AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 26, 1998
REGISTRATION STATEMENT NO. 333-40741
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 2
TO
FORM S-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------
ENGLE HOMES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
FLORIDA 59-2214791
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
<TABLE>
<S> <C>
DAVID SHAPIRO
ENGLE HOMES, INC.
123 N.W. 13TH STREET 123 N.W. 13TH STREET
BOCA RATON, FLORIDA 33432 BOCA RATON, FLORIDA 33432
(561) 391-4012 (561) 391-4012
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENTS FOR SERVICE)
</TABLE>
--------------
SEE TABLE OF ADDITIONAL REGISTRANTS BELOW
WITH COPIES TO:
<TABLE>
<S> <C>
BRIAN J. WALSH, ESQ. JOHN SCHUSTER, ESQ.
GREENBERG TRAURIG HOFFMAN CAHILL GORDON & REINDEL
LIPOFF ROSEN & QUENTEL, P.A. 80 PINE STREET
1221 BRICKELL AVENUE NEW YORK, NEW YORK 10005
MIAMI, FLORIDA 33131 (212) 701-3000
(305) 579-0500 TELECOPY (212) 269-5420
TELECOPY (305) 579-0717
</TABLE>
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
--------------
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [x]
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
TITLE OF EACH CLASS PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------
<S> <C> <C>
% Senior Notes due 2008 ...... $100,000,000 $ 30,103
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Guarantees of the Notes ......... -- --(2)
- --------------------------------------------------------------------------------
Total ........................ $100,000,000 $ 30,103(3)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate
fee is payable for the Guarantees.
(3) A filing fee of $22,728 was paid on November 21, 1997 in respect of
$75,000,000 aggregate principal amount of the securities registered
hereby and a filing fee of $7,375 was paid on January 22, 1998 in
respect of $25,000,000 aggregate principal amount of the securities
registered hereby.
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER,
STATE OR OTHER INCLUDING AREA CODE
JURISDICTION OF I.R.S. EMPLOYER OF REGISTRANT'S PRINCIPAL
NAME INCORPORATION IDENTIFICATION NO. EXECUTIVE OFFICE
- ---- ----------------- -------------------- -----------------------------
<S> <C> <C> <C>
Banyan Trails, Inc. Florida 65-0775403 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Arizona, Inc. Florida 65-0482568 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Atlanta, Inc. Florida 65-0357420 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Broward, Inc. Florida 65-0389397 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Colorado, Inc. Florida 65-0496809 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Gulf Coast, Inc. Florida 65-0429651 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Lake Bernadette, Inc. Florida 59-3288055 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/North Carolina, Inc. Florida 65-0482564 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Orlando, Inc. Florida 65-0326491 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Palm Beach, Inc. Florida 65-0388379 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Pembroke, Inc. Florida 65-0470740 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Southwest Florida, Inc. Florida 65-0559002 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Texas, Inc. Florida 65-0424508 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Virginia, Inc. Florida 65-0482565 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Greenleaf Homes, Inc. Florida 65-0762713 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Pembroke Falls Realty, Inc. Florida 65-0698225 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Preferred Builders Realty, Inc. Florida 59-2552841 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Preferred Home Mortgage Company Florida 65-0325930 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
St. Tropez At Boca Golf, Inc. Florida 65-0304088 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Universal Land Title, Inc. Florida 59-2630287 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Arizona Construction, Inc. Arizona 86-0873699 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Universal Land Title of Colorado, Inc. Colorado 84-1281298 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JANUARY 26, 1998
P R O S P E C T U S
$100,000,000
ENGLE HOMES, INC.
% SENIOR NOTES DUE 2008
---------------
The % Senior Notes due 2008 (the "Senior Notes") are being offered
hereby (the "Notes Offering") by Engle Homes, Inc. ("Engle" or the "Company").
Interest on the Senior Notes is payable semi-annually on and of
each year, commencing , 1998. The Senior Notes mature on , 2008.
The Senior Notes will be redeemable at the option of the Company, in whole
or in part, at any time on or after , 2003 at the redemption prices set
forth herein, plus accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time on or prior to , 2001, the Company
may redeem up to 33% of the aggregate principal amount of the Senior Notes
originally issued with the net proceeds of one or more public offerings of its
common stock at a redemption price equal to % of the aggregate principal
amount of each Senior Note so redeemed, plus accrued and unpaid interest, if
any, to the date of redemption; PROVIDED, HOWEVER, that immediately after
giving effect to any such redemption, not less than $65,000,000 principal
amount of the Senior Notes remains outstanding.
In the event of a Change of Control (as defined), the Company is required
to offer to repurchase all of the Senior Notes at a price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest, if any,
to the date of repurchase. In addition, the Company will be obligated to make
an offer to repurchase Senior Notes for cash at a price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of repurchase with the net cash proceeds of certain asset sales and if the
Company's Net Worth (as defined) falls below a specified level for two
consecutive fiscal quarters.
The Senior Notes will be general unsecured obligations of the Company,
ranking senior in right of payment to all existing and future subordinated
indebtedness of the Company and PARI PASSU in right of payment with all
existing and future senior indebtedness of the Company; however, the Senior
Notes will be effectively subordinated to all secured indebtedness of the
Company and the Guarantors to the extent of the value of the assets securing
such indebtedness. The Senior Notes will be guaranteed (the "Guarantees"), on a
joint and several basis, by all of the Restricted Subsidiaries (as defined) of
the Company existing on the closing date of this Notes Offering (collectively,
the "Guarantors"). The Guarantees will be general unsecured obligations of the
Guarantors, ranking senior in right of payment to all existing and future
subordinated indebtedness of the Guarantors and PARI PASSU in right of payment
with all existing and future senior indebtedness of the Guarantors; however,
the Guarantees will be effectively subordinated to all secured indebtedness of
the Guarantors to the extent of the value of the assets securing such
indebtedness. As of October 31, 1997, after giving effect to the Offerings (as
defined) and the application of the proceeds therefrom as described under "Use
of Proceeds" assuming that all of the 1993 Notes (as defined) are converted by
the holders into Common Stock on or prior to the date of redemption, the
Company and the Guarantors collectively would have had no secured indebtedness
outstanding.
Concurrently with the Notes Offering, the Company is offering shares of
its Common Stock by means of a separate prospectus (the "Equity Offering" and
together with the Notes Offering, the "Offerings"). The consummation of the
Notes Offering and the consummation of the Equity Offering are not conditioned
upon each other.
---------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE
SENIOR NOTES.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Senior Note % % %
- --------------------------------------------------------------------------------
Total $ $ $
- --------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from the date of original issuance.
(2) For information regarding indemnification of the Underwriter, see
"Underwriting."
(3) Before deducting expenses estimated at $400,000, which are payable by the
Company.
---------------
The Senior Notes are offered, subject to receipt and acceptance by the
Underwriter, to prior sale and to the Underwriters' right to reject any order,
in whole or in part, and to withdraw, cancel or modify the offer without
notice. It is expected that delivery of the Senior Notes will be made at the
offices of Salomon Brothers Inc, 7 World Trade Center, New York, New York or
through the facilities of The Depository Trust Company on or about , 1998.
---------------
Salomon Smith Barney
, 1998.
<PAGE>
[Appearing on page 2 and the inside back cover of the Prospectus will be 4
color pictures of homes offered by the Company in several of the Company's
markets and a map showing such markets.]
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT
COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
SAFE HARBOR STATEMENT
The Company wishes to take advantage of the safe harbor provisions
included in the Private Securities Litigation Reform Act of 1995. Accordingly,
in addition to historical information, this Prospectus contains certain
forward-looking statements, including, but not limited to, statements regarding
the Company's future financial performance and financial condition. These
statements involve a number of risks and uncertainties. Any forward-looking
statements made by the Company herein are not guarantees of future performance,
and actual results may differ materially from those in such forward-looking
statements as a result of various factors, including but not limited to, those
referred under "Risk Factors" herein.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS OR
INCORPORATED BY REFERENCE HEREIN. UNLESS THE CONTEXT INDICATES OTHERWISE, THE
TERMS "COMPANY" AND "ENGLE" AS USED IN THIS PROSPECTUS REFER TO ENGLE HOMES,
INC., ITS PREDECESSORS AND ITS SUBSIDIARIES. FISCAL YEAR REFERENCES ARE TO THE
RESPECTIVE FISCAL YEAR ENDED OCTOBER 31.
THE COMPANY
Engle Homes, Inc. designs, constructs, markets and sells detached
single-family residences, townhomes, patio homes and condominiums to entry
level and move-up buyers, retirees and second-home, seasonal buyers. Engle
operates in nine geographic markets: Broward County, Palm Beach County and
Martin County in South Florida; Orlando in Central Florida; Tampa, Sarasota,
Naples and Fort Myers on the west coast of Florida; Denver, Colorado; Dallas,
Texas; Virginia and Maryland; Raleigh, North Carolina; Phoenix, Arizona; and
Atlanta, Georgia. The Company offers a variety of home styles at prices ranging
from approximately $80,000 to over $400,000 with an average sales price in
fiscal 1997 of approximately $203,000. In addition, the Company operates a
mortgage company which provides mortgages primarily to its home buyers in all
of its geographic markets and a title company which provides services to its
home buyers and third parties in Florida and Denver, Colorado.
Engle is a leading Florida homebuilder. The Company believes that it is
the number two and number four builder of single-family homes in South Florida
and Central Florida, respectively, based on revenues from unit closings for the
twelve months ended June 30, 1997. Florida is the number one homebuilding state
in the United States in terms of total housing starts. In addition, Florida is
currently the fourth largest state based upon total population and has
consistently ranked among the top four states in population growth over the
past seven decades.
Since 1993, Engle has expanded into eight of the top 20 homebuilding
markets in the nation through both start-up operations and the acquisition of a
homebuilder in Denver, Colorado. In fiscal 1997, approximately 32% of the
Company's revenues from home sales were generated outside of the Florida
markets as compared to none in fiscal 1993. Most recently, in fiscal 1997 Engle
entered both the Phoenix, Arizona and Atlanta, Georgia markets through start-up
operations.
Over the past five years, the Company's total revenues have grown from
$137.4 million in fiscal 1993 to $425.3 million in fiscal 1997, with annual
EBITDA (as defined) growing from $15.9 million to $40.3 million over the same
period, representing compound annual growth rates of 33% and 26%, respectively.
The Company's fiscal 1997 total revenues of $425.3 million and EBITDA of $40.3
million were the highest in the Company's history. The number of homes
delivered increased from 797 in fiscal 1993 to 1,992 in fiscal 1997. At the end
of fiscal 1997, Engle was marketing homes in 68 communities.
BUSINESS STRATEGY
Engle believes that its success has been due to its market-oriented
approach which it applies to each of the following: (i) identifying new
markets; (ii) acquiring land; and (iii) diversifying its product offerings and
price ranges to appeal to most segments of the home buying public. Engle
believes that this strategy enables it to respond more rapidly to changing
market conditions.
EXPAND IN EXISTING AND NEW MARKETS. The Company has successfully expanded
its operations through both start-up operations in new and existing markets and
the acquisition of a homebuilder in Denver, Colorado. Within its existing
markets, the Company believes that it is able to gain greater
3
<PAGE>
market share by increasing the number of residential projects, thereby
leveraging its existing management structure and enhancing profitability
through economies of scale. As part of its strategy to further diversify
geographically, the Company continually seeks and evaluates market expansion
opportunities, including potential acquisitions of homebuilding companies. The
Company seeks to expand into geographic markets with significant single-family
home permit activity, substantial job growth, a diversified economy and an
availability of strong management with local market expertise. Since its
initial public offering in January 1992, the Company has expanded into eight
new geographic markets.
OFFER A BROAD SELECTION OF PRODUCTS. The Company designs its homes to
appeal to a wide variety of home buyers, including entry level and move-up
buyers, retirees and second-home, seasonal buyers. Accordingly, the Company
offers a number of home styles and price ranges at various locations in each
market, including golf and waterfront communities in certain markets. Engle's
product offerings include semi-custom estate homes, detached single-family
residences, townhomes, semi-detached patio-homes/ duplexes and condominiums.
Management believes that the Company's long-standing policy of product
diversification enables it to respond more rapidly to changing market
conditions.
SELECTIVELY ACQUIRE LAND. The Company maintains a land acquisition policy
designed to enhance profitability and return on capital while minimizing the
risks associated with investments in land. Engle seeks to identify and acquire
superior locations in each market and offer a number of communities with
diverse products and sales prices. The Company prefers to acquire improved
residential lots ready for construction by entering into option contracts,
whenever possible, or through outright purchases. The Company also acquires
tracts of land that require site improvements prior to the start of home
construction. Occasionally, Engle purchases larger parcels of undeveloped land
suited for master-planned communities, primarily in South Florida. When
acquiring larger parcels, the Company typically contracts to sell portions of
improved or unimproved land to other builders as a source of additional revenue
thereby reducing the Company's investment. In addition, when economically
advantageous to the Company, Engle enters into partnership or joint venture
agreements with other major homebuilders to purchase and develop well located
parcels of land. The Company generally purchases land only after required
zoning entitlements have been obtained.
MAINTAIN STRINGENT COST CONTROLS. The Company believes that maintaining
stringent cost controls is a key factor in achieving profitability. The Company
seeks to reduce its costs and risks by (i) obtaining required zoning
entitlements prior to purchasing land, (ii) using subcontractors to perform
home construction and site improvement work on a fixed price basis, (iii)
minimizing inventory of unsold homes, (iv) improving construction cycle time
for new homes, (v) using its position as a leading homebuilder to obtain
national volume discounts on construction materials and favorable pricing from
subcontractors and (vi) maintaining a sophisticated management information
system that allows it to monitor homebuilding production, scheduling and
budgeting on a daily basis.
COMMITMENT TO CUSTOMER SATISFACTION. The Company is dedicated to providing
customer satisfaction through quality construction and customer service.
Divisional managers are responsible for the quality of construction and the
level of customer satisfaction in their respective divisions.
EXPERIENCED MANAGEMENT WITH DECENTRALIZED OPERATING STRUCTURE. To serve
the needs of each of its markets, the Company relies upon the expertise of its
division managers, each of whom has significant experience in the homebuilding
industry. In order to align corporate and divisional profit goals, division
managers receive bonuses based on the return on assets of their respective
divisions. The division managers benefit from Engle's corporate expertise in
sales and marketing, land acquisition, financial services and its centralized
accounting department. The Company believes that this interaction between the
divisional managers and corporate management provides enhanced operating
results.
4
<PAGE>
RECENT DEVELOPMENTS
On October 17, 1997, the Company announced the early redemption of $15.0
million principal amount of its 7% Convertible Subordinated Notes due 2003 (the
"1993 Notes"). On November 18, 1997, the Company redeemed $14.6 million
aggregate principal amount of the 1993 Notes at a price of 104.2% of the
principal amount thereof, plus accrued interest. As a result of such
redemption, 1,042,432 shares of Common Stock will be eliminated from
consideration in calculating diluted earnings per share after fiscal 1997. An
extraordinary charge of approximately $600,000 (net of income tax benefit) will
be recorded in the first quarter of fiscal 1998 for the early retirement of the
1993 Notes. Prior to the redemption, $406,000 aggregate principal amount of the
1993 Notes called for redemption were converted by the holders into 28,996
shares of Common Stock and an additional $75,000 aggregate principal amount of
the 1993 Notes were converted into 5,357 shares. After November 18, 1997 and
prior to the date of this Prospectus, an additional $89,000 principal amount of
the 1993 Notes were converted into 6,355 shares of Common Stock. The Company
intends to use a portion of the net proceeds of the Equity Offering to fund the
redemption of all of the remaining outstanding principal amount of the 1993
Notes which are not converted into Common Stock on or prior to the date of
redemption. See "Use of Proceeds" and "Capitalization."
On January 26, 1998, the Company issued a press release reporting that it
expects the number of homes closed during the first quarter of fiscal 1998 to
be lower than the first quarter of fiscal 1997 and current analysts'
expectations. As a result, the Company expects revenues from home sales and
profits from its homebuilding operations to be lower in the first quarter of
fiscal 1998 as compared to the first quarter of fiscal 1997 and current
analysts' expectations. This decline is primarily attributable to a decreased
level of backlog at the beginning of the first quarter of fiscal 1998 and
timing differences related to certain of the Company's communities. However,
the Company expects fully diluted earnings per share for the first quarter of
fiscal 1998 to be slightly above fully diluted earnings per share for the prior
year period. The Company also reported that new homes sales contracts have been
strong during the first quarter of fiscal 1998 and are expected to increase by
more than 30% as compared to the prior year period. As a result, the Company
expects that its backlog of new homes under contract at January 31, 1998 will
exceed the Company's backlog at January 31, 1997 by 5% to 10%. See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations--Overview."
The Company is currently in discussions with a group of banks to obtain an
unsecured revolving credit facility to be used for working capital and general
corporate purposes. If obtained, the new facility would be used to replace all
of the Company's existing lines of credit, other than its financial services
debt.
The Company has reached a non-binding agreement in principle to acquire
substantially all of the assets of a Jacksonville, Florida based homebuilder.
The Company believes that this acquisition would complement its existing
presence in Florida and further strengthen its position as a leading Florida
homebuilder. Pursuant to the proposed acquisition, the Company would pay an
aggregate cash purchase price of approximately $7.0 million, depending on the
final valuation of the assets being acquired. The assets include approximately
100 lots, 230 lots under option and 35 homes in backlog. In addition, ancillary
to consummation of the proposed acquisition, the Company would enter into an
option agreement, whereby, at the Company's option, the Company would acquire
substantially all of the assets of a related management company on or prior to
March 31, 1999 for an aggregate cash purchase price of approximately $4.6
million. Consummation of the proposed acquisition is subject to a number of
conditions, including (i) the negotiation and execution of definitive purchase
and management agreements, (ii) the Company's satisfactory completion of its
due diligence investigation, and (iii) approval by the Company's Board of
Directors. Although the Company is in the process of negotiating definitive
documentation and conducting its due diligence investigation, there can be no
assurance that the proposed acquisition will be consummated.
The principal executive offices of the Company are located at 123 N.W.
13th Street, Suite 300, Boca Raton, Florida 33432, and its telephone number is
(561) 391-4012.
5
<PAGE>
THE NOTES OFFERING
Securities offered......... $100,000,000 aggregate principal amount of %
Senior Notes due 2008 (the "Senior Notes").
Maturity Date............ , 2008.
Interest Rate and
Payment Dates.............. The Senior Notes will bear interest at the rate of
% per annum. Interest will accrue from the Issue
Date (as defined) and will be payable
semi-annually on and of each year,
commencing , 1998.
Optional Redemption........ The Senior Notes will be redeemable at the
option of the Company, in whole or in part, at any
time on or after , 2003 at the redemption
prices set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption. In
addition, at any time on or prior to , 2001,
the Company may redeem up to 33% of the aggregate
principal amount of the Senior Notes with the net
proceeds of one or more public offerings of its
common stock at a redemption price equal to %
of the aggregate principal amount of each Senior
Note so redeemed, plus accrued and unpaid
interest, if any, to the date of redemption;
PROVIDED, HOWEVER, that immediately after giving
effect to any such redemption, not less than
$65,000,000 principal amount of the Senior Notes
remains outstanding. See "Description of the
Senior Notes--Optional Redemption."
Offers to Purchase......... In the event of a Change of Control (as
defined), the Company is required to offer to
repurchase all of the Senior Notes at a price
equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any,
to the date of repurchase. See "Description of the
Senior Notes--Certain Covenants--Change of
Control." In addition, the Company will be
obligated to make an offer to repurchase Senior
Notes for cash at a price equal to 100% of the
principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase with
the net cash proceeds of certain asset sales and
if the Company's Net Worth (as defined) falls
below a specified level for two consecutive fiscal
quarters. See "Description of the Senior
Notes--Certain Covenants--Maintenance of Net
Worth" and "--Limitation on Asset Sales."
Ranking.................... The Senior Notes will be general unsecured
obligations of the Company, ranking senior in
right of payment to all existing and future
subordinated indebtedness of the Company and PARI
PASSU in right of payment with all existing and
future senior indebtedness of the Company;
however, the Senior Notes will be effectively
subordinated to all secured indebtedness of the
Company to the extent of the value of the assets
securing such indebtedness. As of October 31,
1997, after giving effect to the Offerings and the
application of the proceeds therefrom as described
under "Use of Proceeds" assuming that all of the
1993 Notes are converted into Common Stock on or
prior to the date
6
<PAGE>
of redemption, the Company and the Guarantors
would have had no secured indebtedness
outstanding.
Guarantees................. The Senior Notes will be guaranteed (the
"Guarantees"), on a joint and several basis, by
all of the Restricted Subsidiaries (as defined) of
the Company existing on the closing date of this
Notes Offering (collectively, the "Guarantors").
The Guarantees will be general unsecured
obligations of the Guarantors, ranking senior in
right of payment to all existing and future
subordinated indebtedness of the Guarantors and
PARI PASSU in right of payment with all existing
and future senior indebtedness of the Guarantors;
however, the Guarantees will be effectively
subordinated to all secured indebtedness of the
Guarantors to the extent of the value of the
assets securing such Indebtedness. See
"Description of the Senior Notes--The Guarantees."
Certain Covenants.......... The Indenture (as defined) will impose certain
limitations on the ability of the Company and its
Restricted Subsidiaries to, among other things,
incur additional indebtedness, pay dividends or
make certain other restricted payments and
investments, consummate certain asset sales, enter
into certain transactions with affiliates,
redesignate an Unrestricted Subsidiary (as
defined) to be a Restricted Subsidiary, designate
a Restricted Subsidiary as an Unrestricted
Subsidiary, incur liens, merge or consolidate with
any other person or sell, assign, transfer, lease,
convey or otherwise dispose of all or
substantially all of its assets. The Indenture
will also impose limitations on the Company's
ability to restrict the ability of its Restricted
Subsidiaries to pay dividends or make certain
payments to the Company or any of its Restricted
Subsidiaries. See "Description of the Senior
Notes--Certain Covenants."
Use of Proceeds............ The net proceeds of the Notes Offering are
estimated to be approximately $97,350,000. Such
net proceeds will be used to repay outstanding
amounts under certain of the Company's lines of
credit. See "Use of Proceeds."
CONCURRENT OFFERING
Concurrently with the Notes Offering the Company is offering shares of its
Common Stock by means of a separate prospectus. The consummation of the Notes
Offering and the consummation of the Equity Offering are not conditioned upon
each other. The net proceeds of the Equity Offering will be used to redeem the
remaining outstanding principal amount of the 1993 Notes which are not
converted by the holders into Common Stock on or prior to the date of
redemption, to repay outstanding amounts under certain of the Company's lines
of credit and any remainder for general corporate purposes. See "Use of
Proceeds."
RISK FACTORS
Investment in the Senior Notes involves certain risks discussed under
"Risk Factors" that should be considered by prospective investors.
7
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Home sales .................................... $ 133,970 $ 215,716 $ 216,059
Cost of home sales ........................... 112,352 183,752 184,888
--------- --------- ---------
Homebuilding gross profit ..................... 21,618 31,964 31,171
--------- --------- ---------
Land sales .................................... 611 2,931 20,964
Cost of land sales ........................... 498 2,577 17,332
--------- --------- ---------
Land gross profit ........................... 113 354 3,632
--------- --------- ---------
Financial services income, net ............... 558 898 1,158
Other income, net .............................. 2,247 1,358 1,573
--------- --------- ---------
Total gross profit ........................... 24,536 34,574 37,534
--------- --------- ---------
Selling, marketing, general and
administrative expenses ..................... 12,741 19,993 24,466
Depreciation and amortization .................. 1,677 2,402 3,532
--------- --------- ---------
Income before income taxes .................. 10,118 12,179 9,536
Provision for income taxes ..................... 3,820 4,604 3,624
--------- --------- ---------
Net income(3) ................................. $ 6,298 $ 7,575 $ 5,912
========= ========= =========
Net income per share--fully diluted(3) ......... $ 0.81 $ 0.96 $ 0.74
Weighted average number of shares outstanding--
fully diluted ................................. 8,131 8,817 9,132
OTHER FINANCIAL DATA:
EBITDA(5) .................................... $ 15,924 $ 22,293 $ 19,972
Interest incurred .............................. 4,068 7,183 13,750
Ratio of EBITDA to interest incurred ......... 3.91x 3.10x 1.45x
Ratio of homebuilding debt to EBITDA ......... 4.01x 4.46x 7.38x
Ratio of earnings to fixed charges(6) ......... 3.14x 2.56x 1.18x
SUMMARY OPERATING DATA:
Units:
Deliveries .................................... 797 1,225 1,137
Backlog at end of period ..................... 687 560 804
Aggregate sales value of backlog ............... $ 119,491 $ 108,200 $ 161,900
Average sales price of homes in backlog ...... 174 193 201
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------
PRO FORMA
AS ADJUSTED
1996 1997 1997(1)
------------- ------------- --------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Home sales .................................... $ 303,972 $ 404,407 $404,407
Cost of home sales ........................... 260,651 345,295 344,890
--------- --------- --------
Homebuilding gross profit ..................... 43,321 59,112 59,517
--------- --------- --------
Land sales .................................... 17,571 7,685 7,685
Cost of land sales ........................... 15,589 7,095 7,095
--------- --------- --------
Land gross profit ........................... 1,982 590 590
--------- --------- --------
Financial services income, net ............... 1,796 2,678 3,858
Other income, net .............................. 1,485 1,513 2,910(2)
--------- --------- --------
Total gross profit ........................... 48,584 63,893 66,875
--------- --------- --------
Selling, marketing, general and
administrative expenses ..................... 31,906 39,620 39,620
Depreciation and amortization .................. 2,977 2,374 2,504
--------- --------- --------
Income before income taxes .................. 13,701 21,899 24,751
Provision for income taxes ..................... 5,206 8,431 9,529
--------- --------- --------
Net income(3) ................................. $ 8,495 $ 13,468 $ 15,222
========= ========= ========
Net income per share--fully diluted(3) ......... $ 1.03 $ 1.58 $ 1.40(4)
Weighted average number of shares outstanding--
fully diluted ................................. 9,251 9,246 10,904
OTHER FINANCIAL DATA:
EBITDA(5) .................................... $ 28,221 $ 40,339 $ 42,917
Interest incurred .............................. 15,272 15,623 15,154
Ratio of EBITDA to interest incurred ......... 1.85x 2.58x 2.83x
Ratio of homebuilding debt to EBITDA ......... 5.39x 3.77x 3.26x
Ratio of earnings to fixed charges(6) ......... 1.63x 2.40x 2.61x
SUMMARY OPERATING DATA:
Units:
Deliveries .................................... 1,567 1,992 1,992
Backlog at end of period ..................... 1,016 869 869
Aggregate sales value of backlog ............... $ 210,300 $ 173,989 $173,989
Average sales price of homes in backlog ...... 207 200 200
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1997
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED(7)
---------- ---------------
<S> <C> <C>
BALANCE SHEET DATA
Cash ............................................. $ 16,546 $ 44,872
Homebuilding inventories ........................ 230,108 230,108
Total assets .................................... 288,412 318,936(8)
Homebuilding bank credit facilities ............ 82,064 --
% Senior Notes due 2008 ........................ -- 100,000
113/4% Senior Notes due 2000 ..................... 40,000 40,000
7% Convertible Subordinated Notes due 2003 ...... 30,000 --
Total homebuilding debt ........................ 152,064 140,000
Total debt(9) ................................. 166,593 140,000
Shareholders' equity ........................... 93,180 150,533
</TABLE>
8
<PAGE>
- ---------------
(1) Pro forma for (i) the redemption on November 18, 1997, of $14,594,000
aggregate principal amount of the 1993 Notes at a price of 104.2% of the
principal amount thereof, plus accrued interest, and the conversion of
$570,000 aggregate principal amount of the 1993 Notes into 40,708 shares
of Common Stock, (ii) the issuance and sale of the Common Stock in the
Equity Offering at an assumed price of $17.00, (iii) the sale of the
Senior Notes in the Notes Offering with an assumed interest rate of 9.25%,
and (iv) the application of the estimated net proceeds from the Offerings
as described under "Use of Proceeds" assuming that all of the 1993 Notes
are converted by the holders into Common Stock on or prior to the date of
redemption, as if each of these transactions had occurred on November 1,
1996. See "Capitalization." The 1993 Notes are callable at 103.5% of the
principal amount thereof as of March 1, 1998 and have a conversion price
of $14.00 per share (an effective conversion price, excluding accrued
interest, of $14.49). The closing sale price of the Common Stock as
reported on the Nasdaq National Market on January 21, 1998, was $17.38. As
a result, the Company anticipates that substantially all of the 1993 Notes
will be converted by the holders into Common Stock prior to being
redeemed.
(2) Interest income at an assumed rate of approximately 5% was computed on the
excess funds generated from the Offerings in the amount of approximately
$28.3 million after application of the estimated net proceeds therefrom as
described under "Use of Proceeds."
(3) Effective November 1, 1993, the Company adopted statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes," which requires
an asset and liability method of accounting for income taxes. The Company
recorded a benefit of $1,332,000 in the first quarter of fiscal 1994 as a
cumulative effect on prior years of this accounting change which has been
excluded from the calculation of net income. Additionally, pro forma as
adjusted net income and income per share exclude the extraordinary charge
of $596,000, net of income taxes, or $.05 per share on a fully diluted
basis, resulting from the elimination of deferred loan costs and the
premium paid in connection with the redemption of $14,594,000 aggregate
principal amount of the 1993 Notes on November 18, 1997.
(4) Assuming all of the remaining outstanding 1993 Notes are redeemed, pro
forma as adjusted fully diluted net income per share for fiscal 1997 would
have been $1.50 (excluding the extraordinary charge of $1,203,000, net of
income taxes, or $.12 per share, resulting from the elimination of
deferred loan costs and the premium paid in connection with the redemption
of $14,594,000 aggregate principal amount of the 1993 Notes on November
18, 1997 and the redemption of the remaining outstanding $14,836,000
aggregate principal amount of the 1993 Notes).
(5) EBITDA is defined as operating income before amortization of capitalized
interest expense included in the cost of goods sold, depreciation and
other amortization. EBITDA is a widely accepted financial indicator of a
company's ability to service debt. However, EBITDA should not be construed
as an alternative to operating income or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of the Company's
operating performance or as a measure of liquidity.
(6) Computed by dividing earnings by fixed charges. "Earnings" consist of
income from operations before income taxes, plus amortization of
previously capitalized interest included in costs of sales and fixed
charges, exclusive of capitalized interest. "Fixed charges" consist of
interest costs incurred, including capitalized interest costs plus
amortization of loan costs and that portion of operating lease rental
expense deemed to be representative of interest.
(7) Pro forma for (i) the redemption on November 18, 1997, of $14,594,000
aggregate principal amount of the 1993 Notes at a price of 104.2% of the
principal amount thereof, plus accrued interest, and the conversion of
$570,000 aggregate principal amount of the 1993 Notes into 40,708 shares
of Common Stock, (ii) the issuance and sale of the Common Stock in the
Equity Offering at an assumed price of $17.00, (iii) the sale of the
Senior Notes in the Notes Offering with an assumed interest rate of 9.25%,
and (iv) the application of the estimated net proceeds from the Offerings
as described under "Use of Proceeds" assuming that all of the 1993 Notes
are converted by the holders into Common Stock on or prior to the date of
redemption. See "Capitalization." The 1993 Notes are callable at 103.5% of
the principal amount thereof as of March 1, 1998 and have a conversion
price of $14.00 per share (an effective conversion price, excluding
accrued interest, of $14.49). The closing sale price of the Common Stock
as reported on the Nasdaq National Market on January 21, 1998, was $17.38.
As a result, the Company anticipates that substantially all of the 1993
Notes will be converted by the holders into Common Stock prior to being
redeemed.
(8) Reflects the estimated professional fees and expenses associated with the
Note Offering and the write-off of the unamortized deferred financing
costs related to the 1993 Notes. A breakdown of the estimated costs and
write-off follows (in thousands):
<TABLE>
<S> <C>
Financing fees and debt issuance costs ................................. $2,250
Legal and professional fees and other costs .............................. 400
Write-off of unamortized deferred financing costs (net of income taxes) (451)
------
$2,199
======
</TABLE>
(9) Total debt includes financial services debt.
9
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER
THE FACTORS SET FORTH BELOW PRIOR TO INVESTING IN THE SENIOR NOTES OFFERED
HEREBY.
GENERAL REAL ESTATE, ECONOMIC, INTEREST RATES AND OTHER CONDITIONS
The homebuilding industry is cyclical and affected by changes in general
and local economic and other conditions including employment levels,
demographic considerations, availability of financing, interest rate levels,
consumer confidence and housing demand. In addition, homebuilders are subject
to various risks, many of them outside the control of the homebuilder including
competitive overbuilding, availability and cost of building lots, materials and
labor, adverse weather conditions which can cause delays in construction
schedules, cost overruns, changes in government regulations, and increases in
real estate taxes and other local government fees. The Company cannot predict
whether interest rates will be at levels attractive to prospective home buyers.
If interest rates increase, and in particular mortgage interest rates, the
Company's business could be adversely affected. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
"Business--Competition and Market Factors."
LEVERAGE; POTENTIAL ADVERSE EFFECT OF INDEBTEDNESS ON FUTURE OPERATIONS
As of October 31, 1997, after giving effect to (i) the redemption on
November 18, 1997, of $14,594,000 aggregate principal amount of the 1993 Notes
and the conversion of $570,000 aggregate principal amount of the 1993 Notes,
(ii) the Offerings and (iii) the application of the estimated net proceeds from
the Offerings as described under "Use of Proceeds" assuming that all of the
1993 Notes are converted into Common Stock on or prior to the date of
redemption, the outstanding indebtedness of the Company would have been
$140,000,000 and the Company would have had stockholders' equity of
approximately $150,533,000. In addition, subject to restrictions in the
indenture (the "1994 Indenture") governing the Company's 113/4% Senior Notes
due 2000 (the "1994 Notes") and the indenture governing the Senior Notes, the
Company may incur additional indebtedness in the future, some of which may be
secured. The Company's ability to make required debt service payments in the
future will be dependent on the Company's operating results, which are subject
to financial, economic and other factors affecting the Company that are beyond
its control. No assurance can be given that the Company will be able to make
required debt service payments. See "Use of Proceeds" and "Capitalization."
The degree to which the Company is leveraged could have an adverse impact
on the Company, including (i) increased vulnerability to adverse general
economic and market conditions, (ii) impaired ability to expand and to respond
to increased competition, (iii) impaired ability to obtain additional financing
for future working capital, capital expenditures, general corporate or other
purposes and (iv) requiring that a significant portion of cash provided by
operating activities be used for the payment of debt obligations, thereby
reducing funds available for operations and future business opportunities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-- Liquidity and Capital Resources" and "Description of Certain
Indebtedness."
GEOGRAPHIC CONCENTRATION; RISKS OF EXPANSION
The Company's operations are situated in South Florida; Central Florida;
the west coast of Florida; Denver, Colorado; Dallas, Texas; Virginia and
Maryland; Raleigh, North Carolina; Phoenix, Arizona; and Atlanta, Georgia.
Adverse general economic conditions in these markets could have a material
adverse impact on the operations of the Company. For fiscal 1997, approximately
68% of the Company's housing revenue and a significant portion of the Company's
operating income were derived from operations in its Florida markets. The
Company's performance could be significantly affected by changes in these
markets. The Company expanded into two new geographic markets, Phoenix,
Arizona,
10
<PAGE>
and Atlanta, Georgia, in fiscal 1997. New markets may prove to be less stable
and may involve delays, problems and expenses not typically found by the
Company in the existing markets with which it is familiar. See "Business."
LAND DEVELOPMENT ACTIVITIES
The Company develops land for some of its subdivisions, which occasionally
may consist of large tracts of land suited for master-planned communities.
Acquiring land and committing the financial and managerial resources to develop
such land involve significant risks. Before a subdivision generates any
revenue, material expenditures are required for items such as acquiring land
and constructing subdivision infrastructure (such as roads and utilities).
SIGNIFICANT VOTING CONTROL BY PRINCIPAL SHAREHOLDERS
Following the closing of the Equity Offering and assuming that none of the
outstanding 1993 Notes have been converted, Alec Engelstein, the Company's
Chairman, President and Chief Executive Officer, and Harry Engelstein, the
Company's Executive Vice President and Chief Construction Officer, will
together beneficially own a total of approximately 36.9% of the outstanding
Common Stock (35.4% if the Underwriters' over-allotment option is exercised in
full) and together will continue to have significant voting power with respect
to the election of the Board of Directors of the Company, and in general, the
determination of the outcome of various matters submitted to the shareholders
of the Company for approval.
DEPENDENCE ON KEY EXECUTIVES
The Company is managed by a relatively small number of executive officers.
The loss of the services of one or more of these executive officers,
particularly Alec Engelstein, the Company's Chairman, President and Chief
Executive Officer, could have an adverse effect on the Company's business and
operations. See "Management."
HOLDING COMPANY STRUCTURE; FRAUDULENT CONVEYANCE CONCERNS
The Company is a holding company which derives substantially all of its
operating income from its subsidiaries. The Company must rely on dividends and
other distributions from its subsidiaries to generate the funds necessary to
meet its obligations, including the payment of principal and interest on the
Senior Notes. The ability of the Company's subsidiaries to pay such dividends
or make such distributions will be subject to, among other things, applicable
state laws and, under certain circumstances, restrictions contained in
agreements or debt instruments that the Company or its subsidiaries may enter
into after the date of the Indenture. All of the subsidiaries of the Company
have jointly and severally guaranteed the Senior Notes. In addition, the Senior
Notes and the Guarantees will be effectively subordinated to all secured
indebtedness of the Company and the Guarantors, respectively, to the extent of
the assets securing such indebtedness. As of October 31, 1997, after giving
effect to the Offerings and the application of the proceeds therefrom as
described under "Use of Proceeds" assuming that all of the 1993 Notes are
converted by the holders into Common Stock on or prior to the date of
redemption, the Company and the Guarantors collectively would have had no
secured indebtedness outstanding.
The Guarantees may be subject to review under federal or state fraudulent
conveyance law. To the extent that a court were to find that (x) a Guarantee
was incurred by a Guarantor with intent to hinder, delay, or defraud any
present or future creditor, or the Guarantor contemplated insolvency with a
design to prefer one or more creditors to the exclusion in whole or in part of
others, or (y) such Guarantor did not receive fair consideration or reasonable
equivalent value for issuing its Guarantee and such Guarantor (i) was
insolvent, (ii) was rendered insolvent by reason of the issuance of such
Guarantee, (iii) was engaged or about to engage in a business or transaction
for which the remaining assets of such Guarantor constituted unreasonably small
capital to carry on its business, or (iv) intended
11
<PAGE>
to incur, or believed that it would incur, debts beyond its ability to pay such
debts as they matured, a court could avoid or subordinate such Guarantee in
favor of the Guarantor's creditors. Among other things, a legal challenge of a
Guarantee on fraudulent conveyance grounds may focus on the benefits, if any,
realized by each Guarantor as a result of the issuance by the Company of the
Senior Notes. The measure of insolvency for purposes of the foregoing will vary
depending on the law of the jurisdiction being applied. Generally, however, an
entity would be considered insolvent if the sum of its debts (including
contingent or unliquidated debts) is greater than all its property at a fair
valuation or if the present fair saleable value of its assets is less than the
amount that will be required to pay its probable liability on its existing
debts as they become absolute and matured. Pursuant to the terms of the
Guarantees, the liability of each Guarantor is limited to the maximum amount of
indebtedness permitted, at the time of the grant of such Guarantee, to be
incurred in compliance with fraudulent conveyance or similar laws.
To the extent any Guarantee was avoided or subordinated as a fraudulent
conveyance, limited as described above, or held unenforceable for any other
reason, holders of the Senior Notes would, to such extent, cease to have a
claim in respect of such Guarantee and, to such extent, would be creditors
solely of the Company and any Guarantor whose Guarantee was not avoided,
subordinated, limited, or held unenforceable. In such event, the claims of the
holders of the Senior Notes against the issuer of an avoided, subordinated,
limited or unenforceable Guarantee would be subject to the prior payment of all
liabilities of such Guarantor. There can be no assurance that, after providing
for all prior claims, there would be sufficient assets to satisfy the claims of
the holders of the Senior Notes.
REPURCHASE OF SENIOR NOTES UPON A CHANGE OF CONTROL
In the event of a Change of Control, the Company will be required to offer
to repurchase all of the outstanding Senior Notes and all of the outstanding
1994 Notes at a purchase price equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any, to the repurchase date.
There can be no assurance that the Company will have sufficient funds available
or will be permitted by its other indebtedness agreements to repurchase the
Senior Notes and the 1994 Notes upon the occurrence of a Change of Control. The
Change of Control purchase feature of the Senior Notes and the 1994 Notes may
in certain circumstances make more difficult or discourage a takeover of the
Company and, thus, the removal of incumbent management. The Change of Control
purchase feature, however, is not the result of management's knowledge of any
specific effort to obtain control of the Company by means of a merger, tender
offer, solicitation or otherwise, or part of a plan by management to adopt a
series of anti-takeover provisions. See "Description of the Senior
Notes--Certain Covenants--Change of Control" and "Description of Certain
Indebtedness--The 1994 Notes."
COMPETITION
The homebuilding industry is highly competitive and fragmented. The
Company competes in each of its markets with numerous national, regional and
local builders, including some builders with greater financial resources.
Builders of new homes compete not only for home buyers, but also for desirable
properties, raw materials and skilled subcontractors. The Company also competes
for residential sales with individual sales of existing homes and available
rental housing. See "Business--Competition and Market Factors."
GOVERNMENTAL REGULATION
In developing housing communities, the Company must obtain the approval of
numerous government authorities regulating such matters as permitted land uses
and levels of density, the installation of utility services such as water and
waste disposal and the dedication of acreage for open space, parks, schools and
other community purposes. Several authorities in Florida and other states have
imposed impact fees as a means of defraying the cost of providing certain
governmental services to developing areas and the amount of these fees has
increased significantly during recent years. Many state laws require the use of
specific construction materials which reduce the need for energy-consuming
12
<PAGE>
heating and cooling systems. Local governments also, at times, declare
moratoriums on the issuance of building permits and impose other restrictions
in areas where sewage treatment facilities and other public facilities do not
reach minimum standards. The Company is also subject to a variety of Federal,
State and local statutes, ordinances, rules and regulations concerning
protection of health and the environment. The particular environmental laws
which apply to any given community vary greatly according to the community
site, the site's environmental conditions and the present and former uses of
the site. Prior to consummating the purchase of land, the Company engages
independent environmental engineers to evaluate such land for the presence of
hazardous or toxic materials, wastes or substances. Such governmental
regulation may result in delays, cause the Company to incur substantial
compliance and other costs and prohibit or severely restrict development in
certain regions or areas, which could have an adverse effect on the Company's
business and results of operations. See "Business-- Government Regulation and
Environmental Matters."
To varying degrees, certain permits and approvals will be required to
complete the residential developments currently being planned by the Company.
The ability of the Company to obtain necessary approvals and permits for these
projects is often beyond the Company's control, and could restrict or prevent
the development of otherwise desirable property. The length of time necessary
to obtain permits and approvals increases the carrying costs of unimproved
property acquired for the purpose of development and construction. In addition,
the continued effectiveness of permits already granted is subject to factors
such as changes in policies, rules and regulations and their interpretation and
application.
ABSENCE OF PUBLIC MARKET
The Senior Notes are a new issue of securities which have no established
trading market. It is expected that the Senior Notes will be sold to a limited
number of investors. The Company has been advised by the Underwriter that it
intends to make a market in the Senior Notes after the consummation of this
Offering; however, the Underwriter is not obligated to do so, and any such
market-making, if commenced, may be terminated at any time without notice. No
assurance can be given as to the liquidity of the trading market, if any, for
the Senior Notes.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Notes Offering are estimated to
be approximately $97.4 million after deducting the estimated underwriting
discounts and offering expenses payable by the Company. The Company intends to
use the entire net proceeds of the Notes Offering to repay outstanding amounts
under certain of the Company's homebuilding lines of credit (the "Homebuilding
Lines of Credit").
Assuming the Equity Offering, which is expected to occur concurrently with
the Notes Offering, is consummated, the net proceeds to the Company from the
sale of the shares of Common Stock in the Equity Offering are estimated to be
approximately $42.8 million ($49.3 million if the Underwriters' overallotment
option is exercised in full), assuming an offering price of $17.00 per share
and after deducting the estimated underwriting discounts and offering expenses
payable by the Company. The Company intends to use up to approximately $15.4
million of the net proceeds of the Equity Offering to fund the redemption of
all of the remaining outstanding principal amount of the 1993 Notes which are
not converted into Common Stock on or prior to the date of redemption at a
price of 103.5% of the principal amount thereof and to use the remaining net
proceeds to repay outstanding amounts under the Homebuilding Lines of Credit.
To the extent that the 1993 Notes are converted into Common Stock on or prior
to the date of redemption, the Company intends to use any remaining net
proceeds, first, to repay additional outstanding amounts under the Homebuilding
Lines of Credit; second, to repay outstanding amounts under the Company's
financial services line of credit (the "Financial Services Line of Credit");
and, any remainder, for general corporate purposes.
The Homebuilding Lines of Credit bear interest at rates varying from LIBOR
plus 3.00% to prime plus .50%, bore a weighted average interest rate of 9.28%
per annum during fiscal 1997 and had approximately $112.0 million outstanding
at December 31, 1997, of which approximately $19.0 million matures in 1998,
approximately $49.4 million matures in 1999, approximately $42.1 million
matures in 2000 and approximately $1.4 million matures thereafter. The
Financial Services Line of Credit bears interest at a rate of prime minus .25%,
bore a weighted average interest rate of 8.125% per annum during fiscal 1997
and had approximately $9.0 million outstanding at December 31, 1997 which
matures in April 1998. As of December 31, 1997, after giving effect to the
Offerings and the application of the net proceeds therefrom as described above
assuming that all of the 1993 Notes are converted into Common Stock on or prior
to the date of redemption, no amounts would have been outstanding under the
Homebuilding Lines of Credit or the Financial Services Line of Credit and
approximately $121.0 million and $18.0 million, respectively, would have been
available to the Company for additional borrowings thereunder. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and Note 5 to the Company's
Consolidated Financial Statements.
14
<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the
Company at October 31, 1997, (ii) the pro forma capitalization of the Company
at October 31, 1997, after giving effect to the redemption on November 18, 1997
of $14,594,000 aggregate principal amount of the 1993 Notes at a price of
104.2% of the principal amount thereof, plus accrued interest, and the
conversion of $570,000 aggregate principal amount of the 1993 Notes into 40,708
shares of Common Stock, as if such events had occurred on October 31, 1997, and
(iii) the pro forma capitalization of the Company as adjusted to reflect the
issuance and sale of the Common Stock in the Equity Offering, the sale of the
Senior Notes in the Notes Offering and the application of the estimated net
proceeds from the Offerings as described under "Use of Proceeds" assuming that
all of the 1993 Notes are converted into Common Stock on or prior to the date
of redemption. This table should be read in conjunction with the Company's
Consolidated Financial Statements and notes thereto and "Management's
Discussion and Analysis of Results of Operations and Financial Condition," each
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1997
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- ----------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Cash ...................................................... $ 16,546 $ 16,546 $ 44,872
======== ========= ==========
Debt
Homebuilding debt
Bank credit facilities(1) ................................. $ 82,064 $ 97,271 $ --
% Senior Notes due 2008 ................................. -- -- 100,000
113/4% Senior Notes due 2000 .............................. 40,000 40,000 40,000
7% Convertible Subordinated Notes due 2003 ............... 30,000 14,836 --
-------- --------- ----------
Total homebuilding debt ................................. 152,064 152,107 140,000
-------- --------- ----------
Financial services debt .................................... 14,529 14,529 --
-------- --------- ----------
Total debt ............................................. 166,593 166,636 140,000(2)
-------- --------- ----------
Shareholders' equity
Common Stock ($.01 par value, 25,000,000 shares authorized;
6,931,693 actual shares issued and outstanding; 6,972,401
shares issued and outstanding pro forma; 10,732,117 shares
issued and outstanding pro forma as adjusted)(3) ......... 69 70 107
Additional paid-in capital ................................. 47,852 48,414 105,763
Retained earnings(4) ....................................... 45,259 44,663 44,663
-------- --------- ----------
Total shareholders' equity .............................. 93,180 93,147 150,533(2)
-------- --------- ----------
Total capitalization ....................................... $259,773 $259,783 $ 290,533
======== ========= ==========
</TABLE>
- ----------------
(1) The Company is currently in discussions with a group of banks to obtain an
unsecured revolving credit facility to be used for working capital and
general corporate purposes. If obtained, the new facility would be used to
replace all of the Company's existing lines of credit, other than
financial services debt.
(2) If all of the remaining $14,836,000 aggregate principal amount of the 1993
Notes were redeemed with the proceeds of the Equity Offering pursuant to
the Company's call for redemption, pro forma as adjusted total debt and
total shareholders' equity as of October 31, 1997 would have been
$140,000,000 and $135,377,000, respectively. After November 18, 1997 and
prior to the date of this Prospectus, an additional $89,000 principal
amount of the 1993 Notes were converted into 6,355 shares of Common Stock.
The 1993 Notes are callable at 103.5% of the principal amount thereof as
of March 1, 1998 and have a conversion price of $14.00 per share (an
effective conversion price of $14.49). The closing price of the Common
Stock on the Nasdaq National Market on January 21, 1998 was $17.38.
(3) Excludes 606,500 shares of Common Stock subject to outstanding options as
of October 31, 1997, of which options to purchase 502,000 shares were
exercisable on that date.
(4) Pro forma amount includes an adjustment to reflect the extraordinary charge
of approximately $600,000, net of income taxes, resulting from the
elimination of deferred loan costs and the premium paid in connection with
the redemption of $14,594,000 aggregate principal amount of the 1993 Notes
on November 18, 1997.
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected consolidated financial and operating data of the
Company were derived from the Company's consolidated financial statements as of
and for the years ended October 31, 1993 through 1997 which have been audited
by BDO Seidman, LLP, independent certified public accountants. The information
presented below should be read in conjunction with the Company's Consolidated
Financial Statements and notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this Prospectus or incorporated by reference herein.
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
---------------------------------------------------------------------
1993 1994 1995 1996 1997
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues .......................................... $ 137,386 $ 224,459 $ 244,528 $ 332,088 $ 425,295
Costs and expenses:
Cost of sales--homes .............................. 112,352 183,752 184,888 260,651 345,295
Cost of sales--land .............................. 498 2,577 17,332 15,589 7,095
Selling, marketing, general & administrative ...... 12,741 19,993 24,466 31,906 39,620
Depreciation & amortization ........................ 1,677 2,402 3,532 2,977 2,374
Financial services ................................. 0 3,556 4,774 7,264 9,012
--------- --------- --------- --------- ---------
Total costs and expenses ........................... 127,268 212,280 234,992 318,387 403,396
--------- --------- --------- --------- ---------
Income before income taxes ........................ 10,118 12,179 9,536 13,701 21,899
--------- --------- --------- --------- ---------
Net income(1) ....................................... $ 6,298 $ 7,575 $ 5,912 $ 8,495 $ 13,468
========= ========= ========= ========= =========
Net income per share
Primary .......................................... $ 0.95 $ 1.13 $ 0.85 $ 1.20 $ 1.94
Fully diluted .................................... 0.81 0.96 0.74 1.03 1.58
Weighted average number of shares outstanding
Primary .......................................... 6,650 6,674 6,989 7,108 6,951
Fully diluted .................................... 8,131 8,817 9,132 9,251 9,246
Cash dividends .................................... $ 1,064 $ 1,066 $ 1,109 $ 1,109 $ 1,109
OTHER FINANCIAL DATA:
EBITDA(2) .......................................... $ 15,924 $ 22,293 $ 19,972 $ 28,221 $ 40,339
Interest incurred ................................. 4,068 7,183 13,750 15,272 15,623
Ratio of EBITDA to interest incurred ............... 3.91x 3.10x 1.45x 1.85x 2.58x
Ratio of earnings to fixed charges(3) ............ 3.14x 2.56x 1.18x 1.63x 2.40x
SUMMARY OPERATING DATA:
Units:
Deliveries ....................................... 797 1,225 1,137 1,567 1,992
Backlog at end of period ........................ 687 560 804 1,016 869
Aggregate sales value of backlog .................. $ 119,491 $ 108,200 $ 161,900 $ 210,300 $ 173,989
Average sales price of homes in backlog ............ 174 193 201 207 200
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 31,
-------------------------------------------------------------
1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash ........................... $ 27,326 $ 13,121 $ 13,400 $ 21,700 $16,546
Homebuilding inventories ...... 88,902 138,428 198,664 220,564 230,108
Total assets .................. 143,991 188,913 251,918 284,789 288,412
Total homebuilding debt ...... 63,794 99,428 147,454 152,117 152,064
Total debt(4) .................. 66,575 102,341 153,927 165,123 166,593
Shareholders' equity ......... 58,102 66,303 74,106 81,492 93,180
</TABLE>
16
<PAGE>
- ----------------
(1) Effective November 1, 1993, the Company adopted statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes," which requires
an asset and liability method of accounting for income taxes. The Company
recorded a benefit of $1,332,000 in the first quarter of fiscal 1994 as a
cumulative effect on prior years of this accounting change which has been
excluded from the calculation of net income.
(2) EBITDA is defined as operating income before amortization of capitalized
interest expense included in the cost of goods sold, depreciation and
other amortization. EBITDA is a widely accepted financial indicator of a
company's ability to service debt. However, EBITDA should not be construed
as an alternative to operating income or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of the Company's
operating performance or as a measure of liquidity.
(3) Computed by dividing earnings by fixed charges. "Earnings" consist of
income from operations before income taxes, plus amortization of
previously capitalized interest included in costs of sales and fixed
charges, exclusive of capitalized interest costs. "Fixed Charges" consist
of interest costs incurred, including capitalized interest costs plus
amortization of loan costs and that portion of operating lease rental
expense deemed to be representative of interest.
(4) Total debt includes financial services debt.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
IS BASED UPON AND SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S CONSOLIDATED
FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN.
OVERVIEW
GENERAL. The following table sets forth for the years indicated certain
items of the Company's Consolidated Financial Statements expressed as a
percentage of the Company's total revenues:
<TABLE>
<CAPTION>
PRCENTAGE OF TOTAL REVENUES
YEAR ENDED OCTOBER 31,
------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Sales of homes ................................................ 88.4% 91.5% 95.1%
Sales of land ................................................ 8.6 5.3 1.8
Rent and other ................................................ 0.6 0.5 0.4
Financial services income .................................... 2.4 2.7 2.7
----- ----- -----
Total ...................................................... 100.0% 100.0% 100.0%
===== ===== =====
Cost of sales--homes .......................................... 75.6 78.5 81.2
Cost of sales--land .......................................... 7.0 4.7 1.7
Selling, marketing, general and administrative expenses ...... 10.0 9.6 9.3
Income before income taxes .................................... 3.9 4.1 5.1
Net income ................................................... 2.4 2.6 3.2
</TABLE>
The following tables set forth information relating to homes closed, new
sales contracts and sales backlog by operating division for fiscal years 1995,
1996 and 1997.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995 1996 1997
-------------------- -------------------- -------------------
HOMES CLOSED CLOSED PERCENT CLOSED PERCENT CLOSED PERCENT
- ------------ -------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
South Florida ............ 513 45.1% 624 39.8% 847 42.4%
Central Florida ......... 244 21.5 343 21.9 386 19.4
West Coast Florida ...... 56 4.9 66 4.2 84 4.2
Dallas, TX ............... 57 5.0 107 6.8 173 8.7
Denver, CO ............... 243 21.4 269 17.2 334 16.8
Virginia/Maryland ...... 18 1.6 102 6.5 103 5.2
Raleigh, NC ............ 6 0.5 56 3.6 64 3.2
Phoenix, AZ ............ -- -- -- -- 1 0.1
----- ---- ----- ---- ----- ----
Total .................. 1,137 100% 1,567 100% 1,992 100%
===== ==== ===== ==== ===== ====
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995 1996 1997
-------------------- -------------------- -------------------
NEW SALES CONTRACTS SOLD DOLLARS SOLD DOLLARS SOLD DOLLARS
- ------------------- ------- ---------- ------- ---------- ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
South Florida ............ 698 $139,000 643 $141,200 628 $135,100
Central Florida ......... 268 48,700 378 70,500 365 69,200
West Coast Florida ...... 60 11,700 81 12,200 153 25,400
Dallas, TX ............... 62 12,500 179 30,200 148 23,800
Denver, CO ............... 217 40,500 318 59,600 346 67,800
Virginia/Maryland ...... 41 10,400 111 24,700 110 27,600
Raleigh, NC ............ 35 7,000 69 14,000 37 7,700
Phoenix, AZ ............ - - - - 58 11,500
----- -------- ----- -------- ----- --------
Total .................. 1,381 $269,800 1,779 $352,400 1,845 $368,100
===== ======== ===== ======== ===== ========
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995 1996 1997
-------------------- -------------------- -------------------
SALES BACKLOG HOMES DOLLARS HOMES DOLLARS HOMES DOLLARS
- ------------- ------- ---------- ------- ---------- ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
South Florida ............ 540 $110,800 559 $126,500 340 $ 72,600
Central Florida ......... 130 23,500 165 31,000 144 28,400
West Coast Florida ...... 25 4,900 39 5,800 108 18,000
Dallas, TX ............... 18 3,600 90 14,500 63 9,900
Denver, CO ............... 37 7,300 86 15,700 100 19,400
Virginia/Maryland ...... 25 6,100 34 8,000 41 10,900
Raleigh, NC ............ 29 5,700 43 8,800 16 3,400
Phoenix, AZ ............ 0 0 0 0 57 11,400
--- -------- ----- -------- --- --------
Total .................. 804 $161,900 1,016 $210,300 869 $174,000
=== ======== ===== ======== === ========
</TABLE>
BACKLOG. Sales of the Company's homes are generally made pursuant to a
standard contract which requires a down payment. The contract includes a
financing contingency which permits the customer to cancel in the event
mortgage financing at prevailing interest rates (including financing arranged
by the Company) is unobtainable within a specified period, typically four to
six weeks. The Company includes an undelivered home sale in its backlog upon
execution of the sales contract and receipt of the down payment. Revenue is
recognized only upon the closing and delivery of a home. The Company estimates
that the average period between the execution of a purchase agreement for a
home and delivery is approximately four to six months.
As of October 31, 1997, the Company's backlog was $174.0 million (869
contracts) as compared to $210.3 million (1,016 contracts) as of October 31,
1996. Excluding South Florida, the Company's backlog increased to $101.4
million (529 contracts) as of October 31, 1997 from $83.8 million (457
contracts) as of October 31, 1996, an increase of 21% (or 16% based on
contracts). The overall decline in the Company's backlog as of October 31, 1997
may lead to fewer closings and correspondingly reduced revenues from home sales
in subsequent quarters of fiscal 1998 which may also lead to reduced profits
from its homebuilding operations for such quarters. See "Prospectus Summary--
Recent Developments."
The Company believes that the decline in South Florida backlog can be
attributed to two primary factors: (i) timing differences between recently
completed subdivisions and the opening of new subdivisions, and (ii) the
success of its pre-sale contract activity at Pembroke Falls prior to October
31, 1996. As is common practice for large projects, the Company began pre-sale
activity at Pembroke Falls prior to October 31, 1996 so that it could begin
home construction on that project immediately upon completion of site
development.
RESULTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997 COMPARED TO YEAR ENDED OCTOBER 31, 1996.
The Company's revenues from home sales during fiscal 1997 increased $100.4
million (or 33.0%) compared to fiscal 1996. The number of homes delivered by
the Company increased 27.1% (to 1,992 from 1,567) and the average selling price
of homes delivered increased 4.6% (to $203,000 from $194,000). The increase of
revenues and homes delivered is primarily attributable to a higher percentage
of backlog being delivered during fiscal 1997. Management believes that changes
in the average selling price of homes delivered from period to period are
attributable to discrete factors at each of its subdivisions, including product
mix and premium lot availability, and cannot be predicted for future periods
with any degree of certainty.
The Company's revenues from land sales decreased approximately $9.9
million (or 56.3%) during fiscal 1997 as compared to fiscal 1996 primarily as a
result of a decrease in commercial and multi-family land sales at Pembroke
Falls.
19
<PAGE>
Cost of home sales increased approximately $84.6 million (or 32.5%)
compared to fiscal 1996, primarily due to the related increase in home sales
revenues. Cost of home sales as a percentage of home sales decreased to 85.3%
from 85.7% as a result of the product mix of homes delivered.
Cost of land sales decreased approximately $8.5 million (or 54.5%) during
fiscal 1997 as compared to fiscal 1996, primarily as a result of the decrease
in land sales. Costs of land sales as a percentage of land sales increased to
92.3% from 88.7%, which was primarily attributable to lower margin single
family lots available for sale. Margins from land sales at Pembroke Falls in
fiscal 1997 were comparable to fiscal 1996.
The Company's selling, marketing, general and administrative ("S,G&A")
expenses increased approximately $7.7 million (or 24.2%) during fiscal 1997 as
compared to fiscal 1996, primarily as a result of variable selling costs
associated with the greater number of homes closed and an increase in selling
expenditures related to an increase in the number of residential subdivisions.
S,G&A expenses as a percentage of total revenues decreased from 9.6% in fiscal
1996 to 9.3% in fiscal 1997, primarily due to certain economies of scale.
Fiscal 1997 income before income taxes increased $8.2 million (or 59.8%)
as compared to fiscal 1996, primarily due to the increase in home sales
revenues.
YEAR ENDED OCTOBER 31, 1996 COMPARED TO YEAR ENDED OCTOBER 31, 1995.
The Company's revenues from home sales during fiscal 1996 increased $87.9
million (or 40.7%) compared to fiscal 1995. The number of homes delivered by
the Company increased 37.8% (to 1,567 from 1,137) and the average selling price
of homes delivered increased 2.1% (to $194,000 from $190,000). The increase of
revenues and homes delivered is primarily attributable to the record backlog of
homes under contract at the beginning of fiscal 1996 and improved sales
activity in all homebuilding divisions as compared to fiscal 1995. Management
believes that changes in the average selling price of homes delivered from
period to period are attributable to discrete factors at each of its
subdivisions, including product mix and premium lot availability, and cannot be
predicted for future periods with any degree of certainty.
The Company's revenues from land sales decreased approximately $3.4
million (or 16.2%) during fiscal 1996 as compared to fiscal 1995 primarily as a
result of a decrease in commercial and multi-family land sales at Pembroke
Falls.
Cost of home sales increased approximately $75.7 million (or 40.9%)
compared to fiscal 1995, primarily due to the related increase in home sales
revenues. Cost of home sales as a percentage of home sales is consistent with
fiscal 1995.
Cost of land sales decreased approximately $1.7 million (or 10.1%) during
fiscal 1996 as compared to fiscal 1995, primarily as a result of the decrease
in land sales. Costs of land sales as a percentage of land sales increased to
88.7% from 82.7%, which was primarily attributable to lower margin single
family lots available for sale. Margins from land sales at Pembroke falls in
fiscal 1996 were comparable to fiscal 1995.
The Company's S,G&A expenses increased approximately $7.4 million (or
30.4%) during fiscal 1996 as compared to fiscal 1995, primarily as a result of
selling costs associated with the greater number of homes closed and an
increase in selling expenditures related to an increase in the number of
residential subdivisions. S,G&A expenses as a percentage of total revenues
decreased from 10.0% in fiscal 1995 to 9.6% in fiscal 1996, primarily due to
economies of scale.
20
<PAGE>
Fiscal 1996 income before income taxes increased $4.2 million (or 43.7%)
as compared to fiscal 1995, primarily due to the increase in home sales
revenues.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL. The Company's financing needs depend upon its construction
volume, asset turnover and land acquisitions. Prior to the Company's initial
public offering, the Company's most significant source of funds were
acquisition, development and revolving construction loans provided by financial
institutions and seller financing for land purchases. In January 1992, the
Company completed an initial public offering of its Common Stock and received
net proceeds of approximately $27.3 million. In February 1993, the Company
issued an aggregate of $30.0 million principal amount of 7% Convertible
Subordinated Notes due 2003 and received net proceeds of approximately $28.7
million. In March 1994, the Company issued an aggregate of $40 million
principal amount of 113/4% Senior Notes due 2000 and received net proceeds of
approximately $38.6 million. The proceeds from these offerings were generally
used for repayment of debt, land acquisition and general corporate purposes.
The Company has two primary credit agreements (the "Agreements") with
various lending institutions which at November 13, 1997, provided for a
combined $130.0 million collateralized revolving line of credit. Borrowings
under these Agreements bear interest at rates ranging from LIBOR plus 2.50% to
prime plus .25% at the Company's election. Available borrowings under the
Agreements are limited to certain percentages of finished lots, construction
costs, land and land under development. The Company is currently in discussions
with a group of banks to obtain an unsecured revolving credit facility to be
used for working capital and general corporate purposes. If obtained, the new
facility would be used to replace all of the Company's existing lines of
credit, other than financial services debt.
At October 31, 1997, the Company had outstanding homebuilding borrowings
of approximately $152.1 million, and aggregate available funds of approximately
$18.9 million pursuant to various credit lines including the Agreements. The
Company believes that funds generated from operations and expected borrowing
availability under existing and future bank credit facilities will be
sufficient to fund the Company's working capital requirements during fiscal
1998, with the exception of major land acquisitions, if any. For a further
description of the Company's borrowings, see Note 5 of the Company's
Consolidated Financial Statements.
On October 17, 1997, the Company announced the early redemption of $15.0
million principal amount of the 1993 Notes. On November 18, 1997, the Company
redeemed approximately $14.6 million principal amount of such 1993 Notes and
$406,000 principal amount thereof were converted into 28,996 shares of Common
Stock. In order to fund this redemption, the Company established a $15.0
million short-term unsecured credit facility. In addition, $75,000 principal
amount of the 1993 Notes not previously called for redemption were converted
into 5,357 shares on November 18, 1997. After November 18, 1997 and prior to
the date of this Prospectus, an additional $89,000 principal amount of the 1993
Notes were converted into 6,355 shares of Common Stock. Following the
consummation of the Equity Offering, the Company intends to call for redemption
the remaining outstanding principal amount of the 1993 Notes to be funded with
a portion of the proceeds of the Equity Offering.
In addition, Preferred Home Mortgage Company ("PHMC") has a warehouse line
of credit of $18.0 million which is guaranteed by the Company. At October 31,
1997 the outstanding balance was $14.5 million to service origination of
mortgage loans. The Company expects to increase the warehouse line of credit to
$25.0 million to accommodate the potential growth of its mortgage banking
operations in fiscal year 1998.
LAND ACQUISITION AND CONSTRUCTION FINANCING. The Company is continually
exploring opportunities to purchase parcels of land for its homebuilding
operations and is, at any given time, in
21
<PAGE>
various stages of proposing, making offers for, and negotiating the acquisition
of various parcels, whether outright or through options. The Company has
continued to increase its land development and construction activities in
response to current and anticipated demand and expects to pursue additional
land acquisition and development opportunities in the future.
DEBT SERVICE. Scheduled and estimated maturities of the Company's
borrowings aggregate approximately $4.4 million during fiscal 1998 and
approximately $42.0 million in fiscal 1999. The Company anticipates that it
will fund the maturities of its debt and required expenditures relating to its
developments primarily with cash flow from operations and existing credit
lines, new or renewed credit lines or term loans or selling of equity or debt.
See Note 5 to the Company's Consolidated Financial Statements.
CASH FLOWS. The Company experienced negative cash flows of $2.7 million
during fiscal 1997. This is primarily the result of increasing land inventory
to meet expected sales demand and site development costs associated with
Pembroke Falls. Cash flows required by operating activities decreased $1.1
million in fiscal 1997 as compared to fiscal 1996 primarily due to the
increased pace of home deliveries. Cash flows from investing activities
decreased by $7.5 million in 1997 primarily due to a reduction in the sales of
commercial property. Cash flows from financing activities decreased by $5.4
million primarily due to a decrease in borrowings.
Management does not anticipate that PHMC's expansion of its operations
will significantly impact the Company's liquidity because the mortgages are
generally sold within a short period of time after their origination to the
Federal National Mortgage Association (FNMA) or other qualified investors. PHMC
has established the capability to retain the servicing of loans; however,
during fiscal 1997 all servicing rights were sold.
INFLATION
The Company, as well as the homebuilding industry in general, may be
adversely affected during periods of high inflation, primarily because of
higher land and construction costs. In addition, higher mortgage interest rates
may significantly affect the affordability of permanent mortgage financing to
prospective purchasers. Inflation also increases the Company's interest costs
and costs of labor and materials. The Company attempts to pass through to its
customers any increases in its costs through increased selling prices and, to
date, inflation has not had a material adverse effect on the Company's results
of operations. However, there is no assurance that inflation will not have a
material adverse impact on the Company's future results of operation.
INTEREST RATES
The Company's operations are interest rate sensitive. Overall housing
demand is adversely affected by increases in interest costs. If mortgage
interest rates increase significantly, this may negatively impact the ability
of a home buyer to secure adequate financing. Such results of higher interest
rates may result in adversely affecting the Company's revenues, gross margins
and net income.
NEW FASB PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
per Share" ("SFAS No. 128"), issued in February 1997, replaces the current
methodology for calculating and presenting earnings per share. Under SFAS No.
128, primary earnings per share will be replaced with a presentation of basic
earnings per share and fully diluted earnings per share will be replaced with
diluted earnings per share. Basic earnings per share excludes dilution and is
computed by dividing income available to common shares outstanding for the
period by the weighted average of common
22
<PAGE>
shares outstanding. Diluted earnings per share is computed similarly to fully
diluted earnings per share in accordance with the Accounting Principles Board
("APB") Opinion No. 15. The Statement will be effective for financial
statements issued by the Company after December 15, 1997. The impact of SFAS
No. 128 is not expected to be material.
SFAS No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"),
establishes standards for reporting and display of comprehensive income, its
components and accumulated balances. Comprehensive income is defined to include
all changes in equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, SFAS No. 130 requires that
all items that are required to be recognized under current accounting standards
as components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131"), which supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise," establishes standards for the
way that public enterprises report information about operating segments in
annual financial statements and requires reporting of selected information
about operating segments in interim financial statements issued to the public.
It also establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate the resources and in assessing performance.
Both SFAS No. 130 and No. 131, issued in June 1997, are effective for
financial statements for periods beginning December 15, 1997 and require
comparative information for earlier years to be restated. Due to the recent
issuance of these standards, management has been unable to fully evaluate the
impact, if any, they may have on future financial statement disclosures.
23
<PAGE>
BUSINESS
GENERAL
Engle Homes, Inc. designs, constructs, markets and sells detached
single-family residences, townhomes, patio homes and condominiums to entry
level and move-up buyers, retirees and second-home, seasonal buyers. Engle
operates in nine geographic markets: Broward County, Palm Beach County and
Martin County in South Florida; Orlando in Central Florida; Tampa, Sarasota,
Naples and Fort Myers on the west coast of Florida; Denver, Colorado; Dallas,
Texas; Virginia and Maryland; Raleigh, North Carolina; Phoenix, Arizona; and
Atlanta, Georgia. The Company offers a variety of home styles at prices ranging
from approximately $80,000 to over $400,000 with an average sales price in
fiscal 1997 of approximately $203,000. In addition, the Company operates a
mortgage company which provides mortgages primarily to its home buyers in all
of its geographic markets and a title company which provides services to its
home buyers and third parties in Florida and Denver, Colorado.
Engle is a leading Florida homebuilder. The Company believes that it is
the number two and number four builder of single-family homes in South Florida
and Central Florida, respectively, based on revenues from unit closings for the
twelve months ended June 30, 1997. Florida is the number one homebuilding state
in the United States in terms of total housing starts. In addition, Florida is
currently the fourth largest state based upon total population and has
consistently ranked among the top four states in population growth over the
past seven decades.
Since 1993, Engle has expanded into eight of the top 20 homebuilding
markets in the nation through both start-up operations and the acquisition of a
homebuilder in Denver, Colorado. In fiscal 1997, approximately 32% of the
Company's revenues from home sales were generated outside of the Florida
markets as compared to none in fiscal 1993. Most recently, in fiscal 1997 Engle
entered both the Phoenix, Arizona and Atlanta, Georgia markets through start-up
operations.
Over the past five years, the Company's total revenues have grown from
$137.4 million in fiscal 1993 to $425.3 million in fiscal 1997, with annual
EBITDA growing from $15.9 million to $40.3 million over the same period,
representing compound annual growth rates of 33% and 26%, respectively. The
Company's fiscal 1997 total revenues of $425.3 million and EBITDA of $40.3
million were the highest in the Company's history. The number of homes
delivered increased from 797 in fiscal 1993 to 1,992 in fiscal 1997. At the end
of fiscal 1997, Engle was marketing homes in 68 communities.
BUSINESS STRATEGY
Engle believes that its success has been due to its market-oriented
approach which it applies to each of the following: (i) identifying new
markets; (ii) acquiring land; and (iii) diversifying its product offerings and
price ranges to appeal to most segments of the home buying public. Engle
believes that this strategy enables it to respond more rapidly to changing
market conditions.
EXPAND IN EXISTING AND NEW MARKETS. The Company has successfully expanded
its operations through both start-up operations in new and existing markets and
the acquisition of a homebuilder in Denver, Colorado. Within its existing
markets, the Company believes that it is able to gain greater market share by
increasing the number of residential projects, thereby leveraging its existing
management structure and enhancing profitability through economies of scale. As
part of its strategy to further diversify geographically, the Company
continually seeks and evaluates market expansion opportunities, including
potential acquisitions of homebuilding companies. The Company seeks to expand
into geographic markets with significant single-family home permit activity,
substantial job growth, a diversified economy and an availability of strong
management with local market expertise. Since its initial public offering in
January 1992, the Company has expanded into eight new geographic markets.
OFFER A BROAD SELECTION OF PRODUCTS. The Company designs its homes to
appeal to a wide variety of home buyers, including entry level and move-up
buyers, retirees and second-home, seasonal buyers.
24
<PAGE>
Accordingly, the Company offers a number of home styles and price ranges at
various locations in each market, including golf and waterfront communities in
certain markets. Engle's product offerings include semi-custom estate homes,
detached single-family residences, townhomes, semi-detached patio-homes/
duplexes and condominiums. Management believes that the Company's long-standing
policy of product diversification enables it to respond more rapidly to
changing market conditions.
SELECTIVELY ACQUIRE LAND. The Company maintains a land acquisition policy
designed to enhance profitability and return on capital while minimizing the
risks associated with investments in land. Engle seeks to identify and acquire
superior locations in each market and offer a number of communities with
diverse products and sales prices. The Company prefers to acquire improved
residential lots ready for construction by entering into option contracts,
whenever possible, or through outright purchases. The Company also acquires
tracts of land that require site improvements prior to the start of home
construction. Occasionally, Engle purchases larger parcels of undeveloped land
suited for master-planned communities, primarily in South Florida. When
acquiring larger parcels, the Company typically contracts to sell portions of
improved or unimproved land to other builders as a source of additional revenue
thereby reducing the Company's investment. In addition, when economically
advantageous to the Company, Engle enters into partnership or joint venture
agreements with other major homebuilders to purchase and develop well located
parcels of land. The Company generally purchases land only after required
zoning entitlements have been obtained.
MAINTAIN STRINGENT COST CONTROLS. The Company believes that maintaining
stringent cost controls is a key factor in achieving profitability. The Company
seeks to reduce its costs and risks by (i) obtaining required zoning
entitlements prior to purchasing land, (ii) using subcontractors to perform
home construction and site improvement work on a fixed price basis, (iii)
minimizing inventory of unsold homes, (iv) improving construction cycle time
for new homes, (v) using its position as a leading homebuilder to obtain
national volume discounts on construction materials and favorable pricing from
subcontractors and (vi) maintaining a sophisticated management information
system that allows it to monitor homebuilding production, scheduling and
budgeting on a daily basis.
COMMITMENT TO CUSTOMER SATISFACTION. The Company is dedicated to providing
customer satisfaction through quality construction and customer service.
Divisional managers are responsible for the quality of construction and the
level of customer satisfaction in their respective divisions.
EXPERIENCED MANAGEMENT WITH DECENTRALIZED OPERATING STRUCTURE. To serve
the needs of each of its markets, the Company relies upon the expertise of its
division managers, each of whom has significant experience in the homebuilding
industry. In order to align corporate and divisional profit goals, division
managers receive bonuses based on the return on assets of their respective
divisions. The division managers benefit from Engle's corporate expertise in
sales and marketing, land acquisition, financial services and its centralized
accounting department. The Company believes that this interaction between the
divisional managers and corporate management provides enhanced operating
results.
LAND ACQUISITION AND DEVELOPMENT
The Company prefers to acquire improved residential lots ready for
construction by entering into option contracts, whenever possible, or through
outright purchases. The Company also acquires tracts of land that require site
improvements prior to the start of home construction. Occasionally, the Company
purchases larger tracts of land with the intention of reselling portions of the
tracts to other builders as a source of additional revenue. Specifically, the
Company purchased large tracts of land and sold parcels to other builders in
connection with the development of its master-planned communities, including
Embassy Lakes, North Passage, Lakeside Green and currently, Pembroke Falls.
Unlike the Company's more typical subdivision projects, the Company's
master-planned communities have involved significantly larger tracts of land,
greater planning and site improvement activities and the development of more
extensive recreational facilities and related amenities. The Company's master-
planned communities normally take five or more years to complete depending on
the project's size, economic conditions prevailing at the time and the
Company's strategy for the particular project. Engle's more traditional
residential developments usually take two to three years to complete.
25
<PAGE>
Management believes that the Company's Pembroke Falls project exemplifies
the opportunities available to the Company when developing master-planned
communities. In February 1994, the Company acquired this approximately 1,500
acre parcel located in southwest Broward County, Florida, a rapidly developing
housing market. The purchase price for the Pembroke Falls parcel was $25.7
million, or approximately $17,100 per acre. The Company expects to build
approximately 2,000 single-family housing units and has sold most of the
approximately 222 acres of land zoned for commercial and multi-family use.
Through October 31, 1997, approximately $45.4 million in land sales contracts
had been written, of which $34.5 million closed through fiscal 1997. Of the
remaining $10.9 million in contracts, $8.3 million are binding contracts, and
$2.6 million are contingent upon completion of an inspection period during the
next ninety days. Management believes that the purchase of this relatively
large parcel enabled the Company to obtain desirable land inventory in its
South Florida division for future development at a lower cost than if the
Company had purchased smaller parcels available for immediate construction of
homes.
The Company's land purchase agreements are typically subject to numerous
conditions, including, but not limited to, the Company's ability to obtain
necessary zoning and other governmental approvals for the proposed subdivision.
During the contingency period, the Company also confirms the availability of
utilities, conducts hazardous waste and other environmental analysis, and
completes its marketing feasibility studies.
The Company expends considerable effort in developing a design and
marketing concept for each of its subdivisions, which includes determination of
size, style and price range of the homes and, in certain projects, layout of
streets, layout of individual lots and overall community design. The product
line offered in a particular subdivision depends upon many factors, including
housing generally available in the area, the needs of the particular market and
the Company's costs of lots in the subdivision. The Company, where necessary,
undertakes development activities that include government approvals, site
planning, engineering, as well as constructing roads, sewer, water and drainage
facilities and, where applicable for recreational facilities and other
amenities.
26
<PAGE>
At October 31, 1997, the Company was marketing 14 subdivisions in South
Florida; 12 in Central Florida; 10 on the west coast of Florida; 9 in Denver,
Colorado; 8 in Dallas, Texas; 8 in Virginia and Maryland; 3 in Raleigh, North
Carolina; and 4 in Phoenix, Arizona. As of October 31, 1997, the Company had
not yet begun to market any subdivisions in Atlanta, Georgia. The Company's
residential real estate inventory at October 31, 1997 was as follows:
<TABLE>
<CAPTION>
LOTS AVAILABLE
HOMES UNDER CONSTRUCTION FOR FUTURE CONSTRUCTION
--------------------------------------- -------------------------------
TOTAL LOTS
DIVISION AVAILABLE SOLD(1) SPECULATIVE(2) MODELS SOLD(1) UNSOLD OPTIONS
- -------- ----------- --------- ---------------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
South Florida(3) ............ 2,544 (4) 182 56 9 158 2,062 77
Central Florida(5) ......... 1,017 61 41 11 83 637 184
West coast Florida(6) ...... 1,706 (7) 39 15 7 69 1,179 397
Denver, CO .................. 999 54 50 1 46 405 443
Dallas, TX .................. 816 25 24 4 38 197 528
Virginia and Maryland ...... 291 26 12 7 15 129 102
Raleigh, NC ............... 270 12 9 1 4 244 --
Phoenix, AZ ............... 225 18 4 -- 39 67 97
----- --- -- -- --- ----- ---
Total ..................... 7,868 417 211 40 452 4,920 1,828
===== === === == === ===== =====
</TABLE>
- ----------------
(1) Under contract, but not delivered. See the discussion of the Company's
backlog under "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(2) Speculative units are unsold homes that are completed or under
construction.
(3) South Florida refers to Broward County, Palm Beach County and Martin
County.
(4) Includes 1,713 remaining lots in Pembroke Falls.
(5) Central Florida refers to Orlando.
(6) Florida's west coast refers to Tampa, Sarasota, Naples and Fort Myers.
(7) Includes 906 lots in Lake Bernadette in Tampa.
CONSTRUCTION
The Company acts as the general contractor for the construction of its
residential developments. Company employees monitor the construction of each
project, participate in all material design and building decisions, coordinate
the activities of subcontractors and suppliers, subject their work to quality
and cost controls and monitor compliance with zoning and building codes.
Subcontractors typically are retained for a specified project pursuant to a
contract which obligates the subcontractor to complete construction at a fixed
price.
The Company does not maintain significant inventories of construction
materials except for work in process, materials for homes under construction
and a limited amount of other construction materials. Generally, the
construction materials used in the Company's operations are readily available
from numerous sources.
MARKETING AND SALES
The Company sells its homes primarily through commissioned employees, who
typically work from sales offices located at the model homes in each Engle
subdivision, as well as through cooperating independent brokers. In all
instances, Company personnel are available to assist prospective buyers by
providing them with floorplans, price information, tours of model homes and the
selection of options and upgrades. Options and upgrades are generally priced to
have a positive effect on profit margins. Sales personnel are trained by the
Company and attend periodic meetings to be updated on the availability of
financing, construction schedules, marketing and advertising plans.
The Company advertises in newspapers, magazines and on billboards. Engle
also uses out-of-state home shows, radio, video tapes, direct mail advertising,
special promotional events, illustrated
27
<PAGE>
brochures and model homes in its comprehensive marketing program. In addition,
Engle maintains a web site on the Internet. The Company also uses a
cross-referral program that encourages Company personnel to direct customers to
other Engle subdivisions based on the customers' needs.
CUSTOMER SERVICE AND QUALITY CONTROL
The Company's customer service department is responsible for pre-closing
and post-closing customer needs. Prior to closing, a Company employee
accompanies the buyer on a home orientation and inspection tour. The Company is
continuing with its objective to provide quality construction through on-going
training programs to maintain its high quality construction standards. The
Company also provides home buyers with a limited warranty program which, in
general, provides a home buyer with a one-year warranty on workmanship and
building materials and a ten-year structural warranty. In addition, the Company
purchases, when required by local or state ordinances, builder liability
insurance for major structural defects.
FINANCIAL SERVICES
The Company's financial services subsidiaries provide mortgage banking and
title insurance services. For fiscal 1997, the financial services subsidiaries
increased their profitability to $2.7 million, an increase of 49% compared to
fiscal 1996.
MORTGAGE BANKING. In April 1992, the Company established PHMC. PHMC is a
full service mortgage banker which arranges financing through the origination
of mortgage loans to the Company's home buyers and to a lesser extent third
party loans that are not associated with homes built by the Company. PHMC is an
approved lender by the Federal National Mortgage Association ("FNMA") to
deliver loan origination to FNMA and to other investors and to service such
loans.
During fiscal 1997, PHMC originated and sold approximately $138.0 million
in mortgage loans (including servicing rights), representing a significant
portion of the Company's home buyers that requested mortgage financing.
Substantially all of PHMC's revenues are derived from mortgages on homes built
by Engle. At October 31, 1997, PHMC was originating mortgages in substantially
all Engle homebuilding divisions.
PHMC must comply with various federal and state laws and consumer credit
rules and regulations in connection with its mortgage lending activities. In
addition, the mortgage banking industry in the United States is highly
competitive. PHMC competes with other mortgage companies and financial
institutions to provide mortgage financing to both the Company's customers as
well as the general public.
TITLE SERVICES. In September 1992, the Company purchased all the
outstanding common stock of the Title Store, Inc. In May 1994, the Company
acquired all the capital stock of Universal Land Title, Inc. ("ULT"), a company
that sells, but does not underwrite, title policies and simultaneously merged
with the Title Store, Inc. to form one company. ULT currently provides title
services to the Company's home buyers in Florida and Denver, Colorado, as well
as third parties. At October 31, 1997, ULT was operating 15 offices in Florida
and four offices in Denver, Colorado.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
In developing housing communities, the Company must obtain the approval of
numerous government authorities regulating such matters as permitted land uses
and levels of density, the installation of utility services such as water and
waste disposal and the dedication of acreage for open space, parks, schools and
other community purposes. Several authorities in Florida and other states have
imposed impact fees as a means of defraying the cost of providing certain
governmental services to developing areas and the amount of these fees has
increased significantly during recent years. Many state laws require the use of
specific construction materials which reduce the need for energy-consuming
28
<PAGE>
heating and cooling systems. Local governments also, at times, declare
moratoriums on the issuance of building permits and impose other restrictions
in areas where sewage treatment facilities and other public facilities do not
reach minimum standards. To date, the governmental approval processes and the
restrictive zoning and moratoriums discussed above have not had a material
adverse effect on the Company's development activities. However, there is no
assurance that these and other restrictions will not adversely affect the
Company in the future. The Company is also subject to a variety of Federal,
State and local statutes, ordinances, rules and regulations concerning
protection of health and the environment. The particular environmental laws
which apply to any given community vary greatly according to the community
site, the site's environmental conditions and the present and former uses of
the site. These environmental laws may result in delays, cause the Company to
incur substantial compliance and other costs and prohibit or severely restrict
development in certain environmentally sensitive regions or areas. Prior to
consummating the purchase of land, the Company engages independent
environmental engineers to evaluate such land for the presence of hazardous or
toxic materials, wastes or substances. The Company has not been materially
affected to date by the presence or potential presence of such materials.
To varying degrees, certain permits and approvals will be required to
complete the residential developments currently being planned by the Company.
The ability of the Company to obtain necessary approvals and permits for these
projects is often beyond the Company's control, and could restrict or prevent
the development of otherwise desirable property. The length of time necessary
to obtain permits and approvals increases the carrying costs of unimproved
property acquired for the purpose of development and construction. In addition,
the continued effectiveness of permits already granted is subject to factors
such as changes in policies, rules and regulations and their interpretation and
application. To minimize these risks, the Company generally restricts land
purchases to tracts that have zoning entitlements.
In recent years, regulation by Federal and state authorities relating to
the sale and advertising of residential real estate has also become more
restrictive. In order to advertise and sell condominiums and other residential
real estate in many jurisdictions, the Company has been required to prepare
registration statements or other disclosure documents and, in some cases, to
file such materials with designated regulatory agencies.
COMPETITION AND MARKET FACTORS
The development and sale of residential properties is highly competitive
and fragmented. The Company competes in each of its markets with numerous
national, regional and local builders, including some builders with greater
financial resources. Builders of new homes compete not only for home buyers,
but also for desirable properties, raw materials and skilled subcontractors.
The Company also competes for residential sales with individual sales of
existing homes and available rental housing.
The housing industry is cyclical and affected by consumer confidence
levels, prevailing economic conditions generally and, in particular, by
interest rate levels. A variety of other factors affect the housing industry
and demand for new homes, including the availability of labor and materials and
increases in the costs thereof, changes in costs associated with home ownership
such as increases in property taxes and energy costs, changes in consumer
preferences, demographic trends and the availability of and changes in mortgage
financing programs.
EMPLOYEES
At October 31, 1997, the Company employed approximately 544 persons,
including sales and marketing personnel, executive, administrative and clerical
personnel, construction employees and financial services personnel.
Although none of the Company's employees are covered by collective
bargaining agreements, certain of the subcontractors which the Company engages
are represented by labor unions or are subject to collective bargaining
agreements. The Company believes that its relations with its employees and
subcontractors are good.
29
<PAGE>
PROPERTIES
The Company's corporate office is located at 123 N.W. 13th Street, Suite
300, Boca Raton, Florida 33432, where the Company leases 9,356 square feet of
office space for a term expiring in August 2006. Engle's building divisions,
PHMC and ULT branch operations lease additional office space at various
locations for their day-to-day operations. Management believes that the current
leased offices are adequate for its needs for the foreseeable future. See Note
3 of Notes to Consolidated Financial Statements for discussion of sale of
commercial properties.
LEGAL PROCEEDINGS
The Company is involved from time to time in litigation arising in the
ordinary course of business, none of which is expected to have a material
adverse effect on the Company's consolidated financial position or results of
operations.
30
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information as of December 17,
1997, regarding each of the Company's executive officers, directors and other
key employees:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ---- --- ---------------------
<S> <C> <C>
Alec Engelstein ............... 67 Chairman of the Board, President and
Chief Executive Officer
Harry Engelstein ............ 62 Executive Vice President, Chief Construction
Officer and Director
John A. Kraynick ............ 42 Senior Vice President and Director
Lawrence R. Shawe ............ 42 Vice President--Sales and Marketing
David Shapiro ............... 42 Vice President--Finance, Chief Financial
Officer and Director
Paul M. Leikert ............... 41 Vice President--Chief Accounting Officer
Henry H. Fishkind, Ph.D ...... 48 Director
Ronald J. Korn ............... 57 Director
Alan L. Shulman ............... 65 Director
</TABLE>
ALEC ENGELSTEIN, a co-founder and Chairman of the Board of the Company,
has served as its President and Chief Executive Officer since its organization
in August 1982. Alec Engelstein has over 35 years of experience in the
homebuilding industry and has been actively engaged as a homebuilder in
southeast Florida since 1969.
HARRY ENGELSTEIN, a co-founder and director of the Company and Alec
Engelstein's brother, has served as Executive Vice President and Chief
Construction Officer since the Company's inception in August 1982. Harry
Engelstein has over 30 years of experience in home construction.
JOHN A. KRAYNICK has served as a Vice President of the Company since
August 1986 and was appointed Senior Vice President in July 1991. Mr. Kraynick
is responsible for administrative matters and coordinating the Company's
compliance with Federal, state and local regulatory requirements. Mr. Kraynick
has over 19 years of experience in the homebuilding industry.
LAWRENCE R. SHAWE has served as the Company's Vice President--Sales and
Marketing since April 1986. Mr. Shawe joined the Company in April 1984 and
since such time has been responsible for the Company's sales and marketing
efforts. Mr. Shawe has over 17 years of experience in the homebuilding
industry.
DAVID SHAPIRO joined the Company in June 1991, has served as the Company's
Chief Financial Officer since July 1991, was appointed Vice President--Finance
in October 1991 and was appointed as a director on December 17, 1997. From
January 1986 until June 1991, he served as vice president of a privately held
retail clothing company located in West Palm Beach, Florida. David Shapiro is
Alec Engelstein's son-in-law.
PAUL M. LEIKERT joined the Company in 1992 and has served as the Vice
President--Chief Accounting Officer since March 1994. Mr. Leikert is a
certified public accountant and has over 13 years of experience in the
homebuilding industry.
HENRY H. FISHKIND, PH.D., has served as a director of the Company since
October 1991 and is a member of the Compensation and Audit Committees of the
Board of Directors. Dr. Fishkind has
31
<PAGE>
served as President of Fishkind & Associates, Inc., an economic and financing
consulting firm based in Orlando, Florida, since 1988. From January 1984 until
December 1987, Dr. Fishkind served as president of M.G. Lewis Econometrics,
Inc., the research subsidiary of an investment banking firm based in Winter
Park, Florida. Dr. Fishkind also serves as editor of Econocast, a quarterly
economic forecast, since 1984, and as a director of Summit Properties.
RONALD J. KORN, chairman of the Compensation and Audit Committees of the
Board of Directors, has served as a director of the Company since October 1991.
Since July 1991, Mr. Korn has served as President of Ronald Korn Consulting, a
business consulting firm, and as Chairman of the Board of Carole Korn
Interiors, Inc., an interior design firm. From August 1985 until June 1991, Mr.
Korn served as the managing partner of the Miami office of KPMG Peat Marwick, a
nationally recognized firm of independent public accountants. Mr. Korn also
serves as a director of Vacation Break USA, Inc., which develops, markets,
operates and finances vacation ownership interests in premium resort properties
and as a director of Magicworks Entertainment, Inc., which produces, manages,
promotes and merchandises live entertainment.
ALAN L. SHULMAN was appointed as a director of the Company on December 17,
1997. Mr. Shulman is currently a private investor. Mr. Shulman served on the
board of directors of Island National Bank in Palm Beach, Florida from its
inception in 1989 until April 1, 1997 and currently serves on the board of
directors of CV Reit, Inc., a New York Stock Exchange listed company.
There are no arrangements or understandings with respect to the selection
of officers or directors.
32
<PAGE>
DESCRIPTION OF THE SENIOR NOTES
The Senior Notes offered hereby are to be issued under an Indenture, dated
as of , 1998 (the "Indenture"), among the Company, the Guarantors and
American Stock Transfer & Trust Company, as Trustee (the "Trustee"), a copy of
which is an exhibit to the Registration Statement of which this Prospectus is a
part. The following summaries of certain provisions of the Indenture do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the Indenture, including the
definitions therein of certain terms. For purposes of this Description of the
Senior Notes and the Indenture, references to the "Company" include only the
Company and not its subsidiaries.
GENERAL
The Senior Notes will be limited to $120,000,000 aggregate principal
amount, $20,000,000 of which may be issued at a later date. The Senior Notes
will mature on , 2008. The Senior Notes will bear interest from the date
of issuance, or from the most recent date to which interest has been paid or
provided for, at the rate stated on the cover page hereof, payable in arrears
on and of each year, commencing , 1998, to the persons in
whose names the Senior Notes are registered at the close of business on the
day of the month in which the interest payment date occurs. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Senior Notes will be general unsecured obligations of the Company,
ranking senior in right of payment to all existing and future subordinated
indebtedness of the Company and pari passu in right of payment with all
existing and future senior indebtedness of the Company; however, the Senior
Notes will be effectively subordinated to all secured indebtedness of the
Company and the Guarantors to the extent of the value of the assets securing
such indebtedness. As of October 31, 1997, after giving effect to the Offerings
and the application of the proceeds therefrom as described under "Use of
Proceeds" assuming that all of the 1993 Notes are converted by the holders into
Common Stock on or prior to the date of redemption, the Company and the
Guarantors would have had no secured indebtedness outstanding. See "Risk
Factors--Holding Company Structure; Fraudulent Conveyance Concerns," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
Principal and premium, if any, and interest on the Senior Notes are to be
payable, and the Senior Notes offered hereby will be exchangeable and transfers
thereof will be registrable, at the offices of the Company's agent maintained
for such purposes in The City of New York; provided that payment of interest
may, at the option of the Company, be made by check mailed to a holder at his
registered address.
The Senior Notes offered hereby will be issued only in fully registered
form without coupons, in denominations of $1,000 and any integral multiple
thereof. The Senior Notes are exchangeable and transfers thereof will be
registered without charge therefor, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
THE GUARANTEES
Each of the Guarantors will (so long as they remain Subsidiaries of the
Company) unconditionally guarantee (each a "Guarantee") on a joint and several
basis all of the Company's obligations under the Senior Notes, including its
obligations to pay principal, premium, if any, and interest with respect to the
Senior Notes. The Guarantees will be general unsecured obligations of the
Guarantors, ranking senior in right of payment to all existing and future
subordinated indebtedness of the Guarantors and pari passu in right of payment
with all existing and future senior indebtedness of the Guarantors; however,
the Guarantees will be effectively subordinated to all secured indebtedness of
the Guarantors to the extent of the value of the assets securing such
indebtedness. See "Risk Factors--Holding Company Structure; Fraudulent
Conveyance Concerns." Except as provided in "Certain Covenants" below, the
Company is not restricted from selling or otherwise disposing of any of the
Guarantors.
33
<PAGE>
The Indenture will provide that each Restricted Subsidiary (other than, in
the Company's discretion, any Restricted Subsidiary the assets of which have a
book value of not more than $1,000,000) will be a Guarantor.
The Indenture provides that if all or substantially all of the assets of
any Guarantor or all of the capital stock of any Guarantor is sold (including
by issuance or otherwise) by the Company or any of its Subsidiaries in a
transaction constituting an Asset Sale, and if the Net Proceeds from such Asset
Sale are used in accordance with the covenant "Limitation on Asset Sales," then
such Guarantor (in the event of a sale or other disposition of all of the
capital stock of such Guarantor) or the corporation acquiring such assets (in
the event of a sale or other disposition of all or substantially all of the
assets of such Guarantor) shall be released and discharged of its Guarantee
obligations.
OPTIONAL REDEMPTION
The Senior Notes are redeemable at the option of the Company, in whole or
in part (in any integral multiple of $1,000), at any time on or after ,
2003, on not less than 30 days nor more than 60 days notice mailed to the
registered holders thereof at their last registered addresses, at the following
redemption prices (expressed as percentages of the principal amount thereof),
plus accrued and unpaid interest, if any, to the redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- -----------
<S> <C>
2003 ..................... %
2004 ..................... %
2005 and thereafter ...... 100%
</TABLE>
In addition, if the Company consummates one or more public offerings of
its Common Stock subsequent to the date of this Prospectus and on or prior to
, 2001, the Company may, at its option, redeem up to 33% of the original
principal amount of the Senior Notes with the net proceeds of such offerings at
% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the redemption date; provided, however, that immediately after giving effect
to any such redemption not less than $65,000,000 principal amount of the Senior
Notes remains outstanding.
If less than all of the Senior Notes are to be redeemed, the Trustee will
select the particular Senior Notes (or the portions thereof) to be redeemed
either by lot, pro rata or by such other method as the Trustee shall deem fair
and appropriate, but in any such event, in such manner as complies with
applicable legal and stock exchange requirements. On or after the redemption
date, interest will cease to accrue on the Senior Notes or portions thereof
called for redemption.
CERTAIN COVENANTS
CHANGE OF CONTROL.
In the event of a Change of Control (as defined below), each holder of
Senior Notes shall have the right upon receipt of a Change of Control Notice
(as defined below), at such holder's option, to require the Company to
repurchase all of such holder's Senior Notes, or a portion thereof which is
$1,000 or any integral multiple thereof, on the date (the "Change of Control
Repurchase Date") that is 45 days after the date of the Change of Control
Notice at a price equal to 101% of the principal amount thereof, plus accrued
interest to the Change of Control Repurchase Date.
Within 30 days after the occurrence of a Change of Control, the Company
or, at the request of the Company, the Trustee, shall deliver to all holders of
record of the Senior Notes a notice (the "Change of Control Notice") of the
occurrence of such Change of Control and of the repurchase right arising as a
result thereof. The Company shall deliver a copy of the Change of Control
Notice to the Trustee. To exercise the repurchase right, on or before the 30th
day after the date of the Change of Control Notice, holders of Senior Notes
must deliver written notice to the Company (or an agent designated by the
Company for such purposes) of the holder's exercise of such right, together
with the Senior Notes with respect to which the right is being exercised, duly
endorsed for transfer. Such written notice shall be irrevocable.
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The right to require the repurchase of Senior Notes shall not continue
after a discharge of the Company from its obligations under the Senior Notes
and the Indenture with respect to the Senior Notes in accordance with the
Indenture as described under "--Defeasance" below.
If the Change of Control Repurchase Date is between a regular record date
for the payment of interest and the next succeeding interest payment date, any
Senior Note to be repurchased must be accompanied by funds equal to the
interest payable on such succeeding interest payment date on the principal
amount to be repurchased (unless such Senior Note shall have been called for
redemption, in which case no such payment shall be required), and the interest
on the principal amount of the Senior Note being repurchased will be paid on
such next succeeding interest payment date to the registered holder of such
Senior Note on the immediately preceding record date. A Senior Note repurchased
on an interest payment date need not be accompanied by any payment, and the
interest on the principal amount of the Senior Note being repurchased will be
paid on such interest payment date to the registered holder of such Senior Note
on the immediately preceding record date.
As used herein, a "Change of Control" of the Company means the occurrence
of any of the following events: (a) any "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), excluding the Permitted
Holders (as defined below), is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has
the right to acquire, whether such right is exercisable immediately, after the
passage of time, upon the happening of an event or otherwise), directly or
indirectly, of more than 50% of the total Voting Stock (as defined below) of
the Company; but only if the Permitted Holders do not have the right or ability
by voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors of the Company; (b) the Company consolidates
with, or merges with or into, another Person or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of its
assets to any Person, or any Person consolidates with, or merges with or into,
the Company, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, other than any such transaction where
immediately after such transaction no "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), excluding the Permitted
Holders, is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately, after the passage of time, upon the
happening of an event or otherwise), directly or indirectly, of more than 50%
of the total Voting Stock of the surviving or transferee corporation; but only
if the Permitted Holders do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the
Board of Directors of the Company; (c) at any time during any consecutive
two-year period, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
stockholders of the Company was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office; or (d) the Company is liquidated or
dissolved or adopts a plan of liquidation. "Permitted Holders" shall mean Alec
Engelstein and Harry Engelstein and their respective estates, affiliates and
associates (as such terms are defined in the Securities Act). "Voting Stock"
shall mean, with respect to any Person, capital stock of any class or kind
normally entitled to vote in the election of the board of directors or other
governing body of such Person.
If any repurchase pursuant to the foregoing provisions constitutes a
tender offer as defined under the Exchange Act, the Company will comply with
the requirements of Rule l4e-1 and any other tender offer rules under the
Exchange Act which then may be applicable. The Company could, in the future,
enter into certain significant transactions that would not constitute a Change
of Control with respect to the Change of Control purchase feature of the Senior
Notes. The Change of Control purchase feature of the Senior Notes may in
certain circumstances make more difficult or discourage a takeover of the
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Company and, thus, the removal of incumbent management. The Change of Control
purchase feature, however, is not the result of management's knowledge of any
specific effort to obtain control of the Company by means of a merger, tender
offer, solicitation or otherwise, or part of a plan by management to adopt a
series of anti-takeover provisions.
The meaning of the phrase "all or substantially all" as used in the
Indenture in the definition of "Change of Control" with respect to a sale of
assets varies according to the facts and circumstances of the subject
transaction, has no clearly established meaning under relevant law and is
subject to judicial interpretation. Accordingly, in certain circumstances,
there may be a degree of uncertainty in ascertaining whether a particular
transaction would involve a disposition of "all or substantially all" of the
assets of the Company, and therefore it may be unclear whether a Change of
Control has occurred and whether the Senior Notes are subject to a Change of
Control Offer.
MAINTENANCE OF NET WORTH.
In the event that the Company's Net Worth at the end of each of any two
consecutive fiscal quarters (the last day of such second fiscal quarter being
referred to as the "Trigger Date") is less than $35,000,000 (the "Minimum Net
Worth"), then the Company shall make an offer to all holders (a "Net Worth
Offer") to acquire on a pro rata basis on the date (the "Net Worth Repurchase
Date") that is 45 days following the date of the Net Worth Notice (as defined
below), Senior Notes in an aggregate principal amount equal to 10% of the
initial outstanding principal amount of the Senior Notes (or if less than 10%
of the initial aggregate principal amount of the Senior Notes issued are then
outstanding, all the Senior Notes outstanding at the time) (the "Net Worth
Offer Amount") at a purchase price of 100% of the principal amount thereof,
plus accrued interest to the Net Worth Repurchase Date (the "Net Worth Price").
The Company may credit against the Net Worth Offer Amount the principal amount
of Senior Notes acquired by the Company prior to the Trigger Date through
purchase, optional redemption or exchange. The Company, however, may not credit
a specific Note in more than one Net Worth Offer. In no event shall the failure
to meet the Minimum Net Worth at the end of any fiscal quarter be counted
toward the making of more than one Net Worth Offer. The Company shall notify
the Trustee promptly after the occurrence of any of the events specified in
this provision and shall notify the Trustee in writing if its Net Worth is
equal to or less than the Minimum Net Worth for any fiscal quarter.
Within 30 days after the Trigger Date, the Company, or, at the request of
the Company, the Trustee, shall give notice of the Net Worth Offer to each
holder (the "Net Worth Notice"). To accept a Net Worth Offer a holder shall
deliver to the Company (or to a Paying Agent designated by the Company for such
purpose), on or before the 30th day after the date of the Net Worth Notice, a
written notice of the holder's acceptance of such offer, together with the
Senior Notes with respect to which the offer is being accepted, duly endorsed
for transfer to the Company. Such written notice may be withdrawn upon further
written notice delivered to the Trustee on or prior to the third day preceding
the Net Worth Repurchase Date.
If the Net Worth Repurchase Date is between a regular record date for the
payment of interest and the next succeeding interest payment date, any Senior
Note to be repurchased must be accompanied by funds equal to the interest
payable on such succeeding interest payment date on the principal amount to be
repurchased (unless such Senior Note shall have been called for redemption, in
which case no such payment shall be required), and the interest on the
principal amount of the Senior Note being repurchased will be paid on such next
succeeding interest payment date to the registered holder of such Senior Note
on the immediately preceding record date. A Senior Note repurchased on an
interest payment date need not be accompanied by any payment, and the interest
on the principal amount of the Senior Note being repurchased will be paid on
such interest payment date to the registered holder of such Senior Note on the
immediately preceding record date.
If any repurchase pursuant to the foregoing provisions constitutes a
tender offer as defined under the Exchange Act, the Company will comply with
the requirements of Rule l4e-1 and any other tender offer rules under the
Exchange Act which then may be applicable.
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LIMITATION ON DEBT.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee or
otherwise become liable for ("Incur") any Debt, except Permitted Debt.
"Permitted Debt" means (a) Debt evidenced by the Senior Notes and the
Guarantees, (b) Debt Incurred by the Company or any Guarantor under or in
respect of a Bank Facility (including any guarantees related thereto) for
working capital or other corporate purposes or evidenced by letters of credit;
provided that the aggregate amount of all such Debt outstanding at any time
pursuant to this clause (b) may not exceed $140,000,000, (c) Debt Incurred
under a Warehouse Facility; provided that the amount of such Debt (including
funding drafts issued thereunder) outstanding at any time pursuant to this
clause (c) guaranteed by the Company or a Restricted Subsidiary may not exceed
the value of the Mortgages pledged to secure Debt thereunder, (d) Debt of the
Company to any Guarantor or of any Restricted Subsidiary of the Company to the
Company or to any Guarantor, (e) Existing Debt (without duplication of Debt
indicated under clauses (a)-(d) above) of the Company and its Restricted
Subsidiaries other than Debt to be repaid from the proceeds of the sale of the
Senior Notes, (f) Non-Recourse Debt, (g) Debt in respect of performance,
completion, guarantee, surety and similar bonds or banker's acceptances
provided by the Company or any of its Restricted Subsidiaries in the ordinary
course of business, (h) additional Debt of the Company or any Guarantor in an
amount not to exceed $7,500,000 at any time outstanding, (i) Debt referred to
in the definition of Interest Rate Protection Agreement, (j) Purchase Money
Obligations incurred in the ordinary course of business in an amount not
exceeding $5,000,000 at any time outstanding, and (k) Refinancing Debt.
Notwithstanding the foregoing, and subject to the immediately succeeding
paragraph, the Company and the Guarantors may Incur Debt if, at the time such
Debt is so Incurred and after giving effect thereto and the application of the
proceeds therefrom, the Company's Coverage Ratio shall not be less than 2.0 to
1.0.
The Company shall not, and the Company will not cause or permit any
Guarantor to, directly or indirectly, Incur any Debt that purports to be by its
terms (or by the terms of any agreement governing such Debt) subordinated to
any other Debt of the Company or of such Guarantor, as the case may be, unless
such Debt is also by its terms (or by the terms of any agreement governing such
Debt) made expressly subordinated to the Senior Notes or the Guarantee of such
Guarantor, as the case may be, to the same extent and in the same manner as
such Debt is subordinated to such other Debt.
LIMITATION ON RESTRICTED PAYMENTS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment, if, after
giving effect thereto (a) an Event of Default, or an event that through the
passage of time or the giving of notice, or both, would become an Event of
Default, shall have occurred and be continuing, or (b) the Company would be
unable to incur $1.00 of additional Debt under the second paragraph set forth
under the caption "Limitation on Debt," or (c) the aggregate amount of all
Restricted Payments made by the Company and its Restricted Subsidiaries (the
amount expended or distributed for such purposes, if other than cash, to be
determined in good faith by the board of directors of the Company) from and
after the Issue Date shall exceed the sum of (i) the aggregate of 50% of the
Consolidated Net Income of the Company accrued for the period (taken as one
accounting period) commencing with , to and including the first full
month ended immediately prior to the date of such calculation (or, in the event
Consolidated Net Income is a deficit, then minus 100% of such deficit), (ii)
the aggregate net proceeds (the amount of such proceeds, if other than cash, to
be determined in good faith by the board of directors of the Company) received
by the Company from the issuance or sale (other than to a Subsidiary of the
Company) of its capital stock (other than Redeemable Stock), including the
principal amount of any of the Convertible Notes outstanding on the Issue Date
and any other convertible or exchangeable notes issued after the Issue Date or
other convertible or exchangeable securities issued after the Issue Date, in
any such case to the extent such principal amount is converted or exchanged
into capital stock from and after the Issue Date, and options, warrants and
rights to purchase its capital
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stock (other than Redeemable Stock); PROVIDED that the net proceeds received by
the Company from the Equity Offering shall be excluded from this clause (ii),
(iii) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after the Issue Date (excluding any
Investment described in clause (4) of the following paragraph, but including
upon the redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary), an amount equal to the lesser of the return of capital with
respect to such Investment and the cost of such Investment, in either case,
reduced (but not below zero) by the excess, if any, of the cost of the
disposition of such Investment over the gain, if any, realized by the Company
or such Restricted Subsidiary in respect of such disposition of such Investment
and (iv) $5,000,000.
The foregoing paragraph will not prevent: (1) the payment of any dividend
within 60 days after the date of its declaration if such dividend could have
been made on the date of its declaration in compliance with the foregoing
provisions; (2) so long as no Default or Event of Default shall have occurred
and be continuing, the redemption, repurchase or other acquisition or
retirement of any shares of any class of capital stock of the Company or any
Subsidiary of the Company in exchange for, or out of the net cash proceeds of,
a substantially concurrent (x) capital contribution to the Company from any
Person (other than a Subsidiary of the Company) or (y) issue and sale of other
shares of capital stock (other than Redeemable Stock) of the Company to any
Person (other than to a Subsidiary of the Company); provided, however, that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase or other acquisition or retirement shall be excluded from clause
(ii) of the preceding paragraph; (3) so long as no Default or Event of Default
shall have occurred and be continuing, any redemption, repurchase or other
acquisition or retirement of subordinated Debt by exchange for, or out of the
net cash proceeds of, a substantially concurrent (x) capital contribution to
the Company from any Person (other than a Subsidiary of the Company) or (y)
issue and sale of (A) capital stock (other than Redeemable Stock) of the
Company to any Person (other than to a Subsidiary of the Company); provided,
however, that the amount of any such net cash proceeds that are utilized for
any such redemption, repurchase or other acquisition or retirement shall be
excluded from clause (ii) of the preceding paragraph; or (B) Debt of the
Company issued to any Person (other than a Subsidiary of the Company), so long
as such Debt (x) has no stated maturity earlier than , 2008, (y) has a
Weighted Average Life to Maturity equal to or greater than the remaining
Weighted Average Life to Maturity of the Senior Notes and (z) is subordinated
to the Senior Notes in the same manner and at least to the same extent as the
subordinated Debt so purchased, exchanged, redeemed, acquired or retired; (4)
Investments constituting Restricted Payments made as a result of the receipt of
non-cash consideration from any Asset Sale made pursuant to and in compliance
with the covenant described under "Limitation on Asset Sales"; (5) so long as
no Default or Event of Default has occurred and is continuing, the repurchase
or redemption of shares of capital stock from any officer, director or employee
of the Company or its Restricted Subsidiaries whose employment has been
terminated or who has died or become disabled in an aggregate amount not to
exceed $250,000 per annum; (6) so long as no Default or Event of Default shall
have occurred and be continuing, the making of Restricted Payments in an
aggregate amount not to exceed $5,000,000 and (7) the redemption of the
Convertible Notes, provided that amounts paid pursuant to clauses (1), (5) and
(6) (but not clauses (2), (3), (4) or (7)) shall reduce amounts available for
future Restricted Payments under the preceding paragraph.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, assume or otherwise cause or
suffer to exist or to become effective any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary of the Company to (a)
pay dividends or make any other distributions on its capital stock to the
Company or any of its Restricted Subsidiaries; (b) make payments in respect of
any Debt owed to the Company or any of its Restricted Subsidiaries; or (c) make
loans or advances to the Company or any of the Company's Restricted
Subsidiaries; provided, however, that the following restrictions shall not be
prohibited pursuant to this provision: (i) those contained in the Indenture, a
Bank Facility, a Warehouse Facility and Refinancing Debt (to the extent
restrictions contained in such Refinancing Debt are not more restrictive than
those
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contained in the Debt being refinanced); (ii) consensual encumbrances or
restrictions binding upon any person at the time such Person becomes a
Subsidiary of the Company; provided that such encumbrances or restrictions are
not created, incurred or assumed in contemplation of such Person becoming a
Subsidiary of the Company and do not extend to any other property of the
Company or another of its Subsidiaries; (iii) restrictions contained in
security agreements permitted by the Indenture securing Debt permitted by the
Indenture to the extent such restrictions restrict the transfer of assets
subject to such security agreements; (iv) any encumbrance or restriction
consisting of customary non-assignment provisions in leases to the extent such
provisions restrict the transfer of the leases; (v) any encumbrance or
restriction pursuant to an agreement in effect on the Issue Date; or (vi) any
restrictions with respect to a Subsidiary of the Company imposed pursuant to an
agreement which has been entered into for the sale or disposition of all or
substantially all the capital stock or assets of such Subsidiary.
LIMITATION ON LIENS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien upon or with respect to any of the assets of the Company or any
such Subsidiary, whether now owned or hereafter acquired, or on any income or
profits therefrom, other than Liens which constitute Permitted Liens at the
date such Liens are created, unless contemporaneously therewith or prior
thereto all payments due under the Indenture and the Senior Notes are secured
on an equal and ratable basis with the obligation or liability so secured until
such time as such obligation or liability is no longer secured by a Lien. The
Indenture will also provide that no Liens will be permitted to be created or
suffered to exist on any Debt from the Company in favor of any Restricted
Subsidiary.
TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into any transactions with
Affiliates of the Company unless (i) such transactions are between or among the
Company and its Restricted Subsidiaries, (ii) such transactions are in the
ordinary course of business and consistent with past practice or (iii) the
terms of such transactions are fair and reasonable to the Company or such
Restricted Subsidiary, as the case may be, and are at least as favorable as the
terms which could be obtained by the Company or such Restricted Subsidiary, as
the case may be, in a comparable transaction made on an arm's-length basis
between unaffiliated parties. In the event of any transaction or series of
transactions occurring subsequent to the Issue Date with an Affiliate of the
Company which involves in excess of $1,000,000 and is not permitted under
clause (i) of the preceding sentence, all of the disinterested members of the
Board of Directors shall by resolution determine that such transaction or
series of transactions meets the criteria set forth in clause (iii) of the
preceding sentence. In the event of any transaction or series of transactions
occurring subsequent to the Issue Date with an Affiliate of the Company which
involves in excess of $10,000,000 and is not permitted under clause (i) above,
the Company will be required to deliver to the Trustee an opinion of an
Independent Financial Advisor to the effect that the transaction is fair to the
Company or the relevant Restricted Subsidiary, as the case may be, from a
financial point of view. Notwithstanding the foregoing, such provisions do not
prohibit and will not apply to (1) any Restricted Payment which is permitted by
the "Limitation on Restricted Payments" covenant or (2) the payment of
compensation to directors of the Company who are not employees of the Company
and wages and other compensation to officers of the Company or any of its
Subsidiaries.
LIMITATION ON ASSET SALES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly consummate an Asset Sale, unless (i)
the Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined in good faith by the board of directors of the Company or
the Restricted Subsidiary, as the case may be) of the assets disposed of, and
(ii) the consideration for such Asset Sale consists of at least
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85% cash; provided that (x) the amount of liabilities assumed by the
transferee, (y) any notes or other obligations received by the Company or such
Restricted Subsidiary and immediately converted into cash or (z) with respect
to the sale or other disposition of all of the capital stock of any Restricted
Subsidiary, the amount of liabilities that remain the obligation of such
Restricted Subsidiary subsequent to such sale or other disposition, shall be
deemed to be "cash."
Within 12 months from the date that any Asset Sale is consummated, the Net
Proceeds thereof will be reinvested in Additional Assets or applied to the
redemption or repurchase of Debt of the Company which ranks pari passu with the
Senior Notes or Debt of a Restricted Subsidiary of the Company which is not
subordinated to other debt of such Restricted Subsidiary (which, in each case,
will be a permanent reduction of such Debt). To the extent that the Net
Proceeds of an Asset Sale are not so applied, the Company or such Restricted
Subsidiary, as the case may be, will, within 30 days from the expiration of
such 12-month period, use the remaining Net Proceeds (less any amounts used to
pay reasonable fees and expenses connected with a Net Proceeds Offer) to make
an offer to repurchase the Senior Notes at a price equal to 100% of the
principal amount thereof, plus accrued interest to the Net Proceeds Repurchase
Date ("a Net Proceeds Offer").
Notwithstanding the foregoing, the Net Proceeds of an Asset Sale are not
required to be applied in accordance with the preceding paragraph, unless and
until the aggregate Net Proceeds for all such Asset Sales in a 12-month period
exceeds $5,000,000.
To accept a Net Proceeds Offer a holder shall deliver to the Company (or
to a Paying Agent designated by the Company for such purpose) on or before the
30th day after the date of the Net Proceeds Offer (the "Net Proceeds Repurchase
Date"), a written notice of the holder's acceptance of the Net Proceeds Offer,
together with the Senior Notes with respect to which the offer is being
accepted, duly endorsed for transfer to the Company. Such written notice may be
withdrawn upon further written notice to the Trustee on or prior to the third
day preceding the Net Proceeds Repurchase Date.
If the Net Proceeds Repurchase Date is between a regular record date for
the payment of interest and the next succeeding interest payment date, any Note
to be repurchased must be accompanied by funds equal to the interest payable on
such succeeding interest payment date on the principal amount to be repurchased
(unless such Senior Note shall have been called for redemption, in which case
no such payment shall be required), and the interest on the principal amount of
the Senior Note being repurchased will be paid on such next succeeding interest
payment date to the registered holder of such Senior Note on the immediately
preceding record date. A Senior Note repurchased on an interest payment date
need not be accompanied by any payment, and the interest on the principal
amount of the Senior Note being repurchased will be paid on such interest
payment date to the registered holder of such Senior Note on the immediately
preceding record date.
If any repurchase pursuant to the foregoing provisions constitutes a
tender offer as defined under the Exchange Act, the Company will comply with
the requirements of Rule l4e-1 and any other tender offer rules under the
Exchange Act which then may be applicable.
Any amount of Net Proceeds remaining after a Net Proceeds Offer shall be
returned by the Trustee to the Company and may be used by the Company for any
purpose not inconsistent with the Indenture.
CERTAIN DEFINITIONS
In addition to the terms defined above, the Indenture contains, among
other things, the following definitions:
"ADDITIONAL ASSETS" means assets used or usable by the Company or any of
its Restricted Subsidiaries in the operation of the existing lines of business
of the Company and its Restricted Subsidiaries.
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"AFFILIATE" of any Person means (i) any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person and (ii) any other Person that beneficially owns at
least 10% of the voting common stock of such Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"ASSET SALE" for any Person means the sale, lease, conveyance or other
disposition (including, without limitation, by merger, consolidation or sale
and leaseback transaction, and whether by operation of law or otherwise) of any
of that Person's assets (including, without limitation, the sale or other
disposition of capital stock of any Subsidiary of such Person, whether by such
Person or such Subsidiary) outside the ordinary course of business, whether
owned on the Issue Date or subsequently acquired in one transaction or a series
of related transactions, in which such Person and/or its Subsidiaries receive
cash and/or other consideration (including, without limitation, the
unconditional assumption of Indebtedness of such Person and/or its
Subsidiaries) of $2,500,000 or more as to each such transaction or series of
related transactions; provided, however, that (i) a transaction or series of
related transactions that results in a Change of Control shall not constitute
an Asset Sale, (ii) sales, leases, conveyances or other dispositions of real
estate related to the homebuilding business of the Company or its Subsidiaries
will not constitute Asset Sales, and (iii) transactions between the Company and
any Guarantor, or among such Guarantors will not constitute Asset Sales.
"BANK FACILITY" means, collectively, one or more commitments from one or
more banks or other lending institutions to lend funds, together with any and
all agreements, documents and instruments from time to time delivered in
connection therewith as such commitments or any such agreements, documents or
instruments may be in effect or amended, amended and restated, renewed,
extended, restructured, supplemented or otherwise modified from time to time
and any credit agreement, loan agreement, note purchase agreement, indenture or
other agreement, document or instrument refinancing, refunding or otherwise
replacing such Bank Facility, whether or not with the same agent, trustee,
representative lenders or holders, and, subject to the proviso to the next
succeeding sentence, irrespective of any changes in the terms and conditions
thereof. Without limiting the generality of the foregoing, the term "Bank
Facility" shall include any amendment, amendment and restatement, renewal,
extension, restructuring, supplement or modification to any Bank Facility and
all refundings, refinancings and replacements of any Bank Facility, including
any agreement (i) extending the maturity of any Debt incurred thereunder or
contemplated thereby, (ii) adding or deleting borrowers or guarantors
thereunder; provided that such borrowers and issuers include one or more of the
Company and its Subsidiaries and their respective successors and assigns, (iii)
increasing the amount of Debt Incurred thereunder or available to be borrowed
thereunder; provided that on the date thereof such Debt would not be prohibited
by clause (b) of the definition of Permitted Debt set forth under the
"Limitation on Debt" covenant, or (iv) otherwise altering the terms and
conditions thereof in a manner not prohibited by the terms of the Indenture.
"COMMON STOCK" means the common stock, par value $.01 per share, of the
Company.
"CONSOLIDATED INTEREST EXPENSE" of the Company means, for any period, the
aggregate amount of interest which, in accordance with generally accepted
accounting principles, would be included on an income statement for the Company
and its Restricted Subsidiaries on a consolidated basis, whether expensed
directly, or included as a component of cost of goods sold, or allocated to
joint ventures or otherwise (including, but not limited to, imputed interest
included on capitalized lease obligations, all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, the net costs associated with hedging obligations, amortization of
other financing fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount or premium, if any, and all other non-cash
interest expense), excluding interest expense related to mortgage banking
operations, plus the product of (x) the sum of (i) cash dividends paid on any
Preferred Stock of the Company plus (ii) cash dividends, the principal amount
of any debt securities
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issued as a dividend, the liquidation value of any Preferred Stock issued as a
dividend and the fair market value (as determined by the Company's board of
directors in good faith) of any other non-cash dividends, in each case, paid on
any Preferred Stock of any Restricted Subsidiary of Company (other than a
Wholly-Owned Restricted Subsidiary), times (y) a fraction, the numerator of
which is one and the denominator of which is one minus the then current
effective aggregate federal, state and local tax rate of the Company, expressed
as a decimal.
"CONSOLIDATED INTEREST INCURRED" of the Company means, for any period, (a)
the aggregate amount of interest which, in accordance with generally accepted
accounting principles, would be included on an income statement for the Company
and its Restricted Subsidiaries on a consolidated basis, whether expensed
directly, or included as a component of cost of goods sold, or allocated to
joint ventures or otherwise (including, but not limited to, imputed interest
included on capitalized lease obligations, all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, the net costs associated with hedging obligations, amortization of
other financing fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount or premium, if any, and all other non-cash
interest expense), excluding interest expense related to the Company's mortgage
banking operations, plus or minus, without duplication, (b) the difference
between capitalized interest for such period and the interest component of cost
of goods sold for such period, plus (c) the product of (x) the sum of (i) cash
dividends paid on any Preferred Stock of the Company plus (ii) cash dividends,
the principal amount of any debt securities issued as a dividend, the
liquidation value of any Preferred Stock issued as a dividend and the fair
market value (as determined by the Company's Board of Directors in good faith)
of any other non-cash dividends, in each case, paid on any Preferred Stock of
any Subsidiary of the Company (other than a Wholly-Owned Restricted
Subsidiary), times (y) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective aggregate federal,
state and local tax rate of the Company, expressed as a decimal.
"CONSOLIDATED NET INCOME" of the Company, for any period, means the net
income (loss) of the Company and its Restricted Subsidiaries for such period,
determined on a consolidated basis, in accordance with generally accepted
accounting principles; provided that, without duplication, (i) the net income
of any Person, other than a Restricted Subsidiary which is consolidated with
the Company, in which any Person other than the Company and its Restricted
Subsidiaries has an interest shall be included only to the extent of the amount
of cash dividends or distributions actually paid to the Company or a Restricted
Subsidiary during such period, (ii) the net income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iii) the net income of any Subsidiary of the
Company shall be excluded to the extent such Subsidiary is prohibited, directly
or indirectly, from distributing such net income or any portion thereof to the
Company or a Restricted Subsidiary, (iv) all extraordinary gains and losses
(after taxes) that would be included on an income statement for such period
shall be excluded and (v) all gains and losses (after taxes) attributable to
Asset Sales shall be excluded; provided, that there shall be included in such
net income, without duplication, the net income of any Unrestricted Subsidiary
to the extent such net income is actually received by the Company or any of its
Restricted Subsidiaries in cash during such period.
"CONSOLIDATED NON-CASH CHARGES" of the Company means, for any period, the
aggregate depreciation, amortization and other non-cash charges (other than
reserves or expenses established in anticipation of future cash requirements
such as reserves for taxes and uncollectible accounts) of the Company and its
Restricted Subsidiaries on a consolidated basis for such period, as determined
in accordance with generally accepted accounting principles; provided that
Consolidated Non-cash Charges shall exclude (i) any charges that are not
included for the purpose of determining Consolidated Net Income, (ii) any
charges that are included for the purpose of determining Consolidated Interest
Expense or Consolidated Tax Expense and (iii) any charges representing
capitalized selling, general and administrative expenses that are expensed
during such period as cost of goods sold.
"CONSOLIDATED TANGIBLE ASSETS" of the Company as of any date means the
total amount of assets of the Company and its Restricted Subsidiaries (less
applicable reserves and less the assets securing the
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payment of Non-Recourse Debt of the Company and its Restricted Subsidiaries) on
a consolidated basis at the end of the fiscal quarter immediately preceding
such date, as determined in accordance with generally accepted accounting
principles, less: (i) unamortized debt and debt issuance expense, deferred
charges, goodwill, patents, trademarks, copyrights, and all other items which
would be treated as intangibles on the consolidated balance sheet of the
Company and its Restricted Subsidiaries prepared in accordance with generally
accepted accounting principles and (ii) appropriate adjustments on account of
minority interests of other Persons holding equity investments in Restricted
Subsidiaries, in the case of each of clauses (i) and (ii) above, as reflected
on the consolidated balance sheet of the Company and its Restricted
Subsidiaries.
"CONSOLIDATED TANGIBLE NET WORTH" of the Company means the Company's Net
Worth less unamortized debt and debt issuance expense, deferred charges,
goodwill, patents, trademarks, copyrights, and all other items which would be
treated as intangibles on the consolidated balance sheet of the Company and its
Restricted Subsidiaries prepared in accordance with generally accepted
accounting principles.
"CONSOLIDATED TAX EXPENSE" of the Company means, for any period, the
aggregate of the tax expense of the Company and its Restricted Subsidiaries for
such period, determined on a consolidated basis, in accordance with generally
accepted accounting principles.
"CONVERTIBLE NOTES" means up to $15,000,000 principal amount of the
Company's 7% Convertible Subordinated Notes due March 1, 2003.
"COVERAGE RATIO" of the Company means the ratio of the Company's EBITDA to
its Consolidated Interest Incurred for the four fiscal quarters ending
immediately prior to the date of determination. Notwithstanding clause (ii) of
the definition of Consolidated Net Income, if the Debt which is being Incurred
is Incurred in connection with an acquisition by the Company or a Restricted
Subsidiary, the Coverage Ratio shall be determined after giving effect to both
the Consolidated Interest Incurred related to the Incurrence of such Debt and
the EBITDA (x) of the Person becoming a Restricted Subsidiary of the Company or
(y) in the case of an acquisition of assets that constitute substantially all
of an operating unit or business, relating to the assets being acquired by the
Company or a Restricted Subsidiary of the Company.
"DEBT" means, as to any Person, without duplication, (a) any indebtedness
of such Person for borrowed money, (b) all indebtedness of such Person
evidenced by bonds, debentures, notes, letters of credit, drafts or similar
instruments, (c) all indebtedness of such Person to pay the deferred purchase
price of property or services, but not including accounts payable and accrued
expenses arising in the ordinary course of business, (d) all capitalized lease
obligations of such Person, (e) all Debt of others secured by a Lien on any
asset of such Person, whether or not such Debt is assumed by such Person or
guaranteed by such Person, (f) Redeemable Stock of such Person and Preferred
Stock of any Subsidiary of such Person, (g) all obligations of such Person with
respect to Interest Rate Protection Agreements and (h) all Debt of others
guaranteed by such Person. The amount of Debt of any Person at any date
pursuant to clauses (a)-(d) and (f) above shall be as would appear as a
liability upon a balance sheet of such Person prepared on a consolidated basis
in accordance with generally accepted accounting principles. Notwithstanding
the foregoing, "Debt" of the Company shall not include the amount reflected on
a consolidated balance sheet of the Company with respect to options to acquire
real property which was purchased by the Company and sold to a third party
within 360 days of such purchase for consideration at least equal to the amount
paid by the Company for such property less an amount equal to the value of such
option.
"EBITDA" for the Company, for any period, means, without duplication, the
Consolidated Net Income of the Company plus, to the extent deducted in
calculating Consolidated Net Income, the sum of (a) Consolidated Tax Expense,
(b) Consolidated Interest Expense and (c) Consolidated Non-cash Charges.
"EXISTING DEBT" means all of the Debt of the Company and its Restricted
Subsidiaries that was outstanding on the Issue Date.
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"GUARANTEE" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt of any other Person
and, without limiting the generality of the foregoing, any obligation, direct
or indirect, contingent or otherwise, of such Person to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt of such other
Person (whether by agreement to keepwell or to maintain financial condition or
otherwise), provided that the term "guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business.
"HOMEBUILDING JOINT VENTURE" means (i) any Unrestricted Subsidiary and
(ii) any person which is not a Guarantor in which the Company or any of its
Subsidiaries has an ownership interest and in which no other person has a
greater beneficial ownership interest than the beneficial ownership interest of
the Company that, in each case, was formed for and is engaged in homebuilding
operations.
"INDEPENDENT FINANCIAL ADVISOR" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified
to perform the task for which it is to be engaged.
"INTEREST RATE PROTECTION AGREEMENT" means any arrangement with any other
Person whereby, directly or indirectly, such Person is entitled to receive from
time to time periodic payments calculated by applying either a floating or a
fixed rate of interest on a stated notional amount in exchange for periodic
payments made by such Person calculated by applying a fixed or a floating rate
of interest on the same notional amount and shall include, without limitation,
interest rate swaps, caps, floors, collars and similar agreements provided that
any arrangement which is entered into by the Company or any of its Restricted
Subsidiaries in connection with Debt Incurred by the Company or any of its
Restricted Subsidiaries shall constitute Permitted Debt.
"INVESTMENT" means, with respect to any Person, any direct or indirect
loan or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any capital stock, bonds, notes, debentures or other securities
or evidences of Debt issued by, any other Person. "Investments" shall exclude
extensions of trade credit by the Company and its Subsidiaries in the ordinary
course of business in accordance with normal trade practices of the Company or
such Subsidiary, as the case may be.
"ISSUE DATE" means the original date of issuance of the Senior Notes.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
assignment (including any assignment of rights to receive payments of money
other than in connection with mortgage banking operations in the ordinary
course of business), charge, security interest or encumbrance of any kind
(including any conditional sale or other title retention agreement or any lease
in the nature thereof) in respect of such asset, any agreement to grant to any
Person any such Lien and any sale and leaseback of any asset.
"MATERIAL SUBSIDIARY" means any Restricted Subsidiary of the Company which
accounted for 10 percent or more of the Consolidated Tangible Assets or EBITDA
of the Company for the fiscal year ending immediately prior to any Default or
Event of Default.
"MORTGAGE" means a first priority mortgage or first priority deed of trust
on improved real property.
"NET PROCEEDS" with respect to any Asset Sale means (i) cash (in U.S.
dollars or freely convertible into U.S. dollars) received by the Company or any
of its Restricted Subsidiaries from such Asset Sale (including cash received as
consideration for the assumption or incurrence of liabilities incurred in
connection with or in anticipation of such Asset Sale), after (a) provision for
all income or other taxes measured by or resulting from such Asset Sale to the
Company or any of its Restricted Subsidiaries, whether or not offset by net
operating loss and tax credit carry-forwards, (b) payment of all brokerage
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commissions and the underwriting fees and, without limitation, all other fees
and expenses related to such Asset Sale, and (c) deduction of appropriate
amounts to be provided by the Company or any of its Restricted Subsidiaries as
a reserve, in accordance with generally accepted accounting principles, against
any liabilities associated with the assets sold or otherwise disposed of in
such Asset Sale (including, without limitation, pension and other
post-employment benefit liabilities and liabilities related to environmental
matters) or against any indemnification obligations associated with the sale or
other disposition of the assets sold or otherwise disposed of in such Asset
Sale, and (ii) all noncash consideration received by the Company or any of its
Restricted Subsidiaries from such Asset Sale upon the liquidation or conversion
of such consideration into cash.
"NET WORTH" of the Company means, at any date, the aggregate of capital,
surplus and retained earnings of the Company and its Restricted Subsidiaries as
would be shown on a consolidated balance sheet of the Company prepared in
accordance with generally accepted accounting principles, adjusted to exclude
(to the extent included) investments by the Company and its Subsidiaries in
joint ventures and the amount of equity attributable to Affiliates other than
Restricted Subsidiaries of such Person.
"NON-RECOURSE DEBT" with respect to any Person means Debt of such Person
for which the sole legal recourse for collection of principal and interest on
such Debt is against the specific property identified in the instruments
evidencing or securing such Debt and such property was acquired with the
proceeds of such Debt or such Debt was Incurred within 90 days after the
acquisition of such property.
"PERMITTED INVESTMENTS" of any Person means Investments of such Person in
(i) direct obligations of the United States or any agency thereof or
obligations guaranteed by the United States or any agency thereof, in each case
maturing within 180 days of the date of acquisition thereof, (ii) certificates
of deposit maturing within 180 days of the date of acquisition thereof issued
by a bank, trust company or savings and loan association which is organized
under the laws of the United States or any state thereof having capital,
surplus and undivided profits aggregating in excess of $250 million and a Keefe
Bank Watch Rating of C or better, (iii) certificates of deposit maturing within
180 days of the date of acquisition thereof issued by a bank, trust company or
savings and loan association organized under the laws of the United States or
any state thereof other than banks, trust companies or savings and loan
associations satisfying the criteria in (ii) above; provided that the aggregate
amount of all certificates of deposit issued to the Company at any one time by
any one such bank, trust company or savings and loan association will not
exceed $100,000, (iv) commercial paper given the highest rating by two
established national credit rating agencies and maturing not more than 180 days
from the date of the acquisition thereof, (v) repurchase agreements or
money-market accounts which are fully secured by direct obligations of the
United States or any agency thereof and (vi) in the case of the Company and its
Subsidiaries, (1) any receivables or loans taken by the Company or a Subsidiary
in connection with the sale of any asset otherwise permitted by the Indenture,
(2) Investments in any Guarantor, (3) Investments in the Senior Notes or Debt
PARI PASSU with the Senior Notes, (4) Investments in evidences of Debt,
securities or other property received from another Person by the Company or any
of its Restricted Subsidiaries in connection with any bankruptcy proceeding or
by reason of a composition or readjustment of debt or a reorganization of such
Person or as a result of foreclosure, perfection or enforcement of any Lien in
exchange for evidences of Debt, securities or other property of such Person
held by the Company or any of its Restricted Subsidiaries, or for other
liabilities or obligations of such other Person to the Company or any of its
Restricted Subsidiaries that were created, in accordance with the terms of the
Indenture, (5) Investments in Interest Rate Protection Agreements which
constitute Permitted Debt, (6) Investments in any Homebuilding Joint Ventures
not in excess of $20 million in the aggregate for all Homebuilding Joint
Ventures and (7) Investments in an aggregate amount outstanding not greater
than $5,000,000.
"PERMITTED LIENS" with respect to the Company and its Restricted
Subsidiaries means (i) (x) until such time as the Company shall have less than
an aggregate of $40,000,000 of maximum availability under one or more Bank
Facilities described in clause (b) of the "Limitation on Debt" covenant which
are secured by any Liens, Liens securing the Company's Bank Facility or Bank
Facilities described in clause (b) of the "Limitation on Debt" covenant, and
(y) from and after the first time at which the
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Company shall have less than an aggregate of $40,000,000 of maximum
availability under one or more Bank Facilities which are secured by Liens,
Liens on assets of the Company or any Restricted Subsidiary of the Company
securing Debt which may be incurred pursuant to the "Limitation on Debt"
covenant, provided that the aggregate amount of Debt secured by Liens
(excluding Nonrecourse Debt of the Company and Restricted Subsidiaries and Debt
outstanding under the Warehouse Facility) may not exceed 40 percent of the
Company's Consolidated Tangible Assets; (ii) Liens securing a Warehouse
Facility; provided that such Liens shall not extend to any assets other than
the mortgages, promissory notes and other collateral that secures mortgage
loans made by the Company or any of its Restricted Subsidiaries; (iii) Liens
securing Non-Recourse Debt of the Company or any Restricted Subsidiary of the
Company, provided that such Liens apply only to the property financed out of
the net proceeds of such Non-Recourse Debt within 90 days of the incurrence of
such Non-Recourse Debt; (iv) Liens securing Debt of a Person existing at the
time that such Person is merged into or consolidated with the Company or a
Restricted Subsidiary; provided that such Liens were not created in
contemplation of such merger or consolidation and do not extend to any assets
or property of the Company or any Restricted Subsidiary, other than the
surviving Person and its Subsidiaries; (v) Liens on assets or property acquired
by the Company or a Restricted Subsidiary; provided that such Liens were not
created in contemplation of such acquisition and do not extend to any other
assets or property (other than proceeds of such acquired assets or property);
(vi) Liens in respect of Interest Rate Protection Agreements which constitute
Permitted Debt; (vii) Liens for taxes, assessments or governmental charges or
claims that either (a) are not yet delinquent or (b) are being contested in
good faith by appropriate proceedings and as to which appropriate reserves have
been established or other provisions have been made in accordance with
generally accepted accounting principles; (viii) statutory Liens of landlords
and carriers', warehousemen's, mechanics', suppliers', materialmen's,
repairmen's, contractors' or other Liens imposed by law and arising in the
ordinary course of business; (ix) Liens (other than any Lien imposed by the
Employee Retirement Income Security Act of 1974, as amended) incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (x)
Liens incurred or deposits made to secure the performance of tenders, bids,
leases, statutory obligations, surety and appeal bonds, progress payments,
government contracts and other obligations of like nature (exclusive of
obligations for the payment of borrowed money), in each case, incurred in the
ordinary course of business; (xi) attachment or judgment Liens not giving rise
to a Default or Event of Default; (xii) easements, rights-of-way, restrictions
and other similar charges or encumbrances not materially interfering with the
ordinary conduct of the business of the Company or any of its Subsidiaries;
(xiii) leases or subleases granted to others not materially interfering with
the ordinary conduct of the business of the Company or any of its Restricted
Subsidiaries; (xiv) Liens securing Refinancing Debt; provided that such Liens
only extend to the assets securing the Debt being refinanced, such refinanced
Debt was previously secured and such Liens do not extend to any other assets of
the Company or the assets of any of the Company's other Subsidiaries; (xv)
Liens securing Purchase Money Obligations (including capitalized lease
obligations); (xvi) Liens existing on the Issue Date (xvii) any contract to
sell an asset provided such sale is otherwise permitted under the Indenture;
and (xviii) Liens on property or assets of any Restricted Subsidiary securing
Debt of such Restricted Subsidiary owing to the Company or one or more
Restricted Subsidiaries of the Company.
"PERSON" means any individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or agency or instrumentality thereof.
"PREFERRED STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding or issued after
the Issue Date, and including, without limitation, all classes and series of
preferred or preference stock.
"PURCHASE MONEY OBLIGATIONS" means Debt of any Person secured by Liens (i)
on property purchased, acquired, or constructed by such Person or its
Subsidiaries after the Issue Date and used in the ordinary course of business
by such Person and (ii) securing the payment of all or any part of the purchase
price or construction cost of such assets and limited to the property so
acquired and
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improvements thereof; provided that such Debt is incurred no later than 90 days
after the acquisition of such property or completion of such construction or
improvements.
"REDEEMABLE STOCK" means, with respect to any Person, any class or series
of capital stock of such Person that is redeemable at the option of the holder
(except pursuant to a change in control provision that does not (i) cause such
capital stock to become redeemable in circumstances which would not constitute
a Change of Control and (ii) require the Company to pay the redemption price
therefor prior to the Change of Control Repurchase Date) or is subject to
mandatory redemption or otherwise matures prior to the final stated maturity of
the Senior Notes.
"REFINANCING DEBT" means Debt that refunds, refinances or extends any
Senior Notes, Existing Debt (other than Existing Debt to be repaid with the net
proceeds of the offering of the Senior Notes) or other Debt incurred by the
Company or its Restricted Subsidiaries permitted under the terms of the
Indenture, but only to the extent that (i) the Refinancing Debt is subordinated
to the Senior Notes to the same extent as the Debt being refunded, refinanced
or extended, if at all, (ii) the Refinancing Debt is scheduled to mature either
(a) no earlier than the Debt being refunded, refinanced or extended, or (b)
after the maturity date of the Senior Notes, (iii) the portion, if any, of the
Refinancing Debt that is scheduled to mature on or prior to the maturity date
of the Senior Notes has a Weighted Average Life to Maturity at the time such
Refinancing Debt is Incurred that is equal to or greater than the Weighted
Average Life to Maturity of the portion of the Debt being refunded, refinanced
or extended that is scheduled to mature on or prior to the maturity date of the
Senior Notes, and (iv) the gross proceeds of such Refinancing Debt are an
amount that is equal to or less than the aggregate principal amount then
outstanding under the Debt being refunded, refinanced or extended (plus the
premiums or other payments paid in connection therewith (which shall not exceed
the stated amount of any premium or other payment required to be paid in
connection with such a renewal, extension, substitution, refunding,
refinancing, redemption, repurchase or replacement pursuant to the terms of the
Debt being renewed, extended, substituted, refunded, refinanced, amended,
modified, supplemented, redeemed, repurchased or replaced) and the expenses
incurred in connection therewith).
"RESTRICTED PAYMENTS" means with respect to the Company or any Restricted
Subsidiary (i) the declaration or payment of any dividend or other distribution
on any shares of such Person's capital stock (except (x) dividends or
distributions in additional shares of capital stock of the Company other than
Redeemable Stock or (y) the declaration or payment of any dividend or other
distribution by a Restricted Subsidiary to the Company or another Restricted
Subsidiary), (ii) any payment on account of the purchase, redemption or other
acquisition of (a) any shares of such Person's capital stock or (b) any option,
warrant or other right to acquire shares of such Person's capital stock,
except, in each case, capital stock held by the Company or a Restricted
Subsidiary, (iii) any Investment (other than a Permitted Investment) in any
Person, or (iv) any principal payment, redemption, repurchase, defeasance or
other acquisition or retirement, prior to scheduled principal payment or
scheduled maturity, of Debt of the Company or its Subsidiaries which is
subordinated in right of payment to the Senior Notes (other than Debt held by
the Company or a Restricted Subsidiary).
"RESTRICTED SUBSIDIARY" means any Subsidiary which is not an Unrestricted
Subsidiary.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation or
entity of which a majority of the capital stock having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions is at the time directly or indirectly owned by such Person or one or
more of the other Subsidiaries of that Person or (ii) any partnership or joint
venture at least a majority of the voting power of which is at the time
directly or indirectly owned by such Person or one or more of the other
Subsidiaries of that Person, or a combination thereof or a successor thereto.
"UNRESTRICTED SUBSIDIARY" means each of the Subsidiaries of the Company
(other than a Guarantor) so designated by a resolution adopted by the Board of
Directors of the Company as provided below; provided that (a) neither the
Company nor any of its other Subsidiaries (other than Unrestricted
Subsidiaries) (1) provides any direct or indirect credit support for any Debt
of such Subsidiary
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(including any undertaking, agreement or instrument evidencing such Debt) or
(2) is directly or indirectly liable for any Debt of such Subsidiary, and (b)
the creditors with respect to Debt for borrowed money of such Subsidiary have
agreed in writing that they have no recourse, direct or indirect, to the
Company or any other Subsidiary of the Company (other than Unrestricted
Subsidiaries), including, without limitation, recourse with respect to the
payment of principal or interest on any Debt of such Subsidiary. The Board of
Directors of the Company may designate an Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that (i) any such redesignation will be deemed
to be an Incurrence by the Company and its Restricted Subsidiaries of the Debt
(if any) of such redesignated Subsidiary for purposes of the "Limitation on
Debt" covenant set forth in the Indenture as of the date of such redesignation,
(ii) any Debt of such Unrestricted Subsidiary could then be Incurred in
accordance with the "Limitation on Debt" covenant set forth in the Indenture on
the date of such redesignation and (iii) the Liens of such Unrestricted
Subsidiary could then be incurred in accordance with the "Limitation on Liens"
covenant set forth in the Indenture as of the date of such redesignation.
Subject to the foregoing, the Board of Directors of the Company also may
designate any Restricted Subsidiary to be an Unrestricted Subsidiary; provided
that (i) all previous Investments by the Company and its Restricted
Subsidiaries in such Restricted Subsidiary (net of any returns previously paid
on such Investments) will be deemed to be Restricted Payments at the time of
such designation and will reduce the amount available for Restricted Payments
under the "Limitations on Restricted Payments" covenant set forth in the
Indenture, (ii) the Company and its Restricted Subsidiaries could incur $1.00
of additional Indebtedness under the Coverage Ratio test contained in the
"Limitations on Debt" covenant set forth in the Indenture and (iii) no Default
or Event of Default shall have occurred or be continuing. Any such designation
or redesignation by the Board of Directors of the Company will be evidenced to
the Trustee by the filing with the Trustee of a certified copy of the
resolution of the Board of Directors of the Company giving effect to such
designation or redesignation and an Officers' Certificate certifying that such
designation or redesignation complied with the foregoing conditions and setting
forth the underlying calculations.
"WAREHOUSE FACILITY" means a Bank Facility to finance the making of
mortgage loans originated by the Company or any of its Subsidiaries.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Debt or
portion thereof, if applicable, at any date, the number of years obtained by
dividing (i) the then outstanding principal amount of such Debt or portion
thereof, if applicable, into (ii) the sum of the products obtained by
multiplying (a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including payment at
final maturity, in respect thereof, by (b) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of
the Company of which 100% of the outstanding capital stock is owned by one or
more Wholly Owned Restricted Subsidiaries of the Company or by the Company and
one or more Wholly Owned Restricted Subsidiaries of the Company. For purposes
of this definition, any directors' qualifying shares shall be disregarded in
determining the ownership of a Subsidiary.
EVENTS OF DEFAULT
The following shall constitute Events of Default with respect to the
Senior Notes: (i) failure to pay the principal of any Senior Note when such
principal becomes due and payable at maturity, upon acceleration or otherwise;
(ii) failure to pay interest on any Senior Note when due, and such failure
continues for a 30-day period; (iii) a default in the observance or performance
of any other covenant or agreement of the Company or the Guarantors in the
Senior Note, the Guarantee or the Indenture that continues for the period and
after the notice specified below; (iv) an event of default shall have occurred
under one or more evidences of Debt of the Company or any of its Restricted
Subsidiaries (other than Non-Recourse Debt) with an outstanding aggregate
principal amount of $5,000,000 or more, whether such Debt now exists or is
created hereafter, which event of default (1) consists of the failure
48
<PAGE>
by the Company or any Restricted Subsidiary to make any payment in respect of
such Debt at its final maturity or (2) results in the acceleration of such Debt
which acceleration shall be in effect; (v) any final judgment or judgments for
payment of money in excess of $5,000,000 in the aggregate shall be rendered
against the Company or any of its Restricted Subsidiaries and shall remain
unstayed, unsatisfied or undischarged for the period and after the notice
specified below; (vi) certain events of bankruptcy, insolvency or
reorganization of the Company or Material Subsidiaries; and (vii) any
Guarantee of a Material Subsidiary ceases to be in full force and effect (other
than in accordance with the terms of such Guarantee and the Indenture) or is
declared null and void and unenforceable or found to be invalid or any
Guarantor denies its liability under its Guarantee (other than by reason of
release of a Guarantor from its Guarantee in accordance with the terms of the
Indenture and the Guarantee). The Company is required to deliver to the Trustee
within 120 days after the end of each fiscal year of the Company, an officer's
certificate stating whether or not the signatories know of any default by the
Company under the Indenture and the Senior Notes and, if any default exists,
describing such default.
A default under clause (iii) or (v) above is not an Event of Default until
the Trustee or the holders of at least 25% in principal amount of the Senior
Notes then outstanding notify the Company of the default and the Company does
not cure the default within 60 days. The notice must specify the default,
demand that it be remedied and state that the notice is a "Notice of Default."
If the holders of 25% in principal amount of Senior Notes then outstanding
request the Trustee to give such notice on their behalf, the Trustee shall do
so.
In case an Event of Default (other than an Event of Default resulting from
certain events of bankruptcy, insolvency or reorganization of the Company)
shall have occurred and be continuing, the Trustee, by notice to the Company,
or the holders of 25% of the principal amount of the Senior Notes then
outstanding, by notice to the Company and the Trustee, may declare the
principal of the Senior Notes, plus accrued interest, to be immediately due and
payable. In case an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization of the Company shall occur, such
amounts shall be due and payable without any declaration or any act on the part
of the Trustee or the holders of the Senior Notes. Any declaration of
acceleration may be rescinded and past defaults may be waived by the holders of
a majority of the principal amount of the Senior Notes then outstanding upon
conditions provided in the Indenture. Except to enforce the right to receive
payment of principal or interest when due, no holder of a Senior Note may
institute any proceeding with respect to the Indenture or for any remedy
thereunder unless such holder has previously given to the Trustee written
notice of a continuing Event of Default and unless the holders of 25% of the
principal amount of the Senior Notes then outstanding have requested the
Trustee to institute proceedings in respect of such Event of Default and have
offered the Trustee reasonable indemnity against loss, liability and expense to
be thereby incurred, the Trustee has failed so to act for 60 days after receipt
of the same and during such 60-day period the holders of a majority of the
principal amount of the Senior Notes then outstanding have not given the
Trustee a direction inconsistent with the request. Subject to certain
restrictions, the holders of a majority in principal amount of the Senior Notes
then outstanding will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee. The Trustee, however, may refuse
to follow any direction that conflicts with law or the Indenture, that is
unduly prejudicial to the rights of any holder of a Senior Note or that would
involve the Trustee in personal liability and the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent with such
direction.
MERGERS AND CONSOLIDATIONS
Neither the Company nor any Guarantor will consolidate or merge with or
into, or sell, lease, convey or otherwise dispose of all or substantially all
of its assets (including, without limitation, by way of liquidation or
dissolution), or assign any of its obligations under the Senior Notes, the
Guarantees or the Indenture (as an entirety or substantially as an entirety in
one transaction or series of related transactions), to any Person or permit any
of its Restricted Subsidiaries to do any of the foregoing (in each case other
than with the Company or another Wholly Owned Restricted Subsidiary) unless:
(i) the
49
<PAGE>
Person formed by or surviving such consolidation or merger (if other than the
Company or such Guarantor, as the case may be), or to which such sale, lease,
conveyance or other disposition or assignment will be made (collectively, the
"Successor"), is a corporation or other legal entity organized and existing
under the laws of the United States or any state thereof or the District of
Columbia, and the Successor assumes by supplemental indenture in a form
reasonably satisfactory to the Trustee all of the obligations of the Company or
such Guarantor, as the case may be, under the Senior Notes or such Guarantor's
Guarantee, as the case may be, and the Indenture, (ii) immediately after giving
effect to such transaction, no Default or Event of Default has occurred and is
continuing, (iii) immediately after giving effect to such transaction and the
use of any net proceeds therefrom, on a pro forma basis, the Consolidated
Tangible Net Worth of the Company or the Successor (in the case of a
transaction involving, the Company), as the case may be, would be at least
equal to the Consolidated Tangible Net Worth of the Company immediately prior
to such transaction and (iv) in the case of a transaction involving the
Company, immediately after giving effect to such transaction and the use of any
net proceeds therefrom, on a pro forma basis, the Coverage Ratio of the Company
or the Successor (in the case of a transaction involving the Company), as the
case may be, would be such that the Company or the Successor (in the case of a
transaction involving the Company), as the case may be, would be entitled to
Incur at least $1.00 of additional Debt under such Coverage Ratio test in the
"Limitation on Debt" covenant set forth in the Indenture. The foregoing
provisions shall not apply to a transaction involving the consolidation or
merger of a Guarantor with or into another person, or the sale, lease,
conveyance or other disposition of all or substantially all of the assets of
such Guarantor, that results in such Guarantor being released from its
Guarantee as provided under "The Guarantees" above.
DEFEASANCE
Under the terms of the Indenture and the Senior Notes, the Company, at its
option, (a) will be discharged from any and all obligations in respect of the
Senior Notes (except in each case for certain obligations to register the
transfer or exchange of Senior Notes, replace stolen, lost or mutilated Senior
Notes, maintain paying agencies and hold moneys for payment in trust) or (b)
need not comply with the covenants of the Indenture nor be subject to the
operation of the cross acceleration provisions described under "Events of
Default," in each case, if the Company irrevocably deposits with the Trustee,
in trust, money or U.S. Government Obligations (as defined in the Indenture)
which through the payment of interest thereon and principal thereof in
accordance with their terms will provide money in an amount sufficient to pay
the principal of and interest on the Senior Notes on the dates such payments
are due in accordance with the terms of the Senior Notes.
To exercise either option above, the Company is required to deliver to the
Trustee an opinion of counsel that the holders of the Senior Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance had not occurred.
In the event the Company exercises its options under clause (b) of the
second preceding paragraph and the Senior Notes are declared due and payable
because of the occurrence of any Event of Default (other than the cross
acceleration provisions described under "Events of Default" which will be
inapplicable), the amount of money and U.S. Government Obligations on deposit
with the Trustee will be sufficient to pay amounts due on the Senior Notes at
the time of their stated maturity but may not be sufficient to pay amounts due
on the Senior Notes at the time of the acceleration resulting from such Event
of Default. However, the Company shall remain liable for such payments.
REPORTS
As long as any of the Senior Notes are outstanding, the Company will
deliver to the Trustee and the Trustee will mail to each Holder within 15 days
after the filing of the same with the Commission copies of the quarterly and
annual reports and of the information, documents and other reports with respect
to the Company and the Guarantors, if any, which the Company and the Guarantors
may be
50
<PAGE>
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. The Indenture will provide that, notwithstanding that neither the
Company nor any of the Guarantors may be required to remain subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will continue to file with the Commission and provide the Trustee and Holders
with such annual and quarterly reports and such information, documents and
other reports with respect to the Company and the Guarantors as are required
under Sections 13 and 15(d) of the Exchange Act. If filing of documents by the
Company with the Commission as aforementioned in this paragraph is not
permitted under the Exchange Act, the Company shall promptly upon written
notice supply copies of such documents to any prospective holder. The Company
and each Guarantor will also comply with the other provisions of Section 314(a)
of the Trust Indenture Act.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Senior Notes may be
amended or supplemented with the consent (which may include consents obtained
in connection with a tender offer or exchange offer for Senior Notes) of the
Holders of at least a majority in principal amount of Senior Notes then
outstanding, and any existing Default or Event of Default (other than any
continuing Default or Event of Default in the payment of interest on or the
principal of the Senior Notes) under, or compliance with any provision of, the
Indenture may be waived with the consent (which may include consents obtained
in connection with a tender offer or exchange offer for Senior Notes) of the
Holders of a majority in principal amount of the Senior Notes then outstanding.
Without the consent of any Holder, the Company, the Guarantors and the Trustee
may amend the Indenture or the Senior Notes or waive any provision of the
Indenture to cure any ambiguity, defect or inconsistency, to comply with the
"Mergers and Consolidations" section set forth in the Indenture, to provide for
uncertificated Senior Notes in addition to certificated Senior Notes, to make
any change that does not adversely affect the legal rights under the Indenture
of any Holder, to comply with the qualification of the Indenture under the
Trust Indenture Act, or to reflect a Guarantor ceasing to be liable on the
Guarantees because it is no longer a Subsidiary of the Company.
Without the consent of each Holder affected, the Company may not (i)
reduce the amount of Senior Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the rate of or change the time for payment of
interest, including default interest, on any Senior Note, (iii) reduce the
principal of or change the fixed maturity of any Senior Note or alter the
provisions with respect to redemption under the "Optional Redemption" section
set forth in the Indenture, (iv) make any Senior Notes payable in money other
than that stated in the Note, (v) make any change in certain other provisions
set forth in the Indenture, (vi) adversely modify the ranking or priority of
the Senior Notes or any Guarantee, (vii) release any Guarantor from any of its
obligations under its Guarantee or the Indenture otherwise than in accordance
with the terms of the Indenture, or (viii) waive a continuing Default or Event
of Default in the payment of principal of or interest on the Senior Notes.
NO PERSONAL LIABILITY OF SHAREHOLDERS, OFFICERS, DIRECTORS OR EMPLOYEES
The Indenture will provide that no recourse for the payment of the
principal of, premium, if any, or interest on any of the Senior Notes, or for
any claim based thereon or otherwise in respect thereof, and no recourse under
or upon any obligation, covenant or agreement of the Company or any Guarantor
in the Indenture or in any of the Senior Notes or because of the creation of
any Debt represented thereby, shall be had against any shareholder, officer,
director, employee or controlling person of the Company, any Guarantor or any
successor Person thereof. Each Holder, by accepting such Senior Notes, will
waive and release all such liability.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received
51
<PAGE>
in respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest (as defined in the Indenture), it must eliminate such
conflict or resign.
The Holders of a majority in principal amount of the then outstanding
Senior Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default occurs and is not cured, the Trustee will be required, in the exercise
of its power, to use the degree of care of a prudent person in similar
circumstances in the conduct of his own affairs. Subject to such provisions,
the Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any Holder, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to the Trustee.
GOVERNING LAW
The Indenture, the Senior Notes and the Guarantees will be governed by the
internal laws of the State of New York.
52
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
THE 1993 NOTES
GENERAL. In February 1993, the Company issued $30,000,000 principal amount
of 7% Convertible Subordinated Notes due 2003 (the "1993 Notes"). The 1993
Notes mature on March 1, 2003, and bear interest at 7% per annum, payable
semi-annually on March 1 and September 1 of each year.
The following is a summary of certain material terms of the 1993 Notes and
is qualified in its entirety by reference to the indenture governing the 1993
Notes (the "1993 Indenture"). The 1993 Notes are unsecured general obligations
of the Company subordinated in right of payment to all existing and future
Senior Indebtedness (as defined in the 1993 Indenture").
CONVERSION. The 1993 Notes are convertible into Common Stock at any time
prior to maturity, unless previously redeemed, at a conversion price of $14.00
per share, subject to adjustment upon certain circumstances.
REDEMPTION. The 1993 Notes are redeemable at the option of the Company on
or after April 1, 1996, in whole or in part, at specified redemption prices
(expressed as a percentage of principal amount), together with accrued and
unpaid interest. On November 18, 1997, the Company redeemed $14,594,000
aggregate principal amount of the 1993 Notes at a price of 104.2% of the
principal amount thereof, plus accrued interest and $406,000 aggregate
principal amount of the 1993 Notes were converted into Common Stock. In
addition, $75,000 principal amount of the 1993 Notes not previously called for
redemption were converted into 5,357 shares on November 18, 1997. After
November 18, 1997 and prior to the date of this Prospectus, an additional
$89,000 principal amount of the 1993 Notes were converted into 6,355 shares of
Common Stock. Following the consummation of the Equity Offering, the Company
intends to call for redemption the remaining outstanding principal amount of
the 1993 Notes. The Company intends to use a portion of the net proceeds of the
Equity Offering to fund the redemption of the remaining outstanding principal
amount of the 1993 Notes which are not converted into Common Stock on or prior
to the date of redemption. See "Use of Proceeds."
OFFERS TO PURCHASE. In the event of a Change of Control or a Consolidated
Net Worth Deficiency (each as defined in the 1993 Indenture), the Company will
be required, subject to certain conditions, to offer to purchase all
outstanding 1993 Notes at a price equal to 100% of the principal amount thereof
together with accrued and unpaid interest.
COVENANTS. The 1993 Indenture contains covenants that, among other things,
limit the Company's ability to merge, consolidate or transfer substantially all
its assets.
GUARANTEES. Payments under the 1993 Notes are guaranteed by the
subsidiaries of the Company.
THE 1994 NOTES
GENERAL. In March 1994, the Company issued $40,000,000 principal amount of
113/4% Senior Notes due 2000 (the "Original 1994 Notes"). In August 1994, the
Company exchanged the Original 1994 Notes for $40,000,000 principal amount of
113/4% Senior Notes due 2000 (the "1994 Notes"), which are substantially
identical to the Original 1994 Notes except that the 1994 Notes are registered
under the Securities Act. The 1994 Notes mature on December 15, 2000, and bear
interest at 113/4% per annum, payable semi-annually on June 15 and December 15
of each year.
The following is a summary of certain material terms of the 1994 Notes and
is qualified in its entirety by reference to the indenture governing the 1994
Notes (the "1994 Indenture"). The 1994 Notes are senior unsecured obligations
of the Company, ranking PARI PASSU in right of payment to all existing and
future Senior Indebtedness (as defined in the 1994 Indenture) of the Company
and senior in right of payment to all subordinated indebtedness of the Company.
53
<PAGE>
REDEMPTION. The 1994 Notes are redeemable at the option of the Company, in
whole or in part, at any time on or after June 15, 1998, initially at 105.875%
of their principal amount plus accrued interest, declining ratably to 100% of
their principal amount plus accrued interest on and after June 15, 2000.
OFFERS TO PURCHASE. In the event of a Change of Control (as defined in the
1994 Indenture), the Company will be required, subject to certain conditions,
to offer to purchase all outstanding 1994 Notes at a price equal to 101% of the
principal amount thereof together with accrued and unpaid interest. In
addition, in the event of a Consolidated Net Worth Deficiency (as defined in
the 1994 Indenture), the Company will be required, subject to certain
conditions, to offer to purchase $4.0 million aggregate principal amount of the
1994 Notes at a price equal to 100% of the principal amount thereof together
with accrued and unpaid interest.
COVENANTS. The 1994 Indenture contains covenants that, among other things,
limit the Company's and its subsidiaries' ability to incur additional
indebtedness; make certain restricted payments; enter into transactions with
affiliates; sell their assets and capital stock; grant liens on their assets;
and merge, consolidate or transfer substantially all of their assets.
GUARANTEES. Payments under the 1994 Notes are guaranteed by the all of
the Company's existing subsidiaries and all future restricted subsidiaries.
CREDIT FACILITIES
For a description of the Company's bank credit facilities, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, par value $.01 per share, and 1,000,000 shares of Preferred
Stock, par value $.01 per share. After the consummation of the Equity Offering,
9,672,401 shares of Common Stock will be outstanding (not including 1,059,716
shares of Common Stock issuable upon conversion of the 1993 Notes). No shares
of Preferred Stock have been issued.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held
of record on all matters submitted to a vote of the shareholders. Subject to
preferential rights with respect to any outstanding Preferred Stock, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." In the event of a liquidation, dissolution or winding up of
the Company, holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities and satisfaction of preferential
rights with respect to any outstanding shares of Preferred Stock and have no
rights to convert their Common Stock into any other securities. The outstanding
shares of Common Stock are, and the Common Stock to be outstanding upon
completion of the Equity Offering will be, fully paid and nonassessable.
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.
PREFERRED STOCK
The Board of Directors is authorized to issue the Preferred Stock in one
or more series and to fix the rights, preferences, privileges and restrictions,
including the dividend rights, conversion rights, voting rights, rights and
terms of redemption, redemption price or prices, liquidation preferences and
the number of shares constituting any series or the designations of such
series, without any further vote or action by the shareholders. The issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company without further action of the shareholders.
The issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others. The Company has no present plans to issue any shares
of Preferred Stock.
CERTAIN FLORIDA LEGISLATION
The State of Florida has enacted legislation that may deter or frustrate
takeovers of Florida corporations. The Florida Control Share Act generally
provides that shares acquired in excess of certain specified thresholds will
not possess any voting rights unless such voting rights are approved by a
majority of a corporation's disinterested shareholders. The Florida Affiliated
Transactions Act generally requires supermajority approval by disinterested
shareholders or majority approval by disinterested directors of certain
specified transactions between a public corporation and holders of more than
10% of the outstanding voting shares of the corporation (or their affiliates).
55
<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, Salomon Brothers Inc (the "Underwriter") has
agreed to purchase, and the Company has agreed to sell to such Underwriter,
$100,000,000 aggregate principal amount of Senior Notes. The Underwriting
Agreement provides that the obligations of the Underwriter to pay for and
accept delivery of the Senior Notes are subject to approval of certain legal
matters by its counsel and to certain other conditions. The Underwriter is
obligated to take and pay for all of the Senior Notes offered hereby if any
such Senior Notes are taken.
The Underwriter has advised the Company that it proposes initially to
offer part of the Senior Notes directly to the public at the public offering
price set forth on the cover page of this Prospectus and part to certain
dealers at a price which represents a concession not in excess of % of the
principal amount of the Senior Notes. The Underwriter may allow, and such
dealers may reallow, a concession not in excess of % of the principal amount
of the Senior Notes to certain other dealers. After the public offering, the
public offering price and such concessions may be changed from time to time by
the Underwriter. The Underwriter has informed the Company that the Underwriter
does not intend to confirm sales to accounts over which it exercises
discretionary authority.
The Company, the Guarantors and the Underwriter have agreed to indemnify
each other against certain liabilities, including liabilities under the
Securities Act.
The Senior Notes are a new issue of securities which have no established
trading market. It is expected that the Senior Notes will be sold to a limited
number of investors. The Company has been advised by the Underwriter that it
intends to make a market in the Senior Notes after the consummation of the
Notes Offering; however, the Underwriter is not obligated to do so, and any
such market-making, if commenced, may be terminated at any time without notice.
No assurance can be given as to the liquidity of the trading market, if any,
for the Senior Notes.
The Underwriter may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Exchange Act. Over-allotment involves syndicate sales in excess of
the offering size, which creates a syndicate short position. Stabilizing
transactions permit bids for and purchases of the Senior Notes so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Senior Notes in the open market in order
to cover syndicate short positions. Penalty bids permit the Underwriter to
reclaim a selling concession from a syndicate member when the Senior Notes
originally sold by such syndicate member is purchased in a stabilizing
transaction or syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the Senior Notes to be higher than it would
otherwise be in the absence of such transactions. The Underwriter is not
required to engage in these activities, and may end any of these activities at
any time.
56
<PAGE>
LEGAL MATTERS
Certain legal matters relating to the issuance and sale of the Senior
Notes offered hereby will be passed upon for the Company by Greenberg Traurig
Hoffman Lipoff Rosen & Quentel, P.A., Miami, Florida. Certain legal matters
relating to the Notes Offering will be passed upon for the Underwriter by
Cahill Gordon & Reindel (a partnership including a professional corporation),
New York, New York.
EXPERTS
The Consolidated Financial Statements of the Company and the related
schedule included and incorporated by reference in this Prospectus and in the
Registration Statement have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods set forth in
their reports appearing elsewhere and incorporated by reference herein and in
the Registration Statement, and are included in reliance upon such reports
given upon the authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company has filed a registration statement on Form S-2 (together with
all amendments and exhibits thereto, the "Registration Statement") under the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement and the exhibits
filed as part thereof. Statements contained herein are qualified in their
entirety by reference to the Registration Statement and such exhibits.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices located at Citicorp Center, 500 West Madison,
14th Floor, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor,
New York, New York 10048. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission also maintains a
World Wide Web site on the Internet at http://www.sec.gov that contains reports
and other information regarding registrants that file electronically with the
Commission. The Common Stock is listed on the Nasdaq National Market, and such
reports, proxy statements and other information can also be inspected at the
offices of The Nasdaq National Market, Reports Section, 1735 K Street, N.W.,
Washington, D.C. 20006.
57
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K, as amended, for the fiscal year
ended October 31, 1997, is hereby incorporated herein by reference.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to constitute
a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the request of any such person, a copy of
all of the documents which are incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to Engle Homes,
Inc., 123 N.W. 13th Street, Suite 300, Boca Raton, Florida 33432, Attention:
David Shapiro, Vice President-- Finance, telephone number (561) 391-4012.
58
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Certified Public Accountants ......... F-2
Consolidated Balance Sheets
as of October 31, 1997 and 1996 ........................... F-3
Consolidated Statements of Income
For the Years Ended October 31, 1997, 1996 and 1995 ...... F-4
Consolidated Statements of Shareholders' Equity
For the Years Ended October 31, 1997, 1996 and 1995 ...... F-5
Consolidated Statements of Cash Flows
For the Years Ended October 31, 1997, 1996 and 1995 ...... F-6
Notes to Consolidated Financial Statements .................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders' and Board of Directors
Engle Homes, Inc.
Boca Raton, Florida
We have audited the accompanying consolidated balance sheets of Engle
Homes, Inc., and subsidiaries as of October 31, 1997 and 1996 and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended October 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Engle
Homes, Inc. and subsidiaries at October 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended October 31, 1997 in conformity with generally accepted accounting
principles.
BDO SEIDMAN, LLP
Miami, Florida
November 10, 1997
F-2
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
1997 1996
---------- ---------
<S> <C> <C>
ASSETS
CASH
Unrestricted ......................................................... $ 15,565 $ 18,262
Restricted ............................................................ 981 3,438
INVENTORIES ............................................................ 230,108 220,564
PROPERTY AND EQUIPMENT, net .......................................... 2,623 3,599
OTHER ASSETS ......................................................... 15,803 19,406
GOODWILL, net of accumulated amortization
of $1,149 and $813, respectively .................................... 5,627 5,964
DEFERRED TAX ASSET ................................................... 3,176 550
MORTGAGE LOANS HELD FOR SALE .......................................... 14,529 13,006
-------- --------
TOTAL ASSETS ...................................................... $288,412 $284,789
======== ========
LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES .............................. $ 21,167 $ 26,170
CUSTOMER DEPOSITS ...................................................... 7,472 12,004
BORROWINGS ............................................................ 82,064 82,117
SENIOR NOTES PAYABLE, including $5,390 to related parties ............ 40,000 40,000
CONVERTIBLE SUBORDINATED NOTES ....................................... 30,000 30,000
FINANCIAL SERVICE BORROWINGS .......................................... 14,529 13,006
-------- --------
TOTAL LIABILITIES ................................................ 195,232 203,297
-------- --------
SHAREHOLDERS' EQUITY
PREFERRED STOCK, $.01 par, shares authorized 1,000,000; none issued ...
COMMON STOCK, $.01 par shares authorized 25,000,000;
issued and outstanding 6,931,693 and 6,929,200 respectively ......... 69 69
ADDITIONAL PAID-IN CAPITAL ............................................. 47,852 48,523
RETAINED EARNINGS ...................................................... 45,259 32,900
-------- --------
TOTAL SHAREHOLDERS' EQUITY ....................................... 93,180 81,492
-------- --------
$288,412 $284,789
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------
1997 1996 1995
---------- ---------- ---------
<S> <C> <C> <C>
REVENUES
Sales of homes ....................................... $404,407 $303,972 $216,059
Sales of land ....................................... 7,685 17,571 20,964
Rent and other ....................................... 1,513 1,485 1,573
Financial services ................................. 11,690 9,060 5,932
-------- -------- --------
425,295 332,088 244,528
-------- -------- --------
COSTS AND EXPENSES
Cost of sales-homes ................................. 345,295 260,651 184,888
Cost of sales-land ................................. 7,095 15,589 17,332
Selling, marketing, general and administrative ...... 39,620 31,906 24,466
Depreciation and amortization ........................ 2,374 2,977 3,532
Financial services ................................. 9,012 7,264 4,774
-------- -------- --------
403,396 318,387 234,992
-------- -------- --------
INCOME BEFORE INCOME TAXES ........................... 21,899 13,701 9,536
Provision for income taxes ........................... 8,431 5,206 3,624
-------- -------- --------
NET INCOME .......................................... $ 13,468 $ 8,495 $ 5,912
======== ======== ========
Net income per share
Primary ............................................. $ 1.94 $ 1.20 $ 0.85
======== ======== ========
Fully diluted ....................................... $ 1.58 $ 1.03 $ 0.74
======== ======== ========
Shares used in earnings per share calculations
Primary ............................................. 6,951 7,108 6,989
Fully diluted ....................................... 9,246 9,251 9,132
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- ADDITIONAL RETAINED
SHARES AMOUNT PAID-IN CAPITAL EARNINGS TOTAL
----------- -------- ----------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Amounts at October 31, 1994 ......... 6,679,200 $ 67 $45,525 $20,711 $66,303
Net income ........................ 5,912 5,912
Dividends to shareholders ......... (1,109) (1,109)
Common Stock issued in connection
with acquisition of land ......... 250,000 2 2,998 3,000
--------- ---- ------- ------- --------
Amounts at October 31, 1995 ......... 6,929,200 $ 69 $48,523 $25,514 $74,106
Net income ........................ 8,495 8,495
Dividends to shareholders ......... (1,109) (1,109)
--------- ---- ------- -------- --------
Amounts at October 31, 1996 ......... 6,929,200 $ 69 $48,523 $32,900 $81,492
Net income ........................ 13,468 13,468
Dividends to shareholders ......... (1,109) (1,109)
Distribution in connection with
land purchase ..................... (694) (694)
Common Stock issued in connection with
employee stock bonus plan ......... 2,493 23 23
--------- ---- ------- ------- --------
Amounts at October 31, 1997 ......... 6,931,693 $ 69 $47,852 $45,259 $93,180
========= ==== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------------
1997 1996 1995
------------ ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ......................................................... $ 13,468 $ 8,495 $ 5,912
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization .................................... 2,374 2,977 3,532
Impairment loss ................................................... 2,156 1,948
Deferred tax (benefit) provision ................................. (2,626) (1,508) 154
Employee stock compensation ....................................... 24
Change in assets and liabilities:
Decrease in restricted cash ....................................... 2,457 819 221
Increase in inventories .......................................... (11,700) (23,848) (56,957)
Decrease (increase) in other assets .............................. 3,231 (5,396) (822)
Increase in mortgages held for sale .............................. (1,523) (6,533) (3,910)
(Decrease) increase in accounts payable and accrued expenses ...... (5,003) 12,462 2,181
(Decrease) increase in deposits .................................... (4,532) 2,785 929
Increase in financial service borrowings ........................... 1,523 6,533 3,910
--------- -------- ---------
Net cash required by operating activities ..................... (151) (1,266) (44,850)
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment .............................. (1,282) (707) (1,567)
Proceeds from sale of property .................................... 592 7,538
--------- -------- ---------
Net cash (required) provided by investing activities ............ (690) 6,831 (1,567)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in borrowings ............................................. 47,510 94,872 105,955
Repayment of borrowings ............................................. (47,563) (90,209) (57,929)
Distribution to shareholders ....................................... (1,803) (1,109) (1,109)
--------- -------- ---------
Net cash (required) provided by financing activities ............ (1,856) 3,554 46,917
--------- -------- ---------
NET (DECREASE) INCREASE IN CASH .................................... (2,697) 9,119 500
CASH AT BEGINNING OF PERIOD .......................................... 18,262 9,143 8,643
--------- -------- ---------
CASH AT END OF PERIOD ................................................ $ 15,565 $ 18,262 $ 9,143
========= ======== =========
Supplemental disclosure of cash flow information
Interest paid ...................................................... $ 15,623 $ 15,293 $ 14,915
========= ======== =========
Income taxes paid ................................................... $ 10,324 $ 4,902 $ 3,407
========= ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND BUSINESS:
Engle Homes, Inc. and subsidiaries ("the Company") is engaged principally
in the construction and sale of residential homes and land development. The
Company's primary market is Florida with divisions in Dallas, Texas; Denver,
Colorado; Virginia and Maryland; Raleigh, North Carolina; Phoenix, Arizona and
Atlanta, Georgia. Ancillary products and services to its residential home
building include land sales to other builders, origination and sale of mortgage
loans and title services. The consolidated financial statements include the
accounts of the Company and all subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
PREPARATION OF FINANCIAL STATEMENTS:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
ASSET IMPAIRMENTS:
During fiscal 1996, the Company adopted Financial Accounting Standard
Statement No. 121 entitled "Accounting for the Impairment of Long-Lived Assets
to be Disposed of" which was not significantly different from the Company's
previous asset impairment accounting policy. The Company periodically reviews
the carrying value of certain of its assets in relation to historical results,
current business conditions and trends to identify potential situations in
which carrying value of assets may not be recoverable. If such reviews indicate
that the carrying value of such assets may not be recoverable, the Company
would estimate the undiscounted sum of the expected cash flows of such assets
to determine if such sum is less than the carrying value of such assets to
ascertain if a permanent impairment exists. If a permanent impairment exists,
the Company would determine the fair value by using quoted market prices, if
available for such assets, or if quoted market prices are not available, the
Company would discount the expected future cash flows of such assets.
CASH:
Unrestricted cash includes amounts in transit from title companies for
home closings and highly liquid investments with an initial maturity of three
months or less.
Restricted cash consists of amounts held in escrow as required by purchase
contracts or by law for rental security deposits and compensating balances for
various letters of credit.
INVENTORIES:
Inventories are stated at the lower of cost or fair value. Inventories
under development or held for development are stated at an accumulated cost
unless such cost would not be recovered from the cash flows generated by future
disposition. In this instance, such inventories are measured at fair value.
Interest, real estate taxes and similar development costs are capitalized
to land and construction costs during the development and construction period
and are amortized to costs of sales as closings occur.
F-7
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
PROPERTY AND EQUIPMENT, DEPRECIATION AND AMORTIZATION:
Property and equipment are stated at cost. Depreciation and amortization
are provided over the assets' estimated useful lives ranging from 18 months to
30 years, primarily on the straight-line method. Loan costs are deferred and
amortized over the term of the outstanding borrowings.
GOODWILL:
The Company has classified as goodwill, the excess of cost over the fair
value of the net assets of companies acquired in purchase transactions.
Goodwill is being amortized on a straight line method over 20 years.
Amortization charged to operations annually amounted to $336,550 in fiscal
1997, 1996, and 1995 respectively.
REVENUE RECOGNITION:
Revenues and profits from sales of commercial and residential real estate
and related activities are recognized when closings have occurred and the
purchaser has made a minimum down payment and other criteria for sale and
profit recognition are satisfied in accordance with generally accepted
accounting principles governing profit recognition for real estate
transactions.
SELLING AND MARKETING:
Certain selling and marketing costs associated with residential projects
are deferred and amortized as closings related to those sales occur and revenue
is recognized. The deferred selling and marketing amount was $1,300,000 at
October 31, 1997. The Company amortized selling and marketing costs of
$27,800,000, $22,100,000 and $15,600,000 in 1997, 1996 and 1995, respectively.
INCOME TAXES:
The Company accounts for income taxes under the asset and liability method
in accordance with Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes."
EARNINGS PER SHARE:
Net income per share is based on the weighted average number of shares of
Common Stock outstanding during each year, after giving effect to the stock
splits, convertible debt and stock options described in Notes 5 and 6. Such
computations are further adjusted for fully diluted purposes by assuming
conversion of the $30,000,000 7% Convertible Subordinated Notes and elimination
of related interest amortized net of taxes during the period, resulting in an
increase in net income of $1,114,000, $1,071,000 and $854,905 for the years
ended October 31, 1997, 1996 and 1995 respectively.
FINANCIAL INSTRUMENTS:
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques as appropriate, unless
otherwise disclosed, the fair values of financial instruments approximate their
recorded values.
F-8
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
STOCK BASED COMPENSATION:
On October 23, 1995, the Financial Accounting Standards Board issued a
SFAS No. 123, "Accounting for Stock-Based Compensation," which is effective for
financial statements for fiscal years beginning after December 15, 1995.
Statement No. 123 provides a fair value method of accounting for stock-based
compensation arrangements rather than the intrinsic value based method
contained in APB Opinion No. 25. The Statement does not require an entity to
adopt the new fair value based method for the purpose of preparing its basic
financial statements. Entities that retain the APB Opinion No. 25 method of
accounting will be required to display in the footnotes pro forma net income
and earnings per share information as if the fair value based method had been
adopted. The Company currently does not intend to adopt the Fair-Value Method
provided in Statement No. 123.
NEW ACCOUNTING PRONOUNCEMENTS:
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," issued in February 1997, replaces the current methodology for
calculating and presenting earnings per share. Under SFAS No. 128, primary
earnings per share will be replaced with a presentation of basic earnings per
share and fully diluted earnings per share will be replaced with diluted
earnings per share. Basic earnings per share excludes dilution and is computed
by dividing income available to common shares outstanding for the period by the
weighted average number of shares of common stock outstanding. Diluted earnings
per share is computed similarly to fully diluted earnings per share in
accordance with APB Opinion No. 15. The Statement will be effective for
financial statements issued by the Company after December 15, 1997. The impact
of SFAS No. 128 is not expected to be material.
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in equity
except those resulting from investments by owners and distributions to owners.
Among other disclosures, SFAS No. 130 requires that all items that are required
to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which supersedes SFAS No. 14, Financial Reporting for Segments of
a Business Enterprise, establishes standards for the way that public
enterprises report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate the resources and in assessing performance.
Both SFAS No. 130 and No. 131, issued in June 1997, are effective for
financial statements for periods beginning after December 15, 1997 and require
comparative information for earlier years to be restated. Due to the recent
issuance of these standards, management has been unable to fully evaluate the
impact, if any, they may have on future financial statement disclosures.
F-9
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
FINANCIAL STATEMENT RECLASSIFICATIONS:
Certain amounts reflected in the consolidated financial statements for the
years ended October 31, 1996 and 1995 have been reclassified to conform to the
presentation for the year ended October 31, 1997.
NOTE 2--INVENTORIES
Inventories consist of (dollars in thousands):
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
1997 1996
---------- ---------
<S> <C> <C>
Land and improvements for residential homes under
development .................................... $180,899 $161,590
Residential homes under construction ............ 46,049 55,715
Land zoned for commercial development ............ 1,780 1,780
Investment in unconsolidated joint ventures ...... 1,380 1,479
-------- --------
................................................... $230,108 $220,564
======== ========
</TABLE>
The investment in the unconsolidated joint venture consists of land
purchased in connection with a joint venture with US Home. Each company
maintains a fifty percent (50%) interest in the venture. The land is being
developed by the joint venture and then transferred to each joint venture
partner at the venture's cost. The Company and US Home separately market and
build the homes.
Included in inventory is the following (dollars in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------------
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Interest capitalized, beginning of period ...... $ 16,821 $ 13,092 $ 6,246
Interest incurred and capitalized ............... 15,623 15,272 13,750
Interest amortized to cost of sales ............ (16,066) (11,543) (6,904)
--------- --------- --------
Interest capitalized, end of period ............ $ 16,378 $ 16,821 $ 13,092
========= ========= ========
</TABLE>
Included in the cost of sales-homes during the years ended October 31,
1997 and 1996, are impairment losses of $2.2 million and $1.9 million,
respectively, to reduce certain projects under development to fair value.
NOTE 3--PROPERTY AND EQUIPMENT (dollars in thousands)
<TABLE>
<CAPTION>
OCTOBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Commercial properties ............... $ 1,041 $ 1,825
Other property and equipment ......... 3,835 4,756
-------- --------
4,876 6,581
Less: accumulated depreciation ...... (2,253) (2,982)
-------- --------
$ 2,623 $ 3,599
======== ========
</TABLE>
During fiscal 1996, the Company sold three commercial properties, a 38,000
square foot shopping plaza and a 60,000 square foot mixed use office building,
both located in Boca Raton, Florida, and a 95 unit rental apartment complex in
Orlando, Florida.
F-10
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--FINANCIAL SERVICES
The Company operates two financial services subsidiaries: a full service
mortgage company and a title company.
The mortgage company's activities include the origination, sale and
servicing of residential mortgages. The mortgage company has established an
$18.0 million line of credit at prime minus .25% (8.25% at October 31, 1997),
expiring April 1998, to finance mortgage originations. As of October 31, 1997,
the balance outstanding under the line of credit was approximately $14.5
million. Management does not anticipate that such expanded operations will
significantly impact the Company's liquidity because the originated mortgages
are sold within a short period of time after their origination to qualified
investors. The following is a summary of the mortgage company's results of
operations and financial position:
PREFERRED HOME MORTGAGE COMPANY
INCOME STATEMENT INFORMATION
(dollars in thousands)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER
31,
-----------------------------
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
REVENUES
Loan origination fees ............ $3,556 $3,041 $1,551
Interest ........................... 577 494 134
------ ------ ------
TOTAL REVENUES ..................... 4,133 3,535 1,685
------ ------ ------
COSTS AND EXPENSES ..................
General and administrative ......... 1,724 1,716 982
Interest ........................... 570 514 174
Application processing costs ...... 566 512 208
------ ------ ------
TOTAL EXPENSES ..................... 2,860 2,742 1,364
------ ------ ------
INCOME BEFORE TAXES ............... $1,273 $ 793 $ 321
====== ====== ======
</TABLE>
F-11
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--FINANCIAL SERVICES--(CONTINUED)
PREFERRED HOME MORTGAGE COMPANY
BALANCE SHEET INFORMATION
(dollars in thousands)
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
1997 1996
--------- --------
<S> <C> <C>
ASSETS
CASH ............................................. $ 102 $ 106
MORTGAGE LOANS HELD FOR SALE ..................... 14,529 13,006
MORTGAGE LOANS RECEIVABLE ........................ 171 360
OTHER .......................................... 559 655
ADVANCES TO PARENT (a) ........................... 1,877 331
------- -------
TOTAL ASSETS ................................. $17,238 $14,458
======= =======
LIABILITIES AND EQUITY
ACCOUNTS PAYABLE ................................. $ 66 $ 82
NOTES PAYABLE .................................... 14,529 13,006
------- -------
TOTAL LIABILITIES .............................. 14,595 13,088
SHAREHOLDERS' EQUITY ........................... 2,643 1,370
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...... $17,238 $14,458
======= =======
</TABLE>
- ----------------
(a) Certain intercompany transactions and balances are eliminated in
consolidation and have no effect on consolidated earnings or equity.
NOTE 5--BORROWINGS (dollars in thousands)
Borrowings consist of:
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
1997 1996
---------- ---------
<S> <C> <C>
Acquisition and development loans from banks, payable through
1999, with interest at floating rates (8.75% at October 31, 1997),
collateralized by inventories .................................... $ 13,357 $ 24,907
Purchase money mortgages, collateralized by inventories ......... 1,624
Revolving construction loans from banks, payable through 2000
with interest at floating rates (8.15% to 9.00% at October 31,
1997), collateralized by inventories ........................... 68,622 55,541
Other ............................................................ 85 45
-------- --------
Borrowings ...................................................... $ 82,064 82,117
Senior Notes due December 15, 2000 with interest at a fixed rate
of 11 3/4% payable semi-annually ................................. $ 40,000 $ 40,000
Convertible Subordinated Notes due March 1, 2003 with interest
at a fixed rate of 7% payable semi-annually ..................... $ 30,000 $ 30,000
-------- --------
$152,064 $152,117
======== ========
</TABLE>
On February 22, 1993, the Company sold $30,000,000 of 7% Convertible
Subordinated Notes Due 2003 (the "Notes"). The Notes are convertible into
Common Stock at a conversion price of $14.00 per share and are redeemable in
whole or in part, at the option of the Company on or after April 1, 1996.
F-12
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5--BORROWINGS--(CONTINUED)
In October 1997, the Company announced the early redemption of $15 million
of the Notes. The redemption is anticipated to be completed in November 1997 at
a redemption price of $1,042.50 per $1,000 (face value) of Notes.
The Company's loan agreements include covenants, including restrictions on
the Company's ability to pay dividends (no more than 50% of net income after
taxes for each fiscal year). Certain of such loans also require that the
principal shareholders continue to beneficially own a majority of the Company's
outstanding Common Stock and provide that the lender may, at its option,
accelerate such loans as a result of, among other things, mergers with other
entities. In addition, the Convertible Subordinated Notes and the Senior Notes
are guaranteed by all of the Company's subsidiaries on a full, unconditional,
joint and several basis. The financial statements of the subsidiary guarantors
are omitted as management has determined that they would not be material to
investors.
Maturities of borrowings are as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
- ----------------------
<S> <C>
1998 ........................... 4,424
1999 ........................... 42,004
2000 ........................... 74,173
2001 ........................... --
Thereafter ..................... 31,463
--------
$152,064
========
</TABLE>
The Company has approximately $18,921,000 available for future borrowings
under various acquisition and development related borrowing arrangements at
October 31, 1997.
As of October 31, 1997, the outstanding principal amount of 7% Convertible
Subordinated Notes and 113/4% Senior Notes were $30,000,000 and $40,000,000,
respectively. The aggregate fair market value of the notes, based upon their
quoted market price as of October 31, 1997, was approximately $75,610,000. All
other borrowings, due to their relative short-term maturity, approximate fair
market value as of October 31, 1997.
NOTE 6--STOCK-BASED COMPENSATION
At October 31, 1997, the Company has a fixed stock option plan which is
described below. The Company applies APB Opinion 25, Accounting for Stock
Issued to Employees, and related interpretations in accounting for the plan.
Under APB Opinion 25, if the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant,
no compensation is recognized.
Under the plan, options were authorized to be granted to purchase 850,000
common shares at not less than the fair market value at the date of grant.
Options expire ten years from the date of grant.
FASB Statement 123, Accounting for Stock-Based Compensation, requires the
Company to provide proforma information regarding net income and net income per
share as if compensation cost for the Company's stock option plan had been
determined in accordance with the fair-value based method prescribed in FASB
Statement 123. There were no options granted during the year ended October 31,
1997 and options to purchase 5,000 shares were granted during the year ended
October 31, 1996. The Company's pro forma net income and income per share under
the accounting provisions of FASB Statement 123 did not materially differ from
the reported amounts.
F-13
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--STOCK-BASED COMPENSATION--(CONTINUED)
A summary of the status of the Company's fixed stock option plan as of
October 31, 1997 and 1996, and changes during the years then ended on those
dates are presented below:
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1997 AS OF OCTOBER 31, 1996
------------------------------ --------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- ------------------ ------------ -----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year ...... 606,500 $10.76 624,000 $ 10.80
Granted .............................. -- -- 5,000 $ 9.00
Exercised .............................. -- -- -- --
Forfeited .............................. -- -- (22,500) $ 11.50
Outstanding at end of year ............ 606,500 $10.76 606,500 $ 10.76
------- ------ ------- -------
Options exercisable at year-end ...... 502,000 $11.10 387,200 $ 11.20
Weighted average fair value of options
granted during the year ............... -- -- 5,000 $ 9.00
</TABLE>
The following table summarizes information about fixed stock options
outstanding at October 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------------------------------------------- -------------------------------
NUMBER WEIGHTED AVERAGE WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICES AT 10/31/97 CONTRACTUAL LIFE EXERCISE PRICE AT 10/31/97 EXERCISE PRICE
- ------------------ ------------- ------------------ ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$9.00 - $11.50 606,500 5 years $10.76 502,000 $11.10
</TABLE>
During fiscal 1997 the Company established the 1997 Performance Bonus Plan
(the "Bonus Plan"). The Bonus Plan provides for the issuance of up to 25,000
shares at "Fair Market Value" to certain management employees. The Company
issued 2,493 shares valued at approximately $24,000 during fiscal 1997.
NOTE 7--INCOME TAXES
The income tax provision in the consolidated statements of income consists
of the following components (dollars in thousands) :
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------
1997 1996 1995
----------- ----------- -------
<S> <C> <C> <C>
Current:
Federal ...... $ 9,467 $ 5,734 $2,952
State ......... 1,589 981 518
-------- -------- ------
$ 11,056 $ 6,715 $3,470
-------- -------- ------
Deferred:
Federal ...... (2,250) (1,288) 132
State ......... (375) (221) 22
-------- -------- ------
(2,625) (1,509) 154
-------- -------- ------
Total ...... $ 8,431 $ 5,206 $3,624
======== ======== ======
</TABLE>
The provision for income taxes was different from the amount computed by
applying the statutory rate due to the effect of state income taxes.
F-14
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--INCOME TAXES--(CONTINUED)
Temporary differences which gave rise to deferred income tax assets and
liabilities at October 31, 1997 and 1996 were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------------
1997 1996
------------ -----------
<S> <C> <C>
Deferred tax liabilities:
Differences in reporting selling and marketing costs for tax
purposes.................................................... $ 818 $ 1,185
Other ...................................................... 97 68
-------- -------
Gross deferred tax liabilities .............................. $ 915 $ 1,253
Deferred tax assets:
Inventory ................................................... 2,822 913
Property and equipment .................................... 384 534
Income recognized for tax purposes and deferred for financial
reporting purposes ....................................... 885 356
-------- -------
Gross deferred tax assets .................................... 4,091 1,803
-------- -------
Net deferred tax asset ....................................... $ (3,176) $ (550)
======== =======
</TABLE>
NOTE 8--COMMITMENTS AND CONTINGENCIES
The Company is subject to the normal obligations associated with entering
into contracts for the purchase, development and sale of real estate in the
routine conduct of its business. The Company is committed under various letters
of credit to perform certain development activities, deposits on land and lot
purchase contract deposits. Outstanding letters of credit and performance bonds
under these arrangements totaled approximately $29.2 million at October 31,
1997.
During fiscal 1996, the Company entered into an agreement for the sale and
leaseback of the Company's office/retail complex located at the Company's
headquarters in Boca Raton, Florida. The sales price was $8,000,000, which
approximated the carrying amount. The lease is classified as an operating lease
in accordance with Statement of Financial Accounting Standards No. 13,
"Accounting for Leases."
The Company and its subsidiaries occupy certain facilities under lease
arrangements. Rent expense, net of sublease income, amounted to $293,541,
$302,582, and $202,888 in fiscal 1997, 1996, and 1995, respectively. Future
minimum rental commitments for operating leases with non-cancelable terms in
excess of one year are $800,000 per year through 2006. Sublease income is
derived primarily from tenants occupying space under month-to-month and annual
leases.
The Internal Revenue Service is in the process of reviewing the Company's
tax returns for the years 1994 through 1996. While the Company cannot be
certain of the results of these audits, it believes that adjustments, if any,
will not be material.
The Company is involved, from time to time, in litigation arising in the
ordinary course of business, none of which is expected to have a material
adverse effect on the Company's consolidated financial position or results of
operations.
The Company, as well as the homebuilding industry in general, may be
adversely affected during periods of high inflation, primarily because of
higher land and construction costs. In addition, higher
F-15
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
mortgage interest rates may significantly affect the affordability of permanent
mortgage financing to prospective purchasers. Inflation also increases the
Company's interest costs and costs of labor and materials. The Company attempts
to pass through to its customers any increases in its costs through increased
selling prices and, to date, inflation has not had a material adverse effect on
the Company's results of operations. However, there is no assurance that
inflation will not have a material adverse impact on the Company's future
results of operations.
The Company's operations are interest rate sensitive. Overall housing
demand is adversely affected by increases in interest costs. If mortgage
interest rates increase significantly, this may negatively impact the ability
of a home buyer to secure adequate financing and may adversely affect the
carrying value of inventory. Such results of higher interest rates may result
in adversely affecting the Company's revenues, gross margins and net income.
NOTE 9--DEFERRED COMPENSATION PLAN
The Company has a defined contribution plan established pursuant to
Section 401(k) of the Internal Revenue Code. Employees contribute to the plan a
percentage of their salaries, subject to certain dollar limitations, and the
Company matches a portion of the employees' contributions. The Company's
contribution to the plan for the years ended October 31, 1997, 1996, and 1995
amounted to $93,000, $61,000 and $66,000, respectively.
NOTE 10--SUMMARIZED FINANCIAL INFORMATION
The securities that may be issued under a debt offering contemplated by
the Company will be guaranteed by all of the Company's subsidiaries on a full,
unconditional, joint and several basis. The financial statements of the
subsidiary guarantors are omitted as management has determined that separate
financial statements and other disclosures concerning the subsidiaries are not
material to investors.
Summarized financial information of guarantor subsidiaries are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------
1997 1996 1995
---------- ---------- ---------
<S> <C> <C> <C>
Inventory ....................................... $194,847 $204,200 $178,407
Total assets .................................... 247,966 239,402 215,204
Borrowings .................................... 51,346 50,098 50,563
Total liabilities .............................. 146,817 155,045 154,241
Revenues from the sales of homes and land ...... 339,198 282,773 198,598
Total revenues ................................. 378,996 293,103 205,209
Cost of sales homes and land .................. 293,884 241,518 167,955
Net income .................................... 10,230 11,341 8,861
</TABLE>
F-16
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11--QUARTERLY RESULTS FOR 1997 AND 1996 (UNAUDITED)
Quarterly results for the years ended October 31, 1997 and 1996 follow:
(dollars in thousands, except per share data):
<TABLE>
<CAPTION>
1997 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
- ---- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues ................................................... $100,108 $105,120 $107,125 $112,942
Income before income taxes ................................. 4,618 4,999 5,856 6,426
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . 2,840 3,074 3,602 3,952
Net income per share
Primary ................................................... 0.41 0.44 0.52 0.56
Fully diluted ............................................. 0.34 0.36 0.43 0.46
Shares used in earnings per share
calculation:
Primary ................................................... 6,989 6,962 6,963 7,047
Fully diluted ............................................. 9,132 9,105 9,106 9,246
1996
- ----
Revenues ................................................... $ 60,050 $ 76,034 $ 90,393 $105,611
Income before income taxes ................................. 1,306 3,304 3,990 5,101
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . 810 2,048 2,474 3,163
Net income per share
Primary ................................................... 0.12 0.29 0.35 0.44
Fully diluted ............................................. 0.11 0.25 0.30 0.38
Shares used in earnings per share
calculation:
Primary ................................................... 6,989 7,037 7,120 7,108
Fully Diluted ............................................. 9,132 9,180 9,263 9,251
</TABLE>
Quarterly and year-to-date computation of per share amounts are made
independently. Therefore, the sum of per share amounts for the quarters may not
agree with per share amounts for the year.
NOTE 12--NON-CASH INVESTING AND FINANCING ACTIVITIES
During fiscal 1996 the Company sold certain commercial properties in
exchange for cash of $7.5 million and notes receivable of $3.9 million.
During fiscal 1995 the Company purchased land valued at $3.0 million in
exchange for 250,000 restricted shares of Common Stock with a minimum
guaranteed price of $12.00 a share. In connection with this transaction, the
Company recorded a deferred tax liability of $280,000 representing the
differential in the basis of the land for financial reporting and tax reporting
purposes. During fiscal 1997, the Company paid the seller approximately
$694,000 in connection with the guarantee. The guarantee expired during fiscal
1997.
F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT
RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER
IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary ........................ 3
Risk Factors .............................. 10
Use of Proceeds ........................... 14
Capitalization ........................... 15
Selected Consolidated Financial and
Operating Data ........................ 16
Management's Discussion and
Analysis of Financial Condition
and Results of Operations ............ 18
Business ................................. 24
Management .............................. 31
Description of the Senior Notes ......... 33
Description of Certain Indebtedness ...... 53
Description of Capital Stock ............ 55
Underwriting .............................. 56
Legal Matters ........................... 57
Experts ................................. 57
Available Information ..................... 57
Incorporation of Certain Documents
by Reference ........................... 58
Index to Consolidated Financial
Statements ........................... F-1
</TABLE>
$100,000,000
ENGLE HOMES, INC.
% SENIOR NOTES
DUE 2008
[LOGO]
-----------------
P R O S P E C T U S
, 1998
-----------------
SALOMON SMITH BARNEY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that expenses payable by the Registrant in
connection with the offering described in this registration statement (other
than underwriting discounts and commissions) will be as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee ............ $ 30,103
NASD filing fee ................................................ 10,500
Printing and engraving expenses ................................. 40,000
Accounting fees and expenses .................................... 20,000
Legal fees and expenses ....................................... 40,000
Fees and expenses (including legal fees) for qualifications under
state securities laws ....................................... 25,000
Trustee's fees and expenses .................................... 1,000
Miscellaneous ................................................... 233,397
--------
Total ......................................................... $400,000
========
</TABLE>
All amounts except the Securities and Exchange Commission registration fee
and the NASD filing fee are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under the Florida Business Corporation Act to
indemnify its directors and officers to the extent provided in such statute.
The Registrant's Amended and Restated Articles of Incorporation provide that
the Registrant may indemnify its executive officers and directors to the
fullest extent permitted by law either now or hereafter. The Registrant has
also entered into an agreement with each of its directors and certain of its
officers wherein it has agreed to indemnify each of them to the fullest extent
permitted by law. In general, Florida law permits a Florida corporation to
indemnify its directors, officers, employees and agents, and persons serving at
the corporation's request in such capacities for another enterprise against
liabilities arising from conduct that such persons reasonably believed to be
in, or not opposed to, the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition,
each director will continue to be subject to liability for (a) violations of
the criminal law, unless the director had reasonable cause to believe his
conduct was lawful or had no reasonable cause to believe his conduct was
unlawful, (b) deriving an improper personal benefit from a transaction, (c)
voting for or assenting to an unlawful distribution, and (d) willful misconduct
or a conscious disregard for the best interests of the Registrant in a
proceeding by or in the right of the Registrant to procure a judgment in its
favor or in a proceeding by or in the right of a shareholder. The statute does
not affect a director's responsibilities under any other law, such as the
Federal securities laws or state or Federal environmental laws.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought from the Registrant, nor is the Registrant aware of any threatened
litigation that may result in claims for indemnification from the Registrant by
any officer or director.
II-1
<PAGE>
Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, the Underwriter agreed to indemnify the directors,
officers and controlling persons of the Registrant against certain civil
liabilities that may be incurred in connection with this offering, including
certain liabilities under the Act.
Pursuant to the Registration Rights Agreement incorporated by reference as
Exhibit 10.3 to this Registration Statement, certain principal shareholders of
the Registrant have agreed to indemnify the directors, officers and controlling
persons of the Registrant against certain civil liabilities that may be
incurred in connection with certain future registrations of the Registrant's
Common Stock, including certain liabilities under the Act.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- -----------
<S> <C>
1.1 Form of Underwriting Agreement.*
4.1 Form of Indenture between the Registrant and the American Stock Transfer & Trust
Company, as trustee, relating to the Senior Notes.*
4.2 Form of Senior Note (included in Exhibit 4.1).*
5.1 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. as to the validity of the
Senior Notes and Guarantees being registered.*
10.1 Registrant's Second Amended and Restated 1991 Stock Option Plan (Compensatory Plan),
hereby incorporated by reference to Exhibit A of the Registrant's Proxy Statement for its 1996
Annual Meeting.
10.2 Indemnification Agreement between the Registrant and each of its directors and certain
executive officers, hereby incorporated by reference to Exhibit 10.2 of the Company's
Registration Statement of Form S-1 (File No. 33-58678).
10.3 Registration Rights Agreement, dated October 1991, among the Registrant, Alec Englestein,
Sheila Englestein and Harry Englestein, incorporated by reference to Exhibit 4.2 to the
Registrant's Registration Statement on Form S-1 (File No. 33-43305).
10.4 Indenture, dated as of February 12, 1993, among the Registrant, its subsidiaries and the First
National Bank of Boston, relating to the Convertible Subordinated Notes, hereby incorporated
by reference to Exhibit 4.3 of the Registrant's Registration Statement on Form S-1 (File
No. 33-58678).
10.5 Indenture, dated as of March 15, 1994, relating to the Registrant's 11.75% Senior Notes due
2000, hereby incorporated by reference to Exhibit 4.9 of the Registrant's Current Report on
Form 8-K, dated March 17, 1994.
10.6 Registrant's 1997 Performance Bonus Plan (Compensatory Plan), hereby incorporated by
reference to Exhibit 10.1 of the Registrant's Registration Statement on Form S-8 (File No. 333-
39223).
11.1 Statement Regarding Computation of Per Share Earnings.*
12.1 Statement of Computation of Ratio of Earnings to Fixed Charges.*
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. (included in
Exhibit 5.1).*
24.1 Powers of Attorney (included on signature page).*
25.1 Statement of Eligibility on Form T-1 of Trustee.*
</TABLE>
- ----------------
* Previously filed.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
ENGLE HOMES, INC.
By: /s/ ALEC ENGELSTEIN
------------------------------------------
Alec Engelstein, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- ------------------------------------------ -----------------
<S> <C> <C>
/s/ ALEC ENGELSTEIN Chairman of the Board, President January 22, 1998
- ----------------------------- and Chief Executive Officer
Alec Engelstein (Principal Executive Officer)
/s/ DAVID SHAPIRO Vice President--Finance, Chief January 22, 1998
- ----------------------------- Financial Officer and Director
David Shapiro (Principal Financial Officer)
* Vice President--Chief Accounting Officer January 22, 1998
- ----------------------------- (Principal Accounting Officer)
Paul Leikert
* Executive Vice President, Chief January 22, 1998
- ----------------------------- Construction Officer and Director
Harry Engelstein
* Senior Vice President and Director January 22, 1998
- -----------------------------
John A. Kraynick
* Director January 22, 1998
- -----------------------------
Henry H. Fishkind
* Director January 22, 1998
- -----------------------------
Ronald J. Korn
Director January 22, 1998
- -----------------------------
Alan L. Shulman
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
BANYAN TRAILS, INC.
By: /s/ DAVID SHAPIRO
------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President and Director January 22, 1998
- ----------------------------- (Principal Executive Officer)
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
ENGLE HOMES/ARIZONA, INC.
By: /s/ DAVID SHAPIRO
------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President January 22, 1998
- ----------------------------- (Principal Executive Officer)
Mark Upton
* Vice President and Director January 22, 1998
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
ENGLE HOMES/ARIZONA CONSTRUCTION, INC.
By: *
------------------------------------------
Mark Upton, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- ----------------------------------- -----------------
<S> <C> <C>
* President January 22, 1998
- ----------------------------- (Principal Executive Officer)
Mark Upton
* Treasurer and Assistant Secretary January 22, 1998
- ----------------------------- (Principal Financial Officer and
Karen Murray Principal Accounting Officer)
* Director January 22, 1998
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Director January 22, 1998
- -----------------------------
David Shapiro
* Director January 22, 1998
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
ENGLE HOMES/ATLANTA, INC.
By: /s/ DAVID SHAPIRO
-----------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President and Director January 22, 1998
- ----------------------------- (Principal Executive Officer)
Geoffrey Brunning
* Vice President and Director January 22, 1998
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- -----------------------------
John A. Kraynick
* Vice President and Director January 22, 1998
- -----------------------------
Harry Engelstein
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
ENGLE HOMES/BROWARD, INC.
By: /s/ DAVID SHAPIRO
-----------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President and Director January 22, 1998
- ----------------------------- (Principal Executive Officer)
Harry Engelstein
* Vice President and Director January 22, 1998
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ------------------------------ Treasurer and Director
David Shapiro (Principal Financial Officer and
(Principal Accounting Officer)
* Vice President and Director January 22, 1998
- ------------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
ENGLE HOMES/COLORADO, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President January 22, 1998
- ----------------------------- (Principal Executive Officer)
Eric Eckberg
* Vice President and Director January 22, 1998
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ----------------------------- Treasurer and Director
(Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
ENGLE HOMES/GULF COAST, INC.
By: /s/ DAVID SHAPIRO
------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President January 22, 1998
- ----------------------------- (Principal Executive Officer)
Joe Mattarazzo
* Vice President and Director January 22, 1998
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
ENGLE HOMES/LAKE BENADETTE, INC.
By: /s/ DAVID SHAPIRO
------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President January 22, 1998
- ----------------------------- (Principal Executive Officer)
Joe Mattarazzo
* Vice President and Director January 22, 1998
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
ENGLE HOMES/NORTH CAROLINA, INC.
By: /s/ DAVID SHAPIRO
------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President January 22, 1998
- ----------------------------- (Principal Executive Officer)
Timothy Franks
* Vice President and Director January 22, 1998
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
ENGLE HOMES/ORLANDO, INC.
By: /s/ DAVID SHAPIRO
------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President and Director January 22, 1998
- ----------------------------- (Principal Executive Officer)
William Carmichael
* Vice President and Director January 22, 1998
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
ENGLE HOMES/PALM BEACH, INC.
By: /s/ DAVID SHAPIRO
------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President and Director January 22, 1998
- ----------------------------- (Principal Executive Officer)
Harry Engelstein
* Vice President and Director January 22, 1998
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
ENGLE HOMES/PEMBROKE, INC.
By: /s/ DAVID SHAPIRO
------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President and Director January 22, 1998
- ----------------------------- (Principal Executive Officer)
Harry Engelstein
* Vice President and Director January 22, 1998
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
ENGLE HOMES/SOUTHWEST FLORIDA, INC.
By: /s/ DAVID SHAPIRO
------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President January 22, 1998
- ----------------------------- (Principal Executive Officer)
Robert Wolfe
* Vice President and Director January 22, 1998
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
ENGLE HOMES/TEXAS, INC.
By: /s/ DAVID SHAPIRO
------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President January 22, 1998
- ----------------------------- (Principal Executive Officer)
Michael J. Moore
* Vice President and Director January 22, 1998
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
ENGLE HOMES/VIRGINIA, INC.
By: /s/ DAVID SHAPIRO
------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President January 22, 1998
- ----------------------------- (Principal Executive Officer)
Bruce Leinberger
* Vice President and Director January 22, 1998
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the requi
rements for filing on Form S-2 and has duly caused this Amendment No. 2 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boca Raton, State of Florida, on January 22,
1998.
GREENLEAF HOMES, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President and Director January 22, 1998
- ----------------------------- (Principal Executive Officer)
Geoffrey Brunning
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
PEMBROKE FALLS REALTY, INC.
By: /s/ DAVID SHAPIRO
------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President and Director January 22, 1998
- ----------------------------- (Principal Executive Officer)
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
PREFERRED BUILDERS REALTY, INC.
By: /s/ DAVID SHAPIRO
------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President and Director January 22, 1998
- ----------------------------- (Principal Executive Officer)
Paul Ackerman
* Vice President and Director January 22, 1998
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ------------------------------ Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- ------------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
PREFERRED HOME MORTGAGE COMPANY
By: /s/ DAVID SHAPIRO
------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President and Director January 22, 1998
- ----------------------------- (Principal Executive Officer)
Dan Klinger
* Vice President and Director January 22, 1998
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ------------------------------ Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- ------------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
ST. TROPEZ AT BOCA GOLF, INC.
By: /s/ DAVID SHAPIRO
------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President and Director January 22, 1998
- ----------------------------- (Principal Executive Officer)
Alec Engelstein
* Vice President and Director January 22, 1998
- -----------------------------
Harry Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ------------------------------ Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* By: /s/ DAVID SHAPIRO
-------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
UNIVERSAL LAND TITLE, INC.
By: /s/ DAVID SHAPIRO
------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President and Director January 22, 1998
- ----------------------------- (Principal Executive Officer)
Michael Glass
* Vice President and Director January 22, 1998
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ------------------------------ Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- ------------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
January 22, 1998.
UNIVERSAL LAND TITLE OF COLORADO, INC.
By: /s/ DAVID SHAPIRO
------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- -----------------
<S> <C> <C>
* President and Director January 22, 1998
- ----------------------------- (Principal Executive Officer)
Michael Glass
/s/ DAVID SHAPIRO Vice President, Secretary, January 22, 1998
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director January 22, 1998
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
------------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-26
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NO. DESCRIPTION NUMBER
- --------- ---------------------------- -----------
<S> <C> <C>
23.1 Consent of BDO Seidman, LLP
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Engle Homes, Inc.
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated November 10, 1997, relating to the
consolidated financial statements of Engle Homes, Inc., which is contained in
that Prospectus, and to the incorporation by reference of our report dated
November 10, 1997 relating to the schedule appearing in the Company's annual
report on Form 10-K/A for the year ended October 31, 1997.
We also consent to the reference to us under the captions "Selected
Consolidated Financial and Operating Data" and "Experts" in the Prospectus.
BDO SEIDMAN, LLP
Miami, Florida
January 22, 1998
