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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
MARK ONE
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NUMBER 001-12822
------------------------------
BEAZER HOMES USA, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 58-2086934
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
5775 PEACHTREE DUNWOODY ROAD, SUITE C-550, ATLANTA, GEORGIA 30342
(Address of principal executive offices)
Registrant's telephone number, including area code: (404) 250-3420
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
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<S> <C>
Common Stock, $.01 par value per share................................... New York Stock Exchange
Series A Cumulative Convertible Exchangeable Preferred Stock, $.01 par
value per share......................................................... New York Stock Exchange
Preferred Share Purchase Rights.......................................... New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant (6,362,526 shares) as of December 2, 1996,
based on the closing sale price per share as reported by the New York Stock
Exchange on such date, was $101,800,416. The number of shares outstanding of the
registrant's Common Stock as of December 2, 1996 was 6,565,690.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
PART OF 10-K
WHERE INCORPORATED
------------------
<S> <C>
Portions of the registrant's 1996 Annual Report to Shareholders for fiscal year ended Septem-
ber 30, 1996................................................................................. II
Portions of the registrant's Proxy Statement for the Annual Meeting of Shareholders to be held
on February 6, 1997.......................................................................... I, III
Portions of the registrant's Registration Statement on Form S-1 (Registration No. 33-72982)... IV
Portions of the registrant's Registration Statement on Form S-1 (Registration No. 33-72576)... IV
Portions of the registrant's Form 10-Q for the quarter ended March 31, 1994................... IV
Portions of the registrant's Form 10-K for the year ended September 30, 1994.................. IV
Portions of the registrant's Form 10-Q for the quarter ended March 31, 1995................... IV
Portions of the registrant's Registration Statement on Form S-3 (Registration No. 33-92892)... IV
Portions of the registrant's Registration Statement on Form S-8 (Registration No. 33-91904)... IV
Portions of the registrant's report on Form 8-K filed on May 30, 1996......................... IV
Portions of the registrant's report on Form 8-K filed on June 21, 1996........................ IV
</TABLE>
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BEAZER HOMES USA, INC.
FORM 10-K
INDEX
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PAGE NUMBER
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PART I.
Item 1. Business............................................................................. 1
Item 2. Properties........................................................................... 9
Item 3. Legal Proceedings.................................................................... 9
Item 4. Submission of Matters to a Vote of Security Holders.................................. 9
PART II.
Item 5. Market for the Company's Common Equity and Related Stockholder Matters............... 12
Item 6. Selected Financial Data.............................................................. 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations......................................................................... 12
Item 8. Financial Statements and Supplementary Data.......................................... 12
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure......................................................................... 12
PART III.
Item 10. Directors and Executive Officers of the Registrant................................... 12
Item 11. Executive Compensation............................................................... 12
Item 12. Security Ownership of Certain Beneficial Owners and Management....................... 12
Item 13. Certain Relationships and Related Transactions....................................... 12
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...................... 13
SIGNATURES
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Beazer Homes USA, Inc. ("Beazer" or the "Company") designs, builds and sells
single family homes in the Southeast, Southwest and Central regions of the
United States. The Company's Southeast region includes Georgia, Florida, North
Carolina, South Carolina and Tennessee, its Southwest region includes Arizona,
California and Nevada, and its Central region includes Texas. The Company's
homes are designed to appeal primarily to entry-level and first move-up home
buyers.
The Company's objective is to provide its customers with homes that
incorporate quality and value while seeking to maximize its return on invested
capital. To achieve this objective, the Company has developed a business
strategy which focuses on the following elements:
GEOGRAPHIC DIVERSITY AND GROWTH MARKETS. The Company competes in a
large number of geographically diverse markets in an attempt to reduce its
exposure to any particular regional economy. Virtually all of the markets in
which the Company operates have experienced significant population growth in
recent years. Within these markets, the Company builds homes in a variety of
projects, typically with fewer than 150 homesites.
QUALITY HOMES FOR ENTRY-LEVEL AND FIRST TIME MOVE-UP HOME BUYERS. The
Company seeks to maximize customer satisfaction by offering homes which
incorporate quality materials, distinctive design features, convenient
locations and competitive prices. The Company focuses on entry-level and
first move-up home buyers because it believes they represent the largest
segment of the homebuilding market. During fiscal year 1996, the average
sales price of the Company's homes closed was approximately $146,000.
DECENTRALIZED OPERATIONS WITH EXPERIENCED MANAGEMENT. The Company
believes its in-depth knowledge of its local markets enables the Company to
better serve its customers. The Company's local managers, who have
significant experience in both the homebuilding industry and the markets
they serve, are responsible for operating decisions regarding design,
construction and marketing. The Company combines these decentralized
operations with a centralized corporate-level management which controls
decisions regarding overall strategy, land acquisitions and financial
matters.
CONSERVATIVE LAND POLICIES. The Company seeks to maximize its return on
capital employed by limiting its investment in land and by focusing on
inventory turnover. To implement this strategy and to reduce the risks
associated with investments in land, the Company uses options to control
land whenever possible. In addition, the Company does not speculate in
unentitled land.
The Company was formed in November 1993 in anticipation of an initial public
offering of its Common Stock and issuance of its 9% Senior Notes due 2004. A
predecessor of the Company was established in 1985 through the acquisition by
Beazer PLC of an established regional homebuilder in Atlanta, Georgia. At the
time of such acquisition, Beazer PLC was among the largest homebuilders in the
United Kingdom. After expanding its homebuilding operations to Tennessee, North
Carolina and South Carolina through additional acquisitions, Beazer PLC was
acquired by an indirect, wholly owned subsidiary of Hanson PLC.
In early 1993, the Company entered the Arizona, California and Nevada
homebuilding markets by acquiring substantially all of the homebuilding
operations of Watt Housing Corporation ("Watt") pursuant to an asset purchase
agreement, effective February 1, 1993 (the "Watt Acquisition"). Affiliates and
predecessors of Watt have been in business since 1947 and, immediately prior to
the Watt Acquisition, Watt was a builder of single family detached and attached
homes in Arizona, California and Nevada.
1
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Beazer entered the Jacksonville, Florida market in fiscal 1994 by acquiring
Panitz & Company, Chartered ("Panitz") pursuant to an asset purchase agreement,
effective October 1, 1993, and the Fort Meyers/Naples, Florida market in fiscal
1996 by acquiring Gulfcoast Homes pursuant to an asset purchase agreement,
effective May 23, 1996.
Beazer entered the Dallas and Houston markets in fiscal 1995 by acquiring
Bramalea Homes Texas, Inc. ("Bramalea") pursuant to an asset purchase agreement,
effective April 1995, and expanded its presence in Dallas in fiscal 1996 by
acquiring Trendmaker Homes - Dallas pursuant to an asset purchase agreement,
effective June 26, 1996.
During fiscal 1996 the Company established Beazer Mortgage Company ("Beazer
Mortgage"). Beazer Mortgage was established to originate, but not hold or
service, mortgages for the homebuilding operations of Beazer. At September 30,
1996 one branch office in Atlanta was operational, with two additional branches,
Charlotte and Houston, in a start-up phase.
MARKETS AND PRODUCT DESCRIPTION
The Company evaluates a number of factors in determining which geographic
markets to enter or in which to concentrate its homebuilding activities. The
Company attempts to anticipate swings in economic and real estate conditions by
evaluating such statistical information as (i) the historical and projected
growth of the population; (ii) the number of new jobs created or projected to be
created; (iii) the number of housing starts in previous periods; (iv) building
lot availability and price; (v) housing inventory; (vi) level of competition;
and (vii) home sales absorption rates. In addition, the Company seeks to avoid
direct competition in a particular market with respect to product type.
The Company maintains the flexibility to alter its product mix within a
given market depending on market conditions and, in determining its product mix,
considers demographic trends, demand for a particular type of product, margins,
timing and the economic strength of the market. While remaining responsive to
market opportunities within the industry, the Company in recent years has
focused, and intends to continue to focus, its business primarily on entry-level
and first move-up housing in the form of single family detached homes and
townhouses. Entry-level homes generally are those homes priced at the lower end
of the market and target first home buyers, while first time move-up homes
generally are priced in the mid-to-upper price range and target a wide variety
of home buyers as they progress in income and family size. Although some of the
Company's move-up homes are priced at the upper end of the market and the
Company offers a selection of amenities, the Company generally does not build
"custom homes," and its prices of first move-up homes generally are well below
the prices of custom homes in most areas. The Company attempts to maximize
efficiency by using standardized design plans whenever possible and sharing
design plans among markets.
2
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The following table summarizes information regarding the Company's markets
as of and for the year ended September 30, 1996.
<TABLE>
<CAPTION>
AVERAGE NUMBER OF
CLOSING ACTIVE HOMES
FISCAL YEAR PRICE BY PROJECTS BY CLOSED BY
STATE MARKET(S) ENTERED STATE STATE STATE
- ----------------- -------------------------------------------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
SOUTHEAST REGION:
Florida Jacksonville...................................... 1993 $ 160,900 22 405
Treasure Coast.................................... 1995
Fort Myers/Naples................................. 1996
Tampa/St. Petersburg.............................. 1996
Georgia Atlanta........................................... 1985 141,700 17 308
North Carolina Charlotte......................................... 1987 144,600 24 697
Raleigh........................................... 1992
South Carolina... Charleston........................................ 1987 117,700 16 276
Columbia.......................................... 1993
Myrtle Beach...................................... 1996
Tennessee Nashville......................................... 1987 171,200 20 526
Knoxville......................................... 1995
SOUTHWEST REGION:
Arizona Phoenix........................................... 1993 121,100 26 1,852
California Los Angeles County................................ 1993 179,300 24 1,018
Orange County..................................... 1993
Riverside & San Bernadino Counties................ 1993
San Diego County.................................. 1992
Ventura County.................................... 1993
Solano County..................................... 1993
Nevada Las Vegas......................................... 1993 145,400 12 473
Reno/Sparks....................................... 1996
CENTRAL REGION:
Texas Dallas............................................ 1995 154,700 31 379
Houston........................................... 1995
OTHER MARKETS:
New Jersey Clifton........................................... 1992 185,000 0 1
---------- --- -----
$ 146,000 192 5,935
---------- --- -----
---------- --- -----
</TABLE>
The Company's homebuilding and marketing activities are conducted under the
name of Beazer Homes in each of its markets except as follows:
<TABLE>
<CAPTION>
MARKET DOING BUSINESS AS
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<S> <C>
Arizona Hancock Homes
Jacksonville, Florida Panitz Homes
Fort Myers, Florida Gulfcoast Homes
Tennessee Phillips Builders
North Carolina Squires Homes
South Carolina Squires Homes
</TABLE>
3
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CORPORATE OPERATIONS
At a centralized level, the Company (i) evaluates and selects geographic
markets; (ii) allocates capital resources to particular markets, including with
respect to land acquisitions; (iii) maintains the Company's relations with its
lenders to regulate the flow of financial resources and develop consistent
relationships with such lenders; and (iv) monitors the decentralized operations
of the Company's divisions. The Company allocates capital resources necessary
for new projects consistent with its overall operating strategy. The Company
utilizes return on capital employed, profit margin and payback period as
criteria for its allocation of capital resources. The Company does not have
pre-set targets for such criteria, and instead varies such capital allocation
based on market conditions, results of operations and other factors. Capital
commitments are determined through consultation among selected executive and
operational personnel, who play an important role in ensuring that new projects
are consistent with the Company's strategy. Centralized financial controls are
also maintained through the standardization of accounting and financial policies
and procedures, which are applied uniformly throughout the Company.
Structurally, the Company operates through separate divisions, which are
generally located within the areas in which they operate. Each division is
managed by executives with substantial experience in the division's market. In
addition, each division is equipped with the skills to complete the functions of
land acquisition, map processing, land development, construction, marketing,
sales and product service.
LAND ACQUISITION AND DEVELOPMENT
Substantially all of the land acquired by the Company is purchased only
after necessary entitlements have been obtained so that the Company has certain
rights to begin development or construction as market conditions dictate. In
certain situations, the Company will purchase unentitled property where it
perceives an opportunity to build on such property in a manner consistent with
the Company's strategy. The term "entitlements" refers to development
agreements, tentative maps or recorded plats, depending on the jurisdiction
within which the land is located. Entitlements generally give a developer the
right to obtain building permits upon compliance with conditions that are
usually within the developer's control. Although entitlements are ordinarily
obtained prior to the Company's purchase of land, the Company is still required
to obtain a variety of other governmental approvals and permits during the
development process.
The Company has occasionally used partnerships or joint ventures to purchase
and develop land where such arrangements were necessary to acquire the land or
appeared to be otherwise economically advantageous to the Company. In the
future, the Company may consider the use of partnership or joint venture
arrangements from time to time when management perceives a favorable opportunity
to use such financing arrangements.
The Company selects its land for development based upon a variety of
factors, including (i) internal and external demographic and marketing studies;
(ii) suitability for projects comprised of generally less than 150 homesites;
(iii) suitability for development during the time period of one to five years
from the beginning of the development process to the last closing; (iv)
financial review as to the feasibility of the proposed project, including
projected profit margins, returns on capital employed and payback periods; (v)
the ability to secure governmental approvals and entitlements; (vi)
environmental and legal due diligence; (vii) competition; (viii) proximity to
local traffic corridors and amenities; and (ix) management's judgment as to the
real estate market, economic trends and the Company's experience in a particular
market.
The Company generally purchases land or obtains an option to purchase land
which, in either case, requires certain site improvements prior to construction.
Where required, the Company then undertakes or, in the case of land under
option, the grantor of the option then undertakes, the development activities
(through contractual arrangements with local developers) that include site
planning and engineering, as well as constructing road, sewer, water, utilities,
drainage and recreational facilities and other amenities. When available in
certain markets, the Company also buys finished lots that are ready for
construction.
4
<PAGE>
The Company strives to develop a design and marketing concept for each of
its projects, which includes determination of size, style and price range of the
homes, layout of streets, layout of individual lots and overall community
design. The product line offered in a particular project depends upon many
factors, including the housing generally available in the area, the needs of a
particular market and the Company's cost of lots in the project. The Company is,
however, often able to use standardized design plans.
The development and construction of each project are managed by the
Company's operating divisions, each of which is led by a president who, in turn,
reports to the president of the region and the Company's Chief Executive
Officer. At the development stage, a manager (who may be assigned to several
projects and reports to the president of the division) supervises development of
buildable lots. In addition, a field superintendent is located at each project
site to supervise actual construction, and each division has one or more
customer service and marketing representatives assigned to projects operated by
that division.
The following table sets forth, by state, the Company's land inventory as of
September 30, 1996.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------------------------------------------------
LAND OWNED LAND UNDER CONTRACT
-------------------------- -------------------------- FISCAL YEAR
FINISHED UNDEVELOPED FINISHED UNDEVELOPED 1996 HOMES
LOTS LOTS(I) LOTS LOTS(I) TOTAL CLOSED
----------- ------------- ----------- ------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
SOUTHEAST REGION:
Georgia............................... 382 170 270 0 822 308
North Carolina........................ 332 554 390 1,416 2,692 697
South Carolina........................ 254 82 170 859 1,365 276
Tennessee............................. 677 437 609 531 2,254 526
Florida............................... 352 30 567 0 949 405
SOUTHWEST REGION:
Arizona............................... 569 54 1,024 0 1,647 1,852
California............................ 642 1,037 397 406 2,482 1,018
Nevada................................ 643 0 581 0 1,224 473
CENTRAL REGION:
Texas................................. 756 65 865 0 1,686 379
Other Markets......................... 0 0 0 0 0 1
----- ----- ----- ----- --------- -----
Total............................... 4,607 2,429 4,873 3,212 15,121 5,935
----- ----- ----- ----- --------- -----
----- ----- ----- ----- --------- -----
</TABLE>
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(i) Undeveloped lots consist of raw land that is expected to be developed into
the respective number of lots reflected in this table.
The Company acquires certain lots by means of option contracts. Option
contracts generally require the payment of a cash deposit or issuance of a
letter of credit for the right to acquire lots during a specified period of time
at a certain price. Under option contracts without specific performance
obligations, the Company's liability is limited to forfeiture of the
non-refundable deposits, which aggregated approximately $10.3 million at
September 30, 1996. Under option contracts with specific performance
obligations, the Company generally is required to purchase specific numbers of
lots on fixed dates pursuant to a contractually established schedule. Under such
option contracts with specific performance obligations, the party granting the
option is required to maintain and/or develop the property pursuant to certain
standards specified in the contract and to deliver lots which are free of any
liens and are appropriate for residential building pursuant to a specified
schedule. If the Company fails to purchase the required number of lots on the
date fixed for purchase pursuant to such option contracts and the party granting
the option has fulfilled all of its obligations under the contract, the party
granting the option to the Company generally has the right to either terminate
the option granted pursuant to the option contract in its entirety or to require
the Company to purchase the remaining lots. If the party granting the option
fails to meet its obligations under such option contracts, the Company generally
may, at its option, either not make the lot purchase or require the party
granting the option to cure the deficiency. Under such option contracts, if the
Company
5
<PAGE>
purchases a lot and subsequently discovers that the lot did not meet all of the
conditions specified by the option contract, the Company generally may require
the party granting the option to repurchase the lot or cure the deficiency. At
September 30, 1996, committed amounts under option contracts with specific
performance obligations aggregated approximately $60.9 million, while option
contracts without specific performance obligations aggregated $131.1 million.
The Company's option contracts have expiration periods ranging from one to 60
months.
CONSTRUCTION
The Company acts as the general contractor for the construction of its
projects. The Company's project development operations are controlled by its
divisions, whose employees supervise the construction of each project,
coordinate the activities of subcontractors and suppliers, subject their work to
quality and cost controls and assure compliance with zoning and building codes.
The Company specifies that quality, durable materials be used in the
construction of the Company's homes. The Company's subcontractors follow design
plans prepared by architects and engineers who are retained by the Company and
whose designs are geared to the local market. Subcontractors typically are
retained on a project-by-project basis to complete construction at a fixed
price. Agreements with the Company's subcontractors and materials' suppliers are
generally entered into after competitive bidding, and the Company does not have
any long-term contractual commitments with any of its subcontractors or
suppliers. In connection with such competitive bid process, the Company obtains
information from prospective subcontractors and vendors with respect to their
financial condition and ability to perform their agreements with the Company.
The Company does not maintain significant inventories of construction materials
except for materials being utilized for homes under construction. The Company
has numerous suppliers of raw materials and services used in its business, and
such materials and services have been and continue to be available. Material
prices may fluctuate, however, due to various factors, including demand or
supply shortages which may be beyond the control of the Company's vendors. In
order to reduce costs and improve service to the Company, Beazer from time to
time enters into regional and national supply contracts with certain of its
vendors. For instance, during 1996 the Company entered into a three year
agreement with General Electric as its exclusive supplier of appliances. The
Company believes that its relationships with its suppliers and subcontractors
are good.
Construction time for the Company's homes depends on the availability of
labor, materials and supplies, product type and location. Homes are designed to
promote efficient use of space and materials, and to minimize construction costs
and time. In all of the Company's markets except California, construction of a
home historically has been completed within three to four months following
commencement of construction. In California, construction of a home historically
has been completed within four to eight months following commencement of
construction. At September 30, 1996, the Company had 608 finished homes, of
which 165 were sold and included in backlog at such date.
WARRANTY PROGRAM
The Company provides a one-year limited warranty of workmanship and
materials with each of its homes, which generally includes home inspection
visits with the customer during the first year following the purchase of a home.
The Company subcontracts its homebuilding work to subcontractors who provide the
Company with an indemnity and a certificate of insurance prior to receiving
payments for their work and, therefore, claims relating to workmanship and
materials are generally the primary responsibility of the Company's
subcontractors. The Company also provides homeowners with an insured 10-year
homeowners' warranty through a single national agreement with the Home Buyers
Warranty Corporation ("HBW"). The first year of such warranty covers unfulfilled
workmanship claims, as well as defects in plumbing, electrical, heating, cooling
and ventilation systems, and major structural defects; the second year of such
warranty covers major structural defects and certain defects in plumbing,
electrical, heating, cooling and ventilation systems of the home (exclusive of
defects in appliances, fixtures and equipment); and the final eight years of
protection cover only major structural defects. An allowance of approximately
0.5% to 1.0%
6
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of the sale price of a home is established to cover warranty expenses, although
this allowance is subject to adjustment in special circumstances. The Company's
historical experience is that such warranty expenses generally fall within the
amount established for such allowance.
For homes closed prior to October 7, 1994, the Company's structural warranty
coverage was with the Home Owners Warranty Corporation ("HOW"). On October 7,
1994, the Commonwealth of Virginia placed HOW under temporary receivership, and
a permanent injunction followed on October 17, 1994. Terms of the injunction
allowed policies that were effective prior to October 7, 1994 to be honored for
their full term. Concurrent with the above, the Company entered into an
agreement with HBW to provide its homebuyers with equally suitable coverage for
homes closed subsequent to October 7, 1994. The Company anticipates, however,
that substantially all claims under such policies will be at levels below
applicable deductibles and, therefore, could be the subject of a claim under the
Company's warranty. The Company does not currently have any material litigation
or claims regarding warranties or latent defects with respect to the
construction of its homes. The Company believes that claims and litigation will
be substantially covered by the Company's warranty accrual or insurance.
The Company is currently considering the establishment of a risk retention
group to self insure its structural warranty obligations and replace the
Company's warranty program with HBW. The Company believes this would result in
cost savings to the Company.
MARKETING AND SALES
The Company makes extensive use of advertising and other promotional
activities, including newspaper advertisements, brochures, direct mail and the
placement of strategically located sign boards in the immediate areas of its
developments.
The Company normally builds, decorates, furnishes and landscapes between one
and five model homes for each project and maintains on-site sales offices. At
September 30, 1996, the Company maintained 248 model homes, of which 168 were
owned and 80 were leased from third parties pursuant to sale and leaseback
agreements. The Company believes that model homes play a particularly important
role in the Company's marketing efforts. Consequently, the Company expends a
significant effort in creating an attractive atmosphere at its model homes.
Interior decorations are undertaken by both in-house and third party local
design specialists, and vary among the Company's models based upon the
lifestyles of targeted home buyers. The purchase of furniture, fixtures and
fittings is coordinated to ensure that manufacturers' bulk discounts are
utilized to the maximum extent. Structural changes in design from the model
homes are not generally permitted, but home buyers may select various optional
amenities. The Company also uses a cross-referral program that encourages
Company personnel to direct customers to other Company subdivisions based on the
customers' needs.
The Company generally sells its homes through commissioned employees (who
typically work from the sales offices located at the model homes used in each
division) as well as through independent brokers. Company personnel are
available to assist prospective home buyers by providing them with floor plans,
price information and tours of model homes and in connection with the selection
of options. The Company's selection of interior features is a principal
component of the Company's marketing and sales efforts. Sales personnel are
trained by the Company and attend periodic meetings to be updated on sales
techniques, competitive products in the area, the availability of financing,
construction schedules, marketing and advertising plans, which management
believes result in a sales force with extensive knowledge of the Company's
operating policies and housing products. The Company's policy also provides that
sales personnel be licensed real estate agents where required by law. The
Company typically also builds a number of homes for which no signed sales
contract exists at the time of commencement of construction. The use of an
inventory of such homes is necessary to satisfy the requirements of relocated
personnel and of independent brokers, who often represent customers who require
a completed home within 60 days. At September 30, 1996, excluding models, the
Company had 1,083 homes at various stages of completion for which the Company
had not received a sales contract.
7
<PAGE>
The Company uses various sales incentives (such as landscaping and certain
interior home options and upgrades) in order to attract home buyers. The use of
incentives depends largely on prevailing economic and competitive market
conditions.
CUSTOMER FINANCING
The Company provides customer financing in certain markets through branch
offices of Beazer Mortgage. Beazer Mortgage provides mortgage originations only,
and does not retain or service the mortgages that it originates. Such mortgages
are generally funded by one of a network of mortgage lenders arranged for the
Company by Homebuilders Financial Network, an independent consultant of the
Company. Beazer Mortgage currently operates in Atlanta, Charlotte and Houston.
For operations that have not established Beazer Mortgage branches, Company
seeks to assist its home buyers in obtaining financing from mortgage lenders
offering qualified home buyers a variety of financing options, including a wide
variety of conventional, FHA and VA financing programs. From time to time, the
Company has arranged for lender representatives to be available in sales
offices, has prequalified home buyers and has paid a portion of the closing
costs and discount mortgage points to assist home buyers with financing. In
certain limited circumstances, the Company may attempt to minimize potential
risks relating to the availability of customer financing by purchasing mortgage
financing commitments that lock in the availability of funds and interest rates
at specified levels for a certain period of time. Since substantially all home
buyers utilize long-term mortgage financing to purchase a home, adverse economic
conditions, increases in unemployment and high mortgage interest rates may deter
and eliminate a substantial number of potential home buyers from the Company's
markets in the future.
COMPETITION AND MARKET FACTORS
The development and sale of residential properties is highly competitive and
fragmented. The Company competes for residential sales on the basis of a number
of interrelated factors, including location, reputation, amenities, design,
quality and price, with numerous large and small homebuilders, including some
homebuilders with nationwide operations and greater financial resources and/or
lower costs than the Company. The Company also competes for residential sales
with individual resales of existing homes, available rental housing and, to a
lesser extent, resales of condominiums. The Company believes that it compares
favorably to other builders in the markets in which it operates, due primarily
to (i) its experience within its geographic markets and breadth of product line,
which allow it to vary its regional product offerings to reflect changing market
conditions; (ii) its responsiveness to market conditions, enabling it to
capitalize on the opportunities for advantageous land acquisitions in desirable
locations; and (iii) its reputation for quality design, construction and
service.
The housing industry is cyclical and is affected by consumer confidence
levels, prevailing economic conditions generally, and interest rate levels in
particular. 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.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
Substantially all the Company's land is purchased with entitlements, giving
it the right to obtain building permits upon compliance with specified
conditions, which generally are within the Company's control. Upon compliance
with such conditions, the Company must seek building permits. The length of time
necessary to obtain such permits and approvals affects 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. Several governmental authorities in California
have imposed impact fees as a means of defraying the cost of providing certain
governmental services to developing areas. To date, the governmental approval
processes discussed above have not had a material adverse effect on the
Company's
8
<PAGE>
development activities, and indeed all home-builders in a given market face the
same fees and restrictions. There can be no assurance, however, that these and
other restrictions will not adversely affect the Company in the future.
The Company may also be subject to periodic delays or may be precluded
entirely from developing communities due to building moratoriums or
"slow-growth" or "no-growth" initiatives or building permit allocation
ordinances which could be implemented in the future in the states and markets in
which it operates. Substantially all of the Company's land is entitled and,
therefore, the moratoriums generally would only adversely affect the Company if
they arose from health, safety and welfare issues such as insufficient water or
sewage facilities. Local and state governments also have broad discretion
regarding the imposition of development fees for projects in their jurisdiction.
These are normally established, however, when the Company receives recorded
final maps and building permits. The Company is also subject to a variety of
local, state and federal statutes, ordinances, rules and regulations concerning
the protection of health and the environment. These 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.
BONDS AND OTHER OBLIGATIONS
The Company is frequently required, in connection with the development of
its projects, to obtain letters of credit and performance, maintenance and other
bonds in support of its related obligations with respect to such developments.
The amount of such obligations outstanding at any time varies in accordance with
the Company's pending development activities. In the event any such bonds or
letters of credit are drawn upon, the Company would be obligated to reimburse
the issuer of such bonds or letters of credit. At September 30, 1996, there were
approximately $6.0 million and $50.4 million of outstanding letters of credit
and performance bonds, respectively for such purposes. The Company does not
believe that any such bonds or letters of credit are likely to be drawn upon.
EMPLOYEES AND SUBCONTRACTORS
At September 30, 1996, the Company employed 1,070 persons, of whom 220 were
sales and marketing personnel, 370 were executive, management and administrative
personnel, 452 were involved in construction and 28 were employed at the
Nashville, Tennessee manufacturing facility. Although none of the Company's
employees is covered by collective bargaining agreements, certain of the
subcontractors engaged by the Company are represented by labor unions or are
subject to collective bargaining arrangements. The Company believes that its
relations with its employees and subcontractors are good.
ITEM 2. PROPERTIES
The Company leases approximately 4,850 square feet of office space in
Atlanta, Georgia to house its corporate headquarters. The Company also leases an
aggregate of approximately 100,000 square feet of office space for its
subsidiaries' operations at various locations. The Company owns approximately
18,500 square feet of manufacturing space and 6,800 square feet of office space
in Nashville, Tennessee.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, all of which have
arisen in the ordinary course of business and some of which are covered by
insurance. In the opinion of the Company's management, none of the claims
relating to such proceedings will have a material adverse effect on the
financial condition or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the quarter
ended September 30, 1996.
9
<PAGE>
SEPARATE ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT
Unless otherwise indicated, the following executive officers have served in
their current capacity with the Company since its inception.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- -------------------------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS
Ian J. McCarthy...................... 43 President, Chief Executive Officer and Director
David S. Weiss....................... 36 Executive Vice President, Chief Financial Officer and Director
John Skelton......................... 47 Senior Vice President, Operations and Controller
Peter H. Simons...................... 37 Since September 1994, Vice President, Corporate Development
David T. Root........................ 49 Since November 1994, Vice President, Operations
Gary N. Baucom....................... 52 President, Squires Homes, Inc.
H. Eddie Phillips.................... 49 President, Phillips Builders, Inc.
James A. Moore....................... 56 Since May 1995, Southeast Regional Manager
Michael T. Rand...................... 34 Since December 1996, Vice President, Operational and Accounting
Controls
</TABLE>
All officers are elected by the Board of Directors.
There are no family relationships nor arrangements or understandings
pursuant to which any of the officers listed were elected. See pages 12 to 14 of
the Company's Proxy Statement for the Annual Meeting of Shareholders to be held
on February 6, 1997 for a description of employment arrangements with certain
executive officers of the Company.
BUSINESS EXPERIENCE
Refer to page 4 of the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on February 6, 1997 for the business experience of
Messrs. Ian J. McCarthy, and David S. Weiss.
JOHN SKELTON. Mr. Skelton has served as the Company's Senior Vice President,
Operations and Controller since March 1994. Mr. Skelton served as Vice President
and Chief Financial Officer of Beazer Homes, Inc. since 1985 and Vice President
and Chief Financial Officer of Beazer Homes Holdings, Inc. since April 1993.
During the period 1977 to 1985, Mr. Skelton served as Finance Director of Leech
Homes, a subsidiary of Leech PLC which was acquired by Beazer PLC in 1985. After
graduating with a Bachelor's degree from Durham University in the United
Kingdom, he was employed by Deloitte & Touche and is a Fellow of the Institute
of Chartered Accountants in England and Wales.
PETER H. SIMONS. Mr. Simons has served as Vice President of Corporate
Development since September 1994. The preceding year, he was Director of
Operations for Lokelani Homes in Hawaii. From 1989 to 1993, Mr. Simons was a
Senior Project Manager for Castle & Cooke Properties in Hawaii. Mr. Simons
earned a Bachelor of Arts degree from Yale University and a Masters in Public
and Private Management from the Yale School of Management.
DAVID T. ROOT. Mr. Root has served as Vice President of Operations since
November 1994. From the time Mr. Root joined the Company in July 1992 to
November 1994, he managed product development and certain operational matters
for the Company. Prior to joining the Company, Mr. Root was the Director of
Operations for several Southern California development companies and brings over
20 years of experience to the Company. Mr. Root earned a Bachelor of Science
degree from the University of Nevada, and is a licensed general contractor and
real estate broker.
10
<PAGE>
GARY N. BAUCOM. Mr. Baucom has served as President of Squires Homes, Inc., a
subsidiary of the Company, since 1987. He joined the Ralph Squires Construction
Company in 1971 and served as Vice President, Finance, and was promoted to
Executive Vice President in 1980. Mr. Baucom earned a Bachelor of Science degree
in Accounting from the University of North Carolina at Charlotte. Mr. Baucom is
a licensed Certified Public Accountant.
H. EDDIE PHILLIPS. Mr. Phillips has served as President of Phillips
Builders, Inc., a subsidiary of the Company, since January 1989. Prior to that
time, Mr. Phillips was Senior Vice President of Phillips Builders, Inc. for the
preceding ten years and, in that capacity, was responsible for all aspects of
land acquisition, land development, product design, home construction and
contracting. Mr. Phillips also established the component manufacturing plant for
Phillips Builders, Inc. in Nashville, Tennessee. Mr. Phillips earned a Bachelor
of Science degree in Business Administration from the University of Tennessee.
JAMES A. MOORE. Mr. Moore joined the Company as President of Beazer Homes
Nevada in January 1994. Since May 1995 he has served as Southeast Regional
Manager responsible for operations in Georgia, Texas and Florida. Prior to
joining the Company, Mr. Moore was President of Watt Housing Corp., a
homebuilding and land development company, as well as a director and officer of
Watt Housing Corp. and several of its subsidiaries. Mr. Moore has also acted as
a management consultant in the homebuilding industry. Mr. Moore earned a
Bachelor of Science degree in Accounting from Northern Illinois University. Mr.
Moore is a licensed Certified Public Accountant.
MICHAEL T. RAND. Mr. Rand joined the Company in December 1996. Prior to that
time he was a Senior Audit Manager with KPMG Peat Marwick LLP, where he had been
employed since 1984. Mr. Rand earned a Bachelor of Science degree in Commerce
from the University of Virginia. Mr. Rand is a licensed Certified Public
Accountant.
11
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information required by this item is incorporated by reference to the
information set forth under the captions "Trading Information" and "Quarterly
Stock Price Information" located on Page 41 and 37, respectively, of the
Company's Annual Report to Shareholders for the year ended September 30, 1996.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference from page
15 of the Company's Annual Report to Shareholders for the Year ended September
30, 1996.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is incorporated by reference from the
pages 16 to 23 of the Company's Annual Report to Shareholders for the year ended
September 30, 1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference from
pages 25 to 36 of the Company's Annual Report to Shareholders for the year ended
September 30, 1996.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On December 12, 1995, upon the recommendation of the Audit Committee, the
Board of Directors selected the firm of Deloitte & Touche LLP to serve as the
Company's independent auditor for the fiscal year ending September 30, 1996.
Ernst & Young LLP served as independent auditor for the Company's fiscal years
ended September 30, 1995 and 1994.
Ernst & Young LLP's report on the financial statements of the Company for
the fiscal years ended September 30, 1995 and 1994 did not contain an adverse
opinion or a disclaimer of an opinion. Neither in connection with the audits by
Ernst & Young LLP for the fiscal years ended September 30, 1995 and 1994 nor
during any subsequent interim period, were there disagreements on any matters of
accounting principles or practice, financial statement disclosure or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
Ernst & Young LLP, would have caused it to make reference to the subject matter
of the disagreement in connection with its reports.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Director information is incorporated by reference from pages 3 to 4 of the
Company's Proxy Statement for the Annual Meeting of Shareholders to be held
February 6, 1997. Information regarding the Company's executive officers is set
forth in under Part I as a separate item.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from
pages 7 to 14 of the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held February 6, 1997.
12
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this is incorporated by reference from page 6 of
the Company's Proxy Statement for the Annual Meeting of Shareholders to be held
February 6, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements.
The Report of the Independent Auditors and the following consolidated
financial statements are incorporated by reference from the Company's
Annual Report to Shareholders for the fiscal year ended September 30,
1996 in Part II, Item 8 of this report:
Consolidated Statements of Operations for the years ended September
30, 1996, 1995 and 1994.
Consolidated Balance Sheets as of September 30, 1996 and 1995.
Consolidated Statement of Stockholders' Equity for the years ended
September 30, 1996, 1995 and 1994.
Consolidated Statements of Cash Flow for the years ended September
30, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
The Report of the Independent Auditors on the consolidated financial
statements for the fiscal year ended September 30, 1995 is included in
this report on page 18.
2. Financial Statement Schedules.
None required.
3. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ---------
<C> <S>
3.1(7) --Amended and Restated Certificate of Incorporation of the Company.
3.2(7) --Amended and Restated Bylaws of the Company.
4.1(1) --Indenture dated as of March 2, 1994 among the Company, its subsidiaries party thereto,
and Continental Bank, National Association, as trustee, relating to the Company's 9%
Senior Notes due 2004.
4.2(2) --Form of 9% Senior Note due 2004.
4.3(6) --Specimen of Common Stock Certificate.
4.4(4) --Form of Certificate of Designations for Series A Cumulative Convertible Exchangeable
Preferred Stock, $.01 par value per share.
4.5(4) --Form of Certificate representing shares of Series A Cumulative Convertible Exchangeable
Preferred Stock, $.01 par value per share.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ---------
<C> <S>
4.6(4) --Form of Indenture between the Company and the First National Bank of Boston, as trustee,
relating to the 8% Convertible Subordinated Debentures due 2005.
4.7(4) --Form of 8% Convertible Subordinated Debenture due 2005.
4.8(5) --Retirement Savings and Investment Plan.
4.9(5) --Summary Plan Description.
4.10(8) --Rights Agreement, dated as of June 21, 1996, between the Company and First Chicago Trust
Company of New York, as Rights Agent.
10.1 --Credit Agreement dated as of October 22, 1996 between the Company and First National Bank
of Chicago, as agent (filed herewith).
10.2(3) --Amended 1994 Stock Incentive Plan.
10.3(3) --Non-Employee Director Stock Option Plan.
10.4(2) --Asset Purchase Agreement dated as of April 14, 1993 as amended, between Beazer Homes
Holdings Inc., Beazer Homes California Inc., Beazer Homes Nevada Inc., Beazer Homes
Arizona Inc., Beazer Homes Sales Arizona Inc., Watt Housing Corporation, Watt American,
Inc., Watt/Hancock Homes of Arizona, Inc., Watt Homes Inc., Watt Nevada, Inc., Watt Homes
of Northern California, Inc., Watt Pacific, Inc., Orange Homes South, Inc., Narcissa
Corporation, and WH/Arizona, Inc.
10.5(9) --Amended and Restated Employment Agreement dated as of March 31, 1995 between the Company
and Ian J. McCarthy.
10.6(9) --Amended and Restated Employment Agreement dated as of March 31, 1995 between the Company
and David S. Weiss.
10.7(9) --Amended and Restated Employment Agreement dated as of March 31, 1995 between the Company
and John Skelton.
10.8(9) --Amended and Restated Employment Agreement dated as of March 31, 1995 between the Company
and Gary N. Baucom.
10.9(1) --Employment Agreement dated as of March 2, 1994 between the Company and H. Eddie Phillips.
10.11 --Supplemental Employment Agreement dated as of July 17, 1996 between the Company and Ian
J. McCarthy (filed herewith).
10.12 --Supplemental Employment Agreement dated as of July 17, 1996 between the Company and David
S. Weiss (filed herewith).
10.13 --Supplemental Employment Agreement dated as of July 17, 1996 between the Company and John
Skelton (filed herewith).
10.14 --Supplemental Employment Agreement dated as of July 17, 1996 between the Company and Peter
H. Simons (filed herewith).
11 --Earnings Per Share Calculations (filed herewith).
13 --Annual Report to Shareholders for the year ended September 30, 1996. (filed herewith)
21 --Subsidiaries of the Company (filed herewith).
23.1 --Consent of Deloitte & Touche LLP, Independent Auditors (filed herewith)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ---------
<C> <S>
23.2 --Consent of Ernst & Young LLP, Independent Auditors (filed herewith).
27 --Financial Data Schedule (filed herewith).
</TABLE>
- --------------------------
(1) Incorporated herein by reference to the exhibits to the Company's report on
Form 10-Q for the quarterly period ended March 31, 1994.
(2) Incorporated herein by reference to the exhibits to the Company's
Registration Statement on Form S-1 (Registration No. 33-72982) initially
filed on December 15, 1993.
(3) Incorporated herein by reference to the exhibits to the Company's report on
Form 10-K for the year ended September 30, 1994.
(4) Incorporated herein by reference to the exhibits to the Company's
Registration Statement on Form S-3 (Registration No. 33-92892) initially
filed on June 15, 1995.
(5) Incorporated herein by reference to the exhibits to the Company's
Registration Statement on Form S-8 (Registration No. 33-91904) filed on May
4, 1995.
(6) Incorporated herein by reference to the exhibits to the Company's
Registration Statement on Form S-1 (Registration No. 33-72576) initially
filed on December 6, 1993.
(7) Incorporated herein by reference to the exhibits to the Company's report on
Form 8-K filed on May 30, 1996
(8) Incorporated herein by reference to the exhibits to the Company's report on
Form 8-K filed on June 21, 1996
(9) Incorporated herein by reference to the exhibits to the Company's report on
Form 10-Q for the quarterly period ended March 31, 1995.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the fourth quarter
of the fiscal year ended September 30, 1996.
(c) Exhibits
Reference is made to Item 14(a)3 above. The following is a list of exhibits,
included in Item 14(a)3 above, that are filed concurrently with this report.
<TABLE>
<C> <S>
10.1 --Credit Agreement dated as of October 22, 1996 between the Company and
First National Bank of Chicago, as agent (filed herewith).
10.11 --Supplemental Employment Agreement dated as of July 17, 1996 between the
Company and Ian J. McCarthy (filed herewith).
10.12 --Supplemental Employment Agreement dated as of July 17, 1996 between the
Company and David S. Weiss (filed herewith).
10.13 --Supplemental Employment Agreement dated as of July 17, 1996 between the
Company and John Skelton (filed herewith).
</TABLE>
15
<PAGE>
<TABLE>
<C> <S>
10.14 --Supplemental Employment Agreement dated as of July 17, 1996 between the
Company and Peter H. Simons (filed herewith).
</TABLE>
<TABLE>
<C> <S>
11 --Earnings Per Share Calculations
13 --The Company's Annual Report to Shareholders for the fiscal year ended
September 30, 1996. Except as expressly incorporated by reference in
this report on Form 10-K, such Annual Report is furnished only for the
information of the Securities and Exchange Commission and is not to be
deemed "filed" as part of this report. The following portions of such
Annual Report are incorporated by reference in the indicated items of
this report.
</TABLE>
<TABLE>
<CAPTION>
PORTIONS OF THE ANNUAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
1996 ITEM OF THIS REPORT
- --------------------------------------------------------------------------- -----------------------
<S> <C>
"Trading Information" and "Quarterly Stock Price Information" 5
Selected Financial Data 6
Management's Discussion and Analysis of Financial Condition and Results
of Operations 7
Consolidated Financial Statements 8
</TABLE>
<TABLE>
<C> <S>
21 --Subsidiaries of the Company
23.1 --Consent of Deloitte & Touche LLP, Independent Auditors
23.2 --Consent of Ernst & Young LLP, Independent Auditors.
27 --Financial Data Schedule
</TABLE>
(d) Financial Statement Schedules
Reference is made to Item 14(a)2 above.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BEAZER HOMES USA, INC.
By: /s/ IAN J. MCCARTHY
--------------------------------------
Name: Ian J. McCarthy
Title: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Date: December 17, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ BRIAN C. BEAZER
- ------------------------------ Director and Non-Executive December 17, 1996
(Brian C. Beazer) Chairman of the Board
Director, President and
/s/ IAN J. MCCARTHY Chief Executive Officer
- ------------------------------ (Principal Executive December 17, 1996
(Ian J. McCarthy) Officer)
Director, Executive Vice
/s/ DAVID S. WEISS President and Chief
- ------------------------------ Financial Officer December 17, 1996
(David S. Weiss) (Principal Financial
Officer)
/s/ THOMAS B. HOWARD
- ------------------------------ Director December 17, 1996
(Thomas B. Howard)
/s/ GEORGE W. MEFFERD
- ------------------------------ Director December 17, 1996
(George W. Mefferd)
/s/ D.E. MUNDELL
- ------------------------------ Director December 17, 1996
(D.E. Mundell)
/s/ LARRY T. SOLARI
- ------------------------------ Director December 17, 1996
(Larry T. Solari)
Secretary, Senior Vice
/s/ JOHN SKELTON President and Controller
- ------------------------------ (Principal Accounting December 17, 1996
(John Skelton) Officer)
17
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
and Stockholders of
Beazer Homes USA, Inc.
We have audited the accompanying consolidated balance sheet of Beazer Homes
USA, Inc. as of September 30, 1995, and the related consolidated statements of
operations, stockholders' equity/invested capital and cash flows for each of the
two years in the period ended September 30, 1995. These consolidated financial
statements are the responsibility of the management of Beazer Homes USA, Inc.
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 consolidated financial position of
Beazer Homes USA, Inc. at September 30, 1995 and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
September 30, 1995, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
October 27, 1995
18
<PAGE>
10/24/96
_________________________________
CREDIT AGREEMENT
_________________________________
Dated as of October 22, 1996
_________________________________
BEAZER HOMES USA, INC.,
The Guarantors Parties Thereto,
The Banks Parties Thereto,
and
The First National Bank of Chicago
As Agent
_________________________________
<PAGE>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS..................... 1
Section 1.01. Defined Terms........................................... 1
Section 1.02. Accounting Terms......................................... 14
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS........................ 14
Section 2.01. Revolving Credit......................................... 14
Section 2.02. Reduction of Commitment.................................. 15
Section 2.03. Notice and Manner of Borrowing........................... 16
Section 2.04. Non-Receipt of Funds by Agent............................ 16
Section 2.05. Determination of Applicable Margins and
Applicable Commitment Rate......................................... 17
Section 2.06. Conversions and Renewals................................. 18
Section 2.07. Interest................................................. 18
Section 2.08. Interest Rate Determination.............................. 20
Section 2.09. Fees..................................................... 20
Section 2.10. Notes.................................................... 21
Section 2.11. Prepayments.............................................. 21
Section 2.12. Method of Payment........................................ 22
Section 2.13. Use of Proceeds.......................................... 23
Section 2.14. Yield Protection......................................... 23
Section 2.15. Changes in Capital Adequacy Regulations.................. 24
Section 2.16. Availability of LIBOR Loans.............................. 25
Section 2.17. Funding Indemnification.................................. 25
Section 2.18. Bank Statements; Survival of Indemnity................... 25
Section 2.19. Extension of Termination Date............................ 25
Section 2.20. Replacement of Certain Banks............................. 26
Section 2.21. Swing Line............................................... 27
ARTICLE III
CONDITIONS PRECEDENT................................ 28
Section 3.01. Conditions Precedent to the Initial
Loan..................................................... 28
Section 3.02. Conditions Precedent to All Loans........................ 30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES............................ 31
Section 4.01. Incorporation, Formations Good Standing,
and Due Qualification.................................... 31
Section 4.02. Power and Authority...................................... 31
Section 4.03. Legally Enforceable Agreement............................ 32
Section 4.04. Financial Statements..................................... 32
Section 4.05. Labor Disputes and Acts of God........................... 32
-i-
<PAGE>
Section 4.06. Other Agreements......................................... 32
Section 4.07. Litigation............................................... 33
Section 4.08. No Defaults on Outstanding Judgments or
Orders................................................... 33
Section 4.09. Ownership and Liens...................................... 33
Section 4.10. Subsidiaries and Ownership of Stock...................... 33
Section 4.11. ERISA.................................................... 34
Section 4.12. Operation of Business.................................... 34
Section 4.13. Taxes.................................................... 34
Section 4.14. Laws; Environment........................................ 34
Section 4.15. Investment Company Act.................................. 35
Section 4.16. Public Utility Holding Company Act...................... 36
ARTICLE V
AFFIRMATIVE COVENANTS.................................. 36
Section 5.01. Maintenance of Existence................................. 36
Section 5.02. Maintenance of Records................................... 36
Section 5.03. Maintenance of Properties................................ 36
Section 5.04. Conduct of Business...................................... 36
Section 5.05. Maintenance of Insurance................................. 36
Section 5.06. Compliance with Laws..................................... 37
Section 5.07. Right of Inspection...................................... 37
Section 5.08. Reporting Requirements................................... 37
Section 5.09. Subsidiary Reporting Requirements........................ 41
Section 5.10. Environment.............................................. 41
Section 5.11. Use of Proceeds.......................................... 42
Section 5.12. Ranking of Obligations................................... 42
Section 5.13. Taxes.................................................... 42
Section 5.14. Wholly Owned Status...................................... 42
Section 5.15. New Subsidiaries......................................... 42
ARTICLE VI
NEGATIVE COVENANTS.................................. 42
Section 6.01. Liens.................................................... 42
Section 6.02. Debt..................................................... 44
Section 6.03. Mergers, Etc..............................................45
Section 6.04. Leases................................................... 45
Section 6.05. Sale and Leaseback....................................... 45
Section 6.06. Sale of Assets........................................... 45
Section 6.07. Investments.............................................. 46
Section 6.08. Guaranties, Etc.......................................... 46
Section 6.09. Transactions With Affiliates............................. 47
Section 6.10. Land Inventory........................................... 47
Section 6.11. Total Inventory.......................................... 47
Section 6.12. Senior Debt ............................................. 47
Section 6.13. Amendment or Modification of Indenture................... 47
Section 6.14. UHIC..................................................... 48
-ii-
<PAGE>
ARTICLE VII
FINANCIAL COVENANTS................................... 48
Section 7.01. Minimum Consolidated Tangible Net Worth.................. 48
Section 7.02. Leverage Ratio........................................... 48
Section 7.03. Interest Coverage Ratio.................................. 48
Section 7.04. Permitted Senior Debt.................................... 48
Section 7.05. Fixed Charge Coverage Ratio.............................. 48
Section 7.06. Land Inventory........................................... 49
ARTICLE VIII
EVENTS OF DEFAULT................................... 49
Section 8.01. Events of Default........................................ 49
Section 8.02. Set Off.................................................. 52
ARTICLE IX
GUARANTY....................................... 52
Section 9.01. Guaranty................................................. 52
Section 9.02. No Impairment of Guaranty................................ 53
Section 9.03. Continuation and Reinstatements etc...................... 54
Section 9.04. Limitation on Guaranteed Amount.......................... 54
ARTICLE X
AGENCY PROVISIONS.................................... 55
Section 10.01. Authorization and Action................................ 55
Section 10.02. Liability of Agent...................................... 55
Section 10.03. Rights of Agent as a Bank.............................. 56
Section 10.04. Independent Credit Decisions............................ 56
Section 10.05. Indemnification......................................... 57
Section 10.06. Successor Agent......................................... 57
Section 10.07. Sharing of Payments, Etc................................ 58
Section 10.08. Withholding Tax Matters................................. 58
ARTICLE XI
MISCELLANEOUS..................................... 59
Section 11.01. Amendments, Etc......................................... 59
Section 11.02. Notices, Etc............................................ 59
Section 11.03. No Waiver............................................... 60
Section 11.04. Costs, Expenses, and Taxes.............................. 60
Section 11.05. Integration............................................. 61
Section 11.06. Indemnity............................................... 61
Section 11.07. Governing Law........................................... 61
Section 11.08 Severability of Provisions.............................. 61
Section 11.09 Counterparts............................................ 61
Section 11.10 Headings................................................ 61
Section 11.11 Submission to Jurisdiction.............................. 61
Section 11.12 Jury Trial Waiver....................................... 62
Section 11.13 Government Regulation................................... 62
Section 11.14 No Fiduciary Duty....................................... 62
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Section 11.15. Confidentiality......................................... 62
Section 11.16. Termination of Existing Credit Agreement................ 62
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS............ 63
Section 12.01. Successors and Assigns.................................. 63
Section 12.02. Participations.......................................... 63
Section 12.03. Assignments............................................. 64
Section 12.04. Dissemination of Information............................ 65
Section 12.05. Tax Treatment........................................... 65
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LIST OF EXHIBITS
Exhibit Description Reference
- ------- ----------- ---------
Exhibit A Form of Note 2.10
Schedule to Note
Exhibit B Summary of Opinion of Counsel for 3.01(5)
Borrower and Delaware Guarantors
Exhibit C Summary of Opinion of Illinois
Counsel for Borrower 3.01(5)
Exhibit D Summary of Opinion of Counsel for
Agent 3.01(6)
Exhibit E Summary of Opinion of Local Counsel for 3.01(10)
Beazer Homes Corp.
Exhibit F List of Subsidiaries of Borrower 4.10
Exhibit G Assignment Agreement 12.03(b)
Exhibit H Indenture 1.01
Schedule 6.02 Existing Debt 6.02
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CREDIT AGREEMENT dated as of October 22, 1996 among BEAZER HOMES USA,
INC., a Delaware corporation (the "Borrower"), BEAZER MORTGAGE CORPORATION, a
Delaware corporation, BEAZER HOMES CORP., a Tennessee corporation, BEAZER HOMES
SALES ARIZONA INC., a Delaware corporation, BEAZER REALTY CORP., a Georgia
corporation, BEAZER/SQUIRES REALTY, INC., a North Carolina corporation, PANITZ
HOMES REALTY, Inc., a Florida corporation, BEAZER HOMES HOLDING CORP., a
Delaware corporation, BEAZER HOMES TEXAS HOLDINGS, INC., a Delaware corporation,
and BEAZER HOMES TEXAS, L.P., a Delaware limited partnership (individually an
"Original Guarantor" and collectively the "Original Guarantors") and THE FIRST
NATIONAL BANK OF CHICAGO ("First Chicago"), THE FIRST NATIONAL BANK OF BOSTON,
BANK ONE, ARIZONA, NA, GUARANTY FEDERAL BANK, F.S.B., BANK OF AMERICA ILLINOIS,
COMERICA BANK, SUNTRUST BANK and THE FIRST NATIONAL BANK OF CHICAGO as Agent for
the Banks hereunder.
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. DEFINED TERMS. As used in this Agreement, the
following terms have the following meanings (terms defined in the singular shall
have the same meaning when used in the plural and vice versa):
"ABR Loan" means any Loan when and to the extent that the interest
rate therefor is determined by reference to the Alternate Base Rate.
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Borrower or any of its Subsidiaries (i) acquires any going concern or all or
substantially all of the assets of any firm, corporation or division thereof,
whether through purchase of assets, merger or otherwise or (ii) directly or
indirectly acquires (in one transaction or as the most recent transaction in a
series of transactions) at least a majority (in number of votes) of the
securities of a corporation which have ordinary voting power for the election of
directors (other than securities having such power only by reason of the
happening of a contingency) or a majority (by percentage or voting power) of the
outstanding partnership interests of a partnership.
"Affiliate" means any Person (1) which directly or indirectly
controls, or is controlled by, or is under common control with, the Borrower or
a Subsidiary; (2) which directly or indirectly beneficially owns or holds five
percent (5%) or more of any class of voting stock of the Borrower or any
Subsidiary; or (3) five percent (5%) or more of the voting stock of which is
directly or indirectly beneficially owned or held by the Borrower or a
Subsidiary. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether
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through the ownership of voting securities, by contract or otherwise.
"Agent" means The First National Bank of Chicago.
"Aggregate Commitments" means the aggregate Commitments of all the
Banks, as reduced from time to time pursuant to the terms of this Agreement.
"Agreement" means this Credit Agreement, as amended, supplemented, or
modified from time to time.
"Alternate Base Rate" means a fluctuating rate per annum equal to the
higher of (i) the corporate base rate of interest announced by the Agent from
time to time, changing when and as said rate changes, or (ii) the sum of 1/2 of
1% plus the Federal Funds Rate then in effect.
"Applicable ABR Margin" means, as at any date of determination, the
margin indicated in Section 2.05 as then applicable to ABR Loans and Swing Line
Loans (under Section 2.07(a)(i)).
"Applicable Commitment Rate" means, as at any date of determination,
the rate per annum indicated in Section 2.05 as then applicable in the
determination of the commitment fee (under Section 2.09).
"Applicable LIBOR Margin" means, as at any date of determination, the
margin indicated in Section 2.05 as then applicable to LIBOR Loans (under
Section 2.07(a)(ii)).
"Applicable Margin(s)" means the Applicable ABR Margin and/or the
Applicable LIBOR Margin, as the case may be.
"Borrowing" means a borrowing consisting of Loans of the same type
made, renewed or converted on the same day.
"Borrowing Base" means, with respect to an Inventory Valuation Date
for which it is to be determined, an amount equal to the sum of (i) ninety
percent (90%) of the unencumbered Receivables, (ii) eighty percent (80%) of the
book value of unencumbered Housing Units Under Contract, (iii) seventy percent
(70%) of the book value of unencumbered Speculative Housing Units, and (iv)
fifty percent (50%) of the book value of unencumbered Finished Lots. The term
"unencumbered" means that such asset is not subject to any Lien (except for
Liens permitted under Sections 6.01(1), (2) or (6)).
"Borrowing Base Certificate" means a written certificate in a form
acceptable to the Majority Banks setting
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forth the amount of the Borrowing Base with respect to the fiscal quarter most
recently completed, certified as true and correct by the Chief Financial Officer
of the Borrower.
"Business Day" means (i) with respect to any borrowing, payment or
rate selection of LIBOR Loans, a day (other than a Saturday or Sunday) on which
banks generally are open in Chicago and New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market and (ii)
for all other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago for the conduct of substantially all of their
commercial lending activities.
"Capital Lease" means all leases which have been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Change of Control" means any of the following: (i) the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Borrower or (except for an Internal Reorganization) of a Significant Guarantor
or Significant Subsidiary, as an entirety or substantially as an entirety to any
Person or "group" (within the meaning of Section 13(d)(3) of the Exchange Act)
in one or a series of transactions; (ii) the acquisition of fifty percent (50%)
or more of the aggregate voting power of all classes of Common Equity of the
Borrower or (except for an Internal Reorganization) of a Significant Guarantor
or Significant Subsidiary in one transaction or a series of related
transactions; (iii) the liquidation or dissolution of the Borrower or (except
for an Internal Reorganization) of a Significant Guarantor or Significant
Subsidiary; (iv) any transaction or a series of related transactions (as a
result of a tender offer, merger, consolidation or otherwise but excluding an
Internal Reorganization) that results in, or that is in connection with, (a) any
Person, including, a "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) acquiring "beneficial ownership" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of fifty percent (50%) or more of the
aggregate voting power of all classes of Common Equity of the Borrower, a
Significant Guarantor or a Significant Subsidiary, or of any Person that
possesses "beneficial ownership" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of fifty percent (50%) or more of the aggregate
voting power of all classes of Common Equity of the Borrower, a Significant
Guarantor or a Significant Subsidiary, or (b) less than fifty percent (50%)
(measured by the aggregate voting power of all classes) of the Common Equity of
the Borrower being registered under Section 12(b) or 12(g) of the Exchange Act;
(v) a majority of the Board
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of Directors of the Borrower, a Significant Guarantor or a Significant
Subsidiary, not being comprised of persons who (a) were members of the Board of
Directors of such Borrower, Significant Guarantor or Significant Subsidiary, as
of the date of this Agreement ("Original Directors"), or (b) were nominated for
election or elected to the Board of Directors of such Borrower, Significant
Guarantor, or Significant Subsidiary, with the affirmative vote of at least a
majority of the directors who themselves were Original Directors (as defined in
the Indenture) or who were similarly nominated for election or elected; or (vi)
with respect to any Significant Guarantor or Significant Subsidiary which is not
a corporation, any loss of the right or power to control the activities,
directly, or indirectly through one or more intermediaries, or both. Nothing
herein contained shall modify or otherwise affect the provisions of Section
6.06.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations and published interpretations thereof.
"Commitment" has the meaning assigned to such term in Section 2.01.
"Common Equity" has the meaning assigned to such term in the
Indenture.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Borrower within the meaning
of Section 414(b) or 414(c) of the Code.
"Consolidated Debt" means the Debt of the Borrower and its
Subsidiaries determined on a consolidated basis.
"Consolidated Tangible Assets" has the meaning assigned to such term
in the Indenture.
"Consolidated Tangible Net Worth" has the meaning assigned to such
term in the Indenture.
"Debt" means, without duplication, with respect to any Person (1)
indebtedness or liability for borrowed money, including, without limitation,
subordinated indebtedness (other than trade accounts payable and accruals
incurred in the ordinary course of business); (2) obligations evidenced by
bonds, debentures, notes, or other similar instruments; (3) obligations for the
deferred purchase price of property (including, without limitation, seller
financing of any Inventory) or services, PROVIDED, HOWEVER, that Debt shall not
include obligations with respect to options to purchase real property that have
not been exercised; (4) obligations as lessee under Capital Leases to the
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extent that the same would, in accordance with GAAP, appear as liabilities in
the Borrower's consolidated balance sheet; (5) current liabilities in respect of
unfunded vested benefits under Plans and incurred withdrawal liability under any
Multiemployer Plan; (6) reimbursement obligations under letters of credit
(including contingent obligations with respect to letters of credit not yet
drawn upon); (7) obligations under acceptance facilities; (8) all guaranties,
endorsements (other than for collection or deposit in the ordinary course of
business), and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any other Person or entity, or otherwise
to assure a creditor against loss, provided, however, that "Debt" shall not
include guaranties of performance obligations; (9) obligations secured by any
Liens on any property of such Person, whether or not the obligations have been
assumed; and (10) net liabilities under interest rate swap, exchange or cap
agreements. A Person's Debt shall also include, without duplication, its
applicable share of the Debt of any joint venture or partnership in which it
holds an interest.
"Default" means any of the events specified in Section 8.01, whether
or not any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"EBITDA" means, for any period, on a consolidated basis for the
Borrower and its Subsidiaries, the sum of the amounts for such period of (i) Net
Income, PLUS (ii) charges against income for foreign, federal, state and local
taxes, PLUS (iii) Interest Expense, PLUS (iv) depreciation, PLUS (v)
amortization expense, including, without limitation, amortization of goodwill
and other intangible assets and amortization of deferred compensation expense,
PLUS (vi) extraordinary losses, MINUS (vii) interest income, MINUS (viii)
extraordinary gains (and any unusual gains arising in or outside of the ordinary
course of business not included in extraordinary gains that have been included
in the determination of Net Income).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.
"Eurocurrency Reserve Requirement" means, for any Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on
"Eurocurrency liabilities" (as such term is used in Regulation D) but without
benefit or credit of proration, exemptions, or offsets that might otherwise be
available from time to time under Regulation D.
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Without limiting the effect of the foregoing, the Eurocurrency Reserve
Requirement shall reflect any other reserves required to be maintained against
(1) any category of liabilities that includes deposits by reference to which the
LIBOR Interest Rate for LIBOR Loans is to be determined; or (2) any category of
extension of credit or other assets that include LIBOR Loans.
"Event of Default" means any of the events specified in Section 8.01,
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Existing Credit Agreement" means that certain Credit Agreement dated
as of January 20, 1995, as amended, among the Borrower, certain of the Original
Guarantors, First Chicago (individually and as agent), The First National Bank
of Boston and Bank One, Arizona, N.A.
"Extension Request" has the meaning assigned to that term in Section
2.19(a).
"Federal Funds Rate" means, for each day, a fluctuating interest rate
per annum equal to the weighted average of the rates on overnight Federal Funds
transactions with members of the Federal Reserve System arranged by Federal
Funds brokers, as published for such day (or, if such day is not a Business Day,
for the immediately preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations at approximately 10:00 A.M. Chicago time on such
day on such transactions received by the Agent from three Federal Funds brokers
of recognized standing selected by the Agent in its sole discretion.
"Finished Lots" means Lots in respect of which a building permit, from
the applicable local governmental authority, has been or could be obtained;
PROVIDED, HOWEVER, that the term "Finished Lots" shall not include any Land upon
which the construction of a Housing Unit has commenced.
"GAAP" means generally accepted accounting principles in the United
States in effect from time to time (subject to the provisions of Section 1.02).
"Guarantor" means an Original Guarantor and any Person that, pursuant
to Section 5.15, guarantees the Obligations.
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"Guaranty" means the guaranty of the Obligations by each Guarantor
under the provisions of Article IX contained herein or under a guaranty of the
Obligations delivered under Section 5.15.
"Housing Unit" means a single family dwelling, whether detached or
attached (including condominiums but excluding mobile homes), including the Land
on which such dwelling is located, that is (or, upon completion of construction
thereof, will be) available for sale; the term "Housing Unit" includes a
Speculative Housing Unit.
"Housing Unit Closing" means a closing of the sale of a Housing Unit
by the Borrower or a Subsidiary to a BONA FIDE purchaser for value that is not
an Affiliate.
"Housing Unit Under Contract" means a Housing Unit owned by the
Borrower or a Subsidiary as to which the Borrower or such Subsidiary has a BONA
FIDE contract of sale, in a form customarily employed by the Borrower or such
Subsidiary and reasonably satisfactory to the Majority Banks, entered into not
more than 15 months prior to the date of determination with a Person who is not
an Affiliate, under which contract no defaults then exist and not less than
$1,000.00 toward the purchase price has been paid; PROVIDED, HOWEVER, that in
the case of any Housing Unit the purchase of which is to be financed in whole or
in part by a loan insured by the Federal Housing Administration or guaranteed by
the Veterans Administration, the required minimum downpayment shall be the
amount (if any) required under the rules of the relevant agency.
"Indenture" means the Indenture dated as of March 2, 1994 among the
Borrower, the guarantors named therein, and Continental Bank, National
Association, as Trustee with respect to the 9% Senior Notes due 2004, a copy of
which is annexed hereto as EXHIBIT H.
"Interest Deficit" has the meaning assigned to that term in
Section 2.08(b) hereof.
"Interest Expense" means, for any period, the total interest expense
of the Borrower and its Subsidiaries, whether paid directly or amortized through
cost of sales (including the interest component of Capital Leases).
"Interest Period" means, with respect to any LIBOR Loan, the period
commencing on the date such Loan is made, converted or renewed, and ending, as
the Borrower may select pursuant to Section 2.03, on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, except that each such Interest Period that commences on the last
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Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month;
provided that all of the foregoing provisions relating to Interest Periods are
subject to the following:
(a) No Interest Period may extend beyond the Termination Date; and
(b) If an Interest Period would end on a day that is not a Business
Day, such Interest Period shall be extended to the next Business Day unless
such Business Day would fall in the next calendar month, in which event
such Interest Period shall end on the immediately preceding Business Day.
"Internal Reorganization" means any reorganization between or among
the Borrower and any Subsidiary or Subsidiaries or between or among any
Subsidiary and one or more other Subsidiaries or any combination thereof by way
of liquidations, mergers, consolidations, conveyances, assignments, sales,
transfers and other dispositions of all or substantially all of the assets of a
Subsidiary (whether in one transaction or in a series of transactions); PROVIDED
THAT (a) the Borrower shall preserve and maintain its status as a validly
existing corporation and (b) all assets, liabilities, obligations and guarantees
of any Subsidiary party to such reorganization will continue to be held by such
Subsidiary or be assumed by the Borrower or a Wholly-Owned Subsidiary of the
Borrower.
"Inventory" means all Housing Units, Lots, goods, merchandise and
other personal property wherever located to be used for or incorporated into any
Housing Unit.
"Inventory Valuation Date" means the last day of the most recent
fiscal quarter of the Borrower with respect to which the Borrower is required to
have delivered a Borrowing Base Certificate pursuant to Section 5.08(6) hereof.
"Land" means land owned by the Borrower or a Subsidiary, which land is
being developed or is held for future development or sale.
"Lending Office" means, with respect to any Bank, for each type of
Loan, the Lending Office of such Bank (or of an affiliate of such Bank)
designated for such type of Loan on the signature pages hereof or such other
office or branch of such Bank (or of an affiliate of such Bank) as that Bank may
from time to time specify to the Borrower and the Agent as the office or branch
at which its Loans of such type are to be made and maintained.
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"LIBOR Interest Rate" means, for each LIBOR Loan for the relevant
Interest Period, the rate per annum (rounded upward, if necessary, to the
nearest one-sixteenth of 1%) determined by the Agent to be equal to the quotient
of (a) the London Interbank Offered Rate for such LIBOR Loan for such Interest
Period divided by (b) one minus the Eurocurrency Reserve Requirement for such
Interest Period.
"LIBOR Loan" means any Loan when and to the extent that the interest
rate therefor is determined by reference to the LIBOR Interest Rate.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing).
"Loan(s)" means a loan made by a Bank pursuant to this Agreement,
including (unless the context otherwise indicates) a Swing Line Loan. Each such
Loan (other than a Swing Line Loan) shall be an ABR Loan or a LIBOR Loan.
"Loan Document(s)" means this Agreement, the Notes and any and all
documents delivered hereunder or pursuant hereto.
"London Interbank Offered Rate" means, with respect to a LIBOR Loan
for the relevant Interest Period, the rate determined by the Agent to be the
rate at which deposits in U.S. Dollars are offered by First Chicago to
first-class banks in the London interbank market at approximately 11:00 A.M.
(London time) two (2) Business Days prior to the first day of such Interest
Period, in the approximate amount of First Chicago's relevant LIBOR Loan and
having a maturity approximately equal to such Interest Period.
"Lots" means all Land owned by the Borrower and/or a Subsidiary which
is zoned by the municipality in which such real property is located for
residential building and use, and with respect to which the Borrower or such
Subsidiary has obtained all necessary approvals for its subdivision for Housing
Units; PROVIDED, HOWEVER, that the term "Lots" shall not include any Land upon
which the construction of a Housing Unit has commenced.
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"Majority Banks" means at any time the Banks holding at least
sixty-six and two-thirds percent (66 2/3%) of the then aggregate unpaid
principal amount of the Notes held by the Banks (including in such amount any
participation held by such Bank as a result of its purchase thereof pursuant to
Section 10.07), or, if no such principal amount is then outstanding, Banks
having at least sixty-six and two-thirds percent (66 2/3%) of the Aggregate
Commitments.
"Multiemployer Plan" means a plan described in Section 4001(a)(3) of
ERISA in respect of which the Borrower, a Subsidiary or a Commonly Controlled
Entity is an "employer" as defined in Section 3(5) of ERISA.
"Net Income" means, for any period, the net earnings (or loss) after
taxes of the Borrower and its Subsidiaries on a consolidated basis for such
period.
"Note(s)" means the promissory notes described in Section 2.10 hereof.
"Notice of Assignment" has the meaning assigned to that term in
Section 12.03(b) hereof.
"Obligations" means (a) the due and punctual payment of principal of
and interest on the Loans and the Notes, and (b) the due and punctual payment of
fees, expenses, reimbursements, indemnifications and other present and future
monetary obligations of the Borrower or any Guarantor to the Banks or to any
Bank, the Agent or any indemnified party under the Loan Documents.
"Participant" has the meaning assigned to that term in Section
12.02(a) hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Acquisition" means any Acquisition (other than by means of
a hostile takeover, hostile tender offer or other similar hostile transaction)
of a business or entity engaged primarily in the business of home building;
provided that, immediately after giving effect to such Acquisition, no Default
or Event of Default has occurred and is continuing.
"Permitted Senior Debt" means all Debt of the Borrower and its
Subsidiaries referred to in Sections 6.02(1), (2) and (8); provided, however,
that, to the extent that any of the Debt referred to in Section 6.02(8) is
secured by assets that would have been included in the Borrowing Base if such
assets were not
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encumbered, the Permitted Senior Debt shall be reduced by the lesser of (i) the
amount of such secured Debt or (ii) the amount by which the Borrowing Base would
have increased if such assets were not so encumbered.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, limited liability company, unincorporated
association, joint venture, governmental authority, or other entity of whatever
nature.
"Plan" means any pension plan which is covered by Title IV of ERISA
and in respect of which (a) the Borrower or a Subsidiary or a Commonly
Controlled Entity is an "employer" as defined in Section 3(5) of ERISA and (b)
the Borrower or a Subsidiary has any material liability; PROVIDED, HOWEVER, that
the term "Plan" shall not include any Multiemployer Plan.
"Principal Office" means, with respect to the Agent, the Principal
Office of the Agent designated as such on the signature pages hereof or such
other office of the Agent as the Agent may from time to time specify to the
Borrower and the Banks as its Principal Office.
"Prohibited Transaction" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Code that could subject the Borrower or any
Subsidiary to any material liability.
"Prospectus" means the prospectus dated February 23, 1994, relating to
the Senior Notes.
"Purchaser" has the meaning assigned to that term in Section 12.03(a)
hereof.
"Receivables" means the net proceeds payable to, but not yet received
by, the Borrower or a Subsidiary following a Housing Unit Closing.
"Refinancing Debt" means Debt that refunds, refinances or extends any
Debt ("Refinanced Debt") described in Schedule 6.02 hereto, but only to the
extent that (i) the Refinancing Debt is subordinated to or PARI PASSU with the
Obligations to the same extent as such Refinanced Debt, if at all, (ii) the
Refinancing Debt is scheduled to mature no earlier than the earlier of (A) the
current maturity date of such Refinanced Debt or (B) a date seven (7) years
after the date of this Agreement, (iii) such Refinancing Debt is in an aggregate
amount that is equal to or less than the sum of (A) the aggregate amount then
outstanding under the Refinanced Debt, PLUS (B) accrued and unpaid interest on
such Refinanced Debt, PLUS (C) reasonable fees and expenses incurred in
obtaining such Refinancing Debt, it being understood
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that this clause (iii) shall not preclude the Refinancing Debt from being a part
of a Debt financing that includes other or additional Debt otherwise permitted
herein, (iv) such Refinancing Debt is Incurred (as defined in the Indenture) by
the same Person that initially Incurred such Refinanced Debt or by another
Person of which the Person that initially Incurred such Refinanced Debt is a
Subsidiary, and (v) such Refinancing Debt is Incurred within 60 days after such
Refinanced Debt is so refunded, refinanced or extended.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by foreign lenders for the purpose of purchasing or carrying
margin stock (as defined therein).
"Rejecting Bank" has the meaning assigned to such term in Section
2.19(b).
"Replacement Bank" has the meaning assigned to such term in Section
2.20.
"Reportable Event" means any of the events set forth in Section 4043
of ERISA with respect to a Plan (excluding any such event with respect to which
the PBGC has waived the 30-day notice requirement).
"Senior Debt" means the Senior Notes or, if the Senior Notes are
refinanced, the Refinancing Debt with respect thereto.
"Senior Debt Ratings" means the publicly announced ratings by Moody's
Investors Service, Inc. or Standard & Poor's Corporation (whichever rating is
higher) on the Borrower's Senior Debt, changing if and when such rating(s)
change. In the event
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that the two ratings differ by more than one gradation, the rating one step
below the higher shall apply.
"Senior Notes" means the 9% Senior Notes due 2004 of the Borrower
issued in the original principal amount of $115,000,000 pursuant to the
Indenture.
"Significant Guarantor" means, at any date of determination thereof,
any Guarantor that (together with its Subsidiaries) accounts for five percent
(5%) or more of the Consolidated Tangible Assets as of the last day of the most
recent fiscal quarter then ended and of the net revenues for the twelve-month
period ending on the last day of the most recent fiscal quarter then ended, in
each case of the Borrower and its Subsidiaries taken as a whole. Such
percentage shall be determined on the basis of financial reports that shall be
available not later than 25 days (or, in the case of the last fiscal quarter of
the fiscal year, 35 days) following the end of such fiscal quarter.
"Significant Subsidiary" means, at any date of determination thereof,
any Subsidiary that (together with its Subsidiaries) accounts for five percent
(5%) or more of the Consolidated Tangible Assets as of the last day of the most
recent fiscal quarter then ended and of the net revenues for the twelve-month
period ending on the last day of the most recent fiscal quarter then ended, in
each case of the Borrower and its Subsidiaries taken as a whole. Such
percentage shall be determined on the basis of financial reports that shall be
available not later than 25 days (or, in the case of the last fiscal quarter of
the fiscal year, 35 days) following the end of such fiscal quarter.
"Speculative Housing Unit" means any Housing Unit owned by the
Borrower or a Subsidiary that is not a Housing Unit Under Contract.
"Subsidiary" means, as to the Borrower or a Guarantor, in the case of
a corporation, a corporation of which shares of stock having ordinary voting
power (other than stock having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation are at the time owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by the Borrower or such Guarantor, as the case may be, or in the case of an
entity which is not a corporation, the activities of which are controlled
directly, or indirectly through one or more intermediaries, or both, by the
Borrower or such Guarantor, as the case may be.
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"Swing Line Bank" means First Chicago or any Purchaser to which First
Chicago assigns the Swing Line Commitment in accordance with Section 12.03
hereof.
"Swing Line Commitment" means the commitment of the Swing Line Bank to
make Swing Line Loans pursuant to Section 2.21(a) hereof. The Swing Line
Commitment is in the amount of $5,000,000.
"Swing Line Loan" has the meaning assigned to such term in Section
2.21(a).
"Termination Date" means October 21, 1999.
"Transferee" has the meaning assigned to that term in Section 12.04.
"UHIC" means United Housing Insurance Corporation, a Vermont
corporation and Wholly Owned Subsidiary of the Borrower.
"Wholly Owned Subsidiary" of any Person means (i) a Subsidiary, of
which one hundred percent (100%) of the outstanding Common Equity (except for
directors' qualifying shares or certain minority interests owned by other
Persons solely due to local law requirements that there be more than one
stockholder, but which interest is not in excess of what is required for such
purpose) is owned directly by such Person or through one or more other Wholly
Owned Subsidiaries of such Person, or (ii) any entity other than a corporation
in which such Person, directly or indirectly, owns all of the outstanding Common
Equity of such entity.
SECTION 1.02. ACCOUNTING TERMS. (a) All accounting terms not
specifically defined herein shall be construed in accordance with GAAP
consistent with those applied in the preparation of the financial statements
referred to in Section 4.04, and all financial data submitted pursuant to this
Agreement shall be prepared in accordance with such principles.
(b) Notwithstanding anything to the contrary contained in this
Agreement, in determining the Borrower's compliance with the provisions of
Article VII hereof, GAAP shall not include modifications of generally accepted
accounting principles that become effective after the date hereof.
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
SECTION 2.01. REVOLVING CREDIT. (a) Each Bank severally agrees, on
the terms and conditions hereinafter set
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forth, to make Loans (other than Swing Line Loans) to the Borrower from time to
time during the period from the date of this Agreement up to but not including
the Termination Date in an aggregate principal amount not to exceed at any time
outstanding the amount set opposite such Bank's name on the signature pages of
this Agreement (such Bank's obligations to make Loans (other than Swing Line
Loans) in such amounts, as reduced or otherwise modified from time to time
pursuant to the terms of this Agreement, being herein referred to as such Bank's
"Commitment") subject to the limitations set forth in Section 2.01(b).
(b) The aggregate amount of Permitted Senior Debt at any one time
outstanding may not exceed the Borrowing Base as of the most recent Inventory
Valuation Date, and no Loan (including a Swing Line Loan) shall be made that
would have the effect of increasing the then outstanding amount of the Permitted
Senior Debt to an amount exceeding such Borrowing Base, provided that a Loan
shall not be deemed to have increased the amount of the Permitted Senior Debt to
the extent that the proceeds of such Loan are immediately used to repay a Swing
Line Loan theretofore included in the Permitted Senior Debt. No Loans shall be
made at any time that any Swing Line Loan is outstanding, except for Loans that
are used, on the day on which made, to repay in full the outstanding principal
balance of the Swing Line Loans.
(c) Each Borrowing which shall not utilize the Commitment in full
shall be in an amount not less than One Million Dollars ($1,000,000) and, if in
excess thereof, in integral multiples of One Million Dollars ($1,000,000). Each
Borrowing shall consist of a Loan made by each Bank in the proportion which that
Bank's Commitment bears to the Aggregate Commitments. Within the limits of the
Aggregate Commitments, the Borrower may borrow, repay pursuant to Section 2.11,
and reborrow under this Section 2.01. On such terms and conditions, the Loans
may be outstanding as ABR Loans or LIBOR Loans. Each type of Loan shall be made
and maintained at such Bank's Lending Office for such type of Loan. The failure
of any Bank to make any requested Loan to be made by it on the date specified
for such Loan shall not relieve any other Bank of its obligation (if any) to
make such Loan on such date, but no Bank shall be responsible for the failure of
any other Bank to make such Loans to be made by such other Bank. The provisions
of this Section 2.01(c) shall not apply to Swing Line Loans.
SECTION 2.02. REDUCTION OF AGGREGATE COMMITMENTS. The Borrower shall
have the right, upon at least three (3) Business Days' prior notice to the
Agent, to terminate in whole or reduce in part the unused portion of the
Aggregate Commitments, provided that each partial reduction shall be in the
amount of at least Five Million Dollars ($5,000,000), and provided further that
no reduction shall be permitted if, after giving effect thereto, and
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to any prepayment made therewith, the outstanding and unpaid principal amount of
the Loans shall exceed the Aggregate Commitments. Each reduction in part of the
unused portion of each Bank's Commitment shall be made in the proportion that
such Bank's Commitment bears to the total amount of the Aggregate Commitments.
Any Commitment, once reduced or terminated, may not be reinstated.
SECTION 2.03. NOTICE AND MANNER OF BORROWING. The Borrower shall
give the Agent notice of any Loans under this Agreement, on the Business Day of
each ABR Loan, and at least three (3) Business Days before each LIBOR Loan,
specifying: (1) the date of such Loan; (2) the amount of such Loan; (3) the
type of Loan (whether an ABR Loan or a LIBOR Loan); and (4) in the case of a
LIBOR Loan, the duration of the Interest Period applicable thereto. Each such
notice shall be accompanied by a Borrowing Base Certificate dated as at the date
of such notice. All notices given by the Borrower under this Section 2.03 shall
be irrevocable and shall be given not later than 9:00 A.M. Chicago time on the
day specified above for such notice. The Agent shall notify each Bank of each
such notice (including any notice provided for in Section 2.20(d)) not later
than 11:00 A.M. Chicago time on the date it receives such notice from the
Borrower if such notice is received by the Agent at or before 9:00 A.M. Chicago
time. In the event such notice from the Borrower is received after 9:00 A.M.
Chicago time, it shall be treated as if received on the next succeeding Business
Day, and the Agent shall notify each Bank of such notice as soon as practicable
but not later than 11:00 A.M. Chicago time on the next succeeding Business Day.
Not later than 1:00 P.M. Chicago time on the date of such Loans, each Bank will
make available to the Agent in immediately available funds, such Bank's PRO RATA
share of such Loans. After the Agent's receipt of such funds, on the date of
such Loans and upon fulfillment of the applicable conditions set forth in
Article III, the Agent will make such Loans available to the Borrower in
immediately available funds by crediting the amount thereof to the Borrower's
account with the Agent. The provisions of this Section 2.03 shall not apply to
Swing Line Loans.
SECTION 2.04. NON-RECEIPT OF FUNDS BY AGENT. (a) Unless the Agent
shall have received notice from a Bank prior to the date (in the case of a LIBOR
Loan), or by 12:00 noon Chicago time on the date (in the case of an ABR Loan),
on which such Bank is to provide funds to the Agent for a Loan to be made by
such Bank that such Bank will not make available to the Agent such funds, the
Agent may assume that such Bank has made such funds available to the Agent on
the date of such Loan in accordance with Section 2.03 and the Agent in its sole
discretion may, but shall not be obligated to, in reliance upon such assumption,
make available to the Borrower on such date a corresponding amount.
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If and to the extent such Bank shall not have given the notice provided for
above and shall not have made such funds available to the Agent, such Bank
agrees to repay to the Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the Agent, at
the Federal Funds Rate for three Business Days and thereafter at the Alternate
Base Rate. If such Bank shall repay to the Agent such corresponding amount,
such amount so repaid shall constitute such Bank's Loan for purposes of this
Agreement. If such Bank does not pay such corresponding amount forthwith upon
Agent's demand therefor, the Agent shall promptly notify the Borrower, and the
Borrower shall immediately pay such corresponding amount to the Agent with
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Agent, at the rate of
interest applicable at the time to such proposed Loan. Nothing set forth in
this Section shall affect the rights of the Borrower with respect to any Bank
that defaults in the performance of its obligation to make a Loan hereunder.
(b) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
in its sole discretion may, but shall not be obligated to, in reliance upon such
assumption, cause to be distributed to each Bank on such due date an amount
equal to the amount then due such Bank. If and to the extent the Borrower shall
not have so made such payment in full to the Agent, each Bank shall repay to the
Agent forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed to such
Bank until the date such Bank repays such amount to the Agent, at the Federal
Funds Rate for three Business Days and thereafter at the Alternate Base Rate.
(c) The provisions of this Section 2.04 shall not apply to Swing Line
Loans.
SECTION 2.05. DETERMINATION OF APPLICABLE MARGINS AND APPLICABLE
COMMITMENT RATE. (a) The Applicable Margins and the Applicable Commitment Rate
shall be determined by reference to the Senior Debt Rating in accordance with
the following table:
Senior Debt Applicable Applicable Applicable
Rating LIBOR Margin ABR Margin Commitment Rate
- ----------- ------------ ---------- ---------------
BB+/Ba1 or higher 1.25 -0- 0.300
BB/Ba2 1.50 0.125 0.350
BB-/Ba3 or B+/B1 1.75 0.375 0.375
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Lower or no Senior 2.25 0.875 0.425
Debt Rating
(b) The Applicable ABR Margin and the Applicable Commitment
Rate shall be adjusted, as applicable from time to time, effective on
the first Business Day after any change in the Senior Debt Ratings.
The Applicable LIBOR Margin in respect of any LIBOR Loan shall be
adjusted, as applicable from time to time, effective on the first day
of the Interest Period for such LIBOR Loan after any change in the
Senior Debt Ratings.
SECTION 2.06. CONVERSIONS AND RENEWALS. The Borrower may
elect from time to time to convert all or a part of one type of Loan
into another type of Loan or to renew all or part of a Loan by giving
the Agent notice at least one (1) Business Day before conversion into
an ABR Loan, and at least three (3) Business Days before the
conversion into or renewal of a LIBOR Loan, specifying: (1) the
renewal or conversion date; (2) the amount of the Loan to be converted
or renewed; (3) in the case of conversions, the type of Loan to be
converted into; and (4) in the case of renewals of or a conversion
into a LIBOR Loan, the duration of the Interest Period applicable
thereto; PROVIDED that (a) the minimum principal amount of each Loan
of each Bank outstanding after a renewal or conversion shall be One
Million Dollars ($1,000,000) in the case of a LIBOR Loan, and Two
Hundred Fifty Thousand Dollars ($250,000) in the case of an ABR Loan;
and (b) LIBOR Loans may be converted on a Business Day that is not the
last day of the Interest Period for such Loan only if the Borrower
pays on the date of conversion all amounts due pursuant to Section
2.17 hereof; and (c) the Borrower may not renew a LIBOR Loan or
convert an ABR Loan into a LIBOR Loan at any time that a Default has
occurred that is continuing. Each such notice shall be accompanied by
a Borrowing Base Certificate dated as at the date of such notice. All
conversions and renewals shall be made in the proportion that each
Bank's Loan bears to the total amount of all the Banks' Loans. All
notices given by the Borrower under this Section 2.06 shall be
irrevocable and shall be given not later than 9:00 A.M. Chicago time
on the day which is not less than the number of Business Days
specified above for such notice. The Agent shall notify each Bank of
each such notice not later than 11:00 A.M. Chicago time on the date it
receives such notice from the Borrower if such notice is received by
the Agent at or before 9:00 A.M. Chicago time. In the event such
notice from the Borrower is received after 9:00 A.M. Chicago time, it
shall be treated as if received on the next succeeding Business Day,
and the Agent shall notify each Bank of such notice as soon as
practicable but not later than 11:00 A.M. Chicago time on the next
succeeding Business Day. Notwithstanding the foregoing, if the
Borrower shall fail to give the Agent the notice as specified above
for the renewal or conversion of a LIBOR Loan prior to the end of the
Interest Period with respect thereto, such LIBOR Loan shall
automatically be converted into an ABR Loan on the last day of the
Interest Period for such Loan.
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The provisions of this Section 2.06 shall not apply to Swing Line
Loans.
SECTION 2.07. INTEREST. (a) The Borrower shall pay
interest to the Agent for the account of each Bank on the outstanding
and unpaid principal amount of the Loans at the following rates:
(i) If an ABR Loan or Swing Line Loan, then at a rate
per annum equal to the sum of (A) the Applicable ABR Margin
in effect from time to time as interest accrues and (B) the
Alternate Base Rate in effect from time to time as interest
accrues; and
(ii) if a LIBOR Loan, then at a rate per annum for the
Interest Period applicable to such LIBOR Loan equal to the
sum of (A) the Applicable LIBOR Margin in effect on the
first day of such Interest Period and (B) the LIBOR Interest
Rate determined for such Interest Period.
(b) Any change in the interest rate based on the Alternate
Base Rate resulting from a change in the Alternate Base Rate shall be
effective as of the opening of business on the day on which such
change in the Alternate Base Rate becomes effective. Interest on each
LIBOR Loan shall be calculated on the basis of a year of 360 days for
the actual number of days elapsed. Interest on each ABR Loan and
Swing Line Loan shall be calculated on the basis of a year of 365 days
for the actual number of days elapsed.
(c) Interest on the Loans shall be paid (in an amount set
forth in a statement delivered by the Agent to the Borrower, PROVIDED,
HOWEVER, that the failure of the Agent to deliver such statement shall
not limit or otherwise affect the obligations of the Borrower
hereunder) in immediately available funds to the Agent at its
Principal Office for the account of the applicable Lending Office of
each Bank as follows:
(1) For each ABR Loan and Swing Line Loan on the first day of
each calendar month commencing on the first such date after
such Loan;
(2) For each LIBOR Loan, on the last day of the Interest Period
with respect thereto, except that, if such Interest Period
is longer than three months, interest shall also be paid on
the last day of the third month of such Interest Period; and
(3) If not sooner paid, then on the Termination Date or such
earlier date as the Loans may be due or declared due
hereunder.
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(d) Any principal amount of any Loan not paid when due (at maturity,
by acceleration, or otherwise) shall bear interest thereafter until paid in
full, payable on demand, at a rate per annum equal to the Alternate Base Rate or
the applicable LIBOR Interest Rate, as the case may be, for such Loan in effect
from time to time as interest accrues, plus the Applicable Margin in effect from
time to time as interest accrues, plus two percent (2%) per annum.
SECTION 2.08. INTEREST RATE DETERMINATION. (a) The Agent shall
determine each London Interbank Offered Rate, as applicable. The Agent shall
give prompt notice to the Borrower and the Banks of the applicable interest rate
determined by the Agent pursuant to the terms of this Agreement.
(b) If the provisions of this Agreement or any Note would at any time
require payment by the Borrower to a Bank of any amount of interest in excess of
the maximum amount then permitted by the law applicable to any Loan, the
interest payments to such Bank shall be reduced to the extent necessary so that
such Bank shall not receive interest in excess of such maximum amount. If, as a
result of the foregoing a Bank shall receive interest payments hereunder or
under a Note in an amount less than the amount otherwise provided hereunder,
such deficit (hereinafter called "Interest Deficit") will cumulate and will be
carried forward (without interest) until the termination of this Agreement.
Interest otherwise payable to a Bank hereunder and under a Note for any
subsequent period shall be increased by the maximum amount of the Interest
Deficit that may be so added without causing such Bank to receive interest in
excess of the maximum amount then permitted by the law applicable to the Loans.
The amount of the Interest Deficit relating to the Loans shall be treated as a
prepayment premium (to the extent permitted by law) and paid in full at the time
of any optional prepayment by the Borrower to the Banks of all the Loans at that
time outstanding pursuant to Section 2.11 hereof. The amount of the Interest
Deficit relating to the Loans at the time of any complete payment of the Loans
at that time outstanding (other than an optional prepayment thereof pursuant to
Section 2.11 hereof) shall be canceled and not paid.
SECTION 2.09. FEES. (a) The Borrower shall pay to the Agent upon
the execution of this Agreement, for the account of each Bank, a one time,
nonrefundable loan fee equal to the percentage of such Bank's Commitment
provided for in the offer letters dated August 20, 1996 from First Chicago to
the Banks. The Agent shall deliver to each Bank its applicable loan fee
promptly upon the Agent's receipt thereof.
(b) The Borrower agrees to pay to the Agent for the account of each
Bank (subject to adjustment in the case of the
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Swing Line Bank as hereinafter provided) a commitment fee on the average daily
unused portion of such Bank's Commitment (in an amount set forth in a statement
delivered by the Agent to the Borrower, PROVIDED, HOWEVER, that the failure of
the Agent to deliver such statement shall not limit or otherwise affect the
obligations of the Borrower hereunder) from the date of this Agreement until the
Termination Date at the Applicable Commitment Rate, payable in arrears on the
first day of each January, April, July and October during the term of such
Bank's Commitment, commencing January 1, 1997, and ending on the Termination
Date. The commitment fees shall be calculated on the basis of a year of 365
days for the actual number of days elapsed. Upon receipt of any commitment
fees, the Agent will promptly thereafter cause to be distributed such payments
to the Banks in the proportion that each Bank's unused Commitment bears to the
unused Aggregate Commitments (subject to adjustment in the case of the Swing
Line Bank as hereinafter provided). For purposes of determining the commitment
fee payable to the Swing Line Bank, the unused portion of such Bank's Commitment
shall be reduced dollar-for-dollar by the amount of any Swing Line Loans then
outstanding.
(c) The Borrower shall pay to the Agent and First Chicago Capital
Markets, Inc. such additional fees as are specified in a separate fee letter
from the Agent and First Chicago Capital Markets, Inc. to the Borrower dated
August 13, 1996, accepted by the Borrower on August 15, 1996.
SECTION 2.10. NOTES. All Loans made by each Bank under this
Agreement shall be evidenced by, and repaid with interest in accordance with, a
single promissory note of the Borrower in substantially the form of EXHIBIT A
hereto, duly completed, dated the date of this Agreement, and payable to such
Bank for the account of its applicable Lending Office, such Note to represent
the obligation of the Borrower to repay the Loans. Each Bank is hereby
authorized by the Borrower to endorse on the schedule attached to the Note held
by it the amount and type of each Loan and each renewal, conversion, and payment
of principal amount received by such Bank for the account of its applicable
Lending Office on account of its Loans, which endorsement shall, in the absence
of manifest error, be conclusive as to the outstanding balance of the Loans made
by such Bank; PROVIDED, HOWEVER, that the failure to make such notation with
respect to any Loan or renewal, conversion, or payment shall not limit or
otherwise affect the obligations of the Borrower under this Agreement or the
Note held by such Bank. All Loans shall be repaid on the Termination Date.
SECTION 2.11. PREPAYMENTS. (a) The Borrower may, upon at least one
(1) Business Day's prior notice to the Agent in the case of ABR Loans and at
least three (3) Business Days' prior notice to the Agent in the case of LIBOR
Loans, prepay
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(including, without limitation, all amounts payable pursuant to the terms of
Section 2.17 hereof) the Notes in whole or in part with accrued interest to the
date of such prepayment on the amount prepaid, PROVIDED that (1) each partial
payment shall be in a principal amount of not less than One Million Dollars
($1,000,000) in the case of a LIBOR Loan and Two Hundred Fifty Thousand Dollars
($250,000) in the case of an ABR Loan; and (2) LIBOR Loans may be prepaid only
on the last day of the Interest Period for such Loans; PROVIDED, HOWEVER, that
such prepayment of LIBOR Loans may be made on any other Business Day if the
Borrower pays at the time of such prepayment all amounts due pursuant to Section
2.17 hereof. Upon receipt of any such prepayments, the Agent will promptly
thereafter cause to be distributed such prepayment to each Bank for the account
of its applicable Lending Office pro rata to each Bank in the proportion that
its Commitment bears to the Aggregate Commitments, except that prepayments of
Swing Line Loans shall be made solely to the Swing Line Bank.
(b) The Borrower shall immediately upon a Change in Control prepay
the Notes in full and all accrued interest to the date of such prepayment, and
in the case of LIBOR Loans all amounts due pursuant to Section 2.17 hereof.
SECTION 2.12. METHOD OF PAYMENT. The Borrower shall make each
payment under this Agreement and under the Notes not later than 11:00 A.M.
Chicago time on the date when due in lawful money of the United States to the
Agent for the account of the applicable Lending Office of each Bank (or, in the
case of Swing Line Loans, for the account of the Swing Line Bank) in immediately
available funds. The Agent will promptly thereafter cause to be distributed (1)
such payments of principal and interest with respect to Loans (other than Swing
Line Loans) in like funds to each Bank for the account of its applicable Lending
Office pro rata to each Bank in the proportion that its Commitment bears to the
Aggregate Commitments, (2) such payments of principal and interest with respect
to Swing Line Loans solely to the Swing Line Bank and (3) other fees payable to
any Bank to be applied in accordance with the terms of this Agreement. If any
such payment is not received by a Bank on the Business Day on which the Agent
received such payment (or the following Business Day if the Agent's receipt
thereof occurs after 2:00 P.M. (Chicago time)), such Bank shall be entitled to
receive from the Agent interest on such payment at the Federal Funds Rate for
three Business Days and thereafter at the Alternate Base Rate (which interest
payment shall not be an obligation for the Borrower's account, including under
Section 11.04 or Seciton 11.06). The Borrower hereby authorizes each Bank, if
and to the extent payment is not made when due under this Agreement or under the
Notes, to charge from time to time against any account of the Borrower with such
Bank any amount as due. Whenever any payment
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to be made under this Agreement or under the Notes shall be stated to be due on
a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall be included in the
computation of the payment of interest and the commitment fee, as the case may
be, except, in the case of a LIBOR Loan, if the result of such extension would
be to extend such payment into another calendar month, such payment shall be
made on the immediately preceding Business Day.
SECTION 2.13. USE OF PROCEEDS. (a) The proceeds of the Loans
hereunder shall be used by the Borrower for working capital and general
corporate purposes of the Borrower and the Guarantors to the extent permitted in
this Agreement and to repay Swing Line Loans, and the initial Loans hereunder
shall be used to pay in full all outstanding principal and all accrued and
unpaid interest and fees under the Existing Credit Agreement. The Borrower will
not, directly or indirectly, (1) use any part of such proceeds for the purpose
of repaying the Senior Notes or for purchasing or carrying any margin stock
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System or to extend credit to any Person for the purpose of purchasing
or carrying any such margin stock, or for any purpose which violates, or is
inconsistent with, Regulation X of such Board of Governors or (2) except as
otherwise permitted in Section 2.13(b), use any part of such proceeds to pay all
or any part of the purchase price or other costs of any one or more
Acquisitions.
(b) The Borrower may use proceeds of the Loans to pay the purchase
price or other costs of any one or more Permitted Acquisitions, provided that
(1) within thirty (30) days after any such use of the proceeds, the Borrower
shall deliver to the Agent a certificate of the President or the Chief Financial
Officer of the Borrower, reasonably satisfactory to the Agent, certifying the
amount of proceeds so used and the purposes for which such proceeds were used,
and (2) in no event shall the proceeds used for such purposes exceed $50,000,000
with respect to any single Permitted Acquisition without the prior written
consent of the Majority Banks.
SECTION 2.14. YIELD PROTECTION. If any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law), or any interpretation thereof, or the compliance
of any Bank therewith,
(i) subjects any Bank or any applicable Lending Office to any tax,
duty, charge or withholding on or from payments due from the
Borrower (excluding federal taxation of the overall net income of
any Bank or
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applicable Lending Office), or changes the basis of taxation of
payments to any Bank in respect of its Loans or other amounts due
it hereunder, or
(ii) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit
extended by, any Bank or any applicable Lending Office (other
than reserves and assessments taken into account in determining
the interest rate applicable to LIBOR Loans), or
(iii) imposes any other condition the result of which is to increase
the cost to any Bank or any applicable Lending Office of making,
funding or maintaining loans or reduces any amount receivable by
any Bank or any applicable Lending Office in connection with
loans, or requires any Bank or any applicable Lending Office to
make any payment calculated by reference to the amount of loans
held or interest received by it, by an amount deemed material by
such Bank,
then, within fifteen (15) days of demand by such Bank, the Borrower shall pay
such Bank that portion of such increased expense incurred or reduction in an
amount received which such Bank reasonably determines is attributable to making,
funding and maintaining its Loans and its Commitment.
SECTION 2.15. CHANGES IN CAPITAL ADEQUACY REGULATIONS. If a Bank
determines the amount of capital required or expected to be maintained by such
Bank, any Lending Office of such Bank or any corporation controlling such Bank
is increased as a result of a Change, then, within 10 days of demand by such
Bank, the Borrower shall pay such Bank the amount necessary to compensate for
any shortfall in the rate of return on the portion of such increased capital
which such Bank determines is attributable to this Agreement, its Loans or its
obligation to make Loans hereunder (after taking into account such Bank's
policies as to capital adequacy); PROVIDED, HOWEVER, that a Bank shall impose
such cost upon the Borrower only if such Bank is generally imposing such cost on
its other borrowers having similar credit arrangements. "Change" means (i) any
change after the date of this Agreement in the Risk-Based Capital Guidelines or
(ii) any adoption of or change in any other law, governmental or
quasi-governmental rule, regulation, policy, guideline, interpretation, or
directive (whether or not having the force of law) after the date of this
Agreement which affects the amount of capital required or expected to be
maintained by any Bank or any Lending Office or any corporation controlling any
Bank. "Risk-Based
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Capital Guidelines" means (i) the risk-based capital guidelines in effect in the
United States on the date of this Agreement, including transition rules, and
(ii) the corresponding capital regulations promulgated by regulatory authorities
outside the United States implementing the July 1988 report of the Basle
Committee on Banking Regulation and Supervisory Practices Entitled
"International Convergence of Capital Measurements and Capital Standards,"
including transition rules, and any amendments to such regulations adopted prior
to the date of this Agreement.
SECTION 2.16. AVAILABILITY OF LIBOR LOANS. If any Bank determines
that maintenance of its LIBOR Loans at the Lending Office selected by the Bank
would violate any applicable law, rule, regulation, or directive, whether or not
having the force of law (and it is not reasonably possible for the Bank to
designate an alternate Lending Office without being adversely affected thereby),
or if the Majority Banks determine that (i) deposits of a type and maturity
appropriate to match fund LIBOR Loans are not available or (ii) the interest
rate applicable to LIBOR Loans does not accurately reflect the cost of making or
maintaining such LIBOR Loans, then the Agent shall suspend the availability of
LIBOR Loans and require any LIBOR Loans to be repaid.
SECTION 2.17. FUNDING INDEMNIFICATION. If any payment of a LIBOR
Loan occurs on a date which is not the last day of the applicable Interest
Period, whether because of acceleration, prepayment or otherwise, or a LIBOR
Loan is not made on the date specified by the Borrower for any reason other than
default by the Banks, the Borrower will indemnify each Bank for any loss or cost
incurred by it resulting therefrom, including, without limitation, any loss or
cost in liquidating or employing deposits required to fund or maintain the LIBOR
Loan.
SECTION 2.18. BANK STATEMENTS; SURVIVAL OF INDEMNITY. To the extent
reasonably possible, each Bank shall designate an alternate Lending Office with
respect to its LIBOR Loans to reduce any liability of the Borrower to such Bank
under Sections 2.14 and 2.15 or to avoid the unavailability of LIBOR Loans.
Each Bank shall deliver a written statement of such Bank as to the amount due,
if any, under Sections 2.14, 2.15 or 2.17. Such written statement shall set
forth in reasonable detail the calculations upon which such Bank determined such
amount and shall be final, conclusive and binding on the Borrower in the absence
of manifest error. Determination of amounts payable under such Sections in
connection with a LIBOR Loan shall be calculated as though each Bank funded its
LIBOR Loan through the purchase of a deposit of the type and maturity
corresponding to the deposit used as a reference in determining the LIBOR Rate
applicable to such Loan, whether in fact that is the case or not. Unless
otherwise provided herein, the amount specified in the
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written statement shall be payable on demand after receipt by the Borrower of
the written statement. The obligations of the Borrower under Sections 2.14,
2.15 and 2.17 shall survive payment of the Obligations and termination of this
Agreement.
SECTION 2.19. EXTENSION OF TERMINATION DATE. (a) The Borrower may
request a one-year extension of the Termination Date by submitting a request for
an extension to the Agent no more than 27 months nor less than 25 months prior
to the then scheduled Termination Date. At the time of or prior to the delivery
of such request, the Borrower shall propose to the Agent the amount of the fees
that the Borrower would agree to pay with respect to such one-year extension if
approved by the Banks. Promptly upon (but not later than five Business Days
after) the Agent's receipt and approval of the extension request and fee
proposal (as so approved, the "Extension Request"), the Agent shall deliver to
each Bank a copy of, and shall request each Bank to approve, the Extension
Request. Each Bank approving the Extension Request shall deliver its written
approval no later than 30 days after such Bank's receipt of the Extension
Request. If the approval of each of the Banks is received by the Agent within
30 days of the receipt by them of the Extension Request (or as otherwise
provided in Section 2.19(b)), the Agent shall promptly so notify the Borrower
and each Bank in writing, and the Termination Date shall be extended by one
year, and in such event the Borrower may thereafter request one (but not more
than one) further extension of the then scheduled Termination Date in accordance
with this Section 2.19. If any of the Banks does not deliver to the Agent such
Bank's written approval to any Extension Request within such 30-day period, the
Termination Date shall not be extended, except as otherwise provided in Section
2.19(b).
(b) If (i) any Bank (but not more than one Bank) ("Rejecting Bank")
shall not approve an Extension Request, (ii) all rights and obligations (from
and after the date of the assignment described below) of such Rejecting Bank
under this Agreement and under the other Loan Documents (including, without
limitation, its Commitment and all Loans owing to it) shall have been assigned,
within 90 days following the Bank's receipt of such Extension Request, in
accordance with Section 2.20, to one or more Replacement Banks who shall have
approved in writing such Extension Request at the time of such assignment, and
(iii) no other Bank shall have given written notice to the Agent of such Bank's
withdrawal of its approval of the Extension Request, the Agent shall promptly so
notify the Borrower and each Bank, and the Termination Date shall be extended by
one year, and in such event the Borrower may thereafter request one (but not
more than one) further extension as provided in Section 2.19(a).
(c) Within ten days of the Agent's notice to the Borrower that all of
the Banks have approved an Extension Request
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(whether pursuant to Section 2.19(a) or 2.19(b)), the Borrower shall pay to the
Agent for the account of each Bank the applicable extension fees specified in
the Extension Request.
SECTION 2.20. REPLACEMENT OF CERTAIN BANKS. In the event a Bank
("Affected Bank"): (i) shall have requested compensation from the Borrower
under Sections 2.14 or 2.15 to recover additional costs incurred by such Bank
that are not being incurred generally by the other Banks, (ii) shall have
delivered a notice pursuant to Section 2.16 claiming that such Bank is unable to
extend LIBOR Loans to the Borrower for reasons not generally applicable to the
other Banks, (iii) shall have invoked Section 11.13 or (iv) is a Rejecting Bank
pursuant to Section 2.19, then, in any such case, the Borrower or the Agent may
make written demand on such Affected Bank (with a copy to the Agent in the case
of a demand by the Borrower and a copy to the Borrower in the case of a demand
by the Agent) for the Affected Bank to assign, and, if a Replacement Bank (as
hereinafter defined) notifies the Affected Bank of its willingness to purchase
the Affected Bank's interest and the Agent and the Borrower consent thereto in
writing, then such Affected Bank shall assign pursuant to one or more duly
executed assignment and acceptance agreements in substantially and in all
material respects in the form and substance of EXHIBIT G five (5) Business Days
after the date of such demand, to one or more financial institutions that comply
with the provisions of Section 12.03(a) that the Borrower or the Agent, as the
case may be, shall have engaged for such purpose ("Replacement Bank"), all of
such Affected Bank's rights and obligations (from and after the date of such
assignment) under this Agreement and the other Loan Documents (including,
without limitation, its Commitment and all Loans owing to it) in accordance with
Section 12.03. The Agent agrees, upon the occurrence of such events with
respect to an Affected Bank and upon the written request of the Borrower, to use
its reasonable efforts to obtain the commitments from one or more financial
institutions to act as a Replacement Bank. As a condition to any such
assignment, the Affected Bank shall have concurrently received, in cash, all
amounts due and owing to the Affected Bank hereunder or under any other Loan
Document, including, without limitation, the aggregate outstanding principal
amount of the Loans owed to such Bank, together with accrued interest thereon
through the date of such assignment, amounts payable under Sections 2.14 and
2.15 with respect to such Affected Bank and the fees payable to such Affected
Bank under Section 2.09(b); PROVIDED that upon such Affected Bank's replacement,
such Affected Bank shall cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 2.14, 2.15, 2.17, 11.04 and 11.06, as well
as to any fees accrued for its account hereunder and not yet paid, and shall
continue to be obligated under Section 10.05 with respect to obligations and
liabilities accruing prior to the replacement of such Affected Bank.
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SECTION 2.21. SWING LINE. (a) The Swing Line Bank agrees, on the
terms and conditions hereinafter set forth, to make loans ("Swing Line Loans")
to the Borrower from time to time during the period from the date of this
Agreement, up to but not including the Termination Date, in an aggregate
principal amount not to exceed at any time outstanding the lesser of (i) the
Swing Line Commitment or (ii) the amount by which the Swing Line Bank's
Commitment under Section 2.01 exceeds the outstanding principal amount of the
Loans made by the Swing Line Bank pursuant to Section 2.01, subject to the
limitations set forth in Section 2.01(b).
(b) Each Swing Line Loan which shall not utilize the Swing Line
Commitment in full shall be in an amount not less than One Million Dollars
($1,000,000) and, if in excess thereof, in integral multiples of One Million
Dollars ($1,000,000). Within the limits of the Swing Line Commitment, the
Borrower may borrow, repay and reborrow under this Section 2.21.
(c) The Borrower shall give the Swing Line Bank notice of any request
for a Swing Line Loan not later than 2:00 p.m. Chicago time on the Business Day
of such Swing Line Loan, specifying the amount of such requested Swing Line
Loan. Each such notice shall be accompanied by a Borrowing Base Certificate
dated as of the date of such notice (and by the notice provided for in Section
2.21(d)). All notices given by the Borrower under this Section 2.21(c) shall be
irrevocable. Upon fulfillment of the applicable conditions set forth in Article
III, the Swing Line Bank will make the Swing Line Loan available to the Borrower
in immediately available funds by crediting the amount thereof to the Borrower's
account with the Swing Line Bank.
(d) On the first Business Day following the making of a Swing Line
Loan, such Swing Line Loan shall be paid in full from the proceeds of a Loan
made pursuant to Section 2.01. Each notice given by the Borrower under Section
2.21(c) shall include, or, if it does not include, shall be deemed to include an
irrevocable notice under Section 2.03 requesting the Banks to make an ABR Loan
on the next succeeding Business Day in the full amount of such Swing Line Loan.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01. CONDITIONS PRECEDENT TO THE INITIAL LOAN. The
obligation of each Bank to make its initial Loan to the Borrower is subject to
the conditions precedent that the Agent shall have received on or before the day
of such Loan each of the following, in form and substance satisfactory to the
Agent
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and its counsel and (except for the Notes) in sufficient copies for each Bank:
(1) NOTES. A Note payable to each Bank duly executed by the
Borrower;
(2) EVIDENCE OF ALL CORPORATE ACTION BY THE BORROWER. Certified
copies of all corporate action taken by the Borrower, including resolutions of
its Board of Directors, authorizing the execution, delivery and performance of
the Loan Documents to which it is a party and each other document to be
delivered pursuant to this Agreement;
(3) INCUMBENCY AND SIGNATURE CERTIFICATE OF BORROWER. A certificate
of the Secretary or Assistant Secretary of the Borrower certifying the names and
true signatures of the officers of the Borrower authorized to sign the Loan
Documents to which it is a party and the other documents to be delivered by the
Borrower under this Agreement;
(4) ARTICLES OF INCORPORATION OF BORROWER. Copies of the articles of
incorporation of the Borrower, together with all amendments, and a certificate
of good standing, all certified by the appropriate governmental officer in its
jurisdiction of incorporation;
(5) OPINIONS OF COUNSEL FOR BORROWER. A favorable opinion of Paul,
Hastings, Janofsky & Walker LLP, counsel for the Borrower and for the Guarantors
that are Delaware Persons, in substantially the form of EXHIBIT B and as to such
other matters as the Agent may reasonably request and of Katten Muchin & Zavis,
Illinois counsel for the Borrower, in substantially the form of EXHIBIT C and as
to such other matters as the Agent may reasonably request;
(6) OPINION OF COUNSEL FOR AGENT. A favorable opinion of Sidley &
Austin, counsel for the Agent, in substantially the form of EXHIBIT D hereto;
(7) EVIDENCE OF ALL CORPORATE OR PARTNERSHIP ACTION BY GUARANTORS.
With respect to each corporate Guarantor, certified (as of the date of this
Agreement) copies of all corporate action taken by such Guarantor, including
resolutions of its Board of Directors, authorizing the execution, delivery, and
performance of the applicable Guaranty, and with respect to each limited
partnership Guarantor, partnership action taken by such Guarantor, including any
and all necessary partnership consents authorizing the execution, delivery, and
performance of the applicable Guaranty;
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(8) ARTICLES OF INCORPORATION OF GUARANTORS. Copies of the articles
of incorporation of each corporate Guarantor, together with all amendments, and
a certificate of good standing, all certified by the appropriate governmental
officer in its jurisdiction of incorporation; PROVIDED, HOWEVER, that, if a
certificate of good standing is not currently available, the Guarantor shall
deliver other reasonably satisfactory evidence of its good standing and, within
thirty (30) days, shall deliver a certificate of good standing;
(9) INCUMBENCY AND SIGNATURE CERTIFICATE OF GUARANTORS. A
certificate (dated as of the date of this Agreement) of the Secretary or
Assistant Secretary of each corporate Guarantor or the general partner of each
partnership Guarantor certifying the names and true signatures of the officers
of each such corporate Guarantor and the representative of each partnership
Guarantor authorized to sign the Guaranty;
(10) OPINION OF COUNSEL FOR CERTAIN GUARANTORS. With respect to
Beazer Homes Corp., a favorable opinion of Tennessee counsel in substantially
the form of EXHIBIT E hereto, and as to such other matters as the Agent may
reasonably request;
(11) PARTNERSHIP AGREEMENT. A true and complete copy of the limited
partnership agreement of each limited partnership Guarantor, including without
limitation, any and all amendments and modifications thereto, and any and all
filed partnership certificates;
(12) OTHER DOCUMENTS. Such other and further documents as any Bank
or its counsel may have reasonably requested.
SECTION 3.02. CONDITIONS PRECEDENT TO ALL LOANS. The obligation of
each Bank to make each Loan (including the initial Loan and, in the case of the
Swing Line Bank, any Swing Line Loan) shall be subject to the further conditions
precedent that (except as hereinafter provided) on the date of such Loan:
(1) The following statements shall be true and the Agent shall have
received a certificate signed by a duly authorized officer of the
Borrower dated the date of such Loan, stating that:
(a) The representations and warranties contained in Article IV of
this Agreement, are correct on and as of the date of such Loan as
though made on and as of such date; and
(b) No Default or Event of Default has occurred and is continuing, or
would result from such Loan;
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(2) The Agent shall have received such other approvals, opinions, or
documents as any Bank through the Agent may reasonably request; and
(3) Such other and further documents as any Bank or its counsel may have
reasonably requested. All matters incident to the making of such Loan
shall be satisfactory to the Banks and their counsel.
Notwithstanding the foregoing, in the case of a Loan (provided for in
Section 2.21(d)) made to repay a Swing Line Loan, the satisfaction of the
foregoing conditions with respect to such Swing Line Loan shall constitute
satisfaction of such conditions with respect to the Loan made on the next
succeeding Business Day to repay such Swing Line Loan.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower and each of the Guarantors, jointly and severally,
represent and warrant that:
SECTION 4.01. INCORPORATION, FORMATION, GOOD STANDING, AND DUE
QUALIFICATION. The Borrower, each Subsidiary, and each of the Guarantors is (in
the case of a corporation) a corporation duly incorporated or (in the case of a
limited partnership) a limited partnership duly formed, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation or
formation; has the power and authority to own its assets and to transact the
business in which it is now engaged or proposed to be engaged in; and is duly
qualified and in good standing under the laws of each other jurisdiction in
which such qualification is required.
SECTION 4.02. POWER AND AUTHORITY. The execution, delivery and
performance by the Borrower and the Guarantors of the Loan Documents to which
each is a party have been duly authorized by all necessary corporate or
partnership action, as the case may be, and do not and will not (1) require any
consent or approval of the stockholders of such corporation, or partners of such
partnership; (2) contravene such corporation's charter or bylaws, or such
partnership's partnership agreement; (3) violate, in any material respect, any
provision of any law, rule, regulation (including, without limitation,
Regulations U and X of the Board of Governors of the Federal Reserve System),
order, writ, judgment, injunction, decree, determination, or award presently in
effect having applicability to such corporation or partnership; (4) result in a
breach of or constitute a default under any indenture or loan or credit
agreement or any other
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material agreement, lease, or instrument to which such corporation or
partnership is a party or by which it or its properties may be bound or
affected; (5) result in, or require, the creation or imposition of any Lien,
upon or with respect to any of the properties now owned or hereafter acquired by
such corporation or partnership; and (6) cause such corporation or partnership
to be in default, in any material respect, under any such law, rule, regulation,
order, writ, judgment, injunction, decree, determination, or award or any such
indenture, agreement, lease or instrument.
SECTION 4.03. LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and
each of the other Loan Documents when delivered under this Agreement will be
legal, valid, and binding obligations of the Borrower or each Guarantor, as the
case may be, enforceable against the Borrower or each Guarantor, as the case may
be, in accordance with their respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency, and other
similar laws affecting creditors' rights generally.
SECTION 4.04. FINANCIAL STATEMENTS. The consolidated balance sheet
of the Borrower and its Subsidiaries as at June 30, 1996, and the consolidated
statements of operations, cash flow and changes to stockholders' equity of the
Borrower and its Subsidiaries for the period of three fiscal quarters ended June
30, 1996, are complete and correct and fairly present as at such date the
financial condition of the Borrower and its Subsidiaries and the results of
their operations for the periods covered by such statements, all in accordance
with GAAP consistently applied (subject to year-end adjustments), and since June
30, 1996, there has been no material adverse change in the condition (financial
or otherwise), business, or operations of the entities for which combined
financial statements have been furnished to the Banks. There are no liabilities
of the Borrower or any Subsidiary, fixed or contingent, which are material but
are not reflected in the financial statements or in the notes thereto, other
than liabilities arising in the ordinary course of business since June 30, 1996.
No information, exhibit, or report furnished by the Borrower to any Bank in
connection with the negotiation of this Agreement taken together, contained any
material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statements contained therein not materially misleading.
SECTION 4.05. LABOR DISPUTES AND ACTS OF GOD. Neither the business
nor the properties of the Borrower or any Subsidiary or any Guarantor are
affected by any fire, explosion, accident, strike, lockout, or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or of the public
enemy, or other casualty (whether or not covered by insurance), materially and
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adversely affecting such business or properties or the operation of the Borrower
or such Subsidiary or such Guarantor.
SECTION 4.06. OTHER AGREEMENTS. Neither the Borrower nor any
Significant Subsidiary nor any Significant Guarantor is a party to any
indenture, loan, or credit agreement, or to any lease or other agreement or
instrument or subject to any charter, corporate or other restriction which could
have a material adverse effect on the business, properties, assets, operations,
or conditions, financial or otherwise, of the Borrower or any Significant
Subsidiary or any Significant Guarantor, or the ability of the Borrower or any
Significant Guarantor to carry out its obligations under the Loan Documents to
which it is a party. Neither the Borrower nor any Significant Subsidiary nor
any Significant Guarantor is in default in any material respect in the
performance, observance, or fulfillment of any of the obligations, covenants, or
conditions contained in any agreement or instrument material to its business to
which it is a party.
SECTION 4.07. LITIGATION. There is no pending or, to the knowledge
of the Borrower or any Guarantor, threatened action or proceeding against or
affecting the Borrower or any Significant Subsidiary or any Significant
Guarantor before any court, governmental agency, or arbitrator, which may, in
any one case or in the aggregate, materially adversely affect the financial
condition, operations, properties, or business of the Borrower or any
Significant Subsidiary or any Significant Guarantor or the ability of the
Borrower or any Significant Guarantor to perform its obligation under the Loan
Documents to which it is a party.
SECTION 4.08. NO DEFAULTS ON OUTSTANDING JUDGMENTS OR ORDERS. The
Borrower, each Significant Subsidiary and each Significant Guarantor have
satisfied all judgments, and neither the Borrower nor any Significant Subsidiary
nor any Significant Guarantor is in default with respect to any judgment, writ,
injunction, decree, rule, or regulation of any court, arbitrator, or federal,
state, municipal, or other governmental authority, commission, board, bureau,
agency, or instrumentality, domestic or foreign.
SECTION 4.09. OWNERSHIP AND LIENS. The Borrower and each Subsidiary
and each Guarantor have title to, or valid leasehold interests in, all of their
respective properties and assets, real and personal, including the properties
and assets and leasehold interests reflected in the financial statements
referred to in Section 4.04 (other than any properties or assets disposed of in
the ordinary course of business), and none of the properties and assets owned by
the Borrower or any Subsidiary or any Guarantor and none of their leasehold
interests is subject to
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any Lien, except such as may be permitted pursuant to Section 6.01 of this
Agreement.
SECTION 4.10. SUBSIDIARIES AND OWNERSHIP OF STOCK. Set forth in
Exhibit F hereto is a complete and accurate list of the Subsidiaries of the
Borrower, showing the jurisdiction of incorporation or formation of each and
showing the percentage of the Borrower's ownership of the outstanding stock or
partnership interest of each Subsidiary. All of the outstanding capital stock
of each such corporate Subsidiary has been validly issued, is fully paid and
nonassessable, and is owned by the Borrower free and clear of all Liens. The
limited partnership agreement of each such limited partnership Subsidiary is in
full force and effect and has not been amended or modified. Each of the
Guarantors is a Wholly Owned Subsidiary of the Borrower.
SECTION 4.11. ERISA. The Borrower and each Subsidiary and each
Guarantor are in compliance in all material respects with all applicable
provisions of ERISA. Neither a Reportable Event nor a Prohibited Transaction
has occurred and is continuing with respect to any Plan; no notice of intent to
terminate a Plan has been filed, nor has any Plan been terminated; no
circumstances exist which constitute grounds entitling the PBGC to institute
proceedings to terminate, or appoint a trustee to administer, a Plan, nor has
the PBGC instituted any such proceedings; neither the Borrower nor any Commonly
Controlled Entity has completely or partially withdrawn from a Multiemployer
Plan under circumstances that could subject the Borrower or any Subsidiary to
material withdrawal liability; the Borrower and each Commonly Controlled Entity
have met their minimum funding requirements under ERISA with respect to all of
their Plans and the present value of all vested benefits under each Plan does
not materially exceed the fair market value of all Plan assets allocable to such
benefits, as determined on the most recent valuation date of the Plan and in
accordance with the provisions of ERISA; and neither the Borrower nor any
Commonly Controlled Entity has incurred any material liability to the PBGC under
ERISA.
SECTION 4.12. OPERATION OF BUSINESS. The Borrower, each Subsidiary
and each Guarantor possess all licenses, permits, franchises, patents,
copyrights, trademarks, and trade names, or rights thereto, to conduct their
respective businesses substantially as now conducted and as presently proposed
to be conducted and the Borrower and each of its Subsidiaries and each Guarantor
are not in violation of any valid rights of others with respect to any of the
foregoing.
SECTION 4.13. TAXES. All income tax liabilities or income tax
obligations of the Borrower, each Subsidiary and each Guarantor have been paid
or have been accrued by or reserved for
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by the Borrower. The Borrower constitutes the parent of an affiliated group of
corporations for purposes of filing a consolidated United States federal income
tax return.
SECTION 4.14. LAWS; ENVIRONMENT. The Borrower, each Subsidiary and
each Guarantor have duly complied, and their businesses, operations, assets,
equipment, property, leaseholds, or other facilities are in compliance, in all
material respects, with the provisions of all federal, state, and local
statutes, laws, codes, and ordinances and all rules and regulations promulgated
thereunder (including without limitation those relating to the environment,
health and safety). The Borrower, each Subsidiary and each Guarantor have been
issued and will maintain all required federal, state, and local permits,
licenses, certificates, and approvals relating to (1) air emissions; (2)
discharges to surface water or groundwater; (3) noise emissions; (4) solid or
liquid waste disposal; (5) the use, generation, storage, transportation, or
disposal of toxic or hazardous substances or hazardous wastes (intended hereby
and hereafter to include any and all such materials listed in any federal,
state, or local law, code, or ordinance and all rules and regulations
promulgated thereunder as hazardous); or (6) other environmental, health or
safety matters. Neither the Borrower nor any Subsidiary nor any Guarantor has
received notice of, or has actual knowledge of any violations of any federal,
state, or local environmental, health, or safety laws, codes or ordinances or
any rules or regulations promulgated thereunder with respect to its businesses,
operations, assets, equipment, property, leaseholds, or other facilities.
Except in accordance with a valid governmental permit, license, certificate or
approval, there has been no material emission, spill, release, or discharge into
or upon (1) the air; (2) soils, or any improvements located thereon; (3) surface
water or groundwater; or (4) the sewer, septic system or waste treatment,
storage or disposal system servicing the premises, of any toxic or hazardous
substances or hazardous wastes at or from the premises; and accordingly the
premises of the Borrower, each Subsidiary and each Guarantor have not been
adversely affected, in any material respect, by any toxic or hazardous
substances or wastes. There has been no complaint, order, directive, claim,
citation, or notice by any governmental authority or any person or entity with
respect to violations of law or damages by reason of Borrower's or any
Subsidiary's (1) air emissions; (2) spills, releases, or discharges to soils or
improvements located thereon, surface water, groundwater or the sewer, septic
system or waste treatment, storage or disposal systems servicing the premises;
(3) noise emissions; (4) solid or liquid waste disposal; (5) use, generation,
storage, transportation, or disposal of toxic or hazardous substances or
hazardous waste; or (6) other environmental, health or safety matters affecting
the Borrower, any Subsidiary or any Guarantor or its business, operations,
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assets, equipment, property, leaseholds, or other facilities. Neither the
Borrower nor any Subsidiary nor any Guarantor has any material indebtedness,
obligation, or liability, absolute or contingent, matured or not matured, with
respect to the storage, treatment, cleanup, or disposal of any solid wastes,
hazardous wastes, or other toxic or hazardous substances (including without
limitation any such indebtedness, obligation, or liability with respect to any
current regulation, law, or statute regarding such storage, treatment, cleanup,
or disposal).
SECTION 4.15. INVESTMENT COMPANY ACT. Neither the Borrower nor any
Subsidiary thereof is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.16. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the
Borrower nor any Subsidiary is a "holding company" or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Note shall remain unpaid or any Bank shall have any
Commitment under this Agreement, the Borrower and each Guarantor will:
SECTION 5.01. MAINTENANCE OF EXISTENCE. Preserve and maintain, and
cause each Subsidiary to preserve and maintain (except for a Subsidiary that
ceases to maintain its existence solely as a result of an Internal
Reorganization), its corporate or limited partnership existence and good
standing in the jurisdiction of its incorporation or formation and qualify and
remain qualified to transact business in each jurisdiction in which such
qualification is required.
SECTION 5.02. MAINTENANCE OF RECORDS. Keep and cause each Subsidiary
to keep, adequate records and books of account, in which complete entries will
be made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Borrower and its Subsidiaries.
SECTION 5.03. MAINTENANCE OF PROPERTIES. Maintain, keep, and
preserve, and cause each Subsidiary to maintain, keep, and preserve, all of its
properties (tangible and intangible) necessary or useful in the proper conduct
of its business in good working order and condition, ordinary wear and tear
excepted.
SECTION 5.04. CONDUCT OF BUSINESS. Continue, and cause each
Subsidiary to continue (except in the case of a Subsidiary that ceases to engage
in business solely as a result
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of an Internal Reorganization), to engage in a business of the same general type
and in the same manner as conducted by it on the date of this Agreement.
SECTION 5.05. MAINTENANCE OF INSURANCE. Maintain, and cause each
Subsidiary to maintain, insurance with financially sound reputable insurance
companies or associations (or, in the case of insurance for construction
warranties and builder default protection for buyers of Housing Units from the
Borrower or any of its Subsidiaries, UHIC) in such amounts and covering such
risks as are usually carried by companies engaged in the same or a similar
business and similarly situated, which insurance may provide for reasonable
deductibility from coverage thereof.
SECTION 5.06. COMPLIANCE WITH LAWS. Comply, and cause each
Subsidiary to comply, in all material respects with all applicable laws, rules,
regulations, and orders, such compliance to include, without limitation, paying
before the same become delinquent all taxes, assessments and governmental
charges imposed upon it or upon its property, other than any such taxes,
assessments and charges being contested by the Borrower in good faith which will
not have a material adverse effect on the financial condition of the Borrower.
SECTION 5.07. RIGHT OF INSPECTION. At any reasonable time and from
time to time, permit any Bank or any agent or representative thereof to examine
and make copies of and abstracts from the records and books of account of, and
visit the properties of, the Borrower and any Subsidiary, and to discuss the
affairs, finances, and accounts of the Borrower and any Subsidiary with any of
their respective officers and directors and the Borrower's independent
accountants.
SECTION 5.08. REPORTING REQUIREMENTS. Furnish to the Agent for
delivery to each of the Banks:
(1) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any
event within sixty (60) days after the end of each of the first three quarters
of each fiscal year of the Borrower, an unaudited condensed consolidated balance
sheet of the Borrower and its Subsidiaries as of the end of such quarter,
unaudited condensed consolidated statements of operations and cash flow of the
Borrower and its Subsidiaries for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, and unaudited
condensed consolidated statements of changes in stockholders' equity of the
Borrower and its Subsidiaries for the portion of the fiscal year ended with the
last day of such quarter, all in reasonable detail and stating in comparative
form the respective figures for the corresponding date and period in the
previous fiscal year and all prepared in accordance with GAAP consistently
applied and
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certified by the chief financial officer of the Borrower (subject to year-end
adjustments); statements in the form of the Borrower's quarterly 10-Q report to
the Securities and Exchange Commission that are consistent with the foregoing
requirements shall satisfy such requirements;
(2) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any
event within ninety (90) days after the end of each fiscal year of the Borrower,
a consolidated balance sheet of the Borrower and its Subsidiaries as of the end
of such fiscal year, consolidated statements of operations and cash flow of the
Borrower and its Subsidiaries for such fiscal year, and consolidated statements
of changes in stockholders' equity of the Borrower and its Subsidiaries for such
fiscal year, all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the prior fiscal
year and all prepared in accordance with GAAP consistently applied and
accompanied by an opinion thereon acceptable to the Agent by Ernst & Young or
other independent accountants selected by the Borrower and acceptable to the
Agent; statements in the form of the Borrower's annual 10-K report to the
Securities and Exchange Commission that are consistent with the foregoing
requirements shall satisfy such requirements;
(3) FINANCIAL PROJECTIONS. On August 15, 1997 and each anniversary
thereof, two-year financial projections (including a consolidated income
statement, balance sheet and statement of cash flows for the Borrower and its
Subsidiaries) broken down by quarters;
(4) VARIANCE ANALYSIS. (a) Within sixty (60) days of the end of
each of the first three fiscal quarters of each fiscal year of the Borrower, a
quarterly variance analysis comparing actual quarterly results versus projected
quarterly results for the fiscal quarter most recently ended (including
consolidated income statements of the Borrower and its Subsidiaries, an analysis
of revenues, closings and operating profits of the Borrower and each Subsidiary
on a state by state basis, and such other items as are requested by any of the
Banks), together with a written explanation of material variances.
(b) Within ninety (90) days after the end of each fiscal year of
the Borrower, a quarterly variance analysis comparing actual quarterly results
versus projected quarterly results for the fiscal year most recently ended
(including consolidated income statements of the Borrower and its Subsidiaries
accompanied by an opinion thereon acceptable to the Agent by Ernst & Young or
other independent accountants selected by the Borrower and acceptable to the
Agent, an analysis of revenues, closings and operating profits of the Borrower
and each Subsidiary on a state by state basis, and such other items as are
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requested by any of the Banks), together with a written explanation of material
variances.
(5) MANAGEMENT LETTERS. Promptly upon receipt thereof, copies of any
reports submitted to the Borrower or any Subsidiary by independent certified
public accountants in connection with examination of the financial statements of
the Borrower or any Subsidiary made by such accountants.
(6) BORROWING BASE CERTIFICATE. Within twenty-five (25) days (or, in
the case of the last quarter of the fiscal year, thirty-five (35) days) after
the end of each fiscal quarter, a Borrowing Base Certificate, with respect to
the Inventory Valuation Date occurring on the last day of such fiscal quarter.
(7) COMPLIANCE CERTIFICATE. Within sixty (60) days after the end of
each of the first three quarters, and within ninety (90) days after the end of
each fourth quarter, of each fiscal year of the Borrower, a certificate of the
President or chief financial officer of the Borrower certifying (a) the
Borrower's compliance with all financial covenants including, without
limitation, those set forth in Sections 6.10 and 6.11 and Article VII hereof,
which certificate shall set forth in reasonable detail the computation thereof
and (b) certifying that to the best of his knowledge no Default or Event of
Default has occurred and is continuing, or if a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof and the action
which is proposed to be taken with respect thereto;
(8) PRODUCTION MONITOR SUMMARY. Within twenty (20) days after the
end of each calendar month, a certificate of the President or Chief Operating
Officer of the Borrower certifying the Inventory as at such date which lists by
state of location each item of Inventory, in the following categories: (a)
pre-foundation, (b) foundation, (c) framed, (d) being finished, and (e) model
homes; such summary shall include a delineation of sold or unsold items in each
category;
(9) LAND BANK INVENTORY. Within sixty (60) days after the end of
each calendar quarter, a certificate of the President or Chief Operating Officer
of the Borrower certifying the Land as at such date, which lists by state of
location all Land, delineating Finished Lots, other Lots and estimated
undeveloped Lots.
(10) ACCOUNTANT'S REPORT. Simultaneously with the delivery of the
annual financial statements referred to in Section 5.08(2), a certificate of the
independent public accountants who audited such statements to the effect that,
in
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making the examination necessary for the audit of such statements, they have
obtained no knowledge of any condition or event which constitutes a Default or
Event of Default, or if such accountants shall have obtained knowledge of any
such condition or event, specifying in such certificate each such condition or
event of which they have knowledge and the nature and status thereof;
(11) NOTICE OF LITIGATION. Promptly after the commencement thereof,
notice of all actions, suits, and proceedings before any court or governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, affecting the Borrower or any Subsidiary which, if determined adversely
to the Borrower or such Subsidiary, would reasonably be expected to result in a
judgment against the Borrower or such Subsidiary in excess of $1,000,000 or
would reasonably be expected to have a material adverse effect on the financial
condition, properties, or operations of the Borrower or such Subsidiary;
(12) NOTICE OF DEFAULTS AND EVENTS OF DEFAULT. As soon as possible
and in any event within ten (10) days after the occurrence of each Default or
Event of Default, a written notice setting forth the details of such Default or
Event of Default and the action which is proposed to be taken by the Borrower
with respect thereto;
(13) ERISA REPORTS. As soon as possible, and in any event within
thirty (30) days after the Borrower knows or has reason to know that any
circumstances exist that constitute grounds entitling the PBGC to institute
proceedings to terminate a Plan subject to ERISA with respect to the Borrower or
any Commonly Controlled Entity, and promptly but in any event within two (2)
Business Days of receipt by the Borrower or any Commonly Controlled Entity of
notice that the PBGC intends to terminate a Plan or appoint a trustee to
administer the same, and promptly but in any event within five (5) Business Days
of the receipt of notice concerning the imposition of withdrawal liability in
excess of $50,000 with respect to the Borrower or any Commonly Controlled
Entity, the Borrower will deliver to each Bank a certificate of the chief
financial officer of the Borrower setting forth all relevant details and the
action which the Borrower proposes to take with respect thereto;
(14) REPORTS TO OTHER CREDITORS. Promptly after the furnishing
thereof, copies of any statement, report, document, notice, certificate, and
correspondence furnished to any other party pursuant to the terms of any
indenture, loan, credit, or similar agreement and not otherwise required to be
furnished to the Bank pursuant to any other clause of this Section 5.08;
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(15) PROXY STATEMENTS, ETC. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements, and reports which
the Borrower or any Subsidiary sends to its stockholders, and copies of all
regular, periodic, and special reports, and all registration statements which
the Borrower or any Subsidiary files with the Securities and Exchange Commission
or any governmental authority which may be substituted therefor, or with any
national securities exchange; and
(16) GENERAL INFORMATION. Such other information respecting the
condition or operations, financial or otherwise, of the Borrower or any
Subsidiary as any Bank may from time to time reasonably request.
SECTION 5.09. SUBSIDIARY REPORTING REQUIREMENTS. In the event any of
the following statements are prepared with respect to any Subsidiary, then upon
written request from any Bank, furnish to the Agent for delivery to each of the
Banks the following with respect to any Subsidiary:
(1) QUARTERLY FINANCIAL STATEMENTS. An unaudited balance sheet of
such Subsidiary as of the end of most recently completed fiscal quarter,
statements of operations and cash flow of such Subsidiary for the period
commencing at the end of the previous fiscal year and ending with the end of
such quarter, and statements of changes in stockholders' equity of such
Subsidiary for the portion of the fiscal year ended with the last day of such
quarter, all in reasonable detail and stating in comparative form the respective
figures for the corresponding date and period in the previous fiscal year and
all prepared in accordance with GAAP consistently applied and certified by the
chief financial officer of such Subsidiary (subject to year-end adjustments);
(2) ANNUAL FINANCIAL STATEMENTS. A balance sheet of such Subsidiary
as of the end of such fiscal year, statements of operations and cash flow of
such Subsidiary for such fiscal year, and statements of changes in stockholders'
equity of such Subsidiary for such fiscal year, all in reasonable detail and
stating in comparative form the respective figures for the corresponding date
and period in the prior fiscal year and all prepared in accordance with GAAP
consistently applied and as to the consolidated statements accompanied by an
opinion thereon acceptable to the Agent by Ernst & Young or other independent
accountants selected by the Borrower and acceptable to the Agent.
SECTION 5.10. ENVIRONMENT. Be and remain, and cause each Subsidiary
to be and remain, in compliance with the provisions of all federal, state, and
local environmental, health, and safety laws, codes and ordinances, and all
rules and regulations issued thereunder; notify the Agent promptly of any
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notice of a hazardous discharge or environmental complaint received from any
governmental agency or any other party (and the Agent shall notify the Banks
promptly following its receipt of any such notice from the Borrower); notify the
Agent promptly of any hazardous discharge from or affecting its premises (and
the Agent shall notify the Banks promptly following its receipt of any such
notice from the Borrower); promptly contain and remove the same, in compliance
with all applicable laws; promptly pay any fine or penalty assessed in
connection therewith; permit any Bank to inspect the premises, to conduct tests
thereon, and to inspect all books, correspondence, and records pertaining
thereto; and at such Bank's request, and at the Borrower's expense, provide a
report of a qualified environmental engineer, satisfactory in scope, form, and
content to the Majority Banks, and such other and further assurances reasonably
satisfactory to the Majority Banks that the condition has been corrected.
SECTION 5.11. USE OF PROCEEDS. Use the proceeds of the Loans solely
as provided in Section 2.13 hereof.
SECTION 5.12. RANKING OF OBLIGATIONS. Ensure that at all times its
Obligations under the Loan Documents shall be and constitute unconditional
general obligations of the Borrower ranking at least PARI PASSU with all its
other unsecured Debt.
SECTION 5.13. TAXES. Pay and cause each Subsidiary to pay when due
all taxes, assessments and governmental charges and levies upon it or its
income, profits or property, except those which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves
have been set aside.
SECTION 5.14. WHOLLY OWNED STATUS. Ensure that at all times each of
the Guarantors is a Wholly Owned Subsidiary of the Borrower.
SECTION 5.15. NEW SUBSIDIARIES. Within thirty (30) days after the
date on which any Person shall become a Subsidiary, cause such Subsidiary to
execute and deliver to the Agent, for the benefit of the Banks, a guaranty of
the Obligations in the form of Article IX and an opinion of counsel, certified
copies of resolutions, articles of incorporation, incumbency certificates and
other documents with respect to such Subsidiary and its guaranty substantially
similar to the documents delivered pursuant to Section 3.01 with respect to the
Original Guarantors and Guaranty, all of which shall be reasonably satisfactory
to the Majority Banks in form and substance. UHIC shall not be required to
deliver a Guaranty.
ARTICLE VI
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NEGATIVE COVENANTS
So long as any Note shall remain unpaid or any Bank shall have any
Commitment under this Agreement, the Borrower and each Guarantor will not:
SECTION 6.01. LIENS. Create, incur, assume, or suffer to exist, or
permit any Subsidiary to create, incur, assume, or suffer to exist, any Lien,
upon or with respect to any of its properties, now owned or hereafter acquired,
except the following:
(1) Liens for taxes or assessments or other government charges or
levies if not yet due and payable or, if due and payable, if they are being
contested in good faith by appropriate proceedings and for which appropriate
reserves are maintained;
(2) Liens imposed by law, such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due for more than ninety (90) days or which are being contested in good
faith by appropriate proceedings and for which appropriate reserves have been
established;
(3) Liens under workers' compensation, unemployment insurance, Social
Security, or similar legislation;
(4) Liens, deposits, or pledges to secure the performance of bids,
tenders, contracts (other than contracts for the payment of money), Capital
Leases (permitted under the terms of this Agreement), public or statutory
obligations, surety, stay, appeal, indemnity, performance, or other similar
bonds, or other similar obligations arising in the ordinary course of business;
(5) Judgment and other similar Liens arising in connection with any
court proceeding, provided the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being actively contested
in good faith and by appropriate proceedings;
(6) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use, and enjoyment by the Borrower or any Subsidiary of the property
or assets encumbered thereby in the normal course of its business or materially
impair the value of the property subject thereto;
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(7) Purchase-money Liens on any property hereafter acquired or the
assumption of any Lien on property existing at the time of such acquisition (and
not created in contemplation of such acquisition), or a Lien incurred in
connection with any conditional sale or other title retention or a Capital
Lease; provided that
(a) Any property subject to any of the foregoing is acquired by the
Borrower or any Subsidiary in the ordinary course of its respective
business and the Lien on any such property attaches to such asset
concurrently or within ninety (90) days after the acquisition thereof;
(b) The obligation secured by any Lien so created, assumed, or existing
shall not exceed eighty percent (80%) of the lesser of the cost or the
fair market value as of the time of acquisition of the property
covered thereby to the Borrower or Subsidiary acquiring the same;
(c) Each Lien shall attach only to the property so acquired and fixed
improvements thereon;
(8) Liens incurred in the ordinary course of business not otherwise
permitted by this covenant, provided that the Debt secured by such Lien is
permitted by the provisions of Sections 6.02(1), (5), (6) or (7); and
(9) Any Lien securing an obligation not exceeding $500,000.
SECTION 6.02. DEBT. Create, incur, assume or suffer to exist, or
permit any Subsidiary to create, incur, assume or suffer to exist, any Debt,
except:
(1) Debt of the Borrower and any Guarantor under this Agreement or the
Notes;
(2) Existing Debt described in Schedule 6.02 and Refinancing Debt;
(3) Debt of the Borrower or any Guarantor subordinated on terms
satisfactory to all the Banks to the Borrower's obligations under this
Agreement and the Notes;
(4) Debt of the Borrower to any Guarantor or of any Guarantor to the
Borrower or another Guarantor;
(5) Debt of UHIC to the Borrower or any Guarantor (subject to the
limitations on Investments in UHIC set forth in Section 6.14);
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(6) Trade accounts payable and accruals arising or occurring in the
ordinary course of business;
(7) Debt of the Borrower or any Guarantor under letters of credit and
performance bonds of the Borrower and/or any Guarantor arising in the
ordinary course of business which shall not exceed in the aggregate at
any one time $75,000,000; and
(8) Debt of the Borrower and all Guarantors not otherwise permitted by
this covenant in an aggregate amount outstanding at any one time up to
$40,000,000.
SECTION 6.03. MERGERS, ETC. Wind up, liquidate or dissolve itself,
reorganize, merge or consolidate with or into, or convey, sell, assign,
transfer, lease, or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to any Person, or acquire all or substantially all
the assets or the business of any Person, or permit any Subsidiary to do so,
except (1) for any Permitted Acquisition, (2) that any Subsidiary (other than
UHIC) may merge into or transfer assets to the Borrower as a result of an
Internal Reorganization or otherwise and (3) that any Subsidiary (other than
UHIC) may merge into or consolidate with or transfer assets to any other
Subsidiary (other than UHIC) as a result of an Internal Reorganization or
otherwise.
SECTION 6.04. LEASES. Create, incur, assume, or suffer to exist, or
permit any Subsidiary to create, incur, assume, or suffer to exist, any
obligation as lessee for the rental or hire of any real or personal property,
except (1) Capital Leases permitted by Section 6.01(8); (2) leases existing on
the date of this Agreement and any extension or renewals thereof; (3) leases
between the Borrower and any Subsidiary or between any Subsidiaries; (4)
operating leases entered into in the ordinary course of business; and (5) any
lease of property having a value of $500,000 or less.
SECTION 6.05. SALE AND LEASEBACK. Sell, transfer or otherwise
dispose of, or permit any Subsidiary to sell, transfer, or otherwise dispose of,
any real or personal property to any Person and thereafter directly or
indirectly lease back the same or similar property, except for the sale and
leaseback of model homes.
SECTION 6.06. SALE OF ASSETS. Sell, lease, assign, transfer, or
otherwise dispose of, or permit any Subsidiary to sell, lease, assign, transfer,
or otherwise dispose of, any of its now owned or hereafter acquired assets
(including, without limitation, shares of stock and indebtedness of
subsidiaries,
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receivables, and leasehold interests), except: (1) Inventory disposed of in the
ordinary course of business; (2) the sale or other disposition of assets no
longer used or useful in the conduct of its business; (3) the sale and leaseback
of model homes, or (4) that any Subsidiary (other than UHIC) may sell, lease,
assign, or otherwise transfer its assets to the Borrower or any Wholly Owned
Subsidiary (other than UHIC) in connection with an Internal Reorganization or
otherwise.
SECTION 6.07. INVESTMENTS. Make, or permit any Subsidiary to make,
any loan or advance to any Person, or purchase or otherwise acquire, or permit
any Subsidiary to purchase or otherwise acquire, any capital stock, assets
(other than assets acquired in the ordinary course of business), obligation, or
other securities of, make any capital contribution to, or otherwise invest in or
acquire any interest in any Person including, without limitation, any hostile
takeover, hostile tender offer or similar hostile transaction (collectively,
"Investments"), except: (1) a direct obligation of the United States or any
agency thereof with maturities of one year or less from the date of acquisition;
(2) commercial paper of a domestic issuer rated at least "A-1" by Standard &
Poor's Corporation or "P-1" by Moody's Investors Service, Inc.; (3) certificates
of deposit with maturities of one year or less from the date of acquisition
issued by any commercial bank or federal savings bank having capital and surplus
in excess of $250,000,000; (4) stock, obligation, or securities received in
settlement of debts (created in the ordinary course of business) owing to the
Borrower or any Subsidiary provided such issuance is approved by the board of
directors of the issuer thereof; (5) a loan or advance from the Borrower to a
Subsidiary, or from a Subsidiary to a Subsidiary, or from a Subsidiary to the
Borrower (subject, however, to the limitations set forth in Section 6.14 in the
case of Investments in UHIC); (6) any Permitted Acquisition; (7) an Investment
in a Wholly Owned Subsidiary, which Investment is, or constitutes a part of, an
Internal Reorganization (subject, however, to the limitations set forth in
Section 6.14 in the case of Investments in UHIC); (8) Investments in UHIC to the
extent permitted in Section 6.14; or (9) any Investment of $500,000 or less.
SECTION 6.08. GUARANTIES, ETC. Assume, guarantee, endorse, or
otherwise be or become directly or contingently responsible or liable, or permit
any Subsidiary to assume, guarantee, endorse, or otherwise be or become directly
or contingently responsible or liable (including, but not limited to, an
agreement to purchase any obligation, stock, assets, goods, or services, or to
supply or advance any funds, assets, goods, or services, or an agreement to
maintain or cause such Person to maintain a minimum working capital or net worth
or otherwise to assure the creditors of any Person against loss),
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for obligations of any Person, except: (1) guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; (2) guaranties of performance obligations in the
ordinary course of business; (3) guaranties of any obligation of $500,000 or
less, PROVIDED, HOWEVER, that neither the Borrower nor any Subsidiary shall
guarantee an obligation of UHIC; and (4) that the Borrower or any Subsidiary or
any Guarantor may, whether as a result of an Internal Reorganization or
otherwise, guarantee the Debt permitted by Section 6.02 hereof of any other
Subsidiary (other than UHIC) or Guarantor or of the Borrower.
SECTION 6.09. TRANSACTIONS WITH AFFILIATES. Enter into any
transaction, including, without limitation, the purchase, sale, or exchange of
property or the rendering of any service, with any Affiliate, or permit any
Subsidiary to enter into any transaction, including, without limitation, the
purchase, sale, or exchange of property or the rendering of any service, with
any Affiliate, except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's or such Guarantor's or any Subsidiary's business
and upon fair and reasonable terms no less favorable to the Borrower or such
Guarantor or any Subsidiary than would obtain in a comparable arm's-length
transaction with a Person not an Affiliate (which exception shall include the
payment of insurance premiums to UHIC for the purchase of construction
warranties and builder default protection for buyers of Housing Units from the
Borrower or any of its Subsidiaries); PROVIDED, HOWEVER, that the transactions
with Affiliates described in Section 4.17(d)(v) of the Indenture, transactions
involving the purchase, sale or exchange of property having a value of $500,000
or less, and transactions otherwise permitted by this Agreement, shall not be
prohibited by this Section 6.09.
SECTION 6.10. LAND INVENTORY. Permit the ratio of (i) the sum of the
number of Finished Lots and the reasonably estimated number of Finished Lots
that will be developed on other Land, all determined as at the end of the most
recent four (4) full fiscal quarters for which financial results have been
reported, to (ii) the number of Housing Unit Closings for the prior four (4)
full fiscal quarters, to exceed 2.5 to 1.0.
SECTION 6.11. HOUSING INVENTORY. Permit the number of Speculative
Housing Units, as at the end of any fiscal quarter, to exceed the greater of (a)
the number of Housing Unit Closings occurring during the period of twelve (12)
months ending on the last day of such fiscal quarter, multiplied by thirty
percent (30%) or (b) the number of Housing Unit Closings occurring during the
period of six (6) months ending on the last day of such fiscal quarter,
multiplied by seventy percent (70%).
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SECTION 6.12. SENIOR DEBT. Repay in whole or in part the principal
of the Senior Debt, except pursuant to Section 6.02(2) hereof.
SECTION 6.13. AMENDMENT OR MODIFICATION OF INDENTURE. Amend or
modify, or permit any amendment or modification of, the Indenture (other than
those provided for in clauses (i), (ii), (iii), (v) or (vi) of Section 10.01(a)
of the Indenture).
SECTION 6.14. UHIC. Permit any of the following: (i) the assets of
UHIC to exceed $5,000,000 at any time; (ii) the aggregate amount of all
Investments in UHIC by the Borrower and its Subsidiaries to exceed $2,000,000;
or (iii) UHIC to engage in any business other than the issuance of construction
warranties and builder default protection for buyers of Housing Units from the
Borrower or any of its Subsidiaries.
ARTICLE VII
FINANCIAL COVENANTS
So long as any Note shall remain unpaid or any Bank shall have any
Commitment under this Agreement:
SECTION 7.01. MINIMUM CONSOLIDATED TANGIBLE NET WORTH. The Borrower
will maintain at all times a Consolidated Tangible Net Worth of not less than
$150,000,000, plus an amount equal to fifty percent (50%) of the cumulative Net
Income of the Borrower earned after September 30, 1996 (excluding any quarter in
which there is a loss) and 100% of the net proceeds of capital stock issued by
the Borrower or its Subsidiaries after June 30, 1996.
SECTION 7.02. LEVERAGE RATIO. The Borrower will maintain at all
times a ratio of Consolidated Debt to Consolidated Tangible Net Worth of not
greater than 2.0 to 1.0.
SECTION 7.03. INTEREST COVERAGE RATIO. The Borrower shall maintain a
ratio of (i) EBITDA to (ii) interest incurred, whether capitalized or expensed
directly, of at least 1.75 to 1.00, which ratio shall be determined as of the
last day of each fiscal quarter for the four-quarter period ending on such day.
SECTION 7.04. PERMITTED SENIOR DEBT. The Borrower will not permit
the outstanding amount of the Permitted Senior Debt to exceed the Borrowing
Base.
SECTION 7.05. FIXED CHARGE COVERAGE RATIO. The Borrower shall
maintain a ratio of (i) EBITDA to (ii) the sum of (A) interest incurred, whether
capitalized or expensed directly, plus (B) required principal payments (other
than balloon payments
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on long-term Debt), (C) scheduled principal payments on Capital Lease
obligations (other than balloon payments on long-term Capital Leases) and (D)
dividends paid with respect to any one or more classes of preferred stock of the
Borrower, of at least 1.5 to 1.0 which ratio shall be determined as of the last
day of each fiscal quarter for the four-quarter period ending on such day.
SECTION 7.06. LAND INVENTORY. The Borrower shall not permit the book
value of Land to exceed Consolidated Tangible Net Worth.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. EVENTS OF DEFAULT. If any of the following events
shall occur:
(1) The Borrower shall fail to pay (a) the principal of any Note, or
any amount of a commitment or other fee, as and when due and payable or (b)
interest on any Note or any amount of any commitment fee or other fee within
five (5) Business Days after the same is due and payable;
(2) Any representation or warranty made or deemed made by the
Borrower or by any Guarantor in any Loan Document or which is contained in any
certificate, document, opinion, or financial or other statement furnished at any
time under or in connection with this Agreement shall prove to have been
incorrect, incomplete, or misleading in any material respect on or as of the
date made or deemed made;
(3) The Borrower or any Guarantor shall fail to perform or observe
any term, covenant, or agreement contained in Articles V, VI or VII hereof, and
such failure shall continue for a period of thirty (30) consecutive days;
(4) The Borrower or any Significant Subsidiary or any Significant
Guarantor shall (a) fail to pay (within the applicable cure period, if any) any
amount in respect of indebtedness for borrowed money equal to or in excess of
$5,000,000 in the aggregate (other than the Notes) of the Borrower or such
Significant Subsidiary or such Significant Guarantor, as the case may be, or any
interest or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise); or (b) fail to perform or
observe any term, covenant, or condition on its part to be performed or observed
(within the applicable cure period, if any) under any agreement or instrument
relating to any such indebtedness, when required to be performed or observed, if
the effect of such failure to perform or observe is to accelerate, or
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permit the acceleration of after the giving of notice or passage of time, or
both, the maturity of such indebtedness, whether or not such failure to perform
or observe shall be waived by the holder of such indebtedness, or any such
indebtedness shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), prior to the stated
maturity thereof;
(5) The Borrower or any Significant Subsidiary or any Significant
Guarantor (a) shall generally not pay, or shall be unable to pay, or shall admit
in writing its inability to pay its debts as such debts become due; or (b) shall
make an assignment for the benefit of creditors, or petition or apply to any
tribunal for the appointment of a custodian, receiver, or trustee for it or a
substantial part of its assets; or (c) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or (d) shall have had any such petition or application filed or any such
proceeding commenced against it in which an order for relief is entered or an
adjudication or appointment is made and which remains undismissed for a period
of forty (40) days or more; or (e) shall take any corporate action indicating
its consent to, approval of, or acquiescence in any such petition, application,
proceeding, or order for relief or the appointment of a custodian, receiver, or
trustee for all or any substantial part of its properties; or (f) shall suffer
any such custodianship, receivership, or trusteeship to continue undischarged
for a period of forty (40) days or more;
(6) One or more judgments, decrees, or orders for the payment of
money in excess of $10,000,000 in the aggregate shall be rendered against the
Borrower and/or any Subsidiary and/or any Guarantor, and such judgments,
decrees, or orders shall continue unsatisfied and in effect for a period of
twenty (20) consecutive days without being vacated, discharged, satisfied, or
stayed or bonded pending appeal;
(7) Any Guaranty hereunder shall at any time after its execution and
delivery and for any reason cease to be in full force and effect or shall be
declared null and void, or the validity or enforceability thereof shall be
contested by the Guarantor or the Guarantor shall deny it has any further
liability or obligation under, or shall fail to perform its obligations under,
the Guaranty (except to the extent that the foregoing occurs solely by reason of
the liquidation or dissolution of a Guarantor as a result of an Internal
Reorganization);
(8) Any Change of Control of the Borrower or any Subsidiary or any
Guarantor shall occur;
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(9) Any of the following events shall occur or exist with respect to
the Borrower, any Subsidiary or any Commonly Controlled Entity under ERISA: any
Reportable Event shall occur; complete or partial withdrawal from any
Multiemployer Plan shall take place; any Prohibited Transaction shall occur; a
notice of intent to terminate a Plan shall be filed, or a Plan shall be
terminated; or circumstances shall exist which constitute grounds entitling the
PBGC to institute proceedings to terminate a Plan, or the PBGC shall institute
such proceedings; and in each case above, such event or condition, together with
all other events or conditions described in this Section 8.01(9), if any, could
subject the Borrower or any Significant Guarantor or Significant Subsidiary to
any tax, penalty, or other liability which in the aggregate may exceed $500,000;
or
(10) If any federal, state, or local agency asserts a material claim
against the Borrower or any Significant Guarantor or Significant Subsidiary
and/or its assets, equipment, property, leaseholds, or other facilities for
damages or cleanup costs relating to a hazardous discharge or an environmental
complaint; PROVIDED, HOWEVER, that such claim shall not constitute a default if,
within fifteen (15) days of the occurrence giving rise to the claim, (a) the
Borrower can prove to the reasonable satisfaction of the Majority Banks that the
Borrower has commenced and is diligently pursuing either: (i) a cure or
correction of the event which constitutes the basis for the claim, and continues
diligently to pursue such cure or correction or (ii) proceedings for an
injunction, a restraining order or other appropriate emergent relief preventing
such agency or agencies from asserting such claim, which relief is granted
within thirty (30) days of the occurrence giving rise to the claim and the
injunction, order, or emergent relief is not thereafter resolved or reversed on
appeal or (iii) the defense against the claim through action in a court or
agency exercising jurisdiction over the claim; and (b) in any of the foregoing
events, the Borrower has posted a bond, letter of credit, or other security
satisfactory in form, substance, and amount to the Majority Banks and the agency
or entity asserting the claim to secure the correction of the event which
constitutes the basis for the claim in accordance with applicable laws;
then, and in any such event, the Agent shall at the request of, or may, with the
consent of, the Majority Banks, by notice to the Borrower, (1) declare the
Banks' obligation to make Loans (including, in the case of the Swing Line Bank,
Swing Line Loans) to be terminated, whereupon the same shall forthwith
terminate; and (2) declare the outstanding Notes, all interest thereon, and all
other amounts payable under this Agreement to be forthwith due and payable,
whereupon the Notes, all such interest, and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest, or further
notice of any
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kind, all of which are hereby expressly waived by the Borrower; PROVIDED,
HOWEVER, in the case of an event described in Section 8.01(5) hereof the
obligations of the Banks to make Loans (including, in the case of the Swing Line
Bank, Swing Line Loans) hereunder shall automatically terminate and the
Obligations shall immediately become due and payable without any election or
action on the part of the Agent or any Bank.
SECTION 8.02. SET OFF. Upon the occurrence and during the
continuance of any Event of Default, each Bank is hereby authorized at any time
and from time to time, without notice to the Borrower (any such notice being
expressly waived by the Borrower), to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Bank to or for the credit or the
account of the Borrower against any and all of the obligations of the Borrower
now or hereafter existing under this Agreement or the Bank's Note or any other
Loan Document, irrespective of whether or not the Agent or such Bank shall have
made any demand under this Agreement or such Bank's Note or such other Loan
Document and although such obligations may be unmatured. Each Bank agrees
promptly to notify the Borrower (with a copy to the Agent) after any such
set-off and application, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of each Bank
under this Section 8.02 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which each Bank may have.
ARTICLE IX
GUARANTY
SECTION 9.01. GUARANTY. (a) Each of the Guarantors unconditionally
and irrevocably guarantees the due and punctual payment and performance of the
Obligations. Each of the Guarantors further agrees that the Obligations may be
extended or renewed, in whole or in part, without notice or further assent from
it, and it will remain bound upon this Guaranty notwithstanding any extension or
renewal of any Obligation.
(b) Each of the Guarantors waives presentation to, demand for payment
from and protest to the Borrower or any other Guarantor of any of the
Obligations, and also waives notice of protest for nonpayment. The Obligations
of the Guarantors hereunder shall not be affected by (i) the failure of the
Agent or any Bank to assert any claim or demand or to enforce any right or
remedy against the Borrower or any other Guarantor under the provisions of this
Agreement or any other agreement or otherwise; (ii) any extension or renewal of
any provision hereof or thereof;
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(iii) any rescission, waiver, compromise, acceleration, amendment or
modification of any of the terms or provisions of any Loan Document or any other
agreement; (iv) the release, exchange, waiver or foreclosure of any security
held by the Agent or any Bank for the Obligations or any of them; (v) the
failure of the Agent or any Bank to exercise any right or remedy against any
other guarantor of the Obligations; or (vi) the release or substitution of any
Guarantor.
(c) Each of the Guarantors further agrees that this Guaranty
constitutes a guaranty of performance and of payment when due and not just of
collection, and waives any right to require that any resort be had by the Agent
or any Bank to any security held for payment of the Obligations or to any
balance of any deposit, account or credit on the books of a Bank in favor of the
Borrower or any other Guarantor, or to any other Person.
(d) Each of the Guarantors hereby expressly assumes all
responsibilities to remain informed of the financial condition of the Borrower
and each other Guarantor and any circumstances affecting the ability of the
Borrower to perform under this Agreement. Each Guarantor acknowledges that it
will receive direct and indirect benefits from the Loans contemplated by this
Agreement and that the Banks required as a condition to entering into this
Agreement, and in order to secure the prompt and complete payment, observance
and performance of the Obligations, that each Guarantor shall make this
Guaranty.
(e) Each of the Guarantors' guaranty shall not be affected by the
genuineness, validity, regularity or enforceability of the Obligations, the
Notes or any other instrument evidencing any Obligations, or by the existence,
validity, enforceability, perfection, or extent of any collateral therefor or by
any other circumstance relating to the Obligations which might otherwise
constitute a defense to this Guaranty. The Agent makes no representation or
warranty in respect of any such circumstances and has no duty or responsibility
whatsoever to the Guarantors in respect of the management and maintenance of the
Obligations or any such collateral.
SECTION 9.02. NO IMPAIRMENT OF GUARANTY. The Obligations of the
Guarantors hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason, including, without limitation, any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense or set-off, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
Obligations of the Guarantors hereunder shall not be discharged or impaired or
otherwise affected by the failure of the Agent or any Bank to
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assert any claim or demand or to enforce any remedy under this Agreement or any
other agreement, by any waiver or modification of any provision thereof, by any
default, failure or delay, willful or otherwise, in the performance of the
Obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
the Guarantors or would otherwise operate as a discharge of the Guarantors as a
matter of law, unless and until the Obligations are paid in full and the
Commitments have been terminated.
SECTION 9.03. CONTINUATION AND REINSTATEMENTS ETC. (a) Each of the
Guarantors further agrees that its guaranty hereunder shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal or of interest on any Obligation is rescinded or must
otherwise be restored by the Agent or any Bank upon the bankruptcy or
reorganization of the Borrower or a Guarantor, or otherwise. In furtherance of
the provisions of this Article IX, and not in limitation of any other right
which the Agent or any Bank may have at law or in equity against the Borrower or
the Guarantors by virtue hereof, upon failure of the Borrower to pay any
Obligation when and as the same shall become due, whether at maturity, by
acceleration, after notice or otherwise, each of the Guarantors hereby promises
to and will, upon receipt of written demand by the Agent on behalf of the Banks,
forthwith pay or cause to be paid to the Agent on behalf of the Banks in cash an
amount equal to the unpaid amount of all the Obligations, and thereupon the
Banks shall assign such Obligation, together with all security interests, if
any, then held by the Agent in respect of such Obligation, to the Guarantor or
Guarantors making such payment.
(b) Upon payment by any Guarantor of any sums to the Agent on behalf
of the Banks hereunder, all rights of such Guarantor against the Borrower,
arising as a result thereof by way of right of subrogation or otherwise, shall
in all respects be subordinate and junior in right of payment to the prior final
and indefeasible payment in full of all the Obligations to the Agent on behalf
of the Banks. If any amount shall be paid to such Guarantor for the account of
the Borrower, such amount shall be held in trust for the benefit of the Banks
and shall forthwith be paid to the Agent on behalf of the Banks to be credited
and applied to the Obligations, whether matured or unmatured.
SECTION 9.04. LIMITATION ON GUARANTEED AMOUNT. Notwithstanding any
other provision of this Article IX, the amount guaranteed by any Guarantor
hereunder shall be limited to the extent, if any, required so that its
obligations under this Article IX shall not be subject to avoidance under
Section 548 of the Bankruptcy Code or to being set aside or annulled under any
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applicable state law relating to fraud on creditors. In determining the
limitations, if any, on the amount of such Guarantor's obligations hereunder
pursuant to the preceding sentence, any rights of subrogation or contribution
which such Guarantor may have under this Article IX or applicable law shall be
taken into account.
ARTICLE X
AGENCY PROVISIONS
SECTION 10.01. AUTHORIZATION AND ACTION. Each Bank hereby
irrevocably appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
the Agent by the terms hereof, together with such powers as are reasonably
incidental thereto. The duties of the Agent shall be mechanical and
administrative in nature and the Agent shall not by reason of this Agreement be
a trustee or fiduciary for any Bank. The Agent shall have no duties or
responsibilities except those expressly set forth herein. As to any matters not
expressly provided for by this Agreement (including, without limitation,
enforcement or collection of the Notes), the Agent shall not be required to act
or to refrain from acting except upon the instructions of the Majority Banks or,
to the extent required under Section 11.01, all Banks (and shall be fully
protected in so acting or so refraining from acting), and such instructions
shall be binding upon all Banks and all holders of Notes; PROVIDED, HOWEVER,
that the Agent shall not be required to take any action which exposes the Agent
to personal liability or which is contrary to this Agreement or applicable law.
The Agent shall administer the Loan in the same manner that it would administer
a comparable loan held 100% for its own account.
SECTION 10.02. LIABILITY OF AGENT. Neither the Agent nor any of its
directors, officers, agents, or employees shall be liable for any action taken
or omitted to be taken by it or them under or in connection with this Agreement
in the absence of its or their own gross negligence or willful misconduct.
Without limiting the generality of the foregoing, the Agent (1) may treat the
payee of any Note as the holder thereof until the Agent receives written notice
of the assignment or transfer thereof signed by such payee and in form
satisfactory to the Agent; (2) may consult with legal counsel (including counsel
for the Borrower), independent public accountants and other experts selected by
it and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants, or
experts; (3) makes no warranty or representation to any Bank and shall not be
responsible to any Bank for any statements, warranties, or representations made
in or in connection with this Agreement; (4)
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shall not have any duty to ascertain or to inquire as to the performance or
observance of any terms, covenants, or conditions of this Agreement on the part
of the Borrower, or to inspect the property (including the books and records) of
the Borrower; (5) shall not be responsible to any Bank for the due execution,
legality, validity, enforceability, genuineness, perfection, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; and (6) shall incur no liability under or in respect of this Agreement
by acting upon any notice, consent, certificate or other instrument or writing
(which may be sent by telegram, telefax, or facsimile transmission) reasonably
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 10.03. RIGHTS OF AGENT AS A BANK. With respect to its
Commitment, the Loans made by it and the Note issued to it, the Agent shall have
the same rights and powers under this Agreement as any other Bank and may
exercise the same as though it were not the Agent; and the term "Bank" or
"Banks" shall, unless otherwise expressly indicated, include the Agent in its
individual capacity. The Agent, each Bank and each of their respective
Affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, the Borrower,
any of its Subsidiaries and any Person who may do business with or own
securities of the Borrower or any Subsidiary, all as if the Agent were not the
Agent and without any duty to account therefor to the other Banks.
SECTION 10.04. INDEPENDENT CREDIT DECISIONS. Each Bank acknowledges
that it has, independently and without reliance upon the Agent or any other Bank
and based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each Bank
also acknowledges that it will, independently and without reliance upon the
Agent or any other Bank and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement. The Agent shall promptly
provide the Banks with copies of all notices of default and other formal notices
sent or received in accordance with Section 11.02 of this Agreement, any written
notice relating to changes in the Borrower's debt ratings that affect the Senior
Debt Rating received from the Borrower or a ratings agency and any other
documents or notices received by the Agent with respect to the Agreement and
requested in writing by any Bank. Except for notices, reports and other
documents and information expressly required to be furnished to the Banks by the
Agent hereunder, the Agent shall have no duty or responsibility to provide any
Bank with any credit or other information concerning the affairs, financial
condition or business of the Borrower or any of its
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Subsidiaries (or any of their Affiliates) which may come into possession of the
Agent or any of its Affiliates.
SECTION 10.05. INDEMNIFICATION. The Banks severally agree to
indemnify the Agent in its capacity as Agent and not as a Bank (to the extent
not reimbursed by the Borrower), ratably according to the respective amounts of
their Commitments, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against the Agent in any way relating to or arising out of this
Agreement or any action taken or omitted by the Agent under this Agreement,
provided that no Bank shall be liable for any portion of any of the foregoing
(i) resulting from the Agent's gross negligence or willful misconduct, (ii) on
account of a strictly internal or regulatory matter relating to the Agent (such
as relating to legal lending limit violation by the Agent), or (iii) in
connection with a breach of an express agreement made by the Agent to a Bank
under this Agreement. Without limitation of the foregoing, each Bank severally
agrees to reimburse the Agent (to the extent not reimbursed by the Borrower)
promptly upon demand for its ratable share of any reasonable out-of-pocket
expenses (including counsel fees) incurred by the Agent in connection with the
preparation, administration, or enforcement of, or legal advice in respect of
rights or responsibilities under, this Agreement; provided, however, that no
Bank shall be required to reimburse the Agent for any such expenses incurred (i)
resulting from the Agent's gross negligence or willful misconduct, (ii) on
account of a strictly internal or regulatory matter relating to the Agent (such
as relating to legal lending limit violation by the Agent), or (iii) in
connection with a breach of an express agreement made by the Agent to a Bank
under this Agreement.
SECTION 10.06. SUCCESSOR AGENT. (a) The Agent may resign at any
time by giving at least sixty (60) days' prior written notice thereof to the
Banks and the Borrower and may be removed at any time with or without cause by
the Majority Banks. Upon any such resignation or removal, the Majority Banks
shall have the right to appoint a successor Agent, subject to Section 10.06(b).
If no successor Agent shall have been so appointed by the Majority Banks, and
shall have accepted such appointment, within thirty (30) days after the retiring
Agent's giving of notice of resignation or the Majority Banks' removal of the
retiring Agent, then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent, which shall be a commercial bank or federal savings bank
organized under the laws of the United States of America or of any State
thereof, subject to Section 10.06(b). Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights,
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powers, privileges and duties of the retiring Agent, and the retiring Agent
shall be discharged from its duties and obligations under this Agreement. After
any retiring Agent's resignation or removal hereunder as Agent, the provisions
of this Article X shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement.
(b) The appointment of any successor Agent that is not a Bank shall
be subject to the prior written approval of the Borrower, which approval shall
not be unreasonably withheld.
SECTION 10.07. SHARING OF PAYMENTS, ETC. If any Bank shall obtain
any payments (whether voluntary, involuntary, through the exercise of any right
of set-off, or otherwise) on account of the Note held by it in excess of its
ratable share of payments on account of the Notes obtained by all the Banks,
such Bank shall purchase from the other Banks such participations in the Notes
held by them as shall be necessary to cause such purchasing Bank to share the
excess payment ratably with each of the other Banks, PROVIDED, HOWEVER, that if
all or any portion of such excess payment is thereafter recovered from such
purchasing Bank, such purchase from each Bank shall be rescinded and each Bank
shall repay to the purchasing Bank the purchase price to the extent of such
recovery together with an amount equal to such Bank's ratable share (according
to the proportion of (1) the amount of such Bank's required repayment to (2) the
total amount so recovered from the purchasing Bank) of any interest or other
amount paid or payable by the purchasing Bank in respect of the total amount so
recovered. The Borrower agrees that any Bank so purchasing a participation from
another Bank pursuant to this Section 10.07 may, to the fullest extent permitted
by law, exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Bank were the direct creditor
of the Borrower in the amount of such participation.
SECTION 10.08. WITHHOLDING TAX MATTERS. Each Bank which is a
Non-United States Person agrees to execute and deliver to the Agent for delivery
to the Borrower, before the first scheduled payment date in each year, either
(i) three United States Internal Revenue Service Forms 1001 or (ii) three United
States Internal Revenue Service Forms 4224 together with three United States
Internal Revenue Service Forms W-9, or any successor forms, as appropriate,
properly completed and claiming complete or partial, as the case may be,
exemption from withholding and deduction of United States federal taxes. Each
Bank which is a Non-United States Person represents and warrants to the Borrower
and to the Agent that, at the date of this Agreement, (i) its Lending Offices
are entitled to receive payments of principal, interest, and fees hereunder
without
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deduction or withholding for or on account of any taxes imposed by the United
States or any political subdivision thereof and (ii) it is permitted to take the
actions described in the preceding sentence under the laws and any applicable
double taxation treaties of the jurisdictions specified in the preceding
sentence. Each Bank which is a Non-United States Person further agrees that, to
the extent any form claiming complete or partial exemption from withholding and
deduction of United States federal taxes delivered under this Section 10.08 is
found to be incomplete or incorrect in any material respect, such Bank shall
execute and deliver to the Agent a complete and correct replacement form.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. AMENDMENTS, ETC. No amendment, modification,
termination, or waiver of any provision of any Loan Document to which the
Borrower is a party, nor consent to any departure by the Borrower from any Loan
Document to which it is a party, shall in any event be effective unless the same
shall be in writing and signed by the Majority Banks and the Borrower, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; PROVIDED, HOWEVER, that no amendment,
waiver or consent shall, unless in writing and signed by all the Banks and the
Borrower, do any of the following: (1) increase the Commitments of the Banks or
the Swing Loan Commitment of the Swing Line Bank or subject the Banks to any
additional obligations; (2) reduce the principal of, or interest on, the Notes
or any fees (other than the Agent's fees) hereunder; (3) postpone any date fixed
for any payment of principal of, or interest on, the Notes or any fees (other
than the Agent's fees) hereunder; (4) change the percentage of the Commitments
or of the aggregate unpaid principal amount of the Notes or the number of Banks
which shall be required for the Banks or any of them to take action hereunder
(including, without limitation, any change in the number of Banks required to
extend the Termination Date under the provisions of Section 2.19); (5) release
any Significant Guarantor; or (6) amend, modify or waive any provision of
Article X or this Section 11.01; and, PROVIDED FURTHER, that no amendment,
waiver, or consent shall, unless in writing and signed by the Agent or the Swing
Line Bank (as applicable) in addition to the Banks required above to take such
action, affect the rights or duties of the Agent or the Swing Line Bank (as
applicable) under any of the Loan Documents.
SECTION 11.02. NOTICES, ETC. All notices and other communications
provided for under this Agreement and under the other Loan Documents to which
the Borrower is a party shall be in
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writing (including telegraphic, telex, and facsimile transmissions) and mailed
or transmitted or hand delivered, if to the Borrower, a Guarantor, a Bank or the
Agent at its respective address set forth on the signature pages hereof; or, as
to each party, at such other address as shall be designated by such party in a
written notice to all other parties complying as to delivery with the terms of
this Section 11.02. Except as is otherwise provided in this Agreement, all such
notices and communications shall be effective when deposited in the mails or
delivered to the telegraph company, or transmitted, answerback received, or hand
delivered, respectively, addressed as aforesaid, except that notices to the
Agent pursuant to the provisions of Article II shall not be effective until
received by the Agent or, in the case of Section 2.21, the Swing Line Bank.
SECTION 11.03. NO WAIVER. No failure or delay on the part of any
Bank or the Agent in exercising any right, power, or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power, or remedy preclude any other or further exercise thereof or
the exercise of any other right, power, or remedy hereunder. The making of a
Loan notwithstanding the existence of a Default or Event of Default shall not
constitute any waiver or acquiescence of such Default or Event of Default, and
the making of any Loan notwithstanding any failure or inability to satisfy the
conditions precedent to such Loan shall not constitute any waiver or
acquiescence with respect to such conditions precedent with respect to any
subsequent Loans. The rights and remedies provided herein are cumulative, and
are not exclusive of any other rights, powers, privileges, or remedies, now or
hereafter existing, at law, in equity or otherwise.
SECTION 11.04. COSTS, EXPENSES, AND TAXES. The Borrower agrees to
reimburse the Agent for any reasonable costs, internal charges and out-of-pocket
expenses (including reasonable fees and time charges of attorneys for the Agent,
which attorneys may be employees of the Agent) paid or incurred by the Agent in
connection with the preparation, negotiation, execution, delivery, review,
amendment, modification and administration of the Loan Documents and the
collection of the Loans and enforcement of the Loan Documents. In addition, the
Borrower shall pay any and all stamp and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing, and
recording of any of the Loan Documents and the other documents to be delivered
under any such Loan Documents, and agrees to hold the Agent and each of the
Banks harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or failing to pay such taxes and fees. This
provision shall survive termination of this Agreement.
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<PAGE>
SECTION 11.05. INTEGRATION. This Agreement (including the Borrower's
obligation to pay the fees of the Agent and First Chicago Capital Markets, Inc.
as provided in Section 2.09(c) and the letter referred to therein) and the Loan
Documents contain the entire agreement between the parties relating to the
subject matter hereof and supersede all oral statements and prior writings with
respect thereto.
SECTION 11.06. INDEMNITY. The Borrower hereby agrees to defend,
indemnify, and hold each Bank harmless from and against all claims, damages,
judgments, penalties, costs, and expenses (including attorney fees and court
costs now or hereafter arising from the aforesaid enforcement of this clause)
arising directly or indirectly from the activities of the Borrower and its
Subsidiaries, its predecessors in interest, or third parties with whom it has a
contractual relationship, or arising directly or indirectly from the violation
of any environmental protection, health, or safety law, whether such claims are
asserted by any governmental agency or any other person. This indemnity shall
survive termination of this Agreement.
SECTION 11.07. GOVERNING LAW. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of Illinois
(without regard to principles of conflict of law) but giving effect to federal
laws applicable to national banks.
SECTION 11.08. SEVERABILITY OF PROVISIONS. Any provision of any Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 11.09. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the different parties to this Agreement in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
Agreement.
SECTION 11.10. HEADINGS. Article and Section headings in the Loan
Documents are included in such Loan Documents for the convenience of reference
only and shall not constitute a part of the applicable Loan Documents for any
other purpose.
SECTION 11.11. SUBMISSION TO JURISDICTION. The Borrower, each
Subsidiary, and each Guarantor hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Northern District of Illinois and of
any Illinois State
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<PAGE>
court sitting in The City of Chicago for purposes of all legal proceedings which
may arise hereunder or under the Notes. The Borrower, each Subsidiary, and each
Guarantor irrevocably waives to the fullest extent permitted by law, any
objection which it may have or hereafter have to the laying of the venue of any
such proceeding brought in such a court, and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. The
Borrower, each Subsidiary, and each Guarantor hereby consents to process being
served in any such proceeding by the mailing of a copy thereof by registered or
certified mail, postage prepaid, to its address specified in Section 11.02
hereof or in any other manner permitted by law.
SECTION 11.12. JURY TRIAL WAIVER. THE BORROWER, EACH SUBSIDIARY,
EACH GUARANTOR, THE AGENT, AND EACH BANK HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF
OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE LOAN DOCUMENTS. NO OFFICER OF
ANY BANK OR OF THE AGENT HAS AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS
PROVISION.
SECTION 11.13. GOVERNMENTAL REGULATION. Anything contained in this
Agreement to the contrary notwithstanding, no Bank shall be obligated to extend
credit to the Borrower in violation of any limitation or prohibition provided by
any applicable statute or regulation.
SECTION 11.14. NO FIDUCIARY DUTY. The relationship between the
Borrower and the Banks and the Agent shall be solely that of borrower and
lender. Neither the Agent nor any Bank shall have any fiduciary
responsibilities to the Borrower. Neither the Agent nor any Bank undertakes any
responsibility to the Borrower to review or inform the Borrower of any matter in
connection with any phase of the Borrower's business or operations.
SECTION 11.15. CONFIDENTIALITY. Each Bank agrees to hold any
confidential information which it may receive from the Borrower pursuant to this
Agreement in confidence, except for disclosure (i) to other Banks and their
respective affiliates, (ii) to legal counsel, accountants, and other
professional advisors to that Bank or to a Transferee, (iii) to regulatory
officials, (iv) to any Person as requested pursuant to or as required by law,
regulation, or legal process, (v) to any Person in connection with any legal
proceeding to which that Bank is a party, and (vi) permitted by Section 12.04.
SECTION 11.16. TERMINATION OF EXISTING CREDIT AGREEMENT. The
Borrower, those Guarantors that are parties to the Existing Credit Agreement and
those Banks that are parties to
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<PAGE>
the Existing Credit Agreement acknowledge and agree that, upon payment, from the
initial Loans hereunder, of the outstanding principal balance and all accrued
and unpaid interest and fees under the Existing Credit Agreement, the Existing
Credit Agreement shall terminate, and the parties thereto shall have no further
rights or obligations thereunder.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
SECTION 12.01. SUCCESSORS AND ASSIGNS. The terms and provisions of
the Loan Documents shall be binding upon and inure to the benefit of the
Borrower and the Agent and the Banks and their respective successors and
assigns, except that (i) the Borrower shall not have the right to assign its
rights or obligations under the Loan Documents without the consent of all Banks
and (ii) any assignment by any Bank must be made in compliance with Section
12.03. Notwithstanding clause (ii) of this Section, any Bank may at any time,
without the consent of the Borrower or the Agent, pledge all or any portion of
its rights under this Agreement and its Notes to a Federal Reserve Bank as
security for an obligation of such pledgor or of an affiliated entity to such
Federal Reserve Bank; PROVIDED, HOWEVER, that no such pledge shall release the
pledgor Bank from its obligations hereunder. The Agent may treat the payee of
any Note as the owner thereof for all purposes hereof unless and until such
payee complies with Section 12.03 in the case of an assignment thereof. Any
assignee or transferee of a Note agrees by acceptance thereof to be bound by all
the terms and provisions of the Loan Documents. Any request, authority or
consent of any Person, who at the time of making such request or giving such
authority or consent is the holder of any Note, shall be conclusive and binding
on any subsequent holder, transferee or assignee of such Note or of any Note or
Notes issued in exchange thereof.
SECTION 12.02. PARTICIPATIONS. (A) PERMITTED PARTICIPANTS; EFFECT.
Any Bank may, in the ordinary course of its business and in accordance with
applicable law, at any time sell to one or more banks or other entities
("Participants") participating interests in any Loan owing to such Bank, any
Note held by such Bank, any Commitment of such Bank (which may include, in the
case of the Swing Line Bank, the Swing Line Commitment) or any other interest of
such Bank under the Loan Documents in an amount not less than Five Million
Dollars ($5,000,000). In the event of any such sale by a Bank of participating
interests to a Participant, such Bank's obligations under the Loan Documents
shall remain unchanged, such Bank shall remain solely responsible to the other
parties hereto for the
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<PAGE>
performance of such obligations, such Bank shall remain the holder of any such
Note for all purposes under the Loan Documents, all amounts payable by the
Borrower under this Agreement shall be determined as if such Bank had not sold
participating interests, and the Borrower and the Agent shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under the Loan Documents.
(B) VOTING RIGHTS. Each Bank shall with respect to its Participants,
if any, retain the sole right to approve, without the consent of any
Participant, any amendment, modification or waiver of any provision of the Loan
Documents other than any amendment, modification or waiver with respect to any
Loan or Commitment (or Swing Line Commitment, if applicable) in which such
Participant has an interest which forgives principal, interest or fees (other
than Agent's fees) or reduces the interest rate or fees (other than Agent's
fees) payable with respect to any such Loan or Commitment (or Swing Line
Commitment, if applicable), postpones any date fixed for any regularly scheduled
payment of principal of, or interest or fees (other than Agent's fees) on, any
such Loan or Commitment (or Swing Line Commitment, if applicable) or releases
any Significant Guarantor.
(C) BENEFIT OF SET-OFF. The Borrower agrees that each Participant
shall be deemed to have the rights of set-off provided in Sections 2.12 and 8.02
in respect of its participating interest in amounts owing under the Loan
Documents to the same extent as if the amount of its participating interest were
owing directly to it as a Bank under the Loan Documents, provided that each Bank
shall retain the right of set-off provided in Sections 2.12 and 8.02 with
respect to the amount of participating interests sold to each Participant. The
Banks agree to share with each Participant, and each Participant, by exercising
the right of set-off provided in Section 2.12 or 8.02, agrees to share with each
Bank, any amount received pursuant to the exercise of its right of set-off, such
amounts to be shared in accordance with Section 10.07 as if each Participant
were a Bank.
SECTION 12.03. ASSIGNMENTS. (A) PERMITTED ASSIGNMENTS. Any Bank
may, in the ordinary course of its business and in accordance with applicable
law, at any time assign to one or more banks or other entities ("Purchasers")
all, or any part (but in an amount not less than Five Million Dollars
($5,000,000) of its Commitment and Loans, which may include, in the case of a
Purchaser of an interest from the Swing Line Bank, the Swing Line Commitment and
Swing Line Loans), of its rights and obligations under the Loan Documents,
PROVIDED, HOWEVER, that, based upon facts and circumstances existing at the time
of any such assignment, such assignment does not result in an event described in
Sections 2.14, 2.15, or 2.16 hereof. Such assignment shall be
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<PAGE>
substantially in the form of EXHIBIT G hereto or in such other form as may be
agreed to by the parties thereto. The consent of the Borrower and the Agent
shall be required prior to an assignment becoming effective with respect to a
Purchaser which is not a Bank or an Affiliate thereof; PROVIDED, HOWEVER, that
if an Event of Default has occurred and is continuing, the consent of the
Borrower shall not be required. Such consent shall not be unreasonably
withheld.
(B) EFFECT; EFFECTIVE DATE. Upon (i) delivery to the Agent of a
notice of assignment, substantially in the form attached as Exhibit 1 to
EXHIBIT G hereto (a "Notice of Assignment"), together with any consents
required by Section 12.03; and (ii) payment (by either the assignor or the
assignee) of a $4,000.00 fee (or, in the case of an assignment to the
assignor's Affiliate or by reason of the provisions of Section 2.19, a $2,000
fee) to the Agent for processing such assignment, such assignment shall
become effective on the effective date specified in such Notice of
Assignment. The Notice of Assignment shall contain a representation by the
Purchaser to the effect that none of the consideration used to make the
purchase of the Commitment and Loans under the applicable assignment
agreement are "plan assets" as defined under ERISA and that the rights and
interests of the Purchaser in and under the Loan Documents will not be "plan
assets" under ERISA. On and after the effective date of such assignment,
such Purchaser shall for all purposes be a Bank party to this Agreement and
shall have all the rights and obligations of a Bank under the Loan Documents,
to the same extent as if it were an original party hereto, and no further
consent or action by the Borrower, the Banks or the Agent shall be required
to release the transferor Bank with respect to the percentage of the
Aggregate Commitments and Loans (and, if
<PAGE>
applicable, Swing Line Commitments and Swing Line Loans) assigned to such
Purchaser. Upon the consummation of any assignment to a Purchaser pursuant
to this Section 12.03(b), the transferor Bank, the Agent and the Borrower
shall make appropriate arrangements so that replacement Notes are issued to
such transferor Bank and new Notes or, as appropriate, replacement Notes, are
issued to such Purchaser, in each case in principal amounts reflecting their
Commitment, as adjusted pursuant to such assignment.
SECTION 12.04. DISSEMINATION OF INFORMATION. The Borrower authorizes
each Bank to disclose to any Participant or Purchaser or any other Person
acquiring an interest in the Loan Documents by operation of law (each a
"Transferee") and any prospective Transferee any and all information in such
Bank's possession concerning the creditworthiness of the Borrower, each
Subsidiary, or each Guarantor, provided that such Transferee or prospective
Transferee agrees to be subject to Section 11.15 to the same effect as if it
were a Bank.
SECTION 12.05. TAX TREATMENT. If any interest in any Loan Document
is transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Bank shall cause such Transferee, concurrently with the effectiveness of such
transfer to comply with the provisions of Section 10.08.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first written.
BEAZER HOMES USA, INC.
By: /s/ David Weiss
--------------------------------------
Name: David S. Weiss
------------------------------------
Title: Executive V.P
-----------------------------------
Address for Notices
5775 Peachtree Dunwoody Road
Suite C-550
Atlanta, Georgia 30342
Attention: President
Tel: (404) 250-3420
Fax: (404) 250-3428
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<PAGE>
BEAZER MORTGAGE CORPORATION
By: /s/ David Weiss
--------------------------------------
Name: David S. Weiss
------------------------------------
Title: Vice President
-----------------------------------
BEAZER HOMES CORP.
By: /s/ David Weiss
--------------------------------------
Name: David S. Weiss
------------------------------------
Title: Vice President
-----------------------------------
BEAZER HOMES SALES ARIZONA INC.
By: /s/ David Weiss
--------------------------------------
Name: David S. Weiss
------------------------------------
Title: Vice President
-----------------------------------
BEAZER REALTY CORP.
By: /s/ David Weiss
--------------------------------------
Name: David S. Weiss
------------------------------------
Title: Vice President
-----------------------------------
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<PAGE>
BEAZER/SQUIRES REALTY, INC.
By: /s/ David Weiss
--------------------------------------
Name: David S. Weiss
------------------------------------
Title: Vice President
-----------------------------------
PANITZ HOMES REALTY INC.
By: /s/ David Weiss
--------------------------------------
Name: David S. Weiss
------------------------------------
Title: Vice President
-----------------------------------
BEAZER HOMES HOLDINGS CORP.
By: /s/ David Weiss
--------------------------------------
Name: David S. Weiss
------------------------------------
Title: Vice President
-----------------------------------
BEAZER HOMES TEXAS HOLDINGS, INC.
By: /s/ David Weiss
--------------------------------------
Name: David S. Weiss
------------------------------------
Title: Vice President
-----------------------------------
BEAZER HOMES TEXAS, L.P.
By: BEAZER HOMES TEXAS HOLDINGS,
INC., its general partner
By: /s/ David Weiss
--------------------------------------
Name: David S. Weiss
------------------------------------
Title: Vice President
-----------------------------------
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<PAGE>
Address for Notices to all
--------------------------
Guarantors
----------
c/o Beazer Homes USA, Inc.
5775 Peachtree Dunwoody Road
Suite C-550
Atlanta, Georgia 30342
Attention: President
Tel: (404) 250-3420
Fax: (404) 250-3428
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<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
Commitment:
$27,500,000
By: /s/ James Benko
--------------------------------
James Benko
Assistant Vice President
Addresses for Notices
---------------------
The First National Bank of Chicago
One First National Plaza
Mail Suite 0151
Chicago, Illinois 60670
Attn: Mr. James Benko
Telephone: (312) 732-5067
Telecopy: (312) 732-1117
Lending Office for ABR Loans
----------------------------
The First National Bank of Chicago
One First National Plaza
Mail Suite 0318
Chicago, Illinois 60670
Attention: Mr. Michael Dowling
Telephone: (312) 732-2517
Telecopy: (312) 732-1582
Lending Office for LIBOR Loans
------------------------------
The First National Bank of Chicago
One First National Plaza,
Mail Suite 0318
Chicago, Illinois 60670
Attention: Mr. Michael Dowling
Telephone: (312) 732-2517
Telecopy: (312) 732-1582
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<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
Commitment:
$25,000,000
By: /s/ [illegible]
--------------------------------------
Name:
------------------------------------
Title: Vice President
-----------------------------------
Addresses for Notices
---------------------
The First National Bank of Boston
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, GA 30346
Attn: Mr. Nicholas Whiting
Telephone: (770) 390-6580
Telecopier: (770) 390-8434
Lending Office for ABR Loans
----------------------------
The First National Bank of Boston
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, GA 30346
Attn: Ms. Cheryl Geoffrion
Telephone: (770) 390-6577
Telecopy: (770) 390-8434
Lending Office for LIBOR Loans
------------------------------
The First National Bank of Boston
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, GA 30346
Attn: Ms. Cheryl Geoffrion
Telephone: (770) 390-6577
Telecopy: (770) 390-8434
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<PAGE>
BANK ONE, ARIZONA, NA
Commitment:
$25,000,000
By: /s/ [illegible]
--------------------------------------
Name: [illegible]
------------------------------------
Title: Assistant Vice President
-----------------------------------
Addresses for Notices
---------------------
Bank One, Arizona, NA
Western Region Real Estate
National Accounts, A383
241 N. Central
P.O. Box 29542
Phoenix, AZ 85038
Attn: Ms. Jennifer J. Pescatore
Telephone: (602) 221-2402
Telecopy: (602) 221-1372
Lending Office for ABR Loans
----------------------------
Bank One, Arizona, NA
Western Region Real Estate, A909
241 N. Central
Phoenix, AZ 85038
Attn: Ms. Karen Hummel
Telephone: (602) 221-1431
Telecopy: (602) 221-1116
Lending Office for LIBOR Loans
------------------------------
Bank One, Arizona, NA
Western Region Real Estate, A909
241 N. Central
Phoenix, AZ 85038
Attn: Ms. Karen Hummel
Telephone: (602) 221-1431
Telecopy: (602) 221-1116
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<PAGE>
GUARANTY FEDERAL BANK, F.S.B.
Commitment:
By: /s/ Randy Reid
--------------------------------------
$20,000,000 Name: Randy Reid
------------------------------------
Title: Vice President
-----------------------------------
Address for Notices
-------------------
Guaranty Federal Bank F.S.B.
8333 Douglas Avenue
Dallas, TX 75225
Attn: Mr. Randy Reid
Telephone: (214)360-2735
Telecopy: (214)360-1661
Lending Office for ABR Loans
----------------------------
Guaranty Federal Bank F.S.B.
8333 Douglas Avenue
Dallas, TX 75225
Attn: Ms. Martha Fleming
Telephone: (214) 360-8905
Telecopy: (214) 360-4854
Lending Office for LIBOR Loans
------------------------------
Guaranty Federal Bank F.S.B.
8333 Douglas Avenue
Dallas, TX 75225
Attn: Ms. Martha Fleming
Telephone: (214) 360-8905
Telecopy: (214) 360-4854
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<PAGE>
BANK OF AMERICA ILLINOIS
Commitment:
By: /s/ Mark W. Lariviere
--------------------------------------
$17,500,000 Name: Mark W. Lariviere
------------------------------------
Title: Vice President
-----------------------------------
Addresses for Notices
---------------------
Bank of America Illinois
Commercial Real Estate Services
Group - Illinois
231 S. LaSalle Street
Chicago, IL 60697
Attn: Mr. Mark W. Lariviere
Telephone: (312) 828-2513
Telecopy: (312) 828-3950
Lending Office for ABR Loans
----------------------------
Bank of America Illinois
231 S. LaSalle Street
Chicago, IL 60697
Attn: George Hernandez
Telephone: (312) 828-4160
Telecopy: (312) 828-3950
Lending Office for LIBOR Loans
------------------------------
Bank of America Illinois
231 S. LaSalle Street
Chicago, IL 60697
Attn: George Hernandez
Telephone: (312) 828-4160
Telecopy: (312) 828-3950
-73-
<PAGE>
COMERICA BANK
Commitment: By: /s/ David Campbell
---------------------------
David J. Campbell
$17,500,000 Vice President
Address for Notices
-------------------
Comerica Bank
500 Woodward Avenue, MC: 3256
Detroit, MI 48226
Attn: Mr. David J. Campbell
Telephone: (313)222-9306
Telecopy: (313)222-9295
Lending Office for ABR Loans
----------------------------
Comerica Bank
500 Woodward Avenue, MC: 3256
Detroit, MI 48226
Attn: Ms. Betsy Branson
Telephone: (313) 222-5878
Telecopy: (313) 222-3697
Lending Office for LIBOR Loans
------------------------------
Comerica Bank
500 Woodward Avenue, MC: 3256
Detroit, MI 48226
Attn: Ms. Betsy Branson
Telephone: (313) 222-5878
Telecopy: (313) 222-3697
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<PAGE>
SUNTRUST BANK, ATLANTA
By: /s/ Willem Jan O. Hattink
--------------------------------------
$17,500,000 Name: Willem Jan O. Hattink
------------------------------------
Title: Group Vice President
-----------------------------------
By: /s/ Mike Smith
--------------------------------------
Name: Mike Smith
------------------------------------
Title: Bank Officer
-----------------------------------
Address for Notices
-------------------
SunTrust Bank, Atlanta
25 Park Place
P.O. Box 4418
Atlanta, GA 30303
Attn: Mr. R. Michael Dunlap
Telephone: (404) 724-3890
Telecopy: (404) 588-8833
Address for ABR Loans
---------------------
SunTrust Bank, Atlanta
25 Park Place
P.O. Box 4418
Atlanta, GA 30303
Attn: Ms. Stephanie Creech
Telephone: (404) 581-1601
Telecopy: (404) 588-8833
Address for LIBOR Loans
-----------------------
SunTrust Bank, Atlanta
25 Park Place
P.O. Box 4418
Atlanta, GA 30303
Attn: Ms. Stephanie Creech
Telephone: (404) 581-1601
Telecopy: (404) 588-8833
-75-
<PAGE>
Exhibit A
NOTE
$_______________________________ October 22, 1996
FOR VALUE RECEIVED, the undersigned, BEAZER HOMES USA, INC., a
Delaware corporation (the "Borrower") HEREBY PROMISES TO PAY to the order of
_______________________ (the "Bank") to THE FIRST NATIONAL BANK OF CHICAGO, as
Agent, at the Agent's Office located at One First National Plaza, Chicago, IL,
for the account of the applicable Lending Office of the Bank, in lawful money of
the United States and in immediately available funds, the principal amount of
_________________ Dollars ($_______) or the aggregate unpaid principal amount
of all Loans made to the Borrower by the Bank pursuant to the Credit Agreement
and outstanding on the Termination Date, whichever is less, and to pay interest
from the date of this Note, in like money, at said office for the account of the
applicable Lending Office, at the time and at a rate per annum as provided in
the Credit Agreement. The Bank is hereby authorized by the Borrower to endorse
on the schedule attached to the Note held by it the amount and type of each Loan
and each renewal, conversion, and payment of principal amount received by the
Bank for the account of the applicable Lending Office on account of its Loans,
which endorsement shall, in the absence of manifest error, be conclusive as to
the outstanding balance of the Loans made by the Bank; PROVIDED, HOWEVER, that
the failure to make such notation with respect to any Loan or renewal,
conversion, or payment shall not limit or otherwise affect the obligations of
the Borrower hereunder.
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Credit Agreement, dated as of October 22, 1996, between the
Borrower, the Guarantors, the Bank and certain other banks parties thereto
(which, as it may be amended, modified, renewed or extended from time to time,
is herein called the "Credit Agreement"). Terms used herein which are defined
in the Credit Agreement shall have their defined meanings when used herein. The
Credit Agreement, among other things, contains provisions for acceleration of
the maturity of this Note upon the happening of certain stated events and also
for prepayments on account of principal hereof prior to the maturity of this
Note upon the terms and conditions specified in the Credit Agreement.
The Borrower hereby agrees to pay all reasonable costs and expenses
(including reasonable attorney's fees and expenses) paid or incurred by the
holder of this Note in the collection of any principal or interest payable under
this Note or the enforcement of this Note or any other Loan Documents.
<PAGE>
This Note shall be governed by the laws of the State of Illinois.
BEAZER HOMES USA, INC.
By:________________________________
Name: _____________________________
Title: ____________________________
<PAGE>
SCHEDULE TO NOTE
Unpaid Name of
Amount of Principal Person
Date Made Type of Principal Balance of Making
or Paid Loan Paid Note Notation
- ---------- ------- --------- --------- --------
<PAGE>
Exhibit B
The opinion of Paul, Hastings, Janofsky & Walker LLP, to be
rendered pursuant to Section 3.01(5) of the Credit Agreement dated as of October
22 1996 (the "Credit Agreement"; any capitalized term used herein and not
otherwise defined herein shall have the meaning assigned to such term in the
Credit Agreement) among Beazer Homes USA, Inc., the Original Guarantors parties
thereto, the banks whose names appear on the signature pages thereof and The
First National Bank of Chicago, as Agent, shall be substantially to the
following effect:
a) The Borrower and each of Beazer Mortgage Corporation, a
Delaware corporation, Beazer Homes Corp., a Tennessee corporation, Beazer Homes
Sales Arizona Inc., a Delaware corporation, Beazer Homes Holding Corp., a
Delaware corporation, Beazer Homes Texas Holdings, Inc., a Delaware corporation
and Beazer Homes Texas, L.P., a Delaware limited partnership (collectively the
"Guarantors") is a corporation duly incorporated (or, in the case of Beazer
Homes Texas, L.P., a partnership duly formed), validly existing, and in good
standing under the laws of the jurisdiction of its incorporation or formation
and has all requisite power and authority, corporate or otherwise, to conduct
its business, to own its properties and to execute and deliver, and to perform
all of its obligations under the Loan Documents.
b) The execution and delivery by the Borrower and each Guarantor
of the Loan Documents and the performance of their respective obligations
thereunder have been duly authorized by all necessary corporate or other action
and do not and will not (i) require any consent or approval of its stockholders,
(ii) violate any provision of any law, rule or regulation (including, without
limitation, Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System), or, to our knowledge, any order, writ, judgment, injunction,
decree, determination or award presently in effect having applicability to it
which violation would (x) impair its ability to perform its obligations under
the Loan Documents or (y) have a material adverse effect on its financial
condition, properties, or operations, or on its charter or by-laws, (iii) to our
knowledge, result in a breach of or constitute a default under any indenture or
lease or loan or credit agreement or any other material agreement or instrument
to which it is a party or by which it or its properties may be bound or
affected, or (iv) to our knowledge, result in, or require, the creation or
imposition of any Lien upon any of the properties now owned or hereafter
acquired by it.
c) No authorization, consent, approval, license, exemption of or
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will be
necessary for
<PAGE>
the valid execution, delivery or performance by the Borrower and each Guarantor
of the Loan Documents.
d) Except as have been disclosed to the Agent and the Banks in
writing, there are to our knowledge no actions, suits or proceedings pending or
threatened against the Borrower or any Subsidiary or their properties before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, the probable outcome of which would have a
material adverse effect on the consolidated financial condition, properties, or
operations of the Borrower and its Subsidiaries taken as a whole.
In rendering the foregoing opinion with respect to Beazer Homes
Corp., we have relied upon the opinion of Tune, Entrekin & White as to matters
of Tennessee law.
In rendering the foregoing opinion we express no opinion as to
the effect (if any) of any laws of any jurisdiction, except those of the General
Corporation Law and Revised Uniform Limited Partnership Act of the State of
Delaware, the Federal laws of the United States and, to the extent provided for
in the preceding paragraph, the laws of Tennessee.
We express no opinion with respect to Beazer Realty Corp., a
Georgia corporation, Beazer/Squires Realty, Inc., a North Carolina corporation
or Panitz Homes Realty, Inc., a Florida corporation.
<PAGE>
Exhibit C
The opinion of Illinois counsel to be rendered pursuant to
Section 3.01(5) of the Credit Agreement dated as of October 22, 1996 (the
"Credit Agreement"; any capitalized term used herein and not otherwise defined
herein shall have the meaning assigned to such term in the Credit Agreement)
among Beazer Homes USA, Inc., the Guarantors parties thereto, the banks whose
names appear on the signature page thereof and The First National Bank of
Chicago, as Agent, shall be substantially to the following effect:
The Loan Documents, when executed and delivered by the parties
thereto, will constitute the legal, valid and binding obligations of the
Borrower and each Guarantor enforceable against it in accordance with their
respective terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium, fraudulent
transfer or similar laws affecting creditors' rights generally or by general
equitable principles.
Counsel is a member of the Bar of the State of Illinois.
In rendering the foregoing opinion we express no opinion as to
the effect (if any) of any laws of any jurisdiction, except those of the State
of Illinois and the Federal laws of the United States.
<PAGE>
Exhibit D
The First National Bank of Chicago,
as Agent
One First National Plaza
Chicago, Illinois 60670
Re: Credit Agreement dated as of October 22 1996 (the
"Credit Agreement") among Beazer Homes USA, Inc., the
Guarantors parties thereto, and each of the banks
("Banks") parties thereto
Ladies and Gentlemen:
We have acted as your special counsel in connection with the
Credit Agreement. Terms used in the Credit Agreement are used herein as defined
therein.
We have examined the opinions (the "Opinions") and other
documents delivered by the Borrower and the Guarantors pursuant to Article III
of the Credit Agreement. We have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
the originals of all documents submitted to us as copies and the due authority
of all persons executing the same. We have relied as to factual matters on the
documents which we have reviewed, and as to matters of law covered by the
Opinions on such Opinions. We are qualified to practice law in the State of
Illinois and we do not purport to be experts on, or to express any opinion
herein concerning, the laws of any other jurisdiction.
Subject to the exceptions expressed in the preceding paragraph
and while we have not independently considered the matters covered by the
Opinions to the extent necessary to enable us to express the conclusions therein
stated, we are of the opinion that the Opinions and other documents
<PAGE>
delivered pursuant to Article III of the Credit Agreement are substantially
responsive to the requirements of said Section. In that regard, we note that
such Section does not require the Opinions to address matters relating to Beazer
Realty Corp., a Georgia corporation, Beazer/Squires Realty, Inc., a North
Carolina corporation, or Panitz Homes Realty, Inc., a Florida corporation.
Very truly yours,
<PAGE>
Exhibit E
The opinion of local counsel to be rendered pursuant to Section
3.01(10) of the Credit Agreement dated as of October 22, "Credit Agreement"; any
capitalized term used herein and not otherwise defined herein shall have the
meaning assigned to such term in the Credit Agreement) among Beazer Homes USA,
Inc., the Guarantors parties thereto, the banks whose names appear on the
signature page thereof and The First National Bank of Chicago, as Agent, shall
be substantially to the following effect:
a) The Guarantor is a corporation duly incorporated validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite power and authority, corporate or
otherwise, to conduct its business, to own its properties and to execute and
deliver, and to perform all of its obligations under the Loan Documents.
b) The execution and delivery by the Guarantor of the Credit
Agreement and the performance of its obligations thereunder have been duly
authorized by all necessary corporate or other action and do not and will not
(i) require any consent or approval of its stockholders, or (ii) violate any
provision of any law, rule or regulation (including, without limitation,
Regulation G, T, U or X of the Board of Governors of the Federal Reserve
System), or, to our knowledge, any order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to it which
violation would (x) impair its ability to perform its obligations under the Loan
Documents (y) have a material adverse effect on its financial condition,
properties, or operations, or on its charter or by-laws.
c) No authorization, consent, approval, license, exemption of or
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will be
necessary for the valid execution, delivery or performance by the Guarantor of
the Credit Agreement.
d) Except as have been disclosed to the Agent and the Banks in
writing, there are to our knowledge no actions, suits or proceedings pending or
threatened against the Guarantor or its properties before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, the probable outcome of which would have a material adverse
effect on the consolidated financial condition, properties, or operations of the
Guarantor.
Counsel is a member of the Bar of the State of __________________.
In rendering the foregoing opinion we express no opinion as to
the effect (if any) of any laws of any jurisdiction, except those of the State
of ______________, and the Federal laws of the United States.
<PAGE>
Exhibit F
Subsidiaries of Borrower
State of Borrower's
Subsidiary Incorporation % Ownership
- ---------- ------------- -----------
Beazer Mortgage Corporation Delaware 100%
Beazer Homes Corp. Tennessee 100%
Beazer Home Sales Arizona Inc. Delaware 100%
Beazer Realty Corp. Georgia 100%
Beazer/Squires Realty, Inc. North Carolina 100%
Panitz Homes Realty, Inc. Florida 100%
Beazer Homes Holdings Corp. Delaware 100%
Beazer Homes Texas Holdings, Inc. Delaware 100%
Beazer Homes Texas, L.P. Delaware 99%(1)
United Housing Insurance
Corporation Vermont 100%
____________________________
(1) The remaining 1% is held by Beazer Homes Texas Holdings, Inc.
<PAGE>
Exhibit G
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
_____________ (the "Assignor") and __________________ (the "Assignee") is dated
as of _____________, 19__. The parties hereto agree as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit
Agreement (which, as it may be amended, modified, renewed or extended from time
to time, is herein called the "Credit Agreement") described in Item 1 of
Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used herein and
not otherwise defined herein shall have the meanings attributed to them in the
Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and
assigns to the Assignee, and the Assignee hereby purchases and assumes from the
Assignor, an interest in and to the Assignor's rights and obligations under the
Credit Agreement such that after giving effect to such assignment the Assignee
shall have purchased pursuant to this Assignment Agreement the percentage
interest specified in Item 3 of Schedule 1 of all outstanding rights and
obligations under the Credit Agreement relating to the facilities listed in Item
3 of Schedule 1 and the other Loan Documents. The Commitment (or Loans, if the
applicable Commitment has been terminated) purchased by the Assignee hereunder
is set forth in Item 3 of Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment
Agreement (the "Effective Date") shall be the later of the date specified in
Item 3 of Schedule 1 or two Business Days (or such shorter period agreed to by
the Agent) after a Notice of Assignment substantially in the form of Exhibit 1
attached hereto has been delivered to the Agent. Such Notice of Assignment must
include any consents required to be delivered to the Agent by Section 12.03 of
the Credit Agreement (including the consent of the Agent). In no event will the
Effective Date occur if the payments required to be made by the Assignee to the
Assignor on the Effective Date under Sections 4 and 5 hereof are not made on the
proposed Effective Date. The Assignor will notify the Assignee of the proposed
Effective Date no later than the Business Day prior to the proposed Effective
Date. As of the Effective Date, (i) the Assignee shall have the rights and
obligations of a Bank under the Loan Documents with respect to the rights and
obligations assigned to the Assignee hereunder and (ii) the Assignor shall
relinquish its rights and be released from its corresponding obligations under
the Loan Documents with respect to the rights and obligations assigned to the
Assignee hereunder.
4. PAYMENTS, OBLIGATIONS. On and after the Effective Date, the
Assignee shall be entitled to receive from
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<PAGE>
the Agent all payments of principal, interest and fees with respect to the
interest assigned hereby. The Assignee shall advance funds directly to the
Agent with respect to all Loans and reimbursement payments made on or after the
Effective Date with respect to the interest assigned hereby. [In consideration
for the sale and assignment of Loans hereunder, (i) the Assignee shall pay the
Assignor on the Effective Date, an amount equal to the principal amount of the
portion of all ABR Loans assigned to the Assignee hereunder and (ii) with
respect to each LIBOR Loan made by the Assignor and assigned to the Assignee
hereunder which is outstanding on the Effective Date, (a) on the last day of the
Interest Period therefor or (b) on such earlier date agreed to by the Assignor
and the Assignee or (c) on the date on which any such LIBOR Loan either becomes
due (by acceleration or otherwise) or is prepaid (the date as described in the
foregoing clauses (a), (b) or (c) being hereinafter referred to as the "Payment
Date"), the Assignee shall pay the Assignor an amount equal to the principal
amounts of the portion of such LIBOR Loan assigned to the Assignee which is
outstanding on the Payment Date. If the Assignor and the Assignee agree that
the Payment Date for such LIBOR Loan shall be the Effective Date, they shall
agree to the interest rate applicable to the portion of such Loan assigned
hereunder for the period from the Effective Date to the end of the existing
Interest Period applicable to such LIBOR Loan (the "Agreed Interest Rate") and
any interest received by the Assignee in excess of the Agreed Interest Rate
shall be remitted to the Assignor. In the event interest for the period from
the Effective Date to but not including the Payment Date is not paid by the
Borrower with respect to any LIBOR Loan sold by the Assignor to the Assignee
hereunder, the Assignee shall pay to the Assignor interest for such period on
the portion of such LIBOR Loan sold by the Assignor to the Assignee hereunder at
the applicable rate provided by the Credit Agreement. In the event a prepayment
of any LIBOR Loan which is existing on the Payment Date and assigned by the
Assignor to the Assignee hereunder occurs after the Payment Date but before the
end of the Interest Period applicable to such LIBOR Loan, the Assignee shall
remit to the Assignor the excess of the prepayment penalty paid with respect to
the portion of such LIBOR Loan assigned to the Assignee hereunder over the
amount which would have been paid if such prepayment penalty was calculated
based on the Agreed Interest Rate. The Assignee will also promptly remit to the
Assignor (i) any principal payments received from the Agent with respect to
LIBOR Loans prior to the Payment Date and (ii) any amounts of interest on Loans
and fees received from the Agent which relate to the portion of the Loans
assigned to the Assignee hereunder for periods prior to the Effective Date, in
the case of ABR Loans, or the Payment Date, in the case of LIBOR Loans, and not
previously paid by the Assignee to the Assignor.]* In the
*THE PARTIES MAY INSERT ALTERNATIVE PAYMENT PROVISIONS IN LIEU OF THE PAYMENT
TERMS INCLUDED IN THIS EXHIBIT.
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<PAGE>
event that either party hereto receives any payment to which the other party
hereto is entitled under this Assignment Agreement, then the party receiving
such amount shall promptly remit it to the other party hereto.
5. FEES PAYABLE BY THE ASSIGNEE. [To the extent applicable, the
Assignee shall pay to the Assignor a fee on each day on which a payment of
interest or commitment fee is made under the Credit Agreement with respect to
the amounts assigned to the Assignee hereunder (other than a payment of interest
or commitment fee for the period prior to the Effective Date or, in the case of
LIBOR Loans, the Payment Date, which the Assignee is obligated to deliver to the
Assignor pursuant to Section 4 hereof). The amount of such fee shall be the
difference between (i) the interest or fee, as applicable, paid with respect to
the amounts assigned to the Assignee hereunder and (ii) the interest or fee, as
applicable, which would have been paid with respect to the amounts assigned to
the Assignee hereunder if each interest rate was ___ of 1% less than the
interest rate paid by the Borrower or if the commitment fee was _____ of 1% less
than the commitment fee paid by the Borrower, as applicable. In addition, the
Assignee agrees to pay ____% of the recordation fee required to be paid to the
Agent pursuant to the Credit Agreement in connection with this Assignment
Agreement.]*
*THE PARTIES MAY INSERT ALTERNATIVE PAYMENT PROVISIONS IN LIEU OF THE PAYMENT
TERMS INCLUDED IN THIS EXHIBIT.
6. REPRESENTATIONS OF THE ASSIGNOR: LIMITATIONS ON THE
ASSIGNOR'S LIABILITY. The Assignor represents and warrants that it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any adverse claim created by the Assignor.
It is understood and agreed that the assignment and assumption hereunder are
made without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor
nor any of its officers, directors, employees, agents or attorneys shall be
responsible for (i) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectibility of any Loan Documents, including
without limitation, documents granting the Assignor and the other Banks a
security interest in assets of the Borrower, any Subsidiary, or any Guarantor,
(ii) any representation, warranty or statement made in or in connection with any
of the Loan Documents, (iii) the financial condition or creditworthiness of the
Borrower, any Subsidiary, or any Guarantor, (iv) the performance of or
compliance with any of the terms or provisions of any of the Loan Documents, (v)
inspecting any of the property, books or records of the Borrower, any
Subsidiary, or any
Guarantor, (vi) the validity, enforceability, perfection, priority, condition,
value or sufficiency of any collateral securing or purporting to secure the
Loans or (vii) any mistake,
<PAGE>
error of judgment, or action taken or omitted to be taken in connection with the
Loans or the Loan Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms
that it has received a copy of the Credit Agreement, together with copies of
such financial statements requested by the Assignee and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement, (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Bank and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under the Loan Documents, (iii) appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto, (iv) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Bank, (v) agrees that its
payment instructions and notice instructions are as set forth in the attachment
to Schedule 1, (vi) confirms that none of the funds, monies, assets or other
consideration being used to make the purchase and assumption hereunder are "plan
assets" as defined under ERISA and that its rights, benefits and interests in
and under the Loan Documents will not be "plan assets" under ERISA, [and (vii)
attaches the forms prescribed by the Internal Revenue Service of the United
States certifying that the Assignee is entitled to receive payments under the
Loan Documents without deduction or withholding of any United States federal
income taxes]* and (viii) represents and warrants that the assignment hereunder
does not and will not, as of the effective date of such assignment, result in
any increased costs or expenses, including without limitation pursuant to
Section 2.14 or 2.15 of the Credit Agreement, payable by the Borrower or any
Guarantor.
*TO BE INSERTED IF THE ASSIGNEE IS NOT INCORPORATED UNDER THE LAWS OF THE UNITED
STATES, OR A STATE THEREOF.
8. INDEMNITY. The Assignee agrees to indemnify and hold the
Assignor harmless against any and all losses, costs and expenses (including,
without limitation, reasonable attorneys' fees) and liabilities incurred by the
Assignor in connection with or arising in any manner from the Assignee's
non-performance of the obligations assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the
Assignee shall have the right pursuant to Section 12.03 of the Credit Agreement
to assign the rights which are assigned to the Assignee hereunder to any entity
or person, provided that (i) any such subsequent assignment does not violate any
of the terms or conditions of the Loan Documents or any law, rule, regulation,
order, writ, judgment, injunction or decree and that
<PAGE>
all consents required under the terms of the Loan Documents have been obtained
and (ii) unless the prior written consent of the Assignor is obtained, the
Assignee is not thereby released from its obligations to the Assignor hereunder,
if any remain unsatisfied, including, without limitation, its obligations under
Sections 4, 5 and 8 hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENTS. If any reduction in
the Aggregate Commitments occurs between the date of this Assignment Agreement
and the Effective Date, the percentage interest specified in Item 3 of Schedule
1 shall remain the same, but the dollar amount purchased shall be recalculated
based on the reduced Commitment of the Assignor.
11. ENTIRE AGREEMENT. This Assignment Agreement and the
attached Notice of Assignment embody the entire agreement and understanding
between the parties hereto and supersede all prior agreements and understandings
between the parties hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed
by and construed in accordance with, the laws of the State of Illinois without
regard to principles of conflict of laws.
13. NOTICES. Notices shall be given under this Assignment
Agreement in the manner set forth in the Credit Agreement. For the purpose
hereof the addresses of the parties hereto (until notice of a change is
delivered) shall be the addresses set forth in the attachment to Schedule 1.
IN WITNESS WHEREOF, the parties hereto have executed this
Assignment Agreement by their duly authorized officers as of the date first
above written.
[NAME OF ASSIGNOR]
By:________________________________
Title:_____________________________
[NAME OF ASSIGNEE]
By:________________________________
Title:_____________________________
<PAGE>
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement:
2. Date of Assignment Agreement: _________________, 19__
3. Amounts (As of Date of Item 2 above):
Facility Facility Facility
1* 2* 3*
-------- -------- --------
a. Total of Commitments
(Loans)** under
Credit Agreement $_______ $_______ $_______
b. Assignee's Percentage
of each Facility
purchased under the
Assignment
Agreement*** _______% _______% _______%
c. Amount of Assigned
Share in each Facility
purchased under the
Assignment Agreement $_______ $_______ $_______
d. Assignee's aggregate
Commitment Amount
(Loan Amount)***
Purchased Hereunder: $_______ $_______ $_______
e. Proposed Effective
Date: ________ ________ ________
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By:___________________________ By:______________________
Title:________________________ Title:___________________
*Insert specific facility names per Credit Agreement
**If a Commitment has been terminated, insert outstanding Loans
in place of Commitment
***Percentage taken to 10 decimal places
<PAGE>
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which must include
notice address for the Assignor and the Assignee and the ABR Loan Lending Office
address and the LIBOR Loan Lending Office address for the Assignee.
<PAGE>
EXHIBIT 1
to Assignment Agreement
NOTICE
OF ASSIGNMENT
_______________________, 19__
To: [NAME OF BORROWER]*
______________________
______________________
[NAME OF AGENT]
______________________
______________________
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that certain Credit Agreement (the "Credit Agreement")
described in Item I of Schedule 1 attached hereto ("Schedule 1"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
attributed to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and delivered
to [the Borrower and]* the Agent pursuant to Section 12.03 of the Credit
Agreement.
3. The Assignor and the Assignee have entered into an Assignment
Agreement, dated as of __________, 19__ (the "Assignment"), pursuant to which,
among other things, the Assignor has sold, assigned, delegated and transferred
to the Assignee, and the Assignee has purchased, accepted and assumed from the
Assignor the percentage interest specified in Item 3 of Schedule 1 of all
outstanding rights and obligations under the Credit Agreement relating to the
facilities listed in Item 3 of Schedule 1. The Effective Date of the Assignment
shall be the later of the date specified in Item 5 of Schedule 1 or two Business
Days (or such shorter period as agreed to by the Agent) after this Notice of
Assignment and any consents and fees required by Section 12.03 of the Credit
Agreement have been delivered to the Agent, provided that the Effective Date
shall not occur if any condition precedent agreed to by the Assignor and the
Assignee has not been satisfied.
*TO BE INCLUDED ONLY IF CONSENT MUST BE OBTAINED FROM THE BORROWER PURSUANT TO
SECTION 12.03 OF THE CREDIT AGREEMENT.
<PAGE>
4. The Assignor and the Assignee hereby give to the Borrower and the
Agent notice of the assignment and delegation referred to herein. The Assignor
will confer with the Agent before the date specified in Item 5 of Schedule 1 to
determine if the Assignment Agreement will become effective on such date
pursuant to Section 3 hereof, and will confer with the Agent to determine the
Effective Date pursuant to Section 3 hereof if it occurs thereafter. The
Assignor shall notify the Agent if the Assignment Agreement does not become
effective on any proposed Effective Date as a result of the failure to satisfy
the conditions precedent agreed to by the Assignor and the Assignee. At the
request of the Agent, the Assignor will give the Agent written confirmation of
the satisfaction of the conditions precedent.
5. The Assignor or the Assignee shall pay to the Agent on or before
the Effective Date the processing fee of $4,000.00 required by Section 12.03 of
the Credit Agreement.
6. If any Notes are outstanding on the Effective Date, the Assignor
and the Assignee request and direct that the Agent prepare and cause the
Borrower to execute and deliver new Notes or, as appropriate, replacement Notes,
to the Assignor and the Assignee. The Assignor and, if applicable, the Assignee
each agree to deliver to the Agent the original Note received by it from the
Borrower upon its receipt of a new Note (or replacement Note) in the appropriate
amount, whereupon such original Note shall be marked "canceled" and returned to
the Borrower.
7. The Assignee advises the Agent that notice and payment
instructions are set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of the
funds, monies, assets or other consideration being used to make the purchase
pursuant to the Assignment Agreement are "plan assets" as defined under ERISA
and that its rights, benefits, and interests in and under the Loan Documents
will not be "plan assets" under ERISA.
9. The Assignee authorizes the Agent to act as its agent under the
Loan Documents in accordance with the terms thereof. The Assignee acknowledges
that the Agent has no duty to supply information with respect to the Borrower or
the Loan Documents to the Assignee until the Assignee becomes a party to the
Credit Agreement.*
*MAY BE ELIMINATED IF ASSIGNEE IS A PARTY TO THE CREDIT AGREEMENT PRIOR TO THE
EFFECTIVE DATE.
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<PAGE>
NAME OF ASSIGNOR NAME OF ASSIGNEE
By:________________________ By:___________________________
Title:_____________________ Title:________________________
ACKNOWLEDGED [AND CONSENTED ACKNOWLEDGED [AND CONSENTED
TO] BY (NAME OF AGENT] TO] BY (NAME OF BORROWER]
By:________________________ By:___________________________
Title:_____________________ Title:________________________
[Attach photocopy of Schedule 1 to Assignment)
<PAGE>
Exhibit 10.11
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Beazer Homes USA, Inc. a Delaware corporation
(the "Company") and Ian J. McCarthy (the "Executive"), dated as of the 17 day
of July, 1996.
The Board of Directors of the Company (the "Board"), has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or threatened Change of
Control and to encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that the compensation and
benefits expectations of the Executive will be satisfied and which are
competitive with those of other corporations. Therefore, in order to
accomplish these objectives, the Board has caused the Company to enter into
this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall mean the first
date during the Change of Control Period (as defined in Section 1(b)) on
which a Change of Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control occurs and
if the Executive's employment with the Company is terminated prior to the
date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (i) was at
the request of a third party who has taken steps reasonably calculated to
effect a Change of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control, then for all purposes of this Agreement
the "Effective Date" shall mean the date immediately prior to the date of
such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the second anniversary of the date hereof;
provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Change
<PAGE>
of Control Period shall be automatically extended so as to terminate two
years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a),
the following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c) of this
Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company
(a "Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
2
<PAGE>
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the
employ of the Company subject to the terms and conditions of this Agreement,
for the period commencing on the Effective Date and ending on the second
anniversary of such date (the "Employment Period").
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities
shall be at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time during the
120-day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the location where the Executive
was employed immediately preceding the Effective Date or any office or
location less than 35 miles from such location.
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(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and time during normal business hours
to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use
the Executive's reasonable best efforts to perform faithfully and efficiently
such responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on corporate,
civic or charitable boards or committees, (B) deliver lectures, fulfill
speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the continued conduct
of such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company.
(b) COMPENSATION. (i) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the Employment Period, the
Annual Base Salary shall be reviewed no more than 12 months after the last
salary increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such increase
and the term Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by, controlling
or under common control with the Company.
(ii) ANNUAL BONUS. In Addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
Executive's highest bonus under the Company's annual incentive plans, for the
last three full fiscal years prior to the Effective Date (annualized in the
event that the Executive was not employed
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by the Company for the whole of such fiscal year) (the "Recent Annual
Bonus"). Each such Annual Bonus shall be paid no later than the end of the
third month of the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices, policies
and programs provide the Executive with incentive opportunities (measured
with respect to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and its
affiliated companies for the Executive under such plans, practices, policies
and programs as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the Executive, those
provided generally at any time after the Effective Date to other peer
executives of the Company and its affiliated companies.
(iv) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and
its affiliated companies (including, without limitation, medical,
prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with benefits which are less favorable, in the
aggregate, than the most favorable of such plans, practices, policies and
programs in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
(v) EXPENSES. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated companies in
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effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
(vi) FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and, if applicable, use of
an automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
(vii) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, as least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
(viii) VACATION. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable
plans, policies, programs and practices of the Company and its affiliated
companies as in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's
death during the Employment Period. If the Company determines in good faith
that the Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth below), it may
give to the Executive written notice in accordance with Section 12(b) of this
Agreement of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall terminate effective
on the 30th day after receipt of such notice by the
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Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's
duties with the Company on a full-time basis for 180 consecutive business
days as a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.
(b) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement,
"Cause" shall mean:
(i) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or one of
its affiliates (other than any such failure resulting from incapacity
due to physical or mental illness), after a written demand for
substantial performance is delivered to the Executive by the Board or
the Chief Executive Officer of the Company which specifically identifies
the manner in which the Board or Chief Executive Officer believes that
the Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct
or gross misconduct which is materially and demonstrably injurious to
the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of
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the conduct described in subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by
the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 4(a) of this Agreement,
or any other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(B) hereof
or the Company's requiring the Executive to travel on Company business
to a substantially greater extent than required immediately prior to the
Effective date;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this Agreement
to the contrary notwithstanding, a termination by the Executive for any
reason during the 30-day period immediately following the first anniversary
of the Effective Date shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice
of Termination to the other party
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hereto given in accordance with Section 12(b) of this Agreement. For purposes
of this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than
thirty days after the giving of such notice). The failure by the Executive or
the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing the Executive's or the Company's rights
hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) of the Executive's
employment is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the
case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON;
OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period,
the Company shall terminate the Executive's employment other than for Cause
or Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the higher of (I) the Recent Annual Bonus and (II)
the Annual Bonus paid or payable, including any bonus or portion
thereof which has been earned but deferred (and annualized for any
fiscal year consisting of less than twelve full months or during
which the Executive was employed for less than twelve full
months), for the most recently completed fiscal year
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during the Employment Period, if any (such higher amount being
referred to as the "Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is
365 and (d) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (1), (2), and (3)
shall be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) 3, and (2) the sum
of (x) the Executive's Annual Base Salary and (y) the Highest
Annual Bonus; and
C. an amount equal to the excess of (a) the actuarial
equivalent of the benefit under the Company's qualified defined
benefit retirement plan (the "Retirement Plan") (utilizing
actuarial assumptions no less favorable to the Executive than those
in effect under the Company's Retirement Plan immediately prior to
the Effective Date), and any excess or supplemental retirement plan
in which the Executive participates (together, the "SERP") which
the Executive would receive if the Executive's employment continued
for 3 years after the Date of Termination assuming for this purpose
that all accrued benefits are fully vested, and, assuming that the
Executive's compensation in each of the three years is that
required by Section 4(b)(i) and Section 4(b)(ii), over (b) the
actuarial equivalent of the Executive's actual benefit (paid or
payable), if any, under the Retirement Plan and the SERP as of the
Date of Termination;
(ii) for three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate
plan, program, practice or policy, the Company shall continue benefits
to the Executive and/or the Executive's family at least equal to those
which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 4(b)(iv) of this
Agreement if the Executive's employment has not been terminated or, if
more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible
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to receive medical or other welfare benefits under another employer
provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination and to
have retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred, provide
the Executive with outplacement services the scope and provider of which
shall be selected by the Executive in his sole discretion; and
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies (such
other amounts and benefits shall be hereinafter referred to as the
"Other Benefits").
(b) DEATH. If the Executive's employment is terminated by reason
of the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive,
benefits as least equal to the most favorable benefits provided by the Company
and affiliated companies to the estates and beneficiaries of peer executives
of the Company and such affiliated companies under such plans, programs,
practices and policies relating to death benefits, if any, as in effect with
respect to other peer executives and their beneficiaries at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the Executive's beneficiaries, as
in effect on the date of the Executive's death with respect to other peer
executives of the Company and its affiliated companies and their
beneficiaries.
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(c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision
of Other Benefits. Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With respect to
the provision of Other Benefits, the term Other Benefits as utilized in this
Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at
least equal to the most favorable of those generally provided by the Company
and its affiliated companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating to
disability, if any, as in effect generally with respect to other peer
executives and their families at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive and/or the Executive's family, as in effect at any time thereafter
generally with respect to other peer executives of the Company and its
affiliated companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) is Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) Other Benefits, in each case to the extent
theretofore unpaid. If the Executive voluntarily terminates employment during
the Employment Period, excluding a termination for Good Reason, this
Agreement shall terminate without further obligations to the Executive, other
than for Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance
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with such plan, policy, practice or program or contract or agreement except
as explicitly modified by this Agreement.
8. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against
the Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest by the Company, provided that the
Executive prevails in at least one material issue, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of
any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 9) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Executive with respect to such excise tax
(such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in
an amount such that after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest or penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 9(a), if it shall be
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determined that the Executive is entitled to a Gross-Up Payment, but that the
Payments do not exceed 110% of the greatest amount (the "Reduced Amount")
that could be paid to the Executive such that the receipt of Payments would
not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the
Executive and the Payments, in the aggregate, shall be reduced to the Reduced
Amount.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made
by Deloitte & Touche LLP or such other certified public accounting firm as
may be designated by the Executive (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then
be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as determined pursuant to this Section 9, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of
any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service, that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive
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shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation
and payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 9(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on
an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment
of taxes for the
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taxable year of the Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall
be entitled to settle or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to Section 9(c),
a determination is made that the Executive shall not be entitled to any
refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required
to be paid.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law
or legal process, communicate or divulge any such information, knowledge or
data to anyone other than the Company and those designated by it. In no event
shall an asserted violation of the provisions of this Section 10 constitute a
basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This
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Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operations of
law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
IF TO THE EXECUTIVE:
Ian J. McCarthy
600 Blue Teal Court
Atlanta, Georgia 30327
IF TO THE COMPANY:
5775 Peachtree Dunwoody Road
Suite C-550
Atlanta, Georgia 30342
Attention: Company Secretary
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or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amount payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed
to be a waiver of such provision or right or any other provision or right of
this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1 hereof, prior to the Effective Date, the
Executive's employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date, in which
case the Executive shall have no further rights under this Agreement. From
and after the Effective Date this Agreement shall supersede any other
agreement between the parties with respect to the subject matter hereof.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
/s/ IAN J. MCCARTHY
-----------------------------------
Ian J. McCarthy
BEAZER HOMES USA, INC.
By /s/ BRIAN C. BEAZER
---------------------------------
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Exhibit 10.12
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Beazer Homes USA, Inc. a Delaware corporation
(the "Company") and David S. Weiss (the "Executive"), dated as of the 17 day
of July, 1996.
The Board of Directors of the Company (the "Board"), has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or threatened Change of
Control and to encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that the compensation and
benefits expectations of the Executive will be satisfied and which are
competitive with those of other corporations. Therefore, in order to
accomplish these objectives, the Board has caused the Company to enter into
this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall mean the first
date during the Change of Control Period (as defined in Section 1(b)) on
which a Change of Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control occurs and
if the Executive's employment with the Company is terminated prior to the
date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (i) was at
the request of a third party who has taken steps reasonably calculated to
effect a Change of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control, then for all purposes of this Agreement
the "Effective Date" shall mean the date immediately prior to the date of
such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the second anniversary of the date hereof;
provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Change
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of Control Period shall be automatically extended so as to terminate two
years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a),
the following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c) of this
Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company
(a "Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
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Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the
employ of the Company subject to the terms and conditions of this Agreement,
for the period commencing on the Effective Date and ending on the second
anniversary of such date (the "Employment Period").
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities
shall be at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time during the
120-day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the location where the Executive
was employed immediately preceding the Effective Date or any office or
location less than 35 miles from such location.
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(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and time during normal business hours
to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use
the Executive's reasonable best efforts to perform faithfully and efficiently
such responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on corporate,
civic or charitable boards or committees, (B) deliver lectures, fulfill
speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the continued conduct
of such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company.
(b) COMPENSATION. (i) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the Employment Period, the
Annual Base Salary shall be reviewed no more than 12 months after the last
salary increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such increase
and the term Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by, controlling
or under common control with the Company.
(ii) ANNUAL BONUS. In Addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
Executive's highest bonus under the Company's annual incentive plans, for the
last three full fiscal years prior to the Effective Date (annualized in the
event that the Executive was not employed
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<PAGE>
by the Company for the whole of such fiscal year) (the "Recent Annual
Bonus"). Each such Annual Bonus shall be paid no later than the end of the
third month of the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices, policies
and programs provide the Executive with incentive opportunities (measured
with respect to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and its
affiliated companies for the Executive under such plans, practices, policies
and programs as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the Executive, those
provided generally at any time after the Effective Date to other peer
executives of the Company and its affiliated companies.
(iv) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and
its affiliated companies (including, without limitation, medical,
prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with benefits which are less favorable, in the
aggregate, than the most favorable of such plans, practices, policies and
programs in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
(v) EXPENSES. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated companies in
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effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
(vi) FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and, if applicable, use of
an automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
(vii) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, as least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
(viii) VACATION. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable
plans, policies, programs and practices of the Company and its affiliated
companies as in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's
death during the Employment Period. If the Company determines in good faith
that the Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth below), it may
give to the Executive written notice in accordance with Section 12(b) of this
Agreement of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall terminate effective
on the 30th day after receipt of such notice by the
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Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's
duties with the Company on a full-time basis for 180 consecutive business
days as a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.
(b) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement,
"Cause" shall mean:
(i) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or one of
its affiliates (other than any such failure resulting from incapacity
due to physical or mental illness), after a written demand for
substantial performance is delivered to the Executive by the Board or
the Chief Executive Officer of the Company which specifically identifies
the manner in which the Board or Chief Executive Officer believes that
the Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct
or gross misconduct which is materially and demonstrably injurious to
the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of
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<PAGE>
the conduct described in subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by
the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 4(a) of this Agreement,
or any other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(B) hereof
or the Company's requiring the Executive to travel on Company business
to a substantially greater extent than required immediately prior to the
Effective date;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this Agreement
to the contrary notwithstanding, a termination by the Executive for any
reason during the 30-day period immediately following the first anniversary
of the Effective Date shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice
of Termination to the other party
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hereto given in accordance with Section 12(b) of this Agreement. For purposes
of this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than
thirty days after the giving of such notice). The failure by the Executive or
the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing the Executive's or the Company's rights
hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) of the Executive's
employment is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the
case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON;
OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period,
the Company shall terminate the Executive's employment other than for Cause
or Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the higher of (I) the Recent Annual Bonus and (II)
the Annual Bonus paid or payable, including any bonus or portion
thereof which has been earned but deferred (and annualized for any
fiscal year consisting of less than twelve full months or during
which the Executive was employed for less than twelve full
months), for the most recently completed fiscal year
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during the Employment Period, if any (such higher amount being
referred to as the "Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is
365 and (d) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (1), (2), and (3)
shall be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) 2.5, and (2) the sum
of (x) the Executive's Annual Base Salary and (y) the Highest
Annual Bonus; and
C. an amount equal to the excess of (a) the actuarial
equivalent of the benefit under the Company's qualified defined
benefit retirement plan (the "Retirement Plan") (utilizing
actuarial assumptions no less favorable to the Executive than those
in effect under the Company's Retirement Plan immediately prior to
the Effective Date), and any excess or supplemental retirement plan
in which the Executive participates (together, the "SERP") which
the Executive would receive if the Executive's employment continued
for 3 years after the Date of Termination assuming for this purpose
that all accrued benefits are fully vested, and, assuming that the
Executive's compensation in each of the three years is that
required by Section 4(b)(i) and Section 4(b)(ii), over (b) the
actuarial equivalent of the Executive's actual benefit (paid or
payable), if any, under the Retirement Plan and the SERP as of the
Date of Termination;
(ii) for three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate
plan, program, practice or policy, the Company shall continue benefits
to the Executive and/or the Executive's family at least equal to those
which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 4(b)(iv) of this
Agreement if the Executive's employment has not been terminated or, if
more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible
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to receive medical or other welfare benefits under another employer
provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination and to
have retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred, provide
the Executive with outplacement services the scope and provider of which
shall be selected by the Executive in his sole discretion; and
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies (such
other amounts and benefits shall be hereinafter referred to as the
"Other Benefits").
(b) DEATH. If the Executive's employment is terminated by reason
of the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive,
benefits as least equal to the most favorable benefits provided by the Company
and affiliated companies to the estates and beneficiaries of peer executives
of the Company and such affiliated companies under such plans, programs,
practices and policies relating to death benefits, if any, as in effect with
respect to other peer executives and their beneficiaries at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the Executive's beneficiaries, as
in effect on the date of the Executive's death with respect to other peer
executives of the Company and its affiliated companies and their
beneficiaries.
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(c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision
of Other Benefits. Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With respect to
the provision of Other Benefits, the term Other Benefits as utilized in this
Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at
least equal to the most favorable of those generally provided by the Company
and its affiliated companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating to
disability, if any, as in effect generally with respect to other peer
executives and their families at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive and/or the Executive's family, as in effect at any time thereafter
generally with respect to other peer executives of the Company and its
affiliated companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) is Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) Other Benefits, in each case to the extent
theretofore unpaid. If the Executive voluntarily terminates employment during
the Employment Period, excluding a termination for Good Reason, this
Agreement shall terminate without further obligations to the Executive, other
than for Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance
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with such plan, policy, practice or program or contract or agreement except
as explicitly modified by this Agreement.
8. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against
the Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest by the Company, provided that the
Executive prevails in at least one material issue, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of
any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 9) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Executive with respect to such excise tax
(such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in
an amount such that after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest or penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 9(a), if it shall be
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determined that the Executive is entitled to a Gross-Up Payment, but that the
Payments do not exceed 110% of the greatest amount (the "Reduced Amount")
that could be paid to the Executive such that the receipt of Payments would
not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the
Executive and the Payments, in the aggregate, shall be reduced to the Reduced
Amount.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made
by Deloitte & Touche LLP or such other certified public accounting firm as
may be designated by the Executive (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then
be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as determined pursuant to this Section 9, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of
any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service, that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive
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shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation
and payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 9(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on
an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment
of taxes for the
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taxable year of the Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall
be entitled to settle or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to Section 9(c),
a determination is made that the Executive shall not be entitled to any
refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required
to be paid.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law
or legal process, communicate or divulge any such information, knowledge or
data to anyone other than the Company and those designated by it. In no event
shall an asserted violation of the provisions of this Section 10 constitute a
basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This
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Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operations of
law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
IF TO THE EXECUTIVE:
David S. Weiss
1855 Redbourne Drive
Atlanta, Georgia 30350
IF TO THE COMPANY:
5775 Peachtree Dunwoody Road
Suite C-550
Atlanta, Georgia 30342
Attention: Company Secretary
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or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amount payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed
to be a waiver of such provision or right or any other provision or right of
this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1 hereof, prior to the Effective Date, the
Executive's employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date, in which
case the Executive shall have no further rights under this Agreement. From
and after the Effective Date this Agreement shall supersede any other
agreement between the parties with respect to the subject matter hereof.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
/s/ DAVID S. WEISS
-----------------------------------
David S. Weiss
BEAZER HOMES USA, INC.
By /s/ BRIAN C. BEAZER
---------------------------------
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Exhibit 10.13
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Beazer Homes USA, Inc. a Delaware corporation
(the "Company") and John Skelton (the "Executive"), dated as of the 17 day
of July, 1996.
The Board of Directors of the Company (the "Board"), has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or threatened Change of
Control and to encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that the compensation and
benefits expectations of the Executive will be satisfied and which are
competitive with those of other corporations. Therefore, in order to
accomplish these objectives, the Board has caused the Company to enter into
this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall mean the first
date during the Change of Control Period (as defined in Section 1(b)) on
which a Change of Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control occurs and
if the Executive's employment with the Company is terminated prior to the
date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (i) was at
the request of a third party who has taken steps reasonably calculated to
effect a Change of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control, then for all purposes of this Agreement
the "Effective Date" shall mean the date immediately prior to the date of
such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the second anniversary of the date hereof;
provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Change
<PAGE>
of Control Period shall be automatically extended so as to terminate two
years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a),
the following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c) of this
Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company
(a "Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
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Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the
employ of the Company subject to the terms and conditions of this Agreement,
for the period commencing on the Effective Date and ending on the second
anniversary of such date (the "Employment Period").
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities
shall be at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time during the
120-day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the location where the Executive
was employed immediately preceding the Effective Date or any office or
location less than 35 miles from such location.
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(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and time during normal business hours
to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use
the Executive's reasonable best efforts to perform faithfully and efficiently
such responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on corporate,
civic or charitable boards or committees, (B) deliver lectures, fulfill
speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the continued conduct
of such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company.
(b) COMPENSATION. (i) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the Employment Period, the
Annual Base Salary shall be reviewed no more than 12 months after the last
salary increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such increase
and the term Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by, controlling
or under common control with the Company.
(ii) ANNUAL BONUS. In Addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
Executive's highest bonus under the Company's annual incentive plans, for the
last three full fiscal years prior to the Effective Date (annualized in the
event that the Executive was not employed
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by the Company for the whole of such fiscal year) (the "Recent Annual
Bonus"). Each such Annual Bonus shall be paid no later than the end of the
third month of the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices, policies
and programs provide the Executive with incentive opportunities (measured
with respect to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and its
affiliated companies for the Executive under such plans, practices, policies
and programs as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the Executive, those
provided generally at any time after the Effective Date to other peer
executives of the Company and its affiliated companies.
(iv) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and
its affiliated companies (including, without limitation, medical,
prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with benefits which are less favorable, in the
aggregate, than the most favorable of such plans, practices, policies and
programs in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
(v) EXPENSES. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated companies in
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effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
(vi) FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and, if applicable, use of
an automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
(vii) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, as least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
(viii) VACATION. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable
plans, policies, programs and practices of the Company and its affiliated
companies as in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's
death during the Employment Period. If the Company determines in good faith
that the Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth below), it may
give to the Executive written notice in accordance with Section 12(b) of this
Agreement of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall terminate effective
on the 30th day after receipt of such notice by the
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Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's
duties with the Company on a full-time basis for 180 consecutive business
days as a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.
(b) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement,
"Cause" shall mean:
(i) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or one of
its affiliates (other than any such failure resulting from incapacity
due to physical or mental illness), after a written demand for
substantial performance is delivered to the Executive by the Board or
the Chief Executive Officer of the Company which specifically identifies
the manner in which the Board or Chief Executive Officer believes that
the Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct
or gross misconduct which is materially and demonstrably injurious to
the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of
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the conduct described in subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by
the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 4(a) of this Agreement,
or any other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(B) hereof
or the Company's requiring the Executive to travel on Company business
to a substantially greater extent than required immediately prior to the
Effective date;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this Agreement
to the contrary notwithstanding, a termination by the Executive for any
reason during the 30-day period immediately following the first anniversary
of the Effective Date shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice
of Termination to the other party
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hereto given in accordance with Section 12(b) of this Agreement. For purposes
of this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than
thirty days after the giving of such notice). The failure by the Executive or
the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing the Executive's or the Company's rights
hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) of the Executive's
employment is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the
case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON;
OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period,
the Company shall terminate the Executive's employment other than for Cause
or Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the higher of (I) the Recent Annual Bonus and (II)
the Annual Bonus paid or payable, including any bonus or portion
thereof which has been earned but deferred (and annualized for any
fiscal year consisting of less than twelve full months or during
which the Executive was employed for less than twelve full
months), for the most recently completed fiscal year
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during the Employment Period, if any (such higher amount being
referred to as the "Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is
365 and (d) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (1), (2), and (3)
shall be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) 1.5, and (2) the sum
of (x) the Executive's Annual Base Salary and (y) the Highest
Annual Bonus; and
C. an amount equal to the excess of (a) the actuarial
equivalent of the benefit under the Company's qualified defined
benefit retirement plan (the "Retirement Plan") (utilizing
actuarial assumptions no less favorable to the Executive than those
in effect under the Company's Retirement Plan immediately prior to
the Effective Date), and any excess or supplemental retirement plan
in which the Executive participates (together, the "SERP") which
the Executive would receive if the Executive's employment continued
for 3 years after the Date of Termination assuming for this purpose
that all accrued benefits are fully vested, and, assuming that the
Executive's compensation in each of the three years is that
required by Section 4(b)(i) and Section 4(b)(ii), over (b) the
actuarial equivalent of the Executive's actual benefit (paid or
payable), if any, under the Retirement Plan and the SERP as of the
Date of Termination;
(ii) for three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate
plan, program, practice or policy, the Company shall continue benefits
to the Executive and/or the Executive's family at least equal to those
which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 4(b)(iv) of this
Agreement if the Executive's employment has not been terminated or, if
more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible
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to receive medical or other welfare benefits under another employer
provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination and to
have retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred, provide
the Executive with outplacement services the scope and provider of which
shall be selected by the Executive in his sole discretion; and
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies (such
other amounts and benefits shall be hereinafter referred to as the
"Other Benefits").
(b) DEATH. If the Executive's employment is terminated by reason
of the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive,
benefits as least equal to the most favorable benefits provided by the Company
and affiliated companies to the estates and beneficiaries of peer executives
of the Company and such affiliated companies under such plans, programs,
practices and policies relating to death benefits, if any, as in effect with
respect to other peer executives and their beneficiaries at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the Executive's beneficiaries, as
in effect on the date of the Executive's death with respect to other peer
executives of the Company and its affiliated companies and their
beneficiaries.
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(c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision
of Other Benefits. Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With respect to
the provision of Other Benefits, the term Other Benefits as utilized in this
Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at
least equal to the most favorable of those generally provided by the Company
and its affiliated companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating to
disability, if any, as in effect generally with respect to other peer
executives and their families at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive and/or the Executive's family, as in effect at any time thereafter
generally with respect to other peer executives of the Company and its
affiliated companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) is Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) Other Benefits, in each case to the extent
theretofore unpaid. If the Executive voluntarily terminates employment during
the Employment Period, excluding a termination for Good Reason, this
Agreement shall terminate without further obligations to the Executive, other
than for Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance
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with such plan, policy, practice or program or contract or agreement except
as explicitly modified by this Agreement.
8. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against
the Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest by the Company, provided that the
Executive prevails in at least one material issue, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of
any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 9) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Executive with respect to such excise tax
(such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in
an amount such that after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest or penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 9(a), if it shall be
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determined that the Executive is entitled to a Gross-Up Payment, but that the
Payments do not exceed 110% of the greatest amount (the "Reduced Amount")
that could be paid to the Executive such that the receipt of Payments would
not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the
Executive and the Payments, in the aggregate, shall be reduced to the Reduced
Amount.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made
by Deloitte & Touche LLP or such other certified public accounting firm as
may be designated by the Executive (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then
be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as determined pursuant to this Section 9, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of
any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service, that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive
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shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation
and payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 9(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on
an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment
of taxes for the
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taxable year of the Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall
be entitled to settle or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to Section 9(c),
a determination is made that the Executive shall not be entitled to any
refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required
to be paid.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law
or legal process, communicate or divulge any such information, knowledge or
data to anyone other than the Company and those designated by it. In no event
shall an asserted violation of the provisions of this Section 10 constitute a
basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This
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Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operations of
law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
IF TO THE EXECUTIVE:
John Skelton
1523 Sheridan Walk
Atlanta, Georgia 30324
IF TO THE COMPANY:
5775 Peachtree Dunwoody Road
Suite C-550
Atlanta, Georgia 30342
Attention: Company Secretary
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or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amount payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed
to be a waiver of such provision or right or any other provision or right of
this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1 hereof, prior to the Effective Date, the
Executive's employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date, in which
case the Executive shall have no further rights under this Agreement. From
and after the Effective Date this Agreement shall supersede any other
agreement between the parties with respect to the subject matter hereof.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
/s/ JOHN SKELTON
-----------------------------------
John Skelton
BEAZER HOMES USA, INC.
By /s/ BRIAN C. BEAZER
---------------------------------
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Exhibit 10.14
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Beazer Homes USA, Inc. a Delaware corporation
(the "Company") and Peter H. Simons (the "Executive"), dated as of the 17 day
of July, 1996.
The Board of Directors of the Company (the "Board"), has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or threatened Change of
Control and to encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that the compensation and
benefits expectations of the Executive will be satisfied and which are
competitive with those of other corporations. Therefore, in order to
accomplish these objectives, the Board has caused the Company to enter into
this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall mean the first
date during the Change of Control Period (as defined in Section 1(b)) on
which a Change of Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control occurs and
if the Executive's employment with the Company is terminated prior to the
date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (i) was at
the request of a third party who has taken steps reasonably calculated to
effect a Change of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control, then for all purposes of this Agreement
the "Effective Date" shall mean the date immediately prior to the date of
such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the second anniversary of the date hereof;
provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Change
<PAGE>
of Control Period shall be automatically extended so as to terminate two
years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Company shall give notice to the Executive that the Change of
Control Period shall not be so extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a),
the following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c) of this
Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company
(a "Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
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Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the
employ of the Company subject to the terms and conditions of this Agreement,
for the period commencing on the Effective Date and ending on the second
anniversary of such date (the "Employment Period").
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities
shall be at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time during the
120-day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the location where the Executive
was employed immediately preceding the Effective Date or any office or
location less than 35 miles from such location.
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(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and time during normal business hours
to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use
the Executive's reasonable best efforts to perform faithfully and efficiently
such responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on corporate,
civic or charitable boards or committees, (B) deliver lectures, fulfill
speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the continued conduct
of such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company.
(b) COMPENSATION. (i) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the Employment Period, the
Annual Base Salary shall be reviewed no more than 12 months after the last
salary increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such increase
and the term Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by, controlling
or under common control with the Company.
(ii) ANNUAL BONUS. In Addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
Executive's highest bonus under the Company's annual incentive plans, for the
last three full fiscal years prior to the Effective Date (annualized in the
event that the Executive was not employed
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by the Company for the whole of such fiscal year) (the "Recent Annual
Bonus"). Each such Annual Bonus shall be paid no later than the end of the
third month of the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices, policies
and programs provide the Executive with incentive opportunities (measured
with respect to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and its
affiliated companies for the Executive under such plans, practices, policies
and programs as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the Executive, those
provided generally at any time after the Effective Date to other peer
executives of the Company and its affiliated companies.
(iv) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and
its affiliated companies (including, without limitation, medical,
prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with benefits which are less favorable, in the
aggregate, than the most favorable of such plans, practices, policies and
programs in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
(v) EXPENSES. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated companies in
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effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
(vi) FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and, if applicable, use of
an automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
(vii) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, as least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
(viii) VACATION. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable
plans, policies, programs and practices of the Company and its affiliated
companies as in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's
death during the Employment Period. If the Company determines in good faith
that the Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth below), it may
give to the Executive written notice in accordance with Section 12(b) of this
Agreement of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall terminate effective
on the 30th day after receipt of such notice by the
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Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's
duties with the Company on a full-time basis for 180 consecutive business
days as a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.
(b) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement,
"Cause" shall mean:
(i) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or one of
its affiliates (other than any such failure resulting from incapacity
due to physical or mental illness), after a written demand for
substantial performance is delivered to the Executive by the Board or
the Chief Executive Officer of the Company which specifically identifies
the manner in which the Board or Chief Executive Officer believes that
the Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct
or gross misconduct which is materially and demonstrably injurious to
the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of
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the conduct described in subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by
the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 4(a) of this Agreement,
or any other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(B) hereof
or the Company's requiring the Executive to travel on Company business
to a substantially greater extent than required immediately prior to the
Effective date;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this Agreement
to the contrary notwithstanding, a termination by the Executive for any
reason during the 30-day period immediately following the first anniversary
of the Effective Date shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice
of Termination to the other party
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hereto given in accordance with Section 12(b) of this Agreement. For purposes
of this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than
thirty days after the giving of such notice). The failure by the Executive or
the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing the Executive's or the Company's rights
hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) of the Executive's
employment is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the
case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON;
OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period,
the Company shall terminate the Executive's employment other than for Cause
or Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the higher of (I) the Recent Annual Bonus and (II)
the Annual Bonus paid or payable, including any bonus or portion
thereof which has been earned but deferred (and annualized for any
fiscal year consisting of less than twelve full months or during
which the Executive was employed for less than twelve full
months), for the most recently completed fiscal year
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during the Employment Period, if any (such higher amount being
referred to as the "Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is
365 and (d) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (1), (2), and (3)
shall be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) 1.5, and (2) the sum
of (x) the Executive's Annual Base Salary and (y) the Highest
Annual Bonus; and
C. an amount equal to the excess of (a) the actuarial
equivalent of the benefit under the Company's qualified defined
benefit retirement plan (the "Retirement Plan") (utilizing
actuarial assumptions no less favorable to the Executive than those
in effect under the Company's Retirement Plan immediately prior to
the Effective Date), and any excess or supplemental retirement plan
in which the Executive participates (together, the "SERP") which
the Executive would receive if the Executive's employment continued
for 3 years after the Date of Termination assuming for this purpose
that all accrued benefits are fully vested, and, assuming that the
Executive's compensation in each of the three years is that
required by Section 4(b)(i) and Section 4(b)(ii), over (b) the
actuarial equivalent of the Executive's actual benefit (paid or
payable), if any, under the Retirement Plan and the SERP as of the
Date of Termination;
(ii) for three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate
plan, program, practice or policy, the Company shall continue benefits
to the Executive and/or the Executive's family at least equal to those
which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 4(b)(iv) of this
Agreement if the Executive's employment has not been terminated or, if
more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible
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to receive medical or other welfare benefits under another employer
provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination and to
have retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred, provide
the Executive with outplacement services the scope and provider of which
shall be selected by the Executive in his sole discretion; and
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies (such
other amounts and benefits shall be hereinafter referred to as the
"Other Benefits").
(b) DEATH. If the Executive's employment is terminated by reason
of the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive,
benefits as least equal to the most favorable benefits provided by the Company
and affiliated companies to the estates and beneficiaries of peer executives
of the Company and such affiliated companies under such plans, programs,
practices and policies relating to death benefits, if any, as in effect with
respect to other peer executives and their beneficiaries at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the Executive's beneficiaries, as
in effect on the date of the Executive's death with respect to other peer
executives of the Company and its affiliated companies and their
beneficiaries.
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(c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision
of Other Benefits. Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With respect to
the provision of Other Benefits, the term Other Benefits as utilized in this
Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at
least equal to the most favorable of those generally provided by the Company
and its affiliated companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating to
disability, if any, as in effect generally with respect to other peer
executives and their families at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive and/or the Executive's family, as in effect at any time thereafter
generally with respect to other peer executives of the Company and its
affiliated companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) is Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) Other Benefits, in each case to the extent
theretofore unpaid. If the Executive voluntarily terminates employment during
the Employment Period, excluding a termination for Good Reason, this
Agreement shall terminate without further obligations to the Executive, other
than for Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance
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with such plan, policy, practice or program or contract or agreement except
as explicitly modified by this Agreement.
8. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against
the Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest by the Company, provided that the
Executive prevails in at least one material issue, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of
any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 9) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Executive with respect to such excise tax
(such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in
an amount such that after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest or penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 9(a), if it shall be
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determined that the Executive is entitled to a Gross-Up Payment, but that the
Payments do not exceed 110% of the greatest amount (the "Reduced Amount")
that could be paid to the Executive such that the receipt of Payments would
not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the
Executive and the Payments, in the aggregate, shall be reduced to the Reduced
Amount.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made
by Deloitte & Touche LLP or such other certified public accounting firm as
may be designated by the Executive (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then
be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as determined pursuant to this Section 9, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of
any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service, that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive
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shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation
and payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 9(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on
an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment
of taxes for the
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taxable year of the Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall
be entitled to settle or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to Section 9(c),
a determination is made that the Executive shall not be entitled to any
refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required
to be paid.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law
or legal process, communicate or divulge any such information, knowledge or
data to anyone other than the Company and those designated by it. In no event
shall an asserted violation of the provisions of this Section 10 constitute a
basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This
16
<PAGE>
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operations of
law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
IF TO THE EXECUTIVE:
Peter H. Simons
2904 Mitchell Cove
Atlanta, Georgia 30319
IF TO THE COMPANY:
5775 Peachtree Dunwoody Road
Suite C-550
Atlanta, Georgia 30342
Attention: Company Secretary
17
<PAGE>
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amount payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed
to be a waiver of such provision or right or any other provision or right of
this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1 hereof, prior to the Effective Date, the
Executive's employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date, in which
case the Executive shall have no further rights under this Agreement. From
and after the Effective Date this Agreement shall supersede any other
agreement between the parties with respect to the subject matter hereof.
18
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
/s/ PETER H. SIMONS
-----------------------------------
Peter H. Simons
BEAZER HOMES USA, INC.
By /s/ BRIAN C. BEAZER
---------------------------------
19
<PAGE>
EXHIBIT 11
BEAZER HOMES USA, INC.
STATEMENT COMPUTATION OF PER SHARE EARNINGS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year ended
September 30,
----------------------
1996 1995
----------------------
<S> <C> <C>
Primary:
Earnings
Net income $18,266 $11,352
Less: Dividends on preferred shares (a) 4,000 611
--------- ---------
Net income applicable to common shares $14,266 $10,741
--------- ---------
--------- ---------
Shares
Weighted average number of unrestricted
common shares outstanding 6,374,961 8,557,669
Weighted average number of restricted
common shares outstanding, net 98,809 152,684
Dilutive effect of outstanding options as determined
by the application of the treasury stock method 1,397 --
--------- ---------
Weighted average number of shares outstanding,
as adjusted 6,475,167 8,710,353
--------- ---------
--------- ---------
Primary net income per share $2.20 $1.23
--------- ---------
--------- ---------
Fully-diluted:
Earnings
Net income (b) $18,266 $10,741
--------- ---------
Shares
Weighted average number of unrestricted
common shares outstanding 6,374,961 8,557,669
Weighted average number of restricted
common shares outstanding, net 98,807 152,684
Dilutive effect of outstanding options as determined
by the application of the treasury stock method 1,397 --
Assumed conversion of preferred stock (a) 2,624,672 --
--------- ---------
Weighted average number of shares outstanding,
as adjusted 9,099,839 8,710,353
--------- ---------
Net income per share assuming full dilution $2.01 $1.23
--------- ---------
--------- ---------
</TABLE>
(a) The Company's Series A Cumulative Convertible Exchangeable Preferred
Stock (2,000,000 shares of $50,000,000 aggregate liquidation preference,
convertible into 2,624,672 shares of common stock), issued in August 1995.
The assumed conversion is excluded from the September 30, 1995
calculation of fully-diluted earnings per share as the effect of such
conversion is antidilutive.
(b) For the year ended September 30,1995 represents net income applicable to
common shares.
<PAGE>
BEAZER HOMES USA
MOVING FORWARD
1996
ANNUAL REPORT
* HOMES *
---------
BEAZER
<PAGE>
TABLE OF CONTENTS
FINANCIAL HIGHLIGHTS
MARKET DATA
LETTER TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ADDING VALUE TO
OUR OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ADAPTING TO
A CHANGING ENVIRONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
TAKING ADVANTAGE
OF OPPORTUNITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
DIRECTORY OF HOMEBUILDERS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
INDEX TO FINANCIALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
NOTE REGARDING
FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 38
CORPORATE AND
OPERATING MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SHAREHOLDER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
BUSINESS DESCRIPTION
Beazer Homes USA, Inc., headquartered in Atlanta, Georgia, is one of the
nation's largest geographically diversified homebuilders. The Company currently
has operations in nine states: five in the Southeast, three in the Southwest,
and Texas. Beazer Homes focuses on building quality homes that provide value to
entry-level and first move-up home buyers. The Company has been doing business
in the United States since 1985 and has been listed on the New York Stock
Exchange since 1994. Its common stock is traded under the symbol "BZH."
[Bar Charts - Inside Cover]
[Bar Charts - 1]
93 $275.1
94 $536.5
95 $647.8
96 $866.6
[Bar Charts - 2]
93 $12.3
94 $16.5
95 $11.4
96 $18.3
[Bar Charts - 3]
93 $245.3
94 $314.9
95 $345.2
96 $356.6
[Bar Charts - 4]
93 16.6%
94 15.8%
95 11.8%
96 15.5%
Designed and produced by Collateral Communications, Inc. / Atlanta
<PAGE>
BEAZER HOMES USA
[Map of U.S.A]
Tennessee 20 active subdivisions
Nevada 12 active subdivisions
North Carolina 24 active subdivisions
California 24 active subdivisions
South Carolina 16 active subdivisions
Arizona 26 active subdivisions
Georgia 17 active subdivisions
Florida 22 active subdivisions
Texas 31 active subdivisions
MARKET DATA
SELECTED INFORMATION BY STATE
<TABLE>
<CAPTION>
ANNUAL
1996 INCREASE 9/30/96 AVERAGE PRICE MARKET POSITION
STATE CLOSINGS (DECREASE) BACKLOG OF HOMES CLOSED AS OF 9/30/96 (i)
<S> <C> <C> <C> <C>
ARIZONA 1,852 47.6% 414 $ 121,100 #3 in Phoenix
CALIFORNIA 1,018 21.5% 96 $ 179,300 #2 in Sacramento
#6 in Southern California
FLORIDA 405 32.4% 104 $ 160,900 #2 in Jacksonville
GEORGIA 308 21.3% 52 $ 141,700 #6 in Atlanta
NEVADA 473 34.8% 170 $ 145,400 #4 in Las Vegas
NEW JERSEY 1 (50.0%) -- $ 185,000 Single N.J. project
closed out in 1996
NORTH CAROLINA 697 16.8% 192 $ 144,600 #2 in Charlotte
#2 in Raleigh
SOUTH CAROLINA 276 22.7% 107 $ 117,700 #2 in Charleston
#6 in Columbia
TENNESSEE 526 11.7% 125 $ 171,200 #1 in Nashville
TEXAS 379 492.2% 166 $ 154,700 Entered Texas in 1995.
Acquired Trendmaker Homes --
Dallas in June 1996.
TOTAL 5,935 36.0% 1,426 $ 146,000
- -------------------------------------------------------------------------
</TABLE>
(i) COMPANY ESTIMATE BASED UPON THE MOST RECENT MARKET DATA
AVAILABLE. MARKET DATA CONSISTS OF HOMES CLOSED OR SOLD IN ALL
MARKETS EXCEPT ATLANTA, WHERE MARKET DATA CONSISTS OF PERMITS
ISSUED.
<PAGE>
The Beazer Homes story has been one of managing successful growth through both
upswings and downturns in the homebuilding industry. Since Beazer Homes began
operations in the United States in 1985, we have grown through a combination of
internal growth and expansion through acquisition.
The results have been impressive! Beazer Homes now builds in over twenty markets
in nine states and is ranked the seventh largest homebuilder in the United
States. We're pleased with our success -- but not satisfied.
In this Annual Report, we describe how Beazer Homes is moving forward on several
key initiatives to become better, stronger and more profitable -- creating value
for our home buyers, our employees and, ultimately, for the shareholders of
Beazer Homes.
<PAGE>
TOTAL REVENUE
IN
MILLIONS
INCOME
BEFORE
CHANGE IN
ACCOUNTING
PRINCIPLE
IN
MILLIONS
TOTAL ASSETS
IN
MILLIONS
RETURN
ON AVERAGE
CAPITAL
BEAZER HOMES USA FINANCIAL HIGHLIGHTS
YEAR ENDED SEPTEMBER 30,
(dollars in thousands,
except per share data) 1996 1995 1994 1993
OPERATING DATA:
Homes closed 5,935 4,363 3,926 2,093
STATEMENT OF OPERATIONS DATA:
Total revenue $866,627 $647,828 $536,526 $275,054
Earnings before interest and taxes $ 45,327 $ 32,188 $ 37,169 $ 22,713
Income before change in
accounting principle $ 18,266 $ 11,352 $ 16,468 $ 12,270
Net income (i) $ 18,266 $ 11,352 $ 16,468 $ 16,046
Net income per common share:
Primary $ 2.20 $ 1.23
Fully diluted $ 2.01 $ 1.23
Pro forma net income
per common share (ii) $ 1.76
BALANCE SHEET DATA:
Total assets $356,643 $345,240 $314,941 $245,349
Total debt $115,000 $115,000 $115,000 $119,925
Stockholders' equity $178,701 $164,544 $150,406 $ 95,595
RETURN DATA (iii):
Return on average assets 12.9% 9.8% 13.3% 14.6%
Return on average capital 15.8% 11.8% 15.5% 16.6%
- ------------------------------------------------------------------------------
(i) Net income for the year ended September 30, 1993 includes a
benefit of $3,776 to reflect the cumulative effect of a change in
accounting for income taxes for the adoption of SFAS No. 109.
(ii) The 1994 pro forma net income per share has been calculated as if
the Company's initial public offering had taken place on October
1, 1993. See Note 2 to the Company's consolidated financial
statements.
(iii) Return on average assets is defined as earnings before interest
and taxes ("EBIT") divided by average total assets for the year.
Return on average capital is defined as EBIT divided by average
total debt plus stockholders' equity for the year.
Note: Certain statements in this Annual Report are "forward-looking
statements" within the meaning of the Private Securities
Litigation Act of 1995. Please refer to page 38 of this report
for additional discussion.
<PAGE>
[Photograph - Page 2]
LEFT TO RIGHT
IAN J. MCCARTHY President and Chief Executive Officer
BRIAN C. BEAZER Non-Executive Chairman
DAVID S. WEISS Executive Vice President and Chief Financial Officer
LETTER TO SHAREHOLDERS
Fiscal 1996 caps a four-year period of phenomenal growth for Beazer Homes. Since
1992, home closings and revenues have both increased more than five times while
net income has nearly tripled. This most recent year ended with impressive
growth:
- - Revenues ($867 million) up 34%,
- - Net income ($18.3 million) up 61%,
- - Earnings per share ($2.01) up 63%.
FOCUS ON PROFITABILITY WHILE CONTINUING GROWTH
While we will continue to pursue growth, we are now moving forward to improve
productivity and increase profitability. As demonstrated by our 1996 results, we
have already begun to make progress -- net income increased 61% while revenues
increased only 34%. Our goal for the next five years is to become one of the
most profitable of the top ten homebuilders in the United States. We intend to
do this while sticking to our "Formula for Success" -- a formula that focuses on
decentralized operations combined with strong central financial controls.
During the coming year, we will begin to implement a number of plans to
improve profitability. Before describing these plans in depth, however, we would
like to review the past year's results.
A VOLATILE YEAR IN WHICH BEAZER GROWS
Much like the two years that preceded it, 1996 was a year of volatility in
interest rates and in the homebuilding industry. The average commitment rate on
a thirty-year mortgage, which was 7.6% as we entered fiscal 1996, declined to
below 7%, then rose to over 8% by September 30, 1996 and dropped soon
thereafter. These swings caused dramatic shifts in new home sales during the
year, shifts that were mirrored by the trend of new home orders at Beazer Homes.
New orders rose over 100% for the first quarter of the fiscal year, but declined
16% during the last quarter. For the full year, new orders showed significant
growth -- up 16%.
Throughout these swings, we stuck to our basic formula for success,
allowing our operating managers to aggressively drive their local markets, while
maintaining a conservative, centrally controlled financial policy. The results:
revenues increased 34% while our financial position improved, with debt to total
capitalization decreasing from 41% to 39%.
2 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
During the year our gross profit margin (including amortization of
interest) increased from 12.7% to 13.7%. Operating profit margins increased from
2.9% to 3.5%. Growth and improved profitability were particularly evident in
Arizona, Texas and Florida.
In Arizona, our decision to expand in the affordable housing segment gave
rise to a dramatic 48% increase in homes closed, to over 1,850. In Texas, the
expansion of our existing operations acquired in 1995, along with the
acquisition of Trendmaker Homes of Dallas in June 1996, created a spectacular
492% increase in homes closed. In addition, our expansion in Florida, both
through internal growth and through further acquisitions, generated a 32%
increase in the number of homes closed.
Moving forward, we expect to continue to grow in Texas and Florida, while
our Phoenix operation will implement a more cautious strategy. Phoenix is a
market that, while we expect it to remain healthy, we believe will decline
somewhat in 1997. We do not want to overextend ourselves by buying the land or
putting in place an overhead structure to maintain the current level of home
closings on a long-term basis in that market.
BEAZER ENDS YEAR IN STRONGEST FINANCIAL POSITION IN ITS HISTORY
While the changing interest rate environment caused fluctuations in homebuilding
markets, our conservative financial policy remained constant. Throughout the
year we maintained a debt to total capitalization ratio around 40% and ended the
year in our strongest financial position ever as a public company. We also
improved our interest coverage (EBITDA/interest incurred) to 3.3 times from 2.3
in 1995. The averages of these figures for the top fifteen public homebuilders
are debt to total capitalization of over 55% and under 2.5 times interest
coverage.
Finally, just after we ended our fiscal year, we increased our liquidity
and financial flexibility by raising our unsecured revolving credit facility
from $80 million to $150 million. We increased the number of banks involved,
improved the pricing and negotiated a less restrictive covenant package. Our new
facility includes seven banks, led by The First National Bank of Chicago.
In the current uncertain economic environment, we believe that it is
particularly important for us to maintain our financial flexibility to take
advantage of any opportunities that may arise; our strong capital position and
increased liquidity give us that flexibility.
[Photograph - Page 3]
LOS ANGELES CA
FOCUS ON RETURNS ON ASSETS AND CAPITAL
We manage our operations to maximize return on assets and return on capital,
which we believe are two of the most important gauges of profitability,
combining both profit margins and asset turnover. Historically at Beazer, we
have emphasized asset turnover to provide superior returns to our shareholders
with less risk than if we focused on profit margins alone. Emphasizing turnover
means controlling inventory, limiting the building of unsold houses and
maintaining a conservative balance sheet -- all of which contribute to lower
risk.
3 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
The following table shows Baezer's returns by component compared to our press:
1996 RETURN ON ASSETS (EBIT/AVERAGE TOTAL ASSETS)
AND RETURN ON CAPITAL (EBIT/AVERAGE TOTAL DEBT PLUS EQUITY)
AVERAGE FOR OTHER TOP
BEAZER HOMES FIFTEEN PUBLIC HOMEBUILDERS (i)
Asset Turnover 2.47 x 1.33 x
x EBIT Margin 5.2% 7.2%
- ------------------------------------------------------------------------------
= Return on Assets 12.9% 9.6%
----------- -----------
Return on Capital 15.8% 13.8%
(i) Derived from financial statements of CTX, CON, DHI, HOV, KBH, LEN, MHO,
MDC, NVR, PHM, RYL, TOL, UH, WBB
Our asset turnover already ranks among the top in the industry. We are now
focused on improving margins. By doing this, we believe we have an opportunity
to leverage off of our rapid turnover and increase the gap between us and the
rest of the homebuilding industry on return on assets and capital.
PLANS TO IMPROVE MARGINS
Our plans for improving margins include the following initiatives:
OPEN DESIGN CENTERS One thing we have learned from our successful expansion in
Phoenix, is that you get more sales and achieve better profitability (even in
lower price points) by letting buyers choose more options. This lesson prompted
our initiative to open design centers, where buyers can choose from a wide
variety of decorator options and upgrades. To date, we have opened such centers
in Arizona, California, Florida, Georgia, Nevada and Tennessee. These design
centers contributed to our improved profitability in 1996 and we expect to open
more in 1997.
ESTABLISH MORTGAGE ORIGINATION OPERATIONS By controlling the mortgage
origination process, we assist our buyers and gain a portion of the profit from
the mortgage business. At the same time, we minimize our financial risk and the
capital involved by originating, but not holding or servicing the mortgages.
During 1996, we established Beazer Mortgage Company. Beazer Mortgage now has
operations in Georgia, North Carolina and Texas and we intend to expand to all
Beazer locations in calendar 1997.
STRENGTHEN PREFERRED VENDOR RELATIONSHIPS One of the advantages of Beazer's
current size and national scope of operations is the ability to negotiate
favorable purchasing contracts with major suppliers. Over the past few years, we
have strengthened our relationship with a number of vendors using such
contracts. During 1996, for example, we established an exclusive, three-year
relationship with General Electric as our national supplier of appliances,
achieving strong benefits for both companies along with significant savings for
Beazer. In the coming year, we intend to expand these contracts and limit the
number of suppliers and vendors with whom Beazer conducts business.
ENHANCE OUR COMPANY-WIDE INFORMATION SYSTEM During 1996, we embarked on an
extensive review of our company-wide information system and are now in the
process of implementing a new, more efficient system -- taking advantage of the
latest technology available. One of the benefits of this effort is an executive
information system that will give our operating managers immediate access to
current information about both their own and other Beazer operations. We believe
that access to information about
[Photograph - Page 4]
ATLANTA GA
DESIGN CENTER
other builders within the Beazer group is one of the key benefits that a company
like Beazer provides to our decentralized network of local managers.
4 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
Later in this Annual Report, under "Adding Value to Our Operations," we
describe some more of these benefits in detail.
These are just a few of the action plans that we have already begun to
implement to help us achieve improved profitability. Perhaps the most important,
however, are a focus on profitability throughout the organization and incentives
established to encourage all of our local managers to develop additional plans
to improve return on capital.
[Photograph - Page 5]
JACKSONVILLE FL
Our near-term objective is to significantly improve our operating profit
margin by the fourth quarter of fiscal 1997. To achieve this objective, we need
to increase the profit per home through a combination of reducing costs and
increasing prices, while still enhancing value to the home buyer. We expect to
make progress toward this goal over the coming year.
MOVING FORWARD
Beazer Homes is "Moving Forward" to meet the challenges of the future and
improve profitability. On the following pages we will provide an overview of how
we intend to:
- - Add value to our operations through sharing ideas and spreading best
practices;
- - Adapt to a changing environment by encouraging our local operating managers
to track local changes and react to them quickly; and
- - Take advantage of future opportunities by maintaining a strong financial
position and the flexibility to act quickly and prudently on opportunities
that arise.
CHALLENGES AHEAD IN 1997
While we are extremely excited about our action plans to improve profitability,
we are also realistic about the challenges ahead. Increases in interest rates
during 1996 have created a very competitive environment as we enter fiscal 1997.
Consequently, we have focused this past year on maintaining our strong financial
position, to allow us to take advantage of future opportunities, rather than on
aggressively expanding our current operations. As we ended fiscal 1996, we had
over 20 active subdivisions with only a few homes left. Most of these
subdivisions are not expected to be immediately replaced and, as a result, we
expect our active subdivision count to decline in the first quarter of fiscal
1997. This has contributed to lower levels of new orders in the fourth quarter
of 1996 and a slightly lower level of backlog at September 30, 1996 than at
September 30, 1995, creating a challenging environment in the first half of
1997.
Despite the challenges of this competitive environment we are optimistic
about the future. We believe that our focus on improving profitability will
provide us with measurable gains in the coming years. In addition, we believe
that our strong financial position will allow us to react quickly to the current
volatile environment and take advantage of any opportunities that may arise.
For our strong results in fiscal 1996, we wish to thank our dedicated
employees, suppliers and subcontractors. They are the backbone of this
organization and provide us the ability to react quickly and make sound
decisions. We look forward to working with them in the coming years to create
one of the most profitable of all U.S. homebuilders.
Sincerely,
/s/ BRIAN C. BEAZER
NON-EXECUTIVE CHAIRMAN
/s/ IAN J. MCCARTHY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
5 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
Beazer Homes has a proven track record for growing both existing and acquired
operations. Our Georgia, North Carolina, South Carolina and Tennessee operations
have all been part of Beazer Homes since 1987. Our Arizona, California and
Nevada operations were acquired in 1993.
[Bar Charts - Page 6]
92 1,182 92 0
93 1,312 93 1,327
94 1,517 94 2,073
95 1,547 95 2,444
96 1,807 96 3,343
INTERNAL GROWTH GROWTH SINCE ACQUISITION
HOMES CLOSED HOMES CLOSED
(1993 PRO FORMA FOR FULL YEAR)
GEORGIA ARIZONA
NORTH CAROLINA CALIFORNIA
SOUTH CAROLINA NEVADA
TENNESSEE
[Photograph - Page 6]
LEFT TO RIGHT:
PATTY ARTIST LAS VEGAS
LAURIE MADDEN HOUSTON
EDDIE PATE CHARLESTON
RICHARD JACKSON RALEIGH
MARILYN GARDNER HOUSTON
[Photograph - Page 6]
NASHVILLE TN
JACKIE ALEXANDER SENIOR VICE PRESIDENT MARKETING AND SALES, PHILLIPS BUILDERS
After being named "National Marketing Director of the Year" for 1996 by the
National Association of Homebuilders, Jackie Alexander has shared her expertise
with other Beazer Homes sales and marketing managers (seen above at one of our
Nashville models). This type of knowledge sharing is just one way Beazer adds
value to its people and operations.
6 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
ADDING VALUE
ADDING VALUE TO OUR OPERATIONS. Sharing ideas across markets. This is one of
the most critical ways we add value to our operations. By giving local managers
access to ideas, they become stronger and have opportunities that others in
their market do not.
- - REGIONAL AND NATIONAL KNOWLEDGE SHARING. Moving forward, the sharing of
ideas will be accelerated through increased national and regional meetings of
functional areas and by implementing a state-of-the-art executive information
system that can be accessed by managers throughout our organization. This
information system will be in place fiscal 1997.
- - ADVERTISING SYNERGY. Shared ideas come in many forms. Some are relatively
small, like the sharing of printed advertisements. Advertising from one market
is available to any other market if they choose to use it. In the future, this
information will be available through our information network.
- - DESIGN CENTERS MEET CUSTOMER NEEDS. Some shared ideas are very broad and
can revolutionize the way we do business. One such idea is the use of design
centers. Beazer's first design center was opened in Phoenix as part of a
strategy that allows home buyers to choose from a wide variety of options and
upgrades -- to get exactly what they want and can afford. The idea of using a
central design center met with such success that it was quickly adopted in
Atlanta, Jacksonville, Las Vegas, Nashville and Southern California. By the end
of 1997, design centers will be open in nearly all of our markets.
- - STRONG GROWTH THROUGH SHARED IDEAS. The ultimate benefits of sharing ideas
can be seen in the growth of our Southeast region, a region made up mostly of
operations that have been with Beazer since 1987. The three operations that made
up Beazer Homes in 1987 (Atlanta, Nashville and the Carolinas) have experienced
significant growth as part of the Beazer group. Without any acquisitions, these
operations have grown 94.9% over the past five years and 16.8% in fiscal 1996.
These operations have been sharing ideas for nearly a decade, giving them the
ability to become better homebuilders and to achieve this growth.
7 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
[Photograph - Page 8]
COLUMBIA SC
The architectural plans for a number of our homes in South Carolina, including
the home shown above, were adapted from efficient, affordable plans developed in
Phoenix (below).
By responding to the changing needs of customers, Beazer Homes has experienced a
steady increase in home closings over the past five years.
[Bar Chart - Page 8]
92 1,182
93 2,093
94 3,926
95 4,363
96 5,935
HOMES CLOSED
[Photograph - Page 8]
PHOENIX AZ
LEFT TO RIGHT:
GONZALO ROMERO Vice President Planning and Design (Southeast Region)
JOSEPH THOMPSON President, Hancock Homes (Arizona)
Joseph Thompson and local managers at Hancock Homes identified a need for
high-quality, affordable housing in Phoenix. By focusing on affordability, they
came up with a series of efficient plans, allowing Hancock Homes to offer 1,000
square-foot, three- bedroom houses for under $60,000. The result -- a 50%
increase in homes closed in Phoenix. Beazer managers in the Southeast region,
like Gonzalo Romero, saw the success of the Phoenix plans and adapted the
designs to fit the needs of their own markets. Today, we build variations on the
affordable Phoenix house plans in California, Nevada, North Carolina and South
Carolina.
8 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
ADAPTING TO CHANGE
ADAPTING TO A CHANGING ENVIRONMENT. The ability to identify changes in a
market as they occur and to react quickly and effectively are the advantages
that only a depth of local market knowledge can bring.
- - IDENTIFYING NICHE OPPORTUNITIES. In Jacksonville, adapting to a changing
environment meant identifying a growing market niche that was not being
adequately served. Lee Panitz, President of Panitz Homes, saw builders competing
head to head in the first-time buyer segment, traditionally the market's largest
segment. As Jacksonville expanded, however, the move-up segment of the market
was growing. He and his team of top managers, with an average of over 18 years
experience of building in Jacksonville, worked to expand their presence in that
segment. Today, Panitz Homes is the second-largest builder in the tri-county
Jacksonville area, measured by units, and the largest in the over $110,000
segment.
- - EXPANSION INTO NEW MARKETS. At Phillips Builders, Nashville's number one
builder, President Eddie Phillips saw the Nashville market becoming increasingly
competitive in 1996 as new builders entered that strong and growing market.
Rather than fight to maintain or increase market share, Eddie expanded to
Knoxville, a growing city 180 miles away. Today, through our satellite expansion
out of Nashville, we are the first major national builder in Knoxville and
expect to build over 100 homes there in the coming year.
- - CONSISTENT GROWTH. The ability to adapt to a changing environment has
given Beazer the ability to grow consistently, despite dramatic economic shifts,
including changes in interest rates. Since 1992, mortgage rates have fluctuated
by over 200 basis points, both up and down. Nevertheless, Beazer has grown every
year since then and, overall, the number of units closed has increased more than
five times.
9 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
Beazer is strategically positioned in key markets to seize growth opportunities.
We are currently in eight of the eleven states with the largest projected
increases in population for the period 1995 through 2000, according to the U.S.
Census Bureau.
1 TEXAS 1,400,000 7.5%
2 FLORIDA 1,060,000 7.5%
3 CALIFORNIA 930,000 2.9%
4 GEORGIA 680,000 9.4%
5 NORTH CAROLINA 580,000 8.1%
6 ARIZONA 580,000 13.7%
7 WASHINGTON 430,000 7.9%
8 COLORADO 420,000 11.2%
9 TENNESSEE 400,000 7.6%
10 VIRGINIA 380,000 5.7%
11 NEVADA 340,000 22.2%
- ---------------------------------------------
TOTAL U.S. 11,932,000 4.3%
POPULATION GROWTH
1995 -- 2000
[Photograph - Page 10]
DALLAS TX
LEFT TO RIGHT:
DANIEL MENENDEZ Warranty Representative, Beazer Homes Texas -- Dallas Division
SUSAN LEONARD Marketing Director, Beazer Homes Texas -- Dallas Division
KURT WATZEK President, Beazer Homes Texas
In 1995, Beazer identified an opportunity to expand to a strong and growing
market through the acquisition of Bramalea Homes Texas. In 1996, we increased
our presence in Texas through the acquisition of Trendmaker Homes -- Dallas.
Leveraging off of the experienced management, like Kurt Watzek with over 20
years of homebuilding experience in Texas, we see significant future growth
opportunities in the Lone Star State.
While revenues have grown by more than 60% since our IPO in 1994, our financial
position has strengthened. Debt to total capitalization is now 39% and we have
just increased our liquidity by expanding our unsecured revolving credit
facility from $80 million to $150 million.
[Bar Chart - Page 10]
DEBT TO TOTAL CAPITALIZATION
94 43%
95 41%
96 39%
10 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
OPPORTUNITIES
TAKING ADVANTAGE OF OPPORTUNITIES.
An opportunity arises. You see it before others and have the proven ability and
resources to act on it. At Beazer Homes, this has been our tradition.
- - GROWTH THROUGH ACQUISITION. In 1995, we seized such an opportunity when we
expanded to Texas through the acquisition, at a substantial discount to book
value, of Bramalea Homes Texas. Our Texas operations grew nearly 500% in 1996,
contributing 379 home closings. With this growth, we found that we were rapidly
running out of land in Dallas. At the same time, we saw an opportunity to
purchase Trendmaker Homes -- Dallas. Again we acted quickly and seized the
opportunity. In June 1996, we purchased Trendmaker Homes for $22 million, again
at a discount to book value, and gained control of over 900 lots. With the
internal growth of our Texas operations and the addition of Trendmaker Homes --
Dallas, we see excellent opportunities for further expansion in Texas in 1997.
- - FOCUS ON GROWING MARKETS. Our Texas acquisitions in 1995 and 1996 have
given us a strong presence in one of the fastest-growing states in the United
States. These acquisitions demonstrate how we target growth markets -- markets
with strong long-term population and employment growth expectations. Currently
we are in eight of the eleven markets with the largest projected population
increases from 1995 to 2000 (according to the U.S. Census Bureau). We intend to
maintain the flexibility to both expand in these current markets and enter other
strong growth markets where we do not currently operate.
- - FINANCIALLY PREPARED FOR FUTURE OPPORTUNITIES. Two critical elements that
give us this flexibility are our conservative financial policies and our
liquidity. As we end fiscal 1996, our financial position is at its strongest
ever -- debt to total capitalization is at an all time low and we have just
increased our liquidity with a new, expanded credit facility. In the current
volatile economic environment, we believe we are well prepared for whatever lies
ahead and intend to take advantage of significant opportunities that are likely
to arise.
<PAGE>
DIRECTORY OF HOMEBUILDERS
BEAZER HOMES ARIZONA
Hancock Homes (Phoenix)
2005 West 14th Street, Suite 110
Tempe, AZ 85281
BEAZER HOMES CALIFORNIA
Southern California Division
Executive Tower
1100 Town and Country, Suite 100
Orange, CA 92868
Northern California Division
2260 Douglas Boulevard
Suite 110
Roseville, CA 95661
BEAZER HOMES FLORIDA
Panitz Homes (Jacksonville)
3020 Hartley Avenue
Suite 200
Jacksonville, FL 32257
Gulfcoast Homes (Ft. Myers/Naples)
11934 Fairway Lakes Drive #1
Ft. Myers, FL 33913
[Photograph]
LAS VEGAS, NV
Tampa Division
City Center Avenue
100 Second Avenue South, Suite 200
St. Petersburg, FL 33701
BEAZER HOMES GEORGIA
3790 Data Drive
Suite 2
Norcross, GA 30092
BEAZER HOMES NEVADA
Las Vegas Division
2700 Chandler
Suite 2A
Las Vegas, NV 89120
Reno/Sparks Division
4480 Scott Peak Circle
Sparks, NV 89434
BEAZER HOMES TEXAS
Houston Division
10235 West Little York
Suite 167
Houston, TX 77040
Dallas Division
1231 Greenway Drive
Suite 400
Irving, TX 75038
PHILLIPS BUILDERS
Nashville Division
2910 Kraft Drive
Nashville, TN 37204
Knoxville Division
1645 Downtown West Blvd.
Suite 45
Knoxville, TN 37922
SQUIRES HOMES
Charlotte Division
5501 Executive Center Drive
Suite 120
Charlotte, NC 28212
Raleigh Division
3701 National Drive
Suite 101
Raleigh, NC 27612
Charleston Division
7410 Northside Drive
Suite 107
North Charleston, SC 29220
Columbia Division
2001 Assembly Street
Suite 202
Columbia, SC 29201
Myrtle Beach Division
1494 Medinah Lane
Murrells Inlet, SC 29576
12 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
INDEX TO FINANCIALS
MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL REPORTING AND
SYSTEM OF INTERNAL CONTROLS. . . . . . . . . . . . . . . . . . . . . . . . . 14
SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 16
REPORT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . 24
CONSOLIDATED STATEMENTS
OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
CONSOLIDATED BALANCE SHEETS. . . . . . . . . . . . . . . . . . . . . . . . . 26
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
CONSOLIDATED STATEMENTS
OF CASH FLOWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
QUARTERLY FINANCIAL DATA
AND STOCK PRICE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 37
1996
FINANCIAL REVIEW
13 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING AND SYSTEM OF INTERNAL
CONTROLS
FINANCIAL STATEMENTS
The accompanying consolidated financial statements are the responsibility of the
Company's management. The consolidated financial statements have been prepared
in accordance with generally accepted accounting principles and, as such,
include amounts based on management's best estimates and judgments.
The Company's 1996 consolidated financial statements have been audited by
Deloitte & Touche LLP, independent auditors, who were given unrestricted access
to all financial records and related data. The Company believes that all
representations made to the independent auditors during their audit were valid
and appropriate. Deloitte & Touche LLP's audit report included on page 24
provides an independent opinion as to the fairness of presentation of the
consolidated financial statements.
SYSTEM OF INTERNAL CONTROLS
The Company maintains a system of internal controls over financial recording and
reporting which is designed to provide reasonable assurance that assets are
safeguarded and transactions are recorded in accordance with the Company's
policies and procedures and which ultimately will result in the preparation of
reliable financial statements. The system contains self-monitoring mechanisms,
and actions are taken to correct deficiencies as they are identified. Even an
effective internal control system has inherent limitations -- including the
possibility of the overriding of controls -- and therefore can provide only
reasonable, not absolute, assurance with respect to financial statement
preparation.
The Company assessed its internal controls system as of September 30, 1996 in
relation to criteria for effective internal control over preparation of
published annual (and interim) financial statements described in "Internal
Control -- Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, the Company
believes that, as of September 30, 1996, its system of internal controls over
the preparation of its published annual (and interim) financial statements met
these criteria. Deloitte & Touche LLP also reviews and tests the effectiveness
of these systems to the extent they deem necessary to determine the extent of
audit procedures needed in connection with their annual audit of the
consolidated financial statements.
The Audit Committee of the Board of Directors, which is composed of Directors
who are not officers or employees of the Company, provides oversight to the
financial reporting process. The independent auditors have unrestricted access
to the Audit Committee.
/s/ IAN J. MCCARTHY
President and Chief Executive Officer
/s/ DAVID S. WEISS
Executive Vice President and Chief Financial Officer
/s/ JOHN SKELTON
Senior Vice President and Controller
14 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(dollars in thousands, except per share amounts) TEN MONTHS
YEAR ENDED SEPTEMBER 30, ENDED
SEPTEMBER 30,
1996 1995 1994 1993 1992(i)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue $ 866,627 $ 647,828 $ 536,526 $ 275,054 $ 111,429
Operating income $ 30,122 $ 18,629 $ 27,377 $ 19,959 $ 8,081
Income before cumulative
effect of change in
accounting principle $ 18,266 $ 11,352 $ 16,468 $ 12,270 $ 6,415
Net income (ii) $ 18,266 $ 11,352 $ 16,468 $ 16,046 $ 6,415
Net income per common share:
Primary $ 2.20 $ 1.23
Fully diluted $ 2.01 $ 1.23
Pro forma net income (iii) $ 16,226
Pro forma net income
per common share (iii) $ 1.76
BALANCE SHEET DATA:
Cash $ 12,942 $ 40,407 $ 35,980 $ 819 $ 469
Inventory $ 320,969 $ 285,268 $ 253,356 $ 225,863 $ 58,948
Total assets $ 356,643 $ 345,240 $ 314,941 $ 245,349 $ 65,694
Total debt $ 115,000 $ 115,000 $ 115,000 $ 119,925 $ 11
Stockholders' equity $ 178,701 $ 164,544 $ 150,406 $ 95,595 $ 58,816
SUPPLEMENTAL FINANCIAL DATA:
EBIT (iv) $ 45,327 $ 32,188 $ 37,169 $ 22,713 $ 8,595
EBITDA (iv) $ 46,855 $ 33,542 $ 38,384 $ 23,609 $ 9,496
Interest incurred $ 14,176 $ 14,737 $ 11,306 $ 6,553 $ 505
EBIT/interest incurred 3.20x 2.18x 3.29x 3.47x 17.02x
EBITDA/interest incurred 3.31x 2.28x 3.40x 3.60x 18.80x
FINANCIAL STATISTICS (v):
Total debt as a percentage
of total debt and
stockholders' equity 39.2% 41.1% 43.3% 55.6% n/m
Asset turnover 2.47x 1.96x 1.92x 1.77x n/m
EBIT margin 5.2% 5.0% 6.9% 8.3% n/m
Return on average assets 12.9% 9.8% 13.3% 14.6% n/m
Return on average capital 15.8% 11.8% 15.5% 16.6% n/m
Return on average equity 10.6% 7.2% 13.4% 20.8% n/m
</TABLE>
(i) Represents the period from the acquisition of Beazer PLC by Hanson PLC on
December 1, 1991 through September 30, 1992.
(ii) Net income for the year ended September 30, 1993 includes a benefit of
$3,776 to reflect the cumulative effect of a change in accounting for
income taxes for the adoption of SFAS No. 109.
(iii) The 1994 pro forma net income per share has been calculated as if the
Company's initial public offering had taken place on October 1, 1993.
See Note 2 to the consolidated financial statements.
(iv) EBIT and EBITDA: EBIT (earnings before interest and taxes) equals net
income before (a) previously capitalized interest amortized to costs and
expenses; (b) income taxes; and (c) cumulative effect of change in
accounting principle. EBITDA (earnings before interest, taxes,
depreciation and amortization) is calculated by adding depreciation and
amortization for the period to EBIT. EBITDA is commonly used to analyze
companies on the basis of operating performance, leverage and liquidity.
EBITDA is not intended to represent cash flows for the period nor has it
been presented as an alternative to net income as an indicator of
operating performance.
(v) Asset turnover = (total revenue divided by average total assets); EBIT
margin = (EBIT divided by total revenues); Return on average assets =
(EBIT divided by average total assets); Return on average capital = (EBIT
divided by average total debt plus stockholders equity); Return on
average equity = (Net income divided by average stockholder's equity).
n/m Not meaningful.
15 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
See "Notes to Consolidated Financial Statements" for definitions of certain
items included in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
OPERATING AND FINANCIAL DATA
The following tables present certain operating and financial data for the
periods discussed:
(DOLLARS IN THOUSANDS) YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993
AMOUNT % CHANGE AMOUNT % CHANGE AMOUNT AMOUNT
NUMBER OF NEW ORDERS,
NET OF CANCELLATIONS(i):
SOUTHEAST REGION:
Georgia 253 (18.4)% 310 13.1% 274 301
North Carolina 671 1.5 661 21.3 545 502
South Carolina 303 30.0 233 (6.0) 248 169
Tennessee 457 (14.9) 537 28.5 418 420
Florida 364 6.4 342 41.9 241
---------------- ----------------- ------- -------
Total Southeast 2,048 (1.7) 2,083 20.7 1,726 1,392
---------------- ----------------- ------- -------
SOUTHWEST REGION:
Arizona 1,681 23.3 1,363 18.9 1,146 660
California 1,008 17.8 856 81.4 472 176
Nevada 483 9.5 441 55.3 284 235
---------------- ----------------- ------- -------
Total Southwest 3,172 19.2 2,660 39.9 1,902 1,071
---------------- ----------------- ------- -------
CENTRAL REGION:
Texas 401 309.2 98 n/a
---------------- ----------------- ------- -------
OTHER MARKETS 48 80
---------------- ----------------- ------- -------
Total 5,621 16.1% 4,841 31.7% 3,676 2,543
---------------- ----------------- ------- -------
BACKLOG AT END OF PERIOD:
SOUTHEAST REGION:
Georgia 52 (51.4)% 107 109.8% 51 68
North Carolina 192 (11.9) 218 41.6 154 161
South Carolina 107 33.8 80 11.1 72 45
Tennessee 125 (35.6) 194 51.6 128 163
Florida 104 (4.6) 109 49.3 73
---------------- ----------------- ------- -------
Total Southeast 580 (18.1) 708 48.1 478 437
---------------- ----------------- ------- -------
SOUTHWEST REGION:
Arizona 414 (9.2) 456 31.0 348 454
California 96 (9.4) 106 20.5 88 72
Nevada 170 6.3 160 128.6 70 151
---------------- ----------------- ------- -------
Total Southwest 680 (5.8) 722 42.7 506 677
---------------- ----------------- ------- -------
CENTRAL REGION:
Texas 166 213.2 53 n/a
---------------- ----------------- ------- -------
OTHER MARKETS 1 (66.7) 3 74
---------------- ----------------- ------- -------
Total 1,426 (3.9)% 1,484 50.4% 987 1,188
---------------- ----------------- ------- -------
(i) NEW ORDERS FOR 1996, 1995, 1994 AND 1993 DO NOT INCLUDE 256, 19, 49 AND
376 HOMES IN BACKLOG FROM ACQUIRED OPERATIONS AT THE DATE OF THEIR
ACQUISITION.
16 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993
AMOUNT % CHANGE AMOUNT % CHANGE AMOUNT AMOUNT
<S> <C> <C> <C> <C> <C> <C>
SALES VALUE OF HOMES IN
BACKLOG AT END OF PERIOD:
Southeast region $ 98,092 (4.3)% $102,511 46.2% $ 70,129 $ 55,765
Southwest region 86,539 (14.6) 101,346 39.3 72,754 88,290
Central region 26,006 219.8 8,133 n/m
Other markets 0 (100.0) 173 (66.4) 515 10,577
-------------------- ------------------- ---------------------
Total $210,637 (0.7)% $212,163 48.0% $143,398 $154,632
-------------------- ------------------- ---------------------
NUMBER OF CLOSINGS:
SOUTHEAST REGION:
Georgia 308 21.3% 254 (12.7)% 291 297
North Carolina 697 16.8 597 8.2 552 460
South Carolina 276 22.7 225 1.8 221 167
Tennessee 526 11.7 471 4.0 453 388
Florida 405 32.4 306 41.0 217
-------------------- ------------------- ---------------------
Total Southeast 2,212 19.4 1,853 6.9 1,734 1,312
-------------------- ------------------- ---------------------
SOUTHWEST REGION:
Arizona 1,852 47.6 1,255 0.2 1,252 441
California 1,018 21.5 838 83.8 456 195
Nevada 473 34.8 351 (3.8) 365 139
-------------------- ------------------- ---------------------
Total Southwest 3,343 36.8 2,444 17.9 2,073 775
-------------------- ------------------- ---------------------
CENTRAL REGION:
Texas 379 492.2 64 n/a
-------------------- ------------------- ---------------------
OTHER MARKETS 1 (50.0) 2 (98.3) 119 6
-------------------- ------------------- ---------------------
Total 5,935 36.0% 4,363 11.1% 3,926 2,093
-------------------- ------------------- ---------------------
REVENUES:
Southeast region $332,159 24.8% $266,228 18.9% $223,967 $153,600
Southwest region 475,662 28.4 370,369 25.8 294,467 120,601
Central region 58,621 438.5 10,886 n/a
Other markets 185 (46.4) 345 (98.1) 18,092 853
-------------------- ------------------- ---------------------
Total $866,627 33.8% $647,828 20.7% $536,526 $275,054
-------------------- ------------------- ---------------------
AVERAGE SALES PRICE
PER HOME CLOSED:
Southeast region $ 150.2 4.5% $ 143.7 11.2% $ 129.2 $ 117.1
Southwest region 142.3 (6.1) 151.5 6.7 142.0 155.6
Central region 154.7 (9.1) 170.1 n/a
Other markets 185.0 7.2 172.5 13.5 152.0 142.2
-------------------- ------------------- ---------------------
Total $ 146.0 (1.7)% $ 148.5 8.6% $ 136.7 $ 131.4
-------------------- ------------------- ---------------------
NUMBER OF ACTIVE
SUBDIVISIONS AT YEAR END:
Southeast region 99 12.5% 88 7.3% 82 94
Southwest region 62 21.6 51 30.8 39 50
Central region 31 210.0 10 n/m
Other markets 1 1
-------------------- ------------------- ---------------------
Total 192 8.9% 149 22.1% 122 145
-------------------- ------------------- ---------------------
</TABLE>
N/A NOT APPLICABLE.
N/M NOT MEANINGFUL.
SEE "RESULTS OF OPERATIONS" FOR A DISCUSSION OF CERTAIN FLUCTUATIONS
CONSIDERED TO BE SIGNIFICANT IN BOTH ABSOLUTE VALUE AND PERCENTAGE
AMOUNT.
17 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
OVERVIEW
Beazer Homes designs, builds and sells single family homes in the Southeast,
Southwest and Central regions of the United States. The Company's Southeast
region includes Georgia, North Carolina, South Carolina, Tennessee and Florida,
its Southwest region includes Arizona, California and Nevada, and its Central
region includes Texas. The Company's other markets include a single project in
New Jersey which was closed out during fiscal 1996. The Company intends,
subject to market conditions, to expand in its current markets and to consider
entering new markets through expansion from existing markets ("satellite
expansion") or through acquisitions of established regional homebuilders.
The Company's homes are designed to appeal primarily to entry-level and
first move-up home buyers, and are generally offered for sale in advance of
their construction. The majority of homes are sold pursuant to standard sales
contracts entered into prior to commencement of construction. Once a contract
has been signed, the Company classifies the transaction as a "new order." Such
sales contracts are usually subject to certain contingencies, such as the
buyer's ability to qualify for financing. Homes covered by such sales contracts
are considered by the Company as its "backlog." The Company does not recognize
revenue on homes in backlog until the sales are closed and the risk of ownership
has been transferred to the buyer.
During fiscal 1996 the Company began providing mortgage origination
services for its local operations through Beazer Mortgage Company ("Beazer
Mortgage"). Beazer Mortgage originates and processes mortgages on behalf of
third-party investors. Beazer Mortgage does not retain or service the mortgages
that it originates. The results of operations for Beazer Mortgage were not
significant for the year ended September 30, 1996.
NEW ORDERS AND BACKLOG -- The Company believes the positive new order
comparisons for the year ended September 30, 1996 compared to the year ended
September 30, 1995 are the result of generally favorable economic conditions for
much of the year (primarily declining mortgage interest rates during the first
four months of the fiscal year), continued order growth in our Southwest region,
and the expanded operations in Texas.
The Company has historically experienced fluctuations in new order activity
in periods of significant mortgage rate changes. The Company's Arizona and
California markets continued to experience strong order growth despite the
increase in rates that began in January 1996 and continued for the remainder of
the Company's fiscal year. The Company believes the timely acquisition of land
from Del Mar Development in Phoenix (December 1995) and successful product mix
in both markets contributed to the sustained growth. New order activity in the
Company's Southeast region for the full year is about flat with that experienced
in fiscal 1995, although new orders were up in the first and second quarters and
down in the third and fourth quarters of fiscal 1996 compared to the same
periods in fiscal 1995. The Company believes that these changes in new orders
are principally the result of interest rate fluctuations.
The strong growth in new orders in 1995 compared to 1994 is the result of
favorable economic conditions during the second half of the year, primarily
reduced mortgage interest rates, and the Company's timing of opening new
subdivisions. The strong backlog comparisons indicate the strength of new orders
at the end of the fiscal year.
With the exception of the Reno/Sparks market, which contributed 59 new
orders during fiscal 1996, recent satellite expansions did not contribute
significantly to new order activity in 1996 or 1995.
18 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
Backlog levels correspond directly with the new order trends experienced by
the Company. As new order levels slowed late in fiscal 1996, unit backlog levels
at September 30, 1996 were slightly less than the comparable prior year date.
The new order acceleration late in fiscal 1995 resulted in strong unit backlog
figures at September 30, 1995 compared to the same date in 1994.
Active subdivision levels for the Company have increased in each of the
last two years. As interest rates decreased and general economic conditions
improved late in fiscal 1995, the Company expanded its number of active
subdivisions. This internal expansion continued through the middle of fiscal
1996 and slowed as conditions warranted. While the number of active subdivisions
at September 30, 1996 is above that at September 30, 1995, many of the
subdivisions are nearing close-out status and the Company anticipates reporting
a decrease in the number of active subdivisions early in fiscal 1997.
SEASONALITY AND QUARTERLY VARIABILITY -- The Company has historically
experienced significant seasonality and quarter-to-quarter variability in
homebuilding activity levels. The annual operating cycle generally reflects
escalating home sales (new orders) in the Company's second and third fiscal
quarters and slower sales in the Company's first and fourth fiscal quarters.
Since closings usually trail home sales by four to six months, closings
typically are lowest in the first quarter of the fiscal year, and revenue from
home closings usually peaks in the third and fourth quarters of the fiscal year.
The Company believes that this seasonality reflects the preference of homebuyers
to shop for a new home in the spring, as well as the scheduling of construction
to accommodate seasonal weather conditions. This trend, however, may be altered
in periods of extreme fluctuations in economic conditions, such as interest
rates and general consumer confidence. For example, decreases in interest rates
contributed to the increased level of new orders during the Company's third and
fourth quarters of fiscal 1995 and first and second quarters of fiscal 1996.
The following table presents certain unaudited financial and operating data
for the Company's last eight fiscal quarters. These historical results are not
necessarily indicative of results to be expected for any future period.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) QUARTER ENDED
September 30, June 30, March 31, December 31, September 30, June 30, March 31, December 31,
1996 1996 1996 1995 1995 1995 1995 1994
------------- -------- --------- ------------ ------------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenue $294,828 $217,065 $196,505 $158,230 $270,604 $151,377 $123,544 $102,303
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NUMBER OF NEW ORDERS, NET:
Southeast 445 550 617 436 618 687 526 252
Southwest 646 837 995 694 776 935 625 324
Central 134 119 94 54 64 34
Other markets 1 (1)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 1,225 1,506 1,706 1,184 1,459 1,656 1,150 576
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NUMBER OF CLOSINGS:
Southeast 709 554 483 466 716 405 384 348
Southwest 1,044 868 836 595 1,055 570 447 372
Central 202 74 46 57 49 15
Other markets 1 2
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 1,955 1,496 1,365 1,119 1,820 990 831 722
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
19 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
The Company's operations can be affected by inflation. All costs and
expenses including land, raw materials, subcontracted labor and interest would
increase in an inflationary period. The Company's margins would decrease unless
the increased costs are recovered through higher sales prices.
RESULTS OF OPERATIONS
The following table shows certain items in the Company's statements of income
expressed as a percentage of total revenue.
YEAR ENDED SEPTEMBER 30,
1996 1995 1994
Total revenue 100.0% 100.0% 100.0%
Costs of home
construction and
land sales (84.5) (85.2) (84.0)
Amortization of
previously capitalized
interest (1.7) (2.0) (1.8)
Selling, general
and administrative
expenses (10.3) (9.8) (9.1)
-------- ------- -------
Operating income 3.5% 3.0% 5.1%
-------- ------- -------
REVENUES -- The increase in revenues for the year ended September 30, 1996
compared to the same period in 1995 is the result of a 36% increase in the
number of homes closed and a 1.7% decrease in average sales price. The increase
in home closings was experienced in all markets and is a result of the strong
order growth early in fiscal 1996, and the expansion of the Texas operations
entered initially via the acquisition of Bramalea Homes Texas ("Bramalea") in
April 1995 and supplemented through the acquisition of Trendmaker Homes --
Dallas in June 1996. Gulfcoast Homes, acquired in May 1996 contributed 16
closings and $4.6 million in revenues. The small decrease in average sales price
is the result of shifting product mix in the Southeast region, an emphasis on
the affordable product in the Southwest (especially in Arizona), and decreases
in Texas as a result of the Company opening new, lower-priced subdivisions in
Dallas.
The revenue growth in fiscal 1995 compared to 1994 is the result of an
11.1% increase in closings and an 8.6% increase in average sales price. This
growth in closings is largely attributable to expansion in existing markets, the
Bramalea acquisition ($10.8 million in revenues and 64 closings) and strong
order growth during the second half of fiscal 1995. Increases in average sales
price are principally the result of expansion in the higher-priced home market
in Tennessee and new higher-priced subdivisions in Raleigh. Offsetting the noted
growth factors is the decrease in revenues because of the close-out of the
Company's single New Jersey project, which contributed $18.1 million in revenues
in 1994 and $0.3 million in 1995.
COST OF HOME CONSTRUCTION AND LAND SALES -- Cost of home construction and land
sales, as a percentage of revenues, decreased for the year ended September 30,
1996 compared to 1995, but increased in 1995 compared to 1994. The decrease in
1996 is largely attributable to decreases in hard construction costs (material
and labor) and an increase in deliveries from homes started subsequent to sale.
Additionally, the Company's Arizona and Texas markets, which typically
experience higher gross margins than the Company average, represent a greater
percentage of total closings for the year. The increase in cost of home
construction and land sales, as a percentage of revenues, in 1995 compared to
1994 is the result of reduced margins in Georgia and South Carolina, where
20 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
measures were taken to reduce inventory levels built up early in the year, and
an increased proportion of sales from the Company's California market, which has
experienced lower gross margins than the Company average.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE -- Selling, general and
administrative expense increased, as a percentage of revenues, in 1996 to 10.3%
from 9.8%. This increase can be attributed primarily to certain consulting and
start-up costs relating to various long-term initiatives the Company began late
in fiscal 1996 and one-time costs relating to employee severance arrangements
for certain employees. General and administrative expenses, as a percentage of
total revenues, increased to 4.2% from 3.7% during 1996, while sales and
marketing expenses were unchanged at 6.1%.
Selling, general and administrative expenses increased, as a percentage of
revenues, to 9.8% in 1995 from 9.1% in 1994. During the year ended September 30,
1995, as market conditions warranted, the Company expanded its number of active
subdivisions and, in doing so, incurred additional marketing expense. This
contrasts with 1994 when, as market conditions worsened, the Company slowed
expansion into additional subdivisions. Additionally, the Company experienced
some increase during 1995 over 1994, as this year represented the first full
year as a public company.
AMORTIZATION OF PREVIOUSLY
CAPITALIZED INTEREST -- The decrease in interest amortized to costs and expenses
as a percentage of revenues for the year ended September 30, 1996 compared to
the same period in 1995 is the result of a favorable interest rate environment
and accelerated inventory turnover. The increase in interest amortized to costs
and expenses during 1995 as compared to 1994 is due to a combination of the
higher interest incurred resulting from a full year's impact of the Senior Notes
(issued in conjunction with the Initial Public Offering in March 1994) and
expanded borrowings under the credit facility during the year to assist internal
expansion.
INCOME TAXES -- The Company's effective income tax rate was 39.5%, 40.0 % and
39.9% for 1996, 1995 and 1994, respectively. The decrease in 1996 compared to
1995 is principally the result of various tax savings strategies implemented
during 1996.
FINANCIAL CONDITION AND LIQUIDITY
In March 1994, the Company completed its initial public offering and sold six
million shares of common stock followed by the issuance of 125,367 additional
(overallotment) shares, providing net cash proceeds of approximately $99
million. In addition, in March 1994, the Company also issued $115 million of 9%
Senior Notes, providing net cash proceeds of approximately $112 million. The net
proceeds were used principally to repay amounts due an Affiliate of the
Company's Former Parent.
During fiscal 1995, the company repurchased the remaining shares held by an
affiliate of the Former Parent and financed the repurchase with the proceeds
from the issuance of the Company's Series A Convertible, Exchangeable Preferred
Stock.
21 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Prior to these offerings, the Company financed its operations from a
combination of cash generated from operations and funds from the Former Parent
and Affiliates.
Effective January 1995, the Company entered into the Credit Agreement with
a group of banks which provides for an $80 million unsecured, revolving line of
credit. Borrowings under the Credit Agreement generally bear interest at a
fluctuating rate equal to (i) the sum of a specified margin plus the higher of
(x) the corporate base rate of interest announced by the Agent from time to time
or (y) a specified spread above the Federal Funds Rate or (ii) the sum of a
specified margin plus a rate of interest based on LIBOR.
Available borrowings under the Credit Agreement are limited to certain
percentages of homes under contract, unsold homes, substantially improved lots
and accounts receivable as defined in the Credit Agreement. At September 30,
1996, the Company had no borrowings outstanding, and had available additional
borrowings of $74.1 million under the Credit Agreement. The Company's debt to
total capitalization ratio at September 30, 1996 was 39.2%.
In October 1996, the Company entered into a $150 million unsecured,
revolving credit agreement (the "New Credit Agreement") with a group of banks to
replace the above $80 million Credit Agreement. Borrowings under the New Credit
Agreement bear interest at a fluctuating rate calculated in a manner consistent
with the previous facility but with lower specified margins. Interest on
outstanding loans is due and payable monthly. All outstanding indebtedness under
the New Credit Agreement will be due in October 1999. The New Credit Agreement
contains various operating and financial covenants.
All subsidiaries of Beazer Homes USA, Inc. are guarantors of the Senior
Notes and the credit agreements and are jointly and severally liable for the
Company's obligations thereunder. Separate financial statements and other
disclosures concerning each of the subsidiaries are not included, as the
aggregate assets, liabilities, earnings and equity of the subsidiaries
substantially equal such amounts for the Company on a consolidated basis and
separate subsidiary financial statements are not considered material to
investors. Neither the Credit Agreement nor the Senior Notes restrict
distributions to Beazer Homes USA, Inc. by its subsidiaries.
In June 1996, the Company's Board of Directors approved a stock repurchase
plan authorizing the repurchase of up to 10% of the Company's currently
outstanding common stock. Such repurchases, if completed, would be effected at
various prices from time to time in the open market. The timing of the purchases
and the exact number of shares to be purchased will depend on market conditions.
As of September 30, 1996, the Company had purchased 25,000 shares for an
aggregate purchase price of approximately $349,000.
The Company has utilized, and will continue to utilize, land options as a
method of controlling and subsequently acquiring land. At September 30, 1996,
the Company had 8,085 lots under option. At September 30, 1996, the Company had
commitments with respect to option contracts with specific performance
obligations of approximately $60.9 million. The Company expects to exercise all
of its option contracts with specific performance obligations and, subject to
market conditions, substantially all of its options contracts without specific
performance obligations.
22 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
Management believes that the Company's current borrowing capacity, cash on
hand at September 30, 1996, and anticipated cash flows from operations are
sufficient to meet liquidity needs for the foreseeable future. There can be no
assurance, however, that amounts available in the future from the Company's
sources of liquidity will be sufficient to meet the Company's future capital
needs and the amount and types of indebtedness that the Company may incur may be
limited by the terms of the Indenture governing the Senior Notes and the credit
agreements.
During fiscal 1996 the Company utilized borrowings under the Credit
Agreement of $21.4 million for acquisitions. All such borrowings were repaid as
of September 30, 1996. The Company continually evaluates expansion opportunities
through acquisition of established regional homebuilders and, such opportunities
may require the Company to seek additional capital in the form of equity or debt
financing from a variety of potential sources, including additional bank
financing and securities offerings.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement No.
123, "Accounting for Stock-Based Compensation"("SFAS 123"). SFAS 123 establishes
financial accounting and reporting standards for stock-based employee
compensation plans, such as stock option plans. SFAS 123 was effective for
certain transactions entered into after December 15, 1995. The Company intends
to adopt the expanded disclosures provisions of SFAS 123 in fiscal 1997.
23 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Beazer Homes USA, Inc.
We have audited the accompanying consolidated balance sheet of Beazer Homes USA,
Inc. as of September 30, 1996 and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the management of
Beazer Homes USA, Inc. Our responsibility is to express an opinion on these
financial statements based on our audit. The consolidated financial statements
of the Company as of September 30, 1995 and for each of the two years in the
period then ended were audited by other auditors whose report, dated October 27,
1995, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Beazer Homes USA, Inc. at September 30, 1996 and the consolidated results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
Atlanta, Georgia
October 30, 1996
24 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts) YEAR ENDED SEPTEMBER 30,
1996 1995 1994
Total revenue $ 866,627 $ 647,828 $ 536,526
Costs and expenses:
Home construction and land sales 732,395 552,204 450,570
Amortization of previously
capitalized interest 15,134 13,268 9,768
Selling, general and administrative 88,976 63,727 48,811
----------- ---------- ----------
Operating income 30,122 18,629 27,377
Other income 71 291 24
----------- ---------- ----------
Income before income taxes 30,193 18,920 27,401
Provision for income taxes 11,927 7,568 10,933
----------- ---------- ----------
Net income $ 18,266 $ 11,352 $ 16,468
----------- ---------- ----------
Preferred dividends $ 4,000 $ 611
Net income applicable to
common shareholders $ 14,266 $ 10,741
NET INCOME PER COMMON SHARE:
Primary $ 2.20 $ 1.23
Fully diluted $ 2.01 $ 1.23
Pro forma net income $ 16,226
Pro forma net income
per common share $ 1.76
WEIGHTED AVERAGE NUMBER OF SHARES:
Primary 6,475,167 8,716,965 9,220,367
Fully diluted 9,099,839 8,716,965
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
25 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) SEPTEMBER 30,
1996 1995
ASSETS:
Cash and cash equivalents $ 12,942 $ 40,407
Accounts receivable 6,473 2,842
Inventory 320,969 285,268
Deferred tax asset 1,645 2,086
Property, plant and equipment, net 2,823 1,323
Goodwill, net 6,204 6,745
Other assets 5,587 6,569
----------- -----------
Total assets $ 356,643 $ 345,240
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Trade accounts payable $ 31,431 $ 40,111
Other liabilities 31,511 25,585
Senior Notes 115,000 115,000
----------- -----------
Total liabilities 177,942 180,696
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock (par value $.01 per share,
5,000,000 shares authorized, 2,000,000
issued and outstanding, $50,000 aggregate
liquidation preference) 20 20
Common stock (par value $.01 per share,
30,000,000 shares authorized, 9,305,200
and 9,297,117 issued, 6,530,933 and
6,547,850 outstanding) 93 93
Paid-in-capital 187,477 187,698
Retained earnings 37,613 23,347
Unearned restricted stock (1,446) (1,907)
Treasury stock, at cost
(2,774,267 and 2,749,267 shares) (45,056) (44,707)
----------- -----------
Total stockholders' equity 178,701 164,544
----------- -----------
Total liabilities and stockholders' equity $ 356,643 $ 345,240
----------- -----------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
26 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) UNEARNED
INVESTED PREFERRED COMMON PAID-IN- RETAINED RESTRICTED TREASURY
CAPITAL STOCK STOCK CAPITAL EARNINGS STOCK STOCK TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1993 $ 95,595 $ 95,595
Dividend to Former Parent (7,400) (7,400)
Net cash transfers from
Former Parent 269 269
Net income prior
to Initial Public Offering 4,195 4,195
Formation of Beazer
Homes USA, Inc. (1 share)
Return of invested capital
to Former Parent (53,238) (53,238)
Exchange of common stock
of BHI and BHH for
common stock of the
Company (2,999,999 shares) (39,421) $ 30 $ 39,391
Public offering of Common
Stock (6,125,367 shares) 61 98,501 98,562
Issuance of restricted stock
(95,000 shares) 1 1,662 $ (1,663)
Remeasurement of unearned
restricted stock (273) 273
Amortization of unearned
restricted stock 150 150
Net income since
Initial Public Offering $ 12,273 12,273
---------- ----------- --------- --------- ----------- ----------- ----------- ----------
BALANCE, SEPTEMBER 30, 1994 $ -- 92 139,281 12,273 (1,240) 150,406
Purchase of treasury stock
(2,749,267 shares) $(44,707) (44,707)
Issuance of preferred stock
(2,000,000 shares) $ 20 47,386 47,406
Issuance of restricted stock
(103,000 shares) 1 1,184 (1,185)
Cancellation of restricted
stock (26,250 shares) (340) 340
Remeasurement of
unearned restricted stock 187 (187)
Amortization of
unearned restricted stock 365 365
Preferred stock dividends paid (278) (278)
Net income 11,352 11,352
---------- ----------- --------- --------- ----------- ----------- ----------- ----------
BALANCE, SEPTEMBER 30, 1995 20 93 187,698 23,347 (1,907) (44,707) 164,544
Purchase of treasury stock
(25,000 shares) (349) (349)
Issuance of restricted stock
(46,500 shares) 482 (482)
Cancellation of restricted
stock (38,417 shares) (458) 458
Remeasurement of
unearned restricted stock (228) 228
Amortization of
unearned restricted stock 257 257
Preferred stock dividends paid (4,000) (4,000)
Other (17) (17)
Net income 18,266 18,266
BALANCE, SEPTEMBER 30, 1996 $ 20 $ 93 $187,477 $ 37,613 $ (1,446) $(45,056) $178,701
---------- ----------- --------- --------- ----------- ----------- ----------- ----------
---------- ----------- --------- --------- ----------- ----------- ----------- ----------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
27 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS) YEAR ENDED SEPTEMBER 30,
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 18,266 $ 11,352 $ 16,468
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 1,528 1,354 1,215
Provision for deferred income taxes 588 1,111 1,709
CHANGES IN OPERATING ASSETS AND LIABILITIES,
NET OF EFFECTS FROM ACQUISITIONS:
Increase in inventory (11,603) (28,674) (25,677)
(Decrease) increase in trade
accounts payable (9,024) 9,409 14,143
Other changes 352 11,650 (2,772)
---------- ---------- ----------
Net cash provided by operating activities 107 6,202 5,086
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,866) (540) (473)
Acquisitions, net of cash acquired (21,357) (3,656) (3,168)
---------- ---------- ----------
Net cash used by investing activities (23,223) (4,196) (3,641)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash transfers from Affiliate 270
Proceeds from common stock issuance 98,562
Proceeds from Senior Notes issuance 111,500
Proceeds from preferred stock issuance 47,406
Repayment of invested capital (53,238)
Repayment of notes payable to Affiliate (115,978)
Payment of dividend to Affiliate (7,400)
Proceeds from short-term debt 169,500 99,500 59,900
Repayments of short-term debt (169,500) (99,500) (59,900)
Preferred stock dividends (4,000) (278)
Treasury stock purchased (349) (44,707)
---------- ---------- ----------
Net cash (used) provided by
financing activities (4,349) 2,421 33,716
---------- ---------- ----------
(Decrease) increase in cash
and cash equivalents (27,465) 4,427 35,161
Cash and cash equivalents at
beginning of year 40,407 35,980 819
---------- ---------- ----------
Cash and cash equivalents at end of year $ 12,942 $ 40,407 $ 35,980
---------- ---------- ----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 13,885 $ 14,023 $ 14,193
Income taxes paid $ 11,581 $ 2,857 $ 6,515
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
28 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 | FORMATION AND ORGANIZATION OF BEAZER HOMES USA, INC.
Beazer Homes USA, Inc. ("Beazer" or the "Company") designs, constructs, markets
and sells single family homes in Arizona, California, Florida, Georgia, Nevada,
North Carolina, South Carolina, Tennessee and Texas.
Beazer was formed in November 1993 by Hanson Properties North America, Inc.
(the "Former Parent") in contemplation of the planned initial public offering of
common stock and issuance of Senior Notes (together, the "Initial Public
Offering") of the homebuilding operations of Beazer Homes, Inc. ("BHI") and
Beazer Homes Holdings, Inc. ("BHH"). The Former Parent was an indirect wholly
owned subsidiary of Hanson PLC ("Hanson"), a company registered in the United
Kingdom. Effective February 24, 1994, the Former Parent contributed all of the
issued and outstanding shares of BHI and BHH to the Company in exchange for
2,999,999 shares of the Company's common stock. In March 1994, the Company
completed the Initial Public Offering. As a result of the Initial Public
Offering, the Former Parent's ownership interest in the Company was reduced to
approximately 30% and the Company was no longer a subsidiary of the Former
Parent.
In accordance with the requirements of Accounting Principles Board Opinion
No. 16, "Business Combinations" ("APB 16"), the exchange of the common stock of
the Company for the common stock of BHI and BHH was accounted for in a manner
similar to a pooling of interests, and the assets and liabilities of the
entities in the combination were carried forward at their historical values.
Financial statements for periods prior to the combination have been combined on
this basis.
In June 1995, the Former Parent transferred its investment (2,749,267
shares) in the Company's common stock to USI Properties, Inc. ("USI"), a
subsidiary of US Industries, Inc. Also in June 1995, the Company and USI entered
into a stock purchase agreement pursuant to which the Company purchased from USI
1,000,000 shares of the Company's common stock for $16.0 million and the Company
entered into an option agreement with USI (the "Option") to acquire the
remaining 1,749,267 shares of the Company's common stock held by USI. Cash
consideration of $500,000 was paid for the Option. In August 1995, pursuant to
its exercise of the Option, the Company repurchased the remaining 1,749,267
shares held by USI for $28.2 million. The repurchased shares are reflected in
the accompanying consolidated financial statements as treasury stock.
Wholly owned subsidiaries of Hanson (other than the Former Parent) are
hereinafter referred to as "Affiliates" for the periods prior to the Initial
Public Offering.
2 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- The accompanying consolidated financial statements
include the accounts of Beazer Homes USA, Inc., and its wholly owned
subsidiaries. Intercompany balances have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS -- The Company considers cash investments with
maturities of three months or less when purchased to be cash equivalents. Cash
and cash equivalents as of September 30, 1996 and 1995 includes $1.4 million and
$6.0 million, respectively, of cash held in escrow for periods of up to three
days.
INVENTORY -- Inventory consists of residential real estate developments,
including interest, real estate taxes and development costs capitalized to land
and construction costs during the development and construction period.
29 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
NOTES OF CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During fiscal 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" ("SFAS No. 121"). SFAS No. 121 requires
that long-lived assets, such as real estate inventories, goodwill, and property,
plant and equipment be reviewed for impairment. The adoption of SFAS 121 had no
impact on the Company's fiscal 1996 financial statements.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are recorded at
cost. Depreciation is computed on a straight-line basis based on estimated
useful lives as follows:
Buildings 15 years
Machinery and equipment 3 - 12 years
Furniture and fixtures 3 - 5 years
INCOME TAXES -- Deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
Prior to the Initial Public Offering, the Company's results were included
in the consolidated federal income tax return filed by its ultimate U.S. parent
company, HM Anglo-American, Ltd. Pursuant to informal tax allocation agreements,
the Company provided for federal income taxes on a stand-alone separate company
basis.
INCOME RECOGNITION AND CLASSIFICATION OF COSTS -- Income from the sale of land
and residential units is recognized when closings have occurred and the risk of
ownership is transferred to the buyer. Sales commissions are included in
selling, general and administrative expense.
GOODWILL -- Goodwill represents the excess of the purchase price over the fair
value of assets acquired and is being amortized over a 15-year period.
Amortization expense was $541,000, $538,000 and $528,000 for the years ended
September 30, 1996, 1995 and 1994, respectively. Accumulated amortization was
$1,908,000 and $1,367,000 at September 30, 1996 and 1995, respectively. In the
event that facts and circumstances indicate that the carrying value of goodwill
may be impaired, an evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted cash flows associated
with the asset would be compared to the asset's carrying amount to determine if
a write-down to fair value is required.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- For short-term financial instruments, the
historical carrying amount is a reasonable estimate of fair value. The fair
value of the Company's Senior Notes at September 30, 1996 and 1995 is
approximately $104 million and $105 million, respectively, based upon quoted
market prices.
EARNINGS PER SHARE -- The computation of primary earnings per Common Share and
common equivalent share for periods subsequent to the Company's Initial Public
Offering is based upon the weighted average number of Common Shares outstanding
during the period plus (in periods in which they have a dilutive effect) the
effect of Common Shares contingently issuable, primarily from stock options.
Common share equivalents are computed using the treasury stock method.
Fully diluted earnings per share further assumes the conversion of
2,000,000 shares of Series A Cumulative Convertible Exchangeable Preferred Stock
issued in August 1995 (see Note 12) into 2,624,672 shares of common stock.
30 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
Pro forma net income per share for the year ended September 30, 1994 is
comprised of pro forma net income per share for the period October 1, 1993
through March 2, 1994 ($.43 per share) and historical net income per share for
the remainder of the year ($1.33 per share). Pro Forma net income per share from
October 1, 1993 through March 2, 1994 was calculated as if the Initial Public
Offering was consummated on October 1, 1993, the other changes in the capital
structure discussed in the second paragraph of Note 1 occurred on such date, and
the Company incurred certain additional general and administrative costs as a
result of being a publicly owned company.
WARRANTY COSTS -- Estimated future warranty costs are charged to cost of sales
in the period when the revenues from home closings are recognized. Such
estimated warranty costs range from 0.5% to 1.0% of total revenue and, based
upon experience, have been sufficient to cover costs incurred.
OTHER LIABILITIES -- Other liabilities include home buyer deposits, land
purchase obligations, accrued compensation and various other accrued expenses.
USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS -- Certain items in prior period financial statements have
been reclassified to conform to the current presentation.
RECENT ACCOUNTING PRONOUNCEMENTS -- In October 1995, the Financial Accounting
Standards Board issued Statement No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 establishes financial accounting and
reporting standards for stock-based employee compensation plans, such as stock
option plans. SFAS 123 was effective for certain transactions entered into after
December 15, 1995. The Company intends to adopt the expanded disclosures
provisions of SFAS 123 in fiscal 1997.
3 | ACQUISITIONS
Since October 1, 1993, the Company has acquired substantially all of the assets
or all of the outstanding capital stock of each of the following businesses:
COMPANY CONSIDERATION ACQUISITION
ACQUIRED (IN THOUSANDS) DATE
Trendmaker
Homes -- Dallas $ 22,000 June 1996
Gulfcoast Homes 3,200 May 1996
Bramalea Homes
Texas, Inc. 3,100 April 1995
Bauer and Barone, Inc. 200 October 1994
Panitz & Company,
Chartered 3,200 October 1993
Consideration includes cash paid plus certain borrowings assumed and repaid
immediately subsequent to the acquisitions. Other liabilities assumed were not
significant. These acquisitions have been recorded using the purchase method of
accounting and, accordingly, the purchase price has been allocated to the assets
acquired and the liabilities assumed, based on their estimated fair values as of
the respective date of acquisition. The operating results of the acquired
businesses are included in the Company's consolidated statements of income from
their respective dates of acquisition. The pro forma effect on the Company's
operating results of acquired businesses prior to their acquisition date would
not be significant.
4 | RELATED PARTY TRANSACTIONS
Prior to the Initial Public Offering, cash accounts for the Company were
controlled on a centralized basis by the Former Parent and Affiliates and,
accordingly, cash receipts and disbursements were received or made through the
Former Parent and Affiliates.
31 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Prior to August 1, 1994, the Former Parent administered two 401(k)
Retirement Plans (the "Plans") for the employees of the Company (see Note 13).
The Company made discretionary contributions under the Plans of $392,000 for the
ten months ended July 31, 1994.
Prior to the Initial Public Offering, operations and acquisitions were
funded by the Former Parent. Interest incurred related to promissory notes to
the Former Parent totaled $3.9 million for the year ended September 30, 1994. As
of the date of the Initial Public Offering, these notes and all accrued interest
thereon were repaid in full.
5 | INVENTORY
Inventory at September 30 includes:
(in thousands) 1996 1995
Finished homes $ 64,709 $ 52,464
Development projects
in progress 197,984 196,500
Unimproved land held
for future development 34,040 21,315
Model homes 24,236 14,989
---------- ----------
$320,969 $285,268
---------- ----------
Development projects in progress consist principally of land, land improvement
costs and, if applicable, construction costs for houses which are in various
stages of development but not ready for sale. Certain of the finished homes in
inventory are reserved by a deposit or sales contract.
Inventory located in California, the state with the Company's largest
concentration of inventory, was $72.5 million and $110.2 million at September
30, 1996 and 1995, respectively. Such inventory at September 30, 1996 includes
three projects with approximately $22 million of unimproved land held for future
development. Given their longer term nature, the Company intends to continually
monitor changes in circumstances related to these projects. If, based upon
future economic circumstances and the costs of developing these properties
(including any future capitalized interest), the book value of the properties
exceeds their undiscounted cash flows (excluding interest), a write-down to fair
value would be required.
The Company acquires certain lots by means of option contracts. Option
contracts generally require the payment of cash for the right to acquire lots
during a specified period of time at a certain price. Under option contracts
without specific performance obligations, the Company's liability is generally
limited to forfeiture of the nonrefundable deposits, which aggregated
approximately $10.3 million and $9.2 million at September 30, 1996 and 1995,
respectively, and is included in development projects in process. Under option
contracts, both with and without specific performance, purchase of the
properties is contingent upon satisfaction of certain requirements by the
Company and the sellers. Below is a summary of amounts committed under all
options:
AGGREGATE PURCHASE
(in thousands) PRICE AS OF
SEPTEMBER 30, 1996
Options with
specific performance $ 60,853
Options without
specific performance 131,123
----------
Total options $191,976
----------
6 | INTEREST
Information regarding interest is as follows:
(in thousands) YEAR ENDED SEPTEMBER 30,
1996 1995 1994
DURING THE PERIOD:
Interest incurred $14,176 $14,737 $11,306
Interest capitalized (14,176) (14,737) (11,306)
Previously capitalized interest
amortized to cost of sales 15,134 13,268 9,768
--------- --------- ---------
Total interest expensed in
statement of operations $15,134 $13,268 $ 9,768
--------- --------- ---------
AT THE END OF THE PERIOD:
Capitalized interest in ending inventory $ 5,553 $ 6,511 $ 5,042
32 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
7 | PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of:
(in thousands) Year Ended September 30,
1996 1995
Land and buildings $ 998 $ 633
Leasehold improvements 378 272
Machinery and equipment 2,547 2,223
Furniture and fixtures 3,074 3,244
--------- ---------
6,997 6,372
Less accumulated
depreciation 4,174 5,049
--------- ---------
Total $ 2,823 $ 1,323
--------- ---------
8 | CREDIT AGREEMENT
In January 1995, the Company entered into a credit agreement (the "Credit
Agreement") for an $80 million unsecured revolving line of credit with a group
of banks. The Credit Agreement replaced a previous $40 million facility.
Borrowings under the Credit Agreement generally bear interest at a fluctuating
rate equal to (i) the sum of a specified margin plus the higher of (x) the
corporate base rate of interest announced by the lead bank (the "Agent") from
time to time or (y) a specified spread above the Federal Funds Rate or (ii) the
sum of a specified margin plus a rate of interest based on LIBOR. All
outstanding indebtedness under the Credit Agreement would be due in full in
January 1998. The Credit Agreement contains various operating and financial
covenants. Each of the Company's subsidiaries is a guarantor under the Credit
Agreement.
Available borrowings under the Credit Agreement are limited to certain
percentages of homes under contract, unsold homes, substantially improved lots
and accounts receivable as defined in the Credit Agreement. At September 30,
1996, the Company had no borrowings outstanding, and had available additional
borrowings of $74.1 million under the Credit Agreement.
On October 22, 1996, the Company entered into a $150 million unsecured,
revolving credit agreement (the "New Credit Agreement") with a group of banks to
replace the previous $80 million credit agreement. Borrowings under the New
Credit Agreement will bear interest at a fluctuating rate calculated in a manner
consistent with the previous facility but with lower specified margins and
spreads. Interest on outstanding loans is payable monthly. All outstanding
indebtedness under the New Credit Agreement will be due in October 1999. The New
Credit Agreement contains various operating and financial covenants. Each of the
Company's subsidiaries is a guarantor under the New Credit Agreement.
9 | SENIOR NOTES
In March 1994, the Company issued the Senior Notes under an Indenture (the
"Senior Note Indenture") among the Company, each of the Company's subsidiaries,
as guarantors, and Continental Bank, National Association, as trustee.
The Senior Notes mature ten years from the date of issuance. Interest on
the Senior Notes is payable semiannually, at the rate of 9% per annum. The
Company may, at its option, redeem the Senior Notes in whole or in part at any
time on or after March 1, 1999, initially at 102.571% of the principal amount
thereof, declining to 100% of the principal amount thereof on or after March 1,
2001, in each case together with accrued interest. The Senior Notes are
unsecured and rank pari passu (except as to collateral) with, or senior in right
of payment to, all other existing and future senior indebtedness of the Company.
The Senior Notes are guaranteed, jointly and severally, on a senior unsecured
basis by all of the subsidiaries of the Company.
The Senior Note Indenture contains certain restrictive covenants, including
limitations on payment of dividends. At September 30, 1996, under the most
restrictive covenants, approximately $34 million of the Company's retained
earnings was available for payment of cash dividends and for the acquisition by
the Company of its common stock. In addition, the Senior Note Indenture provides
that, in the event of defined
33 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
changes in control, or if the consolidated tangible net worth of the Company and
its subsidiaries falls below a specified level, or, in certain circumstances,
upon sales of assets, the Company is required to make an offer to repurchase
certain specified amounts of outstanding Senior Notes.
10 | INCOME TAXES
The provision for income taxes consists of:
(in thousands) YEAR ENDED SEPTEMBER 30,
1996 1995 1994
------ ------ ------
CURRENT:
Federal $ 9,579 $ 5,231 $ 7,443
State 1,760 1,226 1,781
DEFERRED: 588 1,111 1,709
--------- --------- ---------
Total $11,927 $ 7,568 $10,933
--------- --------- ---------
The provision for income taxes differs from the amount computed by applying the
federal income tax statutory rate as follows:
(in thousands) YEAR ENDED SEPTEMBER 30,
1996 1995 1994
------ ------ ------
Income tax computed
at statutory rate $10,568 $ 6,622 $ 9,590
State income taxes,
net of federal benefit 1,143 784 1,158
Goodwill amortization 189 162 185
Other, net 27
--------- --------- ---------
Total $11,927 $ 7,568 $10,933
--------- --------- ---------
Deferred tax assets relate principally to differences between book and tax bases
of inventory as a result of the various acquisitions and accrued warranty costs.
11 | LEASES
The Company is obligated under various noncancelable operating leases for office
facilities and equipment. Rental expense under these agreements amounted to
approximately $2,485,000, $1,292,000 and $1,054,000 for the years ended
September 30, 1996, 1995 and 1994, respectively. As of September 30, 1996,
future minimum lease payments under noncancelable operating lease agreements,
excluding leaseback of model homes, are as follows:
YEAR ENDED SEPTEMBER 30, (in thousands)
1997 $ 2,468
1998 1,817
1999 1,325
2000 304
2001 65
-----------
Total $ 5,979
-----------
During the year ended September 30, 1995, the Company sold and leased back 102
model homes in Arizona, California and Nevada for approximately $15.0 million,
comprised of cash consideration of $13.0 million and recourse notes receivable
of $2.0 million. The transactions were accounted for as a sale-leaseback and
resulted in the recognition of a $350,000 gain. The lease terms on individual
model homes range from 3 to 33 months. Lease payments vary based on LIBOR and
totaled $1,536,000 and $914,000 for fiscal years 1996 and 1995, respectively.
Future lease commitments approximate $422,000 in fiscal year 1997 and $42,000
thereafter. The recourse notes receivable are secured by second deeds of trust
on the model homes, provide interest at LIBOR plus 3.5% and are due upon sale of
the related model home.
12 | STOCKHOLDERS' EQUITY
PREFERRED STOCK -- In August 1995, the Company sold 2,000,000 shares of its
Series A Cumulative Convertible Exchangeable Preferred Stock (liquidation
preference $25.00 per share). The preferred stock pays dividends quarterly at an
annual rate of 8%, is convertible at the holder's option into the Company's
common stock at a conversion price of $19.05 per Common Share and is
exchangeable, at the Company's option beginning September 1, 1997, into 8%
Convertible Subordinated Debentures due 2005. The net proceeds of approximately
$48.1 million were used principally to purchase the Company's common stock held
by USI (see Note 1).
34 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
COMMON STOCK -- In March 1994, the Company completed an offering of 6,125,367
shares of common stock for proceeds of approximately $99 million. The proceeds
were used together with proceed from the issuance of the Senior Notes (see Note
9) to retire borrowings and repay amounts payable to affiliates of the Former
Parent.
In June 1996, the Company's Board of Directors approved a stock repurchase
plan authorizing the purchase of up to 10% of the Company's currently
outstanding common stock. Such repurchases, if completed, would be effected at
various prices from time to time in the open market. As of September 30, 1996,
the Company has purchased 25,000 shares for an aggregate purchase price of
approximately $349,000.
As of September 30, 1996, the Company has reserved 675,000 shares of common
stock for issuance under various stock incentive plans and has 495,167 shares
available for future grants.
SHAREHOLDER RIGHTS PLAN -- In June 1996, the Company's Board of Directors
adopted a Shareholder Rights Plan and distributed a dividend of one preferred
share purchase right (a "Right") to purchase one one-hundredth of a share of
Series B Junior Participating Preferred Stock, par value $0.01 per share (the
"Preferred Shares"), of the Company. The Rights become exercisable in certain
limited circumstances involving principally the acquisition of over 20% of the
Company's outstanding common stock by any one individual or group. The Rights
are initially exercisable at a price of $80.00 per one hundredth of a Preferred
Share, subject to adjustment. Following certain other events after the Rights
have become exercisable, each Right entitles its holder to purchase at the
Right's then current exercise price, a number of shares of the Company's common
stock having a market value of twice such price, or, in certain circumstances,
securities of the acquirer, having a then current market value of two times the
exercise price of the Right.
The Rights are redeemable and may be amended at the Company's option before
they become exercisable. Until a Right is exercised, the holder of a Right has
no rights as a shareholder of the Company. The Rights expire on June 24, 2006.
13 | RETIREMENT PLAN AND INCENTIVE AWARDS
401(k) RETIREMENT PLAN -- Effective August 1994, the Company began its 401(k)
Retirement Savings and Investment Plan (the "Beazer USA Plan"). Similar plans
that were in place prior to August 1994 were terminated and their assets were
transferred to the Beazer USA Plan. Substantially all employees are eligible for
participation in the Beazer USA Plan after completing one year of service with
the Company. Participants are permitted to make contributions to the Beazer USA
Plan on a pre-tax salary reduction basis in accordance with the provisions of
Section 401(k) of the Internal Revenue Code of 1986, as amended. Participants
may defer from 1% to 17% of their salary with certain limitations on highly
compensated individuals. The Company matches 50% of the first 6% of the
participant's contributions. The participant's contributions vest 100%
immediately, while the Company's contributions vest after five years. The
Company's total contributions for the years ended September 30, 1996 and 1995
were approximately $587,000 and $495,000, respectively.
RESTRICTED STOCK AWARDS -- The Company has issued several restricted stock
awards to officers and key employees under the 1994 Stock Incentive Plan (the
"Stock Plan"). All restricted stock is awarded in the name of each participant,
who has all the rights of other common stockholders, subject to restrictions and
forfeiture provisions. Accordingly, all restricted stock awards are considered
outstanding shares.
Stock awards are valued when granted and such associated unearned
compensation is amortized as expense over the vesting period of the awarded
shares. Unearned compensation related to such awards is reflected as a reduction
of stockholders' equity. Compensation
35 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
expense recognized for such awards totaled $257,000, $365,000 and $150,000 for
the years ended September 30, 1996, 1995 and 1994, respectively.
Activity relating to restricted stock awards is summarized as follows:
YEAR ENDED SEPTEMBER 30,
1996 1995 1994
--------------------------------
Restricted shares,
beginning of period 171,750 95,000 --
Shares awarded 46,500 103,000 95,000
Shares forfeited (38,417) (26,250)
--------- --------- --------
Restricted shares,
end of period 179,833 171,750 95,000
--------- --------- --------
Restricted stock awarded during the year ended September 30, 1994 originally
would vest based solely on the achievement of certain future financial targets.
Accordingly, unearned compensation was subsequently remeasured for such awards
based on changes in market value of the Company's common stock. In September
1996, the vesting of such awards was amended to occur unconditionally in March
2001; accordingly, unearned compensation for such awards was then fixed and will
not be subsequently remeasured.
STOCK OPTION AWARDS -- The Company has issued several stock option awards to
officers and key employees under the Stock Plan and to non-employee directors
pursuant to the Company's Non-Employee Director Stock Option Plan. Stock options
may be exercised three to ten years from the date such options were granted. As
of September 30, 1996, there were no stock options exercisable.
Activity under the Company's stock option plans is summarized as follows:
1994 STOCK NON-EMPLOYEE
INCENTIVE PLAN DIRECTOR STOCK
OPTION PLAN
SHARES UNDER OPTION:
October 1, 1993 -- --
Granted at
$17.50 per share 205,000
Canceled at
$17.50 per share (20,000)
--------- --------
September 30, 1994 185,000 --
--------- --------
Granted at $13.375
to $14.375 per share 127,000 40,000
--------- --------
September 30, 1995 312,000 40,000
--------- --------
Granted at $16.875
to $19.125 per share 24,000 10,000
Canceled at $16.875
to $17.50 per share (28,000)
--------- --------
September 30, 1996
(at $13.375 to $17.50
per share) 308,000 50,000
--------- --------
14 | CONTINGENCIES
The Company had outstanding letters of credit and performance bonds of
approximately $6.0 million and $50.4 million, respectively, at September 30,
1996, related principally to its obligations to local governments to construct
roads and other improvements in various developments. The Company does not
believe that any such letters of credit or bonds are likely to be drawn upon.
The Company is a defendant or plaintiff in various legal actions which have
arisen in the normal course of business. In the opinion of management, the
ultimate resolution of these matters will not have a material adverse effect on
the Company's financial position or results of operations.
36 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
QUARTERLY FINANCIAL DATA AND STOCK PRICE INFORMATION (UNAUDITED)
SUMMARIZED QUARTERLY FINANCIAL INFORMATION:
(DOLLARS IN THOUSANDS, Quarter Ended
EXCEPT PER SHARE AMOUNTS)
September 30 June 30 March 31 December 31
-------------------------------------------------------
FISCAL 1996
Total revenue $294,828 $217,065 $196,505 $158,230
Operating income 11,228 7,979 6,084 4,833
Net income 6,888 4,817 3,663 2,900
Net income per common
share:
Primary $ 0.91 $ 0.59 $ 0.41 $ 0.29
Fully diluted 0.76 0.53 0.40 0.29
FISCAL 1995
Total revenue $270,604 $151,377 $123,544 $102,303
Operating income 10,472 2,324 2,461 3,372
Net income 6,317 1,417 1,485 2,133
Net income per common share:
Primary $ 0.78 $ 0.16 $ 0.16 $ 0.23
Fully diluted 0.71 n/a n/a n/a
QUARTERLY STOCK PRICE INFORMATION: HIGH LOW
1996 PERIOD
July 1, 1996 through September 30, 1996 $ 16 3/4 $ 14
---------- ----------
April 1, 1996 through June 30, 1996 $ 18 3/8 $ 15 1/4
---------- ----------
January 1, 1996 through March 31, 1996 $ 20 1/2 $ 16 1/4
---------- ----------
October 1, 1995 through December 31, 1995 $ 20 5/8 $ 16 3/8
---------- ----------
1995 PERIOD
July 1, 1995 through September 30, 1995 $ 17 1/8 $ 15 1/4
---------- ----------
April 1, 1995 through June 30, 1995 $ 16 5/8 $ 13 3/8
---------- ----------
January 1, 1995 through March 31, 1995 $ 14 5/8 $ 11 1/2
---------- ----------
October 1, 1994 through December 31, 1994 $ 14 5/8 $ 11 1/8
---------- ----------
37 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
NOTE REGARDING FORWARD-LOOKING STATEMENTS
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This Annual Report contains "forward-looking statements" within the meaning of
the federal securities laws. These forward-looking statements include, among
others, statements concerning the Company's outlook for 1997, overall and
market-specific volume trends, pricing trends and forces in the industry, cost
reduction strategies and their results, targeted goals for margins and returns,
the Company's expectations as to funding its capital expenditures and operations
during 1997, and other statements of expectations, beliefs, future plans and
strategies, anticipated events or trends, and similar expressions concerning
matters that are not historical facts. The forward-looking statements in this
report are subject to risks and uncertainties that could cause actual results to
differ materially from those expressed in or implied by the statements.
As described in this Annual Report, the Company has begun various
initiatives designed to improve its operating profit margin. The most
significant factors that could prevent the Company from achieving these goals --
and cause actual results to differ materially from those expressed in the
forward-looking statements -- include, but are not limited to, the following:
- - Economic changes nationally or in one of the Company's local markets
- - Volatility of mortgage interest rates
- - Increased competition in some of the Company's local markets
- - Increased prices for labor, land and raw materials used in the production of
houses
- - Any delays in reacting to changing consumer preferences in home design
- - Delays or difficulties in implementing the Company's initiatives to reduce its
production and overhead cost structure.
The Company undertakes no duty to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
38 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
CORPORATE AND OPERATING MANAGEMENT
OPERATING MANAGEMENT
SOUTHEAST REGION
James A. Moore
Regional Manager
FLORIDA
Leon J. Panitz
President, Panitz Homes
Craig G. Bloxham
President, Gulfcoast Homes
Jeffrey D. Thorson
President, Mid-Florida Division
GEORGIA
Scott A. Hoisington
President
NORTH AND SOUTH CAROLINA
Gary N. Baucom
Regional Manager
NORTH CAROLINA
Scott K. Thorson
President, Squires Homes -- Charlotte
Robert J. Polanco
President, Squires Homes -- Raleigh
SOUTH CAROLINA
William J. Mazar
President, Squire Homes -- Columbia
Jeffrey L. Keefer
City Manager, Squire Homes -- Myrtle Beach
TENNESSEE
H. Eddie Phillips
President, Phillips Builders
Thomas O. Brooks
President, Phillips Builders -- Knoxville
SOUTHWEST REGION
ARIZONA
Joseph C. Thompson
President, Hancock Homes
CALIFORNIA
Anthony R. Tonso
President, Northern California Division
Gerald A. Gates
President, Southern California Division
NEVADA
Warren D. Kiggins, Jr.
President
CENTRAL REGION
TEXAS
Kurt S. Watzek
President
Mark A. Angeli
President, Dallas Division
CORPORATE MANAGEMENT
IAN J. MCCARTHY
President and Chief Executive Officer
DAVID S. WEISS
Executive Vice President and Chief
Financial Officer
JOHN SKELTON
Senior Vice President, Operations and Controller
PETER H. SIMONS
Vice President, Corporate Development
DAVID T. ROOT
Vice President, Operations
MICHAEL T. RAND
Vice President, Operational and Accounting Controls
39 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
BOARD OF DIRECTORS
[Photograph - Page 40]
LEFT TO RIGHT:
JOHN SKELTON (Secretary)
DAVID S. WEISS
LARRY T. SOLARI
GEORGE W. MEFFERD
THOMAS B. HOWARD, JR.
D. E. MUNDELL
BRIAN C. BEAZER
IAN J. MCCARTHY
(1) Audit Committee
(2) Compensation Committee
(3) Stock Option Committee
BRIAN C. BEAZER (2)
NON-EXECUTIVE CHAIRMAN OF THE BOARD BEAZER HOMES USA, INC.
Mr. Beazer has served as non-executive Chairman since March 1994. He began work
in the construction industry in the late 1950s. He served as Chief Executive
Officer of Beazer PLC, from 1968 to 1991, and Chairman of that company from 1983
to 1991. Mr. Beazer is also a Director of Koppers Industries, Inc., Beazer
Japan, Ltd., Seal Mint Ltd., Jade Holdings Pte Ltd., Jade Technologies Singapore
Pte Ltd. and U.S. Industries, Inc.
THOMAS B. HOWARD, JR. (1,2,3)
FORMER CHAIRMAN AND CHIEF EXECUTIVE OFFICER, GIFFORD-HILL & COMPANY
Mr. Howard has served as a Director of the Company since 1995. He served as the
Chairman and Chief Executive Officer of Gifford-Hill & Company, a construction
and aggregates company, from 1969 to 1989. Gifford-Hill & Co. was acquired by
Beazer PLC in 1989 and Mr. Howard served as Chairman and Chief Executive Officer
of the successor company until 1992. During the period 1957 to 1969, Mr. Howard
held various positions with Vulcan Materials Company. Mr. Howard currently
serves as a Director of Lennox International, Inc. and is on the Board of
Trustees of the Methodist Hospitals Foundation.
IAN J. MCCARTHY
PRESIDENT AND CHIEF EXECUTIVE OFFICER, BEAZER HOMES USA, INC.
Mr. McCarthy has served as a Director and Chief Executive Officer since March
1994. Mr. McCarthy served as President of Beazer Homes, Inc. ("BHI") since
October 1992 and as President of Beazer Homes Holdings, Inc. ("BHH") since April
1993. From January 1991 to October 1992, he served as Executive Vice President
of BHI, responsible for all U.S. residential homebuilding operations. During the
period May 1981 to January 1991, Mr. McCarthy was employed in Hong Kong and
Thailand as a Director of Beazer Far East, and from January 1980 to May 1981 was
employed by Kier Limited, a company engaged in the U.K. construction industry.
GEORGE W. MEFFERD (1,2,3)
FORMER GROUP VICE PRESIDENT, FLUOR CORPORATION NEWPORT BEACH, CALIFORNIA
Mr. Mefferd has served as a Director since March 1994. In 1986, Mr. Mefferd
retired as Group Vice President and a Director of Flour Corporation, an
engineering and construction company. From 1974 to 1986, Mr. Mefferd held
various positions with Fluor Corporation, including Senior Vice President -
Finance, Treasurer, Group Vice President and Chief Financial Officer.
40 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
D. E. MUNDELL (1,2,3)
Chairman, ORIX USA Corporation
San Francisco, California
Mr. Mundell has served as a Director since March 1994. Mr. Mundell has served as
Chairman of ORIX USA corporation, a financial services company, since January
1991. During the period 1959 to 1990, Mr. Mundell held various positions within
United States Leasing International, Inc., retiring as Chairman in 1990. He is
also a Director of Varian Associates and Stockton Holding, Ltd.
LARRY T. SOLARI (1,2,3)
Former President, Building Materials
Group, Domtar, Inc.
Ann Arbor, Michigan
Mr. Solari has served as a Director since March 1994. Mr. Solari was the
President of the Building Materials Group of Domtar, Inc. He was the President
of the Construction Products Group, Owens-Corning Fiberglass from 1986 to 1994.
Mr. Solari has been a Director of the Policy Advisory Board of the Harvard Joint
Center for Housing Studies and an Advisory Board Member of the National
Homebuilders Association.
DAVID S. WEISS
Executive Vice President and Chief
Financial Officer, Beazer Homes USA, Inc.
Mr. Weiss has served as a Director and as Executive Vice President and Chief
Financial Officer since March 1994. Previously he was Assistant Corporate
Controller of Hanson Industries from February 1993. He was Manager of Financial
Reporting for Colgate -- Palmolive Company from November 1991 to February 1993
and was with the firm Deloitte & Touche from 1982 to 1991, at which time he
served as a Senior Audit Manager.
SHAREHOLDER INFORMATION
CORPORATE HEADQUARTERS
Beazer Homes USA, Inc.
5775 Peachtree Dunwoody Road
Suite C-550
Atlanta, GA 30342
Telephone: (404) 250-3420
INQUIRIES
Individuals seeking financial data should contact David S. Weiss, Executive Vice
President and Chief Financial Officer or Scott M. McKelvey, Manager of Financial
Reporting.
Others seeking information about the Company and its operations should contact
Ian J. McCarthy, President and Chief Executive Officer.
FORM 10-K
Copies of Beazer Homes USA, Inc.'s Annual Report on Form 10-K as filed with the
United States Securities and Exchange Commission will be furnished upon written
request to David S. Weiss, Executive Vice President and Chief Financial Officer.
ANNUAL MEETING
The Annual Shareholders' meeting will be held at 9:00 am EST on February 6, 1997
at The Penn Club, 30 West 44th Street, New York, NY 10036.
TRANSFER AGENT
First Chicago Trust Company of New York
52 Washington Boulevard
Suite 4694
Jersey City, NJ 07310
GENERAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
INDEPENDENT AUDITORS
Deloitte & Touche LLP
TRADING INFORMATION
Beazer Homes USA, Inc. lists its common shares on the New York Stock Exchange,
reading under the symbol BZH, and its preferred shares under the symbol BZH.PrA.
On December 2, 1996, the last reported sales price of Company's Common Stock on
the New York Stock Exchange was $16.00.
OWNERSHIP
On December 2, 1996, Beazer Homes USA, Inc. had approximately 74 shareholders of
record and 6,565,690 shares of Common Stock outstanding.
41 BEAZER HOMES USA 1996 ANNUAL REPORT
<PAGE>
* HOMES *
- ---------
BEAZER
BEAZER HOMES USA, INC. | 5775 Peachtree Dunwoody Road | Suite C-550 |
Atlanta, GA 30342 | 404.250.3420
visit our Web site at www.beazer.com
<PAGE>
APPENDIX TO FORM 10-K FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED AND
EDGAR-FILED TEXTS:
(1) Boldface typeface is displayed with capital letters, italic typeface is
displayed in normal type.
(2) Because the printed page breaks are not reflected, certain tabular and
columnar headings and symbols are displayed differently in this filing.
(3) Bullet points and similar graphic signals are omitted.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation
- ---- ---------------
<S> <C>
Squires Homes, Inc. ...................................... Delaware
Beazer Homes Corp. ....................................... Tennessee
Beazer/Squires Realty, Inc. .............................. North Carolina
Beazer Homes Sales Arizona Inc. .......................... Delaware
Beazer Homes Nevada Inc. ................................. Nevada
Beazer Homes, Inc. ....................................... Delaware
Beazer Homes California Inc. ............................. Delaware
Beazer Realty Corp. ...................................... Georgia
Panitz Homes Realty, Inc. ................................ Florida
Beazer Homes Holdings Corp. .............................. Delaware
Beazer Homes Texas Holdings Corp. ........................ Delaware
Beazer Homes Texas LP .................................... Texas
Beazer Mortgage Corp ..................................... Delaware
</TABLE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-91904 of Beazer Homes USA, Inc. ("Beazer Homes") on Form S-8 of our report
dated October 30, 1996 appearing in Beazer Homes' 1996 Annual Report to
Shareholders and incorporated by reference in this Annual Report on Form 10-K
of Beazer Homes for the year ended September 30, 1996.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
December 19, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 33-91904) of Beazer Homes USA, Inc. of our report dated October 27,
1995, with respect to the consolidated financial statements of Beazer Homes
USA, Inc. included in this Annual Report (Form 10-k) for the year ended
September 30, 1996.
ERNST & YOUNG LLP
Atlanta, Georgia
December 18, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 12942
<SECURITIES> 0
<RECEIVABLES> 6473
<ALLOWANCES> 0
<INVENTORY> 320969
<CURRENT-ASSETS> 0<F1>
<PP&E> 6997
<DEPRECIATION> 4174
<TOTAL-ASSETS> 356643
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 115000
0
20
<COMMON> 93
<OTHER-SE> 178588
<TOTAL-LIABILITY-AND-EQUITY> 356643
<SALES> 866627
<TOTAL-REVENUES> 866627
<CGS> 747529
<TOTAL-COSTS> 836505
<OTHER-EXPENSES> (71)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 30193
<INCOME-TAX> 11927
<INCOME-CONTINUING> 18266
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18266
<EPS-PRIMARY> 2.20
<EPS-DILUTED> 2.01
<FN>
<F1>The Company presents a condensed balance sheet.
</FN>
</TABLE>
