in this
Sixth Amendment are included herein for convenience of reference
only and shall not constitute a part of this Sixth Amendment for
any other purpose or be given any substantive effect.
D. Applicable Law. THIS SIXTH AMENDMENT SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
E. Counterparts; Effectiveness. This Sixth Amendment
may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same
instrument; signature pages may be detached from multiple
separate counterparts and attached to a single counterpart so
that all signature pages are physically attached to the same
document. This Sixth Amendment shall become effective upon the
execution of a counterpart hereof by each Lender (or, in the case
of Tranche B Lenders, each such Lender which is not a Deemed
Voting Lender) and each of the other parties hereto, receipt by
Company and Agent of written or telephonic notification of such
execution and authorization of delivery thereof and satisfaction
or waiver by each Lender (or, in the case of Tranche B Lenders,
each such Lender which is not a Deemed Voting Lender) of the
conditions to effectiveness set forth in Section 2 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Sixth Amendment to be duly executed and delivered by their
respective officers thereunto duly authorized as of the date
first written above.
BORROWERS:
CALTON, INC.
By:/s/Robert A. Fourniadis
Title: Senior Vice President
CALTON FUNDING, INC.
By:/s/ Robert A. Fourniadis
Title: Senior Vice President
GUARANTORS:
(2) Calton California Equity Corp.
Calton Capital, Inc.
Calton Capital II, Inc.
Calton General, Inc.
(1) Calton Homes, Inc.
Calton Homes of California, Inc.
(2) Calton Homes of Florida, Inc.
(1) Calton Homes of Pennsylvania, Inc.
(1) Calton Homes of Pennsylvania
at Pennway, Inc.
(2) Calton Homes of Tampa, Inc.
Calton Lindenwood Corporation
Calton Manzanita Corporation
Calton Tamarack Corporation
Calcap Commercial Management, Inc.
Calcap X, Inc.
Calcap XV, Inc.
Calcap XXXI, Inc.
Calcap XXXII, Inc.
Calcap XXXIII, Inc.
Calcap 36, Inc.
Calcap 42, Inc.
Calcap 48, Inc.
(1) Calton Homes of Chicago, Inc.
Each by:/s/ Robert A. Fourniadis
Title:(1) Senior Vice President
(2) Vice President
President of all others
Calton Homes Finance, Inc.
Calton Homes Finance II, Inc.
Each by:/s/ Robert A. Fourniadis
Title: Senior Vice President
Talcon Title Agency, L.P.
By: Calton General, Inc.,
its General Partner
By: /s/ Robert A. Fourniadis
Title: President
Talpro 31, L.P.
By: Calcap XXXI, Inc.,
its General Partner
By: /s/ Robert A. Fourniadis
Title: President
Talpro 32, L.P.
By: Calcap XXXII, Inc.,
its General Partner
By: /s/ Robert A. Fourniadis
Title: President
Talpro 33, L.P.
By: Calcap XXXIII, Inc.,
its General Partner
By: /s/ Robert A. Fourniadis
Title: President
Talpro 48, L.P.
By: Calcap 48, Inc.,
its General Partner
By:/s/ Robert A. Fourniadis
Title: President
Talpro 36, L.P.
By: Calcap 36, Inc.,
its General Partner
By: /s/ Robert A. Fourniadis
Title: President
LENDERS:
CHEMICAL BANK, Individually and as
Agent and Collateral Agent
By: /s/ Jane E. Orndahl
Title: Vice President
KLEINWORT BENSON LIMITED,
as a Lender
By: /s/ Iain Leigh
Title: Senior Vice President
ALTUS FINANCE,
as a Lender
By: Lion Advisors, L.P.
Its: Attorney-in-Fact
By: Lion Capital Management, Inc.
Its: General Partner
By:/s/ Peter Copses
Title:___________________
AIF II, L.P.,
as a Lender
By: Apollo Advisors, L.P.
Its: Managing General Partner
By: Apollo Capital Management, Inc.
Its: General Partner
By:/s/ Peter Copses
Title:___________________
BELMONT FUND, L.P., as a Lender
By: Fidelity International Services
Limited
Its: Managing General Partner
By: Fidelity Management Trust
Company (acting pursuant to a
power of attorney)
By:/s/ Daniel J. Harmetz
Title: Senior Vice President
FIDELITY CAPITAL & INCOME FUND,
as a Lender
By:/s/ John H. Costello
Title: Assistant Treasurer
By:______________________
Title:___________________
PEARL STREET, L.P., as a Lender
By:/s/Robert O'Shea
Title: Authorized Signer
By:______________________
Title:___________________
CALTON, INC.
FORM 10-K
FOR FISCAL YEAR ENDED NOVEMBER 30, 1995
EXHIBIT 4
SEVENTH AMENDMENT TO AMENDED AND RESTATED LOAN
AND SECURITY AGREEMENT
DATED FEBRUARY 23, 1996
SEVENTH AMENDMENT TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This SEVENTH AMENDMENT TO AMENDED AND RESTATED LOAN AND
RESTATED LOAN AND SECURITY AGREEMENT (this "Seventh Amendment")
is dated as of February 23, 1996 and entered into by and among
Calton, Inc., a New Jersey corporation ("Company"), Calton
Funding, Inc., a New Jersey corporation (together with Company,
the "Borrower"), the subsidiaries of Company listed on the
signature pages hereof as guarantors (the "Guarantors"), the
financial institutions listed on the signature pages hereof
("Lenders") and Chemical Bank, as agent for Lenders ("Agent") and
as collateral agent for Lenders ("Collateral Agent") and is made
with reference to that certain Amended and Restated Loan and
Security Agreement dated as of May 18, 1993 (such agreement, as
amended through the date hereof and as it may hereafter be
amended from time to time, the "Amended Loan Agreement"), by and
among Borrowers, Guarantors, Lenders, Agent and Collateral Agent.
Capitalized terms used herein without definition shall have the
same meanings herein as set forth in the Amended Loan Agreement.
RECITALS
WHEREAS, the Amended Loan Agreement has heretofore been
amended by the First Amendment to Amended and Restated Loan and
Security Agreement dated as of September 27, 1993; the Second
Amendment to Amended and Restated Loan and Security Agreement
dated as of October 14, 1993; the Limited Waiver, Release and
Consent Regarding Sale of Lancot Mortgage Co., Inc., dated as of
October 14, 1993; the Third Amendment to Amended and Restated
Loan and Security Agreement dated as of January 19, 1994; the
Fourth Amendment to Amended and Restated Loan and Security
Agreement dated as of February 28, 1994; the Joinder Agreement
dated as of June 1, 1994 entered into by Pennway Joint Venture,
L.P. in favor of the Collateral Agent (for the benefit of the
Lenders); the Joinder Agreement, Amendment and Limited Waiver
(Calton Homes of Chicago, Inc.) dated as of September 12, 1994;
and the Fifth Amendment to Amended and Restated Loan and Security
Agreement dated as of February 23, 1995; and the Sixth Amendment
to Amended and Restated Loan and Security Agreement dated as of
May 31, 1995;
WHEREAS, Credit Parties and Lenders now desire to amend the
Amended Loan Agreement to (i) modify certain financial covenants,
and (ii) make certain other amendments as set forth below, all in
accordance with the terms hereof; and
WHEREAS, at the request of Credit Parties, the Lenders wish
to authorize the Collateral Agent to execute such documents as
are necessary to release any Liens on the property described on
Exhibit A hereto (the "Placer Property") created by the Mortgages
or otherwise;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the
parties hereto agree as follows:
Section 1. AMENDMENTS TO THE AMENDED LOAN AGREEMENT
1.1 Amendments to Section 1: Provisions Relating to Defined
Terms.
A. Subsection 1.1 of the Amended Loan Agreement is
hereby amended by adding the following definitions thereto in
alphabetical order:
"Seventh Amendment" means the Seventh Amendment to
Amended and Restated Loan and Security Agreement dated
as of February 23, 1996 by and among Borrowers,
Guarantors, Lenders, Agent and Collateral Agent.
"Seventh Amendment Effective Date"means the date
on which the Seventh Amendment has become effective in
accordance with its terms.
B. Subsection 1.1 of the Amended Loan Agreement is
hereby further amended by deleting the definitions of Base Rate
and Excluded Properties therefrom and replacing them with the
following:
"Base Rate" means, at any time, the Prime Rate plus 2%
per annum.
"Excluded Properties" means each of the properties
listed on Schedule 1 to the Seventh Amendment.
1.2 Amendment to Section 2
A. Tranche A Commitments. Subdivision (i) of
subsection 2.1A of the Amended Loan Agreement is hereby amended
by deleting the third sentence thereto and replacing it with the
following:
"The amount of each Tranche A Lender's Commitment as of
the Seventh Amendment Effective Date is set forth
opposite its name on Schedule 2.1 to the Seventh
Amendment and the aggregate Tranche A Commitments as of
the Seventh Amendment Effective Date are $42,625,000;
provided, that (i) the amount of the Tranche A
Commitments shall be reduced from time to time by the
amount of any reductions thereto made pursuant to
subsection 2.4 and (ii) as of November 1, 1996, the
aggregate Tranche A Commitments shall be reduced to
$38,750,000 to the extent such aggregate Tranche A
Commitments have not theretofore been reduced below
$38,750,000.
B. Tranche B. Commitments. Subdivision (ii) of
subsection 2.1A of the Amended Loan Agreement is hereby amended
by deleting the third sentence thereto and replacing it with the
following:
"The amount of each Tranche B Lender's Commitment as of
the Seventh Amendment Effective Date is set forth
opposite its name on Schedule 2.1 to the Seventh
Amendment and the aggregate Tranche B Commitments as of
the Seventh Amendment Effective Date are $12,375,000;
provided, that (i) the amount of the Tranche B
Commitments shall be reduced from time to time by the
amount of any reductions thereto made pursuant to
subsection 2.4 and (ii) as of November 1, 1996, the
aggregate Tranche B Commitments shall be reduced to
$11,250,000 to the extent such aggregate Tranche A
Commitments have not theretofore been reduced below
$11,250,000."
C. Elimination of Scheduled Reductions. Subdivision
(i) of subsection 2.4C of the Amended Loan Agreement is hereby
amended by deleting it in its entirety and replacing it with the
following:
"(i) [Intentionally Omitted]."
D. Modification of Commitment Reductions from Assets
Sales. Subdivision (i) of subsection 2.4C of the Amended Loan
Agreement is hereby amended by deleting such subdivision and
replacing it with the following:
"(ii) Reductions from Assets Sales. No later than the
Second Business Day following the date of receipt by Company
or any of its Subsidiaries of Cash Proceeds of any Asset
Sale, the Commitments shall be permanently reduced in an
amount equal to 75% of the Net Cash Proceeds of such Asset
Sale provided, however, that the reduction in the
Commitments set forth in this Section 2.4C(ii) shall not
apply with respect to the sale of (i) an Excluded Property
or (ii) any real property purchased by the Borrowers or any
of their Subsidiaries after the Seventh Amendment Effective
Date, if, prior to consummation of such purchase, (x) the
Borrower or Subsidiary, as the case may be, has entered into
one or more valid and binding written agreements to sell
such real property to one or more third party purchasers not
affiliated with the Borrowers or any of their Subsidiaries,
and (y) the sale to the third party of such real property
actually takes place within thirty (30) calendar days of the
closing of the purchase thereof by the Borrower or
Subsidiary, as the case may be. Concurrently, with any
reduction of the Commitments pursuant to this subsection
2.4C(ii), Borrowers shall deliver to Agent an Officers'
Certificate demonstrating the derivation of the Net Cash
Proceeds of the correlative Asset Sale from the gross sales
price thereof. In the event that Borrowers shall, at any
time after receipt of Cash Proceeds of any Asset Sale
requiring a reduction of the Commitments pursuant to this
subsection 2.4C(ii), determine that the reductions of the
Commitments previously made in respect of such Asset sale
were in an aggregate amount less than that made in respect
of such Asset sale were in an aggregate amount less than
that received by the terms of this subsection 2.4C(ii),
Borrowers shall promptly deliver to Agent an Officers'
Certificate demonstrating the derivation of the additional
Net Cash Proceeds resulting in such deficit and the
Commitments shall be permanently reduced on the date such
notice is delivered in an amount equal to the amount of any
such deficit."
1.3 Amendment to Section 3; Acquisition of Real Property.
Subdivision (i)(b) of Subsection 3.2D of the Amended Loan
Agreement is hereby amended by deleting it in its entirety and
replacing it with the following:
"(b) In connection with any acquisition of real
property by a Credit Party after the Effective Date, such
Credit Party shall (x) at least thirty (30) days prior to
the closing of the acquisition deliver to the Collateral
Agent and the Lenders the following items, each in form and
substance satisfactory to the Collateral Agent (i) a
feasibility study for such real property, including
comparisons with other similar projects, (ii) a report
outlining the approval status of such real property
(indicating expiration dates of approvals), (iii) a legal
description of such real property sufficient for a mortgage
and establishing that the property constitutes a legal lot
or parcel under applicable subdivision laws, (iv) a report
by an independent consultant satisfactory to Agent regarding
investigation of such property for Hazardous Materials and
compliance with Environmental Laws, wish such report in form
and substance satisfactory to Agent, (v) a cash flow
schedule for such real property, (vi) a summary report
updating land acquisition activity year-to-date, including a
description of all future development commitments, and (vii)
such other documents, instruments and information with
respect to such real property as the Collateral Agent or any
Lender shall reasonably request, and (y) no more than thirty
(30) days after the closing of the acquisition deliver to
the Collateral Agent and the Lenders, in a form and
substance satisfactory to the Collateral Agent, a current
appraisal of such real property performed by an appraiser
satisfactory to Agent. Collateral Agent may from time to
time designate any real property of any Credit Party which
is not Mortgaged Property (including any real property
acquired after the Effective Date) as "Additional Mortgaged
Property," in which case such Credit Party shall as promptly
as possible (and in any event within thirty (30) days after
such designation) deliver to Collateral Agent a fully
executed Mortgage, in form and substance satisfactory to
Collateral Agent together with title insurance policies and
surveys as required by subsections 3.2D(i)(d) and 3.2D(i)(e)
and any other documents or instruments as Collateral Agent
shall reasonably request to perfect a valid and enforceable
first priority mortgage on the respective Additional
Mortgage Property, free and clear of all defects and
encumbrances except for validly perfected and enforceable
Permitted Encumbrances of record on the Effective Date
listed on Schedule 5.8 hereto."
1.4 Amendments to Section 7; Negative Covenants.
A. Subsection 7.1 of the Amended Loan Agreement is
hereby amended by deleting the table in clause (vi) thereof in
its entirety and substituting the following therefor:
Maximum Purchase Money
Period Mortgage Obligations
Seventh Amendment $5,000,000
Effective Date to
Commitment Termination
Date
B. Subsection 7.4 of the Amended Loan Agreement is
hereby amended by deleting it in its entirety and replacing it
with the following:
"(vii) the Credit Parties may become liable with respect to
Contingent Obligations in respect of performance and surety bonds
incurred in the ordinary course of business and customary
indemnification obligations to bonding companies incurred in
connection with the issuance of such bonds; provided that the
aggregate amount of such Contingent Obligations does not, at any
time, up through and including December 31, 1995, exceed
$40,000,000, and at any time after December 31, 1996, exceed
$45,000,000.
C. Subsection 7.6A of the Amended Loan Agreement is
amended by deleting such subsection and replacing it with the
following:
"A. Minimum Consolidated Adjusted EBITDA. The Credit
Parties shall not permit Consolidated Adjusted EBITDA for the
four quarter periods ending on the dates set forth below to be
less than the correlative amount indicated:
Minimum Consolidated
DATE Adjusted EBITDA
February 29, 1996 $ 7,000,000
May 31, 1996 $ 6,500,000
August 31, 1996 $ 4,750,000
November 30, 1996 $ 7,250,000
February 28, 1997 $ 8,500,000
D. Subsection 7.6B of the Amended Loan Agreement is
hereby amended by deleting such subsection and replacing it with
the following:
"B. Minimum Consolidated Adjusted Tangible Net Worth.
The Credit Parties shall not permit Consolidated Adjusted
Tangible Net Worth as of each of the dates set forth below to
be less than the correlative amount indicated:
Minimum Consolidated
DATE Adjusted Tangible Net Worth
February 29, 1996 $20,752,000
May 31, 1996 $20,000,000
August 31, 1996 $20,311,000
November 30, 1996 $21,343,000
February 28, 1997 $21,616,000
E. Subsection 7.6C of the Amended Loan Agreement is
hereby amended by deleting such subsection and replacing it with
the following:
"C. Minimum Consolidated Interest Expense
Coverage Ratio. The Credit Parties shall not permit
the ratio of (i) Consolidated Adjusted EBITDA to (ii)
Consolidated Cash Interest Expense for the four fiscal
quarter periods ending on the dates set forth below to
be less than the correlative amount indicated:
Period Minimum Interest Coverage
February 29, 1996 1.00
May 31, 1996 1.00
August 31, 1996 0.75
November 30, 1996 1.25
February 28, 1997 1.50
F. Subsection 7.8C of the Amended Loan Agreement is
hereby amended by deleting the table set forth therein and
substituting the following therefor:
Maximum Consolidated Land
"Fiscal Year Acquisition Costs
1995 $20,000,000
1996 $18,833,000
1997 (first quarter) $ 8,000,000
G. Subsection 7.8D of the Amended Loan Agreement is
hereby amended by deleting the table set forth therein and
substituting the following therefor:
Maximum Consolidated Land
Fiscal Year Development Costs
1996 $21,046,000
1997 (first quarter) $ 4,640,000
1.5 Amendment to Section 11: Deemed Voting Lenders
The last two sentences of subsection 11.6A are amended
by deleting them in their entirety and substituting the following
therefor:
"Notwithstanding any provision of this Subsection 11.6A
to the contrary, each Tranche B Lender other than any
Tranche B Lender which has given notice to Company and
Agent in accordance with the next sentence of this
Subsection 11.6A (each Tranche B Lender which has not
sent such written notice, a "Deemed Voting Lender")
agrees that such Deemed Voting Lender shall be deemed
to cast its vote on any request, or which it has prior
written notice, for amendment, modification,
termination or waiver of any provision of the Amended
Loan Agreement or any other Loan Document,
proportionately according to the votes cast on such
request by all Tranche B Lenders which are not Deemed
Voting Lenders and any amendment, modification,
termination, waiver or consent signed by an appropriate
percentage of Tranche B Lenders which are not Deemed
Voting Lenders shall be binding on Deemed Voting
Lenders, such that there remain no Tranche B Lenders
exercising voting rights, each Deemed Voting Lender
shall be deemed to cast its vote proportionately
according to such votes cast by Tranche A Lenders,
under the same terms and conditions and with the same
binding effect as if such votes had been cast by
Tranche B Lenders. Tranche B Lenders which are not
Deemed Voting Lenders and Tranche A Lenders shall have
no affirmative obligation to Deemed Voting Lenders to
vote, and in no event shall Deemed Voting Lenders have
any claim or recourse against such Tranche B Lenders
which are not Deemed Voting Lenders and Tranche A
Lenders shall have no affirmative obligation to Deemed
Voting Lenders to vote, and in no event shall Deemed
Voting Lenders have any claim or recourse against such
Tranche B Lenders which are not Deemed Voting Lenders
or Tranche A Lenders with respect to any vote cast or
not cast, or the consequences of any action taken or
omitted to be taken, by any such Tranche B Lender which
is not a Deemed Voting Lender or Tranche A Lender.
Each Tranche B Lender may, by written notice to Company
and Agent, revoke its election to have its vote deemed
cast in the manner described in the immediately
proceeding sentence, provided, that such revocation
shall not be effective with respect to any request for
amendment, modification, termination or waiver if
notice of such revocation is not received by Company
and Agent at least three Business Days prior to the
effective date of such amendment, waiver, modification
or termination. Following written notice in accordance
with the preceding sentence such Tranche B Lender shall
no longer be a Deemed Voting Lender hereunder."
<PAGE>
1.6 Amendment to Schedules
Schedules 2.1 and 5.22 of the Amended Loan Agreement
are hereby amended and restated to read in their entirety as set
forth on Schedules 2.1 and 5.22 of this Seventh Amendment.
Section 2. ACKNOWLEDGEMENT AND LIMITED WAIVER REGARDING THE
PLACER PROPERTY
A. The Lenders, Agent, Collateral Agent and Credit
Parties hereby agree and acknowledge that:
(a) Any Lien created on the Placer Property by
the Mortgage executed in connection with the Amended Loan
Agreement may be terminated by the Collateral Agent, and after
such termination shall no longer be of any force or effect.
(b) The Lenders, Agent, Collateral Agent and
Credit Parties hereby waive any noncompliance with the Amended
Loan Agreement to the extent, and only to the extent, necessary
to permit the termination of the Mortgage on the Placer Property
described in part (a) of this Subsection 2A.
B. Lenders hereby authorize and direct Collateral
Agent and/or Agent to take such actions and to execute such
instruments and documents as may be necessary or desirable in the
sole discretion of the Collateral Agent and/or Agent, to
terminate and release all Liens on the Placer Property created
pursuant to the Mortgage on such property or any other Security
Documents executed in connection therewith. The provisions of
this Subsection 2B are solely for the benefit of Agent,
Collateral Agent and Lenders and neither Company nor any of its
Subsidiaries nor any other person shall have any rights as a
third party beneficiary hereunder.
Section 3. CONDITIONS TO EFFECTIVENESS OF AMENDMENTS
A. Section 1 of this Seventh Amendment shall become
effective only upon the satisfaction of all of the following
conditions precedent (the date of satisfaction of such conditions
being referred to herein a the "Seventh Amendment Effective
Date"):
1. On or before the Seventh Amendment Effective
Date, Credit Parties shall deliver to Lenders (or to Agent for
Lenders with sufficient originally executed copies, where
appropriate, for each Lender and its counsel) the following,
each, unless otherwise noted, dated the Seventh Amendment
Effective Date:
(a) For each of the Borrowers, Calton Homes,
Inc., Calton Homes of Florida, Inc., Calton Homes of
Pennsylvania, Inc. and Calton Homes of Chicago, Inc., (1)
certified copies of its Certificate of Incorporation, and
(ii) good standing certificates from the state of its
organization and each other state where it owns assets or
otherwise conducts business, each dated a recent date prior
to the Seventh Amendment Effective Date;
(b) For each of the Borrowers, Calton Homes,
Inc., Calton Homes of Florida, Inc., Calton Homes of
Pennsylvania, Inc. and Calton Homes of Chicago, Inc., copies
of its Bylaws, certified as of the Seventh Amendment
Effective Date by its corporate secretary or an assistant
secretary;
(c) Resolutions of its Board of Directors
or, in the case of a Credit Party which is not a
corporation, resolutions of the Board of Directors of the
general partner or other Person authorized to act on its
behalf approving and authorizing the execution, delivery and
performance of this Seventh Amendment, certified as of the
Seventh Amendment Effective Date by its corporate secretary
or an assistant secretary as being in full force and effect
without modification or amendment; and
(d) Signature and incumbency certificates of
its officers executing this Seventh Amendment, certified as
of the Seventh Amendment Effective Date by its corporate
secretary or assistant secretary;
(e) Executed copies of this Seventh
Amendment.
2. Borrowers shall have paid an amendment fee to
Agent (for the ratable benefit of the Lenders) in an amount equal
to $25,000, as compensation to the Lenders in connection with the
Seventh Amendment, and all other fees, costs and expenses of
Agent (including fees and expenses of counsel for Agent) and
Lenders accrued and unpaid as of the Seventh Amendment Effective
Date.
3. On or before the Seventh Amendment Effective Date,
all corporate and other proceedings taken or to be taken in
connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by
Agent, acting on behalf of Lenders, and its counsel shall be
satisfactory in form and substance to Agent and such counsel, and
Agent and such counsel shall have received all such counterpart
originals or certified copies of such documents as Agent may
reasonably request.
4. Borrowers shall have paid to O'Melveny & Myers,
Shanley & Fisher and Cravath, Swaine & Moore all outstanding
amounts due for legal expenses, fees and other costs incurred on
behalf of Borrowers prior to January 1, 1996, such payment to be
made in a manner satisfactory to the Agent.
B. Section 2 of this Seventh Amendment shall become
effective as of the date hereof.
Section 4. CREDIT PARTIES' REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Seventh
Amendment and to amend the Amended Loan Agreement in the manner
provided herein, each Credit Party represents and warrants to
each Lender that the following statements are true, correct and
complete:
A. Corporate Power and Authority. Such Credit Party
has all requisite corporate or partnership power and authority to
enter into this Seventh Amendment and to carry out the
transactions contemplated by, and perform its obligations under,
the Amended Loan Agreement as amended by this Seventh Amendment
(the "Amended Agreement").
B. Authorization of Agreements. The execution and
delivery by such Credit Party of this Seventh Amendment and the
performance by such Credit Party of the Amended Agreement have
been duly authorized by all necessary corporate or partnership
action on the part of such Credit Party, as the case may be.
C. No Conflict. The execution and delivery by such
Credit Party of this Seventh Amendment and the performance by
such Credit Party of the Amended Agreement do not and will not
(i) violate any provision of any law or any governmental rule or
regulation applicable to such Credit Party or any of its
Subsidiaries, or any order, judgment or decree of any court or
other agency of government binding on such Credit Party or any of
its Subsidiaries, (ii) violate any provision of the Certificate
or Articles of Incorporation or Bylaws of such Credit Party if it
is a corporation or of its general partner or such other person
or persons authorized to act on its behalf if it is not a
corporation, (iii) violate any provision of its partnership,
joint venture or similar organizational agreement if it is not a
corporation, (iv) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default
under any Contractual Obligation of such Credit Party or any of
its Subsidiaries, (v) result in or require the creation or
imposition of any Lien upon any of the properties or assets of
such Credit Party or any of its Subsidiaries (other than any
Liens created under any of the Loan Documents in favor of
Collateral Agent on behalf of Lenders), or (vi) require any
approval of stockholders or partners or any approval or consent
of any Person under any Contractual Obligation of such Credit
Party or any of its Subsidiaries, except for such approvals or
consents which have been obtained on or before the Seventh
Amendment Effective Date and disclosed in writing to Lenders.
D. Governmental Consents. The execution and delivery
by such Credit Party of this Seventh Amendment and the
performance by such Credit Party of the Amended Agreement do not
and will not require any registration with, consent or approval
of, or notice to, or other action to, with or by, any federal,
state or other governmental authority or regulatory body.
E. Binding Obligation. This Seventh Amendment, the
Amended Agreement have been duly executed and delivered by each
of the Credit Parties party thereto and are the legally valid and
binding obligations of each such Credit Party, enforceable
against such Credit Party in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency
reorganization, moratorium or similar laws relating too liming
creditors' rights generally or by equitable principles relating
to enforceability.
F. Incorporation of Representations and Warranties
From Amended Loan Agreement. The representations and warranties
contained in Section 5 of the Amended Loan Agreement are and will
be true, correct and complete in all material respects on and as
of the Seventh Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier
date, in which case they were true, correct and complete in all
material respects on and as of such earlier date.
G. Absence of Default. No event has occurred and is
continuing or will result from the consummation of the
transactions contemplated by this Seventh Amendment that would
constitute an Event of Default or a Potential Event of Default.
H. Subsidiaries of Borrowers. Other than the
Guarantors listed on the signature pages hereof, no Subsidiary of
the Borrowers owns assets with any material value.
I. Value of Placer Property. In order to induce
Agent, the Collateral Agent and Lender to make the acknowledgment
and waiver set forth in Subsection 2A of this Seventh Amendment,
each Credit Party hereby represents and warrants that the
Borrowers' certification that the Placer Property is of
immaterial or no value, in the form attached as Exhibit B hereto,
is true and correct as of the date hereof.
Section 5. ACKNOWLEDGEMENT AND CONSENT
Borrowers are each party to the Borrower Security
Agreement, the Borrower Pledge Agreement, the Account Collateral
Security Agreement and certain other Security Documents, in each
case as amended through the Seventh Amendment Effective Date,
pursuant to which Borrowers have created Liens in favor of
Collateral Agent on certain Collateral to secure the Obligations
of the Borrowers. Each Guarantor is a party to the Amended
Guaranty Agreement and certain Guarantors are parties to the
Guarantor Security Agreement, the Guarantor Pledge Agreement, the
Account Collateral Security Agreement certain Mortgages, and/or
certain other Security Documents, in each case as amended through
the Seventh Amendment Effective Date, pursuant to which such
Guarantor has (i) guarantied the Obligations of the Borrowers and
(ii) created Liens in favor of Collateral Agent on certain
Collateral to secure the Obligations of such Guarantor under the
Amended Guaranty Agreement. Borrowers and Guarantors are
collectively referred to herein as the "Credit Support Parties",
and the Amended Guaranty Agreement and the Security Documents are
collectively referred to herein as the "Credit Support
Documents".
Each Credit Support Party hereby acknowledges that it
has reviewed the terms and provisions of this Seventh Amendment
and consents to the amendments and limited waiver effected
pursuant to this Seventh Amendment. Each Credit Support Party
hereby confirms that each Credit Support Document to which it is
a party or otherwise bound and all Collateral encumbered thereby
will continue to guaranty or secure, as the case may be, to the
fullest extent possible the payment and performance of all
"Obligations," "Guarantied Obligations" and "Secured
Obligations," as the case may be (in each case as such terms are
defined in the applicable Credit Support Document), including
without limitation the payment and performance of all such
"Obligations," "Guarantied Obligations" or "Secured Obligations,"
as the case may be, in respect of the Obligations of Borrowers
now or hereafter existing under or in respect of the Amended
Agreement and the other Loan Documents.
Each Credit Support Party acknowledges and agrees that
each of the Credit Support Documents to which it is a party or
otherwise bound shall continue in full force and effect and that
all of its obligations thereunder shall be valid and enforceable
and shall not be impaired or limited by the execution or
effectiveness of this Seventh Amendment.
Section 6. MISCELLANEOUS
A. Reference to and Effect on the Amended Loan
Agreement and the Other Loan Documents.
(i) On and after the Seventh Amendment Effective Date,
each reference in the Amended Loan Agreement to "this
Agreement", "hereunder", "hereof", "herein" or words of
like import referring to the Amended Loan Agreement, and
each reference in the other Loan Documents to the "Amended
Loan Agreement", "thereunder", "thereof" or words of like
import referring to the Amended Loan Agreement shall mean
and be a reference to the Amended Agreement.
(ii) Except as specifically amended by Section 1 of
this Seventh Amendment or expressly set forth in Section 2
of this Seventh Amendment, the Amended Loan Agreement and
the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(iii) Except for the limited waiver set forth in
Subsection 2A of this Seventh Amendment, the execution,
delivery and performance of this Seventh Amendment shall not
constitute a waiver of any provision of, or operate as a
waiver of any right, power or remedy of Agent, Collateral
Agent or any Lender under, the Amended Loan Agreement or any
of the other Loan Documents.
(iv) Nothing herein shall constitute a waiver or
forbearance with respect to any Events of Default and/or
Potential Events of Default existing on the date hereof.
(v) The limited waiver set forth in Subsection 2A of
this Seventh Amendment shall be limited precisely as written
and relates solely to the termination of the Mortgage on the
Placer Property.
B. Fees and Expenses. Borrowers acknowledge that all
costs, fees and expenses as described in subsection 11.2 of the
Amended Loan Agreement incurred by Agent, Collateral Agent,
Lenders and their counsel with respect to this Seventh Amendment
and the documents and transactions contemplated hereby shall be
for the account of Borrowers.
C. Headings. Section and subsection headings in this
Seventh Amendment are included herein for convenience of
reference only and shall not constitute a part of this Seventh
Amendment for any other purpose or be given any substantive
effect.
D. Applicable Law. THIS SEVENTH AMENDMENT SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
E. Counterparts; Effectiveness. This Seventh
Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which
when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple
separate counterparts and attached to a single counterpart so
that all signature pages are physically attached to the same
document. This Seventh Amendment shall become effective upon the
execution of a counterpart hereof by each Lender (or, in the case
of Tranche B Lenders, each such Lender which is not a Deemed
Voting Lender) and each of the other parties hereto, receipt by
Company and Agent of written or telephonic notification of such
execution and authorization of delivery thereof and satisfaction
or waiver by each Lender (or, in the case of Tranche B Lenders,
each such Lender which is not a Deemed Voting Lender) of the
conditions to effectiveness set forth in Section 3 hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this
Seventh Amendment to be duly executed and delivered by their
respective officers thereunto duly authorized as of the date
first written above.
BORROWERS:
CALTON, INC.
By: /s/ Bradley A. Little
Title: Senior Vice President of Finance
CALTON FUNDING, INC.
By: /s/ Bradley A. Little
Title: Senior Vice President of Finance
GUARANTORS:
Calton California Equity Corp.
Calton Capital, Inc.
Calton Capital II, Inc.
Calton General, Inc.
Calton Homes, Inc.
Calton Homes of California, Inc.
Calton Homes of Florida, Inc.
Calton Homes of Pennsylvania, Inc.
Calton Homes of Pennsylvania at
Pennway, Inc.
Calton Homes of Tampa, Inc.
Calton Lindenwood Corporation
Calton Manzanita Corporation
Calton Tamarack Corporation
Calcap Commercial Management, Inc.
Calcap X, Inc.
Calcap XV, Inc.
Calcap XXI, Inc.
Calcap XXXII, Inc.
Calcap XXXIII, Inc.
Calcap 36, Inc.
Calcap 42, Inc.
Calcap 48, Inc.
Calton Homes of Chicago, Inc.
Each by: /s/ Bradley A. Little
Title: Senior Vice President
Calton Homes Finance, Inc.
Calton Homes Finance II, Inc.
Each by: /s/ Bradley A. Little
Title: Senior Vice President
Talcon Title Agency, L.P.
By: Calton General, Inc.,
its General Partner
By: /s/ Bradley A. Little
Title: Senior Vice President
Talpro 31, L.P.
By: Calcap XXXI, Inc.,
its General Partner
By: /s/ Bradley A. Little
Title: Senior Vice President
Talpro 32, L.P.
By: Calcap XXXII, Inc.,
its General Partner
By: /s/ Bradley A. Little
Title: Senior Vice President
Talpro 33, L.P.
By: Calcap XXXIII, Inc.,
its General Partner
By: /s/ Bradley A. Little
Title: Senior Vice President
Talpro 48, L.P.
By: Calcap 48, Inc.,
its General Partner
By: /s/ Bradley A. Little
Title: Senior Vice President
Talpro 36, L.P.
By: Calcap 36, Inc.,
its General Partner
By: /s/ Bradley A. Little
Title: Senior Vice President
LENDERS:
CHEMICAL BANK, Individually and as Agent
and Collateral Agent
By: /s/ Jane E. Orndahl
Title: Vice President
KLEINWORT BENSON LIMITED,
as a Lender
By: /s/ Iain Leigh
Title: Senior Vice President
FOOTHILL CAPITAL CORPORATION,
as a Lender
By: /s/ Karen Sandler
Title: Vice President
PEARL STREET, L.P., as a Lender
By: /s/ John E. Urban
Title: Authorized Signer
By: ________________________________
Title: ______________________________
<PAGE>
EXHIBIT A
DESCRIPTION OF THE PLACER PROPERTY
PREMISES LOCATED IN PLACER COUNTY:
PREMISES OWNED BY CALTON HOMES OF CALIFORNIA, INC.:
Roseville:
Description of Premises:
Lots 27 and 77 as shown and designated on that map entitled
"Plat of Northwest Roseville Specific Plan Unit #1," filed
October 5, 1989, in office of the County Recorder of Placer
County, California in Book "Q" of Maps, page 54.
Description of Mortgage:
Mortgagor: Calton Homes of California, Inc.
Mortgagee: Midlantic National Bank,
as collateral agent,
assigned to Chemical Bank,
as collateral agent
Date of Mortgage: As of May 1, 1990
Date of Recordation: July 9, 1990
Recording Office: Placer County Recorder's Office
Recorded in Book: N/A
Page: N/A
Series: 90-043606
<PAGE>
EXHIBIT B
CERTIFICATION AS TO VALUE OF PLACER PROPERTY
[to be provided by Borrowers]
<PAGE>
Schedule 1 to Seventh Amendment to Amended
and Restated Loan and Security Agreement
SCHEDULE 1
EXCLUDED PROPERTIES
Chicago Division Lots (Braeburn and Delaware Crossing)
Highpoint - RK
Belmont (Steeplechase)
SCHEDULE 2.1
LENDER COMMITMENTS; PRO RATA SHARES AND EXISTING LOANS
(RESTATED AS OF SEVENTH AMENDMENT EFFECTIVE DATE)<PAGE>
LENDER TRANCHE A TRANCHE B PRO RATA EXISTING AVAILABLE
COMMITMENT COMMITMENT SHARE OF LOANS AND COMMITMENT
AGGREGATE S/L/C'S
COMMITMENTS
1.Tranche A Lenders
Chemical Bank $11,000,000 0 20.0% $9,697,140.55 $1,302,859.45
Kleinwort Benson
Limited $11,000,000 0 20.0% $9,697,140.55 $1,302,859.45
Foothill
Capital
Corporation $20,625,000 0 37.5% $18,182,138.54 $2,442,861.46
2.Tranche B Lenders
Pearl Street,
L.P. 0 $12,375,000 22.5% $10,909,283.12 $1,465,716.88
Total $42,625,000 $12,375,000 100.0% $48,485,702.76 $6,514,297.24
SCHEDULE 5.22
Mortgage, Owned, and Leased Properties
1. PROPERTIES OWNED/MORTGAGED TO THE LENDERS
All properties shown on Exhibit A annexed hereto.
2. PROPERTIES OWNED/NOT MORTGAGED TO THE LENDERS
a. Polar Communications Building (Talpro 48, L.P.)
Lot 26.01 in Block 25 on the Tax Map of Manalapan
Township, Monmouth County, New Jersey.
b. Roseville
Lots 27 and 77 as shown and designated on that map
entitled "Plat of Northwest Roseville Specific
Plan Unit #1," filed October 5, 1989, in office of
the County Recorder of Placer County, California
in Book "Q" of Maps, page 54 (following release of
the Mortgage covering such property by Collateral
Agent as contemplated by section 2 of the Seventh
Amendment.)
3. LEASED PROPERTIES:
a. New Jersey - 500 Craig Road, Manalapan, NJ 07726
- - - Office
b. Chicago - 2500 West Higgins Road, Suite 905.
Hoffman Estates, IL 60195
c. Florida - 380 South North Lake Boulevard, Suite
1012, Altamonte Springs, FL
CALTON, INC.
FORM 10-K
FOR FISCAL YEAR ENDED NOVEMBER 30, 1995
EXHIBIT 10.3
AMENDED AND RESTATED 1993 NON-QUALIFIED
STOCK OPTION PLAN
DATED MAY 28, 1993
May 28, 1993
CALTON, INC.
AMENDED AND RESTATED 1993 NON-QUALIFIED STOCK OPTION PLAN
1. Name; Statement of Purpose; Effective Date. (a) The
name of this Plan is "Calton, Inc. Amended and Restated 1993
Non-Qualified Stock Option Plan" (the "Plan").
(b) The purpose of this Plan is to benefit Calton, Inc.
("Calton" or the "Company") and its subsidiaries by offering
certain present and future key operations or senior management
level employees of the Company or its subsidiaries an opportunity
to acquire and become holders of common stock of the Company over
a period of years; thereby giving them a stake in the growth and
prosperity of the Company and encouraging the continuance of
their services with the Company or its subsidiaries. All
references herein to the Company's common stock shall mean common
stock, $.01 par value, of Calton. The term "subsidiary" shall
mean a corporation in which the Company owns, directly or
indirectly, a majority of the voting stock.
(c) The Plan shall become effective on May 28, 1993 (the
"Effective Date").
2. Administration. (a) The Plan shall be administered by the
Compensation Committee of the Board of Directors (the
"Committee"). All questions of interpretation and construction
of the Plan, of any option agreement(s) executed in connection
with the Plan, of any options granted under the Plan and any
other matters related to the Plan shall be determined by the
Committee, and shall be final and conclusive upon all persons
having an interest in the Plan and any option granted pursuant to
the Plan. The Committee may, from time-to-time, adopt such rules
and regulations for carrying out the Plan as it may deem
appropriate.
(b) The Committee shall determine and designate from time
to time those eligible employees of the Company and its
subsidiaries to whom options are to be granted (each a
"Participant" and collectively, the "Participants"). An eligible
employee is a key operations or senior management level employee
of the Company or its subsidiaries who, in the judgment of the
Committee, is in a position to contribute substantially to the
success of the Company (the "Eligible Employee"). The Committee
may grant options to Participants in such amounts as the
Committee shall from time to time determine, subject to the
following limitations. The Chief Executive Officer of the
Company may be granted options for no more than fifty percent
(50%) of all shares of the Company's common stock reserved for
issuance under the Plan. Each other officer of the Company may
be granted options for no more than thirty-five percent (35%) of
all shares of the Company's common stock reserved for issuance
under the Plan. Each other Eligible Employee may be granted
options for no more than thirty-five percent (35%) of all shares
of the Company's common stock reserved for issuance under the
Plan. Factors which may be included in the Committee's
determination of the granting of options to Participants include,
without limitation, the Participant's responsibilities,
performance and potential. No member of the Committee shall be
eligible to receive an option under the Plan. No member of the
Committee shall be liable for any action or determination made in
good faith with respect to the Plan.
3. Shares Subject to the Plan. The aggregate number of shares
of the Company's common stock reserved for issuance under the
Plan shall be one million, four hundred and ninety-two thousand,
six hundred and five (1,492,605) (a "Share" or the "Shares"),
subject to any adjustment pursuant to Section 7 below. The
shares to be issued under the Plan shall be made available either
from authorized but unissued shares of common stock of the
Company or from authorized and issued shares of the Company's
common stock that are held by the Company as treasury shares,
including shares acquired by the Company in open market and
private transactions. Shares issued under the Plan shall be
subject to the terms and conditions specified in the Plan and to
such other terms and conditions as the Committee may provide. If
any option granted under the Plan shall terminate or expire
unexercised, in whole or in part, prior to the termination of the
Plan, the Shares so released from the option may be made the
subject of additional options granted under the Plan; provided
that, in the event a Plan Participant exercises an option
pursuant to an "Appreciation Rights Election," as defined in
Section 6 below, the number of Shares equal to the difference
between (i) the number of Shares with respect to which the
option was exercised and the "Appreciation Rights Election" made
and (ii) the number of Shares received by the Participant, may
not be made the subject of additional options granted under the
Plan.
4. Option Exercise Price. The exercise price of an option
shall be determined by the Committee at the time of grant.
5. Duration of Options and Vesting of Options. Except as
otherwise provided in Section 7 and Section 8 hereof, each
option granted under the Plan shall be for such term as
determined by the Committee in its discretion at the date of
grant, but not more than ten (10) years from such date of grant.
Except as otherwise provided in Section 7 and Section 8 hereof,
each option granted under the Plan shall become exercisable with
respect to one-third (1/3) of the total number of Shares subject
to the option twelve (12) months after the date of grant and with
respect to an additional one-third (1/3) of the total number of
Shares subject to the option at the end of each twelve (12) month
period thereafter during the succeeding two (2) years. Subject
to the foregoing, all or any part of the Shares subject to an
option as to which the right to purchase has accrued may be
purchased at the time of such accrual or at any time or times
thereafter during the term of such option.
6. Exercise of Option and Payment of Option Price. A Plan
Participant may exercise an option, or any part thereof, on or
after such option, or a part thereof, has completely vested by
giving written notice to the Company. In exercising an option
granted under the Plan, or a part thereof, the Participant, in
his or her sole discretion, may select one (1) of the following
three (3) methods: (i) the Participant may purchase the Shares
subject to the option by remitting to the Company,
contemporaneous with the issuance of the notice of exercise to
the Company, the sum of the aggregate exercise price, in cash,
cashier's check, certified check, shares of the Company's common
stock owned by the Participant prior to such exercise, provided
that the Participant has owned and held such shares for a period
not less than six (6) months, with a "Fair Market Value" (as
defined below) on the day preceding the date of exercise equal to
the aggregate exercise price, or any combination thereof, and the
"Tax Withholding Amount" (as defined in Subsection (b) below)
("Exercise Buy"); or (ii) the Participant may exercise an option
and sell, or have sold on his behalf, a number of the Shares
subject to the option in an open market transaction on the date
of exercise, without any cost of sale to the Participant, which
approximates the number of Shares that upon sale on the exercise
date would be required to yield cash proceeds equivalent to the
sum of the aggregate exercise price plus the "Tax Withholding
Amount," and the Participant shall be entitled to receive a
number of Shares equal to the difference between the number of
Shares with respect to which the option was exercised and the
number of Shares sold by or on behalf of the Participant in
accordance with the above terms as well as the proceeds of the
sale of Shares remaining after payment to the Company of the
aggregate option exercise price and applicable "Tax Withholding
Amount" ("Exercise Sell"); or (iii) with respect to an option
which has been held by the Participant for not less than six (6)
months, the Participant may exercise the option and sell, or have
sold on his or her behalf, in an open market transaction on the
date of exercise, a number of the Shares subject to the option
which approximates the number of Shares that upon sale on the
exercise date will be required to yield cash proceeds equivalent
to the sum of the aggregate exercise price plus fifty percent
(50%) of the "Appreciated Value," which is the difference between
the total fair market value of the Shares on the date of
exercise, based on the sales price of the Shares on the exercise
date, and the aggregate option exercise price, and the
Appreciation Value shall be paid to the Participant fifty percent
(50%) in cash, less the "Tax Withholding Amount," and fifty
percent (50%) in shares (the "Appreciation Rights Election");
provided that, the Committee shall have the sole discretion to
determine such other form in which payment will be made to a
Participant who selects the Appreciation Rights Election, such as
all cash, all Shares, or any other combination thereof; and
provided further that, if the number of Shares so determined is
not a whole number, such number shall be reduced to the next
lower whole number with the remainder representing the fractional
share paid to the Participant in cash. As used herein, "Fair
Market Value" shall mean the arithmetic average of the highest
and lowest sales prices of the Company's common stock reported by
the American Stock Exchange on a particular date as published in
the Wall Street Journal.
At the time of the exercise of any option granted hereunder
or, if applicable, any election by the Participant under Section
83 of the Code or the regulations thereunder in connection with
his or her participation in the Plan (the "Election"), the
Company shall require, as a condition of the exercise of such
option or upon such an Election, the Participant to pay to the
Company an amount equal to the amount of the tax the Company or
its subsidiary may be required to withhold to obtain a deduction
for federal and state income tax purposes as a result of the
exercise of such option by the Participant or the Participant's
Election, or to comply with applicable law (the "Tax Withholding
Amount").
7. Corporate Transactions; Adjustment of Shares. (a) In the event
there is any change in the capital stock of the Company through a
stock split, share combination or stock dividend or through a
corporate transaction, including, without limitation, a merger,
reorganization, or recapitalization, in which the Company is the
surviving entity, except as otherwise provided in Section 7(b)
below, outstanding options granted under the Plan shall apply to
the securities to which a holder of the number of shares of
common stock of the Company subject to the options would have
been entitled by reason of any such corporate transaction and any
other changes in the number or character of the shares to which
the option relates or the exercise price of the option as may be
made by the Committee in order to protect options granted under
the Plan from dilution or any diminution in value or as may
otherwise be equitable under the circumstances.
(b) In the event of a corporate transaction in which the Company
is not the surviving entity including, without limitation, a
merger (other than a merger intended solely to change the
Company's jurisdiction of incorporation), consolidation,
reorganization, recapitalization, sale of substantially all of
the Company's assets to an entity other than a subsidiary or
other affiliated entity of the Company, or any merger,
consolidation, reorganization, recapitalization or sale of all or
substantially all of the Company's assets in which the previously
outstanding common stock shall be changed into or, pursuant to
the operation of law or the terms of the transaction to which the
Company is a party, exchanged for common stock or other
securities of another corporation or interest in a noncorporate
entity or other property (including cash) or any combination of
any of the foregoing, (each, a "Corporate Transaction"), or a
tender offer for fifty percent (50%) or more of the Company's
voting stock regardless of whether or not the Company continues
as a surviving corporation (the "Tender Offer"), or a change in
control of the Company, as defined below, ("Change in Control"),
the Plan Participant, in his or her sole discretion, may choose
to: (i) accelerate all unvested options /and exercise all such
unexercised options, or any part thereof, (utilizing any of the
methods set forth in Section 6 hereof or if either the Exercise
Sell Method or Appreciation Rights Election is not available,
because of the absence of a trading market for the Company's
common stock on the date of consummation or any other reason,
then the Participant shall be entitled to receive, without the
payment of consideration, that number of Shares equal to the
number of Shares issuable upon exercise of the option less the
number of Shares having an aggregate Fair Market Value on the
date of exercise equal to the aggregate exercise price of the
exercised option) within thirty (30) days of receipt of notice of
the Company's election to enter into any such Corporate
Transaction; provided that (a) the Participant's exercise of any
such options in the event of a Corporate Transaction shall be
conditioned upon the consummation of any such Corporate
Transaction (but such condition shall not preclude the
Participant from receiving, with respect to the shares issuable
upon the exercise of such options, the consideration issuable or
payable in respect of shares of the Company's common stock
pursuant to such Corporate Transaction), and (b) in the case of a
Tender Offer or Change in Control, all options held by a
Participant shall become automatically vested and the Participant
may, subject to the other terms and provisions of the Plan,
exercise any option held at any time prior to the expiration date
of such option; or (ii) within ten (10) days of receiving notice
of the Company's decision to enter into any such Corporate
Transaction, provide the Company with written notice that the
Board of the Company shall be obliged to specifically provide
that the surviving entity will grant substitute options to the
Participant to purchase securities of the surviving entity in
exchange for the Participant's options granted under the Plan,
and the underlying securities of such substitute options shall
have a fair market value equivalent to the highest aggregate Fair
Market Value of all Shares subject to the Participant's options,
whether exercisable or not, from the date of public announcement
through the effective date of the Corporate Transaction, and such
substitute options shall be issued with an aggregate exercise
price equal to the aggregate exercise price of the Shares subject
to the Participant's options and subject to terms and conditions
comparable to the terms and conditions of the Plan and any
related option grant agreement; provided, however, that if a
Participant elects to have the Board provide such substitute
options, the Board, at its option, may within ten (10) days of
receiving notice from the Participant elect to repurchase within
sixty (60) days of the effective date of any such Corporate
Transaction all of the Participant's options granted under the
Plan (which repurchase right may be exercised by the surviving
entity), whether vested or not, by paying a net purchase price
equal to the difference between the highest Fair Market Value of
the Shares subject to the Participant's options from the date of
public announcement through the effective date of the Corporate
Transaction and the aggregate exercise price of the Shares
subject to the Participant's options; provided further, however,
that if the Board determines not to arrange for substitute
options and notifies the Participant that it has elected to
exercise the Company's repurchase option, the Participant shall
be entitled to exercise all of the unexercised options, or any
part thereof, during the remainder of the thirty (30) day period
described in (i) above; or (iii) within ten (10) days of
receiving notice of the commencement of a Tender Offer, provide
the Company with written notice that the Company shall be obliged
to repurchase all of the Participant's options granted under the
Plan, whether vested or not, by paying a net purchase price equal
to the difference between the highest aggregate Fair Market Value
of the Shares subject to the Participant's options from the date
of public announcement through the effective date of the Tender
Offer and the aggregate exercise price of the Shares subject to
the Participant's options; provided, however, that the Company's
obligation to repurchase any of such options shall be subject to
any limitation or prohibition contained in any agreement to which
the Company is a party; or (iv) within ten (10) days of receipt
of notice from the Company of a Change in Control (which notice
shall be furnished promptly upon the Company receiving notice of
the Change in Control), provide the Company with written notice
that the Company shall be obliged to repurchase all of the Plan
Participant's options granted under the Plan, whether vested or
not, by paying a net purchase price equal to the difference
between the aggregate Fair Market Value of the Shares subject to
the Participant's options on the date of the Change in Control of
the Company and the aggregate exercise price of the Shares
subject to the Participant's options; provided, however, that the
Company's obligation to repurchase any of such options shall be
subject to any limitation or prohibition contained in any
agreement to which the Company is a party. For purposes of this
Section 7(b), a Change in Control of the Company shall mean (a)
an event or series of events by which any "Person," as that term
is defined in Section 2(2) of the Securities Act of 1933, or any
affiliate of such Person (when applied to any Person, an
affiliate shall mean any other Person directly or indirectly
controlling, controlled by, or under common control with, that
Person) or Persons and affiliates of such Persons acting in
concert shall, whether in a single transaction or a series of
related transactions, acquire, directly or indirectly, an amount
of the Company's voting stock, representing thirty-five percent
(35%) or more of the total voting power of the outstanding voting
securities of the Company having the right under ordinary
circumstances to vote in an election of the Company's Board, or
(b) the consummation of a merger, reorganization or
recapitalization in which the Company is the surviving entity
that results in the Company's shareholders immediately prior to
such transaction not holding (by virtue of such shares or
securities issued pursuant to such transaction) securities
representing sixty-five percent (65%) or more of the total voting
power of the outstanding voting securities of the Company having
the right under ordinary circumstances to vote in an election of
the Company's Board.
(c) In the event of the dissolution or liquidation of the
Company (except a dissolution or liquidation relating to a sale
of assets or other reorganization of the Company referred to in
the preceding paragraph), outstanding options granted under the
Plan shall terminate as of a date fixed by the Committee;
provided, however, that not less than thirty (30) days written
notice of the date so fixed shall be given to each Participant
and each such Participant shall have the right during such period
to exercise his option as to all or any part of the Shares
covered thereby, including Shares as to which such option would
not otherwise be exercisable by reason of an insufficient lapse
of time.
(d) Notwithstanding the exercise provisions in Subsections (a),
(b) and (c) above, should the Company's legal counsel determine
that an extension of time for the exercise of any option is
necessary in order to allow the Participant to acquire the Shares
subject to any option in compliance with federal and state
securities laws, the Committee shall extend said time of exercise
for whatever additional period of time is necessary, in counsel's
judgment, to allow such compliance.
8. Termination of Employment; Vesting and Exercise of Options
Thereafter. (a) In the event the employment relationship of a Plan
Participant with the Company or any of its subsidiaries is
terminated by reason of the Participant's death or permanent
disability, all unvested options shall be accelerated and become
fully vested on such date of termination, and the Participant, or
the Participant's designated beneficiary or estate, shall have
two (2) years from such date of termination to acquire the Shares
subject to all of the Participant's unexercised options, or any
part thereof.
(b) If a Plan Participant terminates the employment relationship
by reason of resignation from the Company for any reason, the
Participant shall have one (1) year from such date of termination
to exercise all unexercised options, or any part thereof, which
had fully vested on or before the date of the Participant's
resignation.
(c) In the event a Participant, who has been employed with the
Company for one (1) year or more, is terminated by the Company
for any reason other than for "Just Cause," as that term is
defined in Section 8(d) below, each option, or any part thereof,
scheduled to vest on the succeeding anniversary date of the date
of grant of the respective option following the date on which
such termination occurs shall be accelerated and become fully
vested on the date of termination, and the Participant shall have
two (2) years from the date of termination to acquire the Shares
subject to unexercised options, or any part thereof, which are or
are deemed to be exercisable on the date of termination. For any
Participant who has been employed by the Company for less than
one (1) year, the Participant shall have thirty (30) days, or
seven (7) months if the Participant is an officer, director or
more than 10% beneficial owner of the Company (the "Corporate
Insider"), from the date of termination of employment by the
Company for any reason other than Just Cause in which to exercise
only those options, or part thereof, which had fully vested on or
before such date of termination.
(d) If the Participant is terminated by the Company for Just
Cause, the Participant shall have ninety (90) days, or seven (7)
months if such Participant is a Corporate Insider, from the date
of termination to exercise only those options, or any part
thereof, which had fully vested on or before the date of
termination. For purposes of the Plan, the term "Just Cause"
shall mean: (i) a Participant's conviction for a felony or for
fraud; (ii) a Participant engaging in any conduct, by way of act
or omission, which in the opinion of the Company's Board has the
potential to cause, or does cause, a material adverse effect on
the Company's business; (iii) a Participant failing to return
from authorized leave from the Company; (iv) a Participant being
found to be under the influence of, or to have distributed, any
illegal narcotic substance while on the Company's premises,
including any project site of the Company; (v) a Participant
acting dishonestly or committing theft of Company property; or
(vi) the work performance of a Participant failing to meet
Company standards.
9. Non-Transferability of Option. No option shall be
transferable (including pledged or encumbered) by a Participant
otherwise than by will or the laws of descent and distribution,
and each option shall be exercisable during a Participant's
lifetime only by the Participant or by the Participant's legal
representatives.
10. Amendments and Discontinuance. The Board may amend,
suspend, discontinue, or terminate the Plan, subject to
shareholder approval if so required by any applicable federal or
state securities laws or corporate statute. No action of the
Board, however, may without the consent of a Participant alter or
impair any option previously granted to the Participant under the
Plan.
11. Successors and Assigns. The provisions of the Plan shall be
binding upon all successors and assigns of any Participant
acquiring shares under the Plan, including, without limitation,
the estate of any such Participant and the executors,
administrators or trustees of such estate, and any receiver,
trustee in bankruptcy or representative of the creditors of any
such Participant.
12. Termination Date of the Plan. The Plan shall terminate on
May 28, 1998, the fifth anniversary of the Effective Date (the
"Termination Date"), and no options shall be granted under the
Plan subsequent to the Termination Date. Options granted on or
before the Termination Date shall remain exercisable after the
termination of the Plan in accordance with their respective
terms.
13. Miscellaneous. (a) Any and all funds held by the Company under
the Plan may be used for any corporate purpose.
(b) Nothing contained in the Plan, any option agreement executed
in connection with the Plan or any option granted under the Plan
shall confer upon any Plan Participant any right to be continued
in the employment of the Company or any subsidiary of the
Company, or interfere in any way with the right of the Company or
its subsidiaries to terminate the employment relationship at any
time.
(c) Options granted under the Plan are intended to be treated as
non-qualified stock options and not as incentive stock options as
defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
(d) No options may be granted nor may common stock be purchased
under this Plan until the Company has taken all actions then
required to comply with the Securities Act of 1933, as amended,
and any other applicable state securities laws and any exchange
on which the common stock may be listed.
(e) The Company shall take any reasonable and appropriate action
which is necessary, including, without limitation, the filing of
a Form S-8 Registration Statement with the Securities and
Exchange Commission, to effect the registration of the Company's
common stock reserved for issuance under this Plan under the
Securities Act of 1933, as amended.
(f) In the event that any term, condition, or provision of any
agreement, including, without limitation, an employment
agreement, between the Company and a Plan Participant varies
from, or is in any way dissimilar to or in conflict with, any of
the terms, conditions or provisions of the Plan, the terms,
conditions and provisions of any such agreement will control.
As Amended through April 18, 1995
CALTON, INC.
FORM 10-K
FOR FISCAL YEAR ENDED NOVEMBER 30, 1995
EXHIBIT 10.5
EXECUTIVE EMPLOYMENT AGREEMENT AMENDMENT
BETWEEN THE COMPANY AND DOUGLAS T. NOAKES
DATED NOVEMBER 21, 1995
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
This Amendment (the "Amendment") dated November 21, 1995 to
the Executive Employment Agreement dated as of January 26, 1994
(the "Agreement") by and between Calton, Inc., a New Jersey
corporation (the "Employer") and Douglas T. Noakes (the
"Executive").
W I T N E S S E T H:
WHEREAS, the parties hereto agree that it is in their best
interests to terminate the employment relationship of Executive as
President and Chief Executive Officer of Employer; and
WHEREAS, the Executive will resign as a member of the
Employer's Board of Directors; and
WHEREAS, the Employer has agreed to accept the resignation of
the Executive and amend the Agreement in accordance with the
provisions of this Amendment.
NOW THEREFORE, in consideration of the mutual covenants and
promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
1. Effective on Tuesday, November 21, 1995 at 10 a.m. Executive
hereby tenders his resignation as President, Chief Executive
Officer and as a member of the Board of Directors of the Employer
and further resigns in all capacities in which Executive serves for
any of the Employer's subsidiary corporations and as trustee or
administrator for any employee benefit plan sponsored by the
Employer or any of its subsidiaries. The Employer hereby accepts
the Executive's resignation effective upon the execution of this
Amendment.
2. Executive hereby assigns to the Employer that portion of any
cash surrender value in the Whole Life Insurance Policy referenced
in Section 3.4 of the Agreement which represents the full amount of
the accumulated policy premiums paid by the Employer on behalf of
the Executive in accordance with the provisions of Section 3.4 of
the Agreement. Upon Employer's payment of the premiums of $191,260
on or before January 3, 1996, the Employer will have fulfilled its
obligations to provide a fully paid whole life insurance policy and
Employer shall have no further obligations with respect thereto
under Section 3.4.
3. Employer hereby agrees that the provisions of Section 4.5 of
the Agreement are hereby modified to provide that the Executive
shall be entitled to receive all of the benefits and compensation
provided for in Sections 4.4 and 4.7 of the Agreement as a result
of the Executive's resignation of employment with the Employer.
For purposes of this Amendment, the Option Agreement referenced in
Section 3.3 of the Agreement and the Amended Option Grant Agreement
dated April 19,1995, the Executive's resignation shall be deemed
included within the meaning of a termination of the Agreement
pursuant to Section 4.4.
4. The Employer hereby agrees that the Executive is entitled to
21.5 days of accrued and unused vacation days equal to $25,221 to
be paid on or before January 3, 1996. In addition, the parties
agree to modify the payment provisions set forth in Section 4.7(a)
to provide that Executive shall receive normal payroll checks in
the gross amount of $33,628.34 until the end of the calendar year
1995 in accordance with the Employer's normal practices. Within
ten (10) days after January 1, 1996, Employer will pay Executive a
lump sum payment of $316,371.76, which is equal to $350,000 less
the amount of $33,628.34 in payments made to Executive as provided
for in this Section 5. In addition, Employer has agreed to
reimburse Executive the cost of his airline tickets to attend the
Board of Directors Meeting of November 21, 1995 in the amount of
$590 in accordance with normal expense reimbursement procedures of
the Employer.
5. Employer and Executive hereby agree that Executive's Bonus
Compensation pursuant to Section 3.2 of the Agreement shall be
$18,000, and upon payment of that amount to Executive on or before
January 3, 1996, Employer shall have no further obligations to
Executive for any Bonus Compensation under the Agreement.
6. Executive hereby agrees that the provisions of Section 5 of
the Agreement, Covenants of the Executive, shall be binding on the
Executive as set forth therein and for purposes of this Amendment,
the Executive's resignation shall not be deemed to invalidate or
render unenforceable any of the provisions contained in Section 5
of the Agreement. For purposes of this Amendment, as of the date
hereof, the scope of Section 5.1.1 of the Agreement shall not be
deemed to include the states of California, Illinois, Pennsylvania,
Florida with the exception of the Orlando metropolitan area and any
other county in Florida in which the Employer currently owns
property or has executed a contract to purchase land and New Jersey
with the exception of Morris, Warren, Hunterdon, Middlesex,
Somerset, Mercer, Monmouth and Burlington counties.
7. Employer will provide a full accounting to Executive of all
benefits calculations required under Section 4.7 of the Agreement.
8. For purposes of Section 3 of the Supplemental Executive
Compensation Agreement dated May 12, 1995 by and between Employer
and Executive, Executive's resignation shall be treated as a
termination by the Employer in accordance with Section 4.4 of the
Agreement and the provisions of the Supplemental Executive
Compensation Agreement shall not be invalidated thereby.
9. The execution and delivery of this Amendment shall terminate
the following specific provisions of the Agreement: Sections 1, 2,
3.1, 3.5, 3.6, 4.1, 4.2, 4.3 and 4.6. Except as modified herein,
the remaining provisions of the Agreement shall survive and remain
in effect to the limited extent necessary to effectuate the
termination of Executive's employment with the Employer and provide
for the continuing obligations of and payments to the Executive in
accordance with this Amendment and the provision of other benefits
that survive the termination of Executive's employment, including
the provision for indemnification in accordance with Section 8.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be executed on its or his behalf by its officer
thereunto duly authorized or himself, all as of November 21, 1995.
CALTON, INC.
/S/ ROBERT A. FOURNIADIS
ROBERT A. FOURNIADIS
Senior Vice President
/s/ DOUGLAS T. NOAKES
DOUGLAS T. NOAKES
Executive
CALTON, INC.
FORM 10-K
FOR FISCAL YEAR ENDED NOVEMBER 30, 1995
EXHIBIT 10.7
EXECUTIVE EMPLOYMENT AGREEMENT AMENDMENT
BETWEEN THE COMPANY AND ANTHONY J. CALDARONE
DATED NOVEMBER 21, 1995
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as
of this 21st day of November, 1995 by and between Calton, Inc. (the
"Employer" or the "Company"), a New Jersey corporation which
maintains its principal executive offices at 500 Craig Road,
Manalapan, New Jersey 07726, and Anthony J. Caldarone (the
"Executive"), an individual residing at 162 Anchor Drive, Vero
Beach, Florida 32963.
W I T N E S S E T H:
WHEREAS, the Employer is engaged in the acquisition, design,
development, construction and marketing of residential real estate
including, without limitation, residential housing units; and
WHEREAS, the Executive has had extensive experience in the
field of residential and commercial real estate development and
other related areas in a management capacity; and
WHEREAS, the Employer desires to provide for the employment of
the Executive as the President and Chief Executive Officer of the
Company and to serve as the Chairman of the Board of Directors of
the Company (the "Board") pursuant to the terms and conditions of
this Agreement since the Employer believes that the Executive's
business and technical experience, skill, acumen, and expertise
will enhance the business and improve the profitability of the
Company; and
WHEREAS, the Board has determined that it is in the best
interest of the Company to provide for the employment of the
Executive as President, Chief Executive Officer and Chairman of the
Board of the Company and believes that this Agreement will
reinforce and encourage the attention and dedication of the
Executive to the Company as the key member of the Company's
management team.
NOW, THEREFORE, in consideration of the representations,
covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Employment.
1.1 Term. The term of this Agreement shall commence on
November 21, 1995 and end on November 30, 1998 (the "Term"), unless
further extended or sooner terminated as hereinafter provided. On
November 30, 1997, the Term of the Executive's employment shall be
automatically extended one (1) additional year unless, on or before
such date, the Employer shall have delivered to the Executive or
the Executive shall have delivered to the Employer written notice
that the Term of the Executive's employment hereunder will not be
extended. The word "Term" as defined and used herein shall include
any additional one (1) year extension period unless otherwise
indicated.
1.2 Powers, Duties and Responsibilities. For the Term of
this Agreement, the Employer hereby employs the Executive, and the
Executive hereby accepts employment with the Employer, to render
service as President, Chief Executive Officer and Chairman of the
Board of the Company, with such powers, duties and responsibilities
consistent with the position of President, Chief Executive Officer
and Chairman of the Board as provided for in the Employer's Bylaws
and as otherwise may from time to time be determined by the Board
and subject to the rights of the shareholders of the Company. The
Executive agrees to devote the necessary working time to the
Employer to accomplish the Company's goals and to diligently
perform all duties and fulfill all responsibilities incident to his
employment in a businesslike and efficient manner. The Executive
shall be responsible for each facet of the Employer's business
operations, and the Executive will report directly to the
Employer's Board.
The Executive agrees that he will not become involved in any
activity outside of the business of the Company that would
interfere with the performance of his duties hereunder or any
activity that would be inimical to or contrary to the best
interests of the Employer.
2. Compensation and Benefits.
2.1 Salary. During the period of the Executive's
employment hereunder, the Executive shall receive a salary of Two
Hundred and Fifty Thousand Dollars ($250,000) per annum paid in
accordance with the Employer's normal payroll practices (the "Base
Compensation"). The payment of such Base Compensation to the
Executive shall not prevent the Executive from participating in any
other compensation or benefit plan provided by the Employer, unless
excluded by the terms of any such plan. No other compensation,
benefit, or payment made by the Employer hereunder shall in any way
limit or reduce the obligation of the Employer to pay the
Executive's Base Compensation hereunder. Base Compensation as
defined and used herein shall include any increase thereto pursuant
to an action of the Board or the Compensation Committee of the
Board (the "Compensation Committee").
2.2 Bonus Compensation. The Executive shall be entitled to
receive bonus compensation pursuant to the Executive's
participation in the Calton, Inc. Incentive Compensation Plan
("Incentive Plan"). The Executive shall be eligible to participate
in any other bonus compensation plan or arrangement otherwise
provided by the Employer to senior level executives of the Company.
In each fiscal year during the Term of this Agreement, the
Executive shall be entitled to receive bonus compensation under the
Incentive Plan in an amount which is no less than one-half (1/2) of
the average percentage that all other bonus awards to eligible
Incentive Plan participants are of the respective participant's
base salary compensation for the relevant fiscal year; provided,
however, that the Executive may not receive bonus compensation for
a particular fiscal year under the Incentive Plan that is in excess
of thirty percent (30%) of the designated bonus pool provided under
the Incentive Plan (the "Bonus Pool") for that same fiscal year.
The Executive may receive bonus compensation that exceeds one
hundred percent (100%) of his Base Compensation under the Incentive
Plan for a particular fiscal year and the Employer, acting through
its Board or a committee thereof, may, in its discretion, award
bonus compensation to the Executive in excess of the minimum level
specified in the preceding sentence, subject to the above described
limit of thirty percent (30%) of the Bonus Pool for that fiscal
year.
2.3 Benefit Plans. The Executive will be entitled to
participate in all Employer benefit plans available, or hereafter
made available, to senior level executives of the Employer. The
Executive will be eligible to participate in any existing stock
option plan or any stock option plan or arrangement hereafter
adopted by the Employer.
For purposes of eligibility for participation or vesting in
the benefits provided by any Employer sponsored benefit plan, the
Executive will receive credit for his prior service with Company as
President and Chief Executive Officer. Except as provided herein
or required by the terms of an Employer sponsored benefit plan,
nothing paid to the Executive under any such plan or arrangement
presently in effect or made available in the future shall be deemed
to be in lieu of the Base Compensation payable to the Executive
pursuant to Section 2.1 of this Agreement.
2.4 Relocation Expenses. The Employer agrees to reimburse
Executive the expenses Executive incurs to relocate his family and
establish a secondary residence in New Jersey in an amount not to
exceed Forty-Five Thousand ($45,000) Dollars, which shall include
but not be limited to travel expenses and temporary lodging.
2.5 Perequisites. During the Term of this Agreement, the
Executive will be entitled to and the Employer will provide a
monthly automobile allowance of Six Hundred Dollars ($600) to be
applied towards the purchase or lease of an automobile suitable to
the Executive's position with the Employer. The Employer shall
reimburse the Executive for all expenses related to fuel, oil,
tolls, maintenance and repairs for any such automobile.
The Executive shall be entitled to receive any perquisites
available, or hereafter made available, to senior level executives
of the Company.
2.6 Vacation. The Executive shall be entitled to fifteen
(15) days paid vacation per annum.
3. Termination. The Executive's employment by the Employer
hereunder may be terminated under the following conditions:
3.1 Death. The Executive's employment hereunder shall
terminate immediately upon his death, and the Employer shall pay to
the Executive's designated beneficiary, or if he leaves no
designated beneficiary to his estate, any Base Compensation which
has been earned but is unpaid and any unreimbursed expenses or
other unpaid benefits due the Executive hereunder at the time of
his death.
3.2 Disability. In the case of any disabling illness or
injury, whether physical or mental (the "Disability"), the
Executive shall submit to all reasonable requests by the Employer
to permit physical examination by experts retained by the Employer.
If following such examinations by the Employer's experts and the
Executive's experts the Board in its sole discretion determines
that the Executive is unable to perform the duties required of him
under this Agreement, or if the Executive fails for any reason to
perform the duties required of him under this Agreement for a
period of one hundred and eighty (180) consecutive days or a total
of two hundred and seventy (270) days, whether or not such days are
consecutive, in any three hundred and sixty (360) day period, the
Employer may terminate, without written notice and upon the
expiration of any waiting period to the Executive's qualification
for long-term disability benefits under any applicable disability
income plan, the Executive's employment pursuant to this Agreement,
regardless of whether the existing carrier concurs that the
Executive is permanently disabled and entitled to benefits under
any such plan. The Board's determination regarding the Disability
of the Executive shall be binding upon the Executive. Upon
termination of the Executive for Disability, the Executive shall
receive the Severance Compensation and shall be entitled to the
Severance Benefits as defined in Section 3.7 hereunder.
3.3 Termination for Just Cause by Employer. In the event
the Executive is subject to a final, unappealable adjudication by
a court of competent jurisdiction for the commission of a felony in
connection with the performance of his duties as an officer of the
Employer that directly results in a personal financial benefit to
the Executive, the Employer may at any time without notice
terminate the Executive's employment hereunder, and the Executive
shall have no right to receive any Base Compensation, or benefits
of any kind whatsoever, except those benefits which are vested or
otherwise owned by the Executive, on and after such date of
termination. The Executive shall not receive any bonus or
incentive compensation, pursuant to Section 2.2 of this Agreement,
for the year of termination if such termination is by the Employer
for just cause.
3.4 Termination without Cause by Employer. The Employer
may at any time, by written notice issued in accordance with
Section 9 hereunder which establishes the date of termination of
this Agreement, terminate the Executive's employment under this
Agreement without cause. Upon termination without cause by the
Employer, the Executive is entitled to receive from the Employer
any earned but unpaid Base Compensation as well as receive from the
Employer any unreimbursed expenses or other unpaid benefits owed as
of the date of termination. Further, in the event of a termination
without cause by the Employer, the Executive is entitled to the
Severance Compensation and Severance Benefits as defined in Section
3.7 hereunder.
3.5 Termination without Cause by the Executive. The
Executive may terminate this Agreement without specific cause or
reason upon ninety (90) days written notice to the Employer. The
Employer may at any time, in its sole discretion, shorten or
eliminate the ninety (90) day notice period by written notice to
the Executive. The Executive shall receive no further Base
Compensation, other than amounts earned but unpaid, nor benefits of
any kind, other than amounts to which the Executive is entitled to
reimbursement and those benefits which are vested or otherwise
owned by the Executive, following the ninety (90) day notice
period, or such abbreviated period to the extent it is shortened or
eliminated by the Employer as provided above. The Executive shall
not be entitled to bonus or incentive compensation, pursuant to
Section 2.2 of this Agreement, for the year of termination if such
termination is by the Executive without cause. For purposes of
this Agreement, termination by the Executive "without cause" shall
mean termination for any reason other than death, disability,
retirement with the Employer's consent, or termination by the
Executive for just cause as defined in Section 3.6 hereunder.
During the ninety (90) day notice period, or any such abbreviated
period, the Executive shall continue to faithfully and diligently
perform all duties assigned to him by the Board.
3.6 Termination for Just Cause by the Executive. The
Executive may terminate this Agreement upon ninety (90) days
written notice to the Employer in the event that (a) the Board
fails to reelect the Executive as President, Chief Executive
Officer and Chairman of the Board of the Company during the Term of
this Agreement; (b) the Board significantly reduces the nature or
scope of the authorities, powers, functions or duties attached to
the office of the President, Chief Executive Officer or Chairman of
the Board of the Company; (c) the Employer breaches any material
covenant under this Agreement, and such breach is not cured within
forty-five (45) days of the issuance of written notice by the
Executive to the Employer identifying the breach; or (d) the
Employer consents to the Executive's retirement. Upon termination
at the conclusion of the ninety (90) day period, the Executive is
entitled to receive from the Employer any earned but unpaid Base
Compensation and any unreimbursed expenses or other unpaid benefits
owed as of the date of termination. The Employer may shorten or
eliminate the ninety (90) day notice period by providing written
notice to the Executive. Further, the Executive shall be entitled
to the Severance Compensation and Severance Benefits as defined in
Section 3.7 hereunder. Except for Section 3.6(d), an election by
the Executive to terminate this Agreement for just cause shall not
be deemed a voluntary termination of employment by the Executive
for the purpose of this Agreement or any plan or practice of the
Employer.
3.7 Severance Compensation and Severance Benefits.
Pursuant to this Agreement, severance compensation and benefits
shall mean: (a) within ten (10) calendar days of the date of
termination, a single cash payment in an amount equal to one year
payment of the Base Compensation; (b)(i) within ten (10) calendar
days of the date of termination, payment for accrued and unused
vacation for the year of termination; and (b)(ii) payment of the
Executive's prorated bonus or incentive compensation, if any,
pursuant to Section 2.2 of this Agreement, for the year of
termination in accordance with the ordinary payment procedures
under and other terms and provisions of the Incentive Plan or any
other bonus compensation plan (payments pursuant to 3.7(a) and
3.7(b) are collectively, the "Severance Compensation"); (c)(i) to
the extent that the Executive is insurable, the Employer shall
reimburse the Executive the cost of COBRA benefits, other than long
term disability coverage, for the Executive and his family for a
period of eighteen (18) months following the date of termination,
subject to any limitation on the provision of such benefits
established by then existing law; provided, however, that if the
Employer is not able to provide coverage under COBRA for any
reason, including, without limitation, that the Executive is deemed
uninsurable, the Employer shall make a lump-sum cash payment to the
Executive in an amount equal to the Employer's cost for such COBRA
benefits over such eighteen (18) month period if such benefits had
been available for the Executive and his family; and (c)(ii)
Executive shall have the right to convert any other Employer
sponsored benefit plan to the extent provided for by the terms of
such plan, but the Employer shall have no obligation to make
payments in connection with any such conversion (the benefits
described in Section 3.7(c) are collectively, the "Severance
Benefits").
In the event the Employer issues a notice of non-extension of
this Agreement to the Executive in accordance with Section 1.1 of
this Agreement, the Executive shall be entitled to the Severance
Compensation and Severance Benefits in accordance with the terms
and at the times provided in this Section 3.7. In the event the
Executive issues a notice of non-extension of this Agreement to the
Employer in accordance with Section 1.1 of this Agreement, the
Executive shall not be entitled to the Severance Compensation and
Severance Benefits provided in this Section 3.7.
4. Covenants of the Executive.
4.1 Covenants Against Competition. The Executive
acknowledges that (i) the principal business of the Employer is the
acquisition, design, development, construction and marketing of
residential real estate including residential housing units; (ii)
the Employer's business is conducted in various geographic regions
of the United States of America; (iii) the Executive's work for
the Employer will bring him and will continue to bring him into
close contact with many trade secrets of and confidential
information concerning the Employer, its subsidiaries and its
affiliates which are not readily available to the public; and
(iv) the covenants in this Section 5 are essential to protect the
business and goodwill of the Employer. In order to induce the
Employer to enter into this Agreement, the Executive covenants and
agrees that:
4.1.1 Non-Compete. For the Term of this Agreement, and
for a period of twelve (12) months following termination of the
Executive's employment (the "Restricted Period"), other than for
just cause by the Employer or without cause by the Executive, the
Executive shall not, in any state in which the Employer is actively
engaged in the business of the Employer: (i) compete with the
Employer by engaging in the Employer's business of acquiring,
designing, developing, constructing and marketing residential real
estate, including, without limitation, residential housing units;
or (ii) become interested in or engaged in the Employer's business
of acquiring, designing, developing, constructing and marketing
residential real estate, directly or indirectly, as an individual,
partner, shareholder, officer, director, principal, agent, senior
level management employee, trustee, consultant or in any other
relationship or capacity. Notwithstanding the foregoing, the scope
of this Section 4.1.1 shall not be deemed to include the states of
California, Illinois, Pennsylvania or Florida with the exception of
the Orlando metropolitan area and any other county in Florida in
which the Employer currently owns property or has executed a
contract to purchase land and New Jersey with the exception of
Morris, Warren, Hunterdon, Middlesex, Somerset, Mercer, Monmouth
and Burlington counties.
4.1.2 Corporate Opportunities. During the Restricted
Period, the Executive shall not acquire any ownership, creditor's,
beneficial or pecuniary interest, or become a director, officer or
significant equity holder in any entity that acquires any
ownership, creditor's, beneficial, or pecuniary interest, in any
residential real estate development project of the Employer or any
of its subsidiaries or other affiliated entities.
4.1.3 Confidential Information. During and after the
Restricted Period, the Executive shall keep secret and retain in
strictest confidence, and shall not use for the benefit of himself
or others, except in the course of performing his duties for the
Employer, all proprietary and/or confidential matters of the
Employer, its subsidiaries and its affiliates, including, without
limitation, details of contracts, pricing policies, operational
methods, marketing plans and strategies, real estate acquisition,
development and design techniques, projects and plans, business
acquisition plans, new personnel acquisition plans, and other
business affairs of the Employer and its subsidiaries and other
affiliated entities learned by the Executive heretofore or
hereafter; provided, however, the Executive shall not be restricted
with respect to use of confidential information that (i) was
rightfully known to Executive prior to disclosure by Employer; (ii)
is or becomes public knowledge through no action or default on the
part of the Executive; (iii) is disclosed to the Executive by a
third party, provided that the third party has the lawful right to
make such disclosure; (iv) is approved by the Board in writing for
disclosure to specified third parties; or (v) is required to be
disclosed by Executive pursuant to a court order.
4.1.4 Nonsolicitation of Employees. During the
Restricted Period, the Executive shall not, directly or indirectly,
hire, solicit or encourage any employee to leave the employment of
the Employer or any of its subsidiaries or other affiliated
entities.
4.1.5 Property of the Employer. All memoranda, notes,
lists, records and other documents, and all copies thereof,
including but not limited to such items stored in computer
memories, on microfilm or by any other means, made or compiled by
or on behalf of the Executive, or made available to the Executive,
concerning the business of the Employer or any of its subsidiaries
or other affiliated entities are and shall be the Employer's
property and shall be delivered to the Employer promptly upon the
termination of the Executive's employment with the Employer or at
any other time on request. The Executive shall be entitled to
copies of any of the materials referenced herein, at no cost and
expense to the Executive, to the extent necessary to (i) defend any
lawsuit; (ii) respond to any inquiry from any court or governmental
agency related to such materials; (iii) respond to any tax audits;
or (iv) to respond to any other inquiries which require Executive
to have access to such materials.
4.2 Rights and Remedies Upon Breach. If the Executive
breaches, or threatens to commit a breach, of any of the provisions
of Section 4.1, the Employer shall have the rights and remedies set
forth in this Section 4.2 of this Agreement, each of which shall be
independent of the other and severally enforceable, and all of
which rights and remedies shall be in addition to, and not in lieu
of, any other rights and remedies available to the Employer in law
or in equity.
4.2.1 Specific Performance. The Employer shall
have the right and remedy to have the covenants of this Section 4
specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed that any such breach or threatened
breach will cause irreparable injury to the Employer and that money
damages will not provide adequate remedy to the Employer.
4.2.2 Accounting. The Employer shall have the
right and remedy to require the Executive to account for and pay
over to the Employer all compensation, profits, monies, accruals,
increments or other benefits (collectively, the "Benefits") derived
or received by the Executive as the result of any transactions
constituting a breach of any of the covenants of Section 4, and the
Executive shall account for and pay over such Benefits to the
Employer.
4.3 Severability of Covenants. If any court determines
that any of the covenants of Section 4, or any part thereof, is
invalid or unenforceable, the remainder of the covenants shall not
thereby be affected and shall be given full effect, without regard
to the invalid portions.
4.4 Blue-Pencilling. If any court determines that any
of the covenants of Section 4, or any part thereof, is
unenforceable because of the duration or geographic scope of such
provision, such court shall have the power to reduce the duration
or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable and shall be
enforced.
5. Binding Effect. The respective obligations of the
Employer and the Executive under this Agreement shall inure to the
benefit of and be binding upon the Employer and the Executive and
the respective successors and assigns of the Employer. This
Agreement shall be assignable by the Employer but not by the
Executive. As used herein, the term "successors and assigns" shall
include any entity which acquires all or substantially all of the
assets and businesses of Employer whether by purchase, merger,
consolidation or otherwise.
6. Applicable Law. The Agreement shall be interpreted and
construed in accordance with the laws of the State of New Jersey.
7. Indemnification. The Employer will defend and indemnify
the Executive as provided for in the Employer's Bylaws, regardless
of any subsequent amendment, which may restrict or limit the
Executive's right to indemnification as set forth in the Bylaws, or
repeal of the relevant Bylaw provisions. Further, the Executive
shall be covered by any directors' and officers' insurance policy
(the "D&O Policy") provided by the Employer for its officers and
directors to the fullest extent that coverage pursuant to any such
D&O Policy is provided for the Employer's other officers and
directors. Following the termination of the Executive's employment
with the Employer, the Executive shall be covered by any then
existing or subsequently obtained D&O Policy to the same extent
that any such D&O Policy provides coverage for officers or
directors of the Employer. Following termination of his employment
with the Employer, the Executive will be entitled to request and
obtain an endorsement or other customary form of confirmation from
the carrier of any such D&O Policy that the Executive is covered as
a former officer or director of the Employer.
8. Representations and Warranties of the Employer. The
Employer represents and warrants that the execution of this
Agreement by the Employer has been duly authorized by all required
resolutions of its Board and/or Board committees.
9. Notices. For the purposes of this Agreement, notices,
demands and all other communications provided for in the Agreement
shall be in writing and shall be deemed to have been duly issued
when hand delivered, or when dispatched to any overnight delivery
service, or when deposited for mailing in a United States mailbox
or at a United States Post Office if sent postage prepaid and
return receipt requested by United States Certified or Registered
Mail.
If to the Executive:
Anthony J. Caldarone
162 Anchor Drive
Vero Beach, Florida 32963
If to the Employer:
Calton, Inc.
500 Craig Road
Manalapan, New Jersey 07726
or such other address as any party may have furnished to the other
in writing in accordance herewith.
10. Entire Agreement. This Agreement sets forth the entire
understanding between the Employer and Executive with respect to
the employment of the Executive by the Employer, and it supersedes
all prior and contemporaneous, written, oral, express and implied
communications, agreements and understandings between the Executive
and the Employer, its subsidiaries and its other affiliated
entities. In the event that any term, or condition or provision of
this Agreement varies from, or is in any way dissimilar to or a
conflict with, any term, condition or provision of any of the
Employer's benefit plans or any other agreement between the
Employer and the Executive, the terms, conditions and provisions of
this Agreement will control.
11. Amendment. No provision of this Agreement may be
amended, modified, waived or discharged unless such waiver,
amendment, modification or discharge is approved by the Board, or
a committee of the Board having appropriate authority, and agreed
to in writing signed by both the Executive and the Employer.
12. Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the
validity or enforceability of any other provisions of this
Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in
counterparts, each of which will constitute an original, but all of
which together constitute one and the same Agreement.
14. Effective Date. The parties hereto agree that this
agreement is effective and legally binding as of November 21, 1995.
15. Stock Options. Subject to the condition as to
shareholder approval set forth below, the Executive shall be
granted options to acquire 500,000 shares of the Employer's Common
Stock under a new stock option plan which shall be adopted and
approved by the Employer's Board of Directors. The grant of such
options shall be conditioned upon the approval of such plan by the
shareholders of the Employer and the exercise of such options shall
be conditioned upon registration of the shares underlying such
options under the Securities Act of 1933, as amended. The exercise
price of such options, all of which shall be fully vested upon
grant, shall be equal to the fair market value of the Common Stock
of the Employer on the date of the adoption of the plan by the
Employer's Board of Directors.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first written above.
WITNESS:
__________________________ /s/ Anthony J. Caldarone
Anthony J. Caldarone
ATTEST: CALTON, INC.
/s/Carol S. Kuehne By: /s/ Robert A. Fourniadis
Carol S. Kuehne, Robert A. Fourniadis,
Assistant Secretary Senior Vice President
CALTON, INC.
FORM 10-K
FOR FISCAL YEAR ENDED NOVEMBER 30, 1995
EXHIBIT 10.8
SUPPLEMENTAL EXECUTIVE COMPENSATION AGREEMENT
BETWEEN THE COMPANY AND DOUGLAS T. NOAKES
DATED MAY 12, 1995
SUPPLEMENTAL EXECUTIVE
COMPENSATION AGREEMENT
This Agreement, dated as of May 12, 1995 between Calton, Inc.
(the "Company"), a New Jersey corporation with offices located at
500 Craig Road, Manalapan, New Jersey 07726, and Douglas T. Noakes
(the "Executive"), an individual residing at 12 Brandywine Lane,
Colts Neck, New Jersey 07722.
WHEREAS, the Company has previously granted options (the
"Options") to the Executive to purchase 684,564 shares of the
Company's Common Stock under the Company's Amended and Restated
1993 Non-Qualified Stock Option Plan (the "Option Plan");
WHEREAS, each of the Options currently has an exercise price
of $.50 per share;
WHEREAS, the Company has engaged Bear, Stearns & Co. as its
financial advisor and agent in connection with seeking out parties
who would be interested in entering into certain business
transactions with the Company;
WHEREAS, the Board of Directors of the Company has recognized
that the continued services of the Executive are an essential
component in maximizing the value of the Company and completing any
proposed Transaction (as defined below);
NOW, THEREFORE, in consideration for the mutual promises
contained herein and to induce the Executive to remain in the
employ of the Company, the parties hereto do hereby agree as
follows:
1. Supplemental Compensation. In the event that either (a) a
Transaction shall be consummated prior to May 12, 1996 or (b) at
any time subsequent to May 12, 1996, the Company shall consummate
a Transaction with a party (i) from whom it received, prior to May
12, 1996, a written offer relating to a Transaction or (ii) with
whom it entered into a letter of intent or written agreement with
respect to a Transaction prior to May 12, 1996, then, the Company
shall pay to the Executive an amount in cash equal to the amount,
if any, by which $200,000 (as such amount may be proportionately
reduced if any of the Options are exercised prior to a closing of
a Transaction) exceeds the Option Value (as defined below). The
Company shall pay any amount owed under this Agreement on the
closing date of the Transaction or if the amount payable cannot be
determined on such date, promptly upon the determination of such
amount.
2. Definition. The following terms shall have the following meanings
for purposes of this Agreement:
"Option Value" shall mean (a) the amount, if any, by which the
Transaction Price per share of Common Stock exceeds $.50,
multiplied by (b) the number of shares subject to the Options which
are outstanding immediately prior to the Transaction; provided,
however, that if the Executive exercises his right to require the
Company to repurchase his Options pursuant to Section 7(b)(iii) or
7(b)(iv) of the Option Plan, then the Option Value shall mean the
amount paid to the Executive in connection with the repurchase of
such Options.
"Transaction" shall mean (A) a merger (other than a merger intended
solely to change the Company's jurisdiction of incorporation),
consolidation, reorganization, recapitalization, in which (i) the
previously outstanding Common Stock shall be changed into or,
pursuant to operation of law or the terms of the transaction to
which the Company is a party, exchanged for common stock or other
securities of another corporation or interests in a noncorporate
entity or other property (including cash) or (ii) the Company is
the surviving entity and which results in the Company's
shareholders immediately prior to such transaction not holding (by
virtue of such shares or securities issued pursuant to such
transaction) securities representing sixty-five percent (65%) or
more of the total voting power of the outstanding voting securities
of the Company having the right under ordinary circumstances to
vote in an election of the Company's Board, (B) a sale in any
transaction or series of transactions of fifty percent (50%) or
more of the Company's assets to an entity other than a subsidiary
or other affiliated entity of the Company, or (C) an event or
series of events by which any "Person," as that term is defined in
Section 2(2) of the Securities Act of 1933 or any affiliate of such
Person (when applied to any Person, an affiliate shall mean any
other Person directly or indirectly controlling, controlled by, or
under common control with, that Person) or Person and affiliates of
such Persons acting in concert shall, whether in a single
transaction or series of related transactions, acquire, directly or
indirectly, an amount of the Company's voting stock representing
thirty-five percent (35%) or more of the total voting power of the
outstanding voting securities of the Company having the right under
ordinary circumstances to vote in an election of the Company's
Board.
"Transaction Price" shall mean the per share consideration given to
holders of the Company's Common Stock in connection with a
Transaction. If all or a portion of the consideration paid in the
Transaction is other than cash, then the value of such non-cash
consideration shall be the fair market value thereof on the date
the Transaction is consummated as determined in good faith by the
Company's Board of Directors. If all or a portion of the
consideration payable in connection with the Transaction includes
contingent future payments, then the present value of the
reasonably expected amount of such contingent future payments (as
such amount is determined in good faith by the Company's Board of
Directors) using a discount rate of 10% will be included in the
Transaction Price. If the Transaction involves a sale (in any
transaction or series of transactions) of fifty percent (50%) or
more of the Company's assets followed by a dissolution and
liquidation of the Company, then the Transaction Price shall mean
the amount per share distributed to the holders of the Company's
Common Stock in connection with such dissolution and liquidation.
In the event that the Transaction involves (a) an event described
in clause (C) of the definition of "Transaction" set forth above,
(b) a merger, consolidation or recapitalization in which the
Company is the surviving entity which does not affect the
outstanding shares of the Common Stock or in which no securities or
other consideration are issued in respect of the Common Stock, or
(c) a sale (in any transaction or series of transactions) of 50% or
more of the Company's assets which is not followed by a dissolution
and liquidation of the Company, then the Transaction Price shall
mean the closing price of the Company's Common Stock on the
American Stock Exchange (or other principal securities exchange on
which the Common Stock is then traded) on the date of the closing
of the Transaction.
3. Termination. The Company's obligation to make the payment, if any,
contemplated by this Agreement shall terminate if the Executive
voluntarily resigns his employment with the Company prior to the
closing of a Transaction. For purposes of this Agreement, the
Executive will not be deemed to have voluntarily resigned if he
terminates his employment with the Company after (i) the Board
fails to reelect the Executive to the offices he holds as of the
date of this Agreement; (ii) the Board of Directors significantly
reduces the nature or scope of the authorities, powers, functions
or duties attached to the Executives office; (iii) the Company
breaches any material covenant of any employment agreement between
the Executive and the Company, and such breach is not cured within
forty-five (45) days of the issuance of written notice by the
Executive to the Company identifying the breach, (iv) the salary of
the Executive is reduced or (v) the Company consents to the
Executive's retirement.
4. No Effect on Other Rights. Nothing contained in this Agreement
shall be construed as limiting or otherwise affecting any of the
Executive's rights under any other agreement or plan in effect as
of the date hereof, including, but not limited to, the Option Plan
and the Executive Employment Agreement dated as of January 26, 1994
between the Company and the Executive. In the event that a
Transaction shall occur, the compensation payable under this
Agreement shall be payable to the Executive regardless of whether
the employment of the Executive is terminated or continued
following the Transaction.
IN WITNESS WHEREOF, the parties have executed the Agreement as
of the date first above written.
CALTON, INC.
By:/s/Robert A. Fourniadis
Robert A. Fourniadis,
Senior Vice President-Legal
/s/Douglas T. Noakes
DOUGLAS T. NOAKES
CALTON, INC.
FORM 10-K
FOR FISCAL YEAR ENDED NOVEMBER 30, 1995
EXHIBIT 10.9
SUPPLEMENTAL EXECUTIVE COMPENSATION AGREEMENT
BETWEEN THE COMPANY AND BRADLEY A. LITTLE
DATED MAY 12, 1995
SUPPLEMENTAL EXECUTIVE
COMPENSATION AGREEMENT
This Agreement, dated as of May 12, 1995 between Calton, Inc.
(the "Company"), a New Jersey corporation with offices located at
500 Craig Road, Manalapan, New Jersey 07726, and Bradley A. Little
(the "Executive"), an individual residing at 45 Longstreet Road,
Manalapan, New Jersey 07726.
WHEREAS, the Company has previously granted options (the
"Options") to the Executive to purchase 160,000 shares of the
Company's Common Stock under the Company's Amended and Restated
1993 Non-Qualified Stock Option Plan (the "Option Plan");
WHEREAS, each of the Options currently has an exercise price
of $.50 per share;
WHEREAS, the Company has engaged Bear, Stearns & Co. as its
financial advisor and agent in connection with seeking out parties
who would be interested in entering into certain business
transactions with the Company;
WHEREAS, the Board of Directors of the Company has recognized
that the continued services of the Executive are an essential
component in maximizing the value of the Company and completing any
proposed Transaction (as defined below);
NOW, THEREFORE, in consideration for the mutual promises
contained herein and to induce the Executive to remain in the
employ of the Company, the parties hereto do hereby agree as
follows:
1. Supplemental Compensation. In the event that either (a) a
Transaction shall be consummated prior to May 12, 1996 or (b) at
any time subsequent to May 12, 1996, the Company shall consummate
a Transaction with a party (i) from whom it received, prior to May
12, 1996, a written offer relating to a Transaction or (ii) with
whom it entered into a letter of intent or written agreement with
respect to a Transaction prior to May 12, 1996, then, the Company
shall pay to the Executive an amount in cash equal to the amount,
if any, by which $150,000 (as such amount may be proportionately
reduced if any of the Options are exercised prior to a closing of
a Transaction) exceeds the Option Value (as defined below). The
Company shall pay any amount owed under this Agreement on the
closing date of the Transaction or if the amount payable cannot be
determined on such date, promptly upon the determination of such
amount.
2. Definition. The following terms shall have the following meanings
for purposes of this Agreement:
"Option Value" shall mean (a) the amount, if any, by which the
Transaction Price per share of Common Stock exceeds $.50,
multiplied by (b) the number of shares subject to the Options which
are outstanding immediately prior to the Transaction; provided,
however, that if the Executive exercises his right to require the
Company to repurchase his Options pursuant to Section 7(b)(iii) or
7(b)(iv) of the Option Plan, then the Option Value shall mean the
amount paid to the Executive in connection with the repurchase of
such Options.
"Transaction" shall mean (A) a merger (other than a merger intended
solely to change the Company's jurisdiction of incorporation),
consolidation, reorganization, recapitalization, in which (i) the
previously outstanding Common Stock shall be changed into or,
pursuant to operation of law or the terms of the transaction to
which the Company is a party, exchanged for common stock or other
securities of another corporation or interests in a noncorporate
entity or other property (including cash) or (ii) the Company is
the surviving entity and which results in the Company's
shareholders immediately prior to such transaction not holding (by
virtue of such shares or securities issued pursuant to such
transaction) securities representing sixty-five percent (65%) or
more of the total voting power of the outstanding voting securities
of the Company having the right under ordinary circumstances to
vote in an election of the Company's Board, (B) a sale in any
transaction or series of transactions of fifty percent (50%) or
more of the Company's assets to an entity other than a subsidiary
or other affiliated entity of the Company, or (C) an event or
series of events by which any "Person," as that term is defined in
Section 2(2) of the Securities Act of 1933 or any affiliate of such
Person (when applied to any Person, an affiliate shall mean any
other Person directly or indirectly controlling, controlled by, or
under common control with, that Person) or Person and affiliates of
such Persons acting in concert shall, whether in a single
transaction or series of related transactions, acquire, directly or
indirectly, an amount of the Company's voting stock representing
thirty-five percent (35%) or more of the total voting power of the
outstanding voting securities of the Company having the right under
ordinary circumstances to vote in an election of the Company's
Board.
"Transaction Price" shall mean the per share consideration given to
holders of the Company's Common Stock in connection with a
Transaction. If all or a portion of the consideration paid in the
Transaction is other than cash, then the value of such non-cash
consideration shall be the fair market value thereof on the date
the Transaction is consummated as determined in good faith by the
Company's Board of Directors. If all or a portion of the
consideration payable in connection with the Transaction includes
contingent future payments, then the present value of the
reasonably expected amount of such contingent future payments (as
such amount is determined in good faith by the Company's Board of
Directors) using a discount rate of 10% will be included in the
Transaction Price. If the Transaction involves a sale (in any
transaction or series of transactions) of fifty percent (50%) or
more of the Company's assets followed by a dissolution and
liquidation of the Company, then the Transaction Price shall mean
the amount per share distributed to the holders of the Company's
Common Stock in connection with such dissolution and liquidation.
In the event that the Transaction involves (a) an event described
in clause (C) of the definition of "Transaction" set forth above,
(b) a merger, consolidation or recapitalization in which the
Company is the surviving entity which does not affect the
outstanding shares of the Common Stock or in which no securities or
other consideration are issued in respect of the Common Stock, or
(c) a sale (in any transaction or series of transactions) of 50% or
more of the Company's assets which is not followed by a dissolution
and liquidation of the Company, then the Transaction Price shall
mean the closing price of the Company's Common Stock on the
American Stock Exchange (or other principal securities exchange on
which the Common Stock is then traded) on the date of the closing
of the Transaction.
3. Termination. The Company's obligation to make the payment, if any,
contemplated by this Agreement shall terminate if the Executive
voluntarily resigns his employment with the Company prior to the
closing of a Transaction. For purposes of this Agreement, the
Executive will not be deemed to have voluntarily resigned if he
terminates his employment with the Company after (i) the Board
fails to reelect the Executive to the offices he holds as of the
date of this Agreement; (ii) the Board of Directors significantly
reduces the nature or scope of the authorities, powers, functions
or duties attached to the Executives office; (iii) the Company
breaches any material covenant of any employment agreement between
the Executive and the Company, and such breach is not cured within
forty-five (45) days of the issuance of written notice by the
Executive to the Company identifying the breach, (iv) the salary of
the Executive is reduced or (v) the Company consents to the
Executive's retirement.
4. No Effect on Other Rights. Nothing contained in this Agreement
shall be construed as limiting or otherwise affecting any of the
Executive's rights under any other agreement or plan in effect as
of the date hereof, including, but not limited to, the Option Plan
and the Company's Severance Policy for Senior Executives (the
benefits under which the Company acknowledges it is obliged to pay
to Executive in accordance with the terms thereof). In the event
that a Transaction shall occur, the compensation payable under this
Agreement shall be payable to the Executive regardless of whether
the employment of the Executive is terminated or continued
following the Transaction.
IN WITNESS WHEREOF, the parties have executed the Agreement as
of the date first above written.
CALTON, INC.
By:/S/ Douglas T. Noakes
Douglas T. Noakes, President
/s/ Bradley a. Little
BRADLEY A. LITTLE
CALTON, INC.
FORM 10-K
FOR FISCAL YEAR ENDED NOVEMBER 30, 1995
EXHIBIT 13
1995 ANNUAL REPORT TO SHAREHOLDERS
PP. 1, 5-24
<TABLE>
Financial Highlights
(in thousands, except per share amounts)
<CAPTION>
Six Months Six Months
Ended Ended
Years Ended November 30, November May 31, Years Ended November 30,
Selected Operating Data 1995 1994 30, 1993 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . $180,843 $168,723 $ 83,351 $ 76,555 $135,421 $117,980
Gross profit . . . . . . . 21,153 29,384 15,878 8,251 19,125 12,509
Income (loss) from
operations. . . . . . . . (1,225) 8,595 5,560 (15,593) (25,630) (43,186)
Income (loss) before
income taxes and
extraordinary gain. . . . (2,307) 6,560 4,756 (56,494) (38,611) (55,720)
Income (loss) before
extraordinary gain. . . . (3,138) 4,193 2,872 (56,494) (38,611) (43,538)
Net income (loss). . . . . (3,138) 4,193 2,872 1,817 (38,611) (43,538)
Income (loss) per share
before extraordinary
gain. . . . . . . . . . . (.12) .16 .11 (1.67) (1.14) (1.28)
Net income (loss)
per share . . . . . . . . (.12) .16 .11 .05 (1.14) (1.28)
At
At November 30, May 31, At November 30,
Selected Balance Sheet Data 1995 1994 1993 1993 1992 1991
Total assets . . . . . . $ 91,416 $122,144 $110,930 $117,462 $187,909 $216,592
Total debt . . . . . . . 46,227 69,398 62,792 70,242 141,828 147,614
Shareholders' equity
(deficit) 27,013 29,045 23,893 21,000 (452) 38,082
</TABLE>
The selected operating data for the years ended November 30, 1995 and 1994 and
the six months ended November 30, 1993 and selected balance sheet data at and
subsequent to May 31, 1993 are separated by a black line since due to the
adoption of fresh-start accounting and reporting to reflect the effects of the
Reorganization as of May 31, 1993, these amounts are not comparable to the
amounts reflected for prior periods.
Management's Discussion And Analysis Of Financial
Condition And Results Of Operations
Results Of Operations
RESULTS OF OPERATIONS FOR THE YEARS ENDED NOVEMBER 30, 1995 AND 1994
Revenues for the year ended November 30, 1995 were $180.8 million compared
to revenues of $168.7 million for the year ended November 30, 1994. Deliveries
of 749 homes resulted in housing revenues of $171.3 million for the year ended
November 30, 1995. For the year ended November 30, 1994, the Company delivered
899 homes which generated $165.5 million of housing revenues. Housing revenues
in 1995 increased four percent (4%) reflecting an increase in average selling
prices to $229,000 for the homes delivered during the year compared to $184,000
for the homes delivered in 1994. This increase in average revenue per home is
consistent with the Company's plan to position itself in middle and upscale
market segments in the Northeast and Orlando, Florida markets with enhanced
margin potential and reduce its former concentration in entry level,
multi-family products because of unfavorable demographic trends and increasing
regulatory costs. Deliveries in the Northeast division comprised seventy
percent (70%) of the Company's total deliveries in fiscal 1995 where average
selling prices increased to $265,000 from $226,000 in 1994. Deliveries in the
Orlando division comprised twenty-four percent (24%) of total deliveries in
fiscal 1995, where average selling prices increased to $125,000 in 1995 from
$109,000 in 1994. The seventeen percent (17%) decrease in home deliveries in
fiscal 1995 is primarily attributable to a thirty-nine percent (39%) decrease
of home deliveries in the Orlando, Florida division primarily due to the timing
of new project openings.
The Company's gross profit margin on homes delivered was approximately
twelve percent (12%) during the year ended November 30, 1995, compared to
seventeen percent (17%) in the year ended November 30, 1994. The gross profit
margin on homes delivered in 1995 was impacted by increased competition in a
difficult market while the homes delivered in 1994 reflected the revaluation of
the Company's inventory as a result of the application of fresh-start
accounting and reporting in connection with the Company's 1993 Plan of
Reorganization. In addition, gross profit margins have been, and will continue
to be, unfavorably impacted by increased carrying costs resulting from lower
absorption rates. Gross profit margins have also been impacted by the fact that
the Company's land pipeline, which was severely depleted when it completed its
Reorganization in May 1993, has been refilled in a transitional market
environment that reflected upward price pressures on land that could not be
entirely passed along to buyers. As a result of the factors discussed above and
other variables, the number and average selling prices of homes sold and
delivered and gross profit realized in 1995 may not be indicative of future
deliveries.
During the second quarter of fiscal 1995, as a result of the consolidation
of the New Jersey-North and New Jersey-South divisions and economic and market
conditions, the Company decided not to incur further preacquisition costs on
nine properties controlled under option. These actions resulted in a pre-tax
charge of $1.1 million that is reflected in Cost of revenues. The Company
finalized the accounting for a community during the second quarter of fiscal
1995 that delivered its last home earlier in 1995. A reserve previously
provided during the delivery period of the community was no longer required and
the likelihood of payment of the amount reserved was remote. As a result, a
pre-tax credit of $1.1 million is reflected in Cost of revenues.
In the year ended November 30, 1995, the Company recorded non-cash charges
to the provision for estimated net realizable value of $1.6 million to reflect
certain inventory, primarily two properties, at their estimated net realizable
value. For the year ended November 30, 1994, $400,000 was recorded as a
provision for estimated net realizable value. Estimated net realizable value
has been determined based upon the amount the Company expects to realize
through sale or development based on management's plans for each property. The
estimation process involved in the determination of estimated net realizable
value is inherently subjective since it requires estimates as to future events
and conditions. The estimated net realizable value of a property may exceed the
value which could be obtained through the immediate sale of the property if
development plans for such property support a higher cost recovery.
The Company decided to wind down the Chicago Division due to unfavorable
results and prospects. As a result, a $1.1 million charge was recorded in the
fourth quarter of 1995 and is included in Restructuring charges. The Company
plans to dispose of the remaining inventory primarily through the sale and
buildout of single family homes and the sale of the remaining finished lots. Of
the $1.1 million, $727,000 was applied as a reduction to inventory. The Company
anticipates that all of the inventory of the Chicago division will be disposed
of by the end of 1996. Also included in Restructuring charges is $840,000 in
severance benefits, $200,000 of which resulted from the consolidation in March
1995 of the New Jersey- North division and New Jersey-South division; and
$640,000 of which resulted from a severance arrangement with the Company's
former President.
Selling, general and administrative expenses decreased to $18.8 million
(10% of revenues) for the year ended November 30, 1995, compared to $20.2
million (12% of revenues) for the year ended November 30, 1994. The decrease is
principally due to lower employee costs resulting from reductions in employee
levels and consolidation of operations in the Northeast completed early in the
second quarter of 1995.
Gross interest cost was approximately $7.1 million for the year ended
November 30, 1995, compared to $5.5 million for the year ended November 30,
1994, respectively. The increase in gross interest cost for the year ended
November 30, 1995 resulted from higher interest rates and, to a lesser extent,
higher average loan balances compared to the year ended November 30, 1994.
Interest capitalized in the year ended November 30, 1995 was $5.0 million
compared to $4.0 million in the year ended November 30, 1994. The increase of
capitalized interest is primarily a result of higher interest rates. The
capitalized amounts will reduce future gross profit levels assuming no relative
increases in selling prices.
Included in Other (income) expense in 1995 is $890,000 which represents
payments received primarily in the fourth quarter in connection with the
dissolution and liquidation of Talcon, L.P. ("Talcon") in complete satisfaction
of Talcon's debt obligations to the Company. The Company had previously
established a reserve for all amounts owed to it by Talcon.
The Company, primarily as a result of the adoption of fresh-start
accounting and reporting in connection with its Reorganization in 1993, has a
tax basis in its assets held as it exited its Reorganization substantially
in excess of the carrying value of these assets used for financial reporting
purposes. As a result of this difference in basis, the Company will realize a
tax benefit over time against future earnings. In accordance with The American
Institute of Certified Public Accountants Statement of Position 90-7 ("SOP
90-7"), the Company is required to provide a provision in lieu of taxes
notwithstanding the fact that there are no significant taxes payable and must
record a corresponding reduction in the amount of Values in excess of amounts
allocable to identifiable net assets ("goodwill"), until exhausted, then as a
direct increase to Paid in capital. Results for the year ended November 30,
1995 reflect a provision in lieu of taxes for financial reporting purposes of
$831,000, due to recording the above-mentioned non-cash charges, and which is
primarily non-cash, and therefore does not impact the Company's cash position,
tangible net worth or earnings before interest, taxes, depreciation and
amortization ("EBITDA"). Goodwill was fully extinguished during the year ended
November 30, 1994 and an increase of $719,000 was recorded to Paid in capital.
The effective rate of the 1994 provision in lieu of taxes was reduced by
approximately $700,000 as a result of a reduction in tax reserves due to the
resolution of a certain tax issue. The net operating loss carryforwards and
other deferred tax assets are subject to utilization limitations as a result of
the changes in control of the Company that occurred in 1993 and 1995.
The distribution of the Company's stock has been shifting significantly
since May 31, 1993. This activity accelerated in the last half of 1995 when the
Company realized a greater than fifty percent (50%) change in its ownership
since its Reorganization in 1993. The recognition of this event requires that
the Company recalculate the amount of the annual net operating loss ("NOL")
limitation. The preliminary estimate of the Company's ability to use the NOL to
offset future income is approximately $1.7 million per year or approximately
$22.0 million. While the change in ownership impacted the NOL, management
believes that the wider distribution of stock represents a more positive and
liquid ownership base for the Company's common equity.
Net sales contracts of $108.7 million (496 homes) were recorded by the
Company during the year ended November 30, 1995, representing decreases in the
dollar value of contracts of 42% compared to $188.9 million (951 homes) in the
same period in 1994. At November 30, 1995, the backlog of homes under contract
totalled 166 homes having an aggregate dollar value of $36.0 million,
reflecting decreases in the number of homes in backlog and in backlog value of
60% and 63%, respectively, over the levels at November 30, 1994 of 419 homes
having an aggregate dollar value of $98.5 million. Prior year results benefited
from a greater number of communities open for sale in the Florida division,
operating two divisions in the Northeast, and an increasing interest rate
environment which may have accelerated home purchase decisions in the first
nine months of 1994. Due to market conditions, the number of new communities
opened for sales during fiscal 1995 decreased forty-two percent (42%) to seven
communities, six of which were in the Florida market. This resulted in fewer
communities open for sales during 1995 and a reduction in the amount
outstanding under the credit facility by $15.0 million to $45.0 million by
November 30, 1995. The average price per home in backlog at November 30, 1995
decreased 8% to approximately $217,000 compared to $235,000 at November 30,
1994 primarily due to the backlog in the Florida division representing a higher
proportion of the total backlog in 1995. The backlog in both years includes
contracts containing financing and other contingencies customary in the
industry, including contracts that are contingent on the purchaser selling
their existing home. Due to changes in product offerings, the uncertainty of
future market conditions and the general economic environment, the sales
backlog, homes delivered, average selling prices and gross profit achieved in
the current and prior periods may not be indicative of those to be realized in
succeeding periods.
Pursuant to management's continued focus on its core homebuilding
business, the Company sold two of its commercial properties in 1995 for
approximately $8.1 million in addition to the sale of one of its commercial
properties in the fourth quarter of 1994 for $800,000. The 1995 sales resulted
in an aggregate pre-tax gain of approximately $500,000 and provided
approximately $850,000 of additional cash for operations after retirement of
$6.9 million of mortgage debt.
RESULTS OF OPERATIONS FOR THE YEAR ENDED NOVEMBER 30, 1994 AND THE
SIX MONTH PERIODS ENDED NOVEMBER 30, 1993 AND MAY 31, 1993
Economic and industry conditions including increased unemployment and
declining real estate values caused the Company to file and consummate a
"pre-packaged" plan of reorganization under Chapter 11 of the United States
Bankruptcy Code (the "Reorganization") in the second quarter of 1993. As a
result of the Reorganization, the Company's financial statements were restated
to reflect the estimated fair market value of individual assets in accordance
with the SOP 90-7. A reorganization value of $21.0 million as of May 31, 1993
was established by the Company after consideration of a range of values
furnished by the Company's independent advisors.
Due to the adoption of fresh-start accounting and reporting in accordance
with SOP 90-7, the Company's results of operations for periods ending on or
prior to May 31, 1993 are not comparable to results experienced by the Company
in subsequent periods particularly in the areas of interest expense, cost of
revenues and gross profit. Accordingly, operating results for periods
subsequent to May 31, 1993 are separated by a black line from periods ending on
or prior to such date. The following discussion of the results of operations is
presented on a comparative basis with reference to the impact of fresh-start
accounting and reporting where appropriate.
Revenues for the year ended November 30, 1994 were $168.7 million compared
to revenues of $159.9 million for the year ended November 30, 1993. Deliveries
of 899 homes resulted in housing revenues of $165.5 million for the year ended
November 30, 1994. For the year ended November 30, 1993, the Company delivered
860 homes which generated $157.3 million of housing revenues. Revenues in 1994
increased five percent (5%) reflecting an increase in deliveries and average
selling prices to $184,000 for the homes delivered during the year compared to
$183,000 for the homes delivered in 1993. This increase in average revenue per
home is consistent with the Company's plan to position itself in upscale market
segments in the Northeast with enhanced margin potential and reduce its former
concentration in entry level, multi-family products in part, because of
unfavorable demographic trends and increasing regulatory costs. The five
percent (5%) increase in home deliveries in fiscal 1994 is attributable to the
improved land pipeline, a fifty-four percent (54%) increase of home deliveries
in the Florida division and the opening of sixteen (16) new communities since
the Reorganization in May 1993. The Company delivered substantially all of the
remainder of the California division's homebuilding inventory (50 home
deliveries) in fiscal 1994 compared to 116 homes delivered in 1993.
The Company's gross profit margin on homes delivered was approximately
seventeen percent (17%) during the year ended November 30, 1994 compared to
nineteen percent (19%) in the six month period ended November 30, 1993. The
Company had confronted increased competition in a housing market that showed
further signs of slowing due, among other things, to increases in mortgage
rates. In addition, gross profit margins were unfavorably impacted by
construction labor and material cost increases, interest rate increases and the
impact of the timing of certain start-up costs associated with opening a number
of new communities for sales within a short time span. Gross profit margins
were also impacted by the fact that the Company's land pipeline, which was
severely depleted when it completed its Reorganization in May 1993, had been
refilled in a transitional market environment that reflected upward price
pressures on land that could not be entirely passed along to buyers in a rising
interest rate environment. The Company's gross profit margin on homes delivered
was approximately 10% for the six month period ended May 31, 1993. The increase
in gross profit margin in the six months ending November 30, 1993 was primarily
due to the adoption of fresh-start accounting and reporting as of May 31, 1993
which included the revaluation of inventory to estimated fair market value. In
the six months ended May 31, 1993, the Company recorded non-cash charges to the
provision for estimated net realizable value of approximately $3.4 million to
reflect certain inventory and receivables at their estimated net realizable
value. For the year ended November 30, 1994, $400,000 was recorded as a
provision for estimated net realizable value. There were no such charges to the
provision for estimated net realizable value for the six months ended November
30, 1993.
Selling, general and administrative expenses decreased to $20.2 million
(12% of revenues) for the year ended November 30, 1994, compared to $10.1
million (12% of revenues) and $20.9 million (13% of revenues) for the six and
twelve month periods ended November 30, 1993. The decrease is principally due
to lower insurance costs and a reduction of legal and professional fees.
Gross interest cost was approximately $5.5 million for the year ended
November 30, 1994, compared to $2.5 million and $7.2 million for the six and
twelve month periods ended November 30, 1993, respectively. The decrease in
gross interest cost for the year ended November 30, 1994 resulted from lower
average loan balances (primarily due to the impact of the Reorganization)
compared to the year ended November 30, 1993. The increase of $500,000 to $3.0
million for the six month period ended November 30, 1994 compared to the six
month period ended November 30, 1993 is due to interest rate increases in the
revolving credit agreement during 1994. Interest capitalized in the year ended
November 30, 1994 was $4.0 million compared to $1.5 million and $2.6 million in
the six and twelve month periods ended November 30, 1993. The increase of
capitalized interest is primarily a result of higher inventory levels subject
to capitalization and, to a lesser extent, higher interest rates.
Equity in operations of joint ventures resulted in a loss of $9.4 million
for the six month period ended May 31, 1993. These reflected non-cash
write-offs primarily from Talcon investments in certain joint ventures which
resulted from the illiquidity of such joint ventures and continued
deterioration in the markets in which they operate. Talcon's results had no
effect on the results of the Company for the year ended November 30, 1994 and
the six months ended November 30, 1993.
Reorganization charges for the six month period ended May 31, 1993 of $37.5
million reflects the successful consummation of the Reorganization and the
corresponding fresh-start accounting and reporting which includes a $23.9
million inventory adjustment to fair market value, $11.4 million write-off of
the values in excess of amounts allocable to identifiable net assets and $2.2
million of restructuring costs and other reserves incurred in the debt
restructuring. No such additional charges were reflected in the year ended
November 30, 1994 and the six months ended November 30, 1993.
The Company recorded a charge against earnings of $800,000 in fiscal 1994
relating to a proposed offering of securities and related working capital
facility. The proposed offering was terminated due to unfavorable conditions in
the financial markets. Results for the year ended November 30, 1994 and the six
month period ended November 30, 1993 reflected a provision in lieu of income
taxes for financial reporting purposes of $2.4 million and $1.9 million,
respectively. This provision was primarily non-cash and, therefore, did not
impact the Company's cash position, tangible net worth or EBITDA.
The Reorganization resulted in the discharge of approximately $83.4
million of principal and interest due the holders of 12-5/8% Subordinated and
16-5/8% Senior Subordinated Notes in exchange for stock, warrants to purchase
common stock, cash and short-term notes. An extraordinary gain of $58.3 million
resulted for the six month period ended May 31, 1993 since the value of debt
discharged was greater than the consideration given in the exchange.
During the year ended November 30, 1994, the Company recorded net sales
contracts of $188.9 million (951 homes), representing increases in the dollar
value of contracts of fifteen percent (15%) compared to $164.3 million (890
homes) in the same period in 1993. At November 30, 1994, the backlog of homes
under contract totalled 419 homes having an aggregate dollar value of $98.5
million, a record level at a fiscal year end, reflecting increases in the
number of homes in backlog and in backlog value of fourteen percent (14%) and
thirty-one percent (31%), respectively, over the levels at November 30, 1993 of
367 homes having an aggregate dollar value of $75.0 million. The average price
per home in backlog at November 30, 1993 increased fifteen percent (15%) to
approximately $235,000 compared to $205,000 at November 30, 1993. Management
attributes these favorable results to an improved land pipeline, the opening of
sixteen (16) new communities from May 31, 1993 through November 30, 1994 and
the Company's strategic plan, including emphasis on marketing and building
higher priced single family detached homes in the Northeast.
Pursuant to management's continued focus on its core homebuilding
business, the Company sold one of its commercial properties in the fourth
quarter of 1994 for approximately $800,000. Although this sale did not generate
any significant profit or loss, it did result in a reduction of mortgages
payable of approximately $750,000.
Liquidity and Capital Resources
During the past several years, the Company has financed its operations
primarily from internally generated funds from home sales and borrowings under
its Amended Credit Agreement (the "Facility"), which became effective upon the
consummation of the Reorganization. In February 1996, the Company amended its
Facility to meet anticipated operating results through the remainder of the
term of the Facility. In conjunction with the Company's decision to exit from
the Chicago market, the amended Facility will permit borrowings of up to $55.0
million until November 1, 1996, when the commitment is reduced to $50.0
million, subject to borrowing base and other limitations. The amended Facility
increased the interest rate charged to the Company to the lender's prime rate
(8.75% at November 30, 1995) plus two percent (2%). The Company believes that
funds generated by its operating activities, income tax payment reductions
derived from NOL utilization and borrowing availability under the Facility will
provide sufficient capital to support the Company's operations and near term
plans through the term of the Facility; however, the Company will have to seek
an extension of the Facility or arrange replacement financing prior to the
expiration of the Facility on February 28, 1997. Recent market conditions have
resulted in a strategy to conserve capital and reduce the amount
outstanding under the Facility by $15.0 million to $45.0 million at November
30, 1995. As of November 30, 1995, approximately $3.5 million was available to
be borrowed under the Facility.
The February 1996 amendment to the Facility changed various restrictions
and financial covenants with which the Company is required to comply, including
covenants relating to cash basis interest coverage, EBITDA and tangible net
worth and limits the amount which can be expended on land acquisition and land
development. Purchase money financing from other sources is limited to $5.0
million under the Facility. Although these limitations will restrict the
Company's ability to expand its business, the Company believes it will be able
to comply with the amended financial covenants based on its business plan.
There can be no assurance that, if market conditions deteriorate further,
business plan levels will be met. For the year ended November 30, 1995, the
Company's EBITDA was $8.6 million compared to $13.0 million in 1994. Certain
subsidiaries of the Company are guarantors of the obligations under the
Facility. The Lenders have a security interest in substantially all of the
assets of the Company and its subsidiaries, subject only to certain permitted
liens approved by the Lenders.
The number of lenders under the Facility has recently decreased to four
participants with Foothill Capital acquiring thirty-seven and one-half percent
(37.5%) of the Facility from the Apollo Group and Fidelity Investments.
Interest rate increases will continue to impact the Company's cost of
capital and related interest costs. Increases in capitalized interest could
reduce future gross profit levels assuming no relative increases in home
selling prices. EBITDA, however, would not be adversely impacted.
CASH FLOWS FROM OPERATING ACTIVITIES
Inventories amounted to $64.2 million at November 30, 1995, compared to
$88.8 million at November 30, 1994. The decrease of $24.6 million was primarily
a result of home deliveries, offset to a lesser extent by land acquisitions
totalling $10.5 million. Commercial properties were reduced by
$7.2 million from the sale of two commercial buildings during the year. In
addition, inventories decreased by $1.6 million at November 30, 1995 from
non-cash writedowns to adjust primarily two properties to estimated net
realizable value and the abandonment of nine properties under option resulting
in a charge of $1.1 million during the second quarter of 1995. The net effect
of reductions in residential and commercial inventories in 1995 was $27.9
million. Inventories amounted to $78.2 million at November 30, 1993, $73.4
million at May 31, 1993 and $110.3 million at November 30, 1992. The increase
in inventory from November 30, 1993 to November 30, 1994 of $10.6 million was a
result of land acquisitions of $25.8 million during the year which were offset
by reductions in inventory levels through deliveries. Of the $25.8 million in
land acquisitions, approximately $2.5 million was financed with purchase money
mortgage debt. The increase in inventory from May 31, 1993 to November 30, 1993
of $4.8 million included: (i) the purchase of $16.6 million of additional land
primarily in New Jersey, and (ii) the depletion of existing inventories of
$11.8 million which includes the effects of the wind down of the California
operations. The decrease in inventory from November 30, 1992 to May 31, 1993
was primarily due to $23.9 million in non-cash charges to adjust to estimated
fair market value in accordance with SOP 90-7 and, to a lesser extent, certain
non-cash writedowns to estimated net realizable value, partially offset with the
acquisition of approximately $8.2 million of land.
Receivables increased by approximately $1.1 million from November 30, 1994
to November 30, 1995, primarily due to the timing of home closings, offset to a
lesser extent by reductions in cash collateral held for performance guarantees
that were released in conjunction with the completion of communities during the
year. The $900,000 increase in receivables in 1994 is attributable to the
timing of home closings. Receivables decreased by approximately $7.3 million at
November 30, 1993 compared to November 30, 1992 primarily due to the refund of
cash collateral held for performance guarantees returned in exchange for $4.0
million in letters of credit, and the timing of home closings.
The Company will continue to seek opportunities to obtain control of land
for future communities at advantageous prices and terms. Funds generated by the
Company's operations will be utilized for the acquisition of such properties.
In addition, borrowings from the Facility will be utilized for acquisitions as
needed, and to the extent available. Also, options will be utilized to the
extent possible to minimize risks, conserve cash and maximize the Company's
land pipeline. The Facility requires approval of the Lenders for land
acquisitions.
A $3.7 million decrease in accounts payable from $7.0 million at November
30, 1994, to $3.3 million at November 30, 1995, was the result of a decreased
level of homebuilding operations and communities under development. The
decrease in accrued expenses and other liabilities of $1.8 million from $16.7
million at November 30, 1994, to $14.9 million at November 30, 1995, was
primarily the result of a $1.1 million credit taken in the second quarter of
1995 from the reversal of a reserve provided during the delivery period of a
community that closed out in early 1995. A $2.4 million increase in accounts
payable from $4.5 million at November 30, 1993 to $7.0 million at November 30,
1994 was a result of an increased level of homebuilding operations and
communities under development. The decrease in accrued expenses and other
liabilities of $3.0 million from $19.7 million at November 30, 1993 to $16.7
million at November 30, 1994 was the result of payments made in conjunction
with litigation settlements, the Talcon dissolution and the California wind
down. In addition, a $700,000 reserve related to a certain tax issue was
reversed.
CASH FLOWS FROM INVESTING ACTIVITIES
At November 30, 1995, 1994 and 1993, investments in joint ventures
amounted to $850,000, which consists primarily of a partnership interest in a
joint venture located in Maryland. The Company expects to realize this amount
when the joint venture activities are completed in 1996.
In 1995, Talcon, a limited partnership formed by the Company in 1987, paid
the Company $890,000 in full satisfaction of its debt obligations to the
Company. The Company had previously established a reserve for all amounts owed
to it by Talcon and, as a result, the payment received in 1995 was classified
in Other (income) expense.
CASH FLOWS FROM FINANCING ACTIVITIES
The aggregate principal amount of loans outstanding under the Facility was
$45.0 million at November 30, 1995, $60.0 million at November 30, 1994, and
$55.0 million at November 30, 1993. The $15.0 million decrease since November
30, 1994 occurred during the second half of 1995 in conjunction with the
Company's recent strategy to reduce inventory levels, improve the Company's
financial condition and due to a restrictive covenant in the Facility. This
covenant requires the Company to reduce outstanding borrowings to the extent
that the amount held in its collateral deposit account with the lenders'
collateral agent exceeds $6.5 million. The amount outstanding had increased
from November 30, 1993 to November 30, 1994 primarily due to land
acquisitions.
The Company utilizes mortgages payable, when available, to finance a
portion of its acquisitions. Mortgages payable decreased to $1.2 million at
November 30, 1995, from $9.4 million at November 30, 1994, as a result of the
repayment of approximately $6.9 million of the proceeds from the sale of two of
its commercial properties and payment under a purchase money mortgage of $1.3
million.
Inflation
The Company, as well as the homebuilding industry in general, may be
adversely affected by inflation, which can cause increases in the price of
land, raw materials and labor. Unless cost increases are recovered through
higher sales prices, gross margins can decrease. Increases in interest rates
result in higher construction and financing costs which can also adversely
affect gross margins. In addition, increases in home mortgage interest rates
make it more difficult for the Company's customers to qualify for mortgage
loans, potentially reducing the demand for homes. Historically, the Company, in
periods of high inflation, has generally been able to recover increases in
land, construction, labor and interest expenses through increases in selling
prices; however, the Company believes that its gross margins in 1994 and 1995
were adversely impacted by increased costs which could not be entirely passed
through to buyers. See "Results of Operations."
Consolidated Balance Sheet
November 30, 1995 And 1994
1995 1994
Assets
Cash and cash equivalents . . . . . . . . . . $ 5,161,000 $ 5,759,000
Receivables . . . . . . . . . . . . . . . . . 8,964,000 7,823,000
Inventories . . . . . . . . . . . . . . . . . 64,246,000 88,802,000
Commercial land and buildings . . . . . . . . 9,439,000 16,597,000
Investments in joint ventures . . . . . . . . 850,000 850,000
Prepaid expenses and other assets . . . . . . 2,756,000 2,313,000
Total assets . . . . . . . . . . . . . . . . $ 91,416,000 $122,144,000
Liabilities and Shareholders' Equity
Revolving credit agreement. . . . . . . . . . $45,000,000 $ 60,000,000
Mortgages payable . . . . . . . . . . . . . . 1,227,000 9,398,000
Accounts payable. . . . . . . . . . . . . . . 3,270,000 6,968,000
Accrued expenses and other liabilities. . . . 14,906,000 16,733,000
Total liabilities. . . . . . . . . . . . . . 64,403,000 93,099,000
Commitments and contingent liabilities
Shareholders' Equity
Common stock, $.01 par value, 53,700,000
shares authorized; issued and outstanding
26,371,000 in 1995 and 25,997,000 in 1994. . 264,000 260,000
Paid in capital . . . . . . . . . . . . . . . 22,822,000 21,720,000
Retained earnings . . . . . . . . . . . . . . 3,927,000 7,065,000
Total shareholders' equity . . . . . . . . . 27,013,000 29,045,000
Total liabilities and shareholders' equity . $ 91,416,000 $122,144,000
See accompanying notes to consolidated financial statements.
[CAPTION]
Consolidated Statement Of Income
<TABLE>
Six Month Six Month
Period Ended Period Ended
Years Ended November 30, November 30, May 31,
1995 1994 1993 1993
<S> <C> <C> <C> <C>
Revenues. . . . . . . . . . . . . . . . $ 180,843,000 $ 168,723,000 $ 83,351,000 $ 76,555,000
Equity in operations
of joint ventures. . . . . . . . . . . -- -- -- (9,422,000)
180,843,000 168,723,000 83,351,000 67,133,000
Costs and expenses
Cost of revenues. . . . . . . . . . . 159,690,000 139,339,000 67,473,000 68,304,000
Selling, general and administrative . 18,845,000 20,183,000 10,100,000 10,785,000
Provision for estimated
net realizable value . . . . . . . . 1,593,000 400,000 -- 3,384,000
Restructuring charges . . . . . . . . 1,940,000 -- -- --
Amortization of values in excess of
amounts allocable to identifiable
net assets . . . . . . . . . . . . . -- 206,000 218,000 253,000
182,068,000 160,128,000 77,791,000 82,726,000
Income (loss) from operations . . . . . (1,225,000) 8,595,000 5,560,000 (15,593,000)
Other charges (credits)
Interest expense, net . . . . . . . . 1,847,000 1,235,000 879,000 3,338,000
Other (income) expense. . . . . . . . (765,000) -- (75,000) 70,000
Reorganization charges. . . . . . . . -- -- -- 37,493,000
Write-off of financing costs. . . . . -- 800,000 -- --
Income (loss) before income taxes
and extraordinary gain. . . . . . . . (2,307,000) 6,560,000 4,756,000 (56,494,000)
Provision in lieu of income taxes . . . 831,000 2,367,000 1,884,000 --
Income (loss) before
extraordinary gain. . . . . . . . . . (3,138,000) 4,193,000 2,872,000 (56,494,000)
Extraordinary gain. . . . . . . . . . . -- -- -- 58,311,000
Net income (loss) . . . . . . . . . . . $ (3,138,000) $ 4,193,000 $ 2,872,000 $ 1,817,000
Income (loss) per share
Income (loss) before
extraordinary gain. . . . . . . . . . $ (.12) $ .16 $ .11 $ (1.67)
Extraordinary gain . . . . . . . . . . -- -- -- 1.72
Net income (loss) . . . . . . . . . . $ (.12) $ .16 $ .11 $ .05
</TABLE>
See accompanying notes to consolidated financial statements.
[CAPTION]
Consolidated Statement Of Cash Flows
<TABLE>
Six Month Six Month
Period Ended Period Ended
Years Ended November 30, November 30, May 31,
1995 1994 1993 1993
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net (loss) income. . . . . . . . . . . $ (3,138,000) $ 4,193,000 $ 2,872,000 $ 1,817,000
Adjustments to reconcile net (loss)
income to net cash provided (used)
by operating activities
Restructuring charges . . . . . . . 1,940,000 -- -- --
Depreciation and amortization. . . . 1,741,000 1,877,000 1,151,000 1,327,000
Provision for estimated net
realizable value. . . . . . . . . . 1,593,000 400,000 -- 3,384,000
Option abandonments. . . . . . . . . 1,050,000 -- -- --
Provision in lieu of income taxes. . 831,000 2,928,000 1,649,000 --
Issuance of stock under 401(k) Plan. 213,000 198,000 -- --
Reserve reversal . . . . . . . . . . (1,113,000) -- -- --
Extraordinary gain . . . . . . . . . -- -- -- (58,311,000)
Equity in operations of
joint ventures. . . . . . . . . . . -- -- -- 9,422,000
Reorganization charges . . . . . . . -- -- -- 35,765,000
(Increase) decrease in receivables . (1,141,000) (1,460,000) 6,744,000 146,000
Decrease (increase) in inventories . 26,897,000 (11,345,000) (5,530,000) 11,318,000
(Decrease) increase in accounts
payable, accrued expenses and other
liabilities . . . . . . . . . . . . (5,508,000) (1,138,000) (1,834,000) 1,945,000
(Increase) decrease in prepaid
expenses and other assets . . . . . (792,000) 633,000 616,000 11,281,000
22,573,000 (3,714,000) 5,668,000 18,094,000
Cash Flows from Financing Activities
Repayment under revolving credit
agreement. . . . . . . . . . . . . . (19,500,000) (9,500,000) (13,479,000) (8,473,000)
Proceeds under revolving credit
agreement. . . . . . . . . . . . . . 4,500,000 14,500,000 7,500,000 --
Repayment of mortgages payable. . . . (8,171,000) (882,000) (471,000) (2,571,000)
Repurchase of Senior Subordinated
Notes. . . . . . . . . . . . . . . . -- -- (1,000,000) (5,000,000)
(23,171,000) 4,118,000 (7,450,000) (16,044,000)
Net (decrease) increase in cash and
cash equivalents. . . . . . . . . . . (598,000) 404,000 (1,782,000) 2,050,000
Cash and cash equivalents at
beginning of period . . . . . . . . . 5,759,000 5,355,000 7,137,000 5,087,000
Cash and cash equivalents at end
of period . . . . . . . . . . . . . . $ 5,161,000 $ 5,759,000 $ 5,355,000 $ 7,137,000
See accompanying notes to consolidated financial statements.
</TABLE>
[CAPTION]
Consolidated Statement Of Shareholders' Equity
<TABLE>
Class B Retained
Common Common Preferred Paid In Earnings
Stock Stock Stock Capital (Deficit)
<S> <C> <C> <C> <C> <C>
Balance, November 30, 1992. . . . $ 321,000 $ 76,000 $ -- $43,431,000 $(28,113,000)
Net income for the six month
period ended May 31, 1993. . . . -- -- -- -- 1,817,000
Elimination of accumulated
deficit in connection with the
reorganization . . . . . . . . . -- -- -- -- 26,296,000
Retirement of stock in connection
with the plan of reorganization. (321,000) (76,000) -- (22,925,000) --
Issuance of common and. . . . . . 234,000 -- 260,000 -- --
Balance, May 31, 1993 . . . . . . 234,000 -- 260,000 20,506,000 --
Net income for the six month
period ended November 30, 1993 . -- -- -- -- 2,872,000
Amortization of deferred
compensation related to stock
option plan. . . . . . . . . . . -- -- -- 21,000 --
Balance, November 30, 1993. . . . 234,000 -- 260,000 20,527,000 2,872,000
Net income. . . . . . . . . . . . -- -- -- -- 4,193,000
Conversion of preferred stock . . 26,000 -- (260,000) 234,000 --
Issuance of stock under
401(k) Plan. . . . . . . . . . . -- -- -- 198,000 --
Tax adjustment. . . . . . . . . . -- -- -- 719,000 --
Amortization of deferred
compensation related to stock
option plan. . . . . . . . . . . -- -- -- 42,000 --
Balance, November 30, 1994. . . . 260,000 -- -- 21,720,000 7,065,000
Net loss. . . . . . . . . . . . . -- -- -- -- (3,138,000)
Issuance of stock under
401(k) Plan. . . . . . . . . . . 4,000 -- -- 209,000 --
Provision in lieu of income taxes -- -- -- 831,000 --
Amortization of deferred
compensation related to stock
option plan. . . . . . . . . . -- -- -- 62,000 --
Balance, November 30, 1995. . . $ 264,000 $ -- $ -- $22,822,000 $ 3,927,000
</TABLE>
See accompanying notes to consolidated financial statements.
Notes To Consolidated Financial Statements
1. Summary Of Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the accounts of Calton, Inc.
and all of its wholly-owned and majority-owned subsidiaries (the "Company").
All significant intercompany accounts and transactions have been eliminated.
The Company accounts for its investments in its 50% or less interests in
corporate and unincorporated joint ventures by the equity method.
The accompanying financial statements for the years ended November 30,
1995 and 1994 and the six months ended November 30, 1993 are separated by a
black line from prior periods due to the adoption of fresh-start accounting and
reporting to reflect the effects of the Reorganization as of May 31, 1993, and
are not comparable to the amounts reflected for prior periods (see Note 11).
Certain reclassifications have been made to prior years' financial statements
in order to conform with the 1995 presentation.
Income recognition
Revenue and cost of revenue on sales of homes are recognized when
individual homes are completed, and title and other attributes of ownership
have been transferred by means of a closing to the buyer. Revenue and cost of
revenue on land sales are recognized when all conditions precedent to closing
have been fulfilled, a specified minimum down payment has been received and
there is reasonable assurance that resulting receivables will be collected.
Cash and cash equivalents
Cash equivalents consist of short-term, highly liquid investments, with
original maturities of three months or less, that are readily convertible into
cash.
Inventories
Inventories are stated at the lower of cost or estimated net realizable
value for each property. As of November 30, 1995, certain inventories had been
restated to reflect estimated net realizable value. Estimated net realizable
value has been determined based upon the amount the Company expects to realize
through sale or development based on management's present plans for each
property. In a buildout of a community, certain assumptions are made concerning
future sales prices and absorption of sales and closings in the community's
life span. There is an inherent risk that those assumptions made may not occur.
The estimated net realizable value of a property may exceed the value which
could be obtained through the immediate sale of the property if development
plans for such property support a higher cost recovery. Cost includes direct
and allocated indirect costs. Land and land development costs generally include
interest and property taxes incurred. Interest is capitalized using interest
rates on specifically related debt and the Company's average borrowing rate.
Inventoried costs are charged to cost of revenues based upon the estimated
average cost within each community.
Commercial land and buildings
Commercial land and buildings, stated at estimated fair market value,
include certain assumptions in their ultimate disposition such as future cash
flow, the ability of the Company to obtain certain zoning changes and
regulatory or governmental approvals. There is an inherent risk that those
assumptions made may not be realized.
Income taxes
Deferred income taxes are determined on the liability method in accordance
with Statement of Financial Accounting Standards No. 109 (see Note 8).
Prepaid expenses and other assets
Prepaid expenses and other assets consist primarily of property and
equipment, prepaid architect fees and prepaid insurance. Prepaid architect fees
are amortized on a per unit basis as homes are delivered.
Risks and uncertainties
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 dates of the financial
statements and the reported amounts of revenues and expenses for the periods
reported. Actual results could differ from those estimates.
The Company, as well as the homebuilding industry in general, is very
sensitive to economic conditions. Inflation, interest rate fluctuations,
available capital and consumer confidence impact the ability of the Company
to market, sell and build homes.
Per share computations
Per share computations are based upon the weighted average number of
shares of common stock and preferred stock outstanding during each period
presented (26,281,000 and 26,095,000 for the years ended November 30, 1995 and
1994, respectively, and 26,239,000 for the six months ended November 30, 1993.
Prior to the Company's Reorganization in 1993, the weighted average number of
shares of Common Stock and Class B Common Stock was 33,819,000 for the six
months ended May 31, 1993).
2. Receivables
Receivables consist of the following (amounts in thousands):
November 30,
1995 1994
Closing proceeds due . . . . . . . . . . . . . $ 4,946 $ 2,830
Due from municipalities. . . . . . . . . . . . 2,573 3,192
Mortgages and notes receivable, net. . . . . . 557 524
Other. . . . . . . . . . . . . . . . . . . . . 888 1,277
$ 8,964 $ 7,823
3. Inventories
The components of inventories are as follows (amounts in thousands):
November 30,
1995 1994
Land and land development costs. . . . . . . . $ 37,144 $ 59,555
Direct and indirect construction costs . . . . 22,603 24,955
Land purchase options and cost of
projects in planning. . . . . . . . . . . . . 4,499 4,292
$ 64,246 $ 88,802
The total amount of interest costs capitalized was $5,016,000 for the year
ended November 30, 1995, $4,005,000 for the year ended November 30, 1994,
$1,467,000 for the six month period ended November 30, 1993 and $1,130,000 for
the six month period ended May 31, 1993.
In the year ended November 30, 1995, the Company recorded provisions of
$1,593,000 to state inventory, consisting primarily of two properties, to
estimated net realizable value. For the year ended November 30, 1994, $400,000
was recorded as a provision for estimated net realizable value. In the six
month period ended May 31, 1993, the Company recorded provisions of $2,200,000
to state inventory at estimated net realizable value. These charges are
reflected in the provision for estimated net realizable value. There were no
charges recorded in the six month period ended November 30, 1993. During 1995,
the Company acquired $10,511,000 of land. During 1994, the Company acquired
$25,700,000 of land, $2,486,000 of which was financed with a purchase money
mortgage.
4. Commercial land and buildings
During the year ended November 30, 1995, the Company sold approximately
$7,000,000 of its commercial building property and reduced related mortgage
payables by $6,900,000, in accordance with management's plan to focus on its
core business of residential homebuilding. As a result, Commercial land and
buildings was reduced from $16,597,000 at November 30, 1994, to $9,439,000 at
November 30, 1995.
The sales were consummated in April 1995 and July 1995 for proceeds of
$880,000 and $7,200,000, respectively. The sales resulted in pre-tax gains of
approximately $80,000 and $425,000, respectively, and provided approximately
$850,000 of cash for operations after the retirement of the mortgage debt.
The remaining properties consists primarily of land located in
Pennsylvania, New Jersey and Florida. These properties are available for sale
as a result of management's focus on residential homebuilding.
In the last month of 1994, the Company sold a commercial building for
$800,000 in cash which reduced Commercial land and buildings by $770,000. The
net proceeds of approximately $750,000 were used to reduce mortgages payable.
The sale of this building did not result in a significant gain or loss.
5. Revolving Credit Agreement
In February 1995, the Company entered into an agreement with its Lenders
extending the term of the existing Amended Credit Agreement (the "Facility")
from its maturity date of June 1, 1995 to February 28, 1997. In
February 1996, the Company amended its Facility to meet anticipated operating
results through the remainder of the term of the Facility. In conjunction with
the Company's decision to exit from the Chicago market, the amended Facility
will permit borrowings of up to $55,000,000 until November 1, 1996, when the
commitment is reduced to $50,000,000. The amended Facility increased the
interest rate charged to the Company to the lender's prime rate (8.75% at
November 30, 1995) plus two percent (2%). The Company believes that funds
generated by its operating activities and borrowing availability under the
Facility will provide sufficient capital to support the Company's operations
through the term of the Facility; however, the Company believes that it will
have to seek an extension of the Facility or arrange replacement financing
prior to the expiration of the Facility on February 28, 1997.
The February 1996 amendment to the Facility changed various covenants, the
most restrictive of which prescribe levels of tangible net worth (as defined),
EBITDA, and cash basis interest expense coverage and limits the acquisition of
land and land development expenditures and the incurrence of other
indebtedness. Although these limitations will restrict the Company's ability to
expand its business, the Company believes it will be able to comply with the
amended financial covenants based on its business plan. There can be no
assurance that, if market conditions deteriorate further, business plan levels
will be met.
The Facility also limits the aggregate amount of cash and letters of
credit which can be used to collateralize performance bonds to $5,000,000 of
cash (approximately $2,600,000 and $3,200,000 was outstanding as of November
30, 1995 and November 30, 1994, respectively) and up to $10,000,000 of letters
of credit ($1,500,000 and $3,000,000 were outstanding as of November 30, 1995
and November 30, 1994, respectively). At November 30, 1995, approximately
$46,500,000, including $1,500,000 of letters of credit, was outstanding under
the Facility. The Facility includes a borrowing base, based upon a percentage
of the Company's eligible inventory, which restricted borrowings to $50,000,000
at November 30, 1995. The unused Facility commitment of $8,500,000 is available
as of November 30, 1995 to the Company for investment in inventory that results
in the corresponding growth of its borrowing base. As of November 30, 1995,
approximately $3,500,000 was available to be borrowed under the borrowing base
restriction. Substantially all of the Company's assets are pledged as
collateral under the Facility. The number of lenders under the Facility has
recently decreased to four participants with Foothill Capital acquiring
thirty-seven and one-half percent (37.5%) of the Facility from the Apollo Group
and Fidelity Investments.
Amounts borrowed under the Facility during the year ended November 30,
1995, bore interest at the lenders prime rate (8.75% at November 30, 1995) plus
one and one-half percent (1-1/2%). The weighted average interest rates for the
years ended November 30, 1995 and 1994 were 11.1% and 8.1%, respectively. The
weighted average amounts borrowed for the corresponding years were $58,105,000
and $56,704,000, respectively.
The total amount of interest paid, net of amounts capitalized, in the
years ended November 30, 1995 and 1994 was $2,124,000 and $1,440,000,
respectively; $893,000 for the six months ended November 30, 1993; and
$1,445,000 for the six months ended May 31, 1993.
6. Mortgages Payable
Mortgages payable consist of the following (amounts in thousands):
November 30,
Interest Rate 1995 1994
Mortgages payable, land (a). . . . Prime $ 1,227 $ 2,486
Mortgages payable, other (b) . . . Prime + 1% -- 6,912
$ 1,227 $ 9,398
(a) Approximately $1,885,000 of inventories are pledged as collateral
for a purchase money mortgage to a land seller at November 30, 1995 compared to
$3,400,000 at November 30, 1994. During 1995, the purchase money mortgage was
reduced by payments in exchange for mortgage releases. The remaining mortgage
payable is due in 1996. The interest rate is prime (8.75% at November 30, 1995)
but is not to exceed 10% and interest is paid semi-annually in March and
September.
(b) Mortgages of $6,912,000 at November 30, 1994 were paid from the proceeds
from the sale of the commercial properties in April and July 1995 (see Note 4).
The weighted average interest rate for mortgages payable during the year
ended November 30, 1995 was 9.9%.
7. Shareholders' Equity
Pursuant to the Plan of Reorganization on May 28, 1993, the Company's
Restated Certificate of Incorporation was amended to (i) eliminate the
Company's Class B Stock, (ii) provide for 53,700,000 authorized shares of
Common Stock (par value $.01 per share) and (iii) 2,600,000 shares of
Redeemable Convertible Preferred Stock (par value $.10 per share). In 1994, the
Amended and Restated Certificate of Incorporation was amended to also provide
10,000,000 shares of Class A Preferred Stock (par value $.10 per share) none of
which is issued or outstanding.
The Company adopted the Calton, Inc. 1993 Non-Qualified Stock Option Plan
(the "Plan") which became effective upon the consummation of the Reorganization
under which a total of 1,493,000 shares of Common Stock were reserved for
issuance. Under the terms of the Plan, options may be granted at an exercise
price designated by the Compensation Committee. The term of the option is for a
maximum term of ten years. As of November 30, 1995, 1,270,000 options had been
granted, none of which had been exercised and 1,046,000 were exercisable.
During the second quarter of fiscal 1995, the Company's Board of Directors
reviewed the outstanding options granted under the Company's Plan. The Board
considered that the outstanding options were granted in more favorable economic
periods. Therefore, in order to continue to provide an incentive to management,
the Board adjusted the exercise price of all outstanding options held by
employees to $.50 per share, the fair market value of the Company's Common
Stock at the date of the Board action. The market value of the Company's stock
at November 30, 1995 was $.4375.
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock Based Compensation". Effective December 1, 1995,
the Company will adopt the disclosure only alternative.
8. Income Taxes
The following schedule reconciles the federal provision in lieu of income
taxes computed at the statutory rate to the actual provision in lieu of income
taxes (amounts in thousands):
Six Six
Month Month
Period Period
Years Ended Ended Ended
November 30, November May 31,
1995 1994 30, 1993 1993
Computed (benefit)/provision in lieu
of income taxes at 34% . . . . . . . . $ (784) $ 2,231 $ 1,617 $ 618
Expenses for which deferred tax
benefit cannot be
currently recognized. . . . . . . . . 1,258 409 -- 18,722
State and local tax provision/(benefit). 352 346 267 (3,737)
State tax reserves . . . . . . . . . . . -- (695) -- --
Nondeductible acquisition
costs and expenses. . . . . . . . . . -- -- -- 4,223
Gain on extinguishment of debt . . . . . -- -- -- (19,826)
Other, net . . . . . . . . . . . . . . . 5 76 -- --
Total provision in lieu
of income taxes . . . . . . . . . . . $ 831 $ 2,367 $ 1,884 $ --
The components of the provision in lieu of income taxes are as follows
(amounts in thousands):
Six Six
Month Month
Period Period
Years Ended Ended Ended
November 30, November May 31,
1995 1994 30, 1993 1993
Federal
Current . . . . . . . . . . . . . . . $ -- $ -- $ -- $ --
Deferred. . . . . . . . . . . . . . . -- -- -- --
Provision in lieu of income taxes . . 479 2,537 1,479 --
State
Current . . . . . . . . . . . . . . . 79 24 235 --
Deferred. . . . . . . . . . . . . . . -- -- -- --
Provision/(benefit) in lieu of
income taxes. . . . . . . . . . . . 273 (194) 170 --
$ 831 $ 2,367 $ 1,884 $ --
Fresh-start accounting and reporting requires the Company to report a
provision in lieu of income taxes when the Company recognizes a
pre-reorganization deferred tax asset. This requirement applies despite the
fact that the Company's pre-reorganization net operating loss carryforward and
other deferred tax assets would eliminate the related federal income tax
payable. The current and future year tax benefit related to the
pre-reorganization net deferred tax asset was recorded as a reduction of values
in excess of amounts allocable to identifiable net assets until exhausted and
then as a direct increase to paid in capital. The net deferred tax asset of
$18,647,000 is primarily attributable to pre-reorganization deductible
temporary differences.
Temporary differences and carryforwards which give rise to a significant
portion of deferred tax assets and liabilities at November 30, 1995 and 1994
are as follows (amounts in thousands):
November 30, 1995 November 30, 1994
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
Fresh-start inventory reserves . . . . .$ 1,114 $ -- $ 2,636 $ --
Income from joint ventures . . . . . . . 328 417 5,344 2,040
Inventory and other reserves . . . . . . 2,064 -- 5,542 --
Preproduction interest . . . . . . . . . -- 536 -- 536
Federal net operating losses . . . . . . 7,568 -- 14,110 --
State net operating losses . . . . . . . 6,647 -- 8,483 --
Condemnation . . . . . . . . . . . . . . -- -- -- 245
Depreciation . . . . . . . . . . . . . . 285 89 306 7
Deferred state taxes . . . . . . . . . . 1,691 -- 3,938 957
Other. . . . . . . . . . . . . . . . . . 812 820 1,209 891
20,509 1,862 41,568 4,676
Valuation allowance. . . . . . . . . . .(18,647) -- (36,892) --
Total deferred taxes . . . . . . . . . .$ 1,862 $ 1,862 $ 4,676 $ 4,676
Deferred income taxes arise from temporary differences between the tax
basis of assets and liabilities and their reported amounts in the financial
statements. For federal and state tax purposes, a valuation allowance was
provided on the deferred tax assets due to uncertainty of realization. Federal
tax effects of deferred tax assets were recognized to the extent of existing
available deferred tax credits.
The federal net operating loss carryforward for tax purposes is
approximately $22,000,000 at November 30, 1995 and $43,000,000 at November 30,
1994. The decrease is related to the reduction due to the Section 382
limitation and the utilization against taxable income attributable to Talcon
L.P. A preliminary estimate of the Company's ability to use its deferred tax
assets to offset future income is approximately $1,700,000 per year under
Section 382 of the Internal Revenue Code as a result of the recent change in
control of the Company. These federal carryforwards will expire between 2007
and 2009. The Company received an income tax refund of $50,000 in 1995. No such
amounts were received in 1994 and 1993.
9. Commitments and Contingent Liabilities
(a) In July 1994, an action was filed against Calton Homes, Inc., the
Township of Plainsboro, New Jersey and its planning board, certain real estate
brokers and certain unnamed officers of Calton Homes, Inc., by approximately 60
purchasers in the Company's Princeton Manor development seeking compensatory
and punitive damages arising out of an alleged failure to disclose that a
portion of the property adjacent to the community could be developed by
Plainsboro Township as a public works site. The Company is vigorously
contesting this matter and, although there can be no assurances, does not
believe that the case will have any material effect on the financial condition
or results of operations of the Company. In addition, the Company believes that
it is contractually entitled to indemnification from Plainsboro Township in the
event that any liability should arise.
(b) The Company is involved from time to time in other litigation in the
ordinary course of business. Management presently believes that the resolution
of any such matter should not have a material, adverse effect on the financial
condition or results of operations of the Company.
(c) The Company is obligated under operating leases for office space
expiring between 1996 and 2000 with total annual rentals of approximately
$313,000. Rental expense for the year ended November 30, 1995, November 30,
1994, and the six and twelve month periods ended November 30, 1993 amounted to
$781,000, $715,000, $408,000 and $846,000, respectively.
(d) The Company has a qualified contributory retirement plan (401(k)
Plan) which covers all eligible full-time employees with a minimum of one year
of service. Employees may contribute up to eighteen percent (18%) of their
annual compensation with employer matching at the Company's discretion. The
Company's contribution to the plan was $213,000 in 1995 and $198,000 in 1994.
The Company's contribution to the plan was not significant in 1993. The
Company's matching contribution, in the form of registered Common Stock of the
Company, for 1995 was 75% of participant contributions. The Company's matching
contribution, in the form of registered Common Stock of the Company, for 1996
will be 5% of participant contributions.
(e) Commitments include the usual obligations of housing producers for the
completion of contracts in the ordinary course of business.
10. Investments In Joint Ventures
Investments in joint ventures at November 30, 1995 consist of a
partnership interest in a joint venture located in Maryland.
The Company previously wrote off its entire equity investment in Talcon
L.P. and recorded a reserve for $1,000,000 of indebtedness owed to it by
Talcon L.P. In connection with Talcon L.P.'s dissolution and liquidation,
it paid the Company $890,000 in the 1995 in full satisfaction of its debt
obligations. This payment was classified as non-operating Other (income)
expense.
Equity in operations of joint ventures was a loss of $9,422,000 for the
six months ended May 31, 1993. No such amounts were recorded for the years
ended November 30, 1995 and 1994 and the six month period ended November 30,
1993.
11. Reorganization
Calton, Inc. and certain of its subsidiaries consummated a Plan of
Reorganization on May 28, 1993 (the "Effective Date"). The Plan of
Reorganization (the "Reorganization"), which was confirmed by the United States
Bankruptcy Court on May 6, 1993, resulted in the discharge of approximately
$61,542,000 of principal and $22,847,000 of interest due the holders of the
16-5/8% Senior and 12-5/8% Subordinated Notes of Calton, Inc. and certain of
its subsidiaries in exchange for 21,709,000 shares of Common Stock, 2,600,000
Warrants to purchase Common Stock, 2,600,000 shares of Preferred Stock,
$5,000,000 of cash and $1,000,000 of the short term new notes (retired on
September 30, 1993) which were issued to the 16- 5/8% Noteholders. During the
second quarter of fiscal 1994, 2,072,185 Warrants were exercised and, as
required under the terms of the Reorganization, the Company used the proceeds
to redeem 2,072,185 shares of Redeemable Convertible Preferred Stock at a
redemption price of $1.53 per share. The remaining 527,815 shares of Redeemable
Convertible Preferred Stock were automatically converted into Common Stock. The
value of the cash, notes and securities issued was less than the debt
discharged, thereby resulting in an extraordinary gain of $58,311,000.
In accounting for the effects of the Reorganization, the Company
implemented Statement of Position 90-7 ("SOP 90-7"), "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" issued by the American
Institute of Certified Public Accountants in November 1990. SOP 90-7 requires
an allocation of the reorganization value in conformity with the procedures
specified by Accounting Principles Board Opinion No. 16, "Business
Combinations" for transactions reported on the basis of the purchase method.
The Company's reorganization value was determined to be $21,000,000 with
the assistance of independent advisors. The reorganization value was based upon
discounted projected cash flows for the reorganized Company over a five-year
period. The projected cash flows included assumptions as to anticipated sales
and margins, marketing plans and operating expense levels. A discount rate of
16% was used, which reflected the weighted average cost of capital, the
uncertainty of the cash flows, the general inherent risk of the housing
industry and general business conditions. In this regard, the Company
incurred $23,917,000 in charges to adjust its inventories and commercial land
and buildings to estimated fair market value. Such estimates and assumptions
were inherently subject to significant economic and competitive uncertainties
beyond the control of the Company, including, but not limited to, those
with respect to the future courses of the Company's business activity.
Accordingly, there will usually be differences between projections and actual
results because events and circumstances frequently do not occur as expected,
and those differences may be material.
As a result of the determination of the amount of reorganization value and
the fair market value of assets and liabilities (other than intangibles), a
$11,360,000 write-off of Values in excess of amounts allocable to identifiable
net assets ("goodwill") was recorded and a $5,000,000 balance resulted. The
resulting goodwill was amortized and was reduced by the realization of deferred
tax assets through the recognition of the provision in lieu of income taxes. As
a result of these two factors, the amount of goodwill was reduced to zero as
of November 30, 1994.
12. Quarterly Financial Results
Quarterly financial results for the years ended November 30, 1995 and 1994
are as follows (amounts in thousands, except per share amounts):
Three Months Ended
February 28, May 31, August 31, November 30,
1995 1995 1995 1995
Revenues . . . . . . . . . . $38,215 $38,836 $60,362 $43,430
Gross profit . . . . . . . . 4,411 4,403(b) 7,418 4,921
Net income (loss). . . . . . (375)(a) (316) 1,008 (3,455)(c)
Net income (loss) per share. (.01) (.01) .04 (.13)
Three Months Ended
February 28, May 31, August 31, November 30,
1994 1994 1994 1994
Revenues . . . . . . . . . . $28,994 $36,252 $47,129 $56,348
Gross profit . . . . . . . . 5,558 6,441 8,280 9,105
Net income . . . . . . . . . 746 705 1,355 1,387(d)
Net income per share . . . . .03 .03 .05 .05
(a)Includes a $200,000 charge for costs primarily associated with the
consolidation of the New Jersey-North and New Jersey-South divisions.
(b)Includes a $1.1 million charge resulting from abandoning nine
properties under option and a credit of $1.1 million realized from the reversal
of a reserve previously provided on a completed community.
(c)Includes $1.6 million writedown of inventories to estimated net
realizable value, $1.1 million of restructuring charges related to the wind
down of the Chicago division and $640,000 in executive severance, partially
offset by the $820,000 collection of a note previously reserved.
(d)Includes costs of $800,000 relating to the proposed unit offering and
related working capital facility and a tax benefit of approximately $700,000
related to the resolution of a certain tax issue.
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders of Calton, Inc.
We have audited the accompanying consolidated balance sheet of Calton, Inc.
and Subsidiaries as of November 30, 1995 and 1994 and the related consolidated
statements of income, shareholders' equity and cash flows for the years ended
November 30, 1995 and 1994 and the six month periods ended November 30, 1993
and May 31, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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 financial statement presentation. We believe that
our audits provide reasonable basis for our opinion.
On May 28, 1993, Calton, Inc. reorganized and emerged from bankruptcy.
As discussed in Note 11 to the consolidated financial statements, the
financial statements at May 31, 1993 reflect the estimated fair market value
of assets in accordance with the American Institute of Certified Public
Accountants Statement of Position 90-7. The consolidated financial statements
for the years ended November 30, 1995 and 1994 and the six month period ended
November 30, 1993 referred to above are presented on the new basis, and
accordingly, are not comparable to May 31, 1993 and prior.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Calton, Inc.
and Subsidiaries as of November 30, 1995 and 1994 and the consolidated results
of their operations and their cash flows for the years ended November 30, 1995
and 1994 and the six month periods ended November 30, 1993 and May 31, 1993 in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND LLP
/s/ Coopers & Lybrand
Princeton, New Jersey
January 12, 1996
CALTON, INC. COMMON STOCK
Calton, Inc. common stock is traded on the American Stock exchange ("AMEX")
under the symbol CN. The following reflects the high and low sales prices of
the common stock during fiscal 1995 and 1994.
Fiscal 1995 High Low
1st Quarter 1-1/8 5/8
2nd Quarter 11/16 3/8
3rd Quarter 1/2 3/8
4th Quarter 9/16 5/16
Fiscal 1994
1st Quarter 2-5/16 1-1/2
2nd Quarter 2-11/16 1-1/2
3rd Quarter 1-11/16 1-3/8
4th Quarter 1-13/16 7/8
At February 1, 1996, there were approximately 663 holders of the Company's
common stock. On that date, the last sale price for the common stock
as reported by AMEX was $3/8.
EXHIBIT 21
SUBSIDIARIES OF CALTON, INC.
Calton Homes, Inc. Calcap XXXII, Inc.
Calcap Commercial Management, Inc. Calcap XXXIII, Inc.
Calton Homes of Florida, Inc. (1) Calcap XXXIV, Inc.
Calton Homes of Pennsylvania, Inc. (2) Calcap 36, Inc.
Calton Homes of Pennsylvania at Calcap 42, Inc.
Pennway, Inc. (2) Calcap 46, Inc.
Calton Homes of California, Inc. (3) Calcap 48, Inc.
Calton California Equity Corp. (3) Calton General, Inc.
Calton Manzanita Corp. (3) Calton Funding, Inc.
Calton Tamarack Corp. (3) Talcon Assignment, Inc.
Calton Lindenwood Corp. (3) Calton Homes of Chicago, Inc. (5)
Calton Homes of Tampa, Inc. (1) Haddon Group of Virginia, Inc.
Calton Homes Finance, Inc. Wagner Joint Venture
Calton Homes Finance II, Inc. Pennway Joint Venture, L.P.
Calton Capital, Inc. Talcon Title, L.P.
Calton Capital II, Inc. Talpro 31, L.P.
Calcap VII, Inc. Talpro 32, L.P.
Calcap X, Inc. Talpro 33, L.P.
Calcap XV, Inc. Talpro 34, L.P.
Calcap XXXI, Inc. Talpro 48, L.P.
All subsidiaries are incorporated or organized under the laws of the State of
New Jersey, except those marked with a (1), (2), (3), (4) and (5), which are
incorporated under the laws of Florida, Pennsylvania, California, Delaware
and Illinois, respectively.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> NOV-30-1995
<CASH> 5,161,000
<SECURITIES> 0
<RECEIVABLES> 8,964,000
<ALLOWANCES> 0
<INVENTORY> 73,685,000
<CURRENT-ASSETS> 90,942,000
<PP&E> 474,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 91,416,000
<CURRENT-LIABILITIES> 3,270,000
<BONDS> 46,227,000
0
0
<COMMON> 264,000
<OTHER-SE> 26,749,000
<TOTAL-LIABILITY-AND-EQUITY> 91,416,000
<SALES> 180,843,000
<TOTAL-REVENUES> 180,843,000
<CGS> 156,690,000
<TOTAL-COSTS> 182,068,000
<OTHER-EXPENSES> (765,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,847,000
<INCOME-PRETAX> (2,307,000)
<INCOME-TAX> 831,000
<INCOME-CONTINUING> (3,138,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,138,000)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
