Calton Inc.: Form 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended November 30, 1996 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file no. 1-8846 CALTON, INC. (Exact name of registrant as specified in its charter) New Jersey 22-2433361 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 500 Craig Road Manalapan, New Jersey 07726-8790 (Addresses of principal executive offices) Zip Code Registrant's telephone number, including area code: (908) 780-1800 Securities registered pursuant to Section 12(b) of the Act: Title of Class Name of each exchange Title of each class on which registered ------------------------ ----------------------- Common Stock, $.01 par value per share American Stock Exchange Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No X Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K X. Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No X The aggregate market value (based upon the last sales price reported by the American Stock Exchange) of voting shares held by non-affiliates of the registrant as of February 3, 1997 was $8,489,000. As of February 3, 1997, 26,533,000 shares of Common Stock were outstanding. Part III is incorporated by reference to the Proxy Statement for the annual meeting of shareholders. - ------------------------------------------------------------------------------- Disclosure Concerning Forward-Looking Statements All statements, other than statements of historical fact, included in this Form 10-K, including without limitation the statements under "Business," are, or may be deemed to be, "Forward-Looking Statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such forward-looking statements, including the statements pertaining to the proposed extension of the Company's revolving credit facility which are set forth under "Business - Recent Developments" involve assumptions, known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements contained in this Form 10-K. Such potential risks and uncertainties, include without limitation, matters related to national and local economic conditions, the effect of governmental regulation on the Company, the competitive environment in which the Company operates, changes in interest rates, home prices, availability and cost of land for future growth, the timing of land acquisition and product development, availability of working capital and the availability and cost of labor and materials, and other risk factors detailed herein and in other of the Company's Securities and Exchange Commission filings. The forward-looking statements are made as of the date of this Form 10-K and the Company assumes no obligation to update the forward- looking statements or to update the reasons actual results could differ from those projected in such forward-looking statements. - ------------------------------------------------------------------------------- PART I Item 1. BUSINESS (a) General Development of Business General Calton, Inc. (the "Company" or "Calton") and its subsidiaries design, construct and sell single family detached homes primarily in central New Jersey and central Florida. The Company markets primarily to first and second time move-up buyers with the 549 homes delivered in fiscal 1996 having an average sales price of approximately $201,000. The Company's current homebuilding activities are conducted primarily through two divisions: the Northeast and the Florida division. Calton was incorporated in 1981 for the purpose of acquiring all of the issued and outstanding capital stock of Kaufman and Broad of New Jersey, Inc., a New Jersey corporation, from Kaufman and Broad, Inc., a Maryland corporation. After the acquisition, the name of Kaufman and Broad of New Jersey, Inc. was changed to Calton Homes, Inc. ("Calton Homes") which continues as a wholly owned subsidiary of Calton. Calton maintains its executive offices at 500 Craig Road, Manalapan, New Jersey 07726 and its telephone number is (908) 780-1800. On March 9, 1993, Calton and certain of its subsidiaries filed petitions under Chapter 11 of the United States Bankruptcy Code. The United States Bankruptcy Court confirmed the Plan of Reorganization (the "Reorganization") on May 6, 1993 and the Reorganization was consummated on May 28, 1993. The Reorganization resulted in the discharge of approximately $61.5 million of indebtedness and $22.8 million of interest payments owed to certain creditors. In exchange for the discharge of these obligations, these creditors were issued a combination of cash, equity securities and short-term debt instruments which were retired in September 1993. The equity securities issued to the creditors represented approximately 93.5% of the voting power of the Company's capital stock. -1- On November 21, 1995, the Company had a significant shift in stock ownership and voting rights. In addition, changes occurred on the Board of Directors and in the Company's management. Since 1969, the Company and its predecessor have constructed and sold approximately 17,200 units in 143 residential developments in New Jersey, Florida, Pennsylvania, California and Illinois. At November 30, 1996, the Company had 20 communities open for sales. The Company builds single-family detached homes ranging in base price from $96,000 to $199,000 in the Florida division and $180,000 to $515,000 in the Northeast division. The average base selling price of homes to be built on unsold lots, as of November 30, 1996, was approximately $148,000 and $285,000 for the Florida and Northeast divisions, respectively. Because of the timing of home deliveries, the average base selling price of homes under development may not be indicative of the average revenue per home sold in any fiscal year. See Item 1(c), "Residential Development." In 1996, the Company began its entry into the active adult housing market in Ocean County, New Jersey. Through this community, marketed under the name Renaissance, the Company will offer nine different single-family detached home types. The Company has the contractual right to purchase up to 2,000 finished lots on a rolling-option basis with the land seller funding the construction of the amenities. This community is anticipated to be a major part of the Northeast division's future deliveries and results. At Renaissance, a wide array of amenities, including a 24-hour attended gatehouse, a 25,000 square foot clubhouse and an eighteen-hole golf course, is planned. Recent Developments The maturity date of the Company's revolving credit facility (the "Facility") has been extended from February 28, 1997 to March 31, 1997. The Company and its lending group are in the process of finalizing the terms and conditions of an amendment of the Facility which would extend the term through February 28, 1998 and, if certain milestones are attained, August 31, 1998. The Company's disclosures with respect to capital resources and liquidity cannot be finalized until negotiations with the lenders are completed. As a result, certain portions of this report (including the Company's financial statements for fiscal 1996 and "Management's Discussion and Analysis of Financial Condition and Results of Operations") will be filed by amendment after the execution of the amended Facility. No assurances can be given that an amended Facility will be executed on terms favorable to the Company. The Company has been advised by the American Stock Exchange that trading in the Company's Common Stock has been suspended pending the filing of the financial statements. (b) Financial Information About Industry Segments Substantially all revenues and equity in earnings, operating profits and assets of the Company and its subsidiaries are attributable to one line of business, the development and sale of residential housing and the acquisition and sale of real property. (c) Description of Business General The Company designs, constructs and sells single family detached homes, primarily in central New Jersey and central Florida. The Company markets primarily to first and second time move-up buyers with the 549 homes delivered in fiscal 1996 having an average sales price of approximately $201,000. Corporate Operations The Company operates through separate divisions, which are located within or near the markets in which they operate. Each division is managed by an executive with substantial experience in the markets served. In addition, each division is staffed with personnel equipped with the skills to complete the functions of land acquisition, entitlement processing, land development, construction, marketing, sales and product service. -2- The Company's corporate staff is responsible for: (i) evaluating the suitability of and selecting geographic markets; (ii) allocating capital resources among divisions; (iii) maintaining the Company's relations with its lenders to regulate the flow of financial resources; and (iv) monitoring the divisional operations. Capital commitments are determined through consultation among senior management and division managers. Centralized financial controls are also maintained through the standardization of accounting and financial policies and procedures, which are applied uniformly throughout the Company. The Company's operating strategy generally consists of: (i) targeting primarily the second and third time move-up buyer and, beginning in 1997, the active adult community buyer in New Jersey; (ii) conducting homebuilding activities in markets that, based on economic and demographic trends, demonstrate strong growth potential; (iii) designing each residential community to meet the needs of the particular market based on local conditions and demographic factors; (iv) minimizing land risks by purchasing entitled tracts of well-located property through options or contingent purchase contracts and limiting land holdings to those which can be developed within two years from the date of purchase or where available purchasing finished lots on a rolling option basis; (v) developing residential communities in phases which enables the Company to reduce financial exposure, control construction and operating expenses and adapt quickly to changes in customer demands and other market conditions; (vi) utilizing subcontractors to perform land development and home construction on a fixed price basis; and (vii) emphasizing the quality, features and value of its homes. Geographic Markets The Company's current business operations are principally located in central New Jersey and the greater Orlando, Florida area. Generally, the Company has organized divisions that are located in markets that demonstrate a strong growth profile. The Company selects locations within these markets for its residential housing communities that have ready access to metropolitan areas by public transportation and major arterial highways and which have experienced increased housing demand. In March 1995, the Company consolidated its New Jersey-North and New Jersey- South divisions into the Northeast division. The Northeast division conducts homebuilding activities in Burlington, Hunterdon, Monmouth, Middlesex, Ocean and Mercer counties in New Jersey. The Company's Florida division conducts homebuilding activities in the Orange and Seminole County areas, concentrating in the suburban Orlando area. The Company does not anticipate that it will expand into any new geographic areas in fiscal 1997 and, therefore, plans to focus its operating locations and available capital in the Northeast and Florida divisions. Products The Company offers a variety of homestyles tailored to meet the specific needs of the particular geographic and demographic markets served, including the second and third time move-up buyer and, to a lesser extent, the first time and -3- first time move-up buyer. Homestyles, prices and sizes are tailored to each community based upon the Company's assessment of specific market conditions and the restrictions imposed by local jurisdictions. In certain projects, recreational amenities such as tennis courts and playground areas are constructed by the Company. The Company believes that its current product strategy which primarily focuses on the second and third time move up and active adult buyer enables it to mitigate some of the risks inherent in the homebuilding industry by providing it with a product mix that supplies particular markets that are not as susceptible to changing market conditions including interest rate changes. The Company generally standardizes its product line within geographic markets it serves. This standardization improves the quality of construction and permits efficient production techniques and bulk purchasing of materials and components, thus reducing construction costs and the time required to build a home. See "Sales and Marketing." Land Acquisition, Planning and Development Substantially all of the land acquired by the Company is purchased only after necessary entitlements have been obtained so that the Company has certain rights to begin development or construction as market conditions dictate. The term "entitlements" refers to developmental approvals, tentative maps or recorded plats, depending on the jurisdiction within which the land is located. Entitlements generally give a developer the right to obtain building permits upon compliance with certain conditions that are usually within the developer's control. Although entitlements are ordinarily obtained prior to the Company's purchase of the land, the Company is still required to obtain a variety of other governmental approvals and permits during the development process. The Company primarily buys finished lots that are ready for construction in the Florida market. Although finished lots are generally not available in the Northeast markets, the Company has entered into a contract to purchase up to 2,000 finished lots on a rolling option basis in Ocean County, New Jersey, in its active adult community marketed under the name Renaissance. The Company's general policy has been to control land for future development or sale through the use of purchase options or contingent purchase contracts whenever practicable and where market conditions permit. The Company endeavors to acquire property for development either (i) on an installment method, with closings on a portion of a project on a periodic basis or (ii) through the use of purchase money mortgages. In certain cases, when available, the Company acquires finished lots on a rolling option basis. These policies enable the Company to limit its financial commitments, including cash expenditures and interest and other carrying costs, and avoid large land inventories which exceed the Company's near term development needs. At the same time, the Company retains any appreciation in the value of the parcel prior to exercising the option or closing the contingent purchase contract. During the option or contingency period, the Company performs feasibility studies, technical, engineering and environmental surveys and obtains the entitlements. In making land acquisitions, the Company considers such factors as: (i) current market conditions; (ii) internal and external demographic and marketing studies; (iii) environmental conditions; (iv) proximity to developed and recreational areas; (v) availability of mass transportation and major arterial highways and ready access to metropolitan areas and other employment centers; (vi) industrial and commercial growth patterns; (vii) financial review as to the feasibility of the proposed community, including projected profit margins, returns on capital employed and payback periods; (viii) the ability to secure governmental approvals and entitlements; (ix) customer preferences; (x) access to materials and subcontractors; and (xi) management's judgement as to the real -4- estate market, economic trends and the Company's experience in a particular market. The Company's development activities include land planning and securing entitlements. These activities are performed by the Company's employees, together with independent engineers, architects and other consultants. The Company's employees also develop long-term planning of future communities. Construction The Company employs production managers who are responsible for coordinating all functions pertaining to the construction process. All construction work for the Company is performed by subcontractors on a fixed price basis, with the Company acting as general contractor. In order to maintain control over costs, quality and work schedules, the Company employs an on-site superintendent who is responsible for supervising subcontractor work at each project. The Company's housing is constructed according to standardized design plans that are then customized to each individual contract preference. Generally, the Company seeks to develop communities having a number of lots to absorb deliveries over a minimum one year period in order to reduce the per unit cost of the housing products which it sells. Advantages achieved by volume building include lower unit prices paid to subcontractors and reduced material costs per unit. Generally, the Company's policy is to commence construction of a detached housing unit beyond the foundation after a sales contract for that unit has been signed. The Company does, however, ordinarily attempt to maintain a predetermined inventory of homes in-process in order to match the construction times of homes with the mortgage application process and to accommodate customers who require immediate occupancy, such as relocation buyers. In addition, in order to permit construction and delivery of housing units on a year round basis, the Company, in anticipation of winter in the Northeast, will start construction of foundations prior to having signed sales contracts. Materials and Subcontractors The Company attempts to maintain efficient operations by utilizing standardized material available from a variety of sources. Prices for materials may fluctuate due to various factors, including demand levels or supply shortages. During 1996, major building material prices for lumber, asphalt and appliances remained relatively flat while prices for concrete increased modestly. The price of gypsum remained flat overall, increasing during the first half of the year with a corresponding decrease during the second half. The Company enters into contracts with numerous subcontractors representing all building trades in connection with the construction of its homes, and has established long-term relationships with a number of subcontractors. These subcontractors bid competitively for each phase of the work at each project and are selected based on quality, price and reliability. Subcontractor bids are solicited after an internal job cost budget estimate has been prepared based on estimated material quantities. These internal estimates serve as the formal baseline budget against which the cost of each trade is measured. Each division is responsible for contracting all trades in each of its communities. Production costs are monitored monthly to assess actual versus contracted -5- amounts. The Company closely monitors subcontractor performance and expenditures on each community to assess project profitability. Additionally, the Company is generally able to obtain reduced prices from many of its subcontractors due to the volume of work it provides to its subcontractors. Agreements with subcontractors generally are for three to twelve months, and provide a fixed price for labor and materials. The Company has, from time to time, experienced minor temporary construction delays due to shortages of materials or availability of subcontractors. Such construction delays may extend the period of time between the signing of a purchase contract and the receipt of revenues by the Company at the time of delivery of the home to the buyer. To date, the Company has experienced no material adverse financial effects as a result of construction delays. Currently, sufficient materials and subcontractors are available to meet the Company's demands; however, the Company cannot predict the extent to which shortages in necessary materials or labor may occur in the future. Sales and Marketing Each division establishes marketing objectives, determines retail pricing, formulates sales strategies and develops advertising programs, which in each case, are subject to periodic market analyses conducted by the division. The Company typically constructs, furnishes and landscapes model homes for each community and maintains an on-site sales office staffed with its own sales personnel. The Company makes use of newspaper, billboard and direct mail advertising, special promotional events and illustrated brochures in a comprehensive marketing program. The Company has established a web site on the Internet (http://www.caltonhomes.com) to provide its customers with additional information on the Company's communities and homes. In marketing its products, the Company emphasizes quality, features and value and provides a 15 year limited warranty on its homes. In addition, the Company offers a customization program in order to make the products the Company builds more attractive to homebuyers by tailoring them to individual customer needs. The Company's sales personnel participate in an intensive sales training program to develop their skills and knowledge. The Company consults with these personnel in the product development process to obtain and consider feedback from customers and information with respect to the Company's competitors. Sales of the Company's homes are made pursuant to standard sales contracts that are customary in the markets served by the Company. Such contracts require a customer deposit (generally up to 5% of the base selling price unless limited by local law) at time of contract signing and provide the customer with a mortgage contingency, if necessary. The contingency period typically is sixty (60) days following execution of the contract. In certain instances, contracts are contingent on the sale of a purchaser's existing home. In such cases, the Company retains the right to sell the home to a different buyer during the period in which the "house-to-sell" condition is not satisfied. The cancellation rate for new contracts signed was approximately 22% for fiscal 1996. Cancellation rates may vary from year to year. The Company attempts to limit cancellations by training its sales force to determine at the sales -6- office the qualifications of potential homebuyers and by obtaining financial information about the prospective purchaser. At February 3, 1997, the Company employed 48 full-time and part-time sales personnel who are paid on a salary and/or sales commission basis. The Company also utilizes the services of independent real estate brokers through a cooperative broker referral plan. Customer Financing The Company sells its homes to customers who generally finance their purchase through conventional and government insured mortgages. The Company provides its customers with information on a wide selection of conventional mortgage products and various mortgage lenders to assist the homebuyer through the mortgage process. Mortgages arranged by mortgage providers in recent years have been mortgage loans underwritten and made directly by a lending institution to the customer. The Company is not liable for repayment of any mortgage loans. Backlog At November 30, 1996, the Company had a backlog of signed contracts for 165 homes with an aggregate sales price of $40.2 million as compared to a backlog of signed contracts for 166 homes with an aggregate sales price of $36.0 million at November 30, 1995. All of the November 30, 1996 backlog is expected to be completed and delivered by November 30, 1997. Backlog includes contracts containing financing and certain other contingencies, including, in certain instances, contracts which are contingent on the buyer selling their homes. Due to changes in product offerings, the uncertainty of future market conditions and the general economic environment, the sales backlog achieved in the current period may not be indicative of those to be realized in succeeding periods. Residential Development The Company markets and sells varying types of residential homes ranging in base selling prices from $96,000 to $199,000 in the Florida division and $180,000 to $515,000 in the Northeast division. Current average base selling prices for the Company's homes are approximately $262,000 in New Jersey and $154,000 in Florida. Average base selling prices of homes sold in any period or unsold at any point in time will vary depending on the specific projects and style of homes under development. The Company continually monitors prevailing market conditions, including interest rates and the level of resale activity in the markets in which it operates. The Company may, from time to time, sell all or a portion of a residential project prior to its development by the Company. -7- As of November 30, 1996, the Company had 20 residential communities open for sales which include an aggregate of 1,150 single family detached homes to be delivered. The following sets forth certain information as of November 30, 1996 with respect to communities being developed by each of the Company's operating divisions: Homes Deliv- Homes Homes ered Un- Year Deliv- Year der of Lots ered Ended Con- First Ap- Incept- Nov. tract Un- Deliv- proved ion to 30, (Back- sold ery (a) Date 1996 log) Lots Price Range Northeast ------ ----- ----- ---- ---- ---- ----------------- Belmont at Steeple- chase (Burlington) 1995 291 55 31 8 228 $179,990-$231,990 Bey Brook Estates (Dover) 1997 31 0 0 4 27 $396,990-$424,990 Crown Pointe (West Windsor) 1996 94 3 3 13 78 $384,990-$475,990 Jockey Club at Steeplechase (Burlington) 1995 177 88 41 15 74 $137,990-$171,990 Manalapan Chase (Manalapan) 1996 52 19 19 22 11 $328,990-$406,990 Monmouth Ridings (Howell) 1994 144 125 38 9 10 $184,990-$223,990 Regency Oaks (Marlboro) 1995 39 26 9 8 5 $338,990-$429,990 Stanton Ridge (Readington) 1997 14 0 0 2 12 $415,990-$514,990 Other (communities with fewer than 5 homes unsold) 754 752 119 1 1 ----- ----- --- --- --- Total 1,596 1,068 260 82 446 ----- ----- --- --- --- Orlando, Florida Beechwoods (Altamonte Springs) 1995 57 38 27 3 16 $133,900-$174,990 Brookhaven Oaks (Ocoee) 1996 42 5 5 23 14 $145,990-$179,990 Cambridge Commons (Apopka) 1995 87 52 29 9 26 $ 99,990-$121,990 Cheshire Woods (Ocoee) 1996 100 20 20 7 73 $108,990-$127,990 Conway Harbor (Orlando) 1997 63 0 0 1 62 $119,990-$139,990 Crescent Park (Orlando) 1995 108 33 21 5 70 $156,990-$185,990 Cypress Lakes (Orlando) 1996 79 24 24 6 49 $ 95,990-$114,990 Heather Glen @ Eastwood (Orlando) 1997 28 0 0 1 27 $139,990-$171,990 Longwood Club (Longwood) 1997 52 0 0 2 50 $159,990-$198,990 The Meadows (Oviedo) 1995 49 22 13 8 19 $140,990-$176,990 Saddlebrook (Gotha) 1995 52 45 27 1 6 $130,990-$173,990 Sand Lake Cove (Dr. Phillips) 1996 97 26 26 9 62 $164,990-$198,990 Other (communities with fewer than 5 homes unsold) 295 282 66 8 5 ----- ----- --- --- --- Total 1,109 547 258 83 479 ----- ----- --- --- --- Chicago, Illinois 1995 78 74 31 0 4 ----- ----- --- --- --- TOTAL 2,783 1,689 549 165 929 ===== ===== === === === (a) Includes dwelling units completed and delivered, units under construction and units designated on subdivision or site plans where preliminary and final subdivision or site plan approvals, which in certain instances may be subject to the fulfillment of certain conditions imposed thereby, have been received. Also includes approximately 252 planned homes under rolling options in 6 communities in New Jersey and Florida currently being developed and marketed by the Company, which will require cash payments of $4.8 million in 1997, $3.6 million in 1998 and $390,000 in 1999. -8- Land Inventory The Company acquires options or contingent purchase contracts on land where practicable and where market conditions and lending availability permit. In other instances, the Company has endeavored to acquire property either subject to purchase money mortgages, or on an installment method, with closings on a portion of a project on a periodic basis. In order to ensure the availability of land for future development, the Company believes it is necessary to control land in New Jersey at an earlier point in time than in other markets. As of November 30, 1996, if all of the options held by the Company were exercised and all of the contingent purchase contracts to which the Company is a party were closed, the Company would have sufficient land to maintain its anticipated level of deliveries for the next five years in the Northeast market. The Company believes that additional acquisitions of new communities will be required for anticipated deliveries in 1999 and beyond in the Florida market. The Company's revolving credit facility (the "Facility") contains provisions limiting the amount of land which the Company may acquire in any one year. The following table sets forth certain information, as of November 30, 1996, with respect to options held by the Company and contingent purchase contracts to which the Company is a party: Number of Proposed Residential Planned Options by Division Communities Homes(1) Northeast 10 3,459 Orlando, Florida 2 152 -- ----- Total 12 3,611 == ===== (1) Final development approvals have not been obtained with respect to certain properties included in the above table. Accordingly, the number of units approved for development, if any, may differ from the number of planned units reflected in the table. In addition, prior to exercising an option or closing a contingent purchase contract, the Company conducts feasibility studies and other analyses with respect to a proposed community. In certain instances, a determination may be made by the Company not to proceed with certain communities. Accordingly, no assurance can be given that the Company will ultimately pursue the development of every community reflected in the table above. As of November 30, 1996, the Company held options or was a party to contingent contracts to purchase 12 parcels of land in New Jersey and Florida for which it has paid options fees and earnest money aggregating $2.1 million (which includes $900,000 applied to the purchase price of a property acquired in December, 1996). A total of 3,611 homes, of which 3,297 homes are single family and 314 are townhomes, are planned for these parcels. Through November 30, 1996, the Company has spent an additional $3.7 million in predevelopment costs on such land, $2.6 million of which costs would not be recoverable in the event these options were not exercised or the contracts were not closed, as the case may be. Assuming that in each year the Company makes payments with respect to either options or contingent contracts, exercises options, or closes such contracts with respect to the minimum amount of land necessary to retain its rights to acquire the remainder of the subject properties, the aggregate amount required to retain or exercise such options or close or extend such contingent contracts in periods subsequent to November 30, 1996 is approximately -9- $11.7 million in 1997, $13.3 million in 1998, $9.7 million in 1999, $11.9 million in 2000, $8.3 million in 2001 and $59.8 million thereafter. Assuming the Company exercises such options and contingent contracts, the Company will be in a position to acquire title to approximately 313, 469, 425, 618, and 293 lots during fiscal years 1997 through 2001, respectively, and 1,493 lots thereafter. The Renaissance community represents the majority of the capital requirements and lots which are currently planned for development subsequent to the year 2001. Commercial Land and Buildings Pursuant to management's continued focus on its core homebuilding business, the Company sold four of its commercial properties in 1996 for approximately $3.2 million. The sales resulted in an aggregate pre-tax gain of approximately $1.1 million and provided approximately $1.8 million of additional cash for operations. The Company owns certain undeveloped properties in New Jersey, Florida, California and Pennsylvania. These properties include 60 acres of commercial property in Manalapan, New Jersey; 14 acres consisting of two parcels in Orange County, Florida; and three other properties, two in Pennsylvania and one in California. Each of these properties are currently available for sale except for one of the Pennsylvania properties, which has certain acreage under contract for sale. Joint Ventures The Company has participated in joint ventures in the past that were engaged in land and residential housing development. However, as of November 30, 1996, the Company had no involvement in any active joint ventures. In 1996, the Company received $460,000 of a fully reserved note receivable from a previous joint venture. Competition The Company's business is highly competitive. Homebuilders compete for desirable properties, financing, raw materials and skilled labor among other things. The Company competes in each of the geographic areas in which it operates with numerous real estate developers, ranging from small local to larger regional and national builders and developers, some of which have greater sales and financial resources than the Company. Resales of housing provide additional competition. The Company competes primarily on the basis of quality, features, value, reputation, price, location, design and amenities. Regulation and Environmental Matters The Company is subject to various local state and federal statutes, ordinances, rules and regulations concerning zoning, building design, construction and similar matters, including local regulation which imposes restrictive zoning and density requirements in order to limit the number of homes that can eventually be built within the boundaries of a particular locality. In addition, the Company is subject to registration and filing requirements in connection with the construction, advertisement and sale of its communities in certain states and localities in which it operates even if any or all necessary government approvals have been obtained. Generally, the Company must obtain numerous government approvals, licenses, permits, and agreements before it can -10- commence development and construction. Certain governmental authorities impose fees as a means of defraying the cost of providing certain governmental services to developing areas, or have required developers to donate land to the municipality or make certain off-site land improvements. The Company may also be subject to periodic delays or may be precluded entirely from developing communities due to building moratoriums that could be implemented in the future in the states in which it operates. Generally, such moratoriums relate to insufficient water or sewage facilities. The Company is also subject to a variety of local, state and federal statutes, ordinances, rules and regulations concerning protection of health and the environment ("environmental laws"). The particular environmental laws which apply to any given community vary greatly according to the community site, the site's environmental conditions and the present and former uses of the site. These environmental laws may result in delays, may cause the Company to incur substantial compliance and other costs, and can prohibit or severely restrict development in certain environmentally sensitive regions or areas. For example, in July 1987, New Jersey adopted the Fresh Water Wetlands Protection Act which restricts building in or near certain protected geographic areas designated as fresh water wetlands. The preservation of wetlands located within a project may lessen the number of units that may be built in a particular project. The Company has planned all of its projects containing wetlands to comply with the regulations adopted under the Fresh Water Wetlands Protection Act and does not believe that this legislation will adversely affect its present development activities in New Jersey. The State of Florida has adopted a wide variety of other environmental protection laws. The laws regulate developments of substantial size and developments in or near certain specified geographic areas within the State of Florida, including the Big Cypress, Green Swamp and Florida Keys areas, imposing requirements for development approvals which are more stringent than those which the Company would have to meet in Florida for development outside of these geographic areas. Further, the State of Florida regulates certain types of developments located in or near certain types of geographic areas, plant life or animal life. The Company does not believe that any land owned by it that is planned for development is the site of any protected plant or animal life. Although the Company owns land in or near certain protected types of geographic areas, the Company designs its various communities to avoid disturbing such areas so that certain regulations with respect to these areas are not applicable. When the Company undertakes development activity in or near or which may have an impact on any protected areas, it is required to satisfy more stringent requirements for developmental approval than would otherwise be applicable. In addition, the laws of the State of Florida require the use of construction materials which reduce the energy consumption required for heating and cooling. The Florida Growth Management Act of 1985 requires that an infrastructure, including roads, sewer and water lines, must be in existence or funded concurrently with the construction of the development. If such infrastructure will not be concurrently available or funded, then the project cannot be developed. This will have an effect on limiting the amount of land available for development and may delay construction and completion of some developments. -11- In July 1985, New Jersey adopted the Fair Housing Act which established an administrative agency to adopt criteria by which municipalities will determine and provide for their fair share of low and moderate income housing ("Mt. Laurel" housing). This agency promulgated regulations with respect to such criteria effective August 1986. The Company may be required to set aside Mt. Laurel housing in certain municipalities in which it owns or has the right to acquire land. In order to comply with such requirements, the Company may be required to (i) sell some homes at prices which would result in no gain or loss and an operating margin less than would have resulted otherwise, or (ii) contribute to public funding of affordable housing, which contribution will increase the costs of homes to be developed in a community. The Company attempts to recover some of these potential losses or reduced margins through increased density, certain cost saving construction and land development measures and reduced land prices for the sellers of property. Despite the Company's past ability to obtain necessary permits and development approvals for its communities, it can be anticipated that increasingly stringent requirements will be imposed on developers and homebuilders in the future. Although the Company cannot predict the effect of these requirements, they could result in time consuming and expensive compliance programs and substantial expenditures for pollution and water quality control, which could materially adversely affect the Company. In addition, the continued effectiveness of permits already granted or development approvals already obtained is dependent upon many factors, some of which are beyond the Company's control, such as changes in policies, rules and regulations and their interpretation and application. The foregoing does not purport to be a full description of all of the legislation and regulations impacting the business of the Company. The Company may be subject to numerous other governmental rules and regulations regarding building standards, labor practices, environmental matters and other aspects of real estate development in each jurisdiction in which it does business. Employees As of February 3, 1997, the Company employed approximately 118 full-time personnel, including 15 corporate employees, 62 employees in the Northeast division and 41 employees in the Florida division. The Company also employs approximately 20 part-time employees in various locations. The Company believes its employee relations are satisfactory. Item 2. COMPANY FACILITIES The Company leases approximately 19,413 square feet of office space (of which 3,629 square feet are sublet to tenants) and 6,200 square feet of storage space in a two-story office building in Manalapan, New Jersey, which houses the Company's corporate headquarters and its Northeast division. In addition, the Company leases 5,280 square feet of office space in Florida. Management believes that these arrangements provide adequate space for the Company to conduct its operations. -12- The Company also has remote sales offices when not utilizing a model home and construction offices on each of its project sites, some of which include mobile units which are leased for terms varying from one month to one year. From time to time the Company also leases model homes in some of its communities which the Company has previously sold to third parties under a lease-back arrangement. The current leases on model homes have terms up to two years. Item 3. LEGAL PROCEEDINGS In July 1994, an action was filed against Calton Homes, Inc., the Township of Plainsboro, New Jersey and its planning board, certain real estate brokers and certain unnamed officers of Calton Homes, Inc., by approximately 60 purchasers in the Company's Princeton Manor development seeking compensatory and punitive damages arising out of an alleged failure to disclose that a portion of the property adjacent to the community could be developed by Plainsboro Township as a public works site. The Company is vigorously contesting this matter and, although there can be no assurances, does not believe that the case will have any material effect on the financial position, results of operations or cash flows of the Company. In addition, the Company believes that it is contractually entitled to indemnification from Plainsboro Township in the event that any liability should arise. In June 1996, the Federal Deposit Insurance Corporation (the "FDIC"), in its capacity as Liquidating Agent/Receiver of Eliot Savings Bank, instituted an action in the United States District Court, District of Massachusetts, seeking recovery of amounts owed under a $5.7 million promissory note (the "Note") issued to Eliot Savings Bank by the Residences at the Surf joint venture (the "Joint Venture"), an entity in which a Talcon, L.P. ("Talcon") subsidiary had an interest. This action relates to a loan on property owned by the Joint Venture. The loan was placed on the property before Talcon was formed. Accordingly, in connection with the creation of Talcon, the interest in the Joint Venture was transferred upstream to Calton, Inc. and then transferred downstream into Talcon, and eventually into the Talcon subsidiary. In its suit, the FDIC alleges, among other things, that Calton, by virtue of the assignment of the interest in the Joint Venture to Calton in 1987, has liability as a general partner in the Joint Venture and is seeking to collect approximately $8.7 million in principal and interest from Calton and other parties. While no discovery has occurred to date, based upon a preliminary analysis of this matter, Calton believes that the FDIC's position is contrary to applicable law and that Calton does not have any obligations under the Note by virtue of the assignment of the interest in the Joint Venture to Calton or otherwise. The Company will vigorously contest this matter but there can be no assurances that the case will not have a material adverse effect on the Company's financial position, results of operations or cash flows. Calton and its subsidiaries are involved from time to time in routine litigation. Management does not believes that any of this litigation is material to the financial position, results of operations or cash flows of the Company. Calton's by-laws contain provisions which provide indemnification rights to officers, directors and employees under certain circumstances with respect to -13- liabilities and damages incurred in connection with any proceedings brought against such persons by reason of their being officers, directors or employees of Calton. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fourth quarter of 1996, no matter was submitted to a vote of security holders through the solicitation of proxies or otherwise. Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT The Executive officers of the Company as of February 3, 1997 are listed below and brief summaries of their business experience and certain other information with respect to them is set forth in the following table and in the information which follows the table. Name Age Position Anthony J. Caldarone 59 Chairman, President and Chief Executive Officer Robert A. Fourniadis 39 Senior Vice President-Legal and Secretary Bradley A. Little 46 Senior Vice President-Finance, Treasurer and Chief Financial Officer Mr. Caldarone was reappointed as Chairman, President and Chief Executive Officer of Calton in November 1995, having previously served in such capacities from the inception of the Company in 1981 through May 1993 when the Company consummated the Reorganization. From June 1993 through October 1995, Mr. Caldarone served as a Director of the Company. Mr. Fourniadis was named Senior Vice President, Secretary and Corporate Counsel of Calton in June 1993 following the consummation of the Reorganization. Prior thereto, Mr. Fourniadis served as Vice President and Corporate Counsel of Calton Homes from 1988 to 1993. Mr. Little was named Senior Vice President, Treasurer and Chief Financial Officer of Calton in June 1993 following the consummation of the Reorganization. Prior thereto, Mr. Little had served as Vice President of Accounting of Calton from 1989 to June 1993. -14- PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's common stock is traded on the American Stock Exchange ("AMEX") under the symbol CN. The following reflects the high and low sales prices of the common stock during fiscal 1996 and 1995. High Low Fiscal 1996 1st Quarter 7/16 5/16 2nd Quarter 3/4 3/8 3rd Quarter 1/2 5/16 4th Quarter 3/8 1/4 Fiscal 1995 1st Quarter 1-1/8 5/8 2nd Quarter 11/16 3/8 3rd Quarter 1/2 3/8 4th Quarter 9/16 5/16 At February 3, 1997, there were approximately 648 holders of the Company's common stock. The Company has not paid dividends on its capital stock in the past. In addition, the terms of the Facility prohibits the payment of dividends. Item 6. SELECTED FINANCIAL DATA To be filed by amendment. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS To be filed by amendment. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA To be filed by amendment. Item 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. -15- PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information relating to Directors is incorporated herein by reference to "Election of Directors" contained in the Registrant's definitive proxy statement for the annual meeting of shareholders. Certain information relating to executive officers of the Company is set forth in Item 4A of Part I of this Form 10-K under the caption "Executive Officers of the Registrant." Item 11. EXECUTIVE COMPENSATION Information pertaining to executive compensation is incorporated herein by reference to "Election of Directors-Executive Compensation" contained in the Registrant's definitive proxy statement for the annual meeting of shareholders. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information pertaining to security ownership of certain beneficial owners and management is incorporated herein by reference to "Principal Shareholders" and "Security Ownership of Management" from the Registrant's definitive proxy statement for the annual meeting of shareholders. Item 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS None. -16- PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K Page (a) 1. and 2. Financial statements and financial statement schedules* Reference is made to the Index of Financial Statements and Financial Statement Schedules hereinafter contained F-1 3. Exhibits Reference is made to the Index of Exhibits hereinafter contained F-2 and F-3 (b) Reports on Form 8-K None * To be filed by amendment. -17- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CALTON, INC. (Registrant) By: /s/ Bradley A. Little BRADLEY A. LITTLE, Senior Vice President-Finance Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. Signature Title Date /s/ Anthony J. Caldarone Chairman, Chief Executive March 17, 1997 (Anthony J. Caldarone) Officer and President (Principal Executive Officer) /s/ Bradley A. Little Senior Vice President - Finance March 17, 1997 (Bradley A. Little) & Treasurer (Principal Financial & Accounting Officer) /s/ J. Ernest Brophy Director March 17, 1997 (J. Ernest Brophy) /s/ Mark N. Fessel Director March 17, 1997 (Mark N. Fessel) /s/ Frank Cavell Smith, Jr. Director March 17, 1997 (Frank Cavell Smith, Jr.) -18- CALTON, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES Page Number Consolidated Balance Sheet at November 30, 1996 and 1995. . . . . . . . . . . * Consolidated Statement of Operations for the years ended November 30, 1996, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . . * Consolidated Statement of Cash Flows for the years ended November 30, 1996, 1995 and 1994. . . . . . . . . . . . . . . . . . . * Consolidated Statement of Shareholders' Equity for the years ended November 30, 1996, 1995 and 1994. . . . . . . . . . . . . . * Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . * Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . * Consent of Independent Accountants. . . . . . . . . . . . . . . . . . . . . . * Schedules** II-Valuation and Qualifying Accounts. . . . . . . . . . . . . . . . . . . . . * * To be filed by amendment. ** Schedules other than the schedule listed above have been omitted because of the absence of the conditions under which they are required or because the required information is presented in the financial statements or the notes thereto. F-1 INDEX TO EXHIBITS 2. Plan of Reorganization of the Registrant and Subsidiaries incorporated by reference to Exhibit 2 to Amendment No. 1 to Form S-1 Registration Statement under the Securities act of 1933, Registration No. 33-60022. 3.1 Amended and Restated Certificate of Incorporation of the Registrant filed with the Secretary of State, State of New Jersey on May 28, 1993, incorporated by reference to Exhibit 3.2 to Amendment No. 1 to Form S-1 Registration Statement under the Securities Act of 1933, Registration No. 33-60022 and Certificate Amendment to Amended and Restated Certificate of Incorporation of Registrant filed with the Secretary of State, State of New Jersey on April 27, 1994, incorporated by reference to Exhibit 3(b) to Form S-1 Registration Statement under the Securities Act of 1933, Registration No. 33- 76312. 3.2 By Laws of Registrant, as amended, incorporated by reference to Exhibit 3.1 of Form 10-K of Registrant for the fiscal year ended November 30, 1990. 4. Amended and Restated Loan and Security Agreement dated as of May 28, 1993, among the Registrant, Calton Funding, Inc. and a group of financial institutions, incorporated by reference to Exhibit 4 to Amendment No. 1 to Form S-1 Registration Statement under the Securities Act of 1933, Registration No. 33-60022, the First, Second and Third Amendments to such Amended and Restated Loan and Security Agreement, incorporated by reference to Exhibit 4 to Form 10-K of Registrant for the fiscal year ended November 30, 1993, Fourth Amendment to such Amended and Restated Loan Agreement, incorporated by reference to Exhibit 10.7(b) to Amendment No. 2 to Form S-1 Registration Statement under the Securities Act of 1933, Registration No. 33-76312, Fifth Amendment to such Amended and Restated Loan and Security Agreement incorporated by reference to Exhibit 4 to Form 10- K of Registrant for the fiscal year ended November 30, 1994, Sixth Amendment to such Loan and Security Agreement, incorporated by reference to Exhibit 4 to Form 10-K of Registrant for the fiscal year ended November 30, 1995, Seventh Amendment to such Loan and Security Agreement, incorporated by reference to Exhibit 4 to Form 10-K of Registrant for the fiscal year ended November 30, 1995, Eighth Amendment to such Loan and Security Agreement and Ninth Amendment to such Loan and Security Agreement. (*)10.1 1996 Equity Incentive Plan. (*)10.3 Registrant's Amended and Restated 1993 Non-Qualified Stock Option Plan, incorporated by reference to Exhibit 10.3 to Form 10-K of Registrant for the fiscal year ended November 30, 1995. (*)10.4 Incentive Compensation Plan of Registrant. (*)10.6 Severance Policy for Senior Executives of Registrant incorporated by reference to Exhibit 10.6 of Form 10-K of Registrant for the fiscal year ended November 30, 1994. F-2 (**)10.7 Executive Employment Agreement dated as of November 21, 1995 between Registrant and Anthony J. Caldarone, incorporated by reference to Exhibit 10.7 to Form 10-K of Registrant for the fiscal year ended November 30, 1995. (**)10.8 Supplemental Executive Compensation Agreement dated as of May 12, 1995 between the Registrant and Douglas T. Noakes, incorporated by reference to Exhibit 10.8 to Form 10-K of Registrant for the fiscal year ended November 30, 1995. (**)10.9 Supplemental Executive Compensation Agreement dated as of May 12, 1995 between the Registrant and Bradley A. Little, incorporated by reference to Exhibit 10.9 to Form 10-K of Registrant for the fiscal year ended November 30, 1995. An agreement substantially identical in term and content and executed by the Registrant and Robert A. Fourniadis has not been reproduced herein. 13. Certain pages of Registrant's 1996 Annual Report to Shareholders which, except for those portions expressly incorporated herein by reference, are not deemed filed a part hereof - to be filed by amendment. 21. Subsidiaries of the Registrant. 27. Financial Data Schedule - to be filed by amendment. (*) Constitutes a compensatory plan required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K. (**) Constitutes a management contract required to be filed pursuant to Item 14(c) of Form 10-K. F-3 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 EXHIBITS FILED WITH ANNUAL REPORT ON FORM 10-K CALTON, INC. 1996 CALTON, INC. FORM 10-K FOR FISCAL YEAR ENDED NOVEMBER 30, 1996 EXHIBIT 4 EIGHTH AND NINTH AMENDMENTS TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT EIGHTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT This EIGHTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "Eighth Amendment") is dated as of January 31, 1997, and entered into by and among Calton, Inc., a New Jersey corporation ("Company"), Calton Funding, Inc., a New Jersey corporation (together with Company, the "Borrowers"), the subsidiaries of Company listed on the signature pages hereof as guarantors (the "Guarantors"), the financial institutions listed on the signature pages hereof ("Lenders") and The Chase Manhattan Bank (formerly known as Chemical Bank), as agent for Lenders ("Agent") and as collateral agent for Lenders ("Collateral Agent") and is made with reference to that certain Amended and Restated Loan and Security Agreement dated as of May 28, 1993 (such agreement, as amended through the date hereof and as it may hereafter be amended from time to time, the "Amended Loan Agreement"), by and among Borrowers, Guarantors, Lenders, Agent and Collateral Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Amended Loan Agreement. RECITALS WHEREAS, the Amended Loan Agreement has heretofore been amended by the First Amendment to Amended and Restated Loan and Security Agreement dated as of September 27, 1993; the Second Amendment to Amended and Restated Loan and Security Agreement dated as of October 14, 1993: the Limited Waiver, Release and Consent Regarding Sale of Lancot Mortgage Co., Inc., dated as of October 14, 1993; the Third Amendment to Amended and Restated Loan and Security Agreement dated as of January 19, 1994; the Fourth Amendment to Amended and Restated Loan and Security Agreement dated as of February 28, 1994; the Joinder Agreement dated as of June 1, 1994 entered into by Pennway Joint Venture, L.P. in favor of the Collateral Agent (for the benefit of the Lenders); the Joinder Agreement, Amendment and Limited Waiver (Calton Homes of Chicago, Inc.) dated as of September 12, 1994; the Fifth Amendment to Amended and Restated Loan and Security Agreement dated as of February 23, 1995; the Sixth Amendment to Amended and Restated Loan and Security Agreement dated as of May 31, 1995; and the Seventh Amendment to Amended and Restated Loan and Security Agreement dated as of February 23, 1996; WHEREAS, subsection 2.8A of the Amended Loan Agreement provides that the Issuing Lender shall not issue any Letter of Credit with an expiration date later than the earlier of (x) the Commitment Termination Date and (y) the date that is one year from the date of issuance of such Letter of Credit; WHEREAS, Credit Parties and Lenders desire to amend the Amended Loan Agreement in order to allow the Issuing Lender to extend the expiration date of the Letters of Credit identified on Schedule 1 hereto beyond the Commitment Termination Date, to February 28, 1998, and to provide that the reimbursement obligations of any Letters of Credit that remain outstanding on the Commitment Termination Date shall be cash collateralized by the Borrowers; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: Section 1. AMENDMENTS TO THE AMENDED LOAN AGREEMENT 1.1 Amendments to Section 1: Provisions Relating to Defined Terms. A. Subsection 1.1 of the Amended Loan Agreement is hereby amended by adding the following definitions thereto in alphabetical order: "Eighth Amendment" means the Eighth Amendment to Amended and Restated Loan and Security Agreement dated as of January 31, 1997, by and among Borrowers, Guarantors, Lenders, Agent and Collateral Agent. 1.2 Amendments to Section 2: Amounts and Terms of Loans. A. Subsection 2.8A of the Amended Loan Agreement is hereby amended by deleting the second sentence therefrom in its entirety and substituting the following two sentences therefor: "In no event shall the Issuing Lender issue any Letter of Credit having an expiration date later than the earlier of (x) the Commitment Termination Date and (y) the date which is one year from the date of issuance of such Letter of Credit; provided that (i) clause (y) of this sentence shall not prevent the Issuing Lender from agreeing that a Letter of Credit will be automatically extended for a period not to exceed one year unless the Issuing Lender elects not to extend for such additional period and (ii) this sentence shall not prevent the Issuing Lender from agreeing to extend the expiration date of the Letters of Credit identified on Schedule 1 to the Eighth Amendment to a date not later than February 28, 1998. On the Commitment Termination Date, an amount equal to the maximum amount that may at any time be drawn on all Letters of Credit then outstanding (including, without limitation, Letters of Credit with expiration dates after the Commitment Termination Date, and whether or not any beneficiary under any Letter of Credit shall have presented or shall be entitled to present, the drafts and other documents required to draw under the Letter of Credit) shall automatically become immediately due and payable, without presentment, demand, protest or other requirement of any kind, all of which are hereby expressly waived by each Borrower. Such amount shall be held by the Issuing Lender, pursuant to such documentation as the Issuing Lender shall request, as cash collateral for the obligation of Borrowers to reimburse the Issuing Lender in the event of any drawing upon such Letters of Credit. Such cash collateral shall be held and applied by the Issuing Lender as described in the final paragraph of Section 8." Section 2. CONDITIONS TO EFFECTIVENESS OF AMENDMENTS Section 1 of this Eighth Amendment shall become effective only upon the satisfaction of all of the following conditions precedent (the date of satisfaction of such conditions being referred to herein as the "Eighth Amendment Effective Date"): A. On or before the Eighth Amendment Effective Date, Credit Parties shall deliver to Lenders (or to Agent for Lenders with sufficient originally executed copies, where appropriate, for each Lender and its counsel) the following, each, unless otherwise noted, dated the Eighth Amendment Effective Date: 1. Resolutions of its Board of Directors or, in the case of a Credit Party which is not a corporation, resolutions of the Board of Directors of the general partner or other Person authorized to act on its behalf, approving and authorizing the execution, delivery and performance of this Eighth Amendment, certified as of the Eighth Amendment Effective Date by its corporate secretary or an assistant secretary as being in full force and effect without modification or amendment; and 2. Signature and incumbency certificates of its officers executing this Eighth Amendment, certified as of the Eighth Amendment Effective Date by its corporate secretary or assistant secretary; 3. Executed copies of this Eighth Amendment. B. Borrowers shall have paid all fees, costs and expenses of Agent (including fees and expenses of counsel for Agent) and Lenders accrued and unpaid as of the Eighth Amendment Effective Date. C. On or before the Eighth Amendment Effective Date, all corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Agent, acting on behalf of Lenders, and its counsel shall be satisfactory in form and substance to Agent and such counsel, and Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Agent may reasonably request. Section 3. CREDIT PARTIES' REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Eighth Amendment and to amend the Amended Loan Agreement in the manner provided herein, each Credit Party represents and warrants to each Lender that the following statements are true, correct and complete: A. Corporate Power and Authority. Such Credit Party has all requisite corporate or partnership power and authority to enter into this Eighth Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Amended Loan Agreement as amended by this Eighth Amendment (the "Amended Agreement"). B. Authorization of Agreements. The execution and delivery by such Credit Party of this Eighth Amendment and the performance by such Credit Party of the Amended Agreement have been duly authorized by all necessary corporate or partnership action on the part of such Credit Party, as the case may be. C. No Conflict. The execution and delivery by such Credit Party of this Eighth Amendment and the performance by such Credit Party of the Amended Agreement do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to such Credit Party or any of its Subsidiaries, or any order, judgment or decree of any court or other agency of government binding on such Credit Party or any of its Subsidiaries, (ii) violate any provision of the Certificate or Articles of Incorporation or Bylaws of such Credit Party if it is a corporation or of its general partner or such other person or persons authorized to act on its behalf if it is not a corporation, (iii) violate any provision of its partnership, joint venture or similar organizational agreement if it is not a corporation, (iv) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of such Credit Party or any of its Subsidiaries, (v) result in or require the creation or imposition of any Lien upon any of the properties or assets of such Credit Party or any of its Subsidiaries (other than any Liens created under any of the Loan Documents in favor of Collateral Agent on behalf of Lenders), or (vi) require any approval of stockholders or partners or any approval or consent of any Person under any Contractual Obligation of such Credit Party or any of its Subsidiaries, except for such approvals or consents which have been obtained on or before the Eighth Amendment Effective Date and disclosed in writing to Lenders. D. Governmental Consents. The execution and delivery by such Credit Party of this Eighth Amendment and the performance by such Credit Party of the Amended Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body. E. Binding Obligation. This Eighth Amendment and the Amended Agreement have been duly executed and delivered by each of the Credit Parties party thereto and are the legally valid and binding obligations of each such Credit Party, enforceable against such Credit Party in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. F. Incorporation of Representations and Warranties From Amended Loan Agreement. The representations and warranties contained in Section 5 of the Amended Loan Agreement are and will be true, correct and complete in all material respects on and as of the Eighth Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. G. Absence of Default. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Eighth Amendment that would constitute an Event of Default or a Potential Event of Default. H. Subsidiaries of Borrowers. Other than the Guarantors listed on the signature pages hereof, no Subsidiary of the Borrowers owns assets with any material value. Section 4. ACKNOWLEDGEMENT AND CONSENT Borrowers are each party to the Borrower Security Agreement, the Borrower Pledge Agreement, the Account Collateral Security Agreement and certain other Security Documents, in each case as amended through the Eighth Amendment Effective Date, pursuant to which Borrowers have created Liens in favor of Collateral Agent on certain Collateral to secure the Obligations of the Borrowers. Each Guarantor is a party to the Amended Guaranty Agreement and certain Guarantors are parties to the Guarantor Security Agreement, the Guarantor Pledge Agreement, the Account Collateral Security Agreement, certain Mortgages, and/or certain other Security Documents, in each case as amended through the Eighth Amendment Effective Date, pursuant to which such Guarantor has (i) guarantied the Obligations of the Borrowers and (ii) created Liens in favor of Collateral Agent on certain Collateral to secure the Obligations of such Guarantor under the Amended Guaranty Agreement. Borrowers and Guarantors are collectively referred to herein as the "Credit Support Parties", and the Amended Guaranty Agreement and the Security Documents are collectively referred to herein as the "Credit Support Documents". Each Credit Support Party hereby acknowledges that it has reviewed the terms and provisions of this Eighth Amendment and consents to the amendments and limited waiver effected pursuant to this Eighth Amendment. Each Credit Support Party hereby confirms that each Credit Support Document to which it is a party or otherwise bound and all Collateral encumbered thereby will continue to guaranty or secure, as the case may be, to the fullest extent possible the payment and performance of all "Obligations," "Guarantied Obligations" and "Secured Obligations," as the case may be (in each case as such terms are defined in the applicable Credit Support Document), including without limitation the payment and performance of all such "Obligations," "Guarantied Obligations" or "Secured Obligations," as the case may be, in respect of the Obligations of Borrowers now or hereafter existing under or in respect of the Amended Agreement and the other Loan Documents. Each Credit Support Party acknowledges and agrees that each of the Credit Support Documents to which it is a party or otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Eighth Amendment. Section 5. MISCELLANEOUS A. Reference to and Effect on the Amended Loan Agreement and the Other Loan Documents. (i) On and after the Eighth Amendment Effective Date, each reference in the Amended Loan Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Amended Loan Agreement, and each reference in the other Loan Documents to the "Amended Loan Agreement", "thereunder", "thereof" or words of like import referring to the Amended Loan Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by Section 1 of this Eighth Amendment, the Amended Loan Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Eighth Amendment shall not constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Agent, Collateral Agent or any Lender under, the Amended Loan Agreement or any of the other Loan Documents. (iv) Nothing herein shall constitute a waiver or forbearance with respect to any Events of Default and/or Potential Events of Default existing on the date hereof. B. Fees and Expenses. Borrowers acknowledge that all costs, fees and expenses as described in subsection 11.2 of the Amended Loan Agreement incurred by Agent, Collateral Agent, Lenders and their counsel with respect to this Eighth Amendment and the documents and transactions contemplated hereby shall be for the account of Borrowers. C. Headings. Section and subsection headings in this Eighth Amendment are included herein for convenience of reference only and shall not constitute a part of this Eighth Amendment for any other purpose or be given any substantive effect. D. Applicable Law. THIS EIGHTH AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. E. Counterparts; Effectiveness. This Eighth Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Eighth Amendment shall become effective upon the execution of a counterpart hereof by each Lender and each of the other parties hereto, receipt by Company and Agent of written or telephonic notification of such execution and authorization of delivery thereof and satisfaction or waiver by each Lender of the conditions to effectiveness set forth in Section 2 hereof. IN WITNESS WHEREOF, the parties hereto have caused this Eighth Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. BORROWERS: CALTON, INC. By: /s/ Robert A. Fourniadis Title: Senior Vice President CALTON FUNDING, INC. By: /s/ Robert A. Fourniadis Title: Senior Vice President GUARANTORS: Calton California Equity Corp. Calton Capital, Inc. Calton Capital II, Inc. Calton General, Inc. Calton Homes, Inc. Calton Homes of California, Inc. Calton Homes of Florida, Inc. Calton Homes of Pennsylvania, Inc. Calton Homes of Pennsylvania at Pennway, Inc. Calton Homes of Tampa, Inc. Calton Lindenwood Corporation Calton Manzanita Corporation Calton Tamarack Corporation Calcap Commercial Management, Inc. Calcap X, Inc. Calcap XV, Inc. Calcap XXXI, Inc. Calcap XXXII, Inc. Calcap XXXIII, Inc. Calcap 36, Inc. Calcap 42, Inc. Calcap 48, Inc. Calton Homes of Chicago, Inc. Each by: /s/ Robert A. Fourniadis Title: President Calton Homes Finance, Inc. Calton Homes Finance II, Inc. Each by: /s/ Robert A. Fourniadis Title: Senior Vice President Talcon Title Agency, L.P. By: Calton General, Inc., its General Partner By: /s/ Robert A. Fourniadis Title: President Talpro 31, L.P. By: Calcap XXXI, Inc., its General Partner By: /s/ Robert A. Fourniadis Title: President Talpro 32, L.P. By: Calcap XXXII, Inc., its General Partner By: /s/ Robert A. Fourniadis Title: President Talpro 33, L.P. By: Calcap XXXIII, Inc., its General Partner By: /s/ Robert A. Fourniadis Title: President Talpro 48, L.P. By: Calcap 48, Inc., its General Partner By: /s/ Robert A. Fourniadis Title: President Talpro 36, L.P. By: Calcap 36, Inc., its General Partner By: /s/ Robert A. Fourniadis Title: President LENDERS: THE CHASE MANHATTAN BANK (formerly known as Chemical Bank), Individually and as Agent and Collateral Agent By: /s/ Jane P. Orndahl Title: Vice President DRESDNER KLEINWORT BENSON LIMITED, as a Lender By: /s/ Iain Leigh Title: Senior Vice President FOOTHILL CAPITAL CORPORATION, as a Lender By: /s/ Karen S. Sandler Title: Vice President GOLDMAN SACHS CREDIT PARTNERS, L.P. (formerly known as Pearl Street, L.P.), as a Lender By: /s/ John E. Urban Title: Authorized Signer SCHEDULE 1 LETTERS OF CREDIT 1. Letter of Credit Number T-218170 in the amount of $500,000.00. 2. Letter of Credit Number T-218171 in the amount of $500,000.00. 3. Letter of Credit Number T-228642 in the amount of $235,585.76. 4. Letter of Credit Number T-241136 in the amount of $158,225.38. NINTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT This NINTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "Ninth Amendment") is dated as of February 28, 1997, and entered into by and among Calton, Inc., a New Jersey corporation ("Company"), Calton Funding, Inc., a New Jersey corporation (together with Company, the "Borrowers"), the subsidiaries of Company listed on the signature pages hereof as guarantors (the "Guarantors"), the financial institutions listed on the signature pages hereof ("Lenders") and The Chase Manhattan Bank (formerly known as Chemical Bank), as agent for Lenders ("Agent") and as collateral agent for Lenders ("Collateral Agent") and is made with reference to that certain Amended and Restated Loan and Security Agreement dated as of May 28, 1993 (such agreement, as amended through the date hereof and as it may hereafter be amended from time to time, the "Amended Loan Agreement"), by and among Borrowers, Guarantors, Lenders, Agent and Collateral Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Amended Loan Agreement. RECITALS WHEREAS, the Amended Loan Agreement has heretofore been amended by the First Amendment to Amended and Restated Loan and Security Agreement dated as of September 27, 1993; the Second Amendment to Amended and Restated Loan and Security Agreement dated as of October 14, 1993: the Limited Waiver, Release and Consent Regarding Sale of Lancot Mortgage Co., Inc., dated as of October 14, 1993; the Third Amendment to Amended and Restated Loan and Security Agreement dated as of January 19, 1994; the Fourth Amendment to Amended and Restated Loan and Security Agreement dated as of February 28, 1994; the Joinder Agreement dated as of June 1, 1994 entered into by Pennway Joint Venture, L.P. in favor of the Collateral Agent (for the benefit of the Lenders); the Joinder Agreement, Amendment and Limited Waiver (Calton Homes of Chicago, Inc.) dated as of September 12, 1994; the Fifth Amendment to Amended and Restated Loan and Security Agreement dated as of February 23, 1995; the Sixth Amendment to Amended and Restated Loan and Security Agreement dated as of May 31, 1995; the Seventh Amendment to Amended and Restated Loan and Security Agreement dated as of February 23, 1996; and the Eighth Amendment to Amended and Restated Loan and Security Agreement dated as of January 31, 1997; WHEREAS, the parties hereto wish to amend the definition of "Commitment Termination Date" in order to extend the scheduled expiration of the Commitments from February 28, 1997 to March 31, 1997; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: Section 1. AMENDMENTS TO THE AMENDED LOAN AGREEMENT 1.1 Amendments to Section 1: Provisions Relating to Defined Terms. Subsection 1.1 of the Amended Loan Agreement is hereby amended by deleting the reference to "February 28, 1997" in the definition of "Commitment Termination Date" and substituting therefor a reference to "March 31, 1997". Section 2. CONDITIONS TO EFFECTIVENESS OF AMENDMENTS Section 1 of this Ninth Amendment shall become effective only upon the satisfaction of all of the following conditions precedent (the date of satisfaction of such conditions being referred to herein as the "Ninth Amendment Effective Date"): A. On or before the Ninth Amendment Effective Date, Credit Parties shall deliver to Lenders (or to Agent for Lenders with sufficient originally executed copies, where appropriate, for each Lender and its counsel) the following, each, unless otherwise noted, dated the Ninth Amendment Effective Date: 1. Resolutions of its Board of Directors or, in the case of a Credit Party which is not a corporation, resolutions of the Board of Directors of the general partner or other Person authorized to act on its behalf, approving and authorizing the execution, delivery and performance of this Ninth Amendment, certified as of the Ninth Amendment Effective Date by its corporate secretary or an assistant secretary as being in full force and effect without modification or amendment; and 2. Signature and incumbency certificates of its officers executing this Ninth Amendment, certified as of the Ninth Amendment Effective Date by its corporate secretary or assistant secretary; 3. Executed copies of this Ninth Amendment. B. Borrowers shall have paid all fees, costs and expenses of Agent (including fees and expenses of counsel for Agent) and Lenders accrued and unpaid as of the Ninth Amendment Effective Date. C. On or before the Ninth Amendment Effective Date, all corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Agent, acting on behalf of Lenders, and its counsel shall be satisfactory in form and substance to Agent and such counsel, and Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Agent may reasonably request. Section 3. CREDIT PARTIES' REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Ninth Amendment and to amend the Amended Loan Agreement in the manner provided herein, each Credit Party represents and warrants to each Lender that the following statements are true, correct and complete: A. Corporate Power and Authority. Such Credit Party has all requisite corporate or partnership power and authority to enter into this Ninth Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Amended Loan Agreement as amended by this Ninth Amendment (the "Amended Agreement"). B. Authorization of Agreements. The execution and delivery by such Credit Party of this Ninth Amendment and the performance by such Credit Party of the Amended Agreement have been duly authorized by all necessary corporate or partnership action on the part of such Credit Party, as the case may be. C. No Conflict. The execution and delivery by such Credit Party of this Ninth Amendment and the performance by such Credit Party of the Amended Agreement do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to such Credit Party or any of its Subsidiaries, or any order, judgment or decree of any court or other agency of government binding on such Credit Party or any of its Subsidiaries, (ii) violate any provision of the Certificate or Articles of Incorporation or Bylaws of such Credit Party if it is a corporation or of its general partner or such other person or persons authorized to act on its behalf if it is not a corporation, (iii) violate any provision of its partnership, joint venture or similar organizational agreement if it is not a corporation, (iv) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of such Credit Party or any of its Subsidiaries, (v) result in or require the creation or imposition of any Lien upon any of the properties or assets of such Credit Party or any of its Subsidiaries (other than any Liens created under any of the Loan Documents in favor of Collateral Agent on behalf of Lenders), or (vi) require any approval of stockholders or partners or any approval or consent of any Person under any Contractual Obligation of such Credit Party or any of its Subsidiaries, except for such approvals or consents which have been obtained on or before the Ninth Amendment Effective Date and disclosed in writing to Lenders. D. Governmental Consents. The execution and delivery by such Credit Party of this Ninth Amendment and the performance by such Credit Party of the Amended Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body. E. Binding Obligation. This Ninth Amendment and the Amended Agreement have been duly executed and delivered by each of the Credit Parties party thereto and are the legally valid and binding obligations of each such Credit Party, enforceable against such Credit Party in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. F. Incorporation of Representations and Warranties From Amended Loan Agreement. The representations and warranties contained in Section 5 of the Amended Loan Agreement are and will be true, correct and complete in all material respects on and as of the Ninth Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. G. Absence of Default. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Ninth Amendment that would constitute an Event of Default or a Potential Event of Default. H. Subsidiaries of Borrowers. Other than the Guarantors listed on the signature pages hereof, no Subsidiary of the Borrowers owns assets with any material value. Section 4. ACKNOWLEDGEMENT AND CONSENT Borrowers are each party to the Borrower Security Agreement, the Borrower Pledge Agreement, the Account Collateral Security Agreement and certain other Security Documents, in each case as amended through the Ninth Amendment Effective Date, pursuant to which Borrowers have created Liens in favor of Collateral Agent on certain Collateral to secure the Obligations of the Borrowers. Each Guarantor is a party to the Amended Guaranty Agreement and certain Guarantors are parties to the Guarantor Security Agreement, the Guarantor Pledge Agreement, the Account Collateral Security Agreement, certain Mortgages, and/or certain other Security Documents, in each case as amended through the Ninth Amendment Effective Date, pursuant to which such Guarantor has (i) guarantied the Obligations of the Borrowers and (ii) created Liens in favor of Collateral Agent on certain Collateral to secure the Obligations of such Guarantor under the Amended Guaranty Agreement. Borrowers and Guarantors are collectively referred to herein as the "Credit Support Parties", and the Amended Guaranty Agreement and the Security Documents are collectively referred to herein as the "Credit Support Documents". Each Credit Support Party hereby acknowledges that it has reviewed the terms and provisions of this Ninth Amendment and consents to the amendments and limited waiver effected pursuant to this Ninth Amendment. Each Credit Support Party hereby confirms that each Credit Support Document to which it is a party or otherwise bound and all Collateral encumbered thereby will continue to guaranty or secure, as the case may be, to the fullest extent possible the payment and performance of all "Obligations," "Guarantied Obligations" and "Secured Obligations," as the case may be (in each case as such terms are defined in the applicable Credit Support Document), including without limitation the payment and performance of all such "Obligations," "Guarantied Obligations" or "Secured Obligations," as the case may be, in respect of the Obligations of Borrowers now or hereafter existing under or in respect of the Amended Agreement and the other Loan Documents. Each Credit Support Party acknowledges and agrees that each of the Credit Support Documents to which it is a party or otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Ninth Amendment. Section 5. MISCELLANEOUS A. Reference to and Effect on the Amended Loan Agreement and the Other Loan Documents. (i) On and after the Ninth Amendment Effective Date, each reference in the Amended Loan Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Amended Loan Agreement, and each reference in the other Loan Documents to the "Amended Loan Agreement", "thereunder", "thereof" or words of like import referring to the Amended Loan Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by Section 1 of this Ninth Amendment, the Amended Loan Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Ninth Amendment shall not constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Agent, Collateral Agent or any Lender under, the Amended Loan Agreement or any of the other Loan Documents. (iv) Nothing herein shall constitute a waiver or forbearance with respect to any Events of Default and/or Potential Events of Default existing on the date hereof. B. Fees and Expenses. Borrowers acknowledge that all costs, fees and expenses as described in subsection 11.2 of the Amended Loan Agreement incurred by Agent, Collateral Agent, Lenders and their counsel with respect to this Ninth Amendment and the documents and transactions contemplated hereby shall be for the account of Borrowers. C. Headings. Section and subsection headings in this Ninth Amendment are included herein for convenience of reference only and shall not constitute a part of this Ninth Amendment for any other purpose or be given any substantive effect. D. Applicable Law. THIS NINTH AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. E. Counterparts; Effectiveness. This Ninth Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Ninth Amendment shall become effective upon the execution of a counterpart hereof by each Lender and each of the other parties hereto, receipt by Company and Agent of written or telephonic notification of such execution and authorization of delivery thereof and satisfaction or waiver by each Lender of the conditions to effectiveness set forth in Section 2 hereof. IN WITNESS WHEREOF, the parties hereto have caused this Ninth Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. BORROWERS: CALTON, INC. By: /s/ Robert A. Fourniadis Title: Senior Vice President CALTON FUNDING, INC. By: /s/ Robert A. Fourniadis Title: Senior Vice President GUARANTORS: Calton California Equity Corp. Calton Capital, Inc. Calton Capital II, Inc. Calton General, Inc. Calton Homes, Inc. Calton Homes of California, Inc. Calton Homes of Florida, Inc. Calton Homes of Pennsylvania, Inc. Calton Homes of Pennsylvania at Pennway, Inc. Calton Homes of Tampa, Inc. Calton Lindenwood Corporation Calton Manzanita Corporation Calton Tamarack Corporation Calcap Commercial Management, Inc. Calcap X, Inc. Calcap XV, Inc. Calcap XXXI, Inc. Calcap XXXII, Inc. Calcap XXXIII, Inc. Calcap 36, Inc. Calcap 42, Inc. Calcap 48, Inc. Calton Homes of Chicago, Inc. Each by: /s/ Robert A. Fourniadis Title: President Calton Homes Finance, Inc. Calton Homes Finance II, Inc. Each by: /s/ Robert A. Fourniadis Title: Senior Vice President Talcon Title Agency, L.P. By: Calton General, Inc., its General Partner By: /s/ Robert A. Fourniadis Title: President Talpro 31, L.P. By: Calcap XXXI, Inc., its General Partner By: /s/ Robert A. Fourniadis Title: President Talpro 32, L.P. By: Calcap XXXII, Inc., its General Partner By: /s/ Robert A. Fourniadis Title: President Talpro 33, L.P. By: Calcap XXXIII, Inc., its General Partner By: /s/ Robert A. Fourniadis Title: President Talpro 48, L.P. By: Calcap 48, Inc., its General Partner By: /s/ Robert A. Fourniadis Title: President Talpro 36, L.P. By: Calcap 36, Inc., its General Partner By: /s/ Robert A. Fourniadis Title: President LENDERS: THE CHASE MANHATTAN BANK (formerly known as Chemical Bank), Individually and as Agent and Collateral Agent By: /s/ Jane P. Orndahl Title: Vice President DRESDNER KLEINWORT BENSON LIMITED, as a Lender By: /s/ Iain Leigh Title: Senior Vice President FOOTHILL CAPITAL CORPORATION, as a Lender By: /s/ Karen S. Sandler Title: Vice President GOLDMAN SACHS CREDIT PARTNERS, L.P. (formerly known as Pearl Street, L.P.), as a Lender By: /s/ John E. Urban Title: Authorized Signer CALTON, INC. FORM 10-K FOR FISCAL YEAR ENDED NOVEMBER 30, 1996 EXHIBIT 10.1 1996 EQUITY INCENTIVE PLAN 1. Definitions. In this Plan, the following definitions apply: 1.01. "Appreciation Rights Election" means the method of exercising an Option pursuant to which shares of Common Stock subject to the Option are sold to cover the payment to the Company of the Option's aggregate exercise price and the payment of fifty percent (50%) of the Appreciated Value in cash to the Participant, with the Participant receiving the remaining fifty percent (50%) of the amount of the Appreciated Value in shares of Common Stock (as such proportion may be adjusted by the Committee pursuant to Section 10 of the Plan). 1.02. "Appreciated Value" means an amount equal to the difference between the aggregate fair market value of the shares of Common Stock subject to the Option and the aggregate exercise price of the Option on the date of exercise. For purposes of this definition, fair market value of the shares of the Common Stock shall be the price at which such shares are sold on the date of exercise. 1.03. "Board" means the Board of Directors of the Company. 1.04. "Change in Control" means (a) an event or series of events by which any "person" (as such term is defined in Section 2(2) of the Securities Act of 1933, as amended), or any affiliate of such Person (when applied to any Person, an affiliate shall mean any other Person directly or indirectly controlling, controlled by, or under common control with that Person), or Persons and affiliates of such Persons acting in concert, shall, whether in a single transaction or a series of related transactions, acquire directly or indirectly an amount of the Company's voting stock representing thirty-five percent (35%) or more of the total voting power of the outstanding voting securities of the Company having the right under ordinary circumstances to vote in an election of the Board, or (b) the consummation of a merger, reorganization or recapitalization in which the Company is the surviving entity, and in which, after the consummation of the transaction, the shareholders of the Company immediately prior to the consummation of the transaction shall not continue to beneficially own securities representing sixty-five percent (65%) or more of the total voting power of the outstanding voting securities of the Company having the right under ordinary circumstances to vote in an election of the Board. 1.05. "Code" means the Internal Revenue Code of 1986, as amended, and the rule and regulations promulgated thereunder. 1.06. "Committee" means the Compensation Committee of the Board, all of the members of which shall be "disinterested persons" as defined in Rule 16b-3(c)(2)(i) under the Securities Exchange Act of 1934, as amended, or any similar successor rule, and "outside directors" as defined in proposed rule 1.162-27(e)(3) under the Code or any final or similar successor rule. 1.07. "Company" means Calton, Inc. 1.08. "Corporate Transaction" means a transaction such as a merger (other than a merger intended solely to change the Company's jurisdiction of incorporation), consolidation, reorganization, recapitalization, or sale of all or substantially all of the Company's assets (other than a sale of assets to a Subsidiary or other affiliated entity of the Company). 1.09. "Director" shall mean a member of the Company's Board. 1.10. "Exercise Sell" means the method of exercising an Option pursuant to which shares of Common Stock subject to the Option are sold to cover payment of the Option's aggregate exercise price. 1.11. "Fair Market Value" means the arithmetic average of the highest and lowest sales prices of the Common Stock reported by the American Stock Exchange on a particular date, or if there is no sale on such date, then the average of such high and low sales prices on the last previous date on which a sale of the Common Stock is reported. 1.12. "Incentive Stock Option" means an option granted under the Plan that qualifies as an incentive stock option under Section 422 of the Code and that the Committee designates as such when granting the option. 1.13. "Just Cause" shall mean: (i) a Participant's conviction for a felony or for fraud; (ii) a Participant engaging in any conduct, by way of act or omission, which in the opinion of the Board has the potential to cause, or does cause, a material adverse effect on the Company's business; (iii) a Participant failing to return from authorized leave from the Company; (iv) a Participant being found to be under the influence of, or to have distributed, any illegal narcotic substance while on the Company's premises, including any project site of the Company; (v) a Participant acting dishonestly or committing theft of Company property; or (vi) the work performance of a Participant failing to meet Company standards. 1.14. "Nonqualified Stock Option" means an Option granted under the Plan that is not an Incentive Stock Option and that the Committee designates as such when granting the Option, or an Option granted under the Plan that does not qualify as an Incentive Stock Option. 1.15. "Option" means an option to purchase shares of Common Stock granted under the Plan in accordance with the terms of the Plan and related Option Agreement, if any. 1.16. "Option Agreement" means a written agreement which the Committee may authorize the Company to enter into with a Participant in order to implement a grant of an Option by the Committee. 1.17. "Participant" means an employee of the Company or a Director to whom an Option has been granted. 1.18. "Plan" means the Calton, Inc. 1996 Equity Incentive Plan. 1.19. "Subsidiary" means a corporation in which the Company owns a majority of the total combined voting power of all classes of stock, either directly or through one or more other Subsidiaries. 1.20. "Tax Withholding Amount" means the amount, if any, which, upon the exercise of an Option or an election by a Participant under Section 83(b) of the Code, the Company or a Subsidiary may be required to withhold in order to obtain a federal and/or state income tax deduction, such amount which shall be paid to the Company by the Participant. 1.21. "Tender Offer" means a tender offer for fifty percent (50%) or more of the Company's voting stock regardless of whether or not the Company will continue as a separate entity upon the consummation of the Tender Offer. 2. Purpose. The purpose of this Plan is to advance the interests of the shareholders of the Company by enhancing the ability of the Company to (i) induce certain employees, who are in a position to make significant contributions to the Company and its Subsidiaries, to remain in the employ of the Company and its Subsidiaries; (ii) attract and retain new employees who can make significant contributions to the success of the Company and its Subsidiaries; (iii) attract and retain the services of experienced and knowledgeable Directors; and (iv) more closely align the interests of such employees and Directors with the Company's shareholders and to encourage such employees and Directors to take into account the long-term interests of the Company by securing or increasing on reasonable terms their stock ownership in the Company. The Plan will also serve as a vehicle for the issuance of registered shares of Common Stock to any Director who elects to receive the annual retainer fee, Board meeting fees and Board committee fees in the form of shares of Common Stock as provided for in Section 17 of this Plan. 3. Shares Subject to Plan. The aggregate number of shares of Common Stock reserved for issuance under the Plan shall be two million (2,000,000), subject to any adjustment pursuant to Section 11 herein. The shares of Common Stock to be issued under the Plan upon the exercise of an Option shall be made available either from authorized but unissued shares of the Company's Common Stock or from shares of the Company's Common Stock held by the Company as treasury shares, including shares of Common Stock acquired by the Company in open market and private transactions. The shares of Common Stock issued under the Plan shall be subject to the terms and conditions specified in the Plan and related Option Agreements, if any, and to such other terms and conditions as the Committee may provide. If any Option expires or terminates for any reason without having been exercised in full, a new Option may thereafter be granted to acquire the unpurchased shares of Common Stock subject to such expired or terminated Option. 4. Administration. The Plan shall be administered by the Committee. Subject to the express provisions of the Plan, the Committee shall have complete authority, in its discretion, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms and provisions of any related Option Agreements, to determine the employees of the Company and its Subsidiaries who will be selected as Participants under the Plan, to determine the terms and prices at which Options shall be granted, the number of shares of Common Stock to be subject to each Option, the periods during which each Option shall be exercisable, whether such Option shall be an Incentive Stock Option or a Nonqualified Stock Option, and to make all other determinations necessary or advisable for the administration of the Plan. In making such determinations, the Committee may take into account the nature of the services rendered by the Participants to the Company and its Subsidiaries, their present and potential contributions to the success of the Company and its Subsidiaries and such other factors as the Committee, in its discretion, shall deem relevant. The Committee's determination of the matters referred to herein shall be final and conclusive. Any dispute or disagreement which may arise under or as a result of or with respect to any Option shall be determined by the Committee, in its sole discretion, and any interpretations by the Committee of the terms of any Option shall be final, binding and conclusive. No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan. In addition to such other rights of indemnification as they may have as members of the Board or as members of the Committee, the members of the Committee shall be indemnified by the Company against the reasonable expenses, including attorney's fees, actually and reasonably incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, in which any Committee member may be a party by reason of any action taken or failure to act in connection with the Plan or any Option granted under the Plan, and against all amounts reasonably paid by them in settlement thereof or paid by them in satisfaction of a judgment in any such action, suit or proceeding, if such Committee member acted in good faith and in a manner which the member believed to be in, and not opposed to, the best interests of the Company and its shareholders. 5. Eligibility. The Committee may grant Options under the Plan to (a) employees of the Company or a Subsidiary, including employees who are members of the Board, and (b) employees of a corporation or noncorporate entity which has been acquired by the Company or a Subsidiary, who hold options with respect to the stock or other equity interests of such corporation or noncorporate entity which the Company or a Subsidiary has agreed to assume. Nonqualified Stock Options shall be granted to non-employee Directors as formula awards pursuant to the terms set forth in Section 18 of this Plan. Further, the Committee can authorize the issuance of shares of Common Stock to any member of the Board who has elected to receive the annual retainer fee for serving on the Board, Board meeting fees or Board committee fees in the form of shares of the Company's Common Stock as provided for in Section 17 of this Plan. 6. Option Price. The exercise price of an Option shall be equal to the Fair Market Value of the Common Stock on the date of grant; provided, however, that (i) with respect to a Participant who owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, the option price of an Incentive Stock Option granted to such Participant shall not be less than one hundred and ten percent (110%) of the Fair Market Value of the Common Stock on the date of grant, and (ii) with respect to any Option repriced by the Committee, the exercise price shall be equal to the Fair Market Value of the Common Stock on the date such Option is repriced. 7. Option Term. Except as otherwise provided in Section 18 hereof, an Option shall be granted for such term as the Committee shall determine, not in excess of ten (10) years from the date of grant thereof; provided, however, that a Participant who owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company may not be granted an Incentive Stock Option with a term greater than five (5) years from the date of grant. 8. Limitation on Amount of Options Granted. The Chief Executive Officer of the Company, may not be granted Options for more than fifty percent (50%) of all shares of Common Stock reserved for issuance under the Plan. Each other Participant under the Plan may not be granted options for more than thirty-five percent (35%) of all shares of Common Stock reserved for issuance under the Plan. 9. Exercise of Options. Except as otherwise provided in Sections 11, 12 and 18 hereof, and except as otherwise provided below with respect to an Incentive Stock Option, upon granting an Option, the Committee shall determine the date or dates on which such Option shall become exercisable. The Options and the shares issuable upon the exercise of such Options may be subject to such conditions and forfeiture provisions as the Committee may determine, including, but not limited to, the achievement of business objectives and individual, division and Company performance. To the extent exercisable, an Option may be exercised either in whole at any time or in part from time to time. With respect to an Incentive Stock Option granted to a Participant, the Fair Market Value of the shares of Common Stock on the date of grant which are exercisable for the first time by a Participant during any calendar year shall not exceed $100,000. 10. Methods of Exercise and Payment of Option Price. An Option may be exercised only by a written notice of intent to exercise such Option with respect to a specific number of shares of Common Stock subject to such Option and payment to the Company of the aggregate amount of the exercise price for the number of shares of Common Stock so specified in the notice. Payment of the Option's exercise price can be made in cash, by cashier's check or certified bank check, in kind by the delivery of shares of Common Stock having a Fair Market Value on the date preceding the date of exercise equal to the portion of the option price so paid and which have been owned and held by the Participant for a period not less than six (6) months. Upon receipt of written notice evidencing a Participant's intent to exercise an Option, or an election by a Participant under Section 83(b) of the Code, the Company will inform the Participant of the Amount of the Tax Withholding Amount, if any, which the Participant shall be required to remit to the Company before the shares of Common Stock will be issued to the Participant. With respect to Nonqualified Stock Options granted under the Plan and held by the Participant for six (6) months or longer, a Participant can also pay all or part of any such Option's exercise price pursuant to the Exercise Sell or Appreciation Rights Election methods; provided, however, that if a Participant chooses to pay all or part of the exercise price pursuant to the Appreciation Rights Election method, the Committee shall have the sole discretion to determine the form in which payment of the Appreciated Value will be made to the Participant, including all cash, all shares of Common Stock or any other combination thereof. Fractional shares will not be issued to a Participant who exercises an Option pursuant to the Appreciation Rights Election method. The value of any fractional shares shall be paid in cash to the Participants. The shares of Common Stock to be sold in order to pay (i) the exercise price under the Exercise Sell method, or (ii) the exercise price and amount of the cash payment of the Appreciated Value under the Appreciation Rights Election method shall be sold by or on behalf of the Participant in an open market transaction on the date of exercise and the Participant shall not be liable for any cost of such sale. If a Participant elects to exercise an Option pursuant to the Exercise Sell or Appreciation Rights Election method, then the Tax Withholding Amount, if any, shall, in the Participant's discretion, also be covered by the sale of shares of Common Stock subject to the Option being exercised. The Participant shall be entitled to receive any remaining proceeds from the sale of shares of Common Stock which are not applied against the exercise price and Tax Withholding Amount under the Exercise Sell method, or the exercise price, cash portion of the Appreciated Value and the Tax Withholding Amount under the Appreciation Rights Election method. 11. Adjustment of Shares. 11.01. In the event there is any change in the capital stock of the Company pursuant to a stock split, share combination, stock dividend or Corporate Transaction in which the Company is the surviving entity, except as otherwise provided in Subsection 11.02 below, each outstanding Option shall apply to the securities to which a holder of the number of shares of Common Stock subject to an Option shall be entitled to receive in connection with any such transaction. The Committee shall also have the discretion to make any other changes to an Option, including, without limitation, additional changes in the number or character of the shares of Common Stock subject to an Option, or in the exercise price of an Option, in order to protect such Option from dilution or diminution in value upon the occurrence of any of the above transactions. 11.02. In the event of a Corporate Transaction in which the Company is not the surviving entity, or a Corporate Transaction in which the Company is the surviving entity and in which the outstanding shares of Common Stock shall be, pursuant to the operation of law or terms of the Corporate Transaction, changed into or exchanged for securities of another corporation, interests in a noncorporate entity, other property (including cash), or any combination of the foregoing, a Participant can elect within thirty (30) days of receipt of notice of such Corporate Transaction to accelerate all unvested Options and exercise them or any part thereof. The Participant's exercise of any Options and the issuance of shares of Common Stock to the Participant in connection with any such Corporate Transaction shall be conditioned upon the consummation of the Corporate Transaction; provided, however, that such condition shall not preclude the Participant from receiving, with respect to the shares of Common Stock issuable upon the exercise of such Option, the consideration issuable or payable in respect of the shares of Common Stock pursuant to such Corporate Transaction. If, in exercising a Nonqualified Stock Option as a result of a Corporate Transaction, the Exercise Sell or Appreciation Rights Election method is not available to a Participant for any reason including, without limitation, the absence of a trading market for the Common Stock on the date of consummation of the Corporate Transaction, the Participant shall be entitled to receive, without the payment of consideration, the number of shares of Common Stock issuable upon exercise of the Option less the number of shares having an aggregate Fair Market Value equal to the aggregate exercise price on the date the election to exercise the Option is made by the Participant. Alternatively, within ten (10) days of receiving notice of the Company's decision to enter into any such Corporate Transaction, a Participant may provide the Company with written notice that the Board shall provide that the surviving entity will grant the Participant substitute options to