-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U8Y6upNAwDw0KzJnFMHQS8zuyR4qxIaMBEpQ0B/H/gVt6G0LuVu2Jt5Qhd2hREsm 1//lL3AnYstXiZ/YEEOEng== 0000950144-97-003358.txt : 19970401 0000950144-97-003358.hdr.sgml : 19970401 ACCESSION NUMBER: 0000950144-97-003358 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELMONT HOMES INC CENTRAL INDEX KEY: 0000934651 STANDARD INDUSTRIAL CLASSIFICATION: PREFABRICATED WOOD BLDGS & COMPONENTS [2452] IRS NUMBER: 640834574 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-26142 FILM NUMBER: 97568856 BUSINESS ADDRESS: STREET 1: PO BOX 280 CITY: BELMONT STATE: MS ZIP: 38827 BUSINESS PHONE: 6014549217 MAIL ADDRESS: STREET 1: PO BOX 280 CITY: BELMONT STATE: MS ZIP: 38827 10-K 1 BELMONT HOMES, INC. FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996, OR |_| 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 NO. 0-26142 BELMONT HOMES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) MISSISSIPPI 64-0834574 - ------------------------------------------- ---------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) HIGHWAY 25 SOUTH, INDUSTRIAL PARK DRIVE, BELMONT, MISSISSIPPI 38827 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 601-454-9217 -------------- Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered - -------------------------------- ---------------------------------- NONE NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.10 PAR VALUE PER SHARE -------------------------------------- (Title of 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 filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |_| The aggregate market value of the shares of Common Stock (based upon the closing price of these shares in the over-the-counter market on March 25, 1996) of the registrant held by nonaffiliates on March 25, 1997 ($8.75 per share), was approximately $61,692,000. As of March 25, 1997, 9,467,000 shares of the registrant's Common Stock were outstanding. 2 DOCUMENTS INCORPORATED BY REFERENCE Documents incorporated by reference and the part of Form 10-K into which the document is incorporated: Portions of the Registrant's Proxy Statement Relating to the Annual Meeting of Shareholders to be held on June 3, 1997...........Part III
FORWARD-LOOKING STATEMENTS This report contains forward-looking statements regarding the business and industry of Belmont Homes, Inc. (the "Company"), including, without limitation, those regarding the integration of the businesses of its subsidiaries, the growth and financing strategies of the Company, projections of revenues, income, earnings per share or other financial items, the effective implementation of the Company's business or growth strategy, the adequacy of the Company's capital resources and other statements regarding trends relating to the manufactured home industry and various other items involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance and achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include general economic and business conditions; industry trends; demographic changes; competition; raw material and labor costs and availability; import protection and regulation; relationships with customers, distributors or dealers; changes in the business strategy or development plans of the Company; the availability, terms and development of capital; changes in or failure to identify or consummate successful acquisitions or to assimilate the operations of any acquired businesses with those of the Company; the availability of other forms of housing; the availability of consumer credit; general inflationary pressures; the growing number of dealers and manufacturers operating in the Company's markets; and government regulation. PART I ITEM 1. BUSINESS GENERAL The Company produces and markets a variety of single- and double-section manufactured homes under a variety of brand names through approximately 410 dealers and 550 sales centers in 20 states, primarily in the southern United States. The Company has long-established relationships with most of its dealers, and management believes these relationships contribute significantly to the Company's selling efforts. The Company targets its homes to a variety of price points within the moderately-priced segment of the manufactured housing market. The Company's single-section homes range in size from 672 square feet to 1,280 square feet and sell at retail prices between $12,500 and $34,100. The Company's double-section homes range in size from 1,040 square feet to 2,356 square feet and sell at retail prices between $20,000 and $59,600. The Company manufacturers homes in 11 production 2 3 facilities, five of which are located in Mississippi, four of which are located in Arkansas, and two of which are located in Georgia. The Company believes that its clustering approach to manufacturing enables the Company to achieve certain economies of scale unavailable to manufacturers with decentralized operations. The Company, which was incorporated in Mississippi in 1993, is a successor to a business which commenced operations in 1987. OPERATIONS The Company's operating strategy is to produce, at a low manufacturing cost, practical and high quality homes that are competitively priced. The following are the key elements of the Company's operating strategy: (i) to produce practical homes at affordable prices; (ii) to produce low-cost homes in clustered manufacturing facilities; (iii) to increase penetration in existing markets and (iv) to expand the Company's geographic presence and manufacturing capacity. The Company strives to offer homes with standard features at competitive prices at a variety of price points within the manufactured housing market. The designs of the Company's manufactured homes emphasize basic features, including central heating and a kitchen with a refrigerator and a range. Most optional features permit the consumer to customize the home. The Company strives to produce high quality homes at the lowest manufacturing cost possible. In contrast to competitors that operate decentralized production facilities, the Company clusters its production facilities. As a result, the Company is able to utilize a centralized management team and sales staff for each cluster. Within a cluster, each facility is dedicated to the production of a particular type of home. This specialized production system allows the Company to schedule longer production runs of each type of floor plan, resulting in higher volume, lower manufacturing costs and, the Company believes, improved quality. A production run often includes more than 30 floors of the same floor plan. The Company currently has five facilities clustered in and around Belmont, Mississippi, and four facilities located approximately ten miles apart in Conway and Bigelow, Arkansas. In addition, with the acquisition of Bellcrest Homes, Inc. ("Bellcrest") in October 1996, the Company added two facilities clustered in the Millen, Georgia area. The Company intends to increase its penetration of its primary and secondary markets by increasing the number of dealers selling its homes in each of the 20 states in which the Company's products are currently sold. The Company plans to continue to concentrate its efforts on the southern region of the United States because of its dealer and customer relationships and the substantial opportunity for growth which management believes this region offers. ACQUISITIONS The Company's acquisition strategy is to acquire manufacturers that (i) produce manufactured homes which broaden and complement the Company's existing product lines, (ii) utilize a complementary independent dealer network, (iii) operate facilities in areas which will expand the Company's geographic market and (iv) provide management of the Company with the opportunity to increase such manufacturer's floor production and operating margins by implementing the Company's clustered facility manufacturing philosophy and other operating procedures. On October 25, 1996, the Company acquired all of the outstanding capital stock of Bellcrest Homes, Inc. for $9.5 million in cash. Further, if certain performance criteria are met by Bellcrest, additional payments equal to $3.5 million will be paid by the Company to the former 3 4 shareholders of Bellcrest. With the acquisition of Bellcrest, the Company operates 11 manufacturing facilities with an estimated aggregate annual production capacity of 26,650 floors. The acquisition of Bellcrest broadened the Company's product lines and strengthened the Company's capacity to produce multi-section homes. Bellcrest's single-section homes range in size from 924 square feet to 1,280 square feet and sell at retail prices between $22,100 and $34,100. Bellcrest's double-section homes range in size from 1,144 square feet to 2,396 square feet and sell at retail prices between $33,300 and $59,600. Bellcrest's net sales for the fourth quarter of 1997 were approximately $11.8 million. Multi-section homes have historically accounted for more than two-thirds of the annual sales of Bellcrest. Although the Company has engaged in preliminary discussions with respect to potential acquisitions, it does not have any agreements or understandings with respect to the acquisition of any additional manufacturers or facilities. INDUSTRY OVERVIEW A manufactured home is a complete single-family residence that is built in a production facility and transported to either a dealer or a home site. Manufactured homes offer many of the amenities of, and are generally constructed with the same materials as, site-built homes. The manufactured homes are built in floors, with homes consisting of one or more floors. Multi-section homes are joined at the home site by the dealer or an independent installer. Manufactured homes must meet the national construction and safety standards building code administered by Housing and Urban Development ("HUD"), which sets specified industry-wide levels of quality relating to design, materials and performance standards. Manufactured housing has historically been one of the most affordable alternatives for the home buyer. As a result of manufacturing efficiencies, manufactured homes can be purchased at a lower cost per square foot than site-built homes. According to the U.S. Census Bureau, in 1994 the average retail cost per square foot was $22.03 for a single-section manufactured home and $27.41 for a double-section manufactured home, as compared to an average of $58.65 for a site-built home. Because of the lower cost of manufactured homes as compared to site-built homes, manufactured homes traditionally have enabled first-time home buyers and retirees to overcome the obstacles of large down payments and high monthly mortgage payments. According to statistics published by the Manufactured Housing Institute ("MHI"), the manufactured housing industry's share of the single-family housing market has increased from 25.7% of total single-family homes sold in 1992 to 32.4% in 1996. The following table shows the level of new domestic single-family housing sales and shipments and the portion of such sales and shipments represented by manufactured and site-built homes:
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- (In thousands, except percentages) New single-family site-built homes sold(1).............. 610 666 670 667 757 New single-family manufactured homes shipped............ 211 254 304 340 363 --- --- --- ----- ----- Total......................................... 821 920 974 1,007 1,120 === === === ===== ===== New manufactured homes as a percentage of total(1)...... 25.7% 27.6% 31.2% 33.7% 32.4%
- --------------- (1) New single-family site-built homes sold exclude contractor-built and owner-built homes and rental properties. For example, in 1994, contractor-built and owner-built homes and rental properties accounted for an aggregate of 526,000 single-family housing starts. 4 5 According to the MHI, domestic shipments of manufactured homes declined by 42.1% from a peak of 295,079 in 1983 to a low of 170,713 homes in 1991. Management of the Company believes that the principal causes for this decline include economic downturns in certain oil and gas producing states and the deterioration of general economic conditions culminating in the most recent national recession. Additionally, excess site-built housing inventories, contraction in the availability of financing and high levels of apartment vacancies and repossessed manufactured housing inventories contributed to the decline in manufactured home sales in certain regions. As a result of these conditions, the number of manufacturers in the industry fell from 185 in 1983 to 85 in 1991. This trend, however, has reversed, resulting in increased competition for the Company. In 1996, the number of manufacturers increased to 98 companies with 313 plants, from 92 companies with 285 plants in 1995. While the industry has historically been seasonal, with lower shipments occurring in the first and last part of each calendar year, prior to 1996 and since 1991, the manufactured housing industry had experienced a significant increase in sales during these and other periods, slightly reducing the seasonality that has affected the industry. According to the MHI, nationwide shipments in 1996 increased 7% to 363,411 homes from 339,601 homes in 1995, while industry shipments in the Company's primary and secondary markets increased by 12.2% and 5.7% respectively. However, according to MHI, monthly industry shipments declined 5.5% in November 1996 and 4.5% in December 1996 compared to same month sales in 1995. The November 1996 decline was the first such monthly decline since December 1991. This decline in fourth quarter shipments represents a return to the seasonality historically present in the manufactured housing industry. The Company expects that this seasonality will be present in the first and fourth quarters of 1997. According to MHI, 1996 was the first year in the history of the manufactured housing industry that sales of multi-section homes surpassed sales of single-section homes. In 1996, industry shipments of multi-section homes increased to 52.2% of all manufactured homes sold in the United States during the year, from 48.8% in 1995. The Company's shipments of multi-section homes in 1996 increased to 25.8% or 2,870 homes of the total homes sold by the Company during the year, from 17% or 1,335 multi-section homes sold in 1995. Approximately 74% of the homes sold by the Company during 1996 were, therefore, single-section homes. During the fourth quarter of 1996, although the Company's shipment of homes increased 5% to 2,905 homes (primarily as a result of the Company's acquisition of Bellcrest in October 1996), when compared to sales of 2,766 homes in the fourth quarter of 1995, sales of the Company's single-section homes decreased 12.5% during the fourth quarter of 1996 to 2,000 homes, when compared to sales of 2,287 single-section homes in the fourth quarter of 1995. Although management believes the current level of industry shipments is sustainable based on continued favorable economic and demographic factors, it does believe that industry conditions have recently become significantly more competitive and seasonal. Management of the Company believes that this increased competition is primarily the result of the increasing number of manufacturers and plants operating in the industry, together with a related increase in the number of independent and other retail dealers operating in the Company's territory. The return of seasonality is consistent with historical trends present in the industry. Management also believes, based upon recent trends, that the multi-section segment of the industry has become more competitive among manufacturers and more attractive to purchasers of manufactured housing. Management believes that this increased competition and return to seasonality could adversely effect the Company's future sales and results of operations. 5 6 PRODUCTS The Company strives to offer homes with standard features at competitive prices at a variety of price points within the moderately-priced segment of the manufactured housing market. Management believes that the acquisition of Bellcrest increased the breadth of the Company's products, especially in the multi-sectioned product line. PRODUCT LINES. The Company sells its homes under the Premier, Glenwood, Delta, Spirit, River Valley, Bellcrest and other brand names. The number of floor plans offered in each line, range of sizes and retail prices, and percentage of Company sales for the year ended December 31, 1996 in each such line are as follows:
TOTAL FLOOR PERCENTAGE OF SALES FOR YEAR ENDED BRAND NAME TYPE PLANS OFFERED SIZE (SQ. FT.) RETAIL PRICE RANGE December 31, 1996 (1) - ---------- -------------- ------------- -------------- ------------------ ------------------------------- Premier, Single-section 81 672 - 1,216 $12,500 - $30,000 42% Glenwood, Delta Premier, Double-section 21 1,040 - 1,976 $20,000 - $55,000 23% Glenwood, Delta Spirit/River Valley Single-section 16 896 - 1280 $19,500 - $27,800 19% Spirit/River Valley Double-section 22 1,120 - 2,180 $28,500 - $48,700 11% Bellcrest Single-section 66 924 - 1,280 $22,100 - $34,100 1% Bellcrest Double-section 87 1,144 - 2,356 $33,300 - $59,600 4% Total 293 100.0% === =====
The Company's product lines differ primarily in terms of price, size, style and quality of furnishings. Premier homes contain two to four bedrooms, a living room, dining room, kitchen, one or two bathrooms and standard features such as central heating, a range, refrigerator, furniture, carpet and draperies. Optional features which may be added to the standard models include, among other things, fireplaces, vaulted ceilings and patio doors. The Glenwood line features more expensive carpet, cabinets, draperies, furniture and appliances than the Premier line. Spirit homes contain a more elaborate floor plan and more elaborate presentation than Premier homes. Standard features include vaulted textured ceilings in certain rooms, a range, refrigerator, carpeting and draperies. Optional features added to the standard models include, among other things, fireplaces, vaulted textured ceilings throughout, hard board siding, shingled roofs and storm windows. The River Valley line features less expensive standard features and fewer options than the Spirit line. The Bellcrest line, which was acquired in October 1996, includes ten separate brands with homes offering a variety of standard and optional features similar to the Premier and Spirit lines. 6 7 DESIGN AND COSTING. The Company designs its homes to provide attractive, practical features at affordable prices. The Company believes that it has been able to develop designs that are responsive to consumers' needs while maintaining low operating costs. In order to continue to provide practical homes at attractive prices, management annually reviews the Company's existing designs to determine which designs should be eliminated and which should be modified to respond to design trends, material availability or cost concerns. Additionally, in anticipation of trade shows, the Company seeks to develop several new single-section and double-section models each year. To control costs, the Company places particular emphasis on the versatility of the designs so that a few basic features of each decor can be interchanged within a variety of styles. This flexibility offers the consumer additional variations of decors to suit their particular tastes. Additionally, the use of standardized floor plans permits the Company to take advantage of efficiencies of scale in scheduling. The Company also offers numerous combinations of exterior designs, including different colors of vinyl siding and hard board siding, trim and, on its double-section and Wind Zone homes, shingle roofing. MANUFACTURING OPERATIONS FACILITIES. The Company produces its manufactured homes in 11 facilities, five of which are located in Mississippi, four of which are located in Arkansas and two of which are located in Georgia. The Company's facilities generally operate on a one shift per day, five days per week basis, 50 weeks per year. A production manager oversees operations in each facility with the assistance of five or eight foremen, each of whom is responsible for a particular stage of the production process. The following table provides certain information with respect to the Company's manufacturing facilities:
DATE OPENED FACILITY OR ACQUIRED SQUARE FEET CAPACITY(1) -------- ----------- ----------- ----------- (IN FLOORS) Belmont, MS 1 March 1988 77,000 1,750 2 October 1992 54,000 2,600 3 December 1993 80,000 2,500 4 March 1995 104,000 4,100 Clarksdale, MS 1 August 1995 86,000 2,000 Conway, AK 1 October 1995 (2) 91,000 2,100 2 October 1995 79,500 1,300 3 June 1996 110,000 3,400 4 September 1996 110,000 3,400 Millen, GA 1 October 1996 66,000 2,000 2 October 1996 56,000 1,500 TOTAL 913,500 26,650 ======= ======
- ---------- (1) Capacity figures are estimates of management on the basis of one shift per day, five days per week, 50 weeks per year. (2) The Company leases this facility on a month-to-month basis. 7 8 Based on significant increases in Company sales of double-section homes in the past five years, management believes that the demand for double-section homes will continue to increase as a percentage of manufactured housing sales, while the market for 14-foot single-section homes will continue to decline, consistent with the Company's recent experience. As a result, the Company generally utilizes its larger production facilities to produce double-section homes and its smaller production facilities to produce single-section homes. The Company's production facilities are clustered, which allows management to minimize the duplication of personnel necessitated by having production facilities located in different states or regions, enhance quality control and to reduce start-up costs of additional facilities. The Company believes it realizes specific cost savings by having one purchasing staff responsible for the procurement, handling and storage of inventory for its clustered production facilities. Additionally, the Company is able to utilize one sales staff for each cluster of its facilities. Manufacturers generally provide dealers with their products within a limited radius based upon the cost of transporting the home to the dealer. The cost savings resulting from the Company's centralized operations and transportation arrangements permit the Company to expand the radius of its dealer network and still offer its homes at competitive prices. SCHEDULING. Because management believes that the efficient scheduling of production is essential to its success, the Company generally schedules lengthy production runs of each type of floor plan in each of its facilities. Management believes that the Company's scheduling system results in the production of better quality homes in a more efficient manner. Employees at each facility construct the same home in repetition during a production cycle, which familiarizes the employees with their roles in the manufacturing process for the particular type of home. The employees become more efficient in performing their tasks, and the quality of their workmanship improves as a result of this repetition. The Company's sales personnel verify each order before it is scheduled for production, because dealer orders are subject to cancellation prior to manufacture for a variety of reasons. RAW MATERIALS. The principal materials used in the production of the Company's homes include lumber, gypsum, particleboard, paneling, insulation, steel, wiring, plumbing, carpet, vinyl, linoleum, fasteners and hardware items, appliances, electrical items, windows and doors. These materials and components are generally readily available and are purchased by the Company from numerous sources on standard industry terms, which generally require payment within 30 days and offer a 2% discount for payment within ten days. The proximity of the Company's suppliers permits the delivery of such materials on an as-needed basis, thereby reducing the need to maintain a significant inventory of raw materials. No supplier accounted for more than 12.3% of the Company's raw material purchases during 1996. While the Company is dependent upon the timely delivery of such raw materials to its facilities, the loss of any one supplier would not have a material effect on the Company. The Company purchases the appliances for its homes from General Electric, but the Company is not a party to and does not intend to enter any long-term contracts with suppliers. The Company believes its current policy of purchasing from many suppliers enables it to benefit from lower costs and avoid any supply problems caused by using one source of raw materials. During the second half of 1996, the Company invested an aggregate of approximately $2.5 million in two joint ventures. The first joint venture, in which the Company invested with Cavalier Homes, Inc. ("Cavalier"), produces laminated wallboard, paneling and interior doors. The second joint venture, in which the Company invested with Cavalier and Southern Energy Homes, Inc., produces cabinet doors. The majority of the 1996 sales for these joint ventures were to the respective joint venture partners. The Company expects such sales to increase as the full-year requirements of the joint venture partners are met 8 9 and through sales to unaffiliated parties. The Company believes that prices charged by these joint ventures for materials are competitive with the Company's other sources of materials. Management believes that the size of its purchases allows it to obtain favorable volume discounts. The Company's costs of operations, however, can be significantly affected by the availability and pricing of raw materials. Sudden increases in demand for construction materials, particularly lumber and insulation, can greatly increase the costs of production. In the past, the Company has added a lumber surcharge to the price of its homes to offset anticipated lumber price increases the Company may experience. While the Company historically has been able to reflect a significant portion of raw material cost increases in its current prices by anticipating such increases, such raw material cost increases cannot always be reflected immediately in the Company's prices, especially in backlog orders for which price adjustments are not made, and, consequently, may adversely affect the Company's profitability. QUALITY CONTROL. The operation of clustered production facilities allows the dedication of each facility to a particular type of home, which permits lengthy production runs of the same floor plan. Increased repetition makes employees more proficient, which results in improved quality. The Company adheres to strict quality standards, which management believes equal or surpass standards enforced by HUD, and continually refines its production procedures to increase productivity and reduce warranty claims. Personnel at each of the Company's facilities track and correct production deficiencies at various stages of production that are attributable to the manufacturing process. In accordance with HUD requirements, an independent HUD-approved, third-party inspector inspects each of the Company's manufactured homes for compliance during construction at the Company's manufacturing facilities. Before a home moves from one production station to another, the foreman in charge of the station inspects the home. The Company also employs inspectors who perform a final inspection prior to shipping each home. One of the inspectors serves as quality control manager and reports the results of the inspections directly to the President of the Company. In addition, the quality control manager, the other inspectors and all foremen meet daily to review problems in production and to suggest improvements to the manufacturing process. Each facility must be certified in accordance with HUD requirements prior to its opening for production. TRANSPORTATION. The Company uses a combination of its own drivers and common carriers to deliver its homes. The trucks used by the Company's employee drivers are owned by the driver and leased to the Company. Each lease is terminable by either party upon 30 days notice. Management believes that an employee driving his own truck will take better care of both the truck and the home being delivered. The manufacturing facilities operate by Spirit Homes, Inc. ("Spirit" or "Spirit Homes") and Bellcrest, subsidiaries of the Company, utilize common carriers to deliver their homes. SALES AND DEALER NETWORK The Company sells manufactured homes through approximately 410 dealers and 550 sales centers in 20 states, principally in the southern United States. Approximately 80% of the Company's sales during 1996 occurred in its primary market states of Alabama, Arkansas, Kentucky, Louisiana, Mississippi, Missouri, Oklahoma, Tennessee and Texas. Management believes that the quality of its independent dealer network has been, and will continue to be important to the Company's performance. For the year ended December 31, 1996, net sales at the Company's ten largest dealers accounted for approximately 20%. Management believes that providing attractive and well-built homes at affordable prices is essential to recruiting and retaining dealers. The Company provides each dealer with a territory which the Company considers exclusive. Although not contractually bound to maintain any exclusive territories on behalf of its dealers, management believes this practice encourages dealer loyalty. The Company markets 9 10 its homes to dealers through target mailings, trade publications and participation in regional trade shows and participates in advertising campaigns of its dealers on a cooperative basis. Additionally, the Company supports its dealers through the distribution of floor plan literature and brochures. The Company's strategy of selling its homes through independent dealers helps to ensure that the Company's homes are competitive with those of other manufacturers in terms of consumer satisfaction, product design, quality and price. The Company's senior management and sales personnel maintain personal contact with the Company's independent dealers. Each member of the Company's sales staff focuses on a particular region or state and is paid a commission based upon the sales generated. The Company gives its sales personnel considerable discretion in the amount and nature of contact with the independent dealers in their territory, which allows the independent dealers to receive individualized service. Because these independent dealers have significant influence over a retail customer's purchase decision, the Company encourages its independent dealers to promote the Company's homes, monitors each independent dealer's inventory and offers a volume purchase rebate to all of its independent dealers. The Company also sponsors activities with dealers at trade shows and rewards certain dealers with expense-paid promotional trips. The Company does not have formal marketing agreements with its independent dealers, and substantially all of the Company's dealers also sell homes of other manufacturers. WARRANTIES AND SERVICE The Company provides the initial consumer with a HUD-mandated one-year limited warranty on the structure of the home. The Company also offers a 90-day warranty on plumbing and electrical components. In addition to the Company's warranty, direct warranties are provided by the manufacturers of the components, appliances and floor covering included in the homes. Upon delivery of a home, the dealer completes a checklist detailing any needed repairs to the home and sends it to the Company's service manager, who is responsible for taking the necessary corrective action. Warranty and service expense for the Company approximated 2.1% of net sales in 1995 and 3.2% of net sales in 1996. The Company maintains a warranty reserve which management believes is adequate to cover estimated warranty claims to be incurred and which to date has been sufficient to cover the Company's warranty expenses. The Company often incurs service expenditures after the warranty period has expired. Management believes that this practice increases dealer loyalty and maintains goodwill. DEALER AND RETAIL FINANCING Almost all of the Company's dealers finance their purchases through "floor plan" arrangements under which a financial institution provides the dealer with a loan for the purchase price of the home and receives a security interest in the home as collateral. In connection with a "floor plan" arrangement, the financial institution providing the financing customarily requires the Company to enter into a separate repurchase agreement with the financial institution under which the Company is obligated, upon default by the dealer, to repurchase the homes for an amount equal to the unpaid loan balance plus certain administrative and handling expenses. At December 31, 1996, the Company had a contingent repurchase liability under floor plan financing arrangements of approximately $86.1 million. The risk of loss under such repurchase agreements is mitigated by the fact that (i) sales of the Company's manufactured homes are spread over a large number of independent dealers, and (ii) the price the Company is obligated to pay generally declines over the term of the repurchase agreement (generally 12 months). The costs incurred by the Company under such repurchase agreements have been nominal. No assurance can be given, however, that the Company will not suffer losses with respect to, and as a consequence of, these financing 10 11 arrangements. The Company has no contingent liability with respect to any financing arrangement made by the home buyer to purchase his or her home from the dealer. COMPETITION The manufactured housing industry is highly competitive at both the manufacturing and retail levels, with competition based upon factors including total price to the dealer, product features, quality, warranty repair service and the terms of dealer and retail customer financing. A number of firms such as Fleetwood Enterprises, Inc., Champion Enterprises, Inc., Oakwood Homes Corporation and Clayton Homes, Inc., among others, have been operating longer and possess greater manufacturing, financial and other resources than the Company, and there are numerous firms producing manufactured homes in the states in which the Company operates, many of which are in direct competition with the Company in the states where its homes are sold. Certain of the Company's competitors provide customers with financing from captive finance subsidiaries. Additionally, management believes that a significant amount of new manufactured housing production capacity has been developed in the past three years and that the number of retail dealers has increased during the same period. A downturn in the manufactured housing industry could result in excess industry capacity, which in turn could result in increased competition adversely affecting the Company's results of operations or financial condition. In addition, the Company competes with other manufacturers, some of which maintain their own retail sales centers, for quality independent dealers. While management believes that mortgage financing has generally become more available in the manufactured housing industry in recent years, a contraction in consumer credit could provide an advantage to those competitors with internal financing capabilities. Manufactured homes also compete with site-built homes, as well as apartments, townhouses, condominiums and existing site-built and manufactured homes. See "Business - Industry Overview." The barriers to entry into the manufactured housing industry are relatively low. Management believes, however, that the qualifications for obtaining inventory, accounts receivable and finished goods financing, which are based upon the financial strength of the manufacturer and each of its dealers, have in recent years become more difficult to meet. REGULATION The Company's business is subject to a number of federal, state and local laws. Construction of manufactured housing is governed by the National Manufactured Housing Construction and Safety Standards Act of 1974. In 1976, HUD issued regulations under this Act establishing comprehensive national construction standards. The HUD regulations cover all aspects of manufactured home construction, including structural integrity, fire safety, wind loads, thermal protection and ventilation. Such regulations preempt conflicting state and local regulation on such matters. These regulations are subject to continual change. New wind load regulations became effective in July 1994 for certain hurricane-prone areas and new thermal protection standards affecting all regions of the country to a varying degree became effective October 1994. Despite the scope and strict enforcement of these regulations, there can be no assurance that one of the Company's homes will not be damaged or destroyed by an act of God, especially hurricanes and tornadoes. The Company's manufacturing facilities and the plans and specifications of its manufactured homes have been approved at the opening of each facility for compliance with applicable federal regulations by HUD-designated inspection agencies. An independent, HUD-approved third-party inspector checks each of the Company's manufactured homes for compliance during construction. Failure to comply with the HUD regulations could expose the Company to a wide variety of sanctions, including closing one or more of the Company's production facilities. 11 12 Manufactured, modular and site-built homes are all built with particleboard, paneling and other products that contain formaldehyde resins. Since February 1985, HUD has regulated the allowable concentration of formaldehyde in certain products used in manufactured homes and required manufacturers to warn purchasers concerning formaldehyde associated risks. The Company uses materials in its manufactured homes that meet HUD standards for formaldehyde emissions and that otherwise comply with HUD regulations in this regard. In addition, certain components of manufactured homes are subject to regulation by the CPSC which is empowered to ban the use of component materials believed to be hazardous to health and to require, through HUD regulations, the manufacturer to repair defects in components of its homes. The CPSC, the Environmental Protection Agency and other governmental agencies have in the past evaluated the effects of formaldehyde. Regulations of the Federal Trade Commission also require disclosure of a manufactured home's insulation specifications. The transportation of manufactured homes on highways is subject to regulation by various federal, state and local authorities. Such regulations may prescribe size and road use limitations and impose lower than normal speed limits and various other requirements. The Company's manufactured homes are also subject to local zoning and housing regulations. A number of states require manufactured home producers to post bonds to ensure the satisfaction of consumer warranty claims, but no claims have been made against the Company with respect to these bonds. A number of states have adopted procedures governing the installation of manufactured homes. Utility connections are subject to state and local regulation and must be complied with by the dealer or other person installing the home. The Company is subject to the Magnuson-Moss Warranty Federal Trade Commission Improvement Act which regulates the descriptions of warranties on products. The description and substance of the Company's warranties are also subject to a variety of state laws and regulations. The Company's operations are subject to federal, state and local laws and regulations relating to the generation, storage, handling, emission, transportation, disposal and discharge of materials into the environment. Governmental authorities have the power to enforce compliance with these regulations, and violations may result in the payment of fines or the entry of injunctions, or both. Furthermore, the requirements of such environmental laws and enforcement policies have generally become stricter in recent years. The Company currently does not believe it will be required under existing environmental laws and enforcement policies to expend amounts which will have a material adverse effect on its operating results or financial condition. The Company is unable to make any assurance, however, that the ultimate cost of compliance with environmental laws and enforcement policies will not have a material adverse effect on the operating results or financial condition of the Company. EMPLOYEES As of December 31, 1996, the Company employed 2,251 full-time employees involved in the following functional areas: manufacturing, 2,006; transportation, 55; sales, 30; field service, 47; administration and clerical, 94; and management, 19. The Company's manufacturing operations require primarily semi-skilled labor, and the personnel levels fluctuate with seasonal changes in production volume. The Company believes that it has a good relationship with its employees. None of the Company's employees is covered by a collective bargaining agreement, and the Company has never experienced any work stoppage. 12 13 TRADEMARKS The Company has applied with the United States Patent and Trademark office to register "Belmont Homes," and "Spirit Homes," as trademarks. Management believes that the "Belmont Homes" and "Spirit Homes" marks have significant value and are important factors in marketing the Company's products. INSURANCE The Company maintains general liability and property insurance. The costs of insurance coverage vary generally, and the availability of certain coverage has fluctuated in recent years. While the Company believes that its present insurance coverage is adequate for its current operations, there can be no assurance that the coverage is sufficient for all future claims or will continue to be available in adequate amounts or at reasonable rates. The Company also posts bonds in those states which require manufactured home producers to post such bonds to ensure satisfaction of consumer warranty claims. Additionally, the Company sponsors a self-funded group medical plan for its employees, which plan is administered by a third party. The plan has obtained reinsurance coverage which limits the Company's liability thereunder. ITEM 2. PROPERTIES The Company's facilities are described in Item 1 under the caption "Manufacturing Operations - Facilities." The Company owns all of its properties except for the production facility in Conway, Arkansas, which is leased on a month-to-month basis. The Company believes that its facilities are adequate for its current production needs and that adequate space for expansion is available should additional production capacity be required. ITEM 3. LEGAL PROCEEDINGS The Company is, from time to time, a party to litigation which arises in the normal course of its business. The Company does not have pending any litigation that, separately or in the aggregate, is expected to have a material adverse effect on the operating results or financial condition of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 13 14 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Common Stock is quoted on the Nasdaq National Market ("Nasdaq") under the symbol BHIX. The following table sets forth the range of high and low sales prices on Nasdaq for the two most recent fiscal years, as reported by Nasdaq:
1995 High(1) Low (1) ---- ------- ------- Second Quarter............................ $ 6.92 $ 6.00 Third Quarter............................. 10.17 6.50 Fourth Quarter............................ 13.33 9.33 1996 ---- First Quarter............................. $12.33 $10.25 Second Quarter............................ 15.83 11.83 Third Quarter............................. 17.42 12.08 Fourth Quarter............................ 18.67 8.06 1997 ---- First Quarter (through March 25, 1997).... $10.75 $ 7.62
- ----------------------- (1) High and low sales prices have been adjusted to reflect a three-for-two stock split distributed to the Company's shareholders on November 1, 1996. The high and low sale prices shown above reflect the fact that the Company closed its initial public offering on June 8, 1995. As a result, high and low sales prices are not given for the first quarter of 1995. As of March 25, 1997, there were approximately 108 record holders of the Company's Common Stock. The Company historically has retained and currently intends to retain all earnings to finance the development and expansion of its operations and, therefore, does not anticipate paying cash dividends or making any other distributions on its shares of its common stock in the foreseeable future. Furthermore, the Company's credit facilities contain restrictions on the Company's ability to pay dividends. The Company's future dividend policy will be determined by its Board of Directors on the basis of various factors, including the Company's results of operations, financial condition, business opportunities, capital requirements and such other factors as the Board of Directors may deem relevant. In connection with the Company's acquisition of Bellcrest, the Company issued to a former shareholder of Bellcrest warrants to purchase 75,000 shares of the Company's common stock for approximately $14.66 per share (the "Warrant"). The Warrant contains customary antidilution provisions, expires on October 25, 2001, and is subject to the terms of the Registration Rights Agreement dated October 25, 1996, between the Company and the holder of the Warrant. The Warrant was issued by the Company in reliance upon Section 4(2) of the Securities Act of 1933, as amended. 14 15
ITEM 6. SELECTED FINANCIAL DATA Predecessor (1) --------------------------- Period From ----------------------- Year Ended Jan 1 to Jun 1 to Pro ------------------------- December 31, May 31, Dec 31, Forma Year Ended December 31, -------------------------------------------------------------------------------------------------------------- (in thousands, except per share date) 1992 1993 1993 1993 1994 1995 1996 ------------------------------------------------------------------------------------------------------------- INCOME DATA: Net sales $41,441 $26,639 $44,125 $70,765 $107,423 $150,576 $234,050 Cost of sales 35,869 22,941 37,027 59,988 89,902 127,165 197,801 ------------------------------------------------------------------------------------------------------------- Gross profit 5,572 3,698 7,098 10,777 17,521 23,411 36,249 Selling, general and administrative expenses 2,198 1,593 2,710 4,458 6,731 9,333 17,032 ------------------------------------------------------------------------------------------------------------- Income from operations 3,374 2,105 4,388 6,319 10,790 14,078 19,217 Other income (expense), net (104) 34 (637) (1,014) (1,062) (314) 420 Income taxes -- -- 1,430 1,996 3,349 5,154 7,524 ------------------------------------------------------------------------------------------------------------- Net income 3,270 2,139 2,321 3,309 6,379 8,610 12,113 Income tax adjustment 1,242 789 -- -- -- -- -- ------------------------------------ Net income, adjusted for income taxes $ 2,028 $ 1,350 -- -- -- -- -- ==================================== Preferred stock dividends (43) (81) (81) (28) -- Net income applicable to common stock 2,278 3,228 6,298 8,582 12,113 ========================================================================== Net income per common share $0.43 $0.61 $1.20 $1.23 $1.29 -------------------------------------------------------------------------- Weighted average common shares outstanding 5,250 5,250 5,250 6,963 9,426 --------------------------------------------------------------------------
15 16
Predecessor (1) --------------- Year Ended December 31, ----------------------------------------------------------------------------------- 1992 1993 1994 1995 1996 ----------------------------------------------------------------------------------- OPERATING DATA: Net sales per home sold $15,009 $17,085 $17,709 $19,209 $21,080 Homes sold: Single section 2,388 3,370 5,042 6,504 8,233 Double-section 373 772 1,024 1,335 2,870 ----------------------------------------------------------------------------------- Total 2,761 4,142 6,066 7,839 11,103 ----------------------------------------------------------------------------------- Percent double-section 13.5% 18.6% 16.8% 17.0% 25.8% ----------------------------------------------------------------------------------- Manufacturing facilities 1 3 3 7 11 BALANCE SHEET DATA: Total assets 7,149 17,040 23,096 50,068 79,355 Long-term debt 1,343 10,878 9,850 6,919 1,303 Shareholders' equity (deficit) 4,079 (1,072) 5,307 29,048 53,847
- ----------------- (1) Historical data of the Predecessor prior to the Predecessor Acquisition. See note one of the Notes to Consolidated Financial Statements. 16 17 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company achieved record sales and profits in 1996 due to management's plant expansion strategy, a growing manufactured housing industry and the acquisition of Bellcrest Homes, Inc. during the fourth quarter. Net sales increased 55% to $234.1 million from $150.6 million last year, following a 40% increase in 1995. Net income increased 41% to $12.1 million compared to $8.6 million in 1995. The manufactured housing market historically has been highly cyclical and seasonal and is influenced by many of the same national and regional economic and demographic factors which affect the overall housing market, including availability of financing, regional employment trends, consumer confidence and availability of alternative housing. Management believes long-term industry growth is, and will continue to be, most affected by the affordability of manufactured housing relative to site-built housing. According to MHI, industry shipments grew 7% to 363,411 homes in 1996, the fifth consecutive year of growth. Industry shipments increased 12% in 1995 and 20% in 1994. The Company's shipments continued to exceed the industry, increasing 42% to 11,103 homes in 1996; following gains of 29% in 1995 and 46% in 1994. However, monthly industry shipments declined 5.5% in November 1996 and 4.5% in December 1996 compared to same month sales in 1995. The November 1996 decline was the first monthly decline since December 1991. This decline in fourth quarter shipments represents a return to the seasonality historically present in the manufactured housing industry. The Company expects that this seasonality will be present in the first and fourth quarters of 1997. During the fourth quarter of 1996, although the Company's shipment of homes increased 5% to 2,905 homes (primarily as a result of the Company's acquisition of Bellcrest in October 1996 and its higher mix of multi-section homes), when compared to sales of 2,766 homes in the fourth quarter of 1995, sales of the Company's single-section homes decreased 12.5% during the fourth quarter of 1996 to 2,000 homes, when compared to sales of 2,287 single-section homes in the fourth quarter of 1995. Although management believes that the current level of industry shipments is sustainable based on continued favorable economic and demographic factors, it also believes that industry conditions have recently become significantly more competitive and seasonal. Management of the Company believes that this increased competition is primarily the result of the increasing number of manufacturers and plants operating in the industry, together with a related increase in the number of independent and other retail dealers operating in the Company's territory. The return of seasonality is consistent with historical trends present in the industry. Management also believes, based upon recent trends, that the multi-section segment of the industry has become more competitive among manufacturers and more attractive to purchasers of manufactured housing. Management believes that this increased competition and return to seasonality could adversely effect the Company's future sales and results of operations. See "Business - Industry Overview." During the fourth quarter of 1996 the Company acquired Bellcrest, a manufactured housing company headquartered in Millen, Georgia for $9.5 million in cash and $3.5 million in potential incentive payments based on future operating criteria. In the fourth quarter of 1995, the Company acquired Spirit Homes, Inc. a manufactured housing company in Conway, Arkansas for $9.8 million in cash and notes. 17 18 The following table sets forth information derived from the Company's historical financial statements.
1994 1995 1996 ------ ------ ------ Net sales 100.0% 100.0% 100.0% Cost of sales 83.7 84.5 84.5 ----- ----- ----- Gross profit 16.3 15.5 15.5 Selling, general and administrative 6.3 6.2 7.3 ----- ----- ----- Income from operations 10.0 9.3 8.2 Other income (expense), net (1.0) (.2) .2 Income taxes 3.1 3.4 3.2 ----- ----- ----- Net income 5.9% 5.7% 5.2% ----- ----- -----
1996 COMPARED TO 1995 NET SALES. Net sales increased 55.4% in 1996 to $234.1 million from $150.6 million in 1995, on a volume increase of 41.6%. Homes sold increased 3,264 units to 11,103 in 1996 from 7,839 in 1995. The majority of this volume increase results from Spirit Homes which opened two new plants during the second half of 1996. In addition, approximately 14% or 458 homes are from the acquisition of Bellcrest during the fourth quarter of 1996. Multi-sectional homes increased to 25.8% of homes sold in 1996 from 17% in 1995. The average price of a multi-section home in 1996 was $30,687 compared with $30,583 in the prior year. Single-section homes increased 5.1% in average price to $17,731 in 1996 from $16,874 in 1995 due to price and mix changes. COST OF SALES. Cost of sales includes costs of raw materials, direct labor, service and warranty expense, insurance and payroll taxes. Cost of sales increased 55.5% to $197.8 million in the current year from $127.2 million in 1995. Cost of raw materials and direct labor, which are two of the largest components of cost of sales, increased in 1996 to $148.2 million and $26.9 million, respectively, from $98.6 million and $16.5 million in 1995. As a percentage of net sales, cost of sales was 84.5% for both 1996 and 1995. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased 82.8% to $17 million in 1996 from $9.3 million in the prior year, primarily as a result of higher dealer promotional costs, sales commissions and salaries supporting the higher sales. Dealer promotional costs increased to $6.6 million or 2.8% of net sales in 1996 from $2.6 million or 1.7% in 1995. Selling, general and administrative expense was 7.3% of net sales in 1996 compared to 6.2% in the prior year. The Company believes its selling and administrative expense as a percentage of net sales will increase in the future due primarily to increased dealer costs as a result of an increase in the number of dealers and manufacturers in its market territory. Selling expenses include commissions, advertising expenses, salaries for sales support personnel and sales incentives. General and administrative expenses include administrative salaries, bonuses, insurance costs, professional fees and goodwill amortization. INTEREST EXPENSE. Interest expense declined to $285 thousand in 1996 from $825 thousand in 1995 due primarily to the effect of debt reduction from the use of proceeds of the Company's secondary sale of stock in January 1996. 18 19 1995 COMPARED TO 1994 NET SALES. Net sales increased 40.2% in 1995 to $150.6 million from $107.4 million in 1994, on a volume increase of 29.2%. Homes sold increased 1,773 units to 7,839 in 1995 from 6,066 in 1994. This volume increase results from the opening in March 1995 of the Company's fourth and largest plant at its Belmont cluster, the addition of a fifth plant purchased in August 1995 in Clarksdale, Mississippi, and the acquisition of Spirit Homes whose sales, from acquisition in October 1995, of 650 homes represent 37% of the total 1995 volume increase. The average price of a single-section home increased 8.3% to $16,874 in 1995 from $15,575 in the prior year while the average price of a double section home increased 8.4% to $30,583 from $28,218 in 1994. These increases in average price result from both price and mix changes, including the sale of higher priced vinyl siding and Wind Zone homes in 1995 not available in 1994. COST OF SALES. Cost of sales increased 41.4% to $127.2 million in 1995 from $89.9 in 1994. Cost of raw materials and direct labor, which are two of the largest components of cost of sales, increased in 1995 to $98.6 million and $16.2 million, respectively, from $71.2 million and $10.7 million in 1994. As a percentage of net sales, cost of sales for 1995 increased to 84.5% from 83.5% due primarily to the higher manufacturing costs for Spirit Homes. Additionally, slightly higher manufacturing costs were incurred during 1995 as a result of the start up of two plants. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased 38.7% to $9.3 million in 1995 from $6.7 million in 1994, primarily as a result of higher sales commissions and dealer rebates resulting from increased sales. Selling, general and administrative expense was 6.2% of net sales in 1995 compared to 6.3% in 1994. INTEREST EXPENSE. Interest expense declined to $825 thousand in 1995 from $1.2 million in 1994 primarily due to the effect of debt reduction from the use of proceeds of the Company's initial public stock offering in June 1995. LIQUIDITY AND CAPITAL RESOURCES Historically the Company has financed its operations and capital requirements through debt borrowings and internally generated funds. Capital requirements have arisen primarily in connection with the expansion of production capacity and the increased working capital needs that have accompanied sales growth. In June 1995 the Company raised approximately $15.3 million in net cash proceeds from the initial sale of stock to the public. The net proceeds were used to repay all, then existing, outstanding long-term debt and to redeem all outstanding preferred stock including preferred stock dividends. In October 1995, the Company acquired all of the outstanding stock of Spirit for $2.4 million in cash, the issuance of $7.4 million of notes to the former shareholders and the assumption of certain indebtedness including $3 million for an Industrial Development Bond issue for the construction of two new plants. In January 1996, the Company raised approximately $11.7 million in net cash proceeds from a secondary public offering of its stock and used $10.4 million to retire the Spirit notes and bond. In October 1996, the Company acquired all of the stock of Bellcrest for $9.5 million in cash at closing and $3.5 million in potential incentive payments based on future performance criteria. The Company financed this purchase through the use of existing cash resources including the borrowing of $5 million under its principal bank credit line. Net cash provided by operating activities increased to $10.7 million in 1996 from $8.5 million in 1995 and $6.2 million in 1994. Accounts receivable are funded by approved dealer floor-plan financing and usually are collected within 15 days. All homes are manufactured against orders, and, currently no homes 19 20 are produced for inventory. Changes in working capital accounts relate primarily to the increases in sales volume. The change in accounts payable relates primarily to the timing of payments to vendors. Net cash used by investing activities was $17.6 million in 1996, compared to $13.1 million in 1995 and $1.0 million in 1994. In 1996, an additional $1.5 million (net) was invested in certificates of deposit maturing within one year compared to $6.7 million (net) in 1995. Net capital expenditures were $5.9 million in 1996, $5.4 million in 1995 and $1.3 million in 1994. Net capital expenditures relate primarily to plant expansion including two new plants opened by Spirit Homes in 1996 and two plants added to the Belmont cluster in 1995. In addition, during 1996 the Company utilized $2.5 million for investment in two raw material supply joint ventures which will produce passage doors, paneling and cabinet doors. The Company's principal credit line is a $10 million facility that expires in May 1998. Borrowings bear interest at the bank's prime rate or LIBOR plus 2.65% and are secured by substantially all the assets of the Company. At December 31, 1996, the Company had outstanding borrowings under this line of $5 million which was borrowed to purchase Bellcrest. The Company believes that existing cash balances, cash flow from operations and the additional availability under its lines of credit will be adequate to fund the operations and expansion plans of the Company through 1997. The Company plans to continue its current growth strategy of acquiring or constructing new manufacturing facilities when necessitated by consumer demand. In order to provide any additional funds necessary for the continued pursuit of its growth strategy, the Company may incur, from time to time, additional short- and long-term indebtedness, and may issue, in public or private transactions, equity and debt securities, the availability and terms of which will depend upon market and other conditions. Although management believes that the combinations of these sources of funds will be sufficient to meet the Company's liquidity needs and its growth plans, there can be no assurance that such additional financing will be available on terms acceptable to the Company. There are no new accounting pronouncements the adoption of which would have a material effect on the Company's financial condition or results of operations. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Appendix F. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 20 21 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT This information is incorporated by reference from the Company's Proxy Statement relating to the Annual Meeting of Shareholders to be held on June 3, 1997. ITEM 11. EXECUTIVE COMPENSATION This information is incorporated by reference from the Company's Proxy Statement relating to the Annual Meeting of Shareholders to be held on June 3, 1997, except that the Comparative Performance Graph and the Compensation Committee Report on Executive Compensation included in the Proxy Statement are expressly not incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT This information is incorporated by reference to the Company's Proxy Statement relating to the Annual Meeting of Shareholders to be held on June 3, 1997. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS This information is incorporated by reference to the Company's Proxy Statement relating to the Annual Meeting of Shareholders to be held on June 3, 1997. 21 22 PART IV ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K Index to Consolidated Financial Statements, Financial Statement Schedules and Exhibits (1) Consolidated Financial Statements and Report of Independent Certified Public Accountants: See Item 8 herein. The Consolidated Financial Statements of the Company required to be included in Part II, Item 8, are indexed on Page F-1 and submitted as a separate section of this report. (2) All schedules, other than Schedule II - Valuation and Qualifying Accounts, are omitted because they are not applicable or not required, or because the required information is included in the consolidated financial statements or notes thereto. (3) Exhibits EXHIBIT NUMBER DESCRIPTION OF EXHIBITS 3.1 -- Restated Articles of Incorporation of the Registrant (1) 3.2 -- Bylaws of the Registrant (1) 4.1 -- Article 5 of the Restated Articles of Incorporation of the Registrant (included in Exhibit 3.1)(1) 4.2 -- Specimen of Common Stock certificate (1) 10.1 -- Registrant's 1994 Incentive Stock Plan (1) 10.2 -- Registrant's 1994 Non-Qualified Stock Option Plan for Non-Employee Directors (1) 10.3 -- Manufacturer Agreement, dated March 21, 1988, between Registrant and Ford Motor Credit Company (successor to Meritor Creditor Corporation) (1) 10.4 -- Floorplan Repurchase Agreement, dated April 3, 1990, between Registrant and Bombardier Capital, Inc. (1) 10.5 -- Inventory Repurchase Agreement, dated September 30, 1993, between Registrant and NationsCredit Commercial Corporation (1) 10.6 -- Pre-Sold Floorplan Financing Agreement, dated January 12, 1994, between Registrant and Green Tree Financial Corporation (1) 10.7 -- Floorplan Repurchase Agreement, dated October 18, 1994, between Registrant and ITT Commercial Finance Corp. (1) 10.8 -- Manufacturer's Financing Agreement, dated March 8, 1994, between Registrant and Deere Credit, Inc. (1) 10.9 -- Registrant's Form of Manufacturer's Repurchase Agreement (1) 10.10 -- Guaranty of Repurchase Obligations between BHI and Bombardier Capital, Inc. dated June 7, 1990 (1) 10.11 -- $500,000 LINE OF CREDIT, DATED JULY 1, 1994, BETWEEN REGISTRANT AND COLONIAL BANK (1) 10.12 -- Noncompetition Agreement between Registrant and Jerold Kennedy (1) 10.13 -- $2,000,000 Line of Credit, dated January 11, 1995, between Registrant and Colonial Bank (1) 10.14 -- Stock Purchase Agreement, dated as of October 1, 1995, among Registrant and John W. Allison, Milburn Adams, Wendell R. Kennedy, J.B. Pendergraft, Jimmie Don McKissick, Chuck Heriford and Dale Hancock (2) 10.15 -- Client Services Agreement, dated February 13, 1995, between Spirit Homes, Inc. and TSC Human Resources III, Inc. (3) 10.16 -- Pre-Sold Floorplan Financing Agreement, dated January 19, 1994, between Spirit Homes, Inc. and Green Tree Financial Corporation (3)
22 23 10.17 -- Stock Floorplan Financing Agreement, dated September 29, 1994, between Spirit Homes, Inc. and Green Tree Financial Corporation (3) 10.18 -- Manufacturer's Financing Agreement between Spirit Homes, Inc. and Deere Credit, Inc. (3) 10.19 -- Floorplan Repurchase Agreement, dated March 13, 1990, between Spirit Homes, Inc. and Bombardier Capital, Inc. (3) 10.20 -- Manufacturer Agreement dated July 22, 1992, between Spirit Homes, Inc. and Ford Consumer Finance Company, Inc. (3) 10.21 -- Floorplan Agreement, dated November 23, 1994, between Spirit Homes, Inc. and ITT Commercial Finance Corp. (3) 10.22 -- $420,076 Fixed Rate Commercial Promissory Note and Loan and Guaranty Agreement, dated July 14, 1995, between Spirit Homes, Inc. and Boatmen's National Bank of Conway (3) 10.23 -- $10,000,000 Revolving Credit Note, dated November 10, 1995, between Registrant and Bank of Mississippi (3) 10.24 -- $10,000,000 Loan and Security Agreement, dated November 10, 1995, between Registrant and Bank of Mississippi (3) 10.25 -- Stock Purchase Agreement dated October 25, 1996, among the Registrant, Bellcrest Holding Co., Inc., G. Hiller Spann, Joe. H. Bell, James M. Birdwell and Deroy Dailey, Jr.(4) 10.26 -- Form of Pre-Sold Floorplan Financing Agreement, dated February 10, 1994, by and between Bellcrest Homes, Inc. and Green Tree Financial Corporation (5) 10.27 -- Form of Floorplan Repurchase Agreement, dated August 10, 1993, by and between Bellcrest Homes, Inc. and Bombardier Capital Group (5) 10.28 -- Form of Inventory Repurchase Agreement, dated January 4, 1994, by and between Bellcrest Homes, Inc. and Nationscredit Commercial Corporation (5) 10.29 -- Form of Manufacturer Agreement, dated January 16, 1987, by and between Bellcrest Homes, Inc. and Meritor Credit Corporation (5) 10.30 -- Form of Manufacturer's Financing Agreement, dated June 1, 1994, by and between Bellcrest Homes, Inc. and Deere Credit, Inc.(5) 10.31 -- Form of Floorplan Agreement, dated April 24, 1992, by and between Bellcrest Homes, Inc. and ITT Commercial Finance Corp.(5) 10.32 -- Form of Manufacturer Agreement dated January 12, 1987, by and between Bellcrest Homes, Inc. and General Electric Credit Corporation(5) 11.1 -- Statement re: computation of per share earnings (5) 21.1 -- Subsidiaries of the Registrant (5) 23.1 -- Consent of KPMG Peat Marwick LLP (5) 27.1 -- Financial Data Schedule (for SEC use only) (5)
- ---------- (1) Incorporated by reference to the exhibits filed with the Registrant's Registration Statement on Form S-1, Registration No. 33-87868. (2) Incorporated by reference to the exhibits filed with the Registrant's Current Report on Form 8-K, filed October 13, 1995, File No. 0-26142. (3) Incorporated by reference to the exhibits filed with the Registrant's Registration Statement on Form S-1, Registration No. 33-80823. (4) Incorporated by reference to the exhibits filed with the Registrant's Current Report on Form 8-K, filed November 13, 1996, File No. 0-26142. (5) Filed herewith. 23 24 EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS The following is a list of all executive compensation plans and arrangements filed as exhibits to this Annual Report on Form 10-K: Exhibit Number Exhibit - ------- ------- 10.1 Registrant's 1994 Incentive Stock Plan (1) 10.2 Registrant's 1994 Non-Qualified Stock Option Plan for Non-Employee Directors (1) - -------------------- (1) Incorporated by reference to exhibits filed with the Registrant's Registration Statement on Form S-1, Registration No. 33-87868. (4) Reports on Form 8-K. On November 13, 1996, the Company filed a Current Report on Form 8-K to report, pursuant to Item 2, the closing of the Company's acquisition of Bellcrest and, pursuant to Item 5, that Jerold Kennedy, the President and Chief Executive Officer of the Company, had been diagnosed with lung cancer. 24 25 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. BELMONT HOMES, INC. By: /s/ Jerold Kennedy --------------------------------- Jerold Kennedy President and March 27, 1997 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.
Name Title(s) Date ---- -------- ---- /s/ A. Douglas Jumper, Sr. Chairman of the Board March 28, 1997 - ------------------------------- A. Douglas Jumper, Sr. /s/ Jerold Kennedy President and Chief March 28, 1997 - ------------------------------- Jerold Kennedy Executive Officer; Director (principal executive officer) /s/ William M. Kunkel Vice President of Finance March 28, 1997 - ------------------------------- William M. Kunkel (principal financial officer and accounting officer) /s/ John W. Allison President of Spirit Homes, Inc; March 28, 1997 - ------------------------------- John W. Allison Director /s/ Thomas D. Keenum, Sr. Secretary, General Counsel; March 28, 1997 - ------------------------------- Thomas D. Keenum, Sr. Director /s/ Roger D. Moore Director of Sales and Marketing; March 28, 1997 - ------------------------------- Roger D. Moore Director /s/ Don D. Murphy Director March 28, 1997 - ------------------------------- Don D. Murphy /s/ J.M. Page Director March 28, 1997 - ------------------------------- J.M. Page /s/ Hollis Sparks Director March 28, 1997 - ------------------------------- Hollis Sparks
26 BELMONT HOMES, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Independent Auditors' Report F-2 Consolidated Balance Sheets as of December 31, 1995 and 1996 F-3 Consolidated Statements of Income for the years ended December 31, 1994, 1995 and 1996 F-4 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1994, 1995 and 1996 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 F-6 Notes to Consolidated Financial Statements F-7
F-1 27 Independent Auditors' Report The Board of Directors and Shareholders Belmont Homes, Inc.: We have audited the consolidated financial statements of Belmont Homes, Inc. and subsidiaries as listed in the accompanying index. These consolidated financial statements are the responsibility of the management of the Company. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Belmont Homes, Inc. and subsidiaries as of December 31, 1995 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. Jackson, Mississippi /s/ KPMG Peat Marwick LLP February 21, 1997 F-2 28 BELMONT HOMES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In Thousands, except for share information)
December 31, ------------ Assets 1995 1996 ------ ---- ---- Current assets: Cash and cash equivalents $ 2,055 $ 5,070 Certificates of deposit maturing within one year, at cost which approximates market 6,717 8,243 Accounts receivable 7,302 7,829 Inventories (Note 4) 7,425 13,020 Prepaid expenses and other 1,355 2,661 -------- -------- Total current assets 24,854 36,823 Property, plant and equipment, net (Note 5) 14,812 22,318 Goodwill and other assets, less accumulated amortization of $855 and $1,359, respectively (Note 3) 10,402 20,214 -------- -------- $ 50,068 $ 79,355 ======== ======== Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Notes and current portion of long-term debt (Notes 7 and 14) $ 4,600 $ 9,093 Trade accounts payable 3,665 3,461 Accrued expenses and other liabilities (Note 6) 5,552 10,744 -------- -------- Total current liabilities 13,817 23,298 Long-term debt (Notes 7 and 14) 6,919 1,303 Deferred income taxes (Note 8) 284 907 -------- -------- Total liabilities 21,020 25,508 -------- -------- Shareholders' equity (Notes 10, 11 and 14): Preferred stock of no par value -- -- Common stock of $.10 par value. Authorized 20,000,000 shares; issued and outstanding 5,455,000 and 9,466,500 shares, respectively 546 947 Additional paid-in capital 15,087 27,372 Retained earnings 16,908 29,021 -------- -------- 32,541 57,340 Adjustment to predecessor equity (3,493) (3,493) -------- -------- Total shareholders' equity 29,048 53,847 -------- -------- Commitments and contingencies (Note 12) $ 50,068 $ 79,355 ======== ========
See accompanying notes to consolidated financial statements. F-3 29 BELMONT HOMES, INC. AND SUBSIDIARIES Consolidated Statements of Income (In Thousands, except for share information)
Year ended December 31, -------------------------------------- 1994 1995 1996 ---- ---- ---- Net sales $ 107,423 $ 150,576 $ 234,050 Cost of sales 89,902 127,165 197,801 Gross profit 17,521 23,411 36,249 Selling, general and administrative expenses 6,731 9,333 17,032 ------------- ------------ ------------ Income from operations 10,790 14,078 19,217 ------------- ------------ ------------ Other expenses (income): Interest expense (Note 13) 1,185 825 285 Interest income (123) (511) (705) ------------- ------------ ------------ 1,062 314 (420) ------------- ------------ ------------ Income before income taxes 9,728 13,764 19,637 Income tax expense (Note 8) 3,349 5,154 7,524 ------------- ------------ ------------ Net income 6,379 8,610 12,113 Dividends on preferred stock (81) (28) - ------------- ------------ ------------ Net income applicable to common shares $ 6,298 $ 8,582 $ 12,113 ============= ============ ============ Net income per common share $ 1.20 $ 1.23 $ 1.29 ============= ============ =========== Weighted average common shares outstanding 5,250,000 6,963,000 9,426,000 ============= ============ ============
See accompanying notes to consolidated financial statements. F-4 30 BELMONT HOMES, INC. AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity (In Thousands, except for share information)
Additional Adjustment Common paid-in Retained to predecessor stock capital earnings equity Total ------ ---------- -------- -------------- ----- Balance (deficit) at December 31, 1993 $ 350 $ - $ 2,071 $ (3,493) $ (1,072) Net income - - 6,379 - 6,379 ------- ---------- ---------- ---------- ----------- Balance at December 31, 1994 350 - 8,450 (3,493) 5,307 Initial sale of common stock to public (Note 14) 196 15,087 - - 15,283 Dividends on preferred stock - - (152) - (152) Net income - - 8,610 - 8,610 ------- ---------- ---------- ---------- ----------- Balance at December 31, 1995 546 15,087 16,908 (3,493) 29,048 Sale of common stock to public (Note 14) 80 11,645 - - 11,725 Exercise of stock options 6 751 - - 757 Tax benefit from exercise of stock options - 204 - - 204 Three for two stock split 315 (315) - - - Net income - - 12,113 - 12,113 ------- ---------- ---------- ---------- ----------- Balance at December 31, 1996 $ 947 $ 27,372 $ 29,021 $ (3,493) $ 53,847 ======= ========== ========== ========== ===========
See accompanying notes to consolidated financial statements. F-5 31 BELMONT HOMES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In Thousands, except for share information)
Year ended December 31, -------------------------------------- 1994 1995 1996 ---- ---- ---- Cash flows from operating activities: Net income $ 6,379 $ 8,610 $ 12,113 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 892 1,248 1,899 Deferred income taxes (85) (124) (292) Changes in operating assets and liabilities, net of effect of acquisitions: Accounts receivable (207) (2,300) 334 Inventories (328) (1,560) (3,339) Prepaid expenses and refundable income taxes (384) 665 (79) Other assets (147) 165 (101) Accounts payable (954) 661 (1,680) Accrued expenses 1,082 1,178 1,806 ---------- ---------- ----------- Net cash provided by operating activities 6,248 8,543 10,661 ---------- ---------- ----------- Cash flows from investing activities: Additions to property, plant and equipment (1,335) (5,447) (5,915) Purchases of certificates of deposit (2,998) (8,717) (16,114) Maturities of certificates of deposit 3,299 2,000 14,588 Acquisitions, net of cash acquired (Note 3) - (2,377) (8,145) Investment in and advances to joint ventures - - (2,511) Cash restricted for construction - 1,548 521 Other 30 (100) - ---------- ---------- ----------- Net cash used by investing activities (1,004) (13,093) (17,576) ---------- ---------- ----------- Cash flows from financing activities: Proceeds from notes and long-term debt 6,500 - 38 Repayments of notes and long-term debt (7,127) (12,957) (11,394) Net borrowings on line of credit agreements - - 8,600 Retirement of preferred stock, including dividends - (1,052) - Preferred and common stock - 15,283 12,686 ---------- ---------- ----------- Net cash provided (used) by financing activities (627) 1,274 9,930 ---------- ---------- ----------- Net increase (decrease) in cash and cash equivalents 4,617 (3,276) 3,015 Cash and cash equivalents at beginning of year 714 5,331 2,055 ---------- ---------- ----------- Cash and cash equivalents at end of year $ 5,331 $ 2,055 $ 5,070 ========== ========== =========== Supplemental disclosure - interest paid $ 726 $ 1,125 $ 344 ========== ========== =========== Supplemental disclosure - income taxes paid $ 3,802 $ 4,150 $ 6,529 ========== ========== =========== Supplemental disclosure - non cash financing transactions (See note 3).
See accompanying notes to consolidated financial statements. F-6 32 BELMONT HOMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (In Thousands, except for share information) (1) Basis of Presentation Belmont Homes, Inc. ("Belmont"), incorporated in Mississippi in June 1993, is a producer of a variety of single and double section manufactured homes which are marketed primarily in the southern United States. Belmont and its wholly-owned subsidiaries, Spirit Homes, Inc., Bellcrest Homes, Inc. and Delta Homes, Inc. (collectively, the "Company") operate five production facilities in Mississippi, four production facilities in Arkansas and two production facilities in Georgia. The consolidated financial statements include the accounts of Belmont Homes, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. These financial statements have been prepared in conformity with generally accepted accounting principles. Accordingly, management has made 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. Material estimates that are particularly susceptible to change in the near-term relate to determination of estimated costs for warranty claims and promotional programs. Actual results could differ significantly from those estimates. (2) Summary of Significant Accounting Policies (a) Cash Equivalents Cash and cash equivalents includes demand deposits, savings accounts and certificates of deposit with an original maturity of three months or less. (b) Accounts Receivable The Company's net sales and related accounts receivable arise from customers in the manufactured housing industry in the southern United States and are subject to credit risk inherent in the industry. Credit is extended in the normal course of business under normal trade terms. The Company has established an allowance of $37 at December 31, 1995 and 1996, based upon the expected collectibility of its receivables. Homes are manufactured to dealer orders and a sale is recognized upon delivery of the home and the transfer of title. F-7 33 BELMONT HOMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (c) Inventories Inventories are stated at the lower of cost (first-in, first-out) or market (net realizable value). (d) Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation of plant and equipment is calculated using the straight-line method over the estimated useful lives of the assets. (e) Goodwill Goodwill represents the excess of the purchase price over the fair value of the net assets acquired and is being amortized over twenty-five years using the straight-line method. If facts and circumstances indicate that goodwill may be impaired, an assessment will be made by the Company to determine if a writedown is required or if its estimated useful life should be revised. The assessment will be based primarily on forecasted operating income, including interest expense, depreciation and amortization other than goodwill; supplemented if necessary by an independent appraisal of fair value. The Company believes that no impairment of goodwill has occurred and that no revision of its estimated useful life is required. (f) Product Warranties and Volume Incentives The Company warrants its homes against manufacturing defects for a period of ninety days for plumbing and electrical components and for one year on the basic home structure, commencing at the time of sale by a dealer, and provides an allowance for warranty claims based on experience and accumulated statistical data. Expenses related to such claims are accrued currently as operating expenses based on an estimate of claims to be incurred and the cost of repairs performed. F-8 34 BELMONT HOMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The Company awards volume incentive rebates to dealers using a predetermined formula applied to certain models of homes purchased during the rebate period. Rebates are paid semi-annually. Based on management's estimate of rebates which will be earned during the rebate period, the Company accrues a promotional allowance for rebates earned but not paid. Related expenses are accrued currently as operating expenses based on estimates of revenue and the number of homes sold. Management believes the liabilities established for warranty claims and promotional allowances at December 31, 1996 are adequate to cover the ultimate related net costs, but the liabilities are necessarily based on estimates and, accordingly, the amounts ultimately paid will be more or less than such estimates. (g) Income Taxes The Company uses the asset and liability method in accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Additionally, recognition is required of deferred tax liabilities and deferred tax assets for the deferred tax consequences of differences between the assigned values and the tax bases of the assets and liabilities recognized in a purchase business acquisition. The income tax benefit resulting from purchased excess tax basis is accounted for as a reduction of goodwill in the year realized. (h) Stock Based Compensation The Company accounts for its stock option plans in accordance with the provisions of Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock Based Compensation", which provides an alternative to the Accounting Principles Board's Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees", and is effective for the year which began January 1, 1996. As permitted by SFAS 123, the Company will continue to account for its employee stock plans in accordance with the provisions of APB 25 and provide expanded disclosures as required under SFAS 123. Accordingly, SFAS 123 will not have a significant impact on the Company's financial position or results of operations. F-9 35 BELMONT HOMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (i) Investment in Joint Ventures The Company accounts for its investments in joint ventures using the equity method. Financial results from the joint ventures are recorded as a component of cost of sales in the accompanying consolidated financial statements. (j) Accounting Changes Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121 requires that long-lived assets and certain identifiable intangibles to be held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. This statement requires that the majority of long-lived assets and certain identifiable intangibles to be disposed of be reported at the lower of carrying amount or fair value less cost to sell. Implementation of this statement did not have a material impact on the Company's consolidated financial statements. Effective January 1, 1996 the Company adopted SFAS 123 as described in (h) above. (k) Net Income Per Share Net income per share calculations are based on the weighted average number of common shares and dilutive common share equivalents outstanding during each period. All earnings per share data have been adjusted for the three for two stock split declared on November 1, 1996. (l) Reclassifications Certain prior years' amounts have been reclassified to conform to classifications used in 1996. F-10 36 BELMONT HOMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (3) Acquisitions On October 24, 1996, in a transaction accounted for using the purchase method of accounting, the Company completed its purchase of 100% of the stock of Bellcrest Homes, Inc. ("Bellcrest") through the cash payment of $9,500. The effects of the acquisition at the purchase date were as follows: Decrease in cash, net $ 7,145 Increase in other current assets 3,422 Increase in property, plant and equipment 3,525 Increase in goodwill and other assets 6,762 Increase in current liabilities 4,756 Increase in long-term debt and deferred income taxes 1,808
The following unaudited pro forma data are provided for comparative purposes and are not necessarily indicative of actual results that would have been achieved had the acquisition of Bellcrest been consummated at an earlier date and are not necessarily indicative of future results. Assuming that the acquisition was consummated on January 1, 1995 and January 1, 1996, respectively, unaudited pro forma net sales, net income and net income per common share, after giving effect to certain adjustments, including amortization of goodwill and other assets, increased interest expense on debt related to the acquisition, increased depreciation expense, and related income tax effects, for the years ended December 31, 1995 and 1996 follow:
1995 1996 ---- ---- Net sales $180,093 $265,374 Net income 8,736 12,204 Net income per common share 1.25 1.29
In the event Bellcrest attains certain stated levels of earnings before income taxes for the three month period ended December 31, 1996 and for each of the years ending December 31, 1997 and 1998, the Company is required to pay the former Bellcrest shareholders additional consideration in an amount not to exceed $3,500 in the aggregate. Any such additional amounts paid will be recorded as goodwill in the period earned. Subsequent to December 31, 1996, the Company paid $1,000, the amount earned and accrued for 1996, to the former shareholders. F-11 37 BELMONT HOMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements In conjunction with this acquisition, a former Bellcrest shareholder was issued warrants for the purchase of 75,000 shares of Belmont common stock. The warrants, which expire in October 2001, are exercisable at $14.66 per share and their fair value at the issue date was estimated to be negligible. None of these warrants have been exercised as of December 31, 1996. In August 1995 Belmont incorporated Delta Homes, Inc., a wholly-owned subsidiary, and purchased for $450 a production facility in Clarksdale, Mississippi. In October 1995 Belmont acquired, in a transaction accounted for using the purchase method of accounting, all the outstanding common stock of Spirit Homes, Inc. for $9,500, consisting of cash of $2,450 and debt of $7,350. During 1996 the Company acquired a 50% ownership interest in Quality Housing Supply LLC (Quality), which manufactures gypsum and laminated wallboard and various exterior and interior home doors. The Company is entitled to purchase products from Quality and to share in the earnings (losses) of the operation based on the relative purchases of Quality product during 1996 and based on a 50/50 split thereafter. Purchases made by the Company were $2,387 during 1996. The Company also owns a 33% ownership interest in Ridge Pointe Manufacturing LLC (Ridge Pointe), which manufactures a variety of cabinet doors used in the Company's manufactured houses. The Company is entitled to purchase products from Ridge Pointe, such purchases were not material to the Company's 1996 consolidated financial statements. At December 31, 1996, the Company's investment in Quality and Ridge Pointe was approximately $2,611. Equity in the entities' results of operations for 1996 was not material. (4) Inventories The components of inventories are as follows:
1995 1996 ---- ---- Raw materials $ 4,670 $ 9,702 Work in process 580 798 Finished homes 2,175 2,520 -------- -------- $ 7,425 $ 13,020 ======== ========
F-12 38 BELMONT HOMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (5) Property, Plant and Equipment The components of property, plant and equipment are as follows:
Estimated useful life 1995 1996 ----------- ---- ---- Land - $ 873 $ 1,445 Land improvements 15 years 1,211 1,948 Buildings 40 years 6,448 11,798 Machinery, equipment and tools 3 - 7 years 2,986 7,683 Furniture, fixtures and equipment 3 - 7 years 445 708 Automotive equipment 5 years 1,097 1,466 Construction in progress - 2,710 - Cash restricted for construction 521 - ------- ------- 16,291 25,048 Less accumulated depreciation (1,479) (2,730) ------- ------- $14,812 $22,318 ======= =======
(6) Accrued Expenses Accrued expenses and other liabilities consist of the following:
1995 1996 ---- ---- Warranty $ 1,465 $ 3,566 Promotional allowance 1,377 2,916 Salaries and estimated bonuses 1,057 1,561 Payable to former Bellcrest Homes, Inc. shareholders (note 3) -- 1,000 Income taxes 609 718 Other 1,044 983 ------- ------- $ 5,552 $10,744 ======= =======
F-13 39 BELMONT HOMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (7) Notes and Long-Term Debt Notes and long-term debt consist of the following:
1995 1996 ---- ---- (a) 9.25% note payable to bank, due April 1997 $ 170 $ 142 (b) 9.25% note payable to bank, due in monthly instalments through January 1999 406 367 (c) 6% shareholder note, repaid in 1996 525 - (d) Notes liquidated in February 1996 with proceeds of secondary stock offering: - 6% acquisition notes to former Spirit Homes, Inc. shareholders 7,350 - - Variable/Fixed Rate Industrial Development Revenue Bonds 3,000 - (e) Note payable to bank at prime plus .25%, due in monthly instalments through March 2006 - 1,065 (f) Amounts due under various line of credit agreements - 8,600 (g) Amounts due under various capital leases 68 222 ------- ------- Total notes and long-term debt 11,519 10,396 Less: current portion 4,600 9,093 ------- ------- Long-term debt $ 6,919 $ 1,303 ======= =======
The Company has various lines of credit with banks totaling $15,000 which expire at various dates through May 10, 1998. At December 31, 1996 the Company had outstanding letters of credit of $275 under one credit line issued to satisfy state bonding regulations for service warranty. The Company's principal credit line, a $10,000 facility, for which there was $5,000 outstanding at December 31, 1996, bears interest at the bank's prime rate or LIBOR plus 2.65%. Borrowings under the line are secured by substantially all of the assets of Belmont. Restrictive covenants require the maintenance of amounts and ratios of tangible net worth and working capital. F-14 40 BELMONT HOMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (8) Income Taxes A reconciliation of actual income tax expense to the computed "expected" tax expense follows:
1994 1995 1996 -------------------- ------------------- -------------------- Percentage Percentage Percentage of pre-tax of pre-tax of pre-tax Amount income Amount income Amount income ------ ---------- ------ ---------- ------ ---------- "Expected" tax expense computed at normal U. S. Federal corporate tax rate $3,308 34.0% $4,679 34.0% $6,873 35.0% State income taxes, net of Federal benefit 271 2.8 416 3.0 687 3.5 State job credits (341) (3.5) (344) (2.5) (471) (2.4) Other 111 1.1 403 3.0 435 2.2 ------ ---- ------ ---- ------ ---- Actual tax expense $3,349 34.4% $5,154 37.5% $7,524 38.3% ====== ==== ====== ==== ====== ====
Components of income tax expense (benefit) are as follows:
Current Deferred Total ------- -------- ----- December 31, 1994: Federal $ 3,275 $ 5 $ 3,280 State 159 (90) 69 -------- ------- --------- $ 3,434 $ (85) $ 3,349 ======== ======= ========= December 31, 1995: Federal $ 4,910 $ (43) $ 4,867 State 368 (81) 287 -------- ------- --------- $ 5,278 $ (124) $ 5,154 ======== ======= ========= December 31, 1996: Federal $ 7,040 $ (102) $ 6,938 State 776 (190) 586 -------- ------- --------- $ 7,816 $ (292) $ 7,524 ======== ======= =========
F-15 41 BELMONT HOMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:
1995 1996 ---- ---- Deferred tax assets: Accounts receivable, due to allowance for doubtful accounts $ 14 $ 14 Inventories, due to additional costs inventoried for tax purposes 82 212 Accrued expenses, due to the timing of deduction 546 1,274 State jobs credit carryforward 91 385 Plant, equipment and other assets, due to different tax basis and depreciation and amortization methods 100 - -------- -------- Gross deferred tax assets 833 1,885 -------- -------- Deferred tax liabilities: Goodwill, due to different amortization period (384) (534) Plant, equipment and other assets, due to different tax basis and depreciation and amortization methods - (401) Other, net - (38) -------- -------- Gross deferred tax liabilities (384) (973) -------- -------- Net deferred tax asset $ 449 $ 912 ======== ========
The significant components of deferred income tax expense attributable to income from continuing operations for the years ended December 31, 1995 and 1996 are as follows:
1995 1996 ---- ---- Increase in net deferred tax asset (exclusive of the effect of other components listed below) $ (319) $ (463) Effect of acquisitions: Spirit Homes, Inc. 195 - Bellcrest Homes, Inc. - 171 -------- -------- Deferred tax expense $ (124) $ (292) ======== ========
The state jobs credit carryforward expires on December 31, 1999. The Company has determined, based on the Company's history of profitable operations and expectations for the future, that the deferred tax assets will more likely than not be fully realized and that no valuation allowance was necessary at December 31, 1995 or 1996. F-16 42 BELMONT HOMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (9) Employee Benefit Plans Group Medical Plan: The Company has a self-funded group medical plan which is administered by a third party administrator. The Plan has reinsurance coverage limiting its liability for any individual employee loss to $15, with a cap of $348 in aggregate losses in any one year. The cost of this plan to the Company was $453, $688 and $1,090 for the years ended December 31, 1994, 1995 and 1996, respectively. 401(K) Tax-Deferred Savings Plan: Participants, full time employees with at least six months service, may elect to contribute up to 15% of their annual compensation to the plan. The Company may make discretionary matching contributions, which approximated $167, $146 and $135 for the years ended December 31, 1994, 1995 and 1996, respectively. (10) Stock Plans Incentive Stock Plan: The Company has reserved 600,000 shares of Common Stock for issuance pursuant to incentive or non-qualified stock options to be granted under the Belmont Homes, Inc. 1994 Incentive Stock Plan (the "Incentive Plan"). The compensation committee appointed by the board of directors may grant to officers, directors and key employees non-transferable options to purchase shares of common stock for terms not longer than ten years (five years in the case of incentive stock options granted to an individual who, at the time of the grant, owns more than 10% of the total combined voting power of all classes of stock of the Company), at prices to be determined by the board of directors or the compensation committee, which may not be less than 100% of the fair market value of the common stock on the date of grant (110% in the case of an individual who, at the time of the grant of incentive stock options, owns more than 10% of the total combined voting power of all classes of stock of the Company), in the case of incentive stock options under Section 422 of the Internal Revenue Code which may be granted only to employees, and may not be less than 50% of the fair market value of the Common Stock on the date of grant in the case of non-statutory stock options. Options granted under the Incentive Plan may be exercisable in instalments. Unless terminated earlier, the Incentive Plan will terminate in 2004. The aggregate fair market value of stock with regard to which incentive stock options are exercisable by an individual for the first time during any calendar year may not exceed $100 as of the date of the most recent grant. The Incentive Plan is administered by the F-17 43 BELMONT HOMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements compensation committee of the board of directors. During the year ended December 31, 1995, options were granted for 75,000 shares at an option price of $6 per share, of which 30,000 were vested and exercised in 1996. The Company granted options in 1996 for an additional 393,000 shares under this plan at $10.67 per share, 54,000 of which were exercised during 1996. Non-Employee Director Stock Option Plan: The Company has adopted the Belmont Homes, Inc. 1994 Non-Qualified Stock Option Plan for Non-Employee Directors (the "Director Plan"), and has reserved 75,000 shares for issuance under the plan. The Director Plan provides for the granting of non-qualified stock options to each director of the Company who is not also either an employee or officer of the company ("non-employee directors"). The Director Plan authorizes the issuance of up to 75,000 shares of common stock pursuant to options having an exercise price equal to the fair market value of the common stock on the date the options are granted. The Director Plan contains provisions providing for adjustment of the number of shares available for option and subject to unexercised options in the event of stock splits, dividends payable in common stock, business combinations or certain other events. The board of directors shall have no authority, discretion or power to select the participants who will receive options pursuant to the Director Plan, to set the number of shares of common stock to be covered by each option, to set the exercise price or the period within which the options may be exercised or to alter any other terms or conditions specified therein, except as set forth below. The Director Plan provides for the grant on the first trading date each year (the "grant date") of options to purchase 1,500 shares to each non-employee director serving the Company on such date. The board of directors may revoke, on or prior to each January 1, the next automatic grant of options otherwise provided for by the Director Plan if no options have been granted to employees since the preceding January 1 under any employee stock purchase or option plan that the Company might adopt hereafter. Each option shall be exercisable as to one-third of the shares subject to option beginning two years after the grant date, as to two-thirds of such shares beginning three years after the grant date and in full beginning four years after the grant date, and shall expire ten years after the grant date (the "Option Period"), unless canceled sooner due to termination of service or death, or unless such option is fully exercised prior to the end of the Option Period. F-18 44 BELMONT HOMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The Company granted 6,000 options under this plan in 1996 and granted an additional 6,000 options subsequent to December 31, 1996. All shares and per share amounts above for both plans are adjusted for the 3 for 2 stock split in 1996. Options under both plans are granted at the market price of the shares on the date of the grants. Additional information follows:
Incentive stock options Directors plan ------------- -------------- Average Average Number option price Number option price of shares per share of shares per share - --------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1994 - $ - - $ - Options granted 75,000 6.00 - - Options exercised - - - - ------- ------ ----- ------ Balance, December 31, 1995 75,000 6.00 - - Options granted 393,000 10.67 6,000 12.06 Options exercised (84,000) 9.00 - - Options forfeited (7,500) 10.67 - - ------- ------ ----- ------ Balance, December 31, 1996 376,500 $10.11 6,000 $12.06 ======= ====== ===== ======
The number of shares of common stock, as well as stock option prices, were adjusted to reflect the three for two stock split. Under the Incentive Plan and the Director Plan, the Company may grant options to its employees and directors for a remaining 139,500 and 69,000 shares of common stock, respectively. The exercise price of each option equals the market price of the Company's stock on the date of grant. 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 made during the years ended December 31, 1995 and 1996, respectively: no dividend yield; expected volatility of 46 percent for both years, risk-free interest rates of 5.9 and 5.3 percent, and expected option lives of 4 years for both years presented. F-19 45 BELMONT HOMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements A summary of the status of the Company's stock option plans at December 31, 1995 and 1996 and changes during the years ended on those dates is presented below:
Year ended Year ended December 31, 1995 December 31, 1996 ----------------- ----------------- Weighted- Weighted- average average Stock Options Shares exercise price Shares exercise price ------------- ------ -------------- ------ -------------- Outstanding at beginning of year - $ - 75,000 $ 6.00 Granted 75,000 6.00 399,000 10.69 Exercised - - (84,000) 9.00 Forfeited - - (7,500) 10.67 ------ ------ ------- ------- Outstanding at end of year 75,000 $ 6.00 382,500 $ 10.15 ====== ====== ======= ======= Options exercisable at end of year - 22,800 ====== ======= Weighted-average fair value of options granted during the year $ 2.58 $ 4,49 ====== =======
The following table summarizes information about fixed stock options for the year ended December 31, 1996:
Options Outstanding Options Exercisable ------------------- ------------------- Weighted- Number average Weighted- Number Weighted- Range of outstanding remaining average exercisable average exercise prices at 12/31/96 contractual life exercise price at 12/31/96 exercise price --------------- ----------- ---------------- -------------- ------------ -------------- $ 6.00 - $ 12.06 382,500 4.1 years $10.15 22,800 $10.67
The Company applies APB Opinion 25 and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for its stock option plans. Had compensation cost been determined based on the fair value at the grant dates for awards under the plan consistent with the method of SFAS No. 123, the Company's net income and income per common share would have been reduced to the pro forma amounts indicated below for the year ended December 31, 1996. The pro forma amounts for 1995 are not material.
Net income As reported $12,113 ======= Pro forma $11,871 ======= Net income per common share As reported $ 1.29 ======= Pro forma $ 1.26 =======
F-20 46 BELMONT HOMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (11) Preferred Stock The Company's articles of incorporation authorize 5,000,000 shares of preferred stock. The board of directors has the authority, without any further vote or action of the shareholders of the Company, to issue shares of preferred stock in one or more series and to determine the relative rights and preferences of the shares of any such series. During the year ended December 31, 1995, 900 outstanding shares were redeemed at par value plus dividends of $152. (12) Commitments and Contingencies It is customary practice for companies in the manufactured home industry to enter into repurchase agreements with financial institutions which provide financing to dealers. Generally the agreements provide for the repurchase of manufactured homes from the financial institutions in the event of repossession upon dealer's default. The Company's contingent liability under such agreements was approximately $86,149 at December 31, 1996. There have been no repurchases of homes under these agreements in 1995 and 1996, and there is no accrual for repurchase obligations. The Company leases delivery trucks from substantially all its drivers who deliver homes to dealers. Rentals for these trucks are based on a rate per mile and the leases are cancelable by either party upon thirty days notice. Rent expense under these leases was approximately $1,982, $2,647 and $3,140 for the years ended December 31, 1994, 1995 and 1996, respectively. The Company has pending claims incurred in the normal course of business which, in the opinion of management, can be disposed of without material effect on the accompanying consolidated financial statements. (13) Related Party Transactions The Company had several notes payable (Note 7) to shareholders and other related parties. Interest paid and accrued to related parties was $1,069, $776 and $120 for the years ended December 31, 1994, 1995 and 1996, respectively. The Company paid or accrued $200, $690 and $73 in 1994, 1995 and 1996, respectively, for construction of plant facilities to a company in which a shareholder and director of the Company is also a shareholder. F-21 47 BELMONT HOMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The Company paid $10, $8 and $12 in 1994, 1995 and 1996, respectively, for legal services to a law firm in which a shareholder and director of the Company is a partner. The Company paid $272, $367 and $250 for the years ended December 31, 1994, 1995 and 1996, respectively, for the purchase of automotive equipment from a company in which a shareholder and director of the Company is also a shareholder. (14) Public Offerings of Securities In June, 1995 the Company completed an initial public offering of 1,955,000 shares (before stock split) of common stock. The net proceeds of approximately $15,300 were used to retire debt and preferred stock and for working capital. In January, 1996 the Company completed a secondary public offering of 800,000 shares (before stock split) of common stock. The net proceeds of approximately $11,725 were used to retire debt and for working capital. Supplemental net income per share for 1995 and 1996, based on net earnings after adjustment for dividends on preferred stock and the after tax effect of interest expense on debt repaid with proceeds of the above offerings, and on the weighted average shares of common stock outstanding for 1995 and 1996, giving effect to the number of shares sold in the offerings, the proceeds of which were used to repay such preferred stock and debt, is as follows assuming the transactions were effective on January 1, 1995:
1995 1996 ---- ---- Net income, as adjusted $ 9,052 $ 12,160 ============== =============== Net income per share $ 1.05 $ 1.28 ============== =============== Weighted average shares 8,598,000 9,512,000 ============== ===============
(15) Financial Instruments Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," requires that the Company disclose estimated fair values for its financial instruments (as defined). The Company's financial instruments principally consist of cash and cash equivalents, certificates of deposit, short-term trade receivables and payables and various debt instruments. Due to their short term nature, the fair value of F-22 48 BELMONT HOMES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements certificates of deposit, trade receivables and payables approximates their carrying value. The fair value of the various debt instruments has been estimated using interest rates currently offered to the Company for borrowings having similar character, collateral and duration. The fair market value of such financial instruments approximates the Company's carrying amounts. (16) Quarterly Information (Unaudited) (In thousands except per share data)
First Second Third Fourth Total ----- ------ ----- ------ ----- Year ended December 31, 1996 ---------------------------- Net sales $51,445 $61,681 $57,512 $63,412 $234,050 Gross profit 8,015 9,464 8,867 9,903 36,249 Income from operations 4,207 5,563 5,230 4,217 19,217 Net income 2,642 3,539 3,355 2,577 12,113 Net income per common share $ 0.29 $ 0.37 $ 0.35 $ 0.28 $ 1.29 Year ended December 31, 1995 ---------------------------- Net sales $25,275 $35,259 $36,739 $53,303 $150,576 Gross profit 3,822 5,772 6,004 7,813 23,411 Income from operations 2,153 3,678 3,872 4,375 14,078 Net income 1,266 2,079 2,561 2,704 8,610 Net income per common share $ 0.24 $ 0.34 $ 0.31 $ 0.33 $ 1.23
F-23 49 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS) BELMONT HOMES, INC. AND SUBSIDIARIES
Additions Deductions - ------------------------- accounts Balance Increase Amounts written off at attributable charged and Balance at beginning to to warranty end of Description of year acquisitions expense expenditures year ----------- --------- ------------ ------- ------------ ---------- Allowance for doubtful accounts: Year ended December 31, 1994 $ 25 $ -- $ -- $ -- $ 25 Year ended December 31, 1995 25 12 -- -- 37 Year ended December 31, 1996 37 -- -- -- 37 Warranty accrual: Year ended December 31, 1994 $ 354 $ -- $1,469 $1,266 $ 557 Year ended December 31, 1995 557 540 3,151 2,783 1,465 Year ended December 31, 1996 1,465 805 7,506 6,210 3,566
50 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS 3.1 -- Restated Articles of Incorporation of the Registrant (1) 3.2 -- Bylaws of the Registrant (1) 4.1 -- Article 5 of the Restated Articles of Incorporation of the Registrant (included in Exhibit 3.1)(1) 4.2 -- Specimen of Common Stock certificate (1) 10.1 -- Registrant's 1994 Incentive Stock Plan (1) 10.2 -- Registrant's 1994 Non-Qualified Stock Option Plan for Non-Employee Directors (1) 10.3 -- Manufacturer Agreement, dated March 21, 1988, between Registrant and Ford Motor Credit Company (successor to Meritor Creditor Corporation) (1) 10.4 -- Floorplan Repurchase Agreement, dated April 3, 1990, between Registrant and Bombardier Capital, Inc. (1) 10.5 -- Inventory Repurchase Agreement, dated September 30, 1993, between Registrant and NationsCredit Commercial Corporation (1) 10.6 -- Pre-Sold Floorplan Financing Agreement, dated January 12, 1994, between Registrant and Green Tree Financial Corporation (1) 10.7 -- Floorplan Repurchase Agreement, dated October 18, 1994, between Registrant and ITT Commercial Finance Corp. (1) 10.8 -- Manufacturer's Financing Agreement, dated March 8, 1994, between Registrant and Deere Credit, Inc. (1) 10.9 -- Registrant's Form of Manufacturer's Repurchase Agreement (1) 10.10 -- Guaranty of Repurchase Obligations between BHI and Bombardier Capital, Inc. dated June 7, 1990 (1) 10.11 -- $500,000 LINE OF CREDIT, DATED JULY 1, 1994, BETWEEN REGISTRANT AND COLONIAL BANK (1) 10.12 -- Noncompetition Agreement between Registrant and Jerold Kennedy (1) 10.13 -- $2,000,000 Line of Credit, dated January 11, 1995, between Registrant and Colonial Bank (1) 10.14 -- Stock Purchase Agreement, dated as of October 1, 1995, among Registrant and John W. Allison, Milburn Adams, Wendell R. Kennedy, J.B. Pendergraft, Jimmie Don McKissick, Chuck Heriford and Dale Hancock (2) 10.15 -- Client Services Agreement, dated February 13, 1995, between Spirit Homes, Inc. and TSC Human Resources III, Inc. (3) 10.16 -- Pre-Sold Floorplan Financing Agreement, dated January 19, 1994, between Spirit Homes, Inc. and Green Tree Financial Corporation (3) 10.17 -- Stock Floorplan Financing Agreement, dated September 29, 1994, between Spirit Homes, Inc. and Green Tree Financial Corporation (3) 10.18 -- Manufacturer's Financing Agreement between Spirit Homes, Inc. and Deere Credit, Inc. (3) 10.19 -- Floorplan Repurchase Agreement, dated March 13, 1990, between Spirit Homes, Inc. and Bombardier Capital, Inc. (3) 10.20 -- Manufacturer Agreement dated July 22, 1992, between Spirit Homes, Inc. and Ford Consumer Finance Company, Inc. (3) 10.21 -- Floorplan Agreement, dated November 23, 1994, between Spirit Homes, Inc. and ITT Commercial Finance Corp. (3) 10.22 -- $420,076 Fixed Rate Commercial Promissory Note and Loan and Guaranty Agreement, dated July 14, 1995, between Spirit Homes, Inc. and Boatmen's National Bank of Conway (3) 10.23 -- $10,000,000 Revolving Credit Note, dated November 10, 1995, between Registrant and Bank of Mississippi (3) 10.24 -- $10,000,000 Loan and Security Agreement, dated November 10, 1995, between Registrant and Bank of Mississippi (3) 10.25 -- Stock Purchase Agreement dated October 25, 1996, among the Registrant, Bellcrest Holding Co., Inc., G. Hiller Spann, Joe. H. Bell, James M. Birdwell and Deroy Dailey, Jr.(4) 10.26 -- Form of Pre-Sold Floorplan Financing Agreement, dated February 10, 1994, by and between Bellcrest Homes, Inc. and Green Tree Financial Corporation (5) 10.27 -- Form of Floorplan Repurchase Agreement, dated August 10, 1993, by and between Bellcrest Homes, Inc. and Bombardier Capital Group (5) 10.28 -- Form of Inventory Repurchase Agreement, dated January 4, 1994, by and between Bellcrest Homes, Inc. and Nationscredit Commercial Corporation (5) 10.29 -- Form of Manufacturer Agreement, dated January 16, 1987, by and between Bellcrest Homes, Inc. and Meritor Credit Corporation (5) 10.30 -- Form of Manufacturer's Financing Agreement, dated June 1, 1994, by and between Bellcrest Homes, Inc. and Deere Credit, Inc.(5) 10.31 -- Form of Floorplan Agreement, dated April 24, 1992, by and between Bellcrest Homes, Inc. and ITT Commercial Finance Corp.(5) 10.32 -- Form of Manufacturer Agreement dated January 12, 1987, by and between Bellcrest Homes, Inc. and General Electric Credit Corporation(5)
51 11.1 -- Statement re: computation of per share earnings (5) 21.1 -- Subsidiaries of the Registrant (5) 23.1 -- Consent of KPMG Peat Marwick LLP (5) 27.1 -- Financial Data Schedule (for SEC use only) (5)
- ---------- (1) Incorporated by reference to the exhibits filed with the Registrant's Registration Statement on Form S-1, Registration No. 33-87868. (2) Incorporated by reference to the exhibits filed with the Registrant's Current Report on Form 8-K, filed October 13, 1995, File No. 0-26142. (3) Incorporated by reference to the exhibits filed with the Registrant's Registration Statement on Form S-1, Registration No. 33-80823. (4) Incorporated by reference to the exhibits filed with the Registrant's Current Report on Form 8-K, filed November 13, 1996, File No. 0-26142. (5) Filed herewith. EX-10.26 2 PRE-SOLD FLOORPLAN FINANCING AGREEMENT 1 EXHIBIT 10.26 PRE-SOLD FLOORPLAN FINANCING AGREEMENT THIS AGREEMENT, dated the 10th day of February, 1994, is by and between Bellcrest Homes, Inc. (hereinafter referred to as "Manufacturer") and Green Tree Financial Corporation and its subsidiaries (hereinafter referred to as "Green Tree"). WHEREAS, Manufacturer is engaged in the manufacturing of manufactured homes and modular homes which are sold to a network of Manufacturer's dealers throughout the United States and which manufactured homes and modular homes are resold to retail customers by dealers; and WHEREAS, Manufacturer recognizes and acknowledges the value to Manufacturer of its dealers obtaining an additional source of floorplan financing for the purchase of Manufacturer's products; and WHEREAS, Green Tree is in the business of providing floorplan financing for manufactured home and modular home dealers including the taking and processing of credit applications, credit qualification procedures and the supervision of the extension of floorplan credit in the manufactured housing industry; NOW, THEREFORE, Manufacturer and Green Tree hereby agree as follows: 1. DEFINITIONS. As used herein: 1.1 "Commitment" shall mean any agreement, oral or written, made by Green Tree's authorized employees to Manufacturer's employees to reserve and hold for Manufacturer's specific account, for a specified period of time, a stated amount of funds from the Dealer's floorplan line to be paid for a given Pre-Sold Unit upon presentation of Manufacturer's Statement of Origin ("MSO") and original invoice. 1.2 "Dealer(s)" shall mean manufactured home and modular home dealers who are customers of Manufacturer to whom funds are loaned by Green Tree under a Floorplan Financing and Security Agreement between dealer and Green Tree. 1.3 "Floorplan Finance Transaction" shall mean the debt of any Dealer to Green Tree incurred for the financing of the purchase of a Pre-Sold Unit from Manufacturer, together with any security instrument in the form of a security agreement, chattel mortgage, trust receipt, 1 2 conditional sale agreement, or other similar document securing such debt. 1.4 "Pre-Sold Unit(s)" shall mean only those new manufactured homes or modular homes (including the contents of said homes) manufactured by Manufacturer and sold to Dealer for which Green Tree has received (from Dealer) and approved an application for credit submitted by a retail customer of Dealer, and said customer has ordered a particular manufactured home or modular home for which Dealer seeks floorplan financing. 1.5 "Repurchase Price" of a Pre-Sold Unit, unless defined differently in subsequent amendments to this Agreement, shall mean the lesser of: (a) the unpaid principal balance owned by Dealer to Green Tree, or (b) the amount paid by Green Tree to Manufacturer on behalf of Dealer, less curtailments due to Green Tree under paragraph 6.1 below (unless such curtailments have been waived by Manufacturer in writing). 2. SCOPE OF AGREEMENT. Any Commitment by Green Tree to finance Dealer's floorplan under this Agreement shall be strictly limited to Pre-Sold Units. 3. COMMITMENTS. Manufacturer shall secure from Green Tree a Commitment for each Pre-Sold Unit to be financed by Green Tree before it is shipped. Green Tree may, but shall be under no obligation to, finance any Pre-Sold Unit shipped to Dealer without Manufacturer first obtaining such Commitment. Manufacturer shall not seek a Commitment for, nor deliver to Dealer, any Pre-Sold Unit for which it does not have a bona fide order from a representative of Dealer. Manufacturer shall not forward to Green Tree its invoice and MSO for payment unless it has received a Commitment from Green Tree and until the Pre-Sold Unit has been shipped. 4. PAYMENT OF INVOICE PRICE. Payments for Pre-Sold Units financed by Green Tree for Dealer under the terms of this Agreement shall be mailed by Green Tree on the tenth (10th) calendar day after shipment date of Pre-Sold Unit as indicated on Manufacturer's invoice. Green Tree 2 3 must have received and approved Manufacturer's invoice and MSO before payment shall be due. 5. QUALIFICATION OF DEALERS BY GREEN TREE. 5.1 Dealer shall make application to Green Tree by executing a Floorplan Financing and Security Agreement and necessary financing statements. 5.2 Green Tree shall have complete and sole discretion in its decisions as between itself and Dealer to either extend or terminate floorplan financing. 5.3 In the event that Manufacturer requests that Green Tree accept a Dealer that it has previously rejected, Manufacturer (by separate letter agreement) shall provide Green Tree with an unlimited guaranty of that Dealer's obligations to Green Tree. 6. TERMS AND COSTS TO DEALER OF AGREEMENT FOR FLOORPLAN FINANCING. 6.1 Curtailments are a part of this Agreement and Green Tree shall make a reasonable effort to collect same from Dealer in accordance with the following payment schedule:
Billing Period (Month) % of Original Invoice --------------------- Price per month --------------------- 1-3 0% 4-6 3% 7-9 5% 10-11 10% 12 PAID IN FULL
Green Tree shall be allowed an administrative processing period of thirty (30) days beyond the periods set forth above (for mailing of billing statements, collecting funds from Dealer and processing thereof). (a) A "Billing Period" shall mean any calendar month. (b) "Paid in Full" shall mean payment by Dealer to Green Tree of the entire amount remaining unpaid on any Pre-Sold Unit so that 100% of the invoice price has been paid. (c) Curtailments shall be billed by Green Tree to Dealer in accordance with the 3 4 foregoing payment schedule on a per Pre-Sold Unit basis commencing on the first day of the month following the receipt by Green Tree of the original invoice and MSO. (d) The foregoing payment schedule shall prevail until modified by Green Tree (to allow for seasonal sales fluctuations or special programs) with Manufacturer's prior written authorization. 6.2 Interest and a documentation, handling and inspection ("DHI") fee per Pre-Sold Unit shall be paid monthly by Dealer. 7. REPURCHASE UPON DEFAULT. Green Tree shall exercise due diligence in attempting to collect all amounts due it from Dealers when and as due for all Pre-Sold Units sold by Manufacturer. In the event Dealer is unable or unwilling to pay any amount due Green Tree on a given Floorplan Finance Transaction, such action shall constitute prima facie default on all Floorplan Finance Transactions between Green Tree and Dealer. If Green Tree, as a consequence of such default, lawfully repossess Pre-Sold Units financed by it for the Dealer, Manufacturer will, upon written demand from Green Tree, repurchase any Pre-Sold Unit covered by this Agreement when surrendered to Manufacturer by Green Tree at any point within the continental United States, and will pay Green Tree the Repurchase Price therefor under the following conditions: 7.1 Manufacturer agrees to take possession of any Pre-Sold Unit covered by this Agreement within fourteen (14) days after receipt of Green Tree's written repurchase demand and shall pay the Repurchase Price to Green Tree on or before the twentieth (20th) calendar day after receipt of the written demand to repurchase. If payment is not so made, Manufacturer shall pay all interest and DHI fees accruing after the twentieth (20th) day at Green Tree's standard floorplan rate. Green Tree's obligation to collect curtailments from Dealer shall be fully satisfied at the time Green Tree demands repurchase hereunder. 7.2 Responsibility for the safety of the Pre-Sold Unit and it contents shall remain with Green Tree until physical possession of the Pre-Sold Unit is delivered to Manufacturer or a maximum 4 5 of fourteen (14) days after repurchase notification, whichever occurs first. 7.3 Subject to limitations in paragraph 7.1 above, Manufacturer may inspect Pre-Sold Units prior to repurchase. (Reasonable wear incidental to displaying the Pre-Sold Unit for sale shall not affect its condition). Green Tree may participate in that inspection if desired. 7.4 The intent of the inspection referred to in paragraph 7.3 above shall be to determine any damage to the Pre-Sold Unit or shortages of any standard or optional items supplied by Manufacturer. If any standard item(s) supplied by Manufacturer with such Pre-Sold Unit or any specifically identified optional accessory item(s) listed in the Manufacturer's invoice and supplied by Manufacturer with such Pre-Sold Unit is missing, the Repurchase Price shall be reduced by the cost of replacement of such item(s). 7.5 Green Tree may demand repurchase for the reason that any Pre-Sold Unit is not marketable or otherwise salable due to manufacturing defects or noncompliance with applicable state or federal codes. Manufacturer shall be allowed a reasonable time to correct any such defect(s). 7.6 Green Tree may also demand repurchase in the event of breach of any of the warranties described in paragraph 10.3 herein. 7.7 Upon repurchasing any repossessed Pre-Sold Unit under the terms of this Agreement, Manufacturer shall be subrogated to a corresponding portion of the rights of Green Tree against the Dealer with respect to such repossessed Pre-Sold Units and the related Floorplan Finance Transaction. Green Tree agrees to execute and deliver assignment of all such related instruments to Manufacturer upon request. 7.8 If a Pre-Sold Unit is lawfully repossessed by Green Tree and Manufacturer is unable or unwilling to take possession of said Pre-Sold Unit or otherwise to pay the Repurchase Price to Green Tree upon the appropriate written demand, then Manufacturer agrees that Green Tree may, at its option, setoff any amount due and payable by Green Tree to Manufacturer under this Agreement against Green Tree's 5 6 right to receive money from Manufacturer pursuant to Manufacturer's repurchase obligation described herein. 8. COSTS OF REPOSSESSION. In connection with any repossession covered in paragraph 7 hereof, Manufacturer shall reimburse Green Tree for all reasonable costs of transportation, security and storage incurred as a result of Manufacturer's failure to take possession of Pre-Sold Units under paragraph 7.1 above. Green Tree shall furnish Manufacturer with receipts supporting any claim for reimbursement. 9. TERMINATION OF MANUFACTURER'S OBLIGATION. Manufacturer's obligation under this Agreement to repurchase any Pre-Sold Unit shall terminate as of the 366th day after the date of delivery of the Pre-Sold Unit by Manufacturer; provided, however, that Green Tree shall be allowed an additional thirty (30) day period for administrative processing. During such administrative period, Manufacturer's repurchase obligation which immediately precedes such period shall continue in full force and effect. If Green Tree is unable to obtain possession of any Pre-Sold Unit prior to the expiration of said 365 days because of pending legal or governmental proceedings, Manufacturer shall be obligated to repurchase the Pre-Sold Unit(s) within fifteen (15) days after Green Tree has obtained legal possession thereof. 10. INDEMNIFICATION AND WARRANTY. 10.1 Green Tree hereby agrees that it will indemnify and hold harmless Manufacturer, its agents, employees, successors and assigns, and all other persons, firms or corporations liable or claimed to be liable through Manufacturer because of any failure by Green Tree to comply with any state or federal laws. 10.2 Green Tree warrants that: (a) All requests for floorplan Commitments shall be processed through and recommended by Manufacturer's various plants. (b) Reporting of Dealer activity shall be provided by Green Tree upon written request by Manufacturer, but not more frequently than every sixty (60) days. 6 7 (c) Original invoices and MSO's shall be held by Green Tree, unless otherwise provided by law. (d) Green Tree shall inspect Manufacturer's Pre-Sold Units held by Dealers at 30-45 day intervals. 10.3 Manufacturer warrants, with respect to each Pre-Sold Unit shipped, that: (a) Its invoice represents a bona fide order by Dealer. (b) The Pre-Sold Unit has been delivered to Dealer. (c) Title to each Pre-Sold Unit is free and clear of all liens and encumbrances. (d) Its invoice is true and accurate and does not include items not sold with Pre-Sold Unit. (e) Its invoice complies with the Truth in Invoicing Practices Statement. (f) Its invoice compliance with all applicable state and federal laws. 10.4 Manufacturer and Green Tree hereby mutually agree to notify the other party immediately of any material problem and/or sold-out-of-trust situations of which it is aware with respect to any of Manufacturer's Dealers. 11. TERMINATION. This Agreement shall continue in full force and effect from the effective date until terminated by either party by thirty (30) days written notice sent by registered or certified mail to the address shown herein. Such termination shall not affect the rights and obligations of the parties as to any transaction with Dealers or among the parties entered into prior to the receipt of such notice of termination. 12. PARTIES BOUND. This Agreement shall inure to the benefit of and bind the parties hereto, their agents, employees and successors, but it is not assignable without the prior written consent of the parties hereto. 7 8 13. ENTIRE AGREEMENT. This Agreement supersedes any prior agreements between the parties with respect to floorplan financing provided by Green Tree to Dealers and constitutes the entire agreement and may not be modified or amended in any manner, except in writing signed by the parties. 14. HOW NOTICES SENT. 14.1 To Manufacturer at: Bellcrest Homes, Inc. 206 Magnolia Street P.O. Box 630 Millen, Georgia 30442 14.2 To Green Tree at: Green Tree Financial Corporation and its subsidiaries 345 St. Peter Street St. Paul, Minnesota 55102 Attention: Floorplan Department Manager 15. GOVERNING LAW. This Agreement is to be governed by and construed according to the laws of the State of Minnesota. If any provision of this Agreement is held to be invalid or to be contrary to the laws of Minnesota or constituted authority which may apply to this Agreement, such provision shall be regarded as severable and not deemed to be a part of this Agreement. _______________________ GREEN TREE FINANCIAL (Manufacturer) CORPORATION and its subsidiaries BELLCREST HOMES, INC. By:_______________ By:___________________ Its: President Its:__________________ And:_______________ And:__________________ Its: Vice President Finance Its:__________________ 8 EX-10.27 3 FLOORPLAN REPURCHASE AGREEMENT 1 EXHIBIT 10.27 BOMBARDIER CAPITAL GROUP FLOORPLAN REPURCHASE AGREEMENT ("Agreement") - -------------------------------------------------------------------------------- 1. Recitals. The undersigned intends to sell at wholesale to retail dealers or distributors various products which now or in the future may exist (the "Merchandise"). Some dealers or distributors may require financial assistance in order to make such purchases from us (each a "Buyer"). To induce Bombardier Capital Group ("BCG") to finance the acquisition of Merchandise by any Buyer and in consideration of the financing thereby enabling us to sell Merchandise to such Buyers, we agree that, whenever a Buyer requests the shipment of Merchandise from us and requests that BCG finance the Merchandise in accordance with any plan of financing offered by BCG from time to time, we may deliver to BCG a Wholesale Instrument describing the Merchandise requested to be financed by BCG (any Merchandise so financed being the "Merchandise"). As used herein, "Wholesale Instrument" shall mean a note, invoice, bill of sale, conditional sales contract, chattel mortgage, lease, trust receipt, chattel paper or other evidence of indebtedness or obligation of payment arising out of the sale or delivery of Merchandise to a Buyer. 2. Warranties and Representations. Delivery of a Wholesale Instrument shall evidence and warrant the following: (a) That any transfer to the retail dealer or distributor of all right, title, and interest in and to the Merchandise shall be contingent upon BCG's financing the transaction; (b) That our title to the Merchandise is free and clear of all liens and encumbrances when transferred to the retail dealer or distributor, except for liens in favor of BCG; (c) That the Merchandise has been the subject of a bona fide order by the dealer or distributor placed with us and accepted by us and that the dealer or distributor has requested that the transaction be financed by BCG; (d) That the Merchandise is new, unused, and free of any defects; and (e) That the Merchandise has been shipped to the purchasing dealer or distributor no more than ten days prior to the Wholesale Instrument date. In the event we breach any of the foregoing warranties, we will immediately upon demand pay to BCG, in cash, an amount equal to the outstanding balance owed to BCG with respect to such Merchandise, plus the costs and expenses, if any, incurred by BCG in the enforcement of this Agreement. 1 2 3. Acceptance of Wholesale Instrument. This Agreement shall in no way bind BCG to finance the acquisition of any Merchandise, but shall apply only to acquisition transactions accepted by BCG. BCG's final acceptance of a transaction shall be indicated only by BCG's issuance to us of a draft of or other instrument in payment of our Wholesale Instrument less the amount of BCG's discount charge (if any) under the applicable financing program. 4. Payment of Wholesale Instrument. The payment of a Wholesale Instrument shall be according to such pricing program(s) ("Program") as accepted by us. Our acceptance of any Program may or may not be evidenced by a separate agreement or letter of understanding between BCG and us with respect to particular Programs, but the terms of this Agreement shall prevail in the event of any conflict with the terms of any Program. 5. Repurchase Obligations. If BCG pays the Wholesale Instrument (whether by check, draft, notice of set off authorized hereunder, or any other means), we will repurchase, within thirty (30) days of our receipt of the possession of Merchandise or within ten (10) days of BCG repurchase demand, whichever date occurs first, such Merchandise from BCG whenever and for whatever reason BCG or we come into possession of the Merchandise on the following terms and conditions: (a) We will accept delivery of and repurchase the Merchandise, or any portion of the Merchandise that may from time to time be delivered, in a condition that is new, unused and as may have normal wear and tear resulting from display or demonstration, at such location(s) as you may reasonably designate; (b) The price which we will pay to BCG will be an amount equal to the total unpaid balance owed to BCG on the Merchandise plus any reasonable expense, charges or penalties incurred by BCG in connection with the storage or possession of the Merchandise subsequent to repurchase demand, as well as all duties and Canadian taxes (including the goods and services taxes) (the "Repurchase Price"), excluding our wholesale cost for parts and accessories installed by us to replace such parts and accessories specifically identified and delivered pursuant to invoice and financed by you; and, (c) The Repurchase Price shall be payable to BCG in lawful money of (i) the United States if the Merchandise was financed by Bombardier Capital Inc., or (ii) of Canada if the Merchandise was financed by Bombardier Credit Ltd. 2 3 (d) Our obligation to repurchase Merchandise shall terminate on the 540th day after the date of our invoice on such Merchandise,
Time Between Time Between Date of Date of Invoice Invoice and and Date of Date of Your Your Request % of Original Request for % of Original for Repurchase Invoice Amount Repurchase Invoice Amount - -------------- -------------- ------------ -------------- 0-180 days 100% 361-390 days 86% 181-210 days 98% 391-420 days 84% 211-240 days 96% 421-450 days 82% 241-270 days 94% 451-480 days 80% 271-300 days 92% 481-510 days 78% 301-330 days 90% 511-540 days 76% 331-360 days 88%
We acknowledge that the above-mentioned time periods are calibrated to reflect payment due dates from Buyers and that administrative delays can arise with respect to collection of such payments from the respective Buyers. Accordingly, BCG shall have thirty (30) days after the expiration of each stated time period during which to demand a repurchase from us, and, if a demand is made during the thirty (30) days, then the repurchase percentage of the original invoice amount, if applicable, will be the rate as stated in the expired period. In the event no obligations arise hereunder to repurchase the Merchandise, we shall, at your request, provide remarketing services with respect to such Merchandise you repossess. In the event we default in the payment of the Repurchase Price when due, interest shall immediately commence accruing on the unpaid portion of the Repurchase Price at the rate of eighteen percent (18%) per annum until fully paid. Merchandise repossessed or in the possession of BCG may be sold or disposed of by BCG, its agents or affiliates, without prior repurchase demand. 6. Bailment and Transfer of Repurchased Merchandise. Until such time as BCG has received the repurchase payment any Merchandise or portion thereof is held by us solely as bailee for BCG and is subject to the superior possessory right of BCG. Immediately upon demand we shall surrender possession of any Merchandise pursuant to the instructions of BCG. Contemporaneous to full and final payment to BCG of the Repurchase Price, the bailment shall terminate and BCG shall thereby transfer to us all of its right, title, and interest in and to the Merchandise. 3 4 7. Set Off and Extensions. Upon notice to us, BCG may deduct, set off, withhold, or apply any sums or payments due from us to BCG against any sums due from BCG to us. If BCG is entitled to a set off under the terms of this Agreement at the time BCG receives a Wholesale Instrument from us, or before such Wholesale Instrument falls due, then, to the extent of such entitlement, BCG's notice of set off delivered to us shall constitute an instrument in payment for all purposes of this Agreement. BCG may extend the time for payment of, modify, restructure, or defer the obligations of any Buyer without notice to us and without altering our obligations hereunder. 8. Waiver. We waive notice of non-payment, protest and dishonor of any Wholesale Instrument, and all other notices we might otherwise be entitled by law. We waive any rights we may have to require BCG to proceed against the dealer or distributor or to pursue any other remedy in BCG's power. BCG's delay in failure to exercise any rights granted hereunder shall not operate as a waiver of those rights. Any delay by BCG in repossessing Merchandise that is subject to this Agreement shall not waive or modify our obligations hereunder, so long as BCG pursues repossession in good faith. In the event BCG is unable to enforce its security interest in any Merchandise as a result of bankruptcy proceedings or other litigation, mediation or arbitration affecting the Merchandise, any expiration of our repurchase obligations shall be stayed effective the commencement date of such bankruptcy proceedings or other litigation, mediation or arbitration. 9. Financial Statements. We will deliver to you our financial statement for the fiscal year then most recently ended not later than twenty (20) days after the preparation of such financial statement, but in no event later than one hundred twenty (120) days after the expiration of each of our fiscal years. In addition, as BCG may reasonably request from time to time, we will promptly deliver to BCG interim financial statements. All of our financial statements shall be prepared in accordance with generally accepted accounting principles. 10. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of BCG and the undersigned. All of BCG's obligations hereunder may be performed by any of BCG's subsidiary and/or affiliated companies, and all of the promises we make hereunder shall inure jointly and severally to BCG and each of BCG's subsidiary and/or affiliated companies as the same may exist from time to time. If BCG finances the acquisition of any Merchandise sold or shipped to a Buyer by any subsidiary, affiliated company and/or distributor of ours, we agree that all of our promises and obligations shall remain in force as if such Merchandise had been sold or shipped by us. 11. Termination. We may terminate this Agreement by notice to the other party, the termination to be effective thirty days after the date of delivery thereof, but the termination shall in no manner terminate our liability with respect to financial transactions entered into by BCG with any Buyer prior to the 4 5 effective date of termination, including, without limitation, transactions which will not be completed until after the effective date of termination. 12. Louisiana. With respect to transactions financed by BCG for Buyers located in the State of Louisiana, upon BCG's payment for each item of Merchandise, we hereby assign and grant to BCG without warranty or recourse, any vendor's privilege and lien on that item granted under Louisiana law to the fullest extent as if BCG had actually sold the Merchandise to the dealer or distributor; provided, however, that nothing contained in this Agreement shall be deemed a representation or warranty by us that any valid or enforceable vendor's lien or privilege exists under Louisiana law. 13. Miscellaneous. We do not intend to enter into a joint venture with BCG and nothing contained in this Agreement shall be construed to establish a joint venture between BCG and us. We agree that any repurchase by us of Merchandise pursuant to this Agreement does not constitute a purchase of the debt owed by any Buyer to BCG. 14. Merger Clause and Modification. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof. No course of dealing, course of performance or trade usage, and no parol evidence of any nature shall be used to supplement or modify the terms of this Agreement. If at any time one or more provisions of this Agreement becomes invalid, illegal or unenforceable in whole or in part in any jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired. This Agreement may not be modified except by written agreement signed by all parties hereto. We agree to provide to BCG such further writings, certificates or other documentation as BCG may reasonably request in order to fulfill the intent of this Agreement. 15. Notices. All notices or repurchase demands required or permitted to be delivered hereunder shall be in writing, and shall be deemed received three (3) days after mailed postage prepaid, certified mail, return receipt requested, to the business addresses for the parties as written below. 16. Counterparts and Headings. This Agreement may be executed in several counterparts, each of which shall be deemed an original, and such counterparts shall together constitute but one and the same agreement. The section headings in this Agreement are inserted for convenience of reference only and shall not limit or otherwise effect the meaning of any provision thereof. Notice of the acceptance of this Agreement is hereby waived. IN WITNESS WHEREOF, we have caused this Agreement to be executed by our undersigned agents, duly authorized. 5 6 Date:___________________________ BELLCREST HOMES, INC. By:_____________________________ By:___________________ Title:__________________________ Title:________________ (If a Corporation, two authorized Address:______________ officers must sign). ______________________ 6 7 CERTIFICATE OF CORPORATE SECRETARY The undersigned, Secretary of Bellcrest Homes, Inc. (the "Corporation") hereby certifies to Bombardier Capital Group, its successors and assigns, that the foregoing FLOORPLAN REPURCHASE AGREEMENT was approved, and executed thereof by Glinn H. Spann and Richard S. Kluttz acting on behalf of the Corporation was authorized, by resolution of the board of directors of the Corporation duly adopted at a valid meeting of the board of directors of the Corporation held on April 22, 1987, which resolution has not been amended or revoked and remains in full force and effect. I further certify that the signatures appearing above are in fact the signatures of the persons so authorized. In witness whereof, I have subscribed my name and attached the seal of the Corporation hereto this 10th day of August, 1993. ______________________________ Secretary ACCEPTED: By: BOMBARDIER CAPITAL INC. By: BOMBARDIER CREDIT LTD. By:______________________________ By:___________________________ Name:____________________________ Name:_________________________ Title:___________________________ Title:________________________ Attn: Manufacturing Accounts Attn: Manufacturing Accounts Region Region Seven Burlington Square 5571 Saint Joseph Street P.O. Box 5309 Valcourt, Quebec Burlington, Vermont Canada JOE 2L0 U.S.A. 05402-5309 7 EX-10.28 4 INVENTORY REPURCHASE AGREEMENT 1 EXHIBIT 10.28 INVENTORY REPURCHASE AGREEMENT AGREEMENT between NATIONSCREDIT COMMERCIAL CORPORATION (herein called "NCC") and BELLCREST HOMES, INC., herein called "Seller", a Corporation of Georgia. 1. In consideration of the mutual promises contained herein, the parties agree as follows: a) "Inventory" means merchandise sold by Seller and financed by NCC under the terms of a Financing Agreement extended by Dealer in favor of NCC or more specifically identified as: BELLCREST PRODUCTS b) "Dealer" means any individual, partnership, firm, corporation, or other business entity that buys Inventory from Seller. c) "Financing Agreement" means the written agreement and all related documentation including without limitation any note, chattel mortgage, security agreement, financing statement, or other writing pursuant to which NCC has executed inventory financing. 2. NCC from time to time will purchase or otherwise acquire invoices acceptable to NCC and arising out of the sale by Seller by Inventory to Dealers. Such invoices shall be purchased or otherwise acquired under the plans and at terms and rates of NCC in effect from time to time. 3. The Seller warrants that its invoices when presented represent a bonafide order by the Dealer, and its titles as shown are clear and free of all liens and encumbrances, and Dealer named has requested the Inventory to be financed by NCC. In the event that the purported sale from Seller to Dealer is not a bonafide sale of Inventory, or if the Inventory, at the time of delivery to Dealer, is subject to a lien in favor of Seller or anyone claiming under or through Seller, Seller shall repurchase from NCC, upon demand, the invoice(s) purchased or otherwise acquired from Seller by NCC for an amount equal to the then unpaid balance plus costs and expenses incurred by NCC in respect thereto, and any accrued and unpaid charges of NCC. 4. If NCC shall repossess or otherwise come into the possession of any inventory which is covered by a Financing Agreement, Seller agrees to repurchase from NCC, upon demand, such repossessed Inventory under the following terms and conditions. 1 2 (a) This Agreement shall be binding as provided for one hundred percent (100%) of the Seller's invoice plus freight if approved and financed by NCC. (b) In the event that the Dealer defaults in payment of his "Financing Agreement" with NCC, upon written notice from NCC to Seller that it has possession of the Inventory, the Seller will accept delivery from NCC from any point of repossession where the Seller's Inventory may be safely removed. (c) The repurchase price shall first be determined on the basis of the Seller's invoice price plus freight if financed by NCC, excluding interest, finance and insurance charges. Additionally, if NCC is legally restrained from obtaining possession of the inventory because of bankruptcy or other legal action, the repurchase limitation period shall be extended until any order is removed plus sixty (60) days. The repurchase price is further determined by the length of time between the date of delivery of the inventory and the postmark date of NCC's written request to Seller to repurchase, as set forth in the schedule directly below. Inventory 0 days through 365 days 100.0% 366 days through 395 days 98.0% 396 days through 425 days 96.0% 426 days through 455 days 94.0% 456 days through 485 days 92.0% 486 days through 509 days 90.0% 510 days and over 0.0% * A 30 day grace period shall be added at 395 days, 425 days, 455 days, 485 days, and 509 days to collect money due. (d) The Inventory must be in new and unused condition except for any wear that is reasonable necessary or incidental to displaying it for sale or storing it. Seller will not be required to repurchase under this Agreement, any Inventory: (a) that has been refinanced by NCC, (b) where title thereto has been transferred or assigned to others by the Dealer, (c) where the Inventory has been paid for by the Dealer directly to Seller. (e) On Inventory repurchased, in addition to the repurchase price, Seller will, (a) pay NCC interest 2 3 at the then prevailing Dealer rate, provided payment is not made to NCC within thirty (30) days from the date NCC provides Seller with written notification of possession and request to repurchase, (b) reimburse NCC for reasonable costs and expenses in connection with any repossession, not to exceed $100.00 for each product repossessed regardless of the number of products repossessed. All claims for repossession costs must be supported by receipts from NCC. (f) If any specifically standard or accessory items listed on the invoice and supplied by the Seller, are missing from the product or the product is damaged, the repurchase price, in turn, will be adjusted and reduced accordingly by the Seller's cost for such items missing, or the Manufacturer's cost to repair the damage to the product. 5. Upon repurchasing any repossessed inventory under the terms of this Agreement, as a condition to payment of the repurchase price, NCC will convey to Seller all of its rights as a secured party in possession as outlined in the applicable section of the Uniform Commercial Code, free and clear of all liens and encumbrances. NCC agrees to defend and indemnify Seller against any and all third party claims arising out of a lien or encumbrance alleged to be superior to that of NCC. 6. If Seller, for any reason, fails to pay NCC as required by this Agreement, NCC shall have the right to set off obligation, if any, of NCC to Seller against obligations of Seller to NCC. 7. If not prohibited by the Law of jurisdiction in which enforcement is sought, Seller shall pay court costs and a reasonable Attorney's fee in the event NCC is required to enforce its rights hereunder against Seller through legal proceedings. 8. NCC may assign this Agreement, but Seller may not assign this Agreement without prior written consent of NCC. This Agreement shall inure to the benefit of, and bind the respective parties thereto, their successors and assigns, and shall be governed by the Law of the State where Seller is located. 9. This Agreement shall continue in force and effect until terminated by either party by notice to the other party, which notice, if given orally, shall be confirmed promptly in writing. Such termination shall not affect the rights and obligations of the parties as to any transactions entered into prior to the receipt of such notice of termination, including without limitation, 3 4 transactions which will not be completed until after the effective date of termination. THIS AGREEMENT SHALL BECOME EFFECTIVE AS OF JANUARY 4, 1994. NATIONSCREDIT COMMERCIAL CORPORATION BELLCREST HOMES. INC. By:_________________________________ By:______________________ Title:______________________________ Title:___________________ 4 EX-10.29 5 MANUFACTURER AGREEMENT 1 EXHIBIT 10.29 MANUFACTURER AGREEMENT AGREEMENT, between MERITOR CREDIT CORPORATION, a New York corporation ("Lender"), having a principal place of business at 101 Merritt 7, Norwalk, Connecticut, and Manufacturer named below. WHEREAS, Manufacturer wishes to make manufactured homes available to its dealers; and WHEREAS, Lender has agreed to extend a wholesale financing accommodation to dealers pursuant to which Lender will pay Manufacturer's invoices on behalf of dealers; and WHEREAS, Lender wishes to require Manufacturer to reimburse Lender for amounts due and unpaid by dealers to Lender and/or repurchase homes under certain circumstances. NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained therein, the parties hereto agree as follows: 1. Prior to shipping any manufactured home ("Product") to any one of its dealers ("Dealer"), Manufacturer will obtain Lender's oral approval. At the time of shipping of Product to Dealer, Manufacturer will provide Lender with the original invoice and certificate or origin. Manufacturer warrants that (a) its invoice represents a bona fide order by Dealer; (b) title to Product is clear of all liens and encumbrances; (c) the invoice is true and accurate and does not contain items not sold with Product; (d) the invoice is not inflated above published wholesale price (Manufacturer's cost plus reasonable profit for Manufacturer); (e) the invoice does not include dealer's rebate, unless full disclosure of such is made; (f) the invoice complies with the Uniform Invoicing Code of the Manufactured Housing Institute; (g) the Product is new and has not been used as a dwelling by any person or used commercially for any purpose other than display and/or demonstration; and (h) no Product is unsalable due to a manufacturing defect or non-compliance with the National Manufactured Home Construction and Safety Standards Act of 1974. Upon breach of any of the above warranties (a) through (h), at any time, Manufacturer agrees to pay Lender, upon demand, the present balance owed by Dealer to Lender for Product plus interest at the rate paid by Dealer to Lender. 2. Lender will advance Manufacturer 100% of the wholesale invoice amount or such portion thereof as has been agreed upon in writing in advance by Lender, Dealer and Manufacturer. 3. Lender will require Dealer to obtain and maintain insurance against loss by fire, theft, and physical damage for the wholesale invoice amount of each Product. 1 2 4. Whenever Lender repossesses a Product from Dealer for any reason, Lender will notify Manufacturer verbally of such repossession and issue a repurchase request to Manufacturer advising Manufacturer where Product is available for reclamation. Manufacturer will be required to repurchase such Product at a repurchase price determined as follows: Single Section Products - The original invoice amount: (a) less 2% of the original invoice amount for each 30 day period from date of delivery of Product to Dealer to date of repurchase, starting with the fourth 30 day period, and, in addition, Lender will be allowed another 30 day period for administrative processing before any reductions from the original invoice amount are made; (b) plus up to one month's past due interest charges earned by Lender and uncollected from Dealer. Multi Section Products - The original invoice amount: (a) less 2% of the original invoice amount for each 30 day period from date of delivery of Product to Dealer to date of repurchase, starting with the sixth 30 day period, and, in addition, Lender will be allowed another 30 day period for administrative processing before any reductions from the original invoice amount are made; (b) plus up to one month's past due interest charges earned by Landlord and uncollected from Dealer. Manufacturer's obligation to repurchase a Product under this Paragraph 4 will remain in effect for 365 days (12 months) from date of delivery for single section Products, and for 455 days (15 months) from date of delivery for multi-section Products. 5. Whenever Lender issues a repurchase request to Manufacturer, Manufacturer agrees to take possession of Product within 10 days of notice, and to pay Lender in accordance with this Agreement within 20 days of such notice. If Manufacturer does not take possession within 10 days of notice, Manufacturer agrees to reimburse Lender for costs incurred in providing physical protection for Product. 6. Whenever Lender repossesses and Manufacturer is required to repurchase a Product, Manufacturer will reimburse Lender for reasonable costs and expenses not to exceed $75.00 per single section Product and $150.00 per multi section Product, regardless of the number of Products repossessed. 7. Upon reimbursement of Lender or repurchase of a Product under the terms of this Agreement, Manufacturer will be subrogated 2 3 to a corresponding portion of Lender's rights against Dealer with respect to such Product and the security or title retention instrument covering such Product, and Lender agrees to execute and deliver such assignments and other documents relating thereto as Manufacturer may request. Any such reimbursement or repurchase by Manufacturer will not constitute a sale or disposition under the Uniform Commercial Code. Following any such reimbursement or repurchase, Manufacturer will have the duties of a secured party under the Uniform Commercial Code. 8. Periodically, but at least annually, Lender will, upon request, provide Manufacturer with a report detailing Manufacturer's contingent liability under this Agreement. 9. In the event that Manufacturer fails to make any payment due to Lender under this Agreement on a timely basis, Lender will have an immediate right of set-off against any money or other property of Manufacturer in Lender's possession. 10. Manufacturer agrees to indemnify and hold Lender harmless from any and all expenses, claims or damages of whatever kind or nature, including reasonable attorney's fees, relating to or arising out of any claim against Lender for breach of warranty or product liability with respect to Products. 11. This Agreement will inure to the benefit of and bind the parties hereto, their successors and assigns, and all of their subsidiaries whether now existing or hereafter formed, and shall be effective until terminated by either party at any time upon 10 days' written notice to the other, but termination will not relieve either party from obligations assumed prior to the effective date of said termination notice. 12. This Agreement is not intended to and does not set up any third party beneficiary rights on behalf of any Dealer. 13. All parties to this Agreement hereby waive any and all rights to a trial by jury in any action or proceeding, whether in law or in equity, arising out of or related to this Agreement. 14. The parties may submit to arbitration any controversy or claim arising out of or relating to this Agreement, or the breach thereof, and any such controversy or claim shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any court having jurisdiction thereof. 15. Either party to this Agreement will be entitled to all costs of suit, including reasonable attorney's fees, upon prevailing in any action or proceeding brought to enforce any provision of this Agreement. 3 4 16. Time is of the essence with respect to Manufacturer's performance of its obligations hereunder. 17. If any provision of this Agreement should be held to be invalid or unenforceable by any court, the validity and enforceability of the remaining provisions will not be affected. 18. This Agreement supersedes any prior agreement between the parties, constitutes the entire agreement, and may not be modified or amended except in writing. Notwithstanding the foregoing, the terms and conditions of any prior agreement as it relates to any Product shipped prior to the execution of this Agreement will remain in effect. 19. All notices which are required to be given under this Agreement will be addressed to Manufacturer and Lender, postage prepaid, as follows: TO MANUFACTURER: Bellcrest Homes, Inc. P.0. Box 630 Millen, GA 30442 Attn: Glinn H. Spann President TO LENDER: MERITOR CREDIT CORPORATION 101 Merritt 7, First Floor Norwalk Connecticut 06851 Attn: Manufactured Housing, with a copy to General Counsel 4 5 20. This Agreement will be governed by and construed in accordance with the laws of the State of Connecticut. The parties hereto have accepted this Agreement on the dates set forth below: Manufacturer: Bellcrest Homes, Inc. By: _________________________ Title: President Address: P.0. Box 630 Millen, GA 30442 Date: January 16, 1987 MERITOR CREDIT CORPORATION By:__________________________ Title:_______________________ Date:________________________ 21. Manufacturer will not be required to repurchase a product if title thereto has been transferred or assigned by a Dealer to a retail buyer in the ordinary course of business who has accepted delivery of and used such Product. 5 6 EXHIBIT A LIMITED ADDENDUM TO THE MANUFACTURER AGREEMENT The Manufacturer Agreement between Ford Motor Credit Company, successor in interest to Meritor Credit Corporation, f.k.a. PSFS Credit Corporation, and BELLCREST HOMES, INC., dated 1/6/87, is amended as follows: Paragraph 4, Single Section Products, subparagraph (a): 1. The figure 2% Is changed to 3% 2. The term "starting with the fourth 30 day period" is changed to "starting with the ninth 30 day period." Paragraph 4, Multi Section Products, subparagraph (a): 1. The figure 2% is changed to 3% 2. The term "starting with the sixth 30 day period" is changed to "starting with the ninth 30 day period." These changes are limited to repurchases from the following dealer(s): Greeson Homes Corp., Inc. (all locations) Except as amended hereby, said Manufacturer Agreement remains in full force and effect. Firm Name: Bellcrest Homes, Inc. Ford Motor Credit Company By:_________________________ By:___________________________ Title:______________________ Title:________________________ Date:________________________ Date:_________________________ EX-10.30 6 MANUFACTURER'S FINANCING AGREEMENT 1 EXHIBIT 10.30 MANUFACTURER'S FINANCING AGREEMENT MANUFACTURED HOUSING AGREEMENT between Deere Credit, Inc., a Delaware corporation, with offices located at 1415 28th St., West Des Moines, Iowa 5O265-1450 ("Creditor"), and Bellcrest Homes, Inc., a Georgia corporation, with offices located at 206 Magnolia Street, Millen, GA 30442 and any of its subsidiary corporations which produce manufactured housing ("Manufacturer"). In consideration of Creditor's extension of lines of credit to Manufacturer's independent or Manufacturer-owned dealers to finance Manufacturer's products sold or distributed at wholesale, the parties agree as follows: 1. Definitions. 1.1 "Goods" shall mean all products manufactured, sold or distributed by Manufacturer or its subsidiaries. 1.2 "Dealer(s)" shall mean any person, firm or corporation which buys or acquires Goods at wholesale from Manufacturer and sells such Goods at retail. 1.3 "Wholesale Instrument" shall mean a note, chattel paper or other evidence of indebtedness or obligation arising out of the acquisition of Goods by Dealers from Manufacturer. 2. Purchase of Wholesale Instruments. Creditor may, from time to time, finance the acquisition of Goods by Dealers by purchasing, otherwise acquiring or entering into Wholesale Instruments with a Dealer if the Dealer's creditworthiness and financial responsibility are acceptable to Creditor. Such financing by Creditor shall be in accordance with Creditor's plan or plans of wholesale financing in effect from time to time, and shall be limited to enabling Dealers to purchase and acquire Goods from Manufacturer. If Manufacturer requests that Creditor extend such financing to a Dealer, Manufacturer warrants that, to its knowledge the financing will be used for such purpose. 3. Payment to Manufacturer. When the Creditor's wholesale financing plan calls for payment directly to Manufacturer, such payment shall be made following the receipt by Creditor of a copy of the Manufacturer's invoice to the Dealer and the original of the Manufacturer's Certificate(s) of Origin for the unit of Goods being financed. 4. Repurchase by Manufacturer. 2 4.1 After Repossession. If Creditor or Manufacturer repossesses or comes into possession of any unit of Goods covered by any Wholesale Instrument, Manufacturer will, upon demand of Creditor, promptly repurchase such Goods, wherever located from Creditor if the conditions set forth in Section 4.2 are met. On the Wholesale Instrument for each repurchased unit of Goods, Manufacturer shall pay Creditor the total unpaid balance (excluding unpaid finance charges, but including freight and delivery charges if financed by Creditor), less the amount of any curtailment or final maturity which was not waived or extended with the approval of Manufacturer and which is past due from Dealer 30 days or more as of the date Creditor notifies Manufacturer of a default by Dealer ("Repurchase Price"). Creditor shall be responsible for handling any repossession or foreclosure proceedings. Manufacturer hereby grants Creditor a security interest in, and shall not assert any superior interest in or title to, such Goods until the Repurchase Price has been paid in full, which shall be done within 30 days following receipt by Manufacturer of a statement showing the amount owed. Creditor agrees to store all repossessed Goods within a reasonable distance of Dealer's principal or satellite location as specified in the individual Dealer's Inventory Security Agreement. In the event Manufacturer fails to pay the Repurchase Price in full within said 30 days, Manufacturer shall be liable for and shall also pay Creditor all accrued and unpaid finance charges under Dealer's current financing terms with Creditor on each Wholesale Instrument on the Goods from the date on which Creditor notified Manufacturer to repurchase the Goods to the date the Repurchase Price is paid in full. Upon receipt by Creditor of the full Repurchase Price and any finance charges due as provided herein for any Goods repossessed, Creditor agrees to transfer to Manufacturer any and all rights that Creditor may have in and to the Goods as a secured creditor under the Uniform Commercial Code and will return Manufacturer's Certificate of Origin. 4.2 Conditions for Repurchase. 4.2.1 Creditor has paid Manufacturer for the Goods on behalf of Dealer; 4.2.2 Creditor has determined that Dealer is in default and is ceasing all wholesale 2 3 financing of Goods with Dealer and its principals; 4.2.3 Creditor has taken actual or constructive physical possession of the Goods unless Manufacturer has agreed to do so; 4.2.4 Title to the Goods has never passed from Dealer to a retail purchaser; and 4.2.5 The Goods have not been rented and are otherwise in new and unused condition, except for normal wear and tear incidental to storage, display, and incidental demonstration. 4.3 Additional Costs. Manufacturer agrees to pay Creditor $100 per section per unit of Goods for its direct repossession costs, including its storage costs. After Creditor's repossession and tender of the Goods to Manufacturer, Manufacturer shall be fully responsible for all costs and expenses associated with the possession, relocation, care, maintenance, and ongoing storage of each unit of Goods. 5. Remarketing by Manufacturer. In the event the Conditions for Repurchase are not met, but Creditor has obtained possession of Goods, Manufacturer agrees to assist Creditor in selling such Goods. Manufacturer agrees to use its best efforts to remarket the Goods through its Dealer organization or other commercially reasonable methods. 6. Payment and Term Changes. Creditor, in its sole discretion, may renew, extend or modify the time or amount of payment of Wholesale Instruments and may also amend the Terms and Conditions of its financing arrangements with the Dealer. Except as specifically set forth in this Agreement, no such renewal, extension modification or amendment shall affect the liability of Manufacturer hereunder. 7. No Waiver by Creditor. The failure to exercise any right hereunder by Creditor shall not operate as a waiver of such right. All remedies contained in this Agreement shall be cumulative and alterative, and shall be in addition to all other remedies available to Creditor by agreement or law. 8. Manufacturer's Warranties and Representations. Manufacturer warrants and represents to Creditor: (a) that it is a corporation duly existing, qualified and in good standing to do business in all jurisdictions where necessary; 3 4 (b) that each of its invoices represents a bona fide order by Dealer, and all invoices shall be true and accurate and shall comply with all applicable rules and standards, including the Truth-In-Invoicing Practice Statement of the Manufactured Housing Institute; (c) that the Dealer will have title to the Goods which are the subject of a Wholesale Instrument free and clear of all claims of Manufacturer's creditors; (d) that Manufacturer has shipped to Dealer Goods which are the subject of a Wholesale Instrument no earlier than ten (10) days prior to, nor later than, the date on which Manufacturer submits a copy of the invoice on such Goods to Creditor for payment, and that such Goods will be received by Dealer in good and salable condition free of material defects; and (e) that Goods which are the subject of a Wholesale Instrument comply with all state, federal and local laws and regulations in the jurisdictions in which such Goods are to be offered for sale by Dealer. 9. Manufacturer's Covenants. Manufacturer covenants and agrees: (a) to promptly notify Creditor if a Dealer materially defaults under Manufacturer's Dealer Agreement or is discontinued as one of Manufacturer's authorized Dealers; (b) to promptly notify Creditor, to the best of its knowledge and information; (i) if there is a change in control of a Dealer or a change of a principal owner or senior officer of the Dealer; (ii) if a Dealer files for bankruptcy or other protection from creditors, or has material litigation or investigations commenced against it; (c) to provide Creditor with its price lists and literature regarding the Goods; (d) to honor all its warranties on the Goods and to pay Dealer's warranty claims on the Goods within a reason- able period of time; (e) to promptly notify Creditor of any material change in Manufacturer's financial condition, principal officers, directors, or control, and to provide annual audited financial statements to Creditor within 90 days of the end of its calendar or fiscal year; (f) to indemnify and hold harmless Creditor from any claim, lawsuit, judgment, court order, or other dispute, arising from the Goods or the sale of the Goods from Manufacturer to a Dealer, and from any matter alleging defects in or misrepresentation of the Goods. 4 5 (g) not to issue more than one Certificate of Origin to any unit of Goods, except upon the request of Creditor or after Manufacturer's repurchase of the Goods. 10. Breach of Warranties or Representations. In the event of breach by Manufacturer of any warranties or representations contained in this Agreement, upon demand by Creditor, Manufacturer will pay Creditor on the Wholesale Instrument for each unit of Goods directly or indirectly affected by such breach, an amount equal to the total unpaid balance of the Wholesale Instrument (including unpaid finance charges), plus all costs and expenses (including attorneys' fees) reasonably incurred by Creditor as a result of the breach. 11. Notice of Assignment of Dealer Funds. Creditor has obtained or intends to obtain from each Dealer an assignment of Dealer's funds of whatever nature owing, now or in the future, from Manufacturer to Dealer, as security for any amounts Dealer may owe, now or in the future, to Creditor under the terms of Dealer's Inventory Security Agreement. Manufacturer hereby acknowledges this assignment and agrees to honor Creditor's claims to Dealer's funds upon notice from Creditor. 12. Notices. All written notices sent hereunder shall be sent by facsimile, overnight courier, or certified mail, postage prepaid, and addressed as follows: If to Manufacturer: If to Creditor: Bellcrest Homes, Inc. Deere Credit, Inc. 206 Magnolia St. 1415 28th Street P.O. Box 630 West Des Moines, IA 50265-1450 Millen, GA 30442 Attention: Manager, Wholesale Attention: G. Hiller Spann Fax Number: 515-222-4554 Fax Number: 912-982-2992 13. Assignment. This Agreement shall be binding upon and inure to the benefit of the successors or assigns of the parties hereto. Creditor may assign this Agreement, in whole or in part, to any of its subsidiary or affiliated companies and, upon such assignment, such subsidiary or affiliated company shall be entitled to all of the benefits of this Agreement and the obligations of the Manufacturer contained in this Agreement. 14. Amendment. This Agreement may not be modified, altered or amended except in writing executed by the parties hereto. 15. Choice of Law. The validity, enforceability and interpretation of this Agreement and any Amendments and Addenda hereto shall be governed by the laws of the State of Iowa, the place of business of the Creditor. 16. Termination. Either party hereto may cancel this Agreement at any time, upon thirty (30) days' notice in writing. The 5 6 termination of this Agreement shall in no manner affect the obligations of Manufacturer as to Wholesale Instruments purchased, otherwise acquired or entered into by Creditor prior to the effective date of termination. 17. Effective Date/Entire Agreement. This Agreement shall be effective as of the date stated below and shall as of that date supersede any prior Manufacturer's Financing Agreement-Manufactured Housing between Creditor and Manufacturer. This Agreement constitutes the entire agreement of the parties and no oral statements or other understandings are enforceable unless provided for herein in writing. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their authorized officers or representatives as of the 1st day of June, 1994. ATTEST: Bellcrest Homes, Inc. (Manufacturer) By:_______________________ Title:____________________ By:___________________________ Title:________________________ DEERE CREDIT, INC. (Creditor) By:___________________________ Title:________________________ 6 7 ADDENDUM TO MANUFACTURER'S FINANCING AGREEMENT MANUFACTURED HOUSING This is an Addendum to the Manufacturer's Financing Agreement-Manufactured Housing (the "Agreement") between Deere Credit, Inc. ("Creditor") and Bellcrest Homes, Inc. ("Manufacturer") dated June 1, 1994. In consideration of Creditor discounting all invoices payable to Manufacturer pursuant to the Agreement by 0%, Creditor agrees to offer participating Dealers of Manufacturer special terms on Goods covered by a Wholesale Instrument as follows: I. Rates: Rate Period Applicable Rate (Measured from date of Wholesale Instrument) NEGOTIATED BETWEEN CREDITOR AND DEALER II. Flat Charges: a) _______ % per month on the lowest outstanding balance (other than $0) of each Wholesale Instrument outstanding during the month. b) $_________________ per month per unit of Goods covered by any Wholesale Instrument outstanding during the month. NEGOTIATED BETWEEN CREDITOR AND DEALER. III. Curtailment schedule on each unit of Goods covered by a Wholesale Instrument: Curtailment Due Date Curtailment Percent (Measured from date of Wholesale Instrument) 180th Day From Invoice 2% of Original Invoice Each 30 Days Thereafter 2% of Original Invoice 365th Day From Invoice Payment Due In Full If any of the above Curtailment Due Dates arise during the month(s) of ________________________________, the above Curtailment Percents shall not apply; in such months the Curtailment Percent shall be _______%. IV. Payment to Manufacturer: Payment to Manufacturer by Creditor pursuant to Section 3 of the Agreement shall be within 10 days following the receipt by Creditor of a copy of the Manufacturer's invoice to the Dealer and the 1 8 original of the Manufacturer's Certificate(s) of Origin for the unit of Goods being financed. Agreed to this 1st day of June, 1994. ATTEST Bellcrest Homes, Inc. (manufacturer) By:_____________________ By:___________________________ Title:__________________ Title:________________________ DEERE CREDIT, INC. (Creditor) By:___________________________ Title: Manager, Market Development 2 9 ADDENDUM TO MANUFACTURER'S FINANCING AGREEMENT MANUFACTURED HOUSING Reference Definition #4 Section 4.1: Manufacturer shall deduct the wholesale cost of any damages or shortages from any unit repurchased. Normal wear does not constitute damage. Agreed to this 1st day of June, 1994. Bellcrest Homes, Inc. ATTEST (Manufacturer) By:_____________________ By:___________________________ Title:__________________ Title: President DEERE CREDIT, INC. (Creditor) By:___________________________ Title: Manager, Market Development 3 EX-10.31 7 FLOORPLAN AGREEMENT 1 EXHIBIT 10.31 FLOORPLAN AGREEMENT To: ITT COMMERCIAL FINANCE CORP. 8251 Maryland Avenue Clayton, Missouri 63105 We sell various products ("Merchandise") to dealers and/or distributors (collectively, "Dealer") who may require financial assistance in order to make such purchases from us. To induce you to finance the acquisition of Merchandise by any Dealer and in consideration thereof, we agree that: 1. Whenever a Dealer requests the shipment of Merchandise from us and that you finance such Merchandise, we may deliver to you an invoice(s) describing the Merchandise. By delivery of an invoice we warrant the following: a. That we transfer to the Dealer all right, title and interest in and to the Merchandise so described contingent upon your approval to finance the transaction; b. That our title to the Merchandise is free and clear of all liens and encumbrances when transferred to the Dealer; c. That the Merchandise is in salable condition, free of any defects; d. That the Merchandise is the subject of a bona fide order by the Dealer placed with and accepted by us and that the Dealer has requested the transaction be financed by you; and e. That the Merchandise subject to the transaction has been shipped to Dealer not more than 10 days prior to the invoice date. If we breach any of the above-described warranties, we will immediately: (i) pay to you any amount equal to the total unpaid balance (being principal and finance charges) owed to you on all Merchandise directly or indirectly related to the breach; and (ii) reimburse you for all costs and expenses (including, but not limited to, attorney's fees) incurred by you as a direct or indirect result of the breach. 2. You will only be bound to finance Merchandise which you have accepted to finance (which acceptances will be indicated by your issuance of an approval number or a draft or other instrument to us in payment of the invoice less the amount of your charges as agreed upon from time to time) and only if: (i) the Merchandise is delivered to the Dealer within 30 days following your acceptance; (ii) you have received our invoice for such 2 Merchandise within 10 days from the date of delivery of the Merchandise to Dealer; and (iii) you have not revoked your acceptance prior to the shipment of the Merchandise to Dealer. 3. Whenever you deem it necessary in your sole discretion to repossess or if you otherwise come into possession of any Merchandise, in which you have a security interest or other lien, we shall purchase such Merchandise from you at the time of your repossession or other acquisition or possession in accordance with the following terms and conditions: a. We shall purchase such Merchandise, regardless of its condition, at the point where you repossess it or where it otherwise comes into your possession; b. The price that we will pay to you for such Merchandise will be due and payable immediately in full, and will be an amount equal to the total unpaid principal balance owed to you on Merchandise based on our original invoice price, minus, any curtailments paid by Dealers, in accordance with the following schedule: 2% of the original invoice price after 270 days from the original invoice date; and 2% of the original invoice price each 30 days thereafter. Dealers may be granted a thirty (30) day extension period in which to pay the curtailments to you. You may request waivers of scheduled curtailments, in writing, which shall be sent to us at the address set forth below. Such waivers must be approved in writing by us in order to be effective. Repurchase will be in effect for 360 days from the date of invoice. The repurchase price may be reduced by: the cost of replacing any missing standard or accessory items which were supplied by us when the Merchandise was sold and shipped to the Dealer; and, our cost of repairing any damage to the Merchandise after original delivery to the Dealer, excluding normal wear and tear resulting from the sales display or demonstration of the Merchandise. If your repossession of Merchandise and consequently your tendering of Merchandise for repurchase, is delayed because of legal proceedings, including but not limited to proceedings under the Bankruptcy Code, the date of commencement of or entering into legal proceedings by you to repossess the Merchandise, or the date of the filing under the Bankruptcy Code by any party, shall be considered the date that demand for 2 3 repurchase was made for the purposes of this Section 3. If we fail to pay you the repurchase price within ten (10) days after payment is due, we will be responsible for and pay you all finance charges accrued on the Dealer's account after the demand for repurchase and until the time the repurchase price is paid. 4. In addition to our obligations set forth above, if you at any time repossess or otherwise come into possession of any Merchandise from any Dealer, who received the Merchandise from a third party and not directly from us, we shall purchase such Merchandise from you on demand in accordance with the terms set forth above in Section 3; provided, however: (a) you will first request such third party to purchase such Merchandise from you; and (b) if such third party fails to immediately purchase such Merchandise from you, we shall immediately purchase such Merchandise and pay you a purchase price therefore in an amount equal to the total unpaid balance (being principal and finance charges) owed to you with respect to such Merchandise and all costs and expenses (including, without limitation, reasonable attorney fees) paid or incurred by you in connection with your repossession of such Merchandise, but in no event will our liability with respect to any item of such Merchandise exceed our original invoice price for such item. This provision will be in effect if we have approved your purchase from a third party in writing prior to acquisition by you. 5. You may extend the time of a Dealer in default to fulfill its obligations to you without notice to us and without altering our obligations hereunder. We waive any rights we may have to notice of nonpayment, nonperformance, dishonor, the amount of indebtedness of a Dealer outstanding at any time, any legal proceeding against a Dealer, and any other demands and notices required by law, and any rights we may have to require you to proceed against a Dealer or to pursue any other remedy in your power. Our liability to you is direct and unconditional and will not be affected by any change in the terms of payment or performance of any agreement between you and Dealer, or the release, settlement or compromise of or with any party liable for the payment or performance thereof, the release or non-perfection of any security thereunder, any change in Dealer's financial condition, or the interruption of business relations between you and Dealer. 6. We shall pay all your expenses (including, without limitation, court costs, arbitration fees and reasonable attorney fees) in the event you are required to enforce your rights against us. Your failure to exercise any rights granted hereunder will not operate as a waiver of those rights. 7. This Agreement will be binding on and inure to the benefit of your successors and assigns. You may perform or cause 3 4 to be performed any of your subsidiary and/or affiliated companies, and our obligations under this Agreement inure to the benefit of your subsidiary and/or affiliated companies. 8. Either of us may terminate this Agreement by notice to the other in writing, the termination to be effective 30 days after receipt of the notice by the other party, but no termination of this Agreement will affect any of our liability with respect to any financial transactions entered into by you with any Dealer prior to the effective date of termination, including, without limitation, transactions that will not be completed until after the effective date of termination. 9. We waive notice of your acceptance of this Agreement. 10. Any controversy or claim arising out of or relating to this Agreement, the relationship resulting in or from this Agreement or the breach of any duties hereunder will be settled by arbitration in accordance with the Code of Procedure of the National Arbitration Forum, Inc., 2124 Dupont Avenue South, Minneapolis, Minnesota 55405, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Dated: April 24, 1992 ATTEST: ____________________________ Bellcrest Homes, Inc. By:______________________ Title: President ACCEPTED: Business Address: ITT COMMERCIAL FINANCE CORP. 206 Magnolia Street Millen, Georgia 30442 By:___________________________ Title:________________________ +++++++++ 1-Name of Vendor 2-Signature of Vendor's Authorized Representative 3-Signature of Vendor's Secretary, if Vendor is a Corporation, otherwise a Witness' Signature 4 5 MANUFACTURER CERTIFICATION This certifies that all invoices submitted to General Electric Credit Corporation for inventory financing will reflect published prices free of all rebates except true volume incentives. A volume incentive is defined as an established manufacturer marketing practice offered to all dealers on an equal, nondiscriminating basis for volume purchases over a stated period of time of not less than 6 months. Any special bonuses, rebates or refunds will be fully disclosed as line items on the invoices. It is understood that these items will be excluded from GECC financing. It is our understanding that this certification will make our invoices eligible for investments at retail financing of up to 130%, including extra equipment, but exclusive of any special bonuses, rebates or refunds. We further understand that General Electric Credit Corporation is relying on this certificate and would not agree to finance our produce without it. Dated this 12th day of January, 1987. Manufacturer: BELLCREST HOMES, INC. By: ______________________________________ (Officer) Title: President GENERAL ELECTRIC CREDIT CORPORATION EX-10.32 8 MANUFACTURER AGREEMENT 1 EXHIBIT 10.32 MANUFACTURER AGREEMENT In consideration of General Electric Credit Corporation (hereinafter GECC) agreeing to extend, from time to time and in GECC's sole discretion, inventory financing accommodation on the undersigned Manufacturer's products (manufactured homes, mobile homes, modular homes, sectional homes and/or motor homes and recreational vehicles) purchased directly from Manufacturer by Dealers whose credit and financial responsibility are acceptable to GECC, Manufacturer agrees as follows: 1. Prior to shipping each product, Manufacturer will obtain GECC's commitment to finance and pay for such product upon receipt and acceptance by Dealer. Manufacturer will provide GECC with the original invoice and certificate of origin. Manufacturer warrants that (a) its invoice represents a bona fide order by Dealer; (b) titles are clear of all liens and encumbrances; (c) invoices are true and accurate, represent a fair market price for the product, have not been inflated above published prices to include any Dealer rebate and do not contain items not sold with the product; (d) invoices for manufactured home products comply with the Truth in Invoicing Practices Statement of the Manufactured Housing Institute; (e) all right, title and interest to the product have been transferred to Dealer; (f) the product is new, free of all manufacturing defects, and complies and has been constructed in accordance with all applicable laws and regulations including, but not in limitation, the National Manufactured Housing Construction and Safety Standards Act and all applicable FTC Trade Regulation Rules. In case of any breach of any of the above warranties (a) through (f), Manufacturer agrees to reimburse GECC for any amounts advanced plus earned but uncollected charges and to indemnify and hold GECC harmless against all costs and expenses arising out of or related directly or indirectly to such breach. 2. GECC will advance one hundred percent (100%) of the net wholesale invoice amount, of such percentage as has been otherwise agreed upon or as may be reduced by any Dealer downpayment (which shall be Manufacturer's obligation to collect). Such amount shall exclude any dealer assistance programs or subsidies other than volume rebates. A volume rebate is an established manufacturer marketing practice offered to all Dealers on an equal, nondiscriminatory basis for volume purchases over a stated period of time of not less than three months. Rebates on single units or small volume purchases are not considered eligible. 3. Manufacturer will deliver each product in good and merchantable condition to the Dealer at such location or place of business as has been previously approved by GECC under GECC's inventory financing agreement with Dealer. In the event a product is delivered to Dealer at a location other than an approved location, Manufacturer shall reimburse GECC for any loss arising out of such delivery adversely affecting the perfection or priority of GECC's security interest in such product. 2 4. If GECC takes actual or constructive possession of a product financed under this Agreement due to a default on the part of any Dealer, GECC will give Manufacturer notice followed by a written confirmation requesting repurchase and state the repurchase price and where Manufacturer is to take delivery. Manufacturer shall immediately thereafter repurchase such product(s) in accordance with Section 5 below. Manufacturer shall take delivery of such product(s) in "as is" condition provided, however, that the repurchase price may be adjusted as set forth in Section 6 below. The term "default" as used in this section means the failure by Dealer to meet obligations under agreements with GECC which in GECC's sole judgment authorizes GECC to take possession of any products financed under GECC's inventory financing agreement with Dealer. 5. The repurchase price for a product shall be payable prior to taking delivery or, in GECC's discretion, within 5 days thereafter, and will be the principal amount due GECC plus, commencing 10 days after GECC's request for repurchase, earned but uncollected charges. At GECC's option, payment shall be made by i) Manufacturer's check, or ii) certified or bank check. The repurchase price shall in no event be reduced by any reserves or other property held by GECC as security for the performance of Dealer's obligations to GECC. Notwithstanding the foregoing, Manufacturer's repurchase obligation on each product shall be reduced by 2% for each Dealer billing period commencing with the 5th billing period after GECC's advance of funds, provided, however, that GECC shall have 30 days for administration purposes and provided further that in the event of a Dealer bankruptcy, Manufacturer's repurchase obligation shall be fixed as of the filing date. 6. On all products repurchased, in addition to the repurchase price, Manufacturer will reimburse GECC for the reasonable costs and expenses related to the repossession, securing and storing of any product. Manufacturer may deduct from the repurchase price Manufacturer's wholesale cost for any missing or damaged equipment, furniture or appliances provided the same was specifically identified on the invoice and was a part of the product as originally delivered to Dealer. 7. Manufacturer will not be required to repurchase a product if title thereto has been transferred or assigned by a Dealer to a retail buyer in the ordinary course of business who has accepted delivery of and used such product, or if a product has been used as an office or rental or otherwise occupied. 8. Upon the repurchase of any product under the terms of this Agreement, the Manufacturer shall be subrogated to a corresponding portion of GECC's rights against the Dealer with respect to such product and the security or title retention instrument covering such product and GECC agrees to execute and deliver such partial assignments and other documents relating thereto as the Manufacturer may reasonably request. Any such repurchase by Manufacturer shall not constitute a sale or 2 3 disposition under the Uniform Commercial Code. The Manufacturer shall thereafter have the duties of a secured party under the Uniform Commercial Code. 9. Manufacturer waives any failure or delay on the part of GECC in asserting or enforcing any rights of GECC hereunder or against the Dealer. Manufacturer's liability shall not be affected by any extension or variation of terms which may be granted in connection with any obligations of Dealer. 10. Any funds of Manufacturer or any other property of Manufacturer that may now or at any time hereafter be given or left in the possession of GECC, for any purpose, or that may be in transit to or from GECC for any purpose, are hereby pledged and delivered to GECC to secure the payment of, or in GECC's discretion to be offset against, any obligations or liabilities of Manufacturer to GECC, direct or contingent, whether due or to become due, and whether now existing or hereafter arising. Manufacturer waives any cause of action against any Dealer for the collection of any funds offset. A photostatic copy or other reproduction of this Agreement or of a financing statement shall be sufficient as a financing statement. 11. Manufacturer hereby authorizes GECC, by any employee of GECC's designation, to sign, execute, endorse, transfer, file or deliver in the name of Manufacturer any financing or other statements required by applicable law concerning GECC's security interest hereunder, any certificates of title or origin or applications therefor, and any evidences of indebtedness with respect to any advances made by GECC to finance inventory and to endorse in the name of Manufacturer any notes, checks, drafts or other instruments for the payment of money which may come into GECC's possession. This authorization is limited to those acts reasonably necessary to effectuate this Agreement and to those acts necessary or desirable in GECC's discretion to secure the indebtedness due hereunder. 12. In the event that GECC refinances the inventory of a Dealer and such refinanced inventory was originally floorplanned with another financing source, then upon notification to Manufacturer, the terms and conditions of this Agreement shall apply to any of Manufacturer's products in such inventory as though such products had originally been floorplanned by GECC. 13. Regardless of whether GECC or another finance source provides the floorplan financing for a product, Manufacturer agrees to honor all warranty obligations to retail customers whose purchase is financed by GECC and further agrees to reimburse GECC for any expenses, claims or damage (including reasonable attorney fees incurred in any litigation), relating to any claim against GECC for manufacturer defects, breach of warranty or product liability on Manufacturer's products. 14. Manufacturer agrees that all business operations will be conducted in compliance with federal, state and local law. 3 4 Further, all signatures are duly authorized acts of the Manufacturer and the individual signing on behalf of Manufacturer. This Agreement is not intended to and does not set up any third party beneficiary rights on behalf of any Dealer or other person not a party to this Agreement. 15. In the event Manufacturer is a participant in GECC's Instant Access(TM) program, the following shall apply: Manufacturer shall have a non-exclusive and non-transferable license to the program's computer software which shall be revocable by GECC in its discretion. It is expressly understood and agreed that the software contains "trade secret" information and other data proprietary to GECC. Manufacturer shall maintain all software in strict confidence and shall not allow such software to be disclosed, proliferated or duplicated. The license of software shall be on an "as is" basis and all implied warranties of merchantability or fitness for a particular purpose are excluded. GECC shall not be liable for any loss or damage, including, without limitation, any indirect, special or consequential damages arising from Manufacturer's use of the software or its performance. 16. All statements of account rendered by GECC to Manufacturer shall be presumed correct and accurate and constitute an account stated unless, within 30 days after receipt thereof, Manufacturer shall deliver by certified mail, return receipt requested, written objection thereto specifying any errors in the statement. 17. Manufacturer shall furnish, at Manufacturer's expense, at least annually (and sooner if requested by GECC), an audited financial statement, or, if such statement is not available, a balance sheet, a profit and loss statement, and such other documents as may be requested by GECC, reflecting the current financial condition of Manufacturer. Manufacturer further agrees to provide GECC information related to products financed hereunder, including, without limitation, product specifications, construction standards, current price lists, freight practices, any bonus or rebate plans, and warranty materials. Manufacturer represents that all financial and other information supplied to GECC is and will be true, complete and accurate. Manufacturer authorizes GECC to investigate Manufacturer's credit worthiness and credit capacity as may in GECC's discretion be necessary from time to time. Manufacturer further authorizes GECC to furnish information concerning Manufacturer's account to credit reporting agencies and others who may lawfully receive such information. 18. Time is of the essence with respect to Manufacturer's performance of obligations hereunder notwithstanding any course of dealing or custom on the part of GECC to grant extensions of time. Any extension of time shall be a nonbinding accommodation to Manufacturer and shall not prejudice GECC's right to demand immediate performance. 19. If any provision of this Agreement should be held to be void, invalid or unenforceable by any court or other tribunal, 4 5 the validity and enforceability of the remaining provisions shall not be affected. 20. In the event Manufacturer declares bankruptcy, makes an assignment for the benefit of creditors, becomes insolvent or unable to pay debts as they become due, cease to do business as a going concern, fails to meet consumer warranty obligations, or otherwise fails to meet any obligation or breaches any covenant hereunder or under any other agreement with GECC such event shall constitute a default. A default under the terms of this Agreement shall constitute a default under any other agreement with GECC. Both parties agree that the sole and exclusive remedy for any matter or cause of action related directly or indirectly to any breach of the Agreement shall be a cause of action sounding in contract and with damages limited to actual and direct damages incurred. Neither party shall be liable for any consequential, special, incidental or indirect damages. 21. Waiver of any default is not a wavier of any subsequent default. GECC shall have the absolute and unconditional right at all times to enforce all agreements of whatever kind or nature, present or future, in strict accordance with the written terms thereof, notwithstanding any conduct or custom on the part of GECC in refraining from doing so at any prior time or times. GECC shall have the right to refrain from or postpone enforcement of any agreements without prejudice. The failure to strictly enforce such agreements shall not be construed as having created a course of dealing between the parties contrary to the specific terms of the agreements or as having modified, released or waived the same. 22. Manufacturer hereby waives presentment, protest, demand and notice of dishonor. GECC may exercise any and all rights available to it as secured party under the laws of the state governing this Agreement, without limitation or election, it being agreed that all remedies available to GECC shall be cumulative. Manufacturer agrees to pay court costs and reasonable attorney's fees incurred by GECC in enforcing GECC's rights and remedies after default under this Agreement. 23. Both parties to this Agreement agree to waive any and all rights to a trial by jury in any action or proceeding, whether in law or in equity, arising out of or related to this Agreement. 24. This Agreement represents the entire agreement between the parties and may not be modified or amended except by a writing duly executed by both parties hereto. All prior representations, promises and conditions whether written or oral are merged herein and all prior agreements of courses of dealing are hereby amended. This Agreement shall be binding upon, and inure to the benefit of the successors and assigns of the parties, provided that no assignment by Manufacturer shall be valid without GECC's written consent. In the event of conflict between this and any prior agreement or between this Agreement and any legend or 5 6 notation on an invoice, certificate of origin or similar documentation, the terms of this Agreement shall control. 25. This Agreement shall be effective until terminated by either party, with or without cause, upon thirty (30) days written notice sent by certified mail, return receipt requested, but shall continue to be effective as to obligations assumed hereunder prior to the effective date of termination. 26. This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut. The parties hereto have accepted this Agreement on the dates set forth below. Accepted at Stamford, Connecticut. Dated this ________________ day of Dated this 12th day of ______________________________, 19___. January, 1987. General Electric Credit Corporation: Manufacturer: __________________________(Seal) BELLCREST HOMES, INC.(Seal) By:_______________________(Seal) By:__________________(Seal) Title:_________________________ Title: President Business Address: 260 Long Ridge Principal Place of Business Road, Stamford, Connecticut and Mailing Address: Region Office:_________________ 206 Magnolia St., P.O. Box 630, Millen, Georgia 30442 _______________________________ GUARANTY As an inducement to GECC to extend inventory financing on Manufacturers' products purchased directly from Manufacturer by Dealers whose credit and financial responsibility are acceptable to GECC, but without in any way binding you to do so, the undersigned do hereby jointly and severally guarantee to GECC the full and prompt payment and performance by the said Manufacturer of all of its debts, liabilities and obligations to GECC arising under or directly related to the Manufacturer Agreement entered into by said Manufacturer. In the event of default in the performance of this Guaranty, the undersigned jointly and severally agree to pay all reasonable court costs, attorneys' fees, and other expenses paid or incurred by GECC in connection with the enforcement hereof. This Guaranty shall not be affected or impaired by any modification, extension, release or variation of the terms of the Manufacturer Agreement, nor by any waiver of strict compliance with the terms thereof, it being expressly understood and agreed that notice to or the consent of the undersigned with respect to any 6 7 such modification, extension, release, variation or waiver shall not be required. It is further understood and agreed that the liability of the undersigned hereunder is direct and unconditional, and may be enforced without prior resort to any right or remedy, which GECC may have against the Manufacturer. No delay in exercising any right hereunder or failure to exercise the same shall operate as a waiver thereof. To the extent permitted by law, notice of acceptance hereof, notice of default by the Manufacturer, demand for payment or performance thereof, the right to a trial by jury in any action hereon, and any and all notices or demands to which the undersigned might otherwise be entitled are all hereby expressly waived. This Guaranty shall be governed by and construed in accordance with the laws of the State of Connecticut. This Guaranty may not be modified, altered or changed nor may any provisions hereof be waived, expect by an instrument in writing signed by the party against whom such modification, alteration, change or waiver is sought to be enforced. This Guaranty shall be binding upon the successors and assigns of the undersigned and the benefits hereof shall extend to GECC and include its successors and assigns. WITNESS our hands and seals this ____ day of _______________, 19___. ____________________________ _________________________(Seal) ____________________________ By:______________________(Seal) Title:_________________________ 7 EX-11.1 9 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11.1 BELMONT HOMES, INC. Computation of weight average shares outstanding
Year ended Year ended Year ended December 31, 1994 December 31, 1995 December 31, 1996 ----------------- ----------------- ----------------- Historical weighted average shares outstanding, adjusted for stock splits 5,250,000 6,947,322 9,411,911 Common stock equivalents - Employee stock options (1) 16,053 14,378 --------- --------- --------- Weighted average outstanding shares 5,250,000 6,963,375 9,426,289 ========= ========= =========
(1) Calculated using the treasury stock method. EX-21.1 10 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT
Name of Subsidiary State of Incorporation Doing Business As - ------------------ ---------------------- ----------------- Spirit Homes, Inc. Arkansas Spirit Homes Delta Homes, Inc. Mississippi Belmont Homes Belmont Homes Transportation Inc. Mississippi Belmont Homes Bellcrest Homes, Inc. Georgia Bellcrest Homes Quality Housing Supply, L.L.C. * Tennessee N/A Ridge Point Manufacturing, L.L.C. * Alabama N/A
- ------------------ * Not wholly owned. EX-23.1 11 INDEPENDENT AUDITORS CONSENT 1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT Board of Directors Belmont Homes, Inc. We consent to incorporation by reference in the registration statements on From S-8 (No. 333-10901) and Form S-3 (No. 333-20477) of Belmont Homes, Inc. and subsidiaries of our report dated February 21, 1997, relating to the consolidated balance sheets of Belmont Homes, Inc. and subsidiaries as of December 31, 1995 and 1996 and the related consolidated statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996, which report appears in the December 31, 1996 annual report of Form 10-K of Belmont Homes, Inc. and subsidiaries. We also consent to the reference to our firm under heading "Experts" in the related prospectuses. Jackson, Mississippi /s/ KPMG PEAT MARWICK LLP March 28, 1997 EX-27 12 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1996 DEC-31-1996 5,070 8,243 7,866 37 13,020 36,823 25,048 2,730 79,355 23,298 0 0 0 947 52,900 79,355 234,050 234,050 197,801 197,801 0 0 285 19,637 7,524 0 0 0 0 12,113 1.29 1.29
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