<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____________ to _____________
Commission File Number: 0-23270
BORROR CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-1393233
------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5501 Frantz Road, Dublin, Ohio 43017
------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 614-761-6000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares with no par value;
--------------------------------
(Title of each class)
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 filer pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
Based upon the closing sale price reported on the NASDAQ National Market on
March 17, 1997, the aggregate market value of the Common Shares of the
Registrant held by non-affiliates (assuming, for this purpose, that all
executive officers and directors are affiliates) on that date was $9,665,000.
As of March 17, 1997 there were 6,239,153 Common Shares issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
1. Definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on May 7, 1997 (in pertinent
part, as indicated).......................................PART III.
<PAGE> 2
PART I
ITEM 1 BUSINESS
--------
BACKGROUND
Borror Corporation is a leading builder of single family homes in Central
Ohio. Home-building is the only business segment in which the Company operates.
The Company was incorporated in Ohio in October 1993. The Company's
home-building business was started in 1976 by Donald Borror, Chairman of the
Board of the Company. Prior to the consummation of the Company's initial public
offering in March 1994, the business of the Company was operated as part of the
homebuilding and related divisions (the "Homebuilding Divisions") of Borror
Realty Company ("BRC"), an Ohio corporation incorporated in 1946. In connection
with the Company's initial public offering, the Company and BRC entered into a
Corporate Exchange and Subscription Agreement pursuant to which the Company
acquired substantially all of the operating assets of the Homebuilding Division.
PRODUCTS
The Company markets its homes under the "Dominion Homes(SM)" tradename. The
Company offers three series of single-family homes and a series of condominiums
that are differentiated by size, price, standard features and available options.
This product diversity allows the Company to target specific market segments and
appeal to a wide range of homebuyers. The Company's products range from starter
homes to executive homes with prices from $97,000 to more than $300,000. The
Century Series are single family homes generally ranging in size from 1,100 to
1,600 square feet and in price from $97,000 to $130,000 and are targeted to
appeal primarily to young, first-time homebuyers. The Celebrity Series are
single family homes ranging in size from 1,700 to 2,200 square feet and in price
from $130,000 to $180,000 and are targeted to appeal to both first time and
first move-up homebuyers. The Tradition Series are single family homes ranging
in size from 2,000 to 2,800 square feet and in price from $160,000 to more than
$300,000 and are targeted to appeal primarily to existing homeowners who desire
to move up to larger homes with more amenities. The Company's condominiums
generally range in size from 1,550 to 2,500 square feet and in price from
$110,000 to $200,000 and are targeted to appeal to singles and couples without
children, including "empty-nesters," who want the benefits of home ownership
without the maintenance and upkeep required for single family homes.
The Company constructs each of its single family homes and condominiums
using a "stick built" process in which the frame is fit to the exact dimensions
of the foundation. The Company is a "full option" homebuilder. Each of the
Company's homes has a standard design and basic features. After the purchaser
has chosen a home from among the 34 standard floor plans and elevations offered
for single family homes, the purchaser can "customize" the home through the
selection, at additional cost, of structural options and exterior/interior
options from the variety of such options that are available for that particular
home. Structural options include two-foot side wall extensions, side-load
garages and master bathrooms. Exterior/interior options include upgrades on
bathroom and kitchen fixtures, kitchen cabinets, tiles and floorings. The
Company's homes feature nationally recognized and industry leading brand names,
including Trane(R) natural gas furnaces, Atria vinyl windows and sliding glass
doors, Armstrong(R) flooring, Wilsonart(R) decorative laminate, and the
Kohler(R) family of bathroom and kitchen fixtures.
2
<PAGE> 3
LAND ACQUISITION AND DEVELOPMENT
It has been the practice of the Company to develop most of the lots on
which it builds its homes. The Company generally does not buy unimproved land
for speculation, and generally limits its investment in unimproved land to an
amount that it expects to be able to develop and sell within five years.
Although the Company purchases land and engages in land development activities
primarily for the purpose of furthering its own homebuilding activities, the
Company also sells unimproved land and finished lots to other developers and
homebuilders. Sales of unimproved land and developed lots totaled $2.4 million
in 1996.
To limit its risk, the Company attempts to control land through the use of
option contracts and contingent purchase contracts. These contracts condition
the Company's obligation to purchase land upon the Company's review and approval
of such matters as zoning, utilities, soil and subsurface conditions,
environmental and wetland conditions, levels of taxation, traffic patterns,
development costs, title matters and other property-related criteria.
The Company occasionally enters into joint venture agreements with other
homebuilders to own and develop communities. The primary reason is to limit the
Company's exposure to owning large amounts of land in a single community and the
risks associated with longer holding periods for those larger communities. While
the Company anticipates primarily forming joint ventures with unaffiliated
homebuilders, it has purchased finished lots in certain communities which were
developed by BRC under various joint venture agreements. The lots were purchased
pursuant to a Land Option Agreement with BRC at a purchase price equal to the
lesser of (1) BRC's adjusted tax basis in such lots plus $500 per lot or (2) the
fair market value of such lots. Such purchases totaled approximately $8.2
million for the year ended December 31, 1996.
The following table sets forth the Company's land inventory as of December
31, 1996:
<TABLE>
<CAPTION>
Unimproved
Land Total
Finished Lots Under Estimated Estimated
Land Inventory Lots Development Lots Lots
-------------- ---- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Owned by the Company 678 117 3,891 4,686
Controlled by the Company 94 0 2,762 2,856
----- ----- ----- -----
772 117 6,653 7,542
</TABLE>
Land Inventory owned by the Company includes land titled in the Company's
name or to which the Company is committed to purchase. Land Inventory controlled
by the Company represents land the Company has the right to acquire under
contingent purchase contracts and option contracts, including option contracts
with BRC which include 93 finished lots and unimproved land which the Company
expects will be developed into an estimated 149 finished lots.
After the acquisition of unimproved land, the Company's engineering and
design professionals develop it to the Company's specifications. The Company's
development activities include obtaining any necessary zoning, environmental and
other governmental approvals, planning and engineering of the community and
construction of streets, sewers, water and drainage facilities and other
improvements. In developing land, the Company is required by some municipalities
and other governmental authorities to provide letters of credit for sewer,
streets and other improvements. At December 31, 1996, the Company had an
aggregate of $5.0 million of letters of credit outstanding for these purposes.
The Company does not believe that any of the outstanding letters of credit are
likely to be drawn upon.
3
<PAGE> 4
The Company designs each of its residential communities to have its own
identity. Through its control over the details of development, from the
placement of streets to the design of each community entryway, the Company
creates in each of its communities a distinctive look of quality and success.
The Company generally completes the sale of homes in its communities in time
periods that range from one to four years from first to last sale, with smaller
communities generally taking less time to complete than larger ones. In
addition, the Company typically incorporates a Homeowner Association for
communities with common areas to ensure the continued maintenance of the common
areas after the community is developed.
SALES AND MARKETING
The Company conducts its home sales from on-site sales offices in furnished
model homes. Each sales representative is trained and equipped to fully explain
the features and benefits of the Company's homes, to determine which home best
suits the customer's needs and to explain the construction process. The Company
devotes significant attention to the training and re-training of all sales
representatives to assure the highest levels of professionalism and product
knowledge. The Company believes that the use of an in-house sales staff allows
for a more knowledgeable sales presentation and enables the Company to
communicate a consistent message to its customers. Sales representatives are
compensated on a commission and bonus basis. At December 31, 1996, the Company
employed 29 sales representatives and operated 26 model homes, of which 5 were
leased from BRC.
The Company offers a "Helping Hand Program" to purchasers of homes in the
Century Series and some of the homes in the Celebrity Series. The Helping Hand
Program is a work equity program approved by the U.S. Department of Housing and
Urban Development ("HUD") which permits homebuyers to reduce their down payments
by performing some of the more minor construction tasks themselves. Through
training seminars conducted monthly by Company personnel at its corporate
offices, participating homebuyers receive step-by-step guidance on completing
these tasks. The Company aggressively markets this program because it enables
the Company to sell homes to first-time homebuyers who otherwise would not have
the down payment necessary to qualify for mortgage financing. This program also
allows homebuyers to purchase more expensive homes than they otherwise would
qualify to buy.
Sales of the Company's homes are made pursuant to standard sales contracts
which are generally subject to certain contingencies, including the obtaining of
mortgage financing by the purchaser or the sale of the purchaser's existing
home. These contracts generally require the purchaser to make a $500 deposit at
the time of execution of the contract and to pay the balance of the cash down
payment, typically up to 3.0% of the purchase price, at the start of
construction.
The Company advertises in newspapers and magazines, by direct mail, on
billboards and on radio and television. The Company's advertising typically
emphasizes the quality of its homes, the location of its communities and the
wide variety of its home styles and options. A portion of the Company's
advertising is done on a co-op basis with suppliers which contribute to the
Company's advertising budget and are featured in the Company's advertisements.
The Company uses promotional and sales incentives such as discounts on the
purchase price of its homes or options to market its products. It is the
Company's intention to use this practice on a selective or seasonal basis to
target slow moving areas and stabilize production capacity. The Company also
offers a discount to customers who previously purchased one of its homes, to
employees of subcontractors it uses in the building process, and to certain of
its own employees.
The Company welcomes independent broker participation because it believes
that such participation introduces the Company to customers who might not
otherwise consider purchasing a home from the Company. During 1996, the Company
paid commissions to independent brokers on 634 homes with an aggregate sales
price of $93.2 million.
4
<PAGE> 5
DESIGN AND CONSTRUCTION
The Company employs a full-service architectural department which controls
the design of its homes. Each home design is value-engineered for greater
efficiency in the building process and lower cost to the purchaser. For example,
where possible, back-to-back bathrooms are designed to avoid the need for
multiple drains and room sizes are designed to correspond to standard carpet
widths to avoid the expense and waste involved in cutting carpet. On an ongoing
basis, the design team utilizes the Company's knowledge of the Central Ohio
market and the feedback gained from its customers to create new designs and
modify existing designs to keep pace with changing consumer preferences.
The design team of the Company is aided by a computer graphics design
system. This system provides the Company with greater flexibility in creating
new designs and modifying existing designs and enhances the Company's ability to
accurately estimate the materials necessary for a particular design.
The Company acts as the general contractor for the construction of its
homes. The Company's construction superintendents, together with the production
managers they report to, monitor construction, coordinate the activities of
subcontractors and suppliers, maintain quality and cost controls and monitor
compliance with zoning and building codes.
The use of subcontractors by the Company enables it to minimize its
investment in employees, equipment and building supply inventory. This practice
also increases the Company's flexibility in responding to changes in the demand
for housing. The Company has had long business relationships with many of its
subcontractors. These relationships, coupled with the volume and efficient
design of homes built by the Company, enable the Company to negotiate favorable
agreements with its subcontractors.
Through its ownership of a lumberyard which allows it to purchase its
lumber directly from mills and wholesalers, the Company has reduced its exposure
to risks of inadequate supply and significant price fluctuations. From time to
time the Company purchases lumber for delayed delivery to ensure adequate supply
and predictable cost. During 1996, approximately 95% of the lumber purchased
through the lumberyard was used by the Company and the rest was sold to
unaffiliated parties.
The Company has implemented various administrative systems to support its
construction operations. For instance, the Company's management information
system allows the Company to control construction costs by making available the
information necessary to monitor subcontractor performance and expenditures on
each home. All subcontracted work is authorized by work orders, the cost of any
deviation from the work order must be approved for payment by the Company's
construction superintendents, and all significant cost variances are
investigated. These techniques permit the Company to effectively monitor gross
profit margins.
DECORATING CENTER
Since the introduction of the decorating center concept in 1990, the
Company has been able to offer customers full service advice in the decorating
process. Providing the ambiance of a quality retail store, the decorating center
features full-sized samples and vignettes and a computer that depicts the
exterior of the customer's home. These features allow the customer to visualize
color combinations and options, feel the textures and picture how the selections
work together. The Company's full-time, experienced decorating consultants are
available daily to assist the customer in making selections from among hundreds
of options on display at the decorating center, from bathroom fixtures to
outdoor siding. Management believes that the decorating center reduces customer
anxiety in the decorating and selection process and significantly contributes to
customer satisfaction.
5
<PAGE> 6
CUSTOMER SATISFACTION PROGRAM
The Company's strategy focuses every aspect of its operation on satisfying
the customer. The Company recognizes that, for most customers, the purchase of a
home represents the single largest investment that they will ever make. The
Company strives to ensure the soundness of this investment through the delivery
of quality homes that are located in attractive communities and that provide
lasting value.
The Company also understands that many prospective customers are uncertain
about how to choose a homebuilder and a home and have little knowledge about
home construction. Accordingly, every phase of the Company's operations, from
the beginning of the selling process through construction, closing and service
after the closing, educates and involves the customer in the homebuilding
process.
Promptly after receiving a signed contract, a customer representative is
assigned to interact with the customer during the entire building process and to
answer questions and direct any concerns to the appropriate persons. At a
pre-construction conference, the construction superintendent assigned to the
customer's home meets with the customer to review the home plans and explain the
construction process and schedule. Because the Company wants the customer to see
the quality built into the customer's home, the customer is invited to visit the
home site at any time during the course of construction.
The Company's warranty program is designed to provide the customer with
peace of mind. Because of the Company's attention to quality and its commitment
to "doing it right the first time," the Company offers a comprehensive warranty
program that features a two-year warranty covering all mechanical elements
(including heating, plumbing and electrical systems), roof, windows and doors,
as well as a twenty-five year warranty covering all major structural components.
The warranty on each home is automatically transferable to subsequent owners of
the home. The Company also passes along to its customers all warranties provided
by manufacturers and suppliers.
The Company invites each customer after closing to complete questionnaires
that rate the customer's sales representative, construction superintendent,
decorating consultant and customer representative and provide certain other
information regarding the customer's homebuilding experience. The Company uses
the answers to such questionnaires to refine its products, programs and services
to assure that the Company continues to be responsive to its customers.
CUSTOMER FINANCING
The Company currently does not offer customer financing since it does not
own or operate a mortgage lending business. However, the Company does assist
customers in obtaining financing by referring them to independent mortgage
brokers that offer qualified customers a variety of financing options, including
both government insured and conventional financing programs. Additionally, the
Company pays certain elements of its customers' costs of financing, including
loan origination fees, rate commitment fees and discount points. In the event
that a customer chooses to make the customer's own financing arrangements, the
Company will reduce the purchase price of the home.
Upon request and the payment of a fee, the Company will build a home under
FHA or VA guidelines to allow the customer to finance the purchase through a FHA
or VA program. During 1996, 46.1% of the Company's closings used government
insured financing. As of January 1, 1997, the FHA financing limit was increased
in the seven county Columbus Metropolitan Statistical Area to $123,900 from
$113,900 and in Union County to $107,500 from $98,700. These increases in the
financing limit are expected to allow certain customers to increase the purchase
prices of their homes.
6
<PAGE> 7
In comparison to conventional financing, government insured financing
generally allows customers to purchase homes with a higher percentage of their
incomes directed toward housing expenses and with lower down payments (as little
as 5%). As a result of the Company's "Helping Hand Program," a significant
portion of the down payment may be contributed by the purchaser in the form of
work equity as previously described under "sales and marketing". FHA and VA
rules also are generally more liberal with respect to the amount of points and
closing costs that the seller may pay.
Because virtually all of the Company's customers utilize long-term first
mortgages to finance their home purchases, adverse economic conditions,
increases in unemployment, high mortgage interest rates and a reduction in the
scope or funding of government programs could deter and eliminate a substantial
number of potential customers for new homes.
AVAILABILITY OF LABOR AND RAW MATERIALS
During periods of increased construction activity, the homebuilding
industry has faced shortages in the availability of skilled labor. Waiting for
skilled labor to become available may result in construction delays while the
use of less skilled labor to fill a skilled labor shortage may cause quality
standards to suffer. Additionally, unusually harsh winters could result in a
larger than usual labor demand in the early spring from the homebuilding
industry. Increases in the demand for skilled labor can also result in increases
in the cost of skilled labor. The principal raw materials used in the
homebuilding industry, lumber, brick and concrete, as well as plumbing and
electrical supplies, generally are available from a variety of sources, but are
subject to periodic price fluctuations. In particular, lumber is periodically
subject to limited availability and significant price increases. Because the
Company may not be able to pass on to its customers price increases in raw
materials or labor, price increases can have an adverse effect on the Company's
profitability.
COMPETITION
The homebuilding industry is highly competitive and fragmented. The Company
competes with numerous other local, regional and national homebuilders, some of
which have greater financial, marketing, sales and other resources than the
Company. The Company competes with other homebuilders and the resale market for
the sale of homes on the basis of such factors as location, price, design and
the Company's reputation for quality and service. The Company also competes with
other homebuilders for materials and skilled labor and with other homebuilders
and land developers for financing and desirable unimproved land. The Company
believes that its primary competitive strengths are: (i) its knowledge of the
Central Ohio market which has allowed it to capitalize on opportunities for
advantageous land acquisition in desirable locations; (ii) it's ability to
design and offer communities and homes that Central Ohio homebuyers find
appealing and (iii) its reputation for quality and service.
REGULATION
The homebuilding industry is subject to various local, state and federal
statutes, rules and regulations concerning environmental, wetlands, zoning,
building design, construction, dealings with consumers and similar matters. The
Company must obtain licenses, permits and approvals from various governmental
authorities to conduct its business. The Company is subject to local regulations
which impose zoning and density requirements in order to limit the areas for
residential development and the number of houses within particular areas.
The Company could be subject to periodic delays or could be precluded
entirely from developing land due to building moratoriums. Generally, such
moratoriums relate to insufficient water or sewage facilities or inadequate road
capacity within specific areas or subdivisions. To date, moratoriums have not
had a material adverse effect on the Company's business.
7
<PAGE> 8
Because the Company generally conditions its obligation to purchase
unimproved land on, among other things, obtaining acceptable zoning and soil and
wetland studies, land development activities have not been materially adversely
affected by zoning restrictions or environmental liabilities. However, there can
be no assurance that zoning restrictions will not adversely affect the Company
in the future or that material liabilities relating to the removal of toxic
wastes or other environmental matters affecting land acquired by the Company
will not be incurred.
Increasingly stringent requirements could be imposed on homebuilders and
land developers in the future. Such requirements could have a material adverse
effect on the Company and the industry. Although the Company cannot predict the
effect of compliance with any such additional regulatory requirements, the
Company could be required to implement time-consuming and expensive compliance
programs.
SERVICE MARKS
The Company has adopted, has used and owns registrations in the State of
Ohio for the service marks "Dominion Homes(SM)" and "Tradition Homes(SM)". The
Company also has adopted, has used, and owns the service marks in the State of
Ohio for "The Best Building Experience(SM)" and "Building Relationships That
Last(SM)". In 1996, the Company was awarded federal registrations of the latter
two service marks. The Company's application for federal registration of the
service mark "Dominion Homes(SM)" and "The Best of Everything(SM)" are pending.
The Company is not aware of any infringing use by any third party with respect
to such service marks.
EMPLOYEES
On December 31, 1996, the Company employed 339 people (including 20
part-time employees), of which 140 were employed in construction, 66 in sales,
47 in lumber yard operations, and 86 in management, administrative or clerical
positions. Although the Company's employees are not represented by labor unions
or 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 relationships
with its employees and subcontractors are generally good.
OTHER INFORMATION
Information regarding seasonality, practices of the Company regarding
working capital items and backlog orders is contained in the discussion under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
ITEM 2 PROPERTIES
----------
The Company owns, subject to a mortgage, its executive office building
located in Dublin, Ohio. The building was constructed in 1987 and is a stone and
frame structure with approximately 40,000 square feet of available office space.
The Company occupies approximately 31,500 square feet and leases the remaining
space to unaffiliated businesses pursuant to leases with terms ranging from one
to four years.
The Company's decorating center occupies 4,200 square feet and the
Company's architectural department occupies 1,350 square feet of leased space in
a Columbus, Ohio shopping center which is owned by BRC.
The Company owns a lumberyard located on 6.1 acres in Columbus, Ohio. The
facility includes ten buildings containing approximately 75,000 square feet of
space. Two buildings are constructed of steel and the remaining eight buildings
are constructed of concrete block and wood.
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ITEM 3 LEGAL PROCEEDINGS
-----------------
On March 18, 1997, the United States District Court for the Southern
District of Ohio held a hearing to consider approval of a proposed settlement of
a class action that had been filed on August 2, 1995 (Case No. C2-95-746),
against the Company, certain of its present and former directors and officers,
and the lead underwriters in its initial public offering. There were no
objections to the proposed settlement and no class members requested exclusion
from the settlement. A final order from the Court concerning the proposed
settlement is expected shortly. The class action had alleged that the
registration statement for the initial public offering contained false and
misleading statements and asserted violations of Sections 11, 12(2) and 15 of
the Securities Act of 1933. Under the settlement, the defendants agreed to
establish a fund of $2.3 million to pay certain costs, expenses and attorney
fees and to make a distribution to members of the plaintiff-class. The Company's
contribution to the settlement resulted in a pre-tax charge to fourth quarter
1996 earnings of $850,000. In entering into the settlement, neither the Company
nor the other defendants admitted liability. Nevertheless, the Company believes
that settlement of the class action was in its best interests in order to avoid
further costs of litigation.
The Company is also involved in various other legal proceedings, most of
which arise 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
---------------------------------------------------
Not applicable.
9
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PART II
ITEM 5 STOCK MARKET PRICES AND DIVIDEND POLICY
---------------------------------------
The Company's Common Shares are traded on the Nasdaq National Market under
the symbol "BORR." The following table sets forth for the periods indicated the
high and low sales prices for the Common Shares, as reported by the Nasdaq
National Market, since the Common Shares first became publicly traded.
<TABLE>
<CAPTION>
SALES PRICES
------------
CALENDAR YEAR ENDING DECEMBER 31, 1997 HIGH LOW
-------------------------------------- ---- ---
<S> <C> <C>
First Quarter (Through March 17, 1997)............. $ 5.13 $ 4.38
CALENDAR YEAR ENDED DECEMBER 31, 1996 HIGH LOW
------------------------------------- ---- ---
First Quarter...................................... $ 4.88 $ 3.25
Second Quarter..................................... $ 4.63 $ 3.88
Third Quarter...................................... $ 4.38 $ 3.75
Fourth Quarter..................................... $ 4.63 $ 4.00
CALENDAR YEAR ENDED DECEMBER 31, 1995 HIGH LOW
------------------------------------- ---- ---
First Quarter...................................... $ 5.00 $ 3.50
Second Quarter..................................... $ 5.25 $ 3.50
Third Quarter...................................... $ 5.00 $ 3.25
Fourth Quarter..................................... $ 3.75 $ 3.00
</TABLE>
On March 17, 1997, the last sale price of the Common Shares, as reported by
the Nasdaq National Market, was $4.75 per share, and there were approximately
132 holders of record of the Common Shares.
The Company has not paid any dividends in the past and does not anticipate
that it will pay any dividends in the near term. The provisions of the Company's
bank credit facilities limit the amount of dividends that the Company may pay
during any calendar year to 25% of the Company's net income after taxes for such
year.
10
<PAGE> 11
ITEM 6 SELECTED FINANCIAL DATA
-----------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following table summarizes certain selected financial and operating
data of the Company since the initial public offering and of the Homebuilding
Divisions of BRC prior to the initial public offering. This data should be read
in conjunction with "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and the Financial Statements of the Company,
including the notes related thereto, appearing elsewhere herein.
SELECTED FINANCIAL DATA
- -----------------------
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues........................................... $175,579 $178,112 $161,895 $141,821 $93,839
Gross profit....................................... 39,081 27,102 32,701 33,745 23,108
Income from operations............................. 12,756 887 6,333 11,983 6,764
Income (loss) before income taxes.................. 6,411 (5,182) 3,315 8,968 3,549
Provision for income tax expense (benefit)(1)...... 2,374 (1,684) 1,326 3,587 1,420
Net income (loss)(1)............................... 4,037 (3,498) 1,989 5,381 2,129
Net income (loss) per share(1)..................... 0.65 (0.56) 0.35 1.39 0.55
Total assets at year end........................... 103,826 105,031 118,215 75,216 47,766
Long term obligations at year end.................. 54,563 61,782 70,363 50,828 30,335
<FN>
(1) Pro forma, except for 1995 and 1996.
</TABLE>
OPERATING DATA
- --------------
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Homes:
Sales contracts(1)............................ 1,308 1,253 1,103 1,284 815
Closings...................................... 1,188 1,206 1,138 1,067 708
Backlog at period end......................... 688 568 521 556 339
Aggregate sales value of homes
in backlog at period end..................... $101,202 $83,167 $75,438 $80,036 $45,353
<FN>
(1) Net of cancellations.
</TABLE>
11
<PAGE> 12
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
OVERVIEW
During 1996 the Company returned to profitability, reporting net income of
$4.0 million for 1996 compared to a loss of $3.5 million for 1995. The primary
reason for the improvement was that the Company was able to increase its gross
profit margin to 22.3% for 1996 compared to 15.2% for 1995. This change
reflected increased sales prices, more restrictive sales discounting policies
and improved control of direct construction costs. Also, an improved market and
stable economy contributed to the increase in gross profit margin. In addition,
the Company was able to maintain the cost savings in selling, general and
administrative expenses that it had achieved during the previous year.
Sales contracts for 1996 increased to 1,308 from 1,253 a year ago. This was
accomplished despite increases through most of the year in the 30-year fixed
rate FHA mortgage interest rates which went from a low of 7.50% at January 1,
1996, to a high of 8.75% in June 1996. Thirty-year fixed rate FHA mortgage
interest rates ended the year at 8.25%.
The Company's overall production capacity reached an all-time high during
1996. While fewer homes were closed in 1996 than in the previous year, the
Company's production volume was higher because there were 101 fewer inventory
homes under construction on January 1, 1996, than on January 1, 1995. The
increased number of sales contracts, difficult weather conditions in the first
half of the year and tight subcontractor labor markets during 1996 contributed
to construction delays. The increased number of sales contracts and construction
delays resulted in 120 more homes in backlog at December 31, 1996 compared to
December 31, 1995.
COMPANY OUTLOOK
The Company anticipates improving its profitability during 1997 while
maintaining its current share of the Central Ohio market. The Company expects to
do this because of an increase in the FHA financing limit in its marketing area
and by emphasizing overall home value and the sale of higher end homes. The
Company also expects to continue to increase production efficiencies which
should contribute to improved gross profit. The Company however does not expect
to report overall higher gross profit margin because of its emphasis on sales of
higher end homes during 1997. Sales of higher end homes generally increase the
dollar amount of gross profit but reduce the gross profit margin.
While subcontracted labor remains highly sought after in the Company's
market place, the Company feels it is making progress in increasing its overall
production capacity and in the utilization of subcontracted labor. Pressure to
increase the Company's labor costs are a concern but increased labor costs to
date have not significantly impacted profits.
12
<PAGE> 13
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION ACT OF 1995
The statements contained in this report under the caption "Company Outlook"
and other provisions of this report which are not historical facts are "forward
looking statements" that involve various important risks, uncertainties and
other factors which could cause the Company's actual results for 1997 and beyond
to differ materially from those expressed in such forward looking statements.
These important factors include, without limitation, the following risks and
uncertainties: real or perceived adverse economic conditions and/or an increase
in mortgage interest rates, mortgage commitments that expire prior to homes
being delivered, the Company's ability to install public improvements or build
and close homes on a timely basis due to adverse weather conditions, the effect
of changing consumer tastes on the market acceptance for the Company's products,
the impact of competitive products and pricing, the effect of shortages or
increases in the costs of materials, labor and financing, the continued
availability of credit, the outcome of litigation, the impact of changes in
government regulation and the other risks described in the Company's Securities
and Exchange Commission filings.
SEASONALITY AND VARIABILITY IN QUARTERLY RESULTS
The Company has experienced, and expects to continue to experience,
significant seasonality and quarter-to-quarter variability in homebuilding
activity levels. Closings and revenues normally increase substantially in the
third and fourth quarters. The Company believes that this seasonality reflects
the tendency of homebuyers to shop for a new home in the Spring with the goal of
closing in the Fall or Winter. Weather conditions can accelerate or delay the
scheduling of closings.
The following table sets forth certain data for each of the last eight
quarters:
<TABLE>
<CAPTION>
THREE SALES BACKLOG
MONTHS REVENUES CONTRACTS CLOSINGS (AT PERIOD END)
ENDED (IN THOUSANDS) (IN UNITS) (IN UNITS) (IN UNITS)
=======================================================================================
<S> <C> <C> <C> <C>
March 31, 1995 $34,556 306 250 577
June 30, 1995 $46,221 359 325 611
Sept. 30, 1995 $47,764 334 322 623
Dec. 31, 1995 $49,571 254 309 568
March 31, 1996 $36,318 425 255 738
June 30, 1996 $41,524 325 278 785
Sept. 30, 1996 $45,916 305 301 789
Dec. 31, 1996 $51,821 253 354 688
</TABLE>
The Company annually incurs a substantial amount of indirect construction
costs which are essentially fixed in nature. For purposes of financial
reporting, the Company capitalizes these costs to real estate inventories on the
basis of the ratio of estimated annual indirect costs to direct construction
costs to be incurred. Thus, variations in construction activity cause
fluctuations in interim and annual gross profits.
13
<PAGE> 14
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated, certain items
from the Statements of Income expressed as percentages of total revenues, as
well as certain operating data:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues ..................................... 100.0% 100.0% 100.0%
Cost of real estate sold...................... 77.7 84.8 79.8
-------- -------- --------
Gross profit margin......................... 22.3 15.2 20.2
Selling, general and administrative expenses.. 14.5 14.7 16.3
Settlement of litigation...................... 0.5
-------- -------- --------
Income from operations...................... 7.3 0.5 3.9
Interest expense.............................. 3.6 3.4 1.9
-------- -------- --------
Income (loss) before income taxes........... 3.7% (2.9)% 2.0%
========= ======== ========
Homes:
Sales contracts, net........................ 1,308 1,253 1,103
Closings.................................... 1,188 1,206 1,138
Backlog (at period end)..................... 688 568 521
Average sales price of homes closed
during period (in thousands)................ $ 145 $ 141 $ 140
Average sales value of homes in Backlog
at period end (in thousands)................ $ 147 $ 146 $ 145
Aggregate sales value of homes in Backlog
at period end (in thousands)................ $101,202 $ 83,167 $ 75,438
</TABLE>
A home is included in "sales contracts" when the Company's standard sales
contract, which requires a deposit and generally has no contingencies other than
for buyer financing or for the sale of an existing home, is executed. "Closings"
represent homes for which the closing has occurred and title has transferred to
the buyer. Revenue and cost of real estate sold are recognized at the time of
closing. "Backlog" represents homes for which the Company's standard sales
contract has been executed, but for which closings had not occurred as of the
end of the period.
Homes included in "sales contracts" and in "backlog" are net of
cancellations. Most cancellations occur because customers cannot qualify for
financing. While most cancellations occur prior to the start of construction,
some cancellations occur during the construction process. The cancellation rates
for homes in backlog as of December 31, 1995, 1994 and 1993 were 12.7%, 11.1%
and 12.9% respectively.
14
<PAGE> 15
1996 COMPARED TO 1995
REVENUES. Revenues for 1996 decreased to $175.6 million from $178.1 million
for 1995, a decrease of $2.5 million or 1.4%. This decrease was primarily the
result of closing 18 fewer homes in 1996. In 1996, the Company closed 1,188
homes compared to 1,206 homes in 1995. The decrease in closings is attributed to
construction delays due to difficult weather conditions during the first few
months of the year, limited availability of key subcontractor labor and fewer
inventory homes closed during 1996 compared to 1995. The average price of homes
closed during 1996 increased to $144,900 from $141,000 due to price increases
and reduced sales discounts. Included in revenues are other revenues, consisting
principally of the sale of land and building supplies to other builders. In 1996
land sales to other builders decreased to $2.4 million from $6.5 million in 1995
and building supply sales decreased to $1.1 million from $1.6 million for the
same time periods.
GROSS PROFIT. During 1996 gross profit increased by $12.0 million, or to
22.3% of revenues for 1996 compared to 15.2% of revenues for 1995. The increase
in gross profit is attributable primarily to price increases, reduced sales
discounts and better control of direct construction costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased to $25.5 million for 1996 compared to $26.2
million for 1995. As a percent of revenues, these expenses remained relatively
stable at 14.5% for 1996 compared to 14.7% for 1995.
SETTLEMENT OF LITIGATION. During 1996, the Company agreed to the settlement
of a class action that resulted in a charge to operations in the fourth quarter
of $850,000 or 0.5% of revenues (See "Item 3 Legal Proceedings").
INTEREST EXPENSE. Interest expense for 1996 increased to $6.3 million from
$6.1 million for 1995. Although the Company's average indebtedness decreased to
$58.7 million for 1996 from $66.3 million in 1995, the Company's weighted
average interest rate increased to 8.8% for 1996 compared to 8.2% for 1995.
Previously capitalized interest charged to expense exceeded interest capitalized
during 1996 by $500,000.
PROVISION FOR INCOME TAXES. Income tax expense was $2.4 million for 1996
compared to an income tax benefit of $1.7 million for 1995. The Company's
effective tax rate increased to 37.0% for 1996 compared to an effective tax rate
benefit of 32.5% for 1995 due principally to the Company's inability to utilize
certain deductions for tax purposes during 1995. The year ended December 31,
1996 continued to have tax benefits associated with tax loss carryforwards that
lowered the effective tax rate for 1996 by 3.7%. These tax benefits were
exhausted in 1996.
15
<PAGE> 16
1995 COMPARED TO 1994
REVENUES. Revenues for 1995 increased to $178.1 million from $161.9 million
for 1994, an increase of $16.2 million or 10.0%. This increase was primarily the
result of closing 68 additional homes, a slight increase in the average sales
price of homes closed and increased sales of land and building supplies to
outside builders. In 1995 the Company closed 1,206 homes compared to 1,138 homes
in 1994. The average price of homes closed during 1995 increased to $141,000
from $139,900 for 1994. In 1995 land sales to outside builders increased to $6.5
million from $200,000 in 1994. Building supply sales decreased to $1.6 million
from $2.5 million for the same time periods.
GROSS PROFIT. During 1995 gross profit decreased by $5.6 million, or to
15.2% of revenues for 1995 compared to 20.2% of revenues for 1994. Of the
decline in gross profit, 2.3% is attributable to discounts offered by the
Company on the sales price of its homes. These discounts were given in order to
maintain an acceptable sales volume and to reduce the high number of homes in
inventory carried over from 1994. Another 0.7% of the decline in gross profit
was due to valuation adjustments to inventory and trade accounts receivable. In
addition, cost of sales reflect a significant increase in the amount of indirect
construction costs incurred in 1995 compared to 1994.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased to $26.2 million for 1995 compared to $26.4
million for 1994. As a percent of revenues, these expenses decreased to 14.7%
for 1995 compared to 16.3% for 1994.
INTEREST EXPENSE. Interest expense for 1995 increased to $6.1 million from
$3.0 million for 1994. The Company's average indebtedness increased to $66.3
million for 1995 from $57.8 million in 1994 and the Company's weighted average
interest rate increased to 8.2% for 1995 compared to 7.7% for 1994. The
remaining increase in interest expense is primarily due to a change in the
amount of capitalized interest from 1995 to 1994.
PROVISION FOR INCOME TAXES. An income tax benefit reduced the net loss for
1995 by $1.7 million compared to pro forma income tax expense of $1.2 million
for 1994. The Company's effective tax rate was 32.5% for 1995 compared to 37.9%
for 1994. The reason for the lower 1995 effective tax rate was the Company's
inability to utilize certain tax deductions during that year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital needs depend upon its sales volume, asset turnover,
land acquisition and inventory levels. The Company has incurred substantial
indebtedness in the past and expects to incur substantial indebtedness in the
future to fund its operations. Traditionally, the Company's principal sources of
capital have been bank borrowings and internally generated cash. However, when
available, the Company utilizes seller provided financing when purchasing land
for development. Additionally, during the first quarter of 1994, the Company
sold 2.3 million of its common shares in an initial public offering and realized
$23.5 million of net proceeds from that sale.
16
<PAGE> 17
SOURCES AND USES OF CASH
1996 COMPARED TO 1995
Net cash provided by operating activities during 1996 was $7.4 million
compared to $12.4 million for 1995. Net income for 1996 provided cash flow of
$4.0 million compared to a use of cash resulting from a loss of $3.5 million in
1995. These amounts were offset by increases in real estate inventories in 1996
of $1.0 million compared to reduced real estate inventories in 1995 of $14.9
million. In addition, $1.0 million in refundable income taxes were received in
1996. During 1996 accounts payable, deposits on homes under contract and accrued
liabilities provided cash flow of $1.9 million compared to providing cash flow
of $1.2 million in 1995. Additionally, increases in accounts receivable, prepaid
expenses and other assets resulted in a $100,000 use of cash in 1996 compared to
providing cash of $1.2 million in 1995. Net cash used in investing activities
decreased $500,000 because of a reduction in expenditures for property and
equipment, and increased proceeds from sale of property and equipment in 1996.
Net cash used in financing activities, which reflects payments on debt,
decreased to $7.2 million in 1996 from $11.7 million in 1995, principally as a
result of cash flow generated from operations.
SOURCES AND USES OF CASH
1995 COMPARED TO 1994
Net cash provided by operating activities increased $47.0 million from 1995
to 1994. Net cash provided by operating activities was $12.4 million in 1995
compared to net cash used in operating activities of $34.6 million in 1994. The
change was principally the result of a $14.9 million reduction in the Company's
real estate inventories in 1995 versus an additional investment in real estate
inventories of $38.7 million in 1994. The cash provided by inventory reductions
was offset by a $5.7 million reduction in income as the Company recorded a loss
of $3.5 million in 1995 versus net income of $2.2 million in 1994. Net cash used
in investing activities was $0.6 million in 1995 and $2.4 million in 1994. This
reflects a reduction in capital expenditures from the previous year. Cash used
in financing activities in 1995 was $11.7 million, all of which reflects
payments for the reduction of debt. In 1994 financing activities provided net
cash of $37.0 million, consisting principally of net public offering proceeds of
$23.5 million and a $17.6 million net increase in bank debt.
REAL ESTATE INVENTORIES
The Company's practice is to develop most of the lots on which it builds
its homes. Generally, the Company attempts to maintain a land inventory that
will be sufficient to meet its anticipated lot needs for the next three to five
years. At December 31, 1996, the Company either owned or was under contract to
purchase lots or land that could be developed into approximately 4,700 lots and
the Company controlled through option agreements an additional 2,800 lots.
Included in the 2,800 lots controlled through option agreements are 242 lots
owned by BRC. During 1996 the Company exercised options to purchase 1,400
controlled lots, including 335 lots from BRC. Other option agreements expire at
varying dates through July 31, 2000. The Company's decision to exercise any
particular option or otherwise acquire additional land is based upon an
assessment of a number of factors, including its existing land inventory at the
time, its evaluation of the future demand for its homes, and the restrictions on
land acquisition contained in its loan agreement.
Although total real estate inventories at December 31, 1996 and 1995
remained stable, the Company continued to decrease the amount of land it owned
during 1996 by maintaining a restrictive real estate acquisition policy.
Offsetting the decrease in land inventories was an increase in homes under
construction resulting from an increase in construction activity due to the
higher sales volume in 1996.
17
<PAGE> 18
The Company intends to maintain a limited number of unsold inventory homes
for customers who desire occupancy within 60 to 90 days. In addition, the
Company has a strategic policy that increases the number of unsold inventory
homes depending on the season of the year. Generally the Company begins
construction of more unsold inventory homes late in the year in order to have
them available for the peak buying period in the Spring. This strategy is also
designed to help balance the seasonal production cycle. The Company carefully
monitors the number of unsold inventory homes with the objective of preventing a
build-up of excess unsold inventory. The number of contracts cancelled by
customers with homes under construction impacts the number of unsold inventory
homes and may cause the number of unsold inventory homes to be more or less than
the number the Company feels is optimum.
At December 31, 1996, the Company had 140 unsold inventory homes, including
26 condominiums, in various stages of construction which represented an
aggregate investment of $8.6 million, versus 98 unsold inventory homes,
including 39 condominiums, at December 31, 1995 which represented an aggregate
investment of $7.7 million. Unsold inventory homes are not reflected in sales or
backlog. Also included in real estate inventories are building materials and
supplies stored at the Company's lumber yard site.
Additionally, during 1996, the Company sold 84 lots and 14.6 acres of land
to other builders for $2.4 million. The Company expects to continue to reduce
its overall investment in land inventories to the extent that it is
strategically prudent to do so.
SELLER-PROVIDED DEBT
The Company had $2.0 million and $5.9 million of seller-provided term debt
outstanding at December 31, 1996 and 1995, respectively. The Company did not add
any new seller-provided term debt during 1996 primarily because new land
acquisitions were very limited. The seller-provided term debt outstanding at
December 31, 1996 carried interest rates of 8.0% and prime and generally matures
in three to four years.
LAND PURCHASE COMMITMENTS
At December 31, 1996, the Company had commitments to purchase 94
residential lots and unimproved land at an aggregate cost of $2.6 million, all
of which is expected to be funded during 1997. In addition, at December 31,
1996, the Company had $11.0 million of cancelable obligations to purchase
residential lots and unimproved land in which $0.6 million in good faith
deposits had been invested by the Company. Included in the $11.0 million of
cancelable purchase obligations are $1.3 million of purchase options with BRC.
The majority of the land subject to cancelable obligations is for post 1997
development activities. The Company expects to fund its 1997 capital
requirements for land acquisition and development and its obligations under
purchase contracts and mortgage notes from the borrowing capacity available
under its bank credit facilities.
CREDIT FACILITIES
At December 31, 1996, the Company had $11.2 million available under the
revolving credit facility, after adjustment for borrowing base limitations.
However, the borrowing availability under the revolving line of credit could
increase depending upon the Company's utilization of the proceeds. The revolving
credit facility matures on June 30, 1998, and is collateralized by mortgages and
security interests which the Company has granted to the banks on substantially
all of its property and assets. The Company believes that its credit capacity is
sufficient to meet expected seasonal demands in construction activity.
18
<PAGE> 19
Borrowings under the revolving credit facility bear interest at the prime
commercial rate of interest of the lead bank, which was 8.25% at December 31,
1996. The Company has entered into various agreements which effectively limit
its exposure to interest rate fluctuations on those portions of borrowings under
floating rate interest arrangements. These agreements provide effective interest
rate caps of 9.0% on borrowings of $18.0 million through September 15, 1997 and
on an additional $10.0 million of borrowings through December 5, 1997. The
Company's interest rate floor (collar) agreement requires that it pay the
equivalent of a minimum interest rate of 6.0% on $28.0 million of borrowings
through December 5, 1997.
Under the provisions of the revolving credit facility, the Company must
adhere to certain restrictive covenants, including restrictions on the Company's
ability to purchase land, build inventory homes, pay dividends and incur other
borrowings. The most restrictive of these covenants relate to the maintenance of
a total liabilities to tangible net worth ratio, an uncommitted land holdings to
tangible net worth ratio and a minimum tangible net worth. The Company is
required to maintain a total liabilities to tangible net worth ratio of 3.25 to
1.00. However, if the Company's total liabilities to tangible net worth ratio
exceeds 2.25 to 1.00 at the end of any quarter, the Company must pay escalating
fees. In the event total liabilities to tangible net worth is equal to or less
than 2.25 to 1.00 at the end of each quarter, the Company is required to pay a
fee on the unused portion of the revolving credit line. These fees are included
in interest expense. The Company had a total liabilities to tangible net worth
ratio of 2.17 to 1.00 at December 31, 1996 compared to 2.68 to 1.00 at December
31, 1995.
On December 20, 1996, the Company reached agreement with its bank lending
group to extend the term of its revolving credit facility from June 30, 1997 to
June 30, 1998. Under the new agreement, the restriction limiting acquisition of
land was eliminated in favor of the ratio of uncommitted land holdings to
tangible net worth being lowered to 1.75 to 1.00 from 2.00 to 1.00. At December
31, 1996 the Company's ratio of uncommitted land holdings to tangible net worth
was 1.50 to 1.00. All other terms and conditions of the loan agreement remained
the same.
The revolving credit facility requires the Company to maintain a minimum
tangible net worth beginning December 31, 1996 of $30.0 million. At December 31,
1996, the Company had a tangible net worth of $32.7 million.
INFLATION
The Company is not always able to reflect all of its cost increases in the
prices of its homes because competitive pressures and other factors require it
in many cases to maintain or discount those prices. After a sales contract has
been accepted, the Company is generally able to maintain costs with
subcontractors from the date the sales contract is accepted until the date
construction is completed; however, unanticipated additional costs may be
incurred between the date a sales contract is accepted and the date construction
is completed. In addition, during periods of high construction activities,
additional costs may be incurred to obtain subcontractor availability when
certain trades are not readily available, which additional costs could result in
lower gross profits.
19
<PAGE> 20
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------------------------------
TO THE BOARD OF DIRECTORS
AND SHAREHOLDERS
OF BORROR CORPORATION
We have audited the accompanying balance sheets of Borror Corporation as of
December 31, 1996 and 1995 and the related statements of income, changes in
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Borror Corporation as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Columbus, Ohio
February 7, 1997,
except for note 9 as to
which the date is March 18, 1997
20
<PAGE> 21
ITEM 8 FINANCIAL STATEMENT AND SUPPLEMENTARY DATA
------------------------------------------
BORROR CORPORATION
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
==================================================================================
Year ended December 31,
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenues (Note 1) $ 175,579 $ 178,112 $ 161,895
Cost of real estate sold 136,498 151,010 129,194
--------- --------- ---------
Gross profit 39,081 27,102 32,701
Selling, general & administrative
(Notes 7, 8, 10 & 12) 25,475 26,215 26,368
Settlement of litigation (Note 9) 850
--------- --------- ---------
Income from operations 12,756 887 6,333
Interest expense (Note 5) 6,345 6,069 3,018
--------- --------- ---------
Income (loss) before income taxes 6,411 (5,182) 3,315
Provision for income taxes (Note 11) 2,374 (1,684) 1,155
--------- --------- ---------
Net income (loss) $ 4,037 (3,498) $ 2,160
========= ========= =========
Pro forma information (Note 11): $ 3,315
Income before income taxes 1,326
Provision for income taxes ---------
Net Income $ 1,989
=========
Earnings (loss) per share $ 0.65 $ (0.56) $ 0.35
========= ========= =========
Weighted average shares outstanding 6,220,033 6,201,387 5,705,942
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements
21
<PAGE> 22
BORROR CORPORATION
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
=========================================================================
<TABLE>
<CAPTION>
December 31,
1996 1995
------- -------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 252 $ 207
Notes and accounts receivable (Notes 3 & 10):
Trade 1,092 1,469
Due from financial institutions for residential closings 589 421
Refundable federal income tax 1,019
Real estate inventories (Notes 4 & 10):
Land and land development costs 49,990 51,773
Homes under construction 43,049 40,749
Other 2,351 2,416
------- -------
Total real estate inventories 95,390 94,938
------- -------
Prepaid expense 459 217
Other assets 67 504
Deferred income taxes (Note 11) 1,270 840
Property and equipment, at cost 8,948 9,197
Less accumulated depreciation (4,241) (3,781)
------- -------
Total property and equipment 4,707 5,416
------- -------
Total assets $103,826 $105,031
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, trade $ 6,255 $ 6,444
Deposits on homes under contract 1,825 1,697
Accrued liabilities 8,332 6,333
Note payable, banks (Note 5) 49,770 53,051
Term debt (Note 6) 4,793 8,731
------- -------
Total liabilities 70,975 76,256
------- -------
Commitments and contingencies (Notes 4, 5, 7 & 9)
Shareholders' equity (Note 1)
Common shares, without stated value, 12,000,000 shares
authorized: 6,239,153 and 6,213,870 shares issued
and outstanding, respectively 30,526 30,416
Less deferred compensation (Note 12) (107) (36)
Retained earnings (deficit) 2,432 (1,605)
------- -------
Total shareholders' equity 32,851 28,775
------- -------
Total liabilities and shareholders' equity $103,826 $105,031
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE> 23
BORROR CORPORATION
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
===============================================================================
<TABLE>
<CAPTION>
Common Shares
------------------------------------ Retained
Deferred Earnings Net
Shares Amount Compensation (Deficit) Assets Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $ 9,427 $ 9,427
Net income $ 1,893 267 2,160
Interdivisional payments (3,056) (3,056)
Establishment of deferred taxes (Note 11) 103 103
Exchange of net assets for
common shares of
Borror Corporation (Note 1) 3,882,000 $ 6,741 (6,741)
Initial public offering (Note 1) 2,300,000 24,587 24,587
Offering costs (1,107) (1,107)
Shares issued - Shares awarded 9,020 99 99
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 6,191,020 30,320 1,893 32,213
Net loss (3,498) (3,498)
Shares issued - Incentive Stock Plan (Note 12) 12,850 96 96
Deferred compensation (Note 12) 10,000 $ (36) (36)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 6,213,870 30,416 (36) (1,605) 28,775
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 4,037 4,037
Shares issued - Incentive Stock Plan (Note 12) 25,283 110 (93) 17
Deferred Compensation (Note 12) 22 22
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 6,239,153 $ 30,526 $ (107) $ 2,432 $ - $32,851
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE> 24
BORROR CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- -===============================================================================
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------
1996 1995 1994
---------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 4,037 $ (3,498) $ 2,160
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating activities:
Depreciation and amortization 975 1,402 1,464
Loss on disposal of property and equipment 107
Write-down of notes receivable 152 341
Write-down of real estate inventories 549 850 10
Issuance of common shares for compensation 39 54 99
Deferred income taxes (430) (665) (72)
Changes in assets and liabilities:
Decrease in notes and accounts receivable 57 842 4
Decrease (increase) in refundable federal income
tax 1,019 (1,019)
(Increase) decrease in real estate inventories (1,001) 14,915 (38,714)
(Increase) decrease in prepaid expenses (242) 72 (271)
Decrease in other assets 235 242 48
(Decrease) increase in accounts payable (189) (4,056) 1,584
Increase (decrease) in deposits on homes under
contract 128 231 (69)
Increase (decrease) in accrued liabilities 1,999 2,660 (837)
------ ------ ------
Net cash provided by (used in) operating
activities 7,435 12,371 (34,594)
------ ------ ------
Cash flows from investing activities:
Proceeds from sales of property and equipment 151 14
Purchase of property and equipment (322) (625) (2,409)
------ ------ ------
Net cash used in investing activities (171) (625) (2,395)
------ ------ ------
Cash flows from financing activities:
Payments on note payable, banks (3,281) (10,304) (24,587)
Proceeds from note payable, banks 42,208
Payments on term debt (3,938) (1,437) (1,048)
Proceeds from issuance of common shares 23,480
Interdivisional payments (3,056)
------ ------ ------
Net cash (used in) provided by financing
activities (7,219) (11,741) 36,997
------ ------ ------
Net increase in cash and cash equivalents 45 5 8
Cash and cash equivalents, beginning of period 207 202 194
------ ------ ------
Cash and cash equivalents, end of period $ 252 $ 207 $ 202
====== ====== ======
Supplemental disclosures of cash flow information:
Interest paid (net of amounts capitalized) $ 1,367 $ 1,310 $ 1,825
====== ====== ======
Income taxes paid $ 1,878 $ 88 $ 1,554
====== ====== ======
Supplemental disclosures of noncash financing activities:
Land acquired by purchase contract or seller financing $ 3,160 $ 8,950
====== ======
Sale of land for note receivable $ 692
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE> 25
NOTES TO THE FINANCIAL STATEMENTS
1. BUSINESS OPERATIONS AND BASIS OF PRESENTATION:
Borror Corporation (the "Company") was incorporated in October 1993 as BRC
Services, Inc. and on January 19, 1994 changed its corporate name to Borror
Corporation. Prior to the Company's initial public offering of common shares in
March 1994, the business of the Company was operated as part of the homebuilding
and related divisions (the "Homebuilding Divisions") of Borror Realty Company
("BRC"), an Ohio corporation incorporated in 1946. The Company operates as a
single and multi-family homebuilder in Central Ohio.
Effective March 16, 1994 and March 23, 1994, the Company offered and sold
2,000,000 and 300,000 common shares, respectively, for $11.50 per share in an
initial public offering. Simultaneously with the consummation of the public
offering on March 16, 1994, and pursuant to a Corporate Exchange and
Subscription Agreement with BRC, the Company issued 3,882,000 common shares to
BRC in exchange for substantially all the operating assets and liabilities of
the Homebuilding Divisions, but excluding certain real estate, investments in
joint venture partnerships and other assets. The information related to these
divisions has been combined up to the closing date of the offering and included
with the Company from that date to December 31, 1996. The exchange transaction
represented a transfer of assets between entities under common control and, as
such, the assets and liabilities were transferred and accounted for at BRC's
historical cost in a manner similar to a pooling of interests. Transactions
between the Homebuilding Divisions have been eliminated in the preparation of
the combined financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS: For purposes of the statements of cash flows,
all highly liquid investments purchased with an original maturity of three
months or less are considered to be cash equivalents.
REAL ESTATE INVENTORIES: Real estate inventories are stated at the lower of
cost or net realizable value. Net realizable value represents estimates, based
on management's present plans and intentions, of sales prices less development
and disposition costs, assuming that disposition occurs in the normal course of
business. Annually, the Company reviews the estimated carrying values of its
properties on an individual project basis.
During March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of." The
Statement requires that long-lived assets and certain identifiable intangibles
be reviewed for impairment whenever events or changes in circumstances indicate
that full recoverability is questionable. Management evaluates the
recoverability of real estate inventories and other long-lived assets using
several factors in the valuation including, but not limited to, management's
plans for future operations, recent operating results and projected cash flows.
The Company adopted SFAS No. 121 in 1996, the adoption of which did not have a
material adverse effect on the Company's results of operations or financial
condition.
Land and land development costs are allocated to development phases based
on the total number of lots or acres expected to be developed within each
subdivision. As each development phase is completed, land development costs,
including capitalized interest and real estate taxes, are then allocated to
individual lots.
Homes under construction include lot costs, construction costs, capitalized
interest and indirect costs related to development and construction activities.
Indirect costs that do not relate to development and construction activities,
including general and administrative expenses, are charged to expense as
incurred.
Other inventories consist principally of lumber and building supplies.
25
<PAGE> 26
PROPERTY AND EQUIPMENT: Depreciation and amortization are recognized on
straight-line and declining-balance methods at rates adequate to amortize costs
over the estimated useful lives of the applicable assets. Depreciation expense
was $773,000, $1,204,000 and $1,221,000 for the years ended December 31, 1996,
1995 and 1994, respectively.
Maintenance, repairs and minor renewals are charged to expense as incurred
while major renewals and betterments are capitalized and amortized. The asset
cost and accumulated depreciation is removed for assets sold or retired, and any
resulting gain or loss is reflected in operations.
WARRANTY COSTS: The Homebuilding Divisions provide a two-year limited
warranty on materials and workmanship and a twenty-five year warranty against
major structural repairs. An estimated amount of warranty cost is provided for
each home at the date of closing based on actual warranty experience. Warranty
expense was $2,052,000, $1,603,000 and $1,800,000 for the years ended December
31, 1996, 1995 and 1994, respectively. Accrued warranty cost was $1,060,000 and
$672,000 at December 31, 1996 and 1995, respectively.
INCOME TAXES: Prior to the Company's initial public offering and exchange
transaction with BRC, income of the Homebuilding Divisions was taxed under
Subchapter S of the Internal Revenue Code of 1986, as amended. Accordingly, the
Homebuilding Divisions were not subject to federal or state income taxes.
The Company is taxed as a C Corporation for federal income tax purposes.
The Company has adopted SFAS No. 109 "Accounting for Income Taxes" (See Note
11).
INCOME RECOGNITION ON SALES OF REAL ESTATE: The Company recognizes revenues
from the sale of homes at the time title is transferred to the buyer. Accounts
receivable due from financial institutions represent payments to be received on
completed closings.
CAPITALIZATION OF INTEREST: The Company capitalizes the cost of interest
related to construction costs incurred during the construction period of homes
and land development costs incurred while development activities on undeveloped
land are in process. The summary of total interest is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Interest incurred............................... $5,804,000 $6,891,000 $4,451,000
Interest capitalized............................ (4,482,000) (4,712,000) (2,696,000)
--------- --------- ---------
Interest expensed directly...................... 1,322,000 2,179,000 1,755,000
Previously capitalized interest charged to
expense....................................... 5,023,000 3,890,000 1,263,000
--------- --------- ---------
Total interest expense.......................... $6,345,000 $6,069,000 $3,018,000
========= ========= =========
Capitalized interest in ending inventory......... $2,153,000 $2,874,000 $2,696,000
========= ========= =========
</TABLE>
DEFERRED COSTS: Fees and costs incurred in connection with financing
agreements are capitalized as other assets and amortized over the terms of the
respective agreements. Amortization expense was $202,000, $192,000 and $243,000
for the years ended December 31, 1996, 1995 and 1994, respectively.
ADVERTISING COSTS: The Company expenses advertising costs when incurred.
Advertising expense was $1,193,000, $1,272,000 and $1,588,000 for the years
ended December 31, 1996, 1995 and 1994, respectively.
26
<PAGE> 27
UTILIZATION 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 prior year information has been reclassified
to conform with the current year presentation.
3. NOTE RECEIVABLE:
Included in trade notes and accounts receivable at December 31, 1996 is a
$346,000 mortgage note receivable due on or before December 15, 1997 that is
collateralized by real estate. The mortgage note receivable was originally made
on December 15, 1995 in the amount of $692,000. The note bears interest at prime
and interest is payable quarterly. The note receivable resulted from the sale of
land originally purchased for the Company's use.
4. LAND PURCHASE COMMITMENTS:
Unconditional purchase contracts for residential lots at December 31, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Number of lots......................... 94 205
========= =========
Purchase price......................... $2,639,000 $3,493,000
Less deposits.......................... (6,000) (31,000)
--------- ---------
Net land purchase commitments.......... $2,633,000 $3,462,000
========= =========
</TABLE>
In addition, at December 31, 1996, the Company had entered into cancelable
contracts to purchase residential lots and unimproved land in Central Ohio. The
remaining future minimum obligations under cancelable contracts are as follows:
<TABLE>
<CAPTION>
Minimum
Obligations
-----------
<S> <C>
1997.................................................... $4,036,000
1998.................................................... 1,758,000
1999.................................................... 2,927,000
2000.................................................... 1,007,000
---------
$9,728,000
=========
</TABLE>
The Company also has the right to acquire lots subject to option contracts
with BRC. At December 31, 1996, BRC owned 93 finished lots and unimproved land
which the Company expects will be developed into an estimated 149 finished lots.
The approximate cost of all lots under option from BRC is $5.6 million.
27
<PAGE> 28
5. NOTES PAYABLE, BANKS:
Notes payable, banks at December 31, 1996 and 1995 consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Revolving note payable to banks,
principal due June 30, 1998,
with interest payable monthly............. $49,770,000 $53,051,000
========== ==========
</TABLE>
The Company's amended and restated loan agreement provides for a revolving
credit facility of $90.0 million. Up to $10 million of this facility may be used
to issue standby letters of credit. This credit facility is collateralized by
mortgages and security interests on substantially all of the Company's property
and assets. Borrowings under the credit facility bear interest at the prime
commercial rate of interest of the lead bank except that $15.0 million of
borrowings bore interest at 7.1% per annum until August 27, 1995.
The Company has entered into various agreements which effectively limit its
exposure to interest rate fluctuations on those portions of the borrowings under
floating rate interest arrangements. These agreements provide effective interest
rate caps of 9.0% on $10.0 million of borrowings through December 5, 1997 and
9.0% on $18.0 million of borrowings through September 15, 1997. The Company's
interest rate floor (collar) agreement requires that it pay the equivalent of a
minimum interest rate of 6.0% on $28.0 million of borrowings through December 5,
1997.
Under the provisions of the revolving credit facility, the Company must
adhere to certain restrictive covenants, including restrictions on the Company's
ability to purchase land, build inventory homes, pay dividends and incur other
borrowings. The most restrictive of these covenants relate to the maintenance of
a total liabilities to tangible net worth ratio, an uncommitted land holdings to
tangible net worth ratio, and a minimum tangible net worth. The Company is
required to maintain a total liabilities to tangible net worth ratio of 3.25 to
1.00. However, if the Company's total liabilities to tangible net worth ratio
exceeds 2.25 to 1.00 at the end of any quarter, the Company must pay escalating
fees. In the event total liabilities to tangible net worth is equal to or less
than 2.25 to 1.00 at the end of each quarter, the Company is required to pay a
fee on the unused portion of the revolving credit line These fees are included
in interest expense. The Company had a total liabilities to tangible net worth
ratio of 2.17 to 1.00 at December 31, 1996.
On March 19, 1996, the Company amended its revolving credit facility. The
primary impact of this amendment was to require the Company to maintain a
minimum tangible net worth as follows: for the period beginning January 1, 1996,
and continuing through and including September 29, 1996, not less than $27.0
million; beginning September 30, 1996, and continuing through and including
December 31, 1996, not less than the greater of (i) $27.5 million or (ii) the
sum of $27.0 million plus an amount equal to 75% of the Company's net income
after taxes for the period January 1, 1996 through September 30, 1996; beginning
December 31, 1996, and continuing at all times thereafter not less than the
greater of (i) $29.0 million or (ii) the sum of $27.0 million plus an amount
equal to 75% of the Company's net income after taxes for the fiscal year ending
December 31, 1996. At December 31, 1996, the Company had a tangible net worth of
$32.7 million. In addition, the provision under which the Company shall not
incur a loss in any five consecutive fiscal quarters was amended to become
effective with the quarter ending June 30, 1995.
On December 20, 1996, the Company reached agreement with its bank lending
group to extend the term of its revolving credit facility from June 30, 1997 to
June 30, 1998. Under the new agreement, the restriction limiting acquisition of
land was eliminated in favor of the ratio of uncommitted land holdings to
tangible net worth being lowered to 1.75 to 1.00 from 2.00 to 1.00. At December
31, 1996, the Company's ratio of uncommitted land holdings to tangible net worth
was 1.50 to 1.00. All other terms and conditions of the loan agreement remained
the same.
28
<PAGE> 29
The provisions of the Company's bank credit facilities limit the amount of
dividends that the Company may pay during any calendar year to 25% of the
Company's net income after taxes for such year.
<TABLE>
<CAPTION>
Information regarding the bank borrowings is summarized as follows:
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Borrowings outstanding:
Maximum amount........................................... $62,998,000 $80,836,000 $71,053,000
Average amount........................................... $58,739,000 $66,305,000 $57,781,000
Weighted average daily interest rate during the year..... 8.8% 8.2% 7.7%
Interest rate at December 31............................. 8.3% 8.5% 8.7%
</TABLE>
6. TERM DEBT:
Term debt consisted of the following as of December 31:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
9.75% Mortgage note payable, principal and interest payable in monthly
installments of $26,000 through January 1998 with the remaining balance
due at term................................................................ $2,763,000 $2,801,000
Mortgage notes payable with interest rates at 8% and prime, due
in installments through February 2000, collateralized by real estate....... 2,030,000 5,928,000
Other, with an interest rate of 13.5% due in monthly installments through
1996, collateralized by equipment.......................................... 2,000
--------- ---------
Total term debt............................................................... $4,793,000 $8,731,000
========= =========
</TABLE>
Aggregate maturities of note payable, banks and term debt in years
subsequent to December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Note Payable, Term
Banks Debt Total
---------- --------- ----------
<S> <C> <C> <C>
1997 ..................................... $ 634,000 $ 634,000
1998 ..................................... $49,770,000 3,313,000 53,083,000
1999 ..................................... 485,000 485,000
2000 ..................................... 361,000 361,000
---------- --------- ----------
$49,770,000 $ 4,793,000 $54,563,000
========== ========= ==========
</TABLE>
The note payable, banks of $49,770,000 that matures June 30, 1998 reflects
the current expiration of the revolving credit facility. The Company intends
during 1997 to complete a new revolving credit facility.
29
<PAGE> 30
7. LEASE COMMITMENTS:
Rent expense charged to operations is primarily for model homes, vehicles,
equipment and office facilities, including month-to-month leases and
noncancelable commitments. Rent expense amounted to $1,127,000, $1,110,000 and
$515,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
Minimum rental commitments due under noncancelable leases for vehicles,
equipment, and office facilities are as follows:
<TABLE>
<CAPTION>
Minimum
Rentals
-------
<S> <C>
1997 .................................................... $528,000
1998 .................................................... 272,000
1999 .................................................... 113,000
2000 .................................................... 19,000
2001 .................................................... 2,000
-------
$934,000
=======
</TABLE>
8. RETIREMENT PLAN:
The Company maintains a defined contribution plan which provides a base
Company contribution of 2% of a qualified employee's compensation and a Company
matching contribution of one-quarter of the employee's voluntary deferral not to
exceed 1.5%. Substantially all employees are covered by the plan after one year
of service. The Company's contribution to the plan amounted to $279,000,
$281,000 and $257,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
9. COMMITMENTS AND CONTINGENCIES:
On March 18, 1997, the United States District Court for the Southern
District of Ohio held a hearing to consider approval of a proposed settlement of
a class action that had been filed on August 2, 1995 (Case No. C2-95-746),
against the Company, certain of its present and former directors and officers,
and the lead underwriters in its initial public offering. There were no
objections to the proposed settlement and no class members requested exclusion
from the settlement. A final order from the Court concerning the proposed
settlement is expected shortly. The class action had alleged that the
registration statement for the initial public offering contained false and
misleading statements and asserted violations of Sections 11, 12(2) and 15 of
the Securities Act of 1933. Under the settlement, the defendants agreed to
establish a fund of $2.3 million to pay certain costs, expenses and attorney
fees and to make a distribution to members of the plaintiff-class. The Company's
contribution to the settlement resulted in a pre-tax charge to fourth quarter
1996 earnings of $850,000. In entering into the settlement, neither the Company
nor the other defendants admitted liability. Nevertheless, the Company believes
that settlement of the class action was in its best interests in order to avoid
further costs of litigation.
The Company has issued $5.0 million in irrevocable letters of credit at
December 31, 1996 to municipalities to secure performance and the completion of
certain land development activities.
30
<PAGE> 31
10. RELATED PARTY TRANSACTIONS:
Cash accounts for the Homebuilding Divisions were controlled on a
centralized basis by BRC through the date of the initial public offering, and
accordingly, cash receipts and disbursements were received or made through BRC.
Transactions between or on behalf of the Homebuilding Divisions, including
intercompany advances and shareholder distributions, are recorded in the
combined balance sheets as adjustments to net assets.
The Company purchased finished lots, pursuant to a Land Option Agreement,
in certain communities which were developed by BRC and other homebuilders under
various joint venture agreements. Such purchases totaled $8,155,000, $6,485,000
and $4,487,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
The Company also purchased from Wilcox Road Associates additional lots that
amounted to $648,000, $760,000, and $305,000 in 1996, 1995 and 1994,
respectively. Wilcox Road Associates is an Ohio joint venture partnership of
which BRC is the managing partner and in which it has a 50% interest.
The Company acquired printing services from a printing company principally
owned by members of the Borror family. Such services aggregated $177,000,
$166,000 and $315,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
Under the Model Home Lease Agreement dated January 20, 1994, effective with
the initial public offering, the Company leases model homes from BRC. Lease
expense for the years ended December 31, 1996, 1995 and 1994 was $89,000,
$168,000 and $279,000, respectively.
Under the Employee Lease Agreement dated January 20, 1994, effective with
the initial public offering, the Company leased to BRC the employees necessary
to operate BRC's business. The Employee Lease Agreement was terminated December
31, 1995. During 1995 and 1994, BRC reimbursed the Company $183,000 and
$181,000, respectively for the costs associated with the leased employees. In
addition BRC paid the Company $21,400, $19,800 and $4,750 in 1996, 1995 and
1994, respectively for miscellaneous services performed by Company personnel.
The Company and BRC have also entered into operating lease agreements in
which the Company leases space in a shopping center owned by BRC. Lease expense
for the years ended December 31, 1996, 1995 and 1994 was $69,000, $84,000 and
$73,000, respectively.
The Company provides land development and management services to certain
joint ventures in which one of the partners in the joint venture is BRC. Fees
charged for the years ended December 31, 1996, 1995 and 1994 were $571,000,
$234,000 and $700,000, respectively.
At December 31, 1995, the Company had a net receivable of $82,000 from
joint ventures in which BRC is a partner. There were no inter-company
receivables or payables at December 31, 1996.
31
<PAGE> 32
11. INCOME TAXES
Prior to the Company's initial public offering and exchange transaction
with BRC, the income of the Homebuilding Divisions was taxed under Subchapter S
of the Internal Revenue Code of 1986, as amended. Accordingly, the Homebuilding
Divisions were not subject to federal or state income taxes.
On March 16, 1994, in connection with the Company's initial public
offering, the Company adopted SFAS No. 109 "Accounting for Income Taxes". SFAS
No. 109 required the Company to recognize a deferred tax asset for cumulative
temporary differences between financial reporting and tax reporting. This
deferred tax asset was based on the cumulative temporary differences as of the
date of the initial public offering, primarily related to reserves not currently
deductible, and approximated $103,000.
The income tax provision presented in the accompanying statements of
income, represent the income tax expense (benefit) for the periods since the
Company acquired the operating assets and liabilities of the Homebuilding
Divisions.
The Company had net operating loss carryforwards of $826,000 for federal
purposes and $4.0 million for state purposes as of December 31, 1995. These net
operating loss carryforwards were exhausted during 1996.
The provision for income taxes consists of the following for the years
ended December 31, 1996, 1995 and the period March 16, 1994 through December 31,
1994:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Currently payable (refundable):
Federal.......................................... $2,492,000 $(1,019,000) $1,081,000
State and local.................................. 312,000 146,000
Deferred:
Federal.......................................... (231,000) (665,000) (67,000)
State............................................ (199,000) (5,000)
--------- --------- ---------
Income tax expense (benefit)..................... $2,374,000 $(1,684,000) $1,155,000
========= ========= =========
</TABLE>
Deferred income taxes reflect the impact of "temporary differences" between
the amount of assets and liabilities for financial reporting purposes and such
amounts as determined by tax regulations. These temporary differences are
determined in accordance with SFAS No. 109.
32
<PAGE> 33
The components of the net deferred tax asset at December 31, are as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Assets:
Valuation reserves............................................. $ 330,000 $ 112,000
Accrued expenses............................................... 969,000 556,000
Net operating loss benefit..................................... 281,000
Other.......................................................... 52,000 120,000
--------- ---------
Gross deferred tax assets.................................... $1,351,000 $1,069,000
--------- ---------
Liabilities:
Escrow receivable.............................................. $ 137,000
Property and equipment......................................... $ 24,000 35,000
Other.......................................................... 57,000 57,000
--------- ---------
Gross deferred tax liabilities............................... $ 81,000 $ 229,000
--------- ---------
Net deferred income taxes as recorded in the balance sheet....... $1,270,000 $ 840,000
========= =========
</TABLE>
A reconciliation of the Federal corporate income tax rate and the effective tax
rate on income taxes is summarized below for the years ended December 31, 1996,
1995 and the period from March 16, 1994 through December 31, 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory income tax rate........................................ 34.0% 34.0% 34.0%
Permanent differences............................................ .3% .2% 1.4%
State and local taxes, net of Federal benefit.................... 1.0% 3.2%
Other............................................................ 1.7% (1.7)% (0.7)%
---- ---- ----
Effective income tax rate...................................... 37.0% 32.5% 37.9%
==== ==== ====
</TABLE>
33
<PAGE> 34
12. INCENTIVE STOCK AND EXECUTIVE DEFERRED COMPENSATION PLANS
In March 1994, the Company adopted the Borror Corporation Incentive Stock
Plan. The Plan is administered by the Compensation Committee of the Board of
Directors, and provides for grants of performance awards of Common Shares,
restricted Common Shares, incentive stock options and non-qualified options for
the purpose of attracting, motivating, and retaining key employees and eligible
directors. A maximum of 500,000 Common Shares have been reserved for issuance
under the Plan. The Plan provides that grants shall include certain terms and
conditions and be subject to certain restrictions as provided for under
applicable provisions of the Internal Revenue Code and federal securities laws.
In general, grants of options are subject to vesting schedules at twenty percent
a year, set forth an exercise price that is equal to the fair market value on
the grant date (110% of the fair market value for 10% shareholders), and must be
exercised within ten years of the grant date (5 years for 10% shareholders).
In December 1994, the Company adopted a non-qualified Executive Deferred
Compensation Plan for directors and certain executives. Under the Plan,
participants may defer a portion of their compensation (20% of total base and
bonus for employees and 100% of director fees). At December 31 of each year, the
Company provides a matching contribution of 25% of the amount deferred in a
given year by a participant, provided that the Company's matching contribution
will not exceed $2,500 in any year. The Company's contribution vests in 20%
increments over a five-year period. As of the date the contribution or match is
made, the amount is converted to theoretical common shares and will be adjusted
in future periods based on the market value of the Common Shares, similar to
stock appreciation rights.
The Company applies APB Opinion 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for its Incentive Stock Plan. The Company did recognize expense for the
Executive Deferred Compensation Plan of $56,000 and $13,000 for the plan years
ended December 31, 1996 and 1994. The Company did not recognize any expense for
the plan year ended December 31, 1995. Had compensation cost for the Company's
Incentive Stock Plan been determined based on the fair value at the grant dates
for awards under that plan consistent with the method of SFAS No. 123
"Accounting for Stock-Based Compensation", the Company's net income and earnings
per share would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C> <C>
Net Income (loss) Pro forma $3,977,000 $(3,534,000)
As reported $4,037,000 $(3,498,000)
Earnings (loss) Per Share Pro forma $0.64 $(0.57)
As reported $0.65 $(0.56)
</TABLE>
In determining the pro forma amount of stock-based compensation on a basis
consistent with SFAS No. 123, the fair value of each option grant is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1996 and 1995,
respectively: no dividend yield; expected volatility of 27.0% for both years;
risk-free interest rate of 5.6% for the 1996 Plan options and 7.8% for the 1995
Plan options; and expected life of 6 years for the 1996 and 1995 Plan options.
34
<PAGE> 35
A summary of the status of the Company's Incentive Stock Plan as of
December 31, 1996, 1995 and 1994, respectively, and changes during the years
then ended is presented below:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------- ------------------------- -------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Fixed Options Shares Price Shares Price Shares Price
- ------------- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 204,000 $4.44 135,000 $11.50 -0- -0-
Granted 268,500 $3.27 315,000 $ 4.53 150,000 $11.50
Expired (4,200) $4.14
Forfeited (39,800) $3.91 (111,000) $ 4.70
Cancelled (135,000) $11.50 (15,000) $11.50
Exercised -------- -------- ------
Outstanding at end of year 428,500 $3.77 204,000 $ 4.44 135,000 $11.50
Options exercisable at
year-end 85,700 - -
Weighted-average fair
value of options granted $1.27 $ 1.99 -
during the year
</TABLE>
The following table summarizes information about fixed stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
Weighted
Average
Number Remaining Number
Outstanding Contractual Exercisable
Exercise Prices at 12/31/96 Life at 12/31/96
--------------- ----------- ----------- -----------
<S> <C> <C> <C>
$3.25 237,000 9 Years 47,400
3.88 20,000 9 Years 4,000
4.13 7,500 9 Years 1,500
4.25 5,000 8 Years 1,000
4.50 159,000 8 Years 31,800
------- ------
428,500 85,700
</TABLE>
35
<PAGE> 36
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Quarter Ended
March 31, June 30, September 30, December 31,
-------- -------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues:
1996........................................ $36,318 $41,524 $45,916 $51,821
1995........................................ 34,556 46,221 47,764 49,571
Gross Profit:
1996........................................ $ 7,583 $ 9,317 $10,535 $11,646
1995........................................ 6,699 6,622 7,311 6,520
Income (Loss) before income taxes:
1996........................................ $ 252 $ 1,711 $ 2,308 $ 2,140
1995........................................ (1,244) (2,206) (1,386) (346)
Net Income (Loss):
1996........................................ $ 152 $ 1,086 $ 1,418 $ 1,381
1995........................................ (835) (1,530) (900) (233)
Earnings (Loss) Per Share:
1996........................................ $ 0.02 $ 0.17 $ 0.23 $ 0.22
1995........................................ (0.13) (0.25) (0.15) (0.04)
</TABLE>
36
<PAGE> 37
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
-----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
Not applicable.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
In accordance with General Instruction G(3), the information contained under the
caption "BOARD OF DIRECTORS AND MANAGEMENT" in the Company's definitive Proxy
Statement for the Annual Meeting of Shareholders to be held on May 7, 1997, to
be filed with the Securities and Exchange Commission pursuant to Regulation 14A
promulgated under the Securities Exchange Act of 1934, is incorporated herein by
reference. The Registrant is not required to make any disclosure pursuant to
Item 405 of Regulation S-K.
ITEM 11 EXECUTIVE COMPENSATION
In accordance with General Instruction G(3), the information contained under the
captions "COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS" and "COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" in the Company's definitive
Proxy Statement to be filed with the Securities and Exchange Commission pursuant
to Regulation 14A promulgated under the Securities Exchange Act of 1934, is
incorporated herein by reference. Neither the report of the Compensation
Committee of the Company's Board of Directors on executive compensation nor the
performance graph included in the Company's definitive Proxy Statement for the
Annual Meeting of Shareholders to be held on May 7, 1997, shall be deemed to be
incorporated herein by reference.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
In accordance with General Instruction G(3), the information contained under the
caption "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held on May 7, 1997, to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A promulgated under the Securities Exchange Act of
1934, is incorporated herein by reference.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In accordance with General Instruction G(3), the information contained under the
caption "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held on May 7, 1997, to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A promulgated under the Securities Exchange Act of
1934, is incorporated herein by reference.
37
<PAGE> 38
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements.
--------------------
The financial statements filed as part of this Annual Report on Form
10-K are the balance sheets of the Registrant as of December 31, 1996,
and 1995, and the related statements of income, changes in
shareholder's equity and cash flows for each of the three years in the
period ended December 31, 1996, together with the notes thereto.
(a)(2) Financial Statement Schedules.
-----------------------------
There are no financial statement schedules required to be filed with
this Annual Report on Form 10-K.
(a)(3) Exhibits.
---------
Exhibits filed with this Annual Report on Form 10-K are attached
hereto. For a list of such exhibits, see "Index to Exhibits" at page
40. The following table provides certain information concerning
executive compensation plans and arrangements required to be filed as
exhibits to this Annual Report on Form 10-K.
Exhibit No. Description
---------- -----------
10.1 Borror Corporation Incentive Stock Plan, as
amended December 5, 1995
10.18 Incentive Stock Option Agreement, dated
January 4, 1995, between Borror Corporation
and Richard R. Buechler (which agreement
is substantially the same as Incentive Stock
Option Agreements entered into between the
Company and other employees to whom options
were granted under the Company's Incentive
Stock Plan)
10.23 Amended and Restated Borror Corporation
Deferred Compensation Plan, dated
December 5, 1995
10.25 Employment Agreement, dated May 17, 1996,
between Borror Corporation and Richard R.
Buechler, superseding an Employment
Agreement dated February 28, 1995
10.26 Employment Agreement, dated May 17, 1996,
between Borror Corporation and Robert A.
Meyer, Jr., superseding an Employment
Agreement dated February 28, 1995
10.27 Employment Agreement, dated May 17,
1996, between Borror Corporation and
Jon M. Donnell
38
<PAGE> 39
10.28 First Amendment to May 17, 1996 Employment
Agreement between Borror Corporation and
Jon M. Donnell dated November 6, 1996
10.29 Restricted Stock Agreement dated August 1, 1995
between Borror Corporation and Jon M. Donnell
10.30 Restricted Stock Agreement dated November 6, 1996
between Borror Corporation and Jon M. Donnell
(b) Reports on Form 8-K.
--------------------
On December 19, 1996 the Company filed a current report on Form 8-K
reporting under item 5, Other Events, that a class action pending
against the Company had been settled.
(c) Exhibits.
--------
Exhibits filed with this Annual Report on Form 10-K are attached
hereto. For a list of such exhibits, see "Index to Exhibits" at page
40.
(d) Financial Statement Schedules.
------------------------------
There are no financial statement schedules required to be filed with
this Annual Report on Form 10-K.
39
<PAGE> 40
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Location
- ----------- ----------- --------
<S> <C> <C>
2.1 Corporate Exchange and Subscription Agreement Incorporated by
dated January 20, 1994, between Borror Corporation reference to Exhibit
and Borror Realty Company 2.1 to Form S-1.
2.2 Form of First Amendment to Corporate Exchange Incorporated by
and Subscription Agreement reference to Exhibit
2.2 to Form S-1.
3.1 Amended and Restated Articles of Incorporation of Incorporated by
Borror Corporation reference to Exhibit
3.1 to Form S-1.
3.2 Amended and Restated Code of Regulations of Incorporated by
Borror Corporation reference to Exhibit
3.2 to Form S-1.
4.0 Specimen of Stock Certificate of Borror Corporation Incorporated by
reference to Exhibit 4
to Form S-1.
10.1 Borror Corporation Incentive Stock Plan, as Incorporated by
amended December 5, 1995 reference to Exhibit
10.1 to December 31,
1996 Form 10-K.
10.2 Shareholder Agreement, dated January 20, 1994, Incorporated by
between Borror Corporation and Borror Realty reference to Exhibit
Company 10.4 to Form S-1.
10.3 Land Option Agreement, dated January 20, 1994, Incorporated by
between Borror Corporation and Borror Realty reference to Exhibit
Company 10.5 to Form S-1.
10.4 Model Home Lease Agreement, dated January 20, Incorporated by
1994, between Borror Corporation and Borror Realty reference to Exhibit
Company 10.6 to Form S-1.
10.6 Architectural Department Lease Agreement, dated Incorporated by
January 4, 1994, between Borror Corporation and reference to Exhibit
Borror Realty Company 10.9 to Form S-1.
10.7 Open Ended Mortgage and Security Agreement, Incorporated by
dated December 22, 1987, between The Borror reference to Exhibit
Corporation and W. Lyman Case & Company 10.11 to Form S-1.
</TABLE>
40
<PAGE> 41
<TABLE>
<S> <C> <C>
10.8 Decorating Center Lease Agreement, dated Incorporated by
January 4, 1994, between Borror Corporation and reference to Exhibit
Borror Realty Company, as amended by addendum 10.12 to December 31,
No. 1, effective July 1, 1994 1994 Form 10-K.
10.13 Amended and Restated Loan Agreement, dated August Page .
3, 1995, among Borror Corporation, the lenders listed --------
therein, and The Huntington National Bank, as agent,
together with First Amendment thereto dated March
19, 1996 and Second Amendment thereto dated
November 6, 1996
10.14 Open-End Mortgage, Assignment of Rents and Incorporated by reference
Security Agreement, dated March 2, 1995 among to Exhibit 10.16 to December
Borror Corporation, the lenders listed therein and 31, 1994 Form 10-K.
The Huntington National Bank, as agent
10.15 First Mortgage Modification Agreement, dated Incorporated by reference
August 3, 1995 among Borror Corporation, to Exhibit 10.13. to June 30,
the lenders listed therein and The Huntington 1995 Form 10-Q.
National Bank, as agent
10.16 Open-End Mortgage, Assignment of Rents and Incorporated by reference
Security Agreement, dated August 3, 1995 to Exhibit 10.14. to June 30,
among Borror Corporation, the lenders listed 1995 Form 10-Q.
therein and The Huntington National Bank, as agent
10.17 Agent - Security Agreement - Equipment, Fixtures, Incorporated by reference
Inventory and Accounts, dated August 3, 1995 to Exhibit 10.15. to June 30,
of Borror Corporation in favor of The Huntington 1995 Form 10-Q.
National Bank, Bank, as agent for the lenders
listed therein
10.18 Incentive Stock Option Agreement, dated Incorporated by reference
January 4, 1995, between Borror Corporation to Exhibit 10.18 to December
and Richard R. Buechler (which agreement 31, 1995 Form 10-K.
is substantially the same as Incentive Stock
Option Agreements entered into between the
Company and other employees to whom options
were granted under the Company's Incentive
Stock Plan)
10.23 Amended and Restated Borror Corporation Incorporated by
Deferred Compensation Plan, dated reference to Exhibit
December 5, 1995 10.9 to December 31,
1995 Form 10-K.
</TABLE>
41
<PAGE> 42
<TABLE>
<S> <C> <C>
10.24 First Amendment to Lease Agreement dated Incorporated by
March 19, 1996 between Borror Realty reference to Exhibit
Company and and Borror Corporation 10.21. to March 31,
1995 Form 10-Q.
10.25 Employment Agreement, dated May 17, 1996, Page .
between Borror Corporation and Richard R. ----
Buechler, superseding an Employment Agreement
dated February 28, 1995
10.26 Employment Agreement, dated May 17, 1996, Page .
between Borror Corporation and Robert A. ----
Meyer, Jr., superseding an Employment Agreement
dated February 28, 1995
10.27 Employment Agreement dated May 17, 1996, Incorporated by
between Borror Corporation and Jon M. Donnell reference to Exhibit
10.22 to September 30,
1996 Form 10-Q.
10.28 First Amendment to May 17, 1996 Employment Page .
Agreement between Borror Corporation ----
and Jon M. Donnell dated November 6, 1996.
10.29 Restricted Stock Agreement dated August 1, 1995 Incorporated by
between Borror Corporation and Jon M. Donnell reference to Exhibit
10.19 of December
31, 1995 Form 10-K.
10.30 Restricted Stock Agreement dated November 6, 1996, Page .
between Borror Corporation and Jon M. Donnell -----
23 Consent of Coopers & Lybrand L.L.P. Page .
Independent Public Accountants -----
24 Powers of Attorney Page .
-----
27 Financial Data Schedule Page .
-----
</TABLE>
42
<PAGE> 43
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.
Date: March 18, 1997 Borror Corporation
* /s/ Douglas G. Borror
-----------------------------
By Douglas G. Borror, President
and Chief Executive Officer
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.
<TABLE>
<CAPTION>
Signature Capacities Date
- --------- ---------- ----
<S> <C> <C>
*/s/ Donald A. Borror Director March 18, 1997
- -----------------------------
Donald A. Borror
*/s/ Douglas G. Borror Director and March 18, 1997
- ----------------------------- Principal Executive Officer
Douglas G. Borror
*/s/ Jon M. Donnell Principal Financial Officer March 18, 1997
- -----------------------------
Jon M. Donnell
*/s/ Tad E. Lugibihl Principal Accounting Officer March 18, 1997
- -----------------------------
Tad E. Lugibihl
*/s/ David S. Borror Director March 18, 1997
- -----------------------------
David S. Borror
*/s/ Terry E. George Director March 18, 1997
- -----------------------------
Terry E. George
*/s/ Pete A. Klisares Director March 18, 1997
- -----------------------------
Pete A. Klisares
*/s/ Gerald E. Mayo Director March 18, 1997
- -----------------------------
Gerald E. Mayo
*/s/ C. Ronald Tilley Director March 18, 1997
- -----------------------------
C. Ronald Tilley
*By /s/ Robert A. Meyer, Jr. Attorney-in-fact March 18, 1997
- -----------------------------
Robert A. Meyer, Jr.
</TABLE>
43
<PAGE> 1
Exhibit 10.13
SECOND AMENDMENT TO
AMENDED AND RESTATED LOAN AGREEMENT
THIS SECOND AMENDMENT (this "Amendment") to the Amended and Restated Loan
Agreement is entered into as of the 20th day of December, 1996, by and between
Borror Corporation (the "Borrower"), and The Huntington National Bank, (herein
"Huntington"), NBD Bank, a Michigan chartered bank (herein "NBD"), National City
Bank, Columbus (herein "NCB"), and KeyBank National Association, formerly known
as Society National Bank ("Society") as lenders (Huntington, NBD, NCB, and
Society each is herein referred to separately as a "Bank" and collectively as
the "Banks") and Huntington, as agent for the Banks (herein the "Agent").
RECITALS:
A. As of August 3, 1995, the Borrower, the Agent, the Banks and NBD Bank,
an Ohio chartered bank executed a certain Amended and Restated Loan Agreement,
which was amended by a certain Consent and Modification dated as of December 14,
1995, a certain First Amendment to Amended and Restated Loan Agreement dated as
of March 19, 1996, and a certain Consent and Modification dated as of April 9,
1996 (collectively the "Loan Agreement"), setting forth the terms of certain
extensions of credit to the Borrower; and
B. As of February 23, 1996, NBD Bank, an Ohio chartered bank, assigned all
of its right, title, and interest in the NBD Note and the Loan Documents (as
defined below) to NBD; and
C. As of August 3, 1995, the Borrower executed and delivered to Huntington,
inter alia, a revolving note in the original principal sum of Thirty Five
Million Six Hundred Forty Thousand Dollars ($35,640,000.00) (hereinafter the
"Huntington Note"); and
D. As of August 3, 1995, the Borrower executed and delivered to NBD, inter
alia, a revolving note in the original principal sum of Twenty Four Million
Thirty Thousand Dollars ($24,030,000.00) (hereinafter the "NBD Note"); and
E. As of August 3, 1995, the Borrower executed and delivered to NCB, inter
alia, a revolving note in the original principal sum of Seventeen Million Eight
Hundred Twenty Thousand Dollars ($17,820,000.00) (hereinafter the "NCB Note");
and
F. As of August 3, 1995, the Borrower executed and delivered to Society,
inter alia, a revolving note in the original principal sum of Twelve Million
Five Hundred Ten Thousand Dollars ($12,510,000.00) (hereinafter the "Society
Note") (the Huntington Note, the NBD Note, the NCB Note and the Society Note are
hereinafter collectively referred to as the "Notes"); and
G. In connection with the Loan Agreement and the Notes and at various other
times, the Borrower executed and delivered to the Agent and the Banks certain
other loan documents, a standby letter of credit reimbursement agreement,
open-end mortgages, assignment of rents and security agreements, consents,
assignments, security agreements, agreements, instruments and financing
<PAGE> 2
statements in connection with the indebtedness referred to in the Loan Agreement
(all of the foregoing, together with the Notes and the Loan Agreement, are
hereinafter collectively referred to as the "Loan Documents"); and
H. The Borrower has requested that the Agent and the Banks amend and modify
certain terms and covenants in the Loan Agreement, and the Agent and the Banks
are willing to do so upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties hereto for
themselves and their successors and assigns do hereby agree, represent and
warrant as follows:
1. DEFINITIONS. All capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Loan Agreement.
2. Section 1.3, "MATURITY OF THE REVOLVING LOANS," of the Loan
Agreement is hereby amended to recite in its entirety as follows:
1.3 Maturity of the Revolving Loans.
Subject to the terms and conditions of this Agreement, the
Company's right to obtain advances under the Revolving Loans shall
terminate on June 30, 1998, or on such later date that the Revolving
Loans or any portion thereof may be extended in writing by the
respective Bank or Banks. Beginning on or before May 30, 1996, and
continuing on each May 30 thereafter (the "Annual Review Date"), the
Banks, or any of them up to the amount of such Bank's Loan Commitment,
in the sole discretion of such Bank, may elect to extend the Company's
right to obtain advances under the Revolving Loans for a one year
period from June 30, 1998, or any extended maturity date of the
Revolving Loans (the "Maturity Date") by providing notice to the
Company of such election on or before the Annual Review Date,
provided, however, the failure of any Bank to provide notice under
this Section 1.3 shall not be deemed to constitute such Bank's
agreement to extend the Maturity Date with respect to the Revolving
Loans.
3. Section 1.4, "LETTERS OF CREDIT," of the Loan Agreement is hereby
amended to recite in its entirety as follows:
1.4 Letters of Credit.
-2-
<PAGE> 3
Subject to the terms and conditions of this Agreement, the
Company's right to obtain issuance of the Letters of Credit shall
terminate on June 30, 1998, or on such later date that the Letters of
Credit or any portion thereof may be extended in writing by the
respective Bank or Banks. Beginning on or before May 30, l996, and
continuing on each Annual Review Date thereafter, the Banks, or any of
them up to the amount of such Bank's Loan Commitment Percentage, in
the sole discretion of such Bank, may elect to extend the Company's
right to obtain issuance of Letters of Credit for a one year period
from the then existing Maturity Date, by providing notice to the
Company of such election on or before the Annual Review Date,
provided, however, the failure of any Bank to provide notice under
this Section 1.3 shall not be deemed to constitute such Bank's
agreement to extend the Maturity Date with respect to the Letters of
Credit. Each Bank severally, and not jointly, up to such Bank's Loan
Commitment Percentage, subject to the terms and conditions of this
Agreement, shall purchase an absolute, unconditional individual
participation interest in the Letters of Credit.
4. Section 10.14, "RATIO OF UNCOMMITTED LAND HOLDINGS TO TANGIBLE NET
WORTH," of the Loan Agreement is hereby amended to recite in its entirety as
follows:
10.14 Ratio of Uncommitted Land Holdings to Tangible
Net Worth.
The Company shall maintain at all times a ratio of Uncommitted
Land Holdings to Tangible Net Worth of not greater than 1.75 to 1.00.
"Uncommitted Land Holdings" shall mean the sum of all of the
following, valued at cost or market: (i) Real Estate Held for
Development, (ii) Lots Under Development, (iii) Developed Lots, (iv)
Land Deposits, (v) Noncancellable Land Commitments, and (vi) all real
estate deposits, and noncancellable land purchase commitments which
would constitute Real Estate Held For Development, Developed Lots,
Lots Under Development Land Deposits, or Noncancellable Land
Commitments, but for the fact that such items are owned by Approved
Joint Ventures (only to the extent of the Company's net equity
investment in such Approved Joint Ventures). "Land Deposits" shall
mean the sum of down payments, deposits, or other funds paid pursuant
to noncancellable, bona fide, arm's length contracts for the purchase
of real property by the Company. "Noncancellable Land Commitments"
shall mean the amount of the Company's obligations with respect to the
unpaid purchase price of noncancellable contracts for the purchase of
real property by the Company.
-3-
<PAGE> 4
5. Section 10.25, "REAL ESTATE ACQUISITIOn," of the Loan Agreement is
hereby deleted in its entirety.
6. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective as
of December 20, 1996, upon satisfaction of all of the following conditions
precedent:
(a) The Agent shall have received six duly executed copies of the Second
Amendment to Amended and Restated Loan Agreement and such other certificates,
instruments, documents, agreements, and opinions of counsel as may be required
by the Bank, each of which shall be in form and substance satisfactory to the
Agent and its counsel; and
(b) The representations contained in paragraph 7 below shall be true and
accurate.
7. REPRESENTATIONS. The Borrower represents and warrants that after giving
effect to this Amendment (a) each and every one of the representations and
warranties made by or on behalf of the Borrower in the Loan Agreement or the
Loan Documents is true and correct in all respects on and as of the date hereof,
except to the extent that any of such representations and warranties related, by
the expressed terms thereof, solely to a date prior hereto; (b) the Borrower has
duly and properly performed, complied with and observed each of its covenants,
agreements and obligations contained in the Loan Agreement and Loan Documents;
and (c) no event has occurred or is continuing, and no condition exists which
would constitute an Event of Default or Specified Potential Default.
8. AMENDMENT TO LOAN AGREEMENT. (a) Upon the effectiveness of Section 2
through Section 5 hereof, each reference in the Loan Agreement to "Loan
Agreement," "Agreement," the prefix "herein," "hereof," or words of similar
import, and each reference in the Loan Documents to the Loan Agreement, shall
mean and be a reference to the Loan Agreement as amended hereby. (b) Except as
modified herein, all of the representations, warranties, terms, covenants and
conditions of the Loan Agreement, the Loan Documents and all other agreements
executed in connection therewith shall remain as written originally and in full
force and effect in accordance with their respective terms, and nothing herein
shall affect, modify, limit or impair any of the rights and powers which the
Agent and/or the Banks may have thereunder. The amendment set forth herein shall
be limited precisely as provided for herein, and shall not be deemed to be a
waiver of, amendment of, consent to or modification of any of the Agent's or
Banks' rights under or of any other term or provisions of the Loan Agreement,
any Loan Document, or other agreement executed in connection therewith, or of
any term or provision of any other instrument referred to therein or herein or
of any transaction or future action on the part of the Borrower which would
require the consent of the Agent and/or the Banks, including, without
limitation, waivers of Events of Default which may exist after giving effect
hereto. The Borrower ratifies and confirms each term, provision, condition and
covenant set forth in the Loan Agreement and the Loan Documents and acknowledges
that the agreement set forth therein continue to be legal, valid and binding
agreements, and enforceable in accordance with their respective terms.
-4-
<PAGE> 5
9. AUTHORITY. The Borrower hereby represents and warrants to the Agent and
the Banks that (a) the Borrower has legal power and authority to execute and
deliver the within Amendment; (b) the officer executing the within Amendment on
behalf of the Borrower has been duly authorized to execute and deliver the same
and bind the Borrower with respect to the provisions provided for herein; (c)
the execution and delivery hereof by the Borrower and the performance and
observance by the Borrower of the provisions hereof do not violate or conflict
with the articles of incorporation, regulations or by-laws of the Borrower or
any law applicable to the Borrower or result in the breach of any provision of
or constitute a default under any agreement, instrument or document binding upon
or enforceable against the Borrower; and (d) this Amendment constitutes a valid
and legally binding obligation upon the Borrower in every respect.
10. COUNTERPARTS. This Amendment may be executed in two or more
counterparts, each of which, when so executed and delivered, shall be an
original, but all of which together shall constitute one and the same document.
Separate counterparts may be executed with the same effect as if all parties
had executed the same counterparts.
11. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the law of the State of Ohio.
IN WITNESS WHEREOF, the Borrower, the Agent and the Banks have
hereunto set their hands as of the date first set forth above.
THE BORROWER:
BORROR CORPORATION
By:
------------------------------------
Its:
-------------------------------------
THE BANKS:
THE HUNTINGTON NATIONAL BANK
By:
-------------------------------------
Its:
-------------------------------------
-5-
<PAGE> 6
NBD BANK, a Michigan chartered bank
By:
-------------------------------------
Its:
-------------------------------------
NATIONAL CITY BANK, COLUMBUS
By:
-------------------------------------
Its:
-------------------------------------
KEYBANK NATIONAL ASSOCIATION
formerly known as Society National Bank
By:
-------------------------------------
Its:
-------------------------------------
THE AGENT:
THE HUNTINGTON NATIONAL BANK
By:
-------------------------------------
Its:
-------------------------------------
-6-
<PAGE> 7
EXECUTION COPY
FIRST AMENDMENT TO
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDMENT (this "Amendment") to the Amended and Restated Loan
Agreement is entered into as of the _____ day of March, 1996, by and between
Borror Corporation (the "Borrower"), and The Huntington National Bank, (herein
"Huntington"), NBD Bank, a Michigan chartered bank (herein "NBD"), National City
Bank, Columbus (herein "NCB"), and Society National Bank ("Society") as lenders
(Huntington, NBD, NCB, and Society each is herein referred to separately as a
"Bank" and collectively as the "Banks") and Huntington, as agent for the Banks
(herein the "Agent").
RECITALS:
A. As of August 3, 1995, the Borrower, the Agent and the Banks and NBD
Bank, an Ohio chartered bank executed a certain Amended and Restated Loan
Agreement, which was modified by a certain Consent and Modification dated as of
December ____, 1995 (collectively the "Loan Agreement"), setting forth the terms
of certain extensions of credit to the Borrower; and
B. As of February 23, 1996, NBD Bank, an Ohio chartered bank, assigned all
of its right, title, and interest in the NBD Note and the Loan Documents (as
defined below) to NBD; and
C. As of August 3, 1995, the Borrower executed and delivered to Huntington,
inter alia, a revolving note in the original principal sum of Thirty Five
Million Six Hundred Forty Thousand Dollars ($35,640,000.00) (hereinafter the
"Huntington Note"); and
D. As of August 3, 1995, the Borrower executed and delivered to NBD, inter
alia, a revolving note in the original principal sum of Twenty Four Million
Thirty Thousand Dollars ($24,030,000.00) (hereinafter the "NBD Note"); and
E. As of August 3, 1995, the Borrower executed and delivered to NCB, inter
alia, a revolving note in the original principal sum of Seventeen Million Eight
Hundred Twenty Thousand Dollars ($17,820,000.00) (hereinafter the "NCB Note");
and
F. As of August 3, 1995, the Borrower executed and delivered to Society,
inter alia, a revolving note in the original principal sum of Twelve Million
Five Hundred Ten Thousand Dollars ($12,510,000.00) (hereinafter the "Society
Note") (the Huntington Note, the NBD Note, the NCB Note and the Society Note are
hereinafter collectively referred to as the "Notes"); and
G. In connection with the Loan Agreement and the Notes and at various other
times, the Borrower executed and delivered to the Agent and the Banks certain
other loan documents, a standby letter of credit reimbursement agreement,
open-end mortgages, assignment of rents and security
<PAGE> 8
agreements, consents, assignments, security agreements, agreements,
instruments and financing statements in connection with the indebtedness
referred to in the Loan Agreement (all of the foregoing, together with the Notes
and the Loan Agreement, are hereinafter collectively referred to as the "Loan
Documents"); and
H. The Borrower has requested that the Agent and the Banks amend and modify
certain terms and covenants in the Loan Agreement, and the Agent and the Banks
are willing to do so upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties hereto for
themselves and their successors and assigns do hereby agree, represent and
warrant as follows:
1. DEFINITIONS. All capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Loan Agreement.
2. Section 10.7, "OPERATING LEASE RENTALS," of the Loan Agreement is
hereby amended to recite in its entirety as follows:
10.7 Operating Lease Rentals (Excluding Models).
Except for and excluding operating lease rentals in connection
with (a) the rental of Model Homes/Dominion, and Model Homes/Tradition
and (b) the rental of furniture and furnishings located in Model
Homes/Dominion and Model Homes/Tradition (the "Model Home Leases" and
the "Model Furniture Rentals"), the Company will not without the prior
written approval of the Agent enter into operating leases providing in
the aggregate for annual rentals which exceed $750,000.00.
3. Section 10.13, "TANGIBLE NET WORTH," of the Loan Agreement is hereby
amended to recite in its entirety as follows:
10.13 Tangible Net Worth.
At all times, the Company shall maintain a Tangible Net Worth of
not less than the following amounts for the following specified
periods: (a) from the date of this Agreement through and including
December 31, 1995, not less than $28,000,000.00; (b) beginning January
1, 1996, and continuing through and including September 29, 1996, not
less than $27,000,00.00; (c) beginning September 30, 1996, and
continuing through and including December
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<PAGE> 9
31, 1996, not less than the greater of (i) $27,500,000.00 or (ii)
the sum of (A) $27,000,000.00 PLUS (B) an amount equal to 75% of
the Company's net income after taxes for the period January 1, 1996,
through September 30, 1996; (d) beginning December 31, 1996, and
continuing at all times thereafter not less than the greater of (i)
$29,000,000.00 or (ii) the sum of (A) $27,000,000.00 plus (B) an
amount equal to 75% of the Company's net income after taxes for the
Fiscal Year ending December 31, 1996. "Tangible Net Worth" shall mean
Company's shareholders' equity, MINUS the sum of all the following:
(i) the excess of cost over the value of net assets of purchased
businesses, rights, and other similar intangibles, (ii) organization
expenses, (iii) intangible assets (to the extent not reflected in the
foregoing), (iv) goodwill, (v) deferred charges or deferred financing
costs, (vi) loans or advances to and/or accounts or notes receivable
from affiliates, (except for any loans or advances from the Company
to Borror Realty Company, which in the aggregate, do not exceed the
sum of $200,000.00) and (vii) non-compete agreements.
4. Section 10.23, "NO LOSSES," of the Loan Agreement is hereby amended to
recite in its entirety as follows:
10.23. No Losses.
Beginning with the quarter ending June 30, 1995, and continuing
as of the end of each quarter thereafter, the Company shall not incur
an Adjusted Loss in any five consecutive fiscal quarters ending on the
date of determination. "Adjusted Loss" shall mean with respect to any
fiscal quarter, if the Company's (a) net income before taxes as
determined in accordance with GAAP, MINUS (b) the sum of all
extraordinary gains (and any unusual gains arising outside the
ordinary course of business not included in extraordinary gains
determined in accordance with GAAP), is less than $1.00.
5. A new Section 10.26, entitled "OPERATING LEASES - MODELS," shall be
added to the Loan Agreement and shall recite in its entirety as follows:
10.26. Operating Leases - Models.
The Company will not, without the prior written approval of the
Agent enter into Model Home Leases or Model Furniture Rentals
providing in the aggregate for annual rentals which exceed the
aggregate sum of $450,000.00.
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<PAGE> 10
6. Conditions of Effectiveness. This Amendment shall become effective
as of March_____, 1996, upon satisfaction of all of the following conditions
precedent:
(a) The Agent shall have received six duly executed copies of the First
Amendment to Amended and Restated Loan Agreement and such other certificates,
instruments, documents, agreements, and opinions of counsel as may be required
by the Bank, each of which shall be in form and substance satisfactory to the
Agent and its counsel; and
(b) The representations contained in paragraph 8 below shall be true and
accurate.
(c) The Agent shall have received the Amendment Fee.
7. Amendment Fee. On or prior to the date of this Amendment, the Company
agrees to pay to the Agent for the benefit of the Banks an amendment fee of
$75,000.00, which fee shall be shared by the Banks on a pro rata basis.
8. REPRESENTATIONS. The Borrower represents and warrants that after giving
effect to this Amendment (a) each and every one of the representations and
warranties made by or on behalf of the Borrower in the Loan Agreement or the
Loan Documents is true and correct in all respects on and as of the date hereof,
except to the extent that any of such representations and warranties related, by
the expressed terms thereof, solely to a date prior hereto; (b) the Borrower has
duly and properly performed, complied with and observed each of its covenants,
agreements and obligations contained in the Loan Agreement and Loan Documents;
and (c) no event has occurred or is continuing, and no condition exists which
would constitute an Event of Default or Specified Potential Default.
9. AMENDMENT TO LOAN AGREEMENT. (a) Upon the effectiveness of Section 2
through Section 5 hereof, each reference in the Loan Agreement to "Loan
Agreement," "Agreement," the prefix "herein," "hereof," or words of similar
import, and each reference in the Loan Documents to the Loan Agreement, shall
mean and be a reference to the Loan Agreement as amended hereby. (b) Except as
modified herein, all of the representations, warranties, terms, covenants and
conditions of the Loan Agreement, the Loan Documents and all other agreements
executed in connection therewith shall remain as written originally and in full
force and effect in accordance with their respective terms, and nothing herein
shall affect, modify, limit or impair any of the rights and powers which the
Agent and/or the Banks may have thereunder. The amendment set forth herein shall
be limited precisely as provided for herein, and shall not be deemed to be a
waiver of, amendment of, consent to or modification of any of the Agent's or
Banks' rights under or of any other term or provisions of the Loan Agreement,
any Loan Document, or other agreement executed in connection therewith, or of
any term or provision of any other instrument referred to therein or herein or
of any transaction or future action on the part of the Borrower which would
require the consent of the Agent and/or the Banks, including, without
limitation, waivers of Events of Default which may exist after giving effect
hereto. The Borrower ratifies and confirms each term, provision, condition and
covenant set forth in the Loan Agreement and the Loan Documents and acknowledges
that the
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<PAGE> 11
agreement set forth therein continue to be legal, valid and binding
agreements, and enforceable in accordance with their respective terms.
10. AUTHORITY. The Borrower hereby represents and warrants to the Agent and
the Banks that (a) the Borrower has legal power and authority to execute and
deliver the within Amendment; (b) the officer executing the within Amendment on
behalf of the Borrower has been duly authorized to execute and deliver the same
and bind the Borrower with respect to the provisions provided for herein; (c)
the execution and delivery hereof by the Borrower and the performance and
observance by the Borrower of the provisions hereof do not violate or conflict
with the articles of incorporation, regulations or by-laws of the Borrower or
any law applicable to the Borrower or result in the breach of any provision of
or constitute a default under any agreement, instrument or document binding upon
or enforceable against the Borrower; and (d) this Amendment constitutes a valid
and legally binding obligation upon the Borrower in every respect.
11. COUNTERPARTS. This Amendment may be executed in two or more
counterparts, each of which, when so executed and delivered, shall be an
original, but all of which together shall constitute one and the same document.
Separate counterparts may be executed with the same effect as if all parties
had executed the same counterparts.
12. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the law of the State of Ohio.
IN WITNESS WHEREOF, the Borrower, the Agent and the Banks have
hereunto set their hands as of the date first set forth above.
THE BORROWER:
BORROR CORPORATION
By:
-------------------------------------
Its:
-------------------------------------
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<PAGE> 12
THE BANKS:
THE HUNTINGTON NATIONAL BANK
By:
-------------------------------------
Its:
-------------------------------------
NBD BANK, a Michigan chartered bank
By:
-------------------------------------
Its:
-------------------------------------
NATIONAL CITY BANK, COLUMBUS
By:
-------------------------------------
Its:
-------------------------------------
SOCIETY NATIONAL BANK
By:
-------------------------------------
Its:
-------------------------------------
THE AGENT:
THE HUNTINGTON NATIONAL BANK
By:
-------------------------------------
Its:
-------------------------------------
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<PAGE> 1
Exhibit 10.25
EMPLOYMENT AGREEMENT
This Agreement is entered into this 17th day of May, 1996, by and
between Borror Corporation (hereinafter called the "Company") Richard R.
Buechler (hereinafter called the "Employee").
WHEREAS, the Employee has been employed by the Company since May 29,
1985, and currently serves as Executive Vice President and General Manager-Homes
Division; and
WHEREAS, the Employee desires to continue his employment with the
Company and to continue to serve the Company as Executive Vice President and
General Manager- Homes Division; and
WHEREAS, the Company desires to continue to retain the services of the
Employee as Executive Vice President and General Manager-Homes Division; and
WHEREAS, the Company and the Employee desire to enter into an
employment agreement to establish the rights and obligations of the Employee and
the Company in such employment relationship;
NOW, THEREFORE, and in consideration of the mutual covenants herein
contained, the Company and the Employee hereby mutually agree as follows:
1. EMPLOYMENT AND DUTIES. The Company hereby continues to employ the
Employee, and the Employee hereby accepts continued employment with the Company
upon the terms and conditions hereinafter set forth. The Employee shall continue
to serve the Company as Executive Vice President and General Manager-Homes
Division. In such capacity, the Employee shall have all powers, duties, and
obligations as are normally associated with such position. The Employee shall
further perform such other duties related to the business of the Company as may
from time to time be reasonably requested of him by the President/CEO. The
Employee shall devote all of his skills, time, and attention solely and
exclusively to said position and in furtherance of the business and interests of
the Company.
2. TERM OF EMPLOYMENT. This Agreement shall be effective upon execution
by both parties and approval by the Compensation Committee of the Company's
Board of Directors. The term of employment shall begin, or be deemed to have
begun, on January 1, 1996 (the "Effective Date"). It shall continue through the
three-year period ending on the day before the third anniversary date of the
Effective Date, subject, however, to prior termination or to extension, as
herein provided.
3. COMPENSATION. For such services, the Employee shall receive
an initial annual base salary of One Hundred Fifty Thousand Dollars
($150,000.00), which may be increased, but not decreased, by the Company during
the term of this Agreement. In the
<PAGE> 2
event that the Company increases the Employee's initial base salary, the amount
of the initial base salary, together with any increase(s), shall be his base
salary. Said base salary shall be payable in equal installments in accordance
with the Company's regular payroll practices. In addition, the Employee shall be
included in the bonus program, as described in Appendix A which is attached
hereto and made a part hereof. Notwithstanding the provisions of Paragraph 19,
Appendix A may be amended, on a calendar year basis, during the term of this
Agreement (and any extensions thereof), by the Board of Directors of the
Company.
4. FRINGE BENEFITS. The Company shall further provide the Employee
with all health and life insurance coverages, sick leave and disability
programs, tax-qualified retirement plans, stock option plans, paid holidays and
vacations, perquisites, and such other fringe benefits of employment as the
Company may provide from time to time to actively employed executives of the
Company who are similarly situated. Notwithstanding the preceding provisions of
this Paragraph 4, during the term of this Agreement (including extensions
thereof), the Employee shall be entitled to a minimum of three (3) weeks of
vacation per year.
5. EXTENSION OF TERM OF AGREEMENT. The Company and the Employee agree
that the Company's Board of Directors shall, based upon recommendations of the
Company's President/CEO, review the Employee's performance with the intent that,
if the Employee's performance so warrants, the Board may extend the term of this
Agreement for additional three-year periods. By the day preceding the first
anniversary date of the Effective Date, the Board shall notify the Employee of
its decision whether to grant an extension of this Agreement for an additional
three-year period. To the extent that the Board fails to notify the Employee, on
or before the date described in the preceding sentence, of the extension of the
term of this Agreement, the term of this Agreement shall be automatically
extended for an additional three-year period. By way of illustration of this
Paragraph 5, if, by December 31, 1996, the Board notifies the Employee that it
intends to grant an extension of the term of this Agreement (or, if by such
date, the Board fails to notify the Employee that it does not intend to grant
such an extension), the term of this Agreement shall be extended for an
additional three-year period beginning on January 1, 1997 and ending on December
31, 2000. This Agreement shall be subject to extension in the manner set forth
in this paragraph for additional three-year periods on the first anniversary
date of the Effective Date of the immediately preceding extension.
6. TERMINATION OF EMPLOYMENT.
a. Termination of Employment Other Than by Employee. The
Employee's employment hereunder may be terminated by the
Company. However, the Company shall be deemed to have
terminated the employment for "cause" only upon the
following:
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<PAGE> 3
i. Any unauthorized material disclosure by the Employee of
the Company's business practices or accounts to a
competitor which results in serious damage to the
Company.
ii. Willful and wrongful misappropriation by the Employee
of funds, property, or rights of the Company which
results in serious damage to the Company.
iii. Willful and wrongful destruction of business records or
other property by the Employee, which results in
serious damage to the Company.
iv. Conviction of the Employee of a felony involving moral
turpitude, or, as the result of a plea bargain,
conviction of the Employee of a misdemeanor; provided,
the Employee was originally charged (prior to the plea
bargain) with a felony involving moral turpitude.
v. Gross and willful misconduct by the Employee which
results in serious damage to the Company.
vi. The Employee's material breach of, or inability to
perform his obligations under, this Agreement other
than by reason of Disability.
b. Termination of Employment by Employee. The Employee may
terminate his employment at any time. However, he shall be
deemed to have terminated his employment for "Good Reason"
only if he terminates his employment by giving Notice of
Termination pursuant to Paragraphs 6(d) and 6(e)(iii) within
ninety (90) days after the occurrence of any of the
following events (provided the Company does not cure such
event within ten (10) days following its receipt of the
Employee's Notice of Termination):
i. The Employee's base salary is reduced for any reason
other than in connection with the termination of his
employment.
ii. For any reason other than in connection with the
termination of the Employee's employment, the Company
materially reduces any fringe benefit provided to the
Employee under Paragraph 4 below the level of such
fringe benefit provided generally to other actively
employed similarly situated executives of the Company,
unless the Company agrees to fully compensate the
Employee for any such material reduction.
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<PAGE> 4
iii. The Company assigns the Employee to duties inconsistent
in any respect with his position (including, without
limitation, his status, office, and title), authority,
duties or responsibilities as set forth by Paragraph 1,
or takes any other action that results in a material
diminution in such position, authority, duties, or
responsibilities.
iv. The Company otherwise materially breaches, or is unable
to perform its obligations under this Agreement.
c. Termination of Employment Upon Death or Disability of the
Employee. The Employee's employment hereunder shall terminate
upon his death, and may be terminated by the Company in the event
of his Disability. For purposes of this Agreement, "Disability"
means the inability of the Employee due to illness, accident, or
otherwise, to perform his duties for the period of time during
which benefits are payable to the Employee under the Company's
Short-Term Disability Plan, as determined by an independent
physician selected by the Company and reasonably acceptable to
the Employee (or his legal representative), provided that the
Employee does not return to work on a substantially full-time
basis within thirty (30) days after Notice of Termination is
given by the Company pursuant to the provisions of Paragraphs
6(d) and 6(e)(ii).
d. Notice of Termination. Any termination of the Employee's
employment by the Company hereunder, or by the Employee other
than termination upon the Employee's death, shall be communicated
by written Notice of Termination to the other party. For purposes
of this Agreement, a "Notice of Termination" means a notice that
shall indicate the specific termination provision in this
Agreement relied upon, and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so
indicated.
e. Date of Termination. "Date of Termination" means:
i. If the Employee's employment is terminated by his death, the
date of his death.
ii. If the Employee's employment is terminated by the Company as
a result of Disability pursuant to Paragraph 6(c), the date
that is thirty (30) days after Notice of Termination is
given; provided the Employee shall not have returned to the
performance of his duties on a full-time basis during such
thirty- (30-) day period.
iii. If the Employee terminates his employment for Good Reason
pursuant to Paragraph 6(b), the date that is ten (10) days
after Notice
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<PAGE> 5
of Termination is given (provided that the Company does not
cure such event during that ten- (10-) day period).
iv. If the Employee terminates his employment other than for
Good Reason, the date that is two (2) weeks after Notice of
Termination is given; provided, in the sole discretion of
the Company, such date may be any earlier date after Notice
of Termination is given.
v. If the Employee's employment is terminated by the Company
either for Cause pursuant to Paragraph 6(a) or other than
for Cause, the date on which the Notice of Termination is
given.
7. AMOUNTS PAYABLE UPON TERMINATION OF EMPLOYMENT OR DURING
DISABILITY.
a. Death. If the Employee's employment is terminated by his death,
the Employee's beneficiary (as designated by the Employee in
writing with the Company prior to his death) shall be entitled to
the following payments and benefits: (i) any base salary that is
accrued but unpaid, any vacation that is accrued but unused, and
any business expenses that are unreimbursed -- all, as of the
Date of Termination; (ii) a pro rata award under the bonus
program described in Appendix A which is applicable to the
Employee at the time of his death, with proration based on
service completed during the calendar year for which the award is
determined, and payable when the award would have been paid had
the Employee's employment not terminated; and (iii) any benefit
following termination of employment which may be provided under
the fringe benefit plans, policies and programs described in
Paragraph 4. In the absence of a beneficiary designation by the
Employee, or, if the Employee's designated beneficiary does not
survive the Employee, benefits described in this Paragraph 7(a)
shall be paid to the Employee's estate.
b. Disability.
i. During any period that the Employee fails to perform his
duties hereunder as a result of incapacity due to physical
or mental illness ("Disability Period"), the Employee shall
continue to receive his base salary at the rate then in
effect for such period until his employment is terminated
pursuant to Paragraph 6(c); provided, however, that payments
of base salary so made to the Employee shall be reduced by
the sum of the amounts, if any, that were payable to the
Employee at or before the time of any such salary payment
under any disability benefit plan or plans of the Company
and that were not previously applied to reduce any payment
of base salary.
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<PAGE> 6
ii. Upon his termination of employment because of Disability [as
described in Paragraph 6(c)], the Employee shall be entitled
to the payments and benefits described in Paragraph 7(a) as
if the Employee had died on his Date of Termination. In the
event of the Employee's death prior to the time that all
payments described in Paragraph 7(a) have been completed,
such payments and benefits shall be paid to the Employee's
beneficiary [as designated pursuant to Paragraph 7(a)], or,
in the absence of a beneficiary designation or if the
designated beneficiary does not survive the Employee, to the
Employee's estate.
c. Termination by Company Without Cause, or Termination by Employee
for Good Reason. In the event that the Company terminates the
Employee's employment without Cause or the Employee terminates
his employment for Good Reason before the expiration of the term
of this Agreement, including any extension thereof, the Employee
shall be entitled to the following payments and benefits:
i. Those described in Paragraph 7(a) as if the Employee had
died on his Date of Termination
ii. Within thirty (30) days after the Date of Termination, a
lump sum cash payment equal to one (1) year of the base
salary applicable to the Employee on the Date of
Termination.
iii. Within thirty (30) days after the Date of Termination, a
lump sum cash payment equal to eighteen (18) months of the
premium applicable to the Employee on the Date of
Termination for the Employee and his family (provided the
Employee had family coverage on the Date of Termination)
under the Company's group health plan.
d. Termination by Employee Other Than for Good Reason, or
Termination by Company for Cause. In the event that the Employee
terminates his employment other than for Good Reason or the
Company terminates his employment for Cause, the Employee shall
not be entitled to any compensation except as set forth below:
i. Any base salary (but not bonus) that is accrued but unpaid,
any vacation that is accrued but unused, and any business
expenses that are unreimbursed -- all, as of the Date of
Termination.
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<PAGE> 7
ii. Any other rights and benefits (if any) provided under plans
and programs of the Company (excluding any bonus program),
determined in accordance with the applicable terms and
provisions of such plans and programs.
e. No Duty to Mitigate Damages. After any Date of Termination, the
Employee shall have no obligation to seek other employment, but
shall have the right to be otherwise employed, and any
compensation of any type whatsoever received by the Employee in
connection with such employment shall not be offset by the
Company against any of the obligations of the Company under this
Agreement.
8. CHANGE IN CONTROL.
a. Occurrence of Change in Control. Immediately upon the occurrence
of a "Change in Control," the Employee shall become fully vested
in all employee benefit programs (other than any tax qualified
retirement plan, the Employee's interest in which shall vest in
accordance with such plan's terms), including without limitation,
all stock options in which he was a participant at the time of
the Change in Control. For purposes of this Agreement, the term
"Change in Control" shall mean the occurrence of any event which
results in either (a) Borror Realty Company's failing to own at
least thirty percent (30%) of the combined voting power of the
then outstanding voting securities of the Company entitled to
vote generally in the election of directors, or (b) both Don
Borror and Doug Borror ceasing to be directors and officers of
the Company.
b. Termination of Employment. If, at any time within two (2) years
following a Change in Control, the Company terminates the
Employee's employment without Cause or the Employee terminates
his employment for Good Reason, the provisions of this Paragraph
8(b) shall be applicable, instead of the provisions of Paragraph
7(c). To the extent that the provisions of this Paragraph 8(b)
are applicable, the Employee shall be entitled to the following
payments and benefits:
i. Those described in Paragraph 7(a) as if the Employee had
died on his Date of Termination; provided all cash payments
required under such paragraph shall be made within five (5)
calendar days of the Date of Termination;
ii. The lump sum payment, as described in Paragraph 7(c)(iii);
provided, such cash payment shall be made within five (5)
calendar days of the Date of Termination;
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<PAGE> 8
iii. A single lump sum payment, payable within five (5) calendar
days of the Date of Termination, equal to two (2) times the
Employee's annual base salary in effect upon the Date of
Termination; and
iv. Reimbursement of all expenses incurred by the Employee
through the use of any executive out-placement services to
assist him to seek other employment, which shall include,
but not be limited to (A) secretarial services, use of an
office, phone, office supplies and office services
comparable to the level of such services and supplies
available to the Employee prior to the Date of Termination
and (B) all unreimbursed travel expenses incurred by the
Employee to seek other employment up to a maximum amount of
Five Thousand Dollars ($5,000).
9. NONEXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Employee's continuing or future participation in any incentive,
fringe benefit, deferred compensation, or other plan or program provided by the
Company and for which the Employee may qualify, nor shall anything herein limit
or otherwise affect such rights as the Employee may have under any other
agreements with the Company. Amounts that are vested benefits or that the
Employee is otherwise entitled to receive under any plan or program of the
Company at or after the Date of Termination, shall be payable in accordance with
such plan or program.
10. NONCOMPETITION COVENANT. The Employee agrees that, during the term
of this Agreement, including any extension thereof, and for a period of one (1)
year thereafter, he shall not:
a. Anywhere in the State of Ohio or in any other state in which
the Company is then conducting business, without the written
consent of the Company, provide advice with respect to, engage
in or directly or indirectly supervise or assist the provision
of any service or sale of any product which competes with any
service or product of the Company; or
b. Anywhere in any state, accept employment with, provide advice
to, or engage in or directly or indirectly supervise or assist
the provision of any service or sale of any product by any
person, company, partnership, corporation or other entity
which builds homes, develops land, or otherwise competes with
the Company in any market, city or area in which the Company
then conducts business.
Any breach of these Covenants shall be treated the same as a
termination by the Company for Cause.
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<PAGE> 9
The restrictions on competition provided herein may be enforced by the
Company and/or any successor thereto, by an action to recover payments made
under this Agreement, an action for injunction, and/or an action for damages.
The provisions of this Paragraph 10 constitute an essential element of this
Agreement, without which the Company would not have entered into this Agreement.
Notwithstanding any other remedy available to the Company at law or at equity,
the parties hereto agree that the Company or any successor thereto, shall have
the right, at any and all times, to seek injunctive relief in order to enforce
the terms and conditions of this Paragraph 10.
If the scope of any restriction contained in this Paragraph 10 is too
broad to permit enforcement of such restriction to its fullest extent, then such
restriction shall be enforced to the maximum extent permitted by law, and the
Employee hereby consents and agrees that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction.
11. CONFIDENTIAL INFORMATION. The Employee shall hold in a fiduciary
capacity, for the benefit of the Company, all secret or confidential
information, knowledge, and data relating to the Company, that shall have been
obtained by the Employee during his employment with the Company and that is not
public knowledge (other than by acts by the Employee or his representatives in
violation of this Agreement). During and after termination of the Employee's
employment with the Company, the Employee shall not, without the prior written
consent of the Company, communicate or divulge any such information, knowledge,
or data to anyone other than the Company or those designated by it, unless the
communication of such information, knowledge or data is required pursuant to a
compulsory proceeding in which the Employee's failure to provide such
information, knowledge, or data would subject the Employee to criminal or civil
sanctions.
12. INTELLECTUAL PROPERTY. The Employee agrees to communicate to the
Company, promptly and fully, and to assign to the Company all intellectual
property developed or conceived solely by the Employee, or jointly with others,
during the term of his employment, which are within the scope of the Company's
business, or which utilized Company materials or information. For purposes of
this Agreement, "intellectual property" means inventions, discoveries, business
or technical innovations, creative or professional work product, or works of
authorship. The Employee further agrees to execute all necessary papers and
otherwise to assist the Company, at the Company's sole expense, to obtain
patents, copyrights or other legal protection as the Company deems fit. Any such
intellectual property is to be the property of the Company whether or not
patented, copyrighted or published.
13. ASSIGNMENT AND SURVIVORSHIP OF BENEFITS. The rights and obligations
of the Company under this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and assigns of the Company. If the Company shall at
any time be merged or consolidated into, or with, any other company, or if
substantially all of the assets of the Company are transferred to another
company, then the provisions of this Agreement shall
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<PAGE> 10
be binding upon and inure to the benefit of the company resulting from such
merger or consolidation or to which such assets have been transferred, and this
provision shall apply in the event of any subsequent merger, consolidation, or
transfer.
14. NOTICES. Any notice given to either party to this Agreement shall
be in writing, and shall be deemed to have been given when delivered personally
or sent by certified mail, postage prepaid, return receipt requested, duly
addressed to the party concerned, at the address indicated below or to such
changed address as such party may subsequently give notice of:
If to the Company: Borror Corporation
5501 Frantz Road
Dublin, Ohio 43017
Attn: President/CEO
If to the Employee: Richard R. Buechler
6815 Lake Trail Drive
Westerville, Ohio 43081
15. INDEMNIFICATION. The Employee shall be indemnified by the Company,
to the extent provided in the case of officers under the Company's Articles of
Incorporation or Regulations, to the maximum extent permitted under applicable
law.
16. TAXES. Anything in this Agreement to the contrary notwithstanding,
all payments required to be made hereunder by the Company to the Employee shall
be subject to withholding of such amounts relating to taxes as the Company may
reasonably determine that it should withhold pursuant to any applicable law or
regulations. In lieu of withholding such amounts, in whole or in part, however,
the Company may, in its sole discretion, accept other provision for payment of
taxes, provided that it is satisfied that all requirements of the law affecting
its responsibilities to withhold such taxes have been satisfied.
17. ARBITRATION; ENFORCEMENT OF RIGHTS. Any controversy or claim
arising out of, or relating to this Agreement, or the breach thereof, shall be
settled by arbitration in the city of Columbus, Ohio, in accordance with the
Rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrator or arbitrators may be entered in any court having
jurisdiction thereof.
All legal and other fees and expenses, including, without limitation,
any arbitration expenses, incurred by the Employee in connection with seeking to
obtain or enforce any right or benefit provided for in this Agreement, or in
otherwise pursuing any right or claim, shall be paid by the Company, to the
extent permitted by law, provided that the Employee is successful in whole or in
part as to such claims as the result of litigation, arbitration, or settlement.
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<PAGE> 11
In the event that the Company refuses or otherwise fails to make a
payment when due and is ultimately decided that the Employee is entitled to such
payment, such payment shall be increased to reflect an interest equivalent for
the period of delay, compounded annually, equal to the prime or base lending
rate used by The Huntington National Bank, and in effect as of the date the
payment was first due.
18. GOVERNING LAW/CAPTIONS/SEVERANCE. This Agreement shall be construed
in accordance with, and pursuant to, the laws of the State of Ohio. The captions
of this Agreement shall not be part of the provisions hereof, and shall have no
force or effect. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. Except as otherwise specifically provided in this paragraph,
the failure of either party to insist in any instance on the strict performance
of any provision of this Agreement or to exercise any right hereunder shall not
constitute a waiver of such provision or right in any other instance.
19. ENTIRE AGREEMENT/AMENDMENT. This instrument contains the entire
agreement of the parties relating to the subject matter hereof, and the parties
have made no agreement, representations, or warranties relating to the subject
matter of this Agreement that are not set forth herein. Upon execution of this
Agreement, the Employment Agreement entered into between the parties on February
28, 1995, shall be terminated and superseded by this Agreement. This Agreement
may be amended at any time by written agreement of both parties, but it shall
not be amended by oral agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
BORROR CORPORATION
By:
--------------------------------
Robert A. Meyer, Jr.
Senior Vice President
----------------------------------
Richard R. Buechler
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<PAGE> 12
APPENDIX A
----------
The target bonus will be an amount within a range from $0 to
$150,000.00. The determination of the amount of bonus to be awarded will be
based upon the performance of the Company in terms of achievement of its net
income goal, and the Employee's positive and meaningful impact upon it.
The determination of the amount of the bonus shall be made by the
Compensation Committee of the Board of Directors with respect to those employees
whose compensation must be specifically reported for securities law purposes,
and otherwise by the Chief Executive Officer.
<PAGE> 1
Exhibit 10.26
EMPLOYMENT AGREEMENT
This Agreement is entered into this 17th day of May, 1996, by and
between Borror Corporation (hereinafter called the "Company") and Robert A.
Meyer, Jr. (hereinafter called the "Employee").
WHEREAS, the Employee has been employed by the Company since January 1,
1994, and currently serves as Senior Vice President, General Counsel and
Secretary; and
WHEREAS, the Employee desires to continue his employment with the
Company and to continue to serve the Company as Senior Vice President, General
Counsel and Secretary; and
WHEREAS, the Company desires to continue to retain the services of the
Employee as Senior Vice President, General Counsel and Secretary; and
WHEREAS, the Company and the Employee desire to enter into an
employment agreement to establish the rights and obligations of the Employee and
the Company in such employment relationship;
NOW, THEREFORE, and in consideration of the mutual covenants herein
contained, the Company and the Employee hereby mutually agree as follows:
1. EMPLOYMENT AND DUTIES. The Company hereby continues to employ the
Employee, and the Employee hereby accepts continued employment with the Company
upon the terms and conditions hereinafter set forth. The Employee shall continue
to serve the Company as Senior Vice President, General Counsel and Secretary. In
such capacity, the Employee shall have all powers, duties, and obligations as
are normally associated with such position. The Employee shall further perform
such other duties related to the business of the Company as may from time to
time be reasonably requested of him by the President/CEO. The Employee shall
devote all of his skills, time, and attention solely and exclusively to said
position and in furtherance of the business and interests of the Company.
2. TERM OF EMPLOYMENT. This Agreement shall be effective upon execution
by both parties and approval by the Compensation Committee of the Company's
Board of Directors. The term of employment shall begin, or be deemed to have
begun, on January 1, 1996 (the "Effective Date"). It shall continue through the
three-year period ending on the day before the third anniversary date of the
Effective Date, subject, however, to prior termination or to extension, as
herein provided.
3. COMPENSATION. For such services, the Employee shall receive an
initial annual base salary of One Hundred Thirty-five Thousand Dollars
($135,000.00), which may be increased, but not decreased, by the Company during
the term of this Agreement. In the event that the Company increases the
Employee's initial base salary, the amount of the initial base salary, together
with any increase(s), shall be his base salary. Said base salary
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<PAGE> 2
shall be payable in equal installments in accordance with the Company's regular
payroll practices. In addition, the Employee shall be included in the bonus
program, as described in Appendix A which is attached hereto and made a part
hereof. Notwithstanding the provisions of Paragraph 19, Appendix A may be
amended, on a calendar year basis, during the term of this Agreement (and any
extensions thereof), by the Board of Directors of the Company.
4. FRINGE BENEFITS. The Company shall further provide the Employee
with all health and life insurance coverages, sick leave and disability
programs, tax-qualified retirement plans, stock option plans, paid holidays and
vacations, perquisites, and such other fringe benefits of employment as the
Company may provide from time to time to actively employed executives of the
Company who are similarly situated. Notwithstanding the preceding provisions of
this Paragraph 4, during the term of this Agreement (including extensions
thereof), the Employee shall be entitled to a minimum of three (3) weeks of
vacation per year.
5. EXTENSION OF TERM OF AGREEMENT. The Company and the Employee agree
that the Company's Board of Directors shall, based upon recommendations of the
Company's President/CEO, review the Employee's performance with the intent that,
if the Employee's performance so warrants, the Board may extend the term of this
Agreement for additional three-year periods. By the day preceding the first
anniversary date of the Effective Date, the Board shall notify the Employee of
its decision whether to grant an extension of this Agreement for an additional
three-year period. To the extent that the Board fails to notify the Employee, on
or before the date described in the preceding sentence, of the extension of the
term of this Agreement, the term of this Agreement shall be automatically
extended for an additional three-year period. By way of illustration of this
Paragraph 5, if, by December 31, 1996, the Board notifies the Employee that it
intends to grant an extension of the term of this Agreement (or, if by such
date, the Board fails to notify the Employee that it does not intend to grant
such an extension), the term of this Agreement shall be extended for an
additional three-year period beginning on January 1, 1997 and ending on December
31, 2000. This Agreement shall be subject to extension in the manner set forth
in this paragraph for additional three-year periods on the first anniversary
date of the Effective Date of the immediately preceding extension.
6. TERMINATION OF EMPLOYMENT.
a. Termination of Employment Other Than by Employee. The
Employee's employment hereunder may be terminated by the
Company. However, the Company shall be deemed to have
terminated the employment for "cause" only upon the
following:
i. Any unauthorized material disclosure by the Employee of
the Company's business practices or accounts to a
competitor which results in serious damage to the
Company.
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<PAGE> 3
ii. Willful and wrongful misappropriation by the Employee
of funds, property, or rights of the Company which
results in serious damage to the Company.
iii. Willful and wrongful destruction of business records or
other property by the Employee, which results in
serious damage to the Company.
iv. Conviction of the Employee of a felony involving moral
turpitude, or, as the result of a plea bargain,
conviction of the Employee of a misdemeanor; provided,
the Employee was originally charged (prior to the plea
bargain) with a felony involving moral turpitude.
v. Gross and willful misconduct by the Employee which
results in serious damage to the Company.
vi. The Employee's material breach of, or inability to
perform his obligations under, this Agreement other
than by reason of Disability.
b. Termination of Employment by Employee. The Employee may
terminate his employment at any time. However, he shall be
deemed to have terminated his employment for "Good Reason"
only if he terminates his employment by giving Notice of
Termination pursuant to Paragraphs 6(d) and 6(e)(iii) within
ninety (90) days after the occurrence of any of the
following events (provided the Company does not cure such
event within ten (10) days following its receipt of the
Employee's Notice of Termination):
i. The Employee's base salary is reduced for any reason
other than in connection with the termination of his
employment.
ii. For any reason other than in connection with the
termination of the Employee's employment, the Company
materially reduces any fringe benefit provided to the
Employee under Paragraph 4 below the level of such
fringe benefit provided generally to other actively
employed similarly situated executives of the Company,
unless the Company agrees to fully compensate the
Employee for any such material reduction.
iii. The Company assigns the Employee to duties inconsistent
in any respect with his position (including, without
limitation, his status, office, and title), authority,
duties or responsibilities as set forth by Paragraph 1,
or takes any other action that results in a material
diminution in such position, authority, duties, or
responsibilities.
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<PAGE> 4
iv. The Company otherwise materially breaches, or is unable
to perform its obligations under this Agreement.
c. Termination of Employment Upon Death or Disability of the
Employee. The Employee's employment hereunder shall
terminate upon his death, and may be terminated by the
Company in the event of his Disability. For purposes of this
Agreement, "Disability" means the inability of the Employee
due to illness, accident, or otherwise, to perform his
duties for the period of time during which benefits are
payable to the Employee under the Company's Short-Term
Disability Plan, as determined by an independent physician
selected by the Company and reasonably acceptable to the
Employee (or his legal representative), provided that the
Employee does not return to work on a substantially
full-time basis within thirty (30) days after Notice of
Termination is given by the Company pursuant to the
provisions of Paragraphs 6(d) and 6(e)(ii).
d. Notice of Termination. Any termination of the Employee's
employment by the Company hereunder, or by the Employee
other than termination upon the Employee's death, shall be
communicated by written Notice of Termination to the other
party. For purposes of this Agreement, a "Notice of
Termination" means a notice that shall indicate the specific
termination provision in this Agreement relied upon, and
shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
the Employee's employment under the provision so indicated.
e. Date of Termination. "Date of Termination" means:
i. If the Employee's employment is terminated by his
death, the date of his death.
ii. If the Employee's employment is terminated by the
Company as a result of Disability pursuant to Paragraph
6(c), the date that is thirty (30) days after Notice of
Termination is given; provided the Employee shall not
have returned to the performance of his duties on a
full-time basis during such thirty- (30-) day period.
iii. If the Employee terminates his employment for Good
Reason pursuant to Paragraph 6(b), the date that is ten
(10) days after Notice of Termination is given
(provided that the Company does not cure such event
during that ten- (10-) day period).
iv. If the Employee terminates his employment other than
for Good Reason, the date that is two (2) weeks after
Notice of Termination is given; provided, in the sole
discretion of the Company, such date may be any earlier
date after Notice of Termination is given.
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<PAGE> 5
v. If the Employee's employment is terminated by the
Company either for Cause pursuant to Paragraph 6(a) or
other than for Cause, the date on which the Notice of
Termination is given.
7. AMOUNTS PAYABLE UPON TERMINATION OF EMPLOYMENT OR DURING
DISABILITY.
a. Death. If the Employee's employment is terminated by his
death, the Employee's beneficiary (as designated by the
Employee in writing with the Company prior to his death)
shall be entitled to the following payments and benefits:
(i) any base salary that is accrued but unpaid, any vacation
that is accrued but unused, and any business expenses that
are unreimbursed -- all, as of the Date of Termination; (ii)
a pro rata award under the bonus program described in
Appendix A which is applicable to the Employee at the time
of his death, with proration based on service completed
during the calendar year for which the award is determined,
and payable when the award would have been paid had the
Employee's employment not terminated; and (iii) any benefit
following termination of employment which may be provided
under the fringe benefit plans, policies and programs
described in Paragraph 4. In the absence of a beneficiary
designation by the Employee, or, if the Employee's
designated beneficiary does not survive the Employee,
benefits described in this Paragraph 7(a) shall be paid to
the Employee's estate.
b. Disability.
i. During any period that the Employee fails to perform
his duties hereunder as a result of incapacity due to
physical or mental illness ("Disability Period"), the
Employee shall continue to receive his base salary at
the rate then in effect for such period until his
employment is terminated pursuant to Paragraph 6(c);
provided, however, that payments of base salary so made
to the Employee shall be reduced by the sum of the
amounts, if any, that were payable to the Employee at
or before the time of any such salary payment under any
disability benefit plan or plans of the Company and
that were not previously applied to reduce any payment
of base salary.
ii. Upon his termination of employment because of
Disability [as described in Paragraph 6(c)], the
Employee shall be entitled to the payments and benefits
described in Paragraph 7(a) as if the Employee had died
on his Date of Termination. In the event of the
Employee's death prior to the time that all payments
described in Paragraph 7(a) have been completed, such
payments and benefits shall be paid to the Employee's
beneficiary [as designated pursuant to Paragraph 7(a)],
or, in the absence of a beneficiary designation or
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<PAGE> 6
if the designated beneficiary does not survive the Employee,
to the Employee's estate.
c. Termination by Company Without Cause, or Termination by
Employee for Good Reason. In the event that the Company
terminates the Employee's employment without Cause or the
Employee terminates his employment for Good Reason before
the expiration of the term of this Agreement, including any
extension thereof, the Employee shall be entitled to the
following payments and benefits:
i. Those described in Paragraph 7(a) as if the Employee
had died on his Date of Termination
ii. Within thirty (30) days after the Date of Termination,
a lump sum cash payment equal to one (1) year of the
base salary applicable to the Employee on the Date of
Termination.
iii. Within thirty (30) days after the Date of Termination,
a lump sum cash payment equal to eighteen (18) months
of the premium applicable to the Employee on the Date
of Termination for the Employee and his family
(provided the Employee had family coverage on the Date
of Termination) under the Company's group health plan.
d. Termination by Employee Other Than for Good Reason, or
Termination by Company for Cause. In the event that the
Employee terminates his employment other than for Good
Reason or the Company terminates his employment for Cause,
the Employee shall not be entitled to any compensation
except as set forth below:
i. Any base salary (but not bonus) that is accrued but
unpaid, any vacation that is accrued but unused, and
any business expenses that are unreimbursed -- all, as
of the Date of Termination.
ii. Any other rights and benefits (if any) provided under
plans and programs of the Company (excluding any bonus
program), determined in accordance with the applicable
terms and provisions of such plans and programs.
e. No Duty to Mitigate Damages. After any Date of Termination,
the Employee shall have no obligation to seek other
employment, but shall have the right to be otherwise
employed, and any compensation of any type whatsoever
received by the Employee in connection with such employment
shall not be offset by the Company against any of the
obligations of the Company under this Agreement.
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<PAGE> 7
8. CHANGE IN CONTROL.
a. Occurrence of Change in Control. Immediately upon the occurrence
of a "Change in Control," the Employee shall become fully vested
in all employee benefit programs (other than any tax qualified
retirement plan, the Employee's interest in which shall vest in
accordance with such plan's terms), including without limitation,
all stock options in which he was a participant at the time of
the Change in Control. For purposes of this Agreement, the term
"Change in Control" shall mean the occurrence of any event which
results in either (a) Borror Realty Company's failing to own at
least thirty percent (30%) of the combined voting power of the
then outstanding voting securities of the Company entitled to
vote generally in the election of directors, or (b) both Don
Borror and Doug Borror ceasing to be directors and officers of
the Company.
b. Termination of Employment. If, at any time within two (2) years
following a Change in Control, the Company terminates the
Employee's employment without Cause or the Employee terminates
his employment for Good Reason, the provisions of this Paragraph
8(b) shall be applicable, instead of the provisions of Paragraph
7(c). To the extent that the provisions of this Paragraph 8(b)
are applicable, the Employee shall be entitled to the following
payments and benefits:
i. Those described in Paragraph 7(a) as if the Employee had
died on his Date of Termination; provided all cash payments
required under such paragraph shall be made within five (5)
calendar days of the Date of Termination;
ii. The lump sum payment, as described in Paragraph 7(c)(iii);
provided, such cash payment shall be made within five (5)
calendar days of the Date of Termination;
iii. A single lump sum payment, payable within five (5) calendar
days of the Date of Termination, equal to two (2) times the
Employee's annual base salary in effect upon the Date of
Termination; and
iv. Reimbursement of all expenses incurred by the Employee
through the use of any executive out-placement services to
assist him to seek other employment, which shall include,
but not be limited to (A) secretarial services, use of an
office, phone, office supplies and office services
comparable to the level of such services and supplies
available to the Employee prior to the Date of Termination
and (B) all unreimbursed travel expenses incurred by the
Employee to seek other employment up to a maximum amount of
Five Thousand Dollars ($5,000).
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<PAGE> 8
9. NONEXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Employee's continuing or future participation in any incentive,
fringe benefit, deferred compensation, or other plan or program provided by the
Company and for which the Employee may qualify, nor shall anything herein limit
or otherwise affect such rights as the Employee may have under any other
agreements with the Company. Amounts that are vested benefits or that the
Employee is otherwise entitled to receive under any plan or program of the
Company at or after the Date of Termination, shall be payable in accordance with
such plan or program.
10. NONCOMPETITION COVENANT. The Employee agrees that, during the term
of this Agreement, including any extension thereof, and for a period of one (1)
year thereafter, he shall not:
a. Anywhere in the State of Ohio or in any other state in which
the Company is then conducting business, without the written
consent of the Company, provide advice with respect to, engage
in or directly or indirectly supervise or assist the provision
of any service or sale of any product which competes with any
service or product of the Company; or
b. Anywhere in any state, accept employment with, provide advice
to, or engage in or directly or indirectly supervise or assist
the provision of any service or sale of any product by any
person, company, partnership, corporation or other entity
which builds homes, develops land, or otherwise competes with
the Company in any market, city or area in which the Company
then conducts business.
Notwithstanding any provision contained in this Paragraph 10, following
his termination of employment with the Company, the Employee shall not be
precluded (for any period of time following such termination) from engaging, in
any capacity, in the general practice of law.
The restrictions on competition provided herein may be enforced by the
Company and/or any successor thereto, by an action to recover payments made
under this Agreement, an action for injunction, and/or an action for damages.
The provisions of this Paragraph 10 constitute an essential element of this
Agreement, without which the Company would not have entered into this Agreement.
Notwithstanding any other remedy available to the Company at law or at equity,
the parties hereto agree that the Company or any successor thereto, shall have
the right, at any and all times, to seek injunctive relief in order to enforce
the terms and conditions of this Paragraph 10.
If the scope of any restriction contained in this Paragraph 10 is too
broad to permit enforcement of such restriction to its fullest extent, then such
restriction shall be enforced to the maximum extent permitted by law, and the
Employee hereby consents and agrees that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction.
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<PAGE> 9
11. CONFIDENTIAL INFORMATION. The Employee shall hold in a fiduciary
capacity, for the benefit of the Company, all secret or confidential
information, knowledge, and data relating to the Company, that shall have been
obtained by the Employee during his employment with the Company and that is not
public knowledge (other than by acts by the Employee or his representatives in
violation of this Agreement). During and after termination of the Employee's
employment with the Company, the Employee shall not, without the prior written
consent of the Company, communicate or divulge any such information, knowledge,
or data to anyone other than the Company or those designated by it, unless the
communication of such information, knowledge or data is required pursuant to a
compulsory proceeding in which the Employee's failure to provide such
information, knowledge, or data would subject the Employee to criminal or civil
sanctions.
12. INTELLECTUAL PROPERTY. The Employee agrees to communicate to the
Company, promptly and fully, and to assign to the Company all intellectual
property developed or conceived solely by the Employee, or jointly with others,
during the term of his employment, which are within the scope of the Company's
business, or which utilized Company materials or information. For purposes of
this Agreement, "intellectual property" means inventions, discoveries, business
or technical innovations, creative or professional work product, or works of
authorship. The Employee further agrees to execute all necessary papers and
otherwise to assist the Company, at the Company's sole expense, to obtain
patents, copyrights or other legal protection as the Company deems fit. Any such
intellectual property is to be the property of the Company whether or not
patented, copyrighted or published.
13. ASSIGNMENT AND SURVIVORSHIP OF BENEFITS. The rights and obligations
of the Company under this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and assigns of the Company. If the Company shall at
any time be merged or consolidated into, or with, any other company, or if
substantially all of the assets of the Company are transferred to another
company, then the provisions of this Agreement shall be binding upon and inure
to the benefit of the company resulting from such merger or consolidation or to
which such assets have been transferred, and this provision shall apply in the
event of any subsequent merger, consolidation, or transfer.
14. NOTICES. Any notice given to either party to this Agreement shall
be in writing, and shall be deemed to have been given when delivered personally
or sent by certified mail, postage prepaid, return receipt requested, duly
addressed to the party concerned, at the address indicated below or to such
changed address as such party may subsequently give notice of:
If to the Company: Borror Corporation
5501 Frantz Road
Dublin, Ohio 43017
Attn: President/CEO
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<PAGE> 10
If to the Employee: Robert A. Meyer, Jr.
3584 Dockside Court
Hilliard, Ohio 43026
15. INDEMNIFICATION. The Employee shall be indemnified by the Company,
to the extent provided in the case of officers under the Company's Articles of
Incorporation or Regulations, to the maximum extent permitted under applicable
law.
16. TAXES. Anything in this Agreement to the contrary notwithstanding,
all payments required to be made hereunder by the Company to the Employee shall
be subject to withholding of such amounts relating to taxes as the Company may
reasonably determine that it should withhold pursuant to any applicable law or
regulations. In lieu of withholding such amounts, in whole or in part, however,
the Company may, in its sole discretion, accept other provision for payment of
taxes, provided that it is satisfied that all requirements of the law affecting
its responsibilities to withhold such taxes have been satisfied.
17. ARBITRATION; ENFORCEMENT OF RIGHTS. Any controversy or claim
arising out of, or relating to this Agreement, or the breach thereof, shall be
settled by arbitration in the city of Columbus, Ohio, in accordance with the
Rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrator or arbitrators may be entered in any court having
jurisdiction thereof.
All legal and other fees and expenses, including, without limitation,
any arbitration expenses, incurred by the Employee in connection with seeking to
obtain or enforce any right or benefit provided for in this Agreement, or in
otherwise pursuing any right or claim, shall be paid by the Company, to the
extent permitted by law, provided that the Employee is successful in whole or in
part as to such claims as the result of litigation, arbitration, or settlement.
In the event that the Company refuses or otherwise fails to make a
payment when due and is ultimately decided that the Employee is entitled to such
payment, such payment shall be increased to reflect an interest equivalent for
the period of delay, compounded annually, equal to the prime or base lending
rate used by The Huntington National Bank, and in effect as of the date the
payment was first due.
18. GOVERNING LAW/CAPTIONS/SEVERANCE. This Agreement shall be construed
in accordance with, and pursuant to, the laws of the State of Ohio. The captions
of this Agreement shall not be part of the provisions hereof, and shall have no
force or effect. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. Except as otherwise specifically provided in this paragraph,
the failure of either party to insist in any instance on the strict
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<PAGE> 11
performance of any provision of this Agreement or to exercise any right
hereunder shall not constitute a waiver of such provision or right in any
other instance.
19. ENTIRE AGREEMENT/AMENDMENT. This instrument contains the entire
agreement of the parties relating to the subject matter hereof, and the parties
have made no agreement, representations, or warranties relating to the subject
matter of this Agreement that are not set forth herein. Upon execution of this
Agreement, the Employment Agreement entered into between the parties on February
28, 1995, shall be terminated and superseded by this Agreement. This Agreement
may be amended at any time by written agreement of both parties, but it shall
not be amended by oral agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
BORROR CORPORATION
By:
----------------------------
Douglas G. Borror
President
-------------------------------
Robert A. Meyer, Jr.
<PAGE> 12
APPENDIX A
----------
The target bonus will be an amount within a range from $0 to
$100,000.00. The determination of the amount of bonus to be awarded will be
based upon:
1. The quality of the Employee's performance of job elements and
business objectives as set forth on the attached summary,
together with any additional job elements and business objectives
that may be assigned to the Employee by the Chief Executive
Officer (40% of bonus); and
2. The performance of the Company in terms of achievement of its net
income goal, and the Employee's positive and meaningful impact
upon it (60% of bonus).
The determination shall be made by the Compensation Committee of the Board of
Directors with respect to those employees whose compensation must be
specifically reported for securities law purposes, and otherwise by the Chief
Executive Officer.
<PAGE> 13
SUMMARY
-------
1. Legal support to financial reporting.
2. Board of Directors and Board committee support.
3. Oversight of outside counsel.
4. Human Resources department.
5. Governmental affairs/political matters.
6. Legal support to land development and homes division.
<PAGE> 1
Exhibit 10.28
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
This Amendment is entered into this 17th day of November, 1996, by and
between Borror Corporation (hereinafter called the "Company") and Jon M. Donnell
(hereinafter called the "Employee").
WHEREAS, the Employee and the Company entered into an Employment
Agreement dated May 17, 1996 (the "Agreement"); and
WHEREAS, pursuant to the provisions of paragraph 19 of the Agreement,
by mutual agreement of the Employee and the Company, the Agreement may be
amended at any time, in writing; and
WHEREAS, both the Employee and the Company desire to amend the
Agreement in certain respects;
NOW, THEREFORE, the Employee and the Company hereby mutually agree to
amend the Agreement as follows:
1. Paragraph 1 of the Agreement shall be amended to reflect
that the Employee's position shall be Chief Operating Officer and Chief
Financial Officer of the Company. This Amendment shall be effective as
of September 1, 1996.
IN WITNESS WHEREOF, the parties have executed this Amendment to be
effective as of the date first above written.
BORROR CORPORATION
By:
----------------------
Title:
----------------------
----------------------
Jon M. Donnell
<PAGE> 1
Exhibit 10.30
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT is made to be effective as of November 6, 1996, by and
between Borror Corporation, an Ohio corporation (the "COMPANY"), and Jon M.
Donnell (the "EMPLOYEE").
WITNESSETH:
-----------
WHEREAS, the Board of Directors of the COMPANY adopted the Borror
Corporation Incentive Stock Plan (the "PLAN") on February 28, 1994; and
WHEREAS, the shareholders of the COMPANY, upon the recommendation of
the COMPANY'S Board of Directors, approved the PLAN on March 3, 1994; and
WHEREAS, pursuant to the provisions of the PLAN, the Board of Directors
of the COMPANY has appointed a committee (the "COMMITTEE") to administer the
PLAN, and the COMMITTEE has determined that an award of 21,333 common shares,
without par value, of the COMPANY (the "SHARES") should be granted to the
EMPLOYEE upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, the parties hereto
make the following agreement, intending to be legally bound thereby:
1. PLAN AS CONTROLLING. All terms and conditions of the PLAN, as it may
be amended from time to time, applicable to Restricted Stock granted thereunder
shall be deemed incorporated herein by reference. A copy of the PLAN as in
effect on the date of this Agreement is attached hereto as Annex A. In the event
that any provision in this Agreement conflicts with any term in the PLAN, the
term in the PLAN shall be deemed controlling.
2. GRANT OF SHARES OF RESTRICTED STOCK. The COMPANY hereby grants to
the EMPLOYEE 21,333 SHARES. Such SHARES shall initially be unvested and, unless
and until they vest as provided in Section 3, they shall be subject to
forfeiture.
3. VESTING OF SHARES. The shares shall vest in accordance with the
following vesting schedule:
Vesting Date Shares That Will Vest
------------ ---------------------
August 1, 1997 3,667
August 1, 1998 3,666
August 1, 1999 7,000
August 1, 2000 7,000
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<PAGE> 2
provided, however, that upon the occurrence of a "Change in Control," any shares
which have not vested on or before the date of the "Change in Control" shall
fully vest; and, provided further that if the employment of EMPLOYEE with the
COMPANY is terminated for any reason, any SHARES which have not vested on or
before the date of termination of employment shall be forfeited. The grant of
the SHARES shall not confer upon EMPLOYEE any right to continue in the
employment of the COMPANY nor limit in any way the right of the COMPANY to
terminate the employment of EMPLOYEE at any time.
4. TRANSFER RESTRICTIONS. Until the SHARES are vested, the SHARES may
not be sold, assigned, transferred, pledged or otherwise encumbered.
Certificates issued in respect of SHARES which are unvested shall be registered
in the name of the EMPLOYEE and deposited by the EMPLOYEE, together with a stock
power endorsed in blank, with the COMPANY. Upon the vesting of SHARES, such
restrictions on transfer shall terminate with respect to such vested SHARES and
the COMPANY shall deliver to the EMPLOYEE the certificates issued in respect of
such vested SHARES.
5. VOTING AND DIVIDEND RIGHTS. Unless and until any unvested SHARES are
forfeited pursuant to Section 3, the EMPLOYEE shall have all voting rights and,
subject to Section 6, all dividend rights with respect to the SHARES.
6. ADJUSTMENTS. In the event that any dividend or other distribution
(whether in the form of SHARES, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
SHARES or other securities of the COMPANY, issuance of warrants or other rights
to purchase SHARES or other securities of the COMPANY, or other similar
corporate transaction or event affects the SHARES such that an adjustment is
necessary in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the PLAN to the EMPLOYEE,
then the COMMITTEE shall make such adjustment (as necessary). Any property
(other than cash) that is distributed with respect to any unvested SHARES as a
result of any such adjustment shall be deposited by the EMPLOYEE, together with
a stock power endorsed in blank, with the COMPANY and shall be subject to the
same conditions and restrictions (including vesting and forfeiture) imposed by
this Agreement on the unvested SHARES to which the same relate.
7. INCOME TAX ELECTION. If the EMPLOYEE makes an election under Section
83(b) of the Internal Revenue Code of 1986, as amended, the EMPLOYEE shall
provide to the COMPANY a copy of such election within thirty (30) days of the
filing of such election with the Internal Revenue Service.
8. SATISFACTION OF TAXES AND TAX WITHHOLDING REQUIREMENTS.The COMPANY
shall be entitled and is authorized, if the COMMITTEE deems it necessary or
desirable, to
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<PAGE> 3
withhold (or secure payment from the EMPLOYEE in lieu of withholding) as
provided in Section 10(e) of the PLAN.
9. GOVERNING LAW. The rights and obligations of the EMPLOYEE and the
COMPANY under this Agreement shall be governed by and construed in accordance
with the laws of the State of Ohio (without giving effect to the conflict of
laws principles thereof) in all respects, including, without limitation, matters
relating to the validity, construction, interpretation, administration, effect,
enforcement, and remedies provisions of the PLAN and its rules and regulations,
except to the extent preempted by applicable federal law.
10. RIGHTS AND REMEDIES CUMULATIVE. All rights and remedies of the
COMPANY and of the EMPLOYEE enumerated in this Agreement shall be cumulative
and, except as expressly provided otherwise in this Agreement, none shall
exclude any other rights or remedies allowed by law or in equity, and each of
said rights or remedies may be exercised and enforced concurrently.
11. CAPTIONS. The captions contained in this Agreement are included
only for convenience of reference and do not define, explain or modify this
Agreement or its interpretation, construction or meaning and are in no way to
be construed as a part of this Agreement.
12. SEVERABILITY. If any provision of this Agreement or the application
of any provision hereof to any person or any circumstance shall be determined to
be invalid or unenforceable, then such determination shall not affect any other
provision of this Agreement or the application of said provision to any other
person or circumstance, all of which other provisions shall remain in full force
and effect, and it is the intention of each party to this Agreement that if any
provision of this Agreement is susceptible of two or more constructions, one of
which would render the provision enforceable and other or others of which would
render the provision unenforceable, then the provision shall have the meaning
which renders it enforceable.
13. NUMBER AND GENDER. When used in this Agreement, the number and
gender of each pronoun shall be construed to be such number and gender as the
context, circumstances or its antecedent may require.
14. AMENDMENT, ETC. The COMMITTEE may waive any conditions or rights
under, amend any terms of, or alter, suspend, discontinue, cancel or terminate,
the provisions of this Agreement, prospectively or retroactively; provided that
any such waiver, amendment, alteration, suspension, discontinuance, cancellation
or termination that would impair the rights of the EMPLOYEE shall not to that
extent be effective without the consent of the EMPLOYEE.
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<PAGE> 4
15. ENTIRE AGREEMENT. This Agreement, including the PLAN as amended
from time to time and incorporated by referenced herein, constitutes the entire
agreement between the COMPANY and the EMPLOYEE in respect of the subject matter
of this Agreement, and this Agreement supersedes all prior and contemporaneous
agreements between the parties hereto in connection with the subject matter of
this Agreement. No change, termination or attempted waiver of any of the
provisions of this Agreement shall be binding upon any party hereto unless
contained in a writing signed by the party to be charged.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed to be effective as of the date first above written.
COMPANY:
BORROR CORPORATION
By:
------------------------
Its:
------------------------
EMPLOYEE:
---------------------------
Jon M. Donnell
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<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Borror Corporation on Form S-8 (File No. 0-23270) of our report dated February
7, 1997 except for note 9 which is March 18, 1997, on our audits of the
financial statements of Borror Corporation as of December 31, 1996, and 1995 and
for the years ended December 31, 1996, 1995 and 1994, which report is included
in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Columbus, Ohio
March 18, 1997
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Borror Corporation, an Ohio corporation, which is about to file with
the Securities and Exchange Commission, Washington, D.C., under the provisions
of the Securities Exchange Act of 1934, as amended, the Annual Report on Form
10-K for the fiscal year ended December 31, 1996, hereby constitutes and
appoints Robert A. Meyer, Jr. and/or David S. Borror his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign
both the Annual Report on Form 10-K and any and all amendments and documents
related thereto, and to file the same and any and all exhibits, financial
statements and schedules related thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agent, and substitute or substitutes, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all things that
said attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do and seek to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
____ day of March, 1997.
/s/ Gerald E. Mayo
-------------------------
Gerald E. Mayo
<PAGE> 2
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Borror Corporation, an Ohio corporation, which is about to file with
the Securities and Exchange Commission, Washington, D.C., under the provisions
of the Securities Exchange Act of 1934, as amended, the Annual Report on Form
10-K for the fiscal year ended December 31, 1996, hereby constitutes and
appoints Robert A. Meyer, Jr. and/or David S. Borror his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign
both the Annual Report on Form 10-K and any and all amendments and documents
related thereto, and to file the same and any and all exhibits, financial
statements and schedules related thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agent, and substitute or substitutes, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all things that
said attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do and seek to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
____ day of March, 1997.
/s/ Pete A. Klisares
-----------------------
Pete A. Klisares
<PAGE> 3
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Borror Corporation, an Ohio corporation, which is about to file with
the Securities and Exchange Commission, Washington, D.C., under the provisions
of the Securities Exchange Act of 1934, as amended, the Annual Report on Form
10-K for the fiscal year ended December 31, 1996, hereby constitutes and
appoints Robert A. Meyer, Jr. and/or David S. Borror his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign
both the Annual Report on Form 10-K and any and all amendments and documents
related thereto, and to file the same and any and all exhibits, financial
statements and schedules related thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agent, and substitute or substitutes, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all things that
said attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do and seek to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
____ day of March, 1997.
/s/ C. Ronald Tilley
-------------------------
C. Ronald Tilley
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF DECEMBER 31, 1996, AND STATEMENT OF INCOME FOR THE TWELVE MONTHS
ENDING DECEMBER 31, 1996, OF BORROR CORPORATION AND IS QUALFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 252
<SECURITIES> 0
<RECEIVABLES> 2,001
<ALLOWANCES> 320
<INVENTORY> 95,390
<CURRENT-ASSETS> 0
<PP&E> 8,948
<DEPRECIATION> 4,241
<TOTAL-ASSETS> 103,826
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 30,526
0
0
<OTHER-SE> 2,325
<TOTAL-LIABILITY-AND-EQUITY> 103,826
<SALES> 175,579
<TOTAL-REVENUES> 175,579
<CGS> 136,498
<TOTAL-COSTS> 161,973
<OTHER-EXPENSES> 850
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,345
<INCOME-PRETAX> 6,411
<INCOME-TAX> 2,374
<INCOME-CONTINUING> 4,037
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,037
<EPS-PRIMARY> .65
<EPS-DILUTED> .65
</TABLE>
