UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
June 30, 2018
OR
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission File Number: 001-35873
TAYLOR MORRISON HOME CORPORATION
(Exact name of Registrant as specified in its Charter)
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Delaware
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90-0907433
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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4900 N. Scottsdale Road, Suite 2000
Scottsdale, Arizona
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85251
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(Address of principal executive offices)
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(Zip Code)
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(480) 840-8100
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
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
ý
No
¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
ý
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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ý
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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¨
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Emerging growth company
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¨
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act.
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
¨
No
ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Class
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Outstanding as of August 1, 2018
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Class A common stock, $0.00001 par value
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111,392,354
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Class B common stock, $0.00001 par value
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863,434
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TAYLOR MORRISON HOME CORPORATION
TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TAYLOR MORRISON HOME CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts, unaudited)
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June 30,
2018
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December 31,
2017
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Assets
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Cash and cash equivalents
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$
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320,102
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|
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$
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573,925
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Restricted cash
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1,319
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1,578
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Total cash, cash equivalents, and restricted cash
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321,421
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575,503
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Owned inventory
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3,194,241
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2,956,709
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Real estate not owned under option agreements
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1,462
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2,527
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Total real estate inventory
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3,195,703
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2,959,236
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Land deposits
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40,514
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49,768
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Mortgage loans held for sale
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99,606
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187,038
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Derivative assets
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2,888
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1,584
|
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Prepaid expenses and other assets, net
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52,029
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|
72,334
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Other receivables, net
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94,320
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94,488
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Investments in unconsolidated entities
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189,733
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192,364
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Deferred tax assets, net
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117,892
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118,138
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Property and equipment, net
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38,916
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7,112
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Intangible assets, net
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1,601
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|
2,130
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Goodwill
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66,198
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66,198
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Total assets
|
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$
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4,220,821
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$
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4,325,893
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Liabilities
|
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Accounts payable
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$
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160,051
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$
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140,165
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Accrued expenses and other liabilities
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167,315
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201,540
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Income taxes payable
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14,454
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4,525
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Customer deposits
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191,893
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132,529
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Senior notes, net
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1,240,938
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1,239,787
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Loans payable and other borrowings
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136,508
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139,453
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Revolving credit facility borrowings
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—
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—
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Mortgage warehouse borrowings
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49,818
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118,822
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Liabilities attributable to real estate not owned under option agreements
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1,462
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|
|
2,527
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Total liabilities
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1,962,439
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1,979,348
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COMMITMENTS AND CONTINGENCIES (Note 15)
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Stockholders’ Equity
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Class A common stock, $0.00001 par value, 400,000,000 shares authorized,
114,436,481 and 85,449,253 shares issued, 111,387,224 and 82,399,996 shares outstanding as of June 30, 2018 and December 31, 2017, respectively
|
|
1
|
|
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1
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Class B common stock, $0.00001 par value, 200,000,000 shares authorized,
863,434 and 37,179,616 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively
|
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—
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—
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Preferred stock, $0.00001 par value, 50,000,000 shares authorized, no shares issued and outstanding as of June 30, 2018 and December 31, 2017
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—
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—
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Additional paid-in capital
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1,877,468
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1,341,873
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Treasury stock at cost, 3,049,257 shares as of June 30, 2018 and December 31, 2017
|
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(47,622
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)
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(47,622
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)
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Retained earnings
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425,238
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319,833
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Accumulated other comprehensive loss
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(17,968
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)
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(17,968
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)
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Total stockholders’ equity attributable to Taylor Morrison Home Corporation
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2,237,117
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1,596,117
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Non-controlling interests – joint ventures
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1,359
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1,663
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Non-controlling interests
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19,906
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748,765
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Total stockholders’ equity
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2,258,382
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2,346,545
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Total liabilities and stockholders’ equity
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$
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4,220,821
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|
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$
|
4,325,893
|
|
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
TAYLOR MORRISON HOME CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
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Three Months Ended
June 30,
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Six Months Ended
June 30,
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2018
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2017
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2018
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2017
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Home closings revenue, net
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$
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956,565
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$
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889,096
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$
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1,689,524
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$
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1,640,581
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Land closings revenue
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7,997
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3,764
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|
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13,165
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|
|
7,120
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Financial services revenue
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16,266
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|
|
15,634
|
|
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30,472
|
|
|
29,883
|
|
Total revenues
|
|
980,828
|
|
|
908,494
|
|
|
1,733,161
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|
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1,677,584
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Cost of home closings
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784,521
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724,505
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1,379,427
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1,340,800
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Cost of land closings
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6,444
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2,467
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|
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10,725
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|
4,867
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|
Financial services expenses
|
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11,152
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|
10,102
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|
|
21,196
|
|
|
18,804
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Total cost of revenues
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802,117
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|
|
737,074
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|
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1,411,348
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|
|
1,364,471
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Gross margin
|
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178,711
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|
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171,420
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|
|
321,813
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313,113
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Sales, commissions and other marketing costs
|
|
64,604
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61,516
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|
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118,302
|
|
|
117,133
|
|
General and administrative expenses
|
|
35,461
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|
|
33,894
|
|
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68,778
|
|
|
67,022
|
|
Equity in income of unconsolidated entities
|
|
(4,017
|
)
|
|
(3,071
|
)
|
|
(7,263
|
)
|
|
(4,156
|
)
|
Interest income, net
|
|
(276
|
)
|
|
(89
|
)
|
|
(619
|
)
|
|
(179
|
)
|
Other expense, net
|
|
3,654
|
|
|
764
|
|
|
4,092
|
|
|
413
|
|
Income before income taxes
|
|
79,285
|
|
|
78,406
|
|
|
138,523
|
|
|
132,880
|
|
Income tax provision
|
|
19,993
|
|
|
22,476
|
|
|
31,699
|
|
|
41,349
|
|
Net income before allocation to non-controlling interests
|
|
59,292
|
|
|
55,930
|
|
|
106,824
|
|
|
91,531
|
|
Net income attributable to non-controlling interests — joint ventures
|
|
(140
|
)
|
|
(207
|
)
|
|
(269
|
)
|
|
(198
|
)
|
Net income before non-controlling interests
|
|
59,152
|
|
|
55,723
|
|
|
106,555
|
|
|
91,333
|
|
Net income attributable to non-controlling interests
|
|
(474
|
)
|
|
(28,322
|
)
|
|
(3,133
|
)
|
|
(54,164
|
)
|
Net income available to Taylor Morrison Home Corporation
|
|
$
|
58,678
|
|
|
$
|
27,401
|
|
|
$
|
103,422
|
|
|
$
|
37,169
|
|
Earnings per common share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.53
|
|
|
$
|
0.46
|
|
|
$
|
0.94
|
|
|
$
|
0.76
|
|
Diluted
|
|
$
|
0.52
|
|
|
$
|
0.46
|
|
|
$
|
0.93
|
|
|
$
|
0.76
|
|
Weighted average number of shares of common stock:
|
|
|
|
|
|
|
|
|
Basic
|
|
111,347
|
|
|
58,977
|
|
|
110,508
|
|
|
48,822
|
|
Diluted
|
|
113,482
|
|
|
121,061
|
|
|
115,400
|
|
|
120,895
|
|
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
TAYLOR MORRISON HOME CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended
June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Income before non-controlling interests, net of tax
|
|
$
|
59,292
|
|
|
$
|
55,930
|
|
|
$
|
106,824
|
|
|
$
|
91,531
|
|
Comprehensive income attributable to non-controlling interests — joint ventures
|
|
(140
|
)
|
|
(207
|
)
|
|
(269
|
)
|
|
(198
|
)
|
Comprehensive income attributable to non-controlling interests
|
|
(474
|
)
|
|
(28,322
|
)
|
|
(3,133
|
)
|
|
(54,164
|
)
|
Comprehensive income available to Taylor Morrison Home Corporation
|
|
$
|
58,678
|
|
|
$
|
27,401
|
|
|
$
|
103,422
|
|
|
$
|
37,169
|
|
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
TAYLOR MORRISON HOME CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(In thousands, except share data, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
Class B
|
|
Additional
Paid-in
Capital
|
|
Treasury Stock
|
|
Stockholders' Equity
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Non-controlling
Interest - Joint
Venture
|
|
Non-controlling Interests
(1)
|
|
Total
Stockholders’
Equity
|
Balance – December 31, 2017
|
|
82,399,996
|
|
|
$
|
1
|
|
|
37,179,616
|
|
|
$
|
—
|
|
|
$
|
1,341,873
|
|
|
3,049,257
|
|
|
$
|
(47,622
|
)
|
|
$
|
319,833
|
|
|
$
|
(17,968
|
)
|
|
$
|
1,663
|
|
|
$
|
748,765
|
|
|
$
|
2,346,545
|
|
Cumulative-effect adjustment to Retained Earnings related to adoption of ASU No. 2014-09 (see Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,983
|
|
|
|
|
|
|
|
|
1,983
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
103,422
|
|
|
—
|
|
|
269
|
|
|
3,133
|
|
|
106,824
|
|
Exchange of New TMM Units and corresponding number of Class B Common Stock
|
|
20,487
|
|
|
—
|
|
|
(20,487
|
)
|
|
—
|
|
|
1,293
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,293
|
)
|
|
—
|
|
TMHC repurchase and cancellation of New TMM Units from Principal Equityholders
|
|
—
|
|
|
—
|
|
|
(7,588,771
|
)
|
|
—
|
|
|
(201,775
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(201,775
|
)
|
Exercise of stock options
|
|
98,270
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,588
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,588
|
|
Issuance of restricted stock units, net of shares withheld for tax
|
|
161,547
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,491
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,491
|
)
|
Exchange of B shares from secondary offerings
|
|
28,706,924
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
729,954
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
729,954
|
|
Repurchase of New TMM Units from Principal Equityholders
|
|
—
|
|
|
—
|
|
|
(28,706,924
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(730,963
|
)
|
|
(730,963
|
)
|
Share based compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,026
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
264
|
|
|
6,290
|
|
Changes in non-controlling interests of consolidated joint ventures
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(573
|
)
|
|
—
|
|
|
(573
|
)
|
Balance – June 30, 2018
|
|
111,387,224
|
|
|
$
|
1
|
|
|
863,434
|
|
|
$
|
—
|
|
|
$
|
1,877,468
|
|
|
3,049,257
|
|
|
$
|
(47,622
|
)
|
|
$
|
425,238
|
|
|
$
|
(17,968
|
)
|
|
$
|
1,359
|
|
|
$
|
19,906
|
|
|
$
|
2,258,382
|
|
(1)
As of June 30, 2018, the remaining Non-controlling Interest relates to management and director ownership. Refer to Note 10 - Stockholders' Equity for discussion regarding our equity offering transactions during the six months ended June 30, 2018.
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
TAYLOR MORRISON HOME CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
2018
|
|
2017
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
Net income before allocation to non-controlling interests
|
|
$
|
106,824
|
|
|
$
|
91,531
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
Equity in income of unconsolidated entities
|
|
(7,263
|
)
|
|
(4,156
|
)
|
Stock compensation expense
|
|
6,290
|
|
|
6,850
|
|
Distributions of earnings from unconsolidated entities
|
|
3,298
|
|
|
3,496
|
|
Depreciation and amortization
|
|
11,306
|
|
|
2,097
|
|
Debt issuance costs amortization
|
|
1,652
|
|
|
1,909
|
|
Contingent consideration
|
|
146
|
|
|
613
|
|
Deferred income taxes
|
|
246
|
|
|
(6,291
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
Real estate inventory and land deposits
|
|
(228,278
|
)
|
|
(200,801
|
)
|
Mortgages held for sale, prepaid expenses and other assets
|
|
74,094
|
|
|
132,989
|
|
Customer deposits
|
|
59,364
|
|
|
70,867
|
|
Accounts payable, accrued expenses and other liabilities
|
|
(27,119
|
)
|
|
(641
|
)
|
Income taxes payable
|
|
9,929
|
|
|
1,507
|
|
Net cash provided by operating activities
|
|
10,489
|
|
|
99,970
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
Purchase of property and equipment
|
|
(8,593
|
)
|
|
(915
|
)
|
Distributions of capital from unconsolidated entities
|
|
9,965
|
|
|
3,295
|
|
Investments of capital into unconsolidated entities
|
|
(3,368
|
)
|
|
(23,604
|
)
|
Net cash (used in) investing activities
|
|
(1,996
|
)
|
|
(21,224
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
Increase in loans payable and other borrowings
|
|
18,304
|
|
|
8,643
|
|
Repayments of loans payable and other borrowings
|
|
(8,350
|
)
|
|
(8,047
|
)
|
Borrowings on mortgage warehouse
|
|
311,880
|
|
|
388,353
|
|
Repayment on mortgage warehouse
|
|
(380,884
|
)
|
|
(523,767
|
)
|
Payment of contingent consideration
|
|
(265
|
)
|
|
—
|
|
Proceeds from stock option exercises
|
|
1,588
|
|
|
4,734
|
|
Proceeds from issuance of shares from secondary offerings
|
|
767,116
|
|
|
882,306
|
|
TMHC repurchase and cancellation of New TMM Units from principal equityholders
|
|
(201,775
|
)
|
|
—
|
|
Repurchase of shares from principal equityholders
|
|
(768,125
|
)
|
|
(884,303
|
)
|
Payment of taxes related to net share settlement of equity awards
|
|
(1,491
|
)
|
|
(289
|
)
|
Distributions to non-controlling interests of consolidated joint ventures, net
|
|
(573
|
)
|
|
(100
|
)
|
Net cash (used in) financing activities
|
|
(262,575
|
)
|
|
(132,470
|
)
|
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
|
|
$
|
(254,082
|
)
|
|
$
|
(53,724
|
)
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period
|
|
575,503
|
|
|
301,812
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period
|
|
$
|
321,421
|
|
|
$
|
248,088
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
0
|
Income taxes paid, net
|
|
$
|
(21,525
|
)
|
|
$
|
(46,133
|
)
|
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
Change in loans payable issued to sellers in connection with land purchase contracts
|
|
$
|
24,279
|
|
|
$
|
31,305
|
|
Change in inventory not owned
|
|
$
|
(1,065
|
)
|
|
$
|
(2,249
|
)
|
Change in Prepaid expenses and other assets, net due to adoption of ASU 2014-09
|
|
$
|
(32,004
|
)
|
|
$
|
—
|
|
Change in Property and equipment, net due to adoption of ASU 2014-09
|
|
$
|
32,004
|
|
|
$
|
—
|
|
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
TAYLOR MORRISON HOME CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS
Organization and Description of the Business
— Taylor Morrison Home Corporation “TMHC” through its subsidiaries (with TMHC referred to herein as “we,” “our,” “the Company” and “us”), owns and operates a residential homebuilding business and is a developer of lifestyle communities. As of
June 30, 2018
, we operated in the states of Arizona, California, Colorado, Florida, Georgia, Illinois, North and South Carolina, and Texas. Our Company serves a wide array of consumer groups from coast to coast, including first time, move-up, luxury, and active adult. Our homebuilding company operates under our Taylor Morrison and Darling Homes brand names. Our business is organized into multiple homebuilding operating components, and a financial services component (formerly called our mortgage operating component), all of which are managed as
four
reportable segments: East, Central, West, and Financial Services. The communities in our homebuilding segments offer single family attached and detached homes. We are the general contractors for all real estate projects and retain subcontractors for home construction and site development. Our Financial Services reportable segment provides our customers with mortgage services through our wholly owned mortgage subsidiary, operating as Taylor Morrison Home Funding, LLC (“TMHF”), and title services through our wholly owned title services subsidiary, Inspired Title Services, LLC (“Inspired Title”).
As a result of the completion of our initial public offering (“IPO”) on April 12, 2013 and a series of transactions pursuant to a Reorganization Agreement dated as of April 9, 2013, TMHC was formed and became the owner and general partner of TMM Holdings II Limited Partnership (“New TMM”), our direct subsidiary. New TMM was formed by a consortium of investors comprised of affiliates of TPG Global, LLC (the “TPG Entities” or “TPG”), investment funds managed by Oaktree Capital Management, L.P. (“Oaktree”) or their respective subsidiaries (together, the “Oaktree Entities”), and affiliates of JH Investments, Inc. (“JH” and together with the TPG Entities and Oaktree Entities, the “Former Principal Equityholders” and, following JH's February 2017 sale of its equity interest in us, the “Remaining Principal Equityholders”).
From January 2017 through January 2018, we completed
seven
public offerings for an aggregate of
80.2 million
shares of our Class A Common Stock, using all of the net proceeds therefrom to repurchase our Former Principal Equityholders' indirect interest in TMHC. In January 2018, we also purchased an additional
7.6 million
shares of our Class B Common Stock from our Remaining Principal Equityholders. Following our final public offering in January, 2018, the Remaining Principal Equityholders no longer held any ownership in the Company. Refer to
Note 10. Stockholders' Equity
for discussion regarding our equity offering transactions.
On June 7, 2018 we announced and entered into an Agreement and Plan of Merger with AV Homes, Inc. (“AV Homes”). AV Homes is a homebuilder and land developer of residential communities in Florida, North Carolina, South Carolina, Arizona and Texas. AV Homes focuses on the development and construction of primary residential communities that serve first-time and move-up buyers, as well as age restricted active adults communities.
We will acquire all of the outstanding shares of AV Homes common stock at
$21.50
per share in a cash and stock transaction with an estimated value of approximately
$480 million
. We have not completed the fair value measurements with respect to the AV Homes' assets to be acquired and the AV Homes' liabilities to be assumed. A final determination of the fair value of AV Homes’ assets and liabilities will be based on the actual assets and liabilities of AV Homes that exist as of the date of completion of the merger. Additionally, the final value of the consideration to be paid by us to complete the merger will be determined based on the ending number of shares of AV Homes' Common Stock outstanding at the time of the completion of the merger. Within 12 months after the completion of the merger, final valuations will be completed and reflected in the combined company’s financial information. Under the terms of the agreement, AV Homes stockholders will have the option to receive, at their election, consideration per share equal to (i)
$21.50
in cash, (ii)
0.9793
shares of Taylor Morrison Class A common stock or (iii) the combination of
$12.64
in cash and
0.4034
shares of Taylor Morrison Class A common stock, subject to an overall proration of approximately
58.8%
cash and
41.2%
stock. On a pro forma basis, AV Homes stockholders are expected to own up to approximately
10%
of the combined company, subject to conversion mechanics applicable to holders of AV Homes' convertible notes. The transaction has been unanimously approved by the Boards of Directors of both Taylor Morrison and AV Homes and will be submitted to the stockholders of AV Homes for approval. The transaction is expected to close late in the third quarter or early in the fourth quarter of 2018.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation
— The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in our
2017
Annual Report on Form 10-K (the “Annual Report”). In the opinion of management, the accompanying Unaudited Condensed Consolidated Financial Statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for a full fiscal year.
Non-controlling interests
– During the first quarter of 2018, we completed sales of our Class A Common Stock in registered public offerings, totaling
28.7 million
shares. We used all of the net proceeds from the public offerings to purchase partnership units in New TMM (“New TMM Units”) along with shares of our Class B Common Stock, held by our Remaining Principal Equityholders. In addition, in a series of transactions following each public offering, the Company purchased
3.8 million
shares of Class B common stock directly from our Remaining Principal Equityholders on both January 8, 2018 and January 17, 2018, for an aggregate total of
7.6 million
shares purchased. As a result, we adjusted Non-controlling interests and Additional paid-in capital on the Condensed Consolidated Balance Sheets and Condensed Consolidated Statement of Stockholders' Equity to reflect the change in ownership. Refer to
Note 10- Stockholders' Equity
for discussion regarding our equity offering transactions.
Joint Ventures
- We consolidate certain joint ventures in accordance with Accounting Standards Codification (“ASC”)
Topic 810, "
“
Consolidation.
” The income from the percentage of the joint venture not owned by us in presented as “Net income attributable to non-controlling interests - joint ventures” on the Condensed Consolidated Statements of Operations.
Use of Estimates
— The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Significant estimates include real estate development costs to complete, valuation of real estate, valuation of acquired assets, valuation of goodwill, valuation of equity awards, valuation allowance on deferred tax assets and reserves for warranty and self-insured risks. Actual results could differ from those estimates.
Real Estate Inventory
— Inventory consists of raw land, land under development, homes under construction, completed homes, and model homes, all of which are stated at cost. In addition to direct carrying costs, we also capitalize interest, real estate taxes, and related development costs that benefit the entire community, such as field construction supervision and related direct overhead. Home vertical construction costs are accumulated and charged to cost of sales at the time of home closing using the specific identification method. Land acquisition, development, interest, real estate taxes and overhead are allocated to homes and units using the relative sales value method. These costs are capitalized to inventory from the point development begins to the point construction is completed. Changes in estimated costs to be incurred in a community are generally allocated to the remaining lots on a prospective basis. For those communities that have been temporarily closed or development has been discontinued, we do not allocate interest or other costs to the community’s inventory until activity resumes. Such costs are expensed as incurred.
We capitalize qualifying interest costs to inventory during the development and construction periods. Capitalized interest is charged to cost of sales when the related inventory is delivered or when the related inventory is charged to cost of sales.
We assess the recoverability of our inventory in accordance with the provisions of ASC Topic 360,
Property, Plant, and Equipment
. We review our real estate inventory for indicators of impairment by community during each reporting period. If indicators of impairment are present for a community, we first perform an undiscounted cash flow analysis to determine if the carrying value of the assets in that community exceeds the expected undiscounted cash flows. Generally, if the carrying value of the assets exceeds their estimated undiscounted cash flows, then the assets are deemed to be impaired and are recorded at fair value as of the assessment date. Our determination of fair value is based on a discounted cash flow model which includes projections and estimates relating to sales prices, construction costs, sales pace, and other factors. Changes in these expectations may lead to a change in the outcome of our impairment analysis, and actual results may also differ from our assumptions. For the
three and six
months ended
June 30, 2018
and
2017
,
no
impairment charges were recorded.
In certain cases, we may elect to cease development and/or marketing of an existing community if we believe the economic performance of the community would be maximized by deferring development for a period of time to allow for market conditions to improve. The decision may be based on financial and/or operational metrics as determined by us. If we decide to cease developing a project, we will evaluate the project for impairment and then cease future development and marketing activity until such a time when we believe that market conditions have improved and economic performance can be maximized.
Our assessment of the carrying value of our assets typically includes subjective estimates of future performance, including the timing of when development will recommence, the type of product to be offered, and the margin to be realized. In the future, some of these inactive communities may be re-opened while others may be sold. As of
June 30, 2018
and
December 31, 2017
, we had
one
and
two
inactive projects with a carrying value of
$3.2 million
and
$10.7 million
, respectively, in the West homebuilding segment. There were
no
inactive projects in our Central or East homebuilding segments as of
June 30, 2018
or
December 31, 2017
.
In the ordinary course of business, we enter into various specific performance agreements to acquire lots. Real estate not owned under these agreements is consolidated into real estate inventory with a corresponding liability in liabilities attributable to real estate not owned under option agreements in the Condensed Consolidated Balance Sheets.
Investments in Unconsolidated Entities
— We evaluate our investments in unconsolidated entities for indicators of impairment. A series of operating losses of an investee or other factors may indicate that a decrease in value of our investment in the unconsolidated entity has occurred which is other-than-temporary. The amount of impairment recognized is the excess of the investment’s carrying amount over its estimated fair value. Additionally, we consider various qualitative factors to determine if a decrease in the value of the investment is other-than-temporary. These factors include age of the venture, stage in its life cycle, our intent and ability to recover our investment in the unconsolidated entity, financial condition and long-term prospects of the unconsolidated entity, short-term liquidity needs of the unconsolidated entity, trends in the general economic environment of the land, entitlement status of the land held by the unconsolidated entity, overall projected returns on investment, defaults under contracts with third parties (including bank debt), recoverability of the investment through future cash flows and relationships with the other partners. If the Company believes that the decline in the fair value of the investment is temporary, then no impairment is recorded. We did
not
record any impairment charges for the three and six months ended
June 30, 2018
or
2017
.
Revenue Recognition
Topic 606
In January 2018, we adopted ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
(“ASU 2014-09”), which provides new guidance for revenue recognition and elected to use the modified retrospective approach to account for prior periods. The standard's core principle requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The new guidance does not materially impact our home closings revenue, net, land closings revenue or financial services revenue based on our current operations, customer contracts, and policies. However, the following changes were made to conform to the new guidance:
|
|
•
|
Forfeited customer deposits were previously classified as a credit to Other expense/(income), net on the Condensed Consolidated Statement of Operations. Under Topic 606, these are now considered revenue and recorded in Home closings revenue, net as of January 1, 2018. Prior period balances for forfeited customer deposits were not reclassified and are not material to the Condensed Consolidated Financial Statements.
|
|
|
•
|
Certain costs related to sales offices and model homes were previously capitalized and presented within Prepaid expenses and other assets, net on the Condensed Consolidated Balance Sheet and amortized through Sales, commissions and other marketing costs on the Condensed Consolidated Statement of Operations. Beginning January 1, 2018, these costs have been reclassified to Property and equipment, net on the Condensed Consolidated Balance Sheet and depreciated through Sales, commissions and other marketing costs on the Condensed Consolidated Statement of Operations. A total of
$32.0 million
of sales office and model homes costs were reclassified from Prepaid expenses and other assets, net to Property and equipment, net as of January 1, 2018. As we elected the modified retrospective approach to account for prior periods, the balance of any capitalized sales office and model home costs required to be expensed under Topic 606 was recorded as an adjustment to beginning retained earnings in the first quarter of 2018 and reflected as an approximate
$2.0 million
cumulative effect adjustment to retained earnings in the Condensed Consolidated Statement of Stockholders' Equity.
|
Home and land closings revenue
Under Topic 606, the following steps are applied to determine the proper home closings revenue and land closings revenue recognition: (1) we identify the contract(s) with our customer; (2) we identify the performance obligations in the contract; (3) we determine the transaction price; (4) we allocate the transaction price to the performance obligations in the contract; and (5) we recognize revenue when (or as) we satisfy the performance obligation. For our home sales transactions, we have one contract, with one performance obligation, with each customer to build and deliver the home purchased (or develop and deliver l
and). Based on the application of the five steps, the following summarizes the timing and manner of home and land sales revenue:
|
|
•
|
Revenue from closings of residential real estate is recognized when closings have occurred, the buyer has made the required minimum down payment, obtained necessary financing, the risks and rewards of ownership are transferred to the buyer, and we have no continuing involvement with the property, which is generally upon the close of escrow. Revenue is reported net of any discounts and incentives.
|
|
|
•
|
Revenue from land sales is recognized when a significant down payment is received, title passes and collectability of the receivable is reasonably assured, and we have no continuing involvement with the property, which is generally upon the close of escrow.
|
Financial services revenue
Mortgage operations and hedging activity related to financial services are not within the scope of Topic 606 and therefore there was no change to our accounting policies related to such activities. Loan origination fees (including title fees, points, and closing costs) are recognized at the time the related real estate transactions are completed, usually upon the close of escrow. All of the loans TMHF originates are sold to third party investors within a short period of time, on a non-recourse basis. Gains and losses from the sale of mortgages are recognized in accordance with ASC Topic 860-20,
Sales of Financial Assets.
TMHF does not have continuing involvement with the transferred assets, therefore, we derecognize the mortgage loans at time of sale, based on the difference between the selling price and carrying value of the related loans upon sale, recording a gain/loss on sale in the period of sale. Also included in financial services revenue/expenses is the realized and unrealized gains and losses from hedging instruments.
Recently Issued Accounting Pronouncements
— In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02,
Leases (Topic 842)
(“ASU 2016-02”). ASU 2016-02 primarily impacts off-balance sheet operating leases and will require such leases, with the exception of short-term leases, to be recorded on the balance sheet. Lessor accounting is not significantly impacted by the new guidance, however certain updates were made to align lessee and lessor treatment. ASU 2016-02 will be effective for us in our fiscal year beginning January 1, 2019. The guidance requires a modified retrospective approach for all existing leases at the date of initial adoption. In July 2018, the FASB issued ASU No. 2018-10,
Codification Improvements to Topic 842, Leases
. ASU 2018-10 primarily provides additional guidance to Topic 842 including clarification on residual value guarantees, implicit rates, lessee reassessment of lease classifications, and other various areas within the Topic. We do not believe the adoption of ASU 2016-02 or ASU 2018-10 will have a material impact on our Condensed Consolidated Financial Statements and disclosures.
3. EARNINGS PER SHARE
Basic earnings per common share is computed by dividing net income available to TMHC by the weighted average number of shares of Class A Common Stock outstanding during the period. Diluted earnings per share gives effect to the potential dilution that could occur if all shares of Class B Common Stock and their corresponding New TMM Units were exchanged for shares of Class A Common Stock and if all outstanding dilutive equity awards to issue shares of Class A Common Stock were exercised or settled.
The following is a summary of the components of basic and diluted earnings per share (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income available to TMHC – basic
|
|
$
|
58,678
|
|
|
$
|
27,401
|
|
|
$
|
103,422
|
|
|
$
|
37,169
|
|
Net income attributable to non-controlling interest
|
|
474
|
|
|
28,322
|
|
|
3,133
|
|
|
54,164
|
|
Loss fully attributable to public holding company
|
|
84
|
|
|
125
|
|
|
248
|
|
|
152
|
|
Net income – diluted
|
|
$
|
59,236
|
|
|
$
|
55,848
|
|
|
$
|
106,803
|
|
|
$
|
91,485
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average shares – basic (Class A)
|
|
111,347
|
|
|
58,977
|
|
|
110,508
|
|
|
48,822
|
|
Weighted average shares – non-controlling interest (Class B)
|
|
867
|
|
|
60,630
|
|
|
3,339
|
|
|
70,766
|
|
Restricted stock units
|
|
898
|
|
|
1,075
|
|
|
1,068
|
|
|
976
|
|
Stock Options
|
|
370
|
|
|
379
|
|
|
485
|
|
|
331
|
|
Weighted average shares – diluted
|
|
113,482
|
|
|
121,061
|
|
|
115,400
|
|
|
120,895
|
|
Earnings per common share – basic:
|
|
|
|
|
|
|
|
|
Net income available to Taylor Morrison Home Corporation
|
|
$
|
0.53
|
|
|
$
|
0.46
|
|
|
$
|
0.94
|
|
|
$
|
0.76
|
|
Earnings per common share – diluted:
|
|
|
|
|
|
|
|
|
Net income available to Taylor Morrison Home Corporation
|
|
$
|
0.52
|
|
|
$
|
0.46
|
|
|
$
|
0.93
|
|
|
$
|
0.76
|
|
We excluded a total weighted average of
1,579,683
and
1,660,683
outstanding anti-dilutive stock options and unvested restricted stock units (“RSUs”) and
787,527
and
1,926,724
stock options and unvested RSUs from the calculation of earnings per share for the
three and six months ended June 30, 2018 and 2017
, respectively.
The shares of Class B Common Stock have voting rights but do not have economic rights or rights to dividends or distributions on liquidation and, therefore, are not participating securities. Accordingly, Class B Common Stock is not included in basic earnings per share.
4. REAL ESTATE INVENTORY AND LAND DEPOSITS
Inventory consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
June 30,
2018
|
|
December 31, 2017
|
Real estate developed and under development
|
|
$
|
2,190,939
|
|
|
$
|
2,130,263
|
|
Real estate held for development or held for sale
(1)
|
|
56,814
|
|
|
76,552
|
|
Operating communities
(2)
|
|
850,795
|
|
|
659,398
|
|
Capitalized interest
|
|
95,693
|
|
|
90,496
|
|
Total owned inventory
|
|
3,194,241
|
|
|
2,956,709
|
|
Real estate not owned under option agreements
|
|
1,462
|
|
|
2,527
|
|
Total real estate inventory
|
|
$
|
3,195,703
|
|
|
$
|
2,959,236
|
|
(1)
Real estate held for development or held for sale includes properties which are not in active production. This includes raw land recently purchased or awaiting entitlement, properties where we have ceased development and/or marketing, and long-term strategic assets.
(2)
Operating communities consist of all vertical construction costs relating to homes in progress and completed homes for all active production of inventory.
The development status of our land inventory is as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
June 30, 2018
|
|
December 31, 2017
|
|
|
Owned Lots
|
|
Book Value of Land
and Development
|
|
Owned Lots
|
|
Book Value of Land
and Development
|
Raw
|
|
7,864
|
|
|
$
|
336,396
|
|
|
7,703
|
|
|
$
|
338,642
|
|
Partially developed
|
|
5,567
|
|
|
371,810
|
|
|
5,811
|
|
|
543,200
|
|
Finished
|
|
13,108
|
|
|
1,536,378
|
|
|
11,644
|
|
|
1,314,243
|
|
Long-term strategic assets
|
|
50
|
|
|
3,169
|
|
|
763
|
|
|
10,730
|
|
Total
|
|
26,589
|
|
|
$
|
2,247,753
|
|
|
25,921
|
|
|
$
|
2,206,815
|
|
Land Deposits
— We provide deposits related to land options and land purchase contracts, which are capitalized when paid and classified as land deposits until the associated property is purchased.
As of June 30, 2018
and
December 31, 2017
, we had the right to purchase
3,949
and
5,037
lots under land option purchase contracts, respectively, for an aggregate purchase price of
$350.0 million
and
$405.3 million
, respectively. We do not have title to the properties, and the creditors generally have no recourse against the Company. As of
June 30, 2018
and
December 31, 2017
, our exposure to loss related to our option contracts with third parties and unconsolidated entities consisted of non-refundable deposits totaling
$40.5 million
and
$49.8 million
, respectively, in land deposits related to land options and land purchase contracts.
Capitalized Interest
— Interest capitalized, incurred and amortized is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Interest capitalized - beginning of period
|
|
$
|
95,334
|
|
|
$
|
103,059
|
|
|
$
|
90,496
|
|
|
$
|
102,642
|
|
Interest incurred
|
|
20,129
|
|
|
20,711
|
|
|
39,815
|
|
|
41,425
|
|
Interest amortized to cost of home closings
|
|
(19,770
|
)
|
|
(23,280
|
)
|
|
(34,618
|
)
|
|
(43,577
|
)
|
Interest capitalized - end of period
|
|
$
|
95,693
|
|
|
$
|
100,490
|
|
|
$
|
95,693
|
|
|
$
|
100,490
|
|
5. INVESTMENTS IN UNCONSOLIDATED ENTITIES
We have investments in a number of joint ventures with related and unrelated third parties, with ownership interests up to
50.0%
. These entities are generally involved in real estate development, homebuilding and/or mortgage lending activities. Some of these joint ventures develop land for the sole use of the joint venture participants, including us, and others develop land for sale to the joint venture participants and to unrelated builders. Our share of the joint venture profit relating to lots we purchase from the joint ventures is deferred until homes are delivered by us and title passes to a homebuyer.
Summarized, unaudited combined financial information of unconsolidated entities that are accounted for by the equity method is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
June 30,
2018
|
|
December 31,
2017
|
Assets:
|
|
|
|
|
Real estate inventory
|
|
$
|
591,198
|
|
|
$
|
627,841
|
|
Other assets
|
|
145,205
|
|
|
138,341
|
|
Total assets
|
|
$
|
736,403
|
|
|
$
|
766,182
|
|
Liabilities and owners’ equity:
|
|
|
|
|
Debt
|
|
$
|
181,762
|
|
|
$
|
193,770
|
|
Other liabilities
|
|
26,527
|
|
|
27,556
|
|
Total liabilities
|
|
208,289
|
|
|
221,326
|
|
Owners’ equity:
|
|
|
|
|
TMHC
|
|
189,733
|
|
|
192,364
|
|
Others
|
|
338,381
|
|
|
352,492
|
|
Total owners’ equity
|
|
528,114
|
|
|
544,856
|
|
Total liabilities and owners’ equity
|
|
$
|
736,403
|
|
|
$
|
766,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenues
|
|
$
|
76,629
|
|
|
$
|
64,260
|
|
|
$
|
135,703
|
|
|
$
|
87,253
|
|
Costs and expenses
|
|
(61,485
|
)
|
|
(50,937
|
)
|
|
(108,817
|
)
|
|
(71,041
|
)
|
Income of unconsolidated entities
|
|
$
|
15,144
|
|
|
$
|
13,323
|
|
|
$
|
26,886
|
|
|
$
|
16,212
|
|
TMHC’s share in income of unconsolidated entities
|
|
$
|
4,017
|
|
|
$
|
3,071
|
|
|
$
|
7,263
|
|
|
$
|
4,156
|
|
Distributions from unconsolidated entities
|
|
$
|
12,230
|
|
|
$
|
5,052
|
|
|
$
|
13,263
|
|
|
$
|
6,791
|
|
6. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
As of
June 30, 2018
|
|
As of
December 31, 2017
|
Real estate development costs to complete
|
|
$
|
9,966
|
|
|
$
|
14,815
|
|
Compensation and employee benefits
|
|
50,773
|
|
|
72,352
|
|
Self-insurance and warranty reserves
|
|
53,011
|
|
|
51,010
|
|
Interest payable
|
|
17,011
|
|
|
17,125
|
|
Property and sales taxes payable
|
|
10,885
|
|
|
12,294
|
|
Other accruals
|
|
25,669
|
|
|
33,944
|
|
Total accrued expenses and other liabilities
|
|
$
|
167,315
|
|
|
$
|
201,540
|
|
Self-Insurance and Warranty Reserves –
We accrue for the expected costs associated with our limited warranty, deductibles and self-insured amounts under our various insurance policies within Beneva Indemnity Company ("Beneva"), a wholly owned subsidiary. A summary of the changes in our reserves are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Reserve - beginning of period
|
|
$
|
50,336
|
|
|
$
|
52,416
|
|
|
$
|
51,010
|
|
|
$
|
50,550
|
|
Additions to reserves
|
|
10,282
|
|
|
6,744
|
|
|
15,325
|
|
|
11,043
|
|
Costs and claims incurred
|
|
(7,873
|
)
|
|
(6,593
|
)
|
|
(12,933
|
)
|
|
(9,928
|
)
|
Change in estimates to existing reserves
|
|
266
|
|
|
1,517
|
|
|
(391
|
)
|
|
2,419
|
|
Reserve - end of period
|
|
$
|
53,011
|
|
|
$
|
54,084
|
|
|
$
|
53,011
|
|
|
$
|
54,084
|
|
7. DEBT
Total debt consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
June 30, 2018
|
|
December 31, 2017
|
|
|
Principal
|
|
Unamortized Debt Issuance Costs
|
|
Carrying Value
|
|
Principal
|
|
Unamortized Debt Issuance Costs
|
|
Carrying Value
|
5.25% Senior Notes due 2021, unsecured
|
|
$
|
550,000
|
|
|
$
|
3,294
|
|
|
$
|
546,706
|
|
|
$
|
550,000
|
|
|
$
|
3,892
|
|
|
$
|
546,108
|
|
5.875% Senior Notes due 2023, unsecured
|
|
350,000
|
|
|
2,718
|
|
|
347,282
|
|
|
350,000
|
|
|
3,002
|
|
|
346,998
|
|
5.625% Senior Notes due 2024, unsecured
|
|
350,000
|
|
|
3,050
|
|
|
346,950
|
|
|
350,000
|
|
|
3,319
|
|
|
346,681
|
|
Senior Notes subtotal
|
|
1,250,000
|
|
|
9,062
|
|
|
1,240,938
|
|
|
1,250,000
|
|
|
10,213
|
|
|
1,239,787
|
|
Loans payable and other borrowings
|
|
136,508
|
|
|
—
|
|
|
136,508
|
|
|
139,453
|
|
|
—
|
|
|
139,453
|
|
Revolving Credit Facility
(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Mortgage warehouse borrowings
|
|
49,818
|
|
|
—
|
|
|
49,818
|
|
|
118,822
|
|
|
—
|
|
|
118,822
|
|
Total Senior Notes and other financing
|
|
$
|
1,436,326
|
|
|
$
|
9,062
|
|
|
$
|
1,427,264
|
|
|
$
|
1,508,275
|
|
|
$
|
10,213
|
|
|
$
|
1,498,062
|
|
(1)
The Revolving Credit Facility included
$3.1 million
and
$2.0 million
of unamortized debt issuance costs as of
June 30, 2018
and
December 31, 2017
, respectively, which is presented in Prepaid expenses and other assets, net on the Consolidated Balance Sheets. As of
June 30, 2018
and
December 31, 2017
, we had
$48.4 million
and
$47.1 million
, respectively, of utilized letters of credit, resulting in
$551.6 million
and
$452.9 million
, respectively, of availability on the Revolving Credit Facility.
2021 Senior Notes
On April 16, 2013, we issued
$550.0 million
aggregate principal amount of
5.25%
Senior Notes due 2021 (the “2021 Senior Notes”).
The 2021 Senior Notes mature on April 15, 2021. The 2021 Senior Notes are guaranteed by TMM Holdings Limited Partnership (“TMM Holdings”), Taylor Morrison Holdings, Inc., Taylor Morrison Communities II, Inc. and their homebuilding subsidiaries (collectively, the “Guarantors”), which are all subsidiaries directly or indirectly of TMHC. The 2021 Senior Notes and the related guarantees are senior unsecured obligations and are not subject to registration rights. The indenture for the 2021 Senior Notes contains covenants that limit (i) the making of investments, (ii) the payment of dividends and the redemption of equity and junior debt, (iii) the incurrence of additional indebtedness, (iv) asset dispositions, (v) mergers and similar corporate transactions, (vi) the incurrence of liens, (vii) prohibitions on payments and asset transfers among the issuers and restricted subsidiaries and (viii) transactions with affiliates, among others. The indenture governing the 2021 Senior Notes contains customary events of default. If we do not apply the net cash proceeds of certain asset sales within specified deadlines, we will be required to offer to repurchase the 2021 Senior Notes at par (plus accrued and unpaid interest) with such proceeds. We are also required to offer to repurchase the 2021 Senior Notes at a price equal to
101%
of their aggregate principal amount (plus accrued and unpaid interest) upon certain change of control events.
The 2021 Senior Notes are redeemable at scheduled redemption prices, currently at
102.625%
, of their principal amount (plus accrued and unpaid interest).
There are no financial maintenance covenants for the 2021 Senior Notes.
2023 Senior Notes
On April 16, 2015, we issued
$350.0 million
aggregate principal amount of
5.875%
Senior Notes due 2023 (the “2023 Senior Notes”). The 2023 Senior Notes and the related guarantees are senior unsecured obligations and are not subject to registration rights.
The 2023 Senior Notes mature on
April 15, 2023
. The 2023 Senior Notes are guaranteed by the same Guarantors that guarantee the 2021 Senior Notes. The indenture governing the 2023 Senior Notes contains covenants that limit our ability to incur debt secured by liens and enter into certain sale and leaseback transactions. The indenture governing the 2023 Senior Notes contains events of default that are similar to those contained in the indenture governing the 2021 Senior Notes. The change of control provisions in the indenture governing the 2023 Senior Notes are similar to those contained in the indenture governing the 2021 Senior Notes, but a credit rating downgrade must occur in connection with the change of control before the repurchase offer requirement is triggered for the 2023 Senior Notes.
Prior to January 15, 2023, the 2023 Senior Notes are redeemable at a price equal to
100%
plus a “make-whole” premium for payments through January 15, 2023 (plus accrued and unpaid interest). Beginning January 15, 2023, the 2023 Senior Notes are redeemable at par (plus accrued and unpaid interest).
There are no financial maintenance covenants for the 2023 Senior Notes.
2024 Senior Notes
On March 5, 2014, we issued
$350.0 million
aggregate principal amount of
5.625%
Senior Notes due 2024 (the “2024 Senior Notes”).
The 2024 Senior Notes mature on
March 1, 2024
. The 2024 Senior Notes are guaranteed by the same Guarantors that guarantee the 2021 and 2023 Senior Notes. The 2024 Senior Notes and the related guarantees are senior unsecured obligations and are not subject to registration rights. The indenture governing the 2024 Senior Notes contains covenants that limit our ability to incur debt secured by liens and enter into certain sale and leaseback transactions similar to the 2023 Senior Notes. The indenture governing the 2024 Senior Notes contains events of default that are similar to those contained in the indenture governing the 2021 and 2023 Senior Notes. The change of control provisions in the indenture governing the 2024 Senior Notes are similar to those contained in the indenture governing the 2023 Senior Notes.
Prior to December 1, 2023, the 2024 Senior Notes are redeemable at a price equal to
100%
plus a “make-whole” premium for payments through December 1, 2023 (plus accrued and unpaid interest). Beginning on December 1, 2023, the 2024 Senior Notes are redeemable at par (plus accrued and unpaid interest).
There are no financial maintenance covenants for the 2024 Senior Notes.
Revolving Credit Facility
On January 26, 2018, we amended our
$500.0 million
Revolving Credit Facility to extend the maturity date from April 12, 2019 to
January 26, 2022
. On June 29, 2018, we further amended the Revolving Credit Facility to increase the amount available to
$600.0 million
. Other immaterial changes were also made to the structure of the Revolving Credit Facility. The Revolving Credit Facility is guaranteed by the same Guarantors that guarantee the 2021, 2023 and 2024 Senior Notes.
The Revolving Credit Facility contains certain “springing” financial covenants, requiring us and our subsidiaries to comply with a maximum debt to capitalization ratio of not more than
0.60
to
1.00
and a minimum consolidated tangible net worth level of at least
$1.7 billion
. The financial covenants would be in effect for any fiscal quarter during which any (a) loans under the Revolving Credit Facility are outstanding during the last day of such fiscal quarter or on more than five separate days during such fiscal quarter or (b) undrawn letters of credit (except to the extent cash collateralized) issued under the Revolving Credit Facility in an aggregate amount greater than
$40.0 million
or unreimbursed letters of credit issued under the Revolving Credit Facility are outstanding on the last day of such fiscal quarter or for more than
five
consecutive days during such fiscal quarter. For purposes of determining compliance with the financial covenants for any fiscal quarter, the Revolving Credit Facility provides that we may exercise an equity cure by issuing certain permitted securities for cash or otherwise recording cash contributions to our capital that will, upon the contribution of such cash to the borrower, be included in the calculation of consolidated tangible net worth and consolidated total capitalization. The equity cure right is exercisable up to twice in any period of
four
consecutive fiscal quarters and up to
five
times overall.
The Revolving Credit Facility contains certain restrictive covenants including limitations on incurrence of liens, dividends and other distributions, asset dispositions and investments in entities that are not guarantors, limitations on prepayment of subordinated indebtedness and limitations on fundamental changes. The Revolving Credit Facility contains customary events of default, subject to applicable grace periods, including for nonpayment of principal, interest or other amounts, violation of covenants (including financial covenants, subject to the exercise of an equity cure), incorrectness of representations and warranties in any material respect, cross default and cross acceleration, bankruptcy, material monetary judgments, ERISA events with material adverse effect, actual or asserted invalidity of material guarantees and change of control. As of
June 30, 2018
, we were in compliance with all of the covenants under the Revolving Credit Facility.
Mortgage Warehouse Borrowings
The following is a summary of our mortgage warehouse borrowings (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2018
|
Facility
|
|
Amount Drawn
|
|
Facility Amount
|
|
Interest Rate
|
|
Expiration Date
|
|
Collateral
(1)
|
Flagstar
|
|
$
|
1,692
|
|
|
$
|
5,000
|
|
(2)
|
LIBOR + 2.25%
|
|
30 days written notice
|
|
Mortgage Loans
|
Comerica
|
|
18,334
|
|
|
50,000
|
|
|
LIBOR + 2.25%
|
|
On Demand
|
|
Mortgage Loans
|
J.P. Morgan
|
|
29,792
|
|
|
100,000
|
|
|
LIBOR + 2.375%
|
|
September 24, 2018
|
|
Mortgage Loans and Restricted Cash
|
Total
|
|
$
|
49,818
|
|
|
$
|
155,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
Facility
|
|
Amount Drawn
|
|
Facility Amount
|
|
Interest Rate
|
|
Expiration Date
|
|
Collateral
(1)
|
Flagstar
|
|
$
|
12,990
|
|
|
$
|
39,000
|
|
|
LIBOR + 2.25%
|
|
30 days written notice
|
|
Mortgage Loans
|
Comerica
|
|
41,447
|
|
|
85,000
|
|
|
LIBOR + 2.25%
|
|
On Demand
|
|
Mortgage Loans
|
J.P. Morgan
|
|
64,385
|
|
|
125,000
|
|
|
LIBOR + 2.375%
|
|
September 24, 2018
|
|
Mortgage Loans and Restricted Cash
|
Total
|
|
$
|
118,822
|
|
|
$
|
249,000
|
|
|
|
(1)
The mortgage warehouse borrowings outstanding as of
June 30, 2018
and
December 31, 2017
were collateralized by a)
$99.6 million
and
$187.0 million
, respectively, of mortgage loans held for sale, which comprised the balance of mortgage loans held for sale and b) approximately
$1.3 million
and
$1.6 million
, respectively, of cash which are included in restricted cash in the accompanying Condensed Consolidated Balance Sheets.
(2)
We amended our warehouse agreement with Flagstar during the three months ended June 30, 2018 and reduced our capacity from
$39.0 million
to
$5.0 million
. From time to time we have the ability to increase or decrease capacity to accommodate funding needs.
Loans Payable and Other Borrowings
Loans payable and other borrowings as of
June 30, 2018
and
December 31, 2017
consist of project-level debt due to various land sellers and seller financing notes from current and prior year acquisitions. Project-level debt is generally secured by the land that was acquired and the principal payments generally coincide with corresponding project lot sales or a principal reduction schedule. Loans payable bear interest at rates that ranged from
0%
to
8%
at each of
June 30, 2018
and
December 31, 2017
. We impute interest for loans with no stated interest rates.
8. FAIR VALUE DISCLOSURES
We have adopted ASC Topic 820,
Fair Value Measurements,
for valuation of financial instruments. ASC Topic 820 provides a framework for measuring fair value under GAAP, expands disclosures about fair value measurements, and establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the fair value hierarchy are summarized as follows:
Level 1
— Fair value is based on quoted prices for identical assets or liabilities in active markets.
Level 2
— Fair value is determined using quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active or are directly or indirectly observable.
Level 3
— Fair value is determined using one or more significant inputs that are unobservable in active markets at the measurement date, such as a pricing model, discounted cash flow, or similar technique.
The fair value of our mortgage loans held for sale is derived from negotiated rates with partner lending institutions. The fair value of derivative assets includes interest rate lock commitments (“IRLCs”) and mortgage backed securities (“MBS”). The fair value of IRLCs is based on the value of the underlying mortgage loan, quoted MBS prices and the probability that the mortgage loan will fund within the terms of the IRLCs. We estimate the fair value of the forward sales commitments based on quoted MBS prices. The fair value of our mortgage warehouse borrowings, loans payable and other borrowings and the borrowings under our Revolving Credit Facility approximate carrying value due to their short term nature and variable interest rate terms. The fair value of our Senior Notes is derived from quoted market prices by independent dealers in markets that are not active. The fair value of the contingent consideration liability related to previous acquisitions was estimated using a Monte Carlo simulation model under the option pricing method. As the measurement of the contingent consideration is based primarily on significant inputs not observable in the market, it represents a Level 3 measurement. There were no changes to or transfers between the levels of the fair value hierarchy for any of our financial instruments as of
June 30, 2018
, when compared to
December 31, 2017
.
The carrying value and fair value of our financial instruments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
December 31, 2017
|
(Dollars in thousands)
|
|
Level in Fair
Value Hierarchy
|
|
Carrying
Value
|
|
Estimated
Fair
Value
|
|
Carrying
Value
|
|
Estimated
Fair
Value
|
Description:
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans held for sale
|
|
2
|
|
$
|
99,606
|
|
|
$
|
99,606
|
|
|
$
|
187,038
|
|
|
$
|
187,038
|
|
Derivative assets, net
|
|
2
|
|
2,451
|
|
|
2,451
|
|
|
1,352
|
|
|
1,352
|
|
Mortgage warehouse borrowings
|
|
2
|
|
49,818
|
|
|
49,818
|
|
|
118,822
|
|
|
118,822
|
|
Loans payable and other borrowings
|
|
2
|
|
136,508
|
|
|
136,508
|
|
|
139,453
|
|
|
139,453
|
|
5.25% Senior Notes due 2021
(1)
|
|
2
|
|
546,706
|
|
|
550,000
|
|
|
546,108
|
|
|
561,000
|
|
5.875% Senior Notes due 2023
(1)
|
|
2
|
|
347,282
|
|
|
348,250
|
|
|
346,998
|
|
|
369,705
|
|
5.625% Senior Notes due 2024
(1)
|
|
2
|
|
346,950
|
|
|
342,335
|
|
|
346,681
|
|
|
366,205
|
|
Revolving Credit Facility
|
|
2
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Contingent consideration liability
(2)
|
|
3
|
|
—
|
|
|
—
|
|
|
5,328
|
|
|
5,328
|
|
(1)
Carrying value for Senior Notes, as presented, includes unamortized debt issuance costs. Debt issuance costs are not factored into the fair value calculation for the Senior Notes.
(2)
All payments related to our contingent consideration liability were paid during the first quarter of 2018 and
no
liability exists as of June 30, 2018.
9. INCOME TAXES
Our effective tax rate for the
three and six months ended June 30, 2018
was
25.2%
and
22.9%
, respectively, compared to
28.7%
and
31.1%
for the same periods in
2017
, respectively. For the
three and six months ended June 30, 2018 and 2017
, the effective tax rate differed from the U.S. federal statutory income tax rate primarily due to state income taxes, special deductions and credits relating to home building activities, uncertain tax positions, and discrete tax adjustments related to certain deferred tax assets and liabilities. The effective tax rate for the
six months ended June 30, 2018
was favorably impacted by the reduction in the federal corporate tax rate from
35%
to
21%
as a result of the Tax Cuts and Jobs Act (“Tax Act”), the relevant provisions of which became effective on
January 1, 2018
.
In accordance with Staff Accounting Bulletin No. 118 (“SAB 118”), the Company recorded provisional tax expense in the fourth quarter of
2017
related to the write-down of our existing deferred tax assets and the mandatory deemed repatriation of foreign earnings related to the sale of our Canadian business in
2015
. In the
quarter ended June 30, 2018
, we recorded a
$1.0 million
reduction to the provisional tax expense for the mandatory repatriation of foreign earnings. The adjustment to the provisional tax expense during the quarter was a result of the filing of foreign income tax returns and the issuance of additional guidance from the IRS interpreting various provisions of the Tax Act. Our accounting of the Tax Act is still a provisional estimate and further adjustments may be necessary in 2018 due to changes in our interpretation of the Tax Act and the issuance of additional guidance by various regulatory bodies. We expect our final accounting for the Tax Act under SAB 118 to be completed when we finalize our
2017
income tax returns.
At both
June 30, 2018
and
December 31, 2017
, cumulative gross unrecognized tax benefits were
$12.9 million
. If the unrecognized tax benefits as of
June 30, 2018
were to be recognized, approximately
$10.3 million
would affect the effective tax rate. We had
$1.3 million
and
$1.0 million
of gross interest and penalties related to unrecognized tax positions accrued as of
June 30, 2018
and
December 31, 2017
, respectively.
10. STOCKHOLDERS’ EQUITY
Capital Stock —
Holders of Class A Common Stock and Class B Common Stock are entitled to one vote for each share held on all matters submitted to stockholders for their vote or approval.
The holders of Class A Common Stock and Class B Common Stock vote together as a single class on all matters submitted to stockholders for their vote or approval, except with respect to the amendment of certain provisions of the amended and restated Certificate of Incorporation that would alter or change the powers, preferences or special rights of the Class B Common Stock so as to affect them adversely. Such amendments must be approved by a majority of the votes entitled to be cast by the holders of the shares affected by the amendment, voting as a separate class, or as otherwise required by applicable law. The voting power of the outstanding Class B Common Stock (expressed as a percentage of the total voting power of all Common Stock) is equal to the percentage of partnership interests in New TMM not held directly or indirectly by TMHC.
During the first quarter of 2018, we completed sales of our Class A Common Stock in registered public offerings. We used all of the net proceeds from these public offerings to purchase partnership units in New TMM, our direct subsidiary, along with shares of our Class B Common Stock, held by our Remaining Principal Equityholders. As a result, we adjusted Non-controlling interests and Additional paid-in capital on the Condensed Consolidated Balance Sheets to reflect the change in ownership. The aggregate number of partnership units and corresponding shares of Class B Common Stock we purchased was equal to the number of shares of Class A Common Stock sold in the public offerings.
The following is a summary of the completed sales of our Class A Common Stock in registered public offerings for the first quarter of 2018:
|
|
|
|
|
|
|
|
(Shares presented in thousands)
|
|
|
|
Closing date
|
Number of shares
|
|
Net sale price per share
|
January 8, 2018
|
11,000
|
|
|
$
|
26.05
|
|
January 17, 2018
(1)
|
19,207
|
|
|
27.14
|
|
(1)
The January 17, 2018 offering consisted of
17.7 million
shares of Class A common stock offered by the Company and
1.5 million
shares offered directly by our Principal Equityholder, TPG.
In addition, in a series of transactions following each public offering, the Company purchased
3.8 million
shares of Class B common stock directly from our Remaining Principal Equityholders on both January 8, 2018 and January 17, 2018 at the same respective net purchase price per share, for an aggregate total of
7.6 million
shares purchased.
Following our final public offering on January 17, 2018, our Principal Equityholders no longer have any remaining investment in us. The components and respective voting power of outstanding TMHC Common Stock, including the effects of the secondary offerings, at
June 30, 2018
are as follows:
|
|
|
|
|
|
|
|
|
|
Shares
Outstanding
|
|
Percentage
|
Class A Common Stock
|
|
111,387,224
|
|
|
99.2
|
%
|
Class B Common Stock
(1)
|
|
863,434
|
|
|
0.8
|
%
|
Total
|
|
112,250,658
|
|
|
100
|
%
|
(1)
The remaining
0.8%
of Class B Common Stock is held by certain current and former members of management and directors.
Stock Repurchase Program
On January 3, 2018, our Board of Directors authorized an extension of the Company's stock repurchase program through December 31, 2018 and increased the amount available for repurchases under the program to a maximum total amount of
$200.0 million
of the Company’s Common Stock in open market purchases, privately negotiated transactions or other transactions. The stock repurchase program is subject to prevailing market conditions and other considerations, including our liquidity, the terms of our debt instruments, statutory requirements, planned land investment and development spending, acquisition and other investment opportunities and ongoing capital requirements. On January 8, 2018 we purchased
$100.0 million
of Common Stock. On January 17, 2018 we purchased an additional
$101.8 million
. Because these repurchases were in connection with the offerings by our Remaining Principal Equityholders, the stock repurchase program was not reduced by such purchase and such authorization remained in effect thereafter. As of June 30, 2018 there was
$95.9 million
available to be used for repurchases. During the three months ended June 30, 2018, there were
no
shares repurchased. During the three and six months ended June 30, 2017, there were
no
shares repurchased.
11. STOCK BASED COMPENSATION
Equity-Based Compensation
In April 2013, we adopted the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan (the "Plan"). The Plan was most recently amended and restated in May 2017. The Plan provides for the grant of stock options, RSUs and other equity-based awards deliverable in shares of our Class A Common Stock. As of
June 30, 2018
, we had an aggregate of
8,338,851
shares of Class A Common Stock available for future grants under the Plan.
The following table provides information regarding the amount and components of stock-based compensation expense, all of which is included in general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Restricted stock units
(1)
|
|
$
|
1,803
|
|
|
$
|
2,294
|
|
|
$
|
4,105
|
|
|
$
|
4,191
|
|
Stock options
|
|
944
|
|
|
1,188
|
|
|
2,185
|
|
|
2,146
|
|
New TMM units
(2)
|
|
—
|
|
|
356
|
|
|
—
|
|
|
513
|
|
Total stock compensation
|
|
$
|
2,747
|
|
|
$
|
3,838
|
|
|
$
|
6,290
|
|
|
$
|
6,850
|
|
(1)
Includes compensation expense related to time-based RSUs and performance-based RSUs. Outstanding performance-based RSUs reflected in the table above are reported at target level of performance.
(2)
As of December 31, 2017, all new TMM units were vested, and there is no further expense associated with them.
At
June 30, 2018
and
December 31, 2017
, the aggregate unrecognized value of all outstanding stock-based compensation awards was approximately
$27.7 million
and
$19.8 million
, respectively.
Restricted Stock Units
– The following table summarizes the time-based RSU and performance-based RSU activity for the
six months ended June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted Average
Grant Date Fair
Value
|
Balance at December 31, 2017
|
|
1,889,559
|
|
|
$
|
14.84
|
|
Granted
|
|
566,943
|
|
|
24.12
|
|
Vested
|
|
(223,739
|
)
|
|
15.29
|
|
Forfeited
(1)
|
|
(367,860
|
)
|
|
16.59
|
|
Balance at June 30, 2018
|
|
1,864,903
|
|
|
$
|
17.09
|
|
(1)
Forfeitures on time-based RSUs are a result of terminations of employment, while forfeitures on performance-based RSUs are a result of failing to attain certain goals as outlined in our stock based compensation awards or termination of employment.
During the three and six months ended
June 30, 2018
, we granted time-based RSU awards and performance-based RSU awards to certain employees and members of the Board of Directors of the Company.
Our time-based RSUs consist of awards that settle in shares of Class A Common Stock and have been awarded to our employees and members of our Board of Directors. Vesting of these RSUs is subject to continued employment with TMHC or an affiliate, or continued service on the Board of Directors, through the applicable vesting dates. Time-based RSUs granted to employees generally vest ratably over a
three
to
four
year period, based on the grant date. Time-based RSUs granted to members of the Board of Directors generally vest on the first anniversary of the grant date.
Additionally, we granted performance-based RSUs to certain employees of the Company. These awards will vest in full based on the achievement of certain performance goals over a
three
-year performance period, subject to the employee’s continued employment through the date the Compensation Committee certifies the applicable level of performance achieved and will be settled in shares of our Class A Common Stock. The number of shares that may be issued in settlement of the performance-based RSUs to the award recipients may be greater or lesser than the target award amount depending on actual performance achieved as compared to the performance targets set forth in the awards.
Stock Options –
The following table summarizes the stock option activity for the
six months ended June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted
Average Exercise
Price Per Share
|
Outstanding at December 31, 2017
|
|
2,854,213
|
|
|
$
|
17.50
|
|
Granted
|
|
721,762
|
|
|
23.86
|
|
Exercised
|
|
(98,270
|
)
|
|
16.16
|
|
Canceled/Forfeited
|
|
(194,849
|
)
|
|
18.52
|
|
Outstanding at June 30, 2018
|
|
3,282,856
|
|
|
$
|
18.86
|
|
Options exercisable at June 30, 2018
|
|
1,541,557
|
|
|
$
|
18.74
|
|
Options granted to employees vest and become exercisable ratably on the second, third, fourth and fifth anniversary of the date of grant. Options granted to members of the Board of Directors vest and become exercisable ratably on the first, second and third anniversary of the date of grant. Vesting of the options is subject to continued employment with TMHC or an affiliate, or continued service on the Board of Directors, through the applicable vesting dates, and options expire within
ten
years from the date of grant.
New TMM Units –
Certain members of management and certain members of the Board of Directors were issued Class M partnership units in TMM Holdings. Those units were subject to both time and performance vesting conditions.
Pursuant to the reorganization transactions in connection with our IPO, the time-vesting Class M Units in TMM Holdings were exchanged for New TMM Units with vesting terms substantially the same as the Class M Units surrendered for exchange.
One
New TMM Unit together with a corresponding share of Class B Common Stock is exchangeable for
one
share of Class A Common Stock. As of December 31, 2017, all New TMM Units were vested. The shares of Class B Common Stock/New TMM Units held by members of management and members of our Board of Directors as of
June 30, 2018
were as follows:
|
|
|
|
|
|
|
|
|
|
|
Class B Shares/New
TMM Units
|
|
Weighted
Average Grant Date
Fair Value
|
Balance at December 31, 2017
|
|
883,921
|
|
|
$
|
5.24
|
|
Exchanges
(1)
|
|
(20,487
|
)
|
|
6.93
|
|
Balance at June 30, 2018
|
|
863,434
|
|
|
$
|
5.20
|
|
(1)
Exchanges during the period represent the exchange of a vested New TMM Unit along with the corresponding share of Class B Common Stock for a newly issued share of Class A Common Stock.
12. RELATED-PARTY TRANSACTIONS
From time to time, we may engage in transactions with entities or persons that are affiliated with us. Such transactions with related parties are typically conducted in the normal course of operations and are generally executed at arm’s length, as they are entered into at terms comparable to those entered into with unrelated third parties. There was no activity for the three months ended June 30, 2018.
During the six months ended June 30, 2018 we engaged in multiple equity offering transactions with our Remaining Principal Equityholders. Refer to
Note 10 - Stockholders' Equity
for discussion regarding such transactions.
During the
three months ended June 30, 2017
, we entered into a contract to purchase
140
home lots in Tustin, California for a total purchase price of
$30.0 million
from Intracorp Companies, which is owned and controlled by a member of the Board of Directors.
During the three and
six months ended June 30, 2017
, we completed multiple sales of our Class A Common Stock in registered public offerings. We used all of the net proceeds from these public offerings to purchase partnership units in New TMM, our direct subsidiary, along with shares of our Class B Common Stock, held by our Former Principal Equityholders. As a result, we adjusted Non-controlling interests and Additional paid-in capital on the Condensed Consolidated Balance Sheets to reflect the change in ownership. The aggregate number of partnership units and corresponding shares of Class B Common Stock we purchased was equal to the number of shares of Class A Common Stock sold in the public offerings. The following is a summary of the completed sales of our Class A Common Stock in registered public offerings for the six months ended June 30, 2017:
|
|
|
|
|
|
|
|
(Shares presented in thousands)
|
|
|
|
Closing date
|
Number of shares
|
|
Net purchase price per share
|
February 6, 2017
|
11,500
|
|
|
$
|
18.2875
|
|
March 27, 2017
|
10,000
|
|
|
20.7800
|
|
May 5, 2017
|
10,000
|
|
|
23.1200
|
|
June 27, 2017
|
10,000
|
|
|
23.3000
|
|
13. ACCUMULATED OTHER COMPREHENSIVE INCOME
The table below provides the components of accumulated other comprehensive income (loss) (“AOCI”) for the periods presented (in thousands). There was no activity in the three months ended June 30, 2018, therefore it is not presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
|
|
Total Post-
Retirement
Benefits
Adjustments
|
|
Foreign
Currency
Translation
Adjustments
|
|
Non-controlling
Interest - Principal
Equityholders
Reclassification
|
|
Total
|
Balance, beginning of period
|
|
$
|
2,082
|
|
|
$
|
(45,205
|
)
|
|
$
|
25,155
|
|
|
$
|
(17,968
|
)
|
Gross amounts reclassified within AOCI
|
|
—
|
|
|
25,155
|
|
|
(25,155
|
)
|
|
—
|
|
Balance, end of period
|
|
$
|
2,082
|
|
|
$
|
(20,050
|
)
|
|
$
|
—
|
|
|
$
|
(17,968
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2017
|
|
|
Total Post-
Retirement
Benefits
Adjustments
|
|
Foreign
Currency
Translation
Adjustments
|
|
Non-controlling
Interest - Principal
Equityholders
Reclassification
|
|
Total
|
Balance, beginning of period
|
|
$
|
2,061
|
|
|
$
|
(63,448
|
)
|
|
$
|
43,398
|
|
|
$
|
(17,989
|
)
|
Gross amounts reclassified within AOCI
|
|
—
|
|
|
11,489
|
|
|
(11,489
|
)
|
|
—
|
|
Balance, end of period
|
|
$
|
2,061
|
|
|
$
|
(51,959
|
)
|
|
$
|
31,909
|
|
|
$
|
(17,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2017
|
|
|
Total Post-
Retirement
Benefits
Adjustments
|
|
Foreign
Currency
Translation
Adjustments
|
|
Non-controlling
Interest - Principal
Equityholders
Reclassification
|
|
Total
|
Balance, beginning of period
|
|
$
|
2,061
|
|
|
$
|
(79,927
|
)
|
|
$
|
59,877
|
|
|
$
|
(17,989
|
)
|
Gross amounts reclassified within AOCI
|
|
—
|
|
|
27,968
|
|
|
(27,968
|
)
|
|
—
|
|
Balance, end of period
|
|
$
|
2,061
|
|
|
$
|
(51,959
|
)
|
|
$
|
31,909
|
|
|
$
|
(17,989
|
)
|
14. REPORTING SEGMENTS
We have multiple homebuilding operating components which are engaged in the business of acquiring and developing land, constructing homes, marketing and selling those homes, and providing warranty and customer service. We aggregate our homebuilding operating components into
three
reporting segments, East, Central, and West, based on similar long-term economic characteristics. We also have a financial services reporting segment. We have no inter-segment sales as all sales are to external customers.
Our reporting segments are as follows:
|
|
|
East
|
Atlanta, Charlotte, Chicago, Orlando, Raleigh, Southwest Florida and Tampa
|
Central
|
Austin, Dallas and Houston (both include a Taylor Morrison division and a Darling Homes division), and Denver
|
West
|
Bay Area, Phoenix, Sacramento and Southern California
|
Financial Services
|
Taylor Morrison Home Funding, LLC (“TMHF”) and Inspired Title Services, LLC (“Inspired Title”)
|
Segment information is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
|
East
|
|
Central
|
|
West
|
|
Financial Services
|
|
Corporate
and
Unallocated
|
|
Total
|
Total revenues
|
|
$
|
360,472
|
|
|
$
|
298,112
|
|
|
$
|
305,978
|
|
|
$
|
16,266
|
|
|
$
|
—
|
|
|
$
|
980,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
65,128
|
|
|
53,653
|
|
|
54,816
|
|
|
5,114
|
|
|
—
|
|
|
178,711
|
|
Selling, general and administrative expenses
|
|
(31,105
|
)
|
|
(26,122
|
)
|
|
(20,061
|
)
|
|
—
|
|
|
(22,777
|
)
|
|
(100,065
|
)
|
Equity in income of unconsolidated entities
|
|
128
|
|
|
374
|
|
|
1,476
|
|
|
2,039
|
|
|
—
|
|
|
4,017
|
|
Interest and other (expense), net
|
|
(122
|
)
|
|
(130
|
)
|
|
(101
|
)
|
|
—
|
|
|
(3,025
|
)
|
|
(3,378
|
)
|
Income/(loss) before income taxes
|
|
$
|
34,029
|
|
|
$
|
27,775
|
|
|
$
|
36,130
|
|
|
$
|
7,153
|
|
|
$
|
(25,802
|
)
|
|
$
|
79,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2017
|
|
|
East
|
|
Central
|
|
West
|
|
Financial Services
|
|
Corporate
and
Unallocated
|
|
Total
|
Total revenues
|
|
$
|
320,053
|
|
|
$
|
267,562
|
|
|
$
|
305,245
|
|
|
$
|
15,634
|
|
|
$
|
—
|
|
|
$
|
908,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
68,988
|
|
|
48,413
|
|
|
48,487
|
|
|
5,532
|
|
|
—
|
|
|
171,420
|
|
Selling, general and administrative expenses
|
|
(29,337
|
)
|
|
(25,933
|
)
|
|
(18,854
|
)
|
|
—
|
|
|
(21,286
|
)
|
|
(95,410
|
)
|
Equity in income of unconsolidated entities
|
|
—
|
|
|
226
|
|
|
685
|
|
|
2,160
|
|
|
|
|
|
3,071
|
|
Interest and other (expense)/income, net
|
|
(129
|
)
|
|
602
|
|
|
(67
|
)
|
|
—
|
|
|
(1,081
|
)
|
|
(675
|
)
|
Income/(loss) before income taxes
|
|
$
|
39,522
|
|
|
$
|
23,308
|
|
|
$
|
30,251
|
|
|
$
|
7,692
|
|
|
$
|
(22,367
|
)
|
|
$
|
78,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
|
|
East
|
|
Central
|
|
West
|
|
Financial
Services
|
|
Corporate
and
Unallocated
|
|
Total
|
Total revenues
|
|
$
|
645,279
|
|
|
$
|
512,224
|
|
|
$
|
545,186
|
|
|
$
|
30,472
|
|
|
$
|
—
|
|
|
$
|
1,733,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
117,417
|
|
|
94,280
|
|
|
100,840
|
|
|
9,276
|
|
|
—
|
|
|
321,813
|
|
Selling, general and administrative expenses
|
|
(59,738
|
)
|
|
(48,402
|
)
|
|
(35,626
|
)
|
|
—
|
|
|
(43,314
|
)
|
|
(187,080
|
)
|
Equity in income of unconsolidated entities
|
|
239
|
|
|
755
|
|
|
2,571
|
|
|
3,698
|
|
|
—
|
|
|
7,263
|
|
Interest and other (expense), net
|
|
(600
|
)
|
|
(238
|
)
|
|
(81
|
)
|
|
—
|
|
|
(2,554
|
)
|
|
(3,473
|
)
|
Income/(loss) before income taxes
|
|
$
|
57,318
|
|
|
$
|
46,395
|
|
|
$
|
67,704
|
|
|
$
|
12,974
|
|
|
$
|
(45,868
|
)
|
|
$
|
138,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2017
|
|
|
East
|
|
Central
|
|
West
|
|
Financial
Services
|
|
Corporate
and
Unallocated
|
|
Total
|
Total revenues
|
|
$
|
583,718
|
|
|
$
|
473,819
|
|
|
$
|
590,164
|
|
|
$
|
29,883
|
|
|
$
|
—
|
|
|
$
|
1,677,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
122,346
|
|
|
85,621
|
|
|
94,067
|
|
|
11,079
|
|
|
—
|
|
|
313,113
|
|
Selling, general and administrative expenses
|
|
(56,506
|
)
|
|
(47,425
|
)
|
|
(37,907
|
)
|
|
—
|
|
|
(42,317
|
)
|
|
(184,155
|
)
|
Equity in income of unconsolidated entities
|
|
—
|
|
|
58
|
|
|
602
|
|
|
3,496
|
|
|
—
|
|
|
4,156
|
|
Interest and other (expense)/income, net
|
|
(213
|
)
|
|
258
|
|
|
(192
|
)
|
|
—
|
|
|
(87
|
)
|
|
(234
|
)
|
Income/(loss) before income taxes
|
|
$
|
65,627
|
|
|
$
|
38,512
|
|
|
$
|
56,570
|
|
|
$
|
14,575
|
|
|
$
|
(42,404
|
)
|
|
$
|
132,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2018
|
|
|
East
|
|
Central
|
|
West
|
|
Financial Services
|
|
Corporate
and
Unallocated
|
|
Total
|
Real estate inventory and land deposits
|
|
$
|
1,253,377
|
|
|
$
|
913,502
|
|
|
$
|
1,069,338
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,236,217
|
|
Investments in unconsolidated entities
|
|
30,250
|
|
|
34,763
|
|
|
120,705
|
|
|
4,015
|
|
|
—
|
|
|
189,733
|
|
Other assets
|
|
76,418
|
|
|
114,518
|
|
|
35,082
|
|
|
149,492
|
|
|
419,361
|
|
|
794,871
|
|
Total assets
|
|
$
|
1,360,045
|
|
|
$
|
1,062,783
|
|
|
$
|
1,225,125
|
|
|
$
|
153,507
|
|
|
$
|
419,361
|
|
|
$
|
4,220,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
|
East
|
|
Central
|
|
West
|
|
Financial Services
|
|
Corporate
and
Unallocated
|
|
Total
|
Real estate inventory and land deposits
|
|
$
|
1,150,918
|
|
|
$
|
818,431
|
|
|
$
|
1,039,655
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,009,004
|
|
Investments in unconsolidated entities
|
|
29,316
|
|
|
32,874
|
|
|
126,559
|
|
|
3,615
|
|
|
—
|
|
|
192,364
|
|
Other assets
|
|
85,753
|
|
|
124,593
|
|
|
53,492
|
|
|
225,641
|
|
|
635,046
|
|
|
1,124,525
|
|
Total assets
|
|
$
|
1,265,987
|
|
|
$
|
975,898
|
|
|
$
|
1,219,706
|
|
|
$
|
229,256
|
|
|
$
|
635,046
|
|
|
$
|
4,325,893
|
|
15. COMMITMENTS AND CONTINGENCIES
Letters of Credit and Surety Bonds
— We are committed, under various letters of credit and surety bonds, to perform certain development and construction activities and provide certain guarantees in the normal course of business. Outstanding letters of credit and surety bonds under these arrangements totaled
$341.0 million
and
$331.7 million
as of
June 30, 2018
and
December 31, 2017
, respectively. Although significant development and construction activities have been completed related to these site improvements, the bonds are generally not released until all development and construction activities are completed. We do not believe that it is probable that any outstanding bonds as of
June 30, 2018
will be drawn upon.
Legal Proceedings
— We are involved in various litigation and legal claims in the normal course of our business operations, including actions brought on behalf of various classes of claimants. We are also subject to a variety of local, state, and federal laws and regulations related to land development activities, house construction standards, sales practices, mortgage lending operations, employment practices, and protection of the environment. As a result, we are subject to periodic examination or inquiry by various governmental agencies that administer these laws and regulations. We establish liabilities for legal claims and regulatory matters when such matters are both probable of occurring and any potential loss is reasonably estimable. At
June 30, 2018
and
December 31, 2017
, our legal accruals were
$1.0 million
and
$2.3 million
, respectively. We accrue for such matters based on the facts and circumstances specific to each matter and revise these estimates as the matters evolve. In such cases, there may exist an exposure to loss in excess of any amounts currently accrued. In view of the inherent difficulty of predicting the outcome of these legal and regulatory matters, we generally cannot predict the ultimate resolution of the pending matters, the related timing or the eventual loss. While the outcome of such contingencies cannot be predicted with certainty, we do not believe that the resolution of such matters will have a material adverse impact on our results of operations, financial position, or cash flows. However, to the extent the liability arising from the ultimate resolution of any matter exceeds the estimates reflected in the recorded reserves relating to such matter, we could incur additional charges that could be significant.
16. MORTGAGE HEDGING ACTIVITIES
We enter into IRLCs to originate residential mortgage loans held for sale, at specified interest rates and within a specified period of time (generally between
30
and
60
days), with customers who have applied for a loan and meet certain credit and underwriting criteria. These IRLCs meet the definition of a derivative and are reflected on the balance sheet at fair value with changes in fair value recognized in Financial Services revenue/expenses on the statements of operations and other comprehensive income. Unrealized gains and losses on the IRLCs, reflected as derivative assets or liabilities, are measured based on the fair value of the underlying mortgage loan, quoted Agency MBS prices, estimates of the fair value of the mortgage servicing rights (“MSRs”) and the probability that the mortgage loan will fund within the terms of the IRLC, net of commission expense and broker fees. The fair value of the forward loan sales commitment and mandatory delivery commitments being used to hedge the IRLCs and mortgage loans held for sale not committed to be purchased by investors are based on quoted Agency MBS prices.
The following summarizes derivative instrument assets (liabilities) as of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
June 30, 2018
|
|
December 31, 2017
|
(Dollars in thousands)
|
|
Fair Value
|
|
Notional Amount
|
|
Fair Value
|
|
Notional Amount
|
IRLCs
|
|
$
|
2,888
|
|
|
$
|
152,089
|
|
|
$
|
1,584
|
|
|
$
|
73,817
|
|
MBSs
|
|
(437
|
)
|
|
136,000
|
|
|
(232
|
)
|
|
118,078
|
|
Total
|
|
$
|
2,451
|
|
|
|
|
$
|
1,352
|
|
|
|
Total commitments to originate loans approximated
$163.9 million
and
$80.0 million
as of
June 30, 2018
and
December 31, 2017
, respectively. The fair value and notional amounts represent the commitments to originate loans for both best efforts and mandatory loans that have been locked.
We have exposure to credit loss in the event of contractual non-performance by our trading counterparties in derivative instruments that we use in our rate risk management activities. We manage this credit risk by selecting only counterparties that we believe to be financially strong, spreading the risk among multiple counterparties, by placing contractual limits on the amount of unsecured credit extended to any single counterparty, and by entering into netting agreements with counterparties, as appropriate. Commitments to originate loans do not necessarily reflect future cash requirements as some commitments are expected to expire without being drawn upon.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For purposes of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the terms “the Company,” “we,” “us,” or “our” refer to Taylor Morrison Home Corporation (“TMHC”) and its subsidiaries. The Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our condensed consolidated financial statements included elsewhere in this quarterly report.
Forward-Looking Statements
This quarterly report includes certain forward-looking statements within the meaning of the federal securities laws regarding, among other things, our or management’s intentions, plans, beliefs, expectations or predictions of future events, which are considered forward-looking statements. You should not place undue reliance on those statements because they are subject to numerous uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These statements often include words such as “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “can,” “could,” “might,” “project” or similar expressions. These statements are based upon assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances. As you read this quarterly report, you should understand that these statements are not guarantees of performance or results. They involve known and unknown risks, uncertainties and assumptions, including those described under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended
December 31, 2017
(the “Annual Report”) filed with the Securities and Exchange Commission (“SEC”). Although we believe that these forward-
looking statements are based upon reasonable assumptions, you should be aware that many factors, including those described under the heading “Risk Factors” in the Annual Report, could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements.
Our forward-looking statements made herein are made only as of the date of this quarterly report. We expressly disclaim any intent, obligation or undertaking to update or revise any forward-looking statements made herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based, except as required by applicable law.
Business Overview
Our principal business is residential homebuilding and the development of lifestyle communities with operations in Arizona, California, Colorado, Florida, Georgia, Illinois, North and South Carolina and Texas. Our Company serves a wide array of consumer groups from coast to coast, including first time, move-up, luxury and active adult. Our homebuilding business operates under our Taylor Morrison and Darling Homes brand names. Our business is organized into multiple homebuilding operating components, and a financial services component (formerly called our mortgage operating component), all of which are managed as
four
reportable segments: East, Central, West and Financial Services, as follows:
|
|
|
|
East
|
|
Atlanta, Charlotte, Chicago, Orlando, Raleigh, Southwest Florida and Tampa
|
Central
|
|
Austin, Dallas and Houston (both include a Taylor Morrison division and a Darling Homes division), and Denver
|
West
|
|
Bay Area, Phoenix, Sacramento and Southern California
|
Financial Services
|
|
Taylor Morrison Home Funding, LLC (
“
TMHF
”
) and Inspired Title Services, LLC (
“
Inspired Title
”
)
|
We offer single family attached and detached homes, and revenue is recognized when the homes are completed and delivered to the buyers. Our primary costs are the acquisition of land in various stages of development and the construction costs of the homes we sell.
Our Financial Services reportable segment provides our customers with mortgage services through our wholly owned mortgage subsidiary, TMHF, and title services through our wholly owned title services subsidiary, Inspired Title. Revenues from loan origination are recognized at the time the related real estate transactions are completed, usually upon the close of escrow.
Recent Developments
Registered public offerings:
During the first quarter of 2018, we completed sales of our Class A Common Stock in registered public offerings, totaling
28.7 million
shares. We used all the net proceeds from the public offerings to purchase partnership units (“New TMM Units”) in TMM Holdings II Limited Partnership (“New TMM”), our direct subsidiary, along with shares of our Class B Common Stock, held by affiliates of TPG Global, LLC (“TPG”) and investment funds managed by Oaktree Capital Management, L.P. or their respective subsidiaries (“Oaktree” and, together with TPG, the “Remaining Principal Equityholders”). In addition, in a series of transactions following each public offering, the Company purchased
3.8 million
shares of Class B common stock directly from our Remaining Principal Equityholders on both January 8, 2018 and January 17, 2018 for an aggregate total of
7.6 million
shares purchased. Following our last public offering on January 17, 2018, neither TPG, Oaktree, nor affiliates of JH Investments, Inc. (“JH” and, together with TPG and Oaktree, the “Principal Equityholders”) had any remaining investment in us.
Business combinations:
On June 7, 2018 we announced and entered into an Agreement and Plan of Merger with AV Homes, Inc. (“AV Homes”). AV Homes is a homebuilder and land developer of residential communities in Florida, North and South Carolina, Arizona and Texas. AV Homes focuses on the development and construction of primary residential communities that serve first-time and move-up buyers, as well as age restricted active adults communities.
We will acquire all of the outstanding shares of AV Homes common stock at $21.50 per share in a cash and stock transaction with an estimated value of approximately $480 million. Under the terms of the agreement, AV Homes stockholders will have the option to receive, at their election, consideration per share equal to (i) $21.50 in cash, (ii) 0.9793 shares of Taylor Morrison Class A common stock or (iii) the combination of $12.64 in cash and 0.4034 shares of Taylor Morrison Class A common stock, subject to an overall proration of approximately 58.8% cash and 41.2% stock. On a pro forma basis, AV Homes stockholders are expected to own up to approximately 10% of the combined company, subject to conversion mechanics applicable to holders of AV Homes' convertible notes. The transaction has been unanimously approved by the Boards of Directors of both Taylor
Morrison and AV Homes and will be submitted to the stockholders of AV Homes for approval. The transaction is expected to close late in the third quarter or early in the fourth quarter of 2018 and the closing is subject to customary closing conditions.
Revolving Credit Facility:
Our $500.0 million Revolving Credit Facility was amended on January 26, 2018 to extend the maturity date from April 12, 2019 to January 26, 2022. On June 29, 2018, the Revolving Credit Facility was further amended to increase the commitments under the facility to $600.0 million.
Second Quarter 2018 Highlights:
|
|
•
|
Sales per outlet were 2.6
|
|
|
•
|
Net sales orders were 2,342
|
|
|
•
|
Home closings were 1,992
|
|
|
•
|
Total revenue was $981 million
|
|
|
•
|
Home closings gross margin, inclusive of capitalized interest, was 18.0 percent
|
|
|
•
|
Net income was $59 million with diluted earnings per share of $0.52
|
Results of Operations
The following table sets forth our results of operations for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2018
|
|
Six Months Ended
June 30,
|
(Dollars in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
Home closings revenue, net
|
|
$
|
956,565
|
|
|
$
|
889,096
|
|
|
$
|
1,689,524
|
|
|
$
|
1,640,581
|
|
Land closings revenue
|
|
7,997
|
|
|
3,764
|
|
|
13,165
|
|
|
7,120
|
|
Financial services revenue
|
|
16,266
|
|
|
15,634
|
|
|
30,472
|
|
|
29,883
|
|
Total revenues
|
|
980,828
|
|
|
908,494
|
|
|
1,733,161
|
|
|
1,677,584
|
|
Cost of home closings
|
|
784,521
|
|
|
724,505
|
|
|
1,379,427
|
|
|
1,340,800
|
|
Cost of land closings
|
|
6,444
|
|
|
2,467
|
|
|
10,725
|
|
|
4,867
|
|
Financial services expenses
|
|
11,152
|
|
|
10,102
|
|
|
21,196
|
|
|
18,804
|
|
Gross margin
|
|
178,711
|
|
|
171,420
|
|
|
321,813
|
|
|
313,113
|
|
Sales, commissions and other marketing costs
|
|
64,604
|
|
|
61,516
|
|
|
118,302
|
|
|
117,133
|
|
General and administrative expenses
|
|
35,461
|
|
|
33,894
|
|
|
68,778
|
|
|
67,022
|
|
Equity in income of unconsolidated entities
|
|
(4,017
|
)
|
|
(3,071
|
)
|
|
(7,263
|
)
|
|
(4,156
|
)
|
Interest income, net
|
|
(276
|
)
|
|
(89
|
)
|
|
(619
|
)
|
|
(179
|
)
|
Other expense, net
|
|
3,654
|
|
|
764
|
|
|
4,092
|
|
|
413
|
|
Income before income taxes
|
|
79,285
|
|
|
78,406
|
|
|
138,523
|
|
|
132,880
|
|
Income tax provision
|
|
19,993
|
|
|
22,476
|
|
|
31,699
|
|
|
41,349
|
|
Net income before allocation to non-controlling interests
|
|
59,292
|
|
|
55,930
|
|
|
106,824
|
|
|
91,531
|
|
Net income attributable to non-controlling interests — joint ventures
|
|
(140
|
)
|
|
(207
|
)
|
|
(269
|
)
|
|
(198
|
)
|
Net income before non-controlling interests
|
|
59,152
|
|
|
55,723
|
|
|
106,555
|
|
|
91,333
|
|
Net income from continuing operations attributable to non-controlling interests
|
|
(474
|
)
|
|
(28,322
|
)
|
|
(3,133
|
)
|
|
(54,164
|
)
|
Net income available to Taylor Morrison Home Corporation
|
|
$
|
58,678
|
|
|
$
|
27,401
|
|
|
$
|
103,422
|
|
|
$
|
37,169
|
|
Home closings gross margin
|
|
18.0
|
%
|
|
18.5
|
%
|
|
18.4
|
%
|
|
18.3
|
%
|
Sales, commissions and other marketing costs as a percentage of home closings revenue
|
|
6.8
|
%
|
|
6.9
|
%
|
|
7.0
|
%
|
|
7.1
|
%
|
General and administrative expenses as a percentage of home closings revenue
|
|
3.7
|
%
|
|
3.8
|
%
|
|
4.1
|
%
|
|
4.1
|
%
|
Average sales price per home closed
|
|
$
|
480
|
|
|
$
|
477
|
|
|
$
|
477
|
|
|
$
|
470
|
|
Six Months Ended June 30, 2018
Compared to
Six Months Ended June 30, 2017
Average Active Selling Communities
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
2018
|
|
2017
|
|
Change
|
East
|
|
121
|
|
|
127
|
|
|
(4.7
|
)%
|
Central
|
|
124
|
|
|
117
|
|
|
6.0
|
|
West
|
|
52
|
|
|
50
|
|
|
4.0
|
|
Total
|
|
297
|
|
|
294
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
2018
|
|
2017
|
|
Change
|
East
|
|
123
|
|
|
126
|
|
|
(2.4
|
)%
|
Central
|
|
119
|
|
|
117
|
|
|
1.7
|
|
West
|
|
50
|
|
|
54
|
|
|
(7.4
|
)
|
Total
|
|
292
|
|
|
297
|
|
|
(1.7
|
)%
|
An increase in new community openings in several of our Texas and California markets during the second quarter of 2018 contributed to the
6.0%
and
4.0%
increases in average active communities in our Central and West regions, respectively. The increases in the Central and West regions were offset by a decrease in our East region as a result of a shift in timing of new community openings to later in the year. As a result, our total average active selling communities remained relatively flat for the
three months ended June 30, 2018
compared to the prior year. The slight decrease in average active selling communities for the
six months ended June 30, 2018
when compared to the prior year was driven by our West region, due to higher than expected sales pace in the current year which led to increased community close outs.
Net Sales Orders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Net Sales Orders
(1)
|
|
Sales Value
(1)
|
|
Average Selling Price
|
(Dollars in thousands)
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
East
|
|
894
|
|
|
1,096
|
|
|
(18.4
|
)%
|
|
$
|
390,007
|
|
|
$
|
418,001
|
|
|
(6.7
|
)%
|
|
$
|
436
|
|
|
$
|
381
|
|
|
14.4
|
%
|
Central
|
|
832
|
|
|
677
|
|
|
22.9
|
|
|
393,236
|
|
|
328,658
|
|
|
19.6
|
|
|
473
|
|
|
485
|
|
|
(2.5
|
)
|
West
|
|
616
|
|
|
603
|
|
|
2.2
|
|
|
396,123
|
|
|
357,319
|
|
|
10.9
|
|
|
643
|
|
|
593
|
|
|
8.4
|
|
Total
|
|
2,342
|
|
|
2,376
|
|
|
(1.4
|
)%
|
|
$
|
1,179,366
|
|
|
$
|
1,103,978
|
|
|
6.8
|
%
|
|
$
|
504
|
|
|
$
|
465
|
|
|
8.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
Net Sales Orders
(1)
|
|
Sales Value
(1)
|
|
Average Selling Price
|
(Dollars in thousands)
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
East
|
|
1,894
|
|
|
2,146
|
|
|
(11.7
|
)%
|
|
$
|
806,809
|
|
|
$
|
830,044
|
|
|
(2.8
|
)%
|
|
$
|
426
|
|
|
$
|
387
|
|
|
10.1
|
%
|
Central
|
|
1,587
|
|
|
1,305
|
|
|
21.6
|
|
|
766,742
|
|
|
617,713
|
|
|
24.1
|
|
|
483
|
|
|
473
|
|
|
2.1
|
|
West
|
|
1,304
|
|
|
1,350
|
|
|
(3.4
|
)
|
|
822,759
|
|
|
787,846
|
|
|
4.4
|
|
|
631
|
|
|
584
|
|
|
8.0
|
|
Total
|
|
4,785
|
|
|
4,801
|
|
|
(0.3
|
)%
|
|
$
|
2,396,310
|
|
|
$
|
2,235,603
|
|
|
7.2
|
%
|
|
$
|
501
|
|
|
$
|
466
|
|
|
7.5
|
%
|
(1)
Net sales orders represent the number and dollar value of new sales contracts executed with customers, net of cancellations.
East:
The average selling price of net sales orders increased by
14.4%
and
10.1%
, respectively, for
three and six months ended June 30, 2018
compared to the same period in the prior year. Geographical and product mix among all divisions within the region contributed to the increase in average selling prices. The number of net sales orders decreased by
18.4%
and
11.7%
, respectively, for the same comparative periods. The decreases in units was driven by a reduction in average active selling communities due to higher than expected sales pace resulting in limited product availability.
Central:
The number of net sales orders increased by
22.9%
and
21.6%
, and sales value of homes increased by
19.6%
and
24.1%
, respectively, for the
three and six months ended June 30, 2018
compared to the same period in the prior year. The expansion of our Taylor Morrison brand in Dallas contributed to the higher number of sales orders and overall sales value in the region in the current year as well as other markets in the Central region that continue to strengthen their performance.
West:
The average selling price of net sales orders increased by
8.4%
and
8.0%
, respectively, for the
three and six months ended June 30, 2018
compared to the same period in the prior year. Limited supply combined with strong demand across all markets in our West region have contributed to the increase in average selling prices. In addition, product mix in our California market has allowed for higher average selling prices in the current year.
Sales Order Cancellations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation Rate
(1)
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
East
|
|
10.6
|
%
|
|
8.8
|
%
|
|
10.5
|
%
|
|
9.5
|
%
|
Central
|
|
11.3
|
|
|
11.2
|
|
|
10.0
|
|
|
11.3
|
|
West
|
|
10.6
|
|
|
12.5
|
|
|
9.1
|
|
|
11.8
|
|
Total Company
|
|
10.8
|
%
|
|
10.4
|
%
|
|
10.0
|
%
|
|
10.7
|
%
|
(1)
Cancellation rate represents the number of canceled sales orders divided by gross sales orders.
The Total Company cancellation rate increase for the
three months ended June 30, 2018
compared to the same period in the prior year was driven primarily by our East region, as a result of new communities in these regions being in earlier stages of their life cycle. For the
six months ended June 30, 2018
compared to the same period in the prior year, Total Company cancellation rate decreased to 10.0% from 10.7% due to increased demand for new housing and a rising interest rate environment.
Sales Order Backlog
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30,
|
|
|
Sold Homes in Backlog
(1)
|
|
Sales Value
|
|
Average Selling Price
|
(Dollars in thousands)
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
East
|
|
1,832
|
|
|
1,905
|
|
|
(3.8
|
)%
|
|
$
|
825,231
|
|
|
$
|
772,244
|
|
|
6.9
|
%
|
|
$
|
450
|
|
|
$
|
405
|
|
|
11.1
|
%
|
Central
|
|
1,587
|
|
|
1,282
|
|
|
23.8
|
|
|
778,782
|
|
|
655,956
|
|
|
18.7
|
|
|
491
|
|
|
512
|
|
|
(4.1
|
)
|
West
|
|
1,323
|
|
|
1,254
|
|
|
5.5
|
|
|
820,175
|
|
|
712,816
|
|
|
15.1
|
|
|
620
|
|
|
568
|
|
|
9.2
|
|
Total
|
|
4,742
|
|
|
4,441
|
|
|
6.8
|
%
|
|
$
|
2,424,188
|
|
|
$
|
2,141,016
|
|
|
13.2
|
%
|
|
$
|
511
|
|
|
$
|
482
|
|
|
6.0
|
%
|
(1)
Sales order backlog represents homes under contract for which revenue has not yet been recognized at the end of the period (including homes sold but not yet started). Some of the contracts in our sales order backlog are subject to contingencies including mortgage loan approval and buyers selling their existing homes, which can result in cancellations.
Total backlog units and total sales value increased by
6.8%
and
13.2%
at
June 30, 2018
, respectively, compared to
June 30, 2017
. The increase in backlog units is primarily a result of a shift in timing of closings to a future period partially due to platting and permitting delays with municipalities in several of our markets. In addition, higher average selling prices resulted in higher sales value compared to the prior year.
Home Closings Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Homes Closed
|
|
Home Closings Revenue, Net
|
|
Average Selling Price
|
(Dollars in thousands)
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
East
|
|
875
|
|
|
780
|
|
|
12.2
|
%
|
|
$
|
356,351
|
|
|
$
|
317,113
|
|
|
12.4
|
%
|
|
$
|
407
|
|
|
$
|
407
|
|
|
—
|
%
|
Central
|
|
617
|
|
|
557
|
|
|
10.8
|
|
|
294,236
|
|
|
266,738
|
|
|
10.3
|
|
|
477
|
|
|
479
|
|
|
(0.4
|
)
|
West
|
|
500
|
|
|
526
|
|
|
(4.9
|
)
|
|
305,978
|
|
|
305,245
|
|
|
0.2
|
|
|
612
|
|
|
580
|
|
|
5.5
|
|
Total
|
|
1,992
|
|
|
1,863
|
|
|
6.9
|
%
|
|
$
|
956,565
|
|
|
$
|
889,096
|
|
|
7.6
|
%
|
|
$
|
480
|
|
|
$
|
477
|
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
Homes Closed
|
|
Home Closings Revenue, Net
|
|
Average Selling Price
|
(Dollars in thousands)
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
East
|
|
1,575
|
|
|
1,462
|
|
|
7.7
|
%
|
|
$
|
640,787
|
|
|
$
|
580,214
|
|
|
10.4
|
%
|
|
$
|
407
|
|
|
$
|
397
|
|
|
2.5
|
%
|
Central
|
|
1,051
|
|
|
981
|
|
|
7.1
|
|
|
507,701
|
|
|
470,203
|
|
|
8.0
|
|
|
483
|
|
|
479
|
|
|
0.8
|
|
West
|
|
913
|
|
|
1,050
|
|
|
(13.0
|
)
|
|
541,036
|
|
|
590,164
|
|
|
(8.3
|
)
|
|
593
|
|
|
562
|
|
|
5.5
|
|
Total
|
|
3,539
|
|
|
3,493
|
|
|
1.3
|
%
|
|
$
|
1,689,524
|
|
|
$
|
1,640,581
|
|
|
3.0
|
%
|
|
$
|
477
|
|
|
$
|
470
|
|
|
1.5
|
%
|
East:
The number of homes closed increased by
12.2%
and
7.7%
, respectively, for the
three and six months ended June 30, 2018
compared to the same periods in the prior year. Home closings revenue, net increased by
12.4%
and
10.4%
, respectively, for the same comparative periods. Our Florida markets were the primary drivers of the increase in both units and dollars as a result of continued favorable homebuyer reception of our products and communities in those markets.
Central:
The number of homes closed increased by
10.8%
and
7.1%
, respectively, for the
three and six months ended June 30, 2018
compared to the same periods in the prior year. Home closings revenue, net increased by
10.3%
and
8.0%
, respectively, for the same comparative periods. The increase in units was a result of the expansion of our Taylor Morrison brand in our Dallas market, leading to an increase in the number of communities and home closings in the current year compared to the prior year. In addition, there was a shift in closings from the first quarter of the year to the second quarter in our Houston market due to a delay in starts in the prior year caused by Hurricane Harvey.
West:
We saw a decrease in the number of homes closed for the
three and six months ended June 30, 2018
compared to the same periods in the prior year. The decreases were primarily driven by a decline in product availability as a result of fewer active communities in the prior periods when the sales occurred. However, demand for our products in this region remain strong as evidenced by a
5.5%
increase in average selling price for homes closed for both the
three and six months ended June 30, 2018
.
Land Closings Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
(Dollars in thousands)
|
|
2018
|
|
2017
|
|
Change
|
East
|
|
$
|
4,121
|
|
|
$
|
2,940
|
|
|
$
|
1,181
|
|
Central
|
|
3,876
|
|
|
824
|
|
|
3,052
|
|
West
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
7,997
|
|
|
$
|
3,764
|
|
|
$
|
4,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
(Dollars in thousands)
|
|
2018
|
|
2017
|
|
Change
|
East
|
|
$
|
4,492
|
|
|
$
|
3,504
|
|
|
$
|
988
|
|
Central
|
|
4,523
|
|
|
3,616
|
|
|
907
|
|
West
|
|
4,150
|
|
|
—
|
|
|
4,150
|
|
Total
|
|
$
|
13,165
|
|
|
$
|
7,120
|
|
|
$
|
6,045
|
|
We generally purchase land and lots with the intent to build and sell homes. However, in some locations where we act as a
developer, we occasionally purchase land that includes commercially zoned parcels or areas designated for school or
government use, which we typically sell to commercial developers or municipalities, as applicable. We also sell residential lots
or land parcels to manage our land and lot supply on larger tracts of land. As a developer, we may include land sales in our
underwriting strategies in many of our master plan communities where we may mitigate risk, enhance our returns or pursue
opportunities allowing access to new land positions. Land and lot sales occur at various intervals and varying degrees of
profitability. Therefore, the revenue and gross margin from land closings will fluctuate from period to period, depending upon
market opportunities. The increase in land closings revenue for the current quarter in the Central region is due to sales of a large self-developed project in our Dallas market. The increase in land closings revenue for the
six months ended June 30, 2018
in the West region is due to the sale of certain long-term strategic assets in the current year.
Home Closings Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
East
|
|
Central
|
|
West
|
|
Consolidated
|
(Dollars in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Home closings revenue, net
|
|
$
|
356,351
|
|
|
$
|
317,113
|
|
|
$
|
294,236
|
|
|
$
|
266,738
|
|
|
$
|
305,978
|
|
|
$
|
305,245
|
|
|
$
|
956,565
|
|
|
$
|
889,096
|
|
Cost of home closings
|
|
291,548
|
|
|
249,341
|
|
|
241,811
|
|
|
218,406
|
|
|
251,162
|
|
|
256,758
|
|
|
784,521
|
|
|
724,505
|
|
Home closings gross margin
|
|
64,803
|
|
|
67,772
|
|
|
52,425
|
|
|
48,332
|
|
|
54,816
|
|
|
48,487
|
|
|
172,044
|
|
|
164,591
|
|
Home closings gross margin %
|
|
18.2
|
%
|
|
21.4
|
%
|
|
17.8
|
%
|
|
18.1
|
%
|
|
17.9
|
%
|
|
15.9
|
%
|
|
18.0
|
%
|
|
18.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
East
|
|
Central
|
|
West
|
|
Consolidated
|
(Dollars in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Home closings revenue, net
|
|
$
|
640,787
|
|
|
$
|
580,214
|
|
|
$
|
507,701
|
|
|
$
|
470,203
|
|
|
$
|
541,036
|
|
|
$
|
590,164
|
|
|
$
|
1,689,524
|
|
|
$
|
1,640,581
|
|
Cost of home closings
|
|
523,747
|
|
|
459,159
|
|
|
414,905
|
|
|
385,543
|
|
|
440,775
|
|
|
496,098
|
|
|
1,379,427
|
|
|
1,340,800
|
|
Home closings gross margin
|
|
117,040
|
|
|
121,055
|
|
|
92,796
|
|
|
84,660
|
|
|
100,261
|
|
|
94,066
|
|
|
310,097
|
|
|
299,781
|
|
Home closings gross margin %
|
|
18.3
|
%
|
|
20.9
|
%
|
|
18.3
|
%
|
|
18.0
|
%
|
|
18.5
|
%
|
|
15.9
|
%
|
|
18.4
|
%
|
|
18.3
|
%
|
East:
Home closings gross margin percentage decreased to
18.2%
from
21.4%
for the
three months ended June 30, 2018
and 2017, respectively, and to
18.3%
from
20.9%
for the
six months ended June 30, 2018
and 2017, respectively. The primary driver for
these decreases was geographic and product mix within the East region as well as increased land and development costs in several of our markets.
Central:
Home closings gross margin percentage decreased to
17.8%
from
18.1%
for the
three months ended June 30, 2018
and 2017, respectively, and increased to
18.3%
from
18.0%
for the
six months ended June 30, 2018
and 2017, respectively. The decrease in home closings gross margin percentage for the current quarter compared to the same quarter in the prior year is partially due to product mix within the region resulting in lower average selling prices as well as rising construction costs in our Houston market. However, several markets within the Central region experienced an increase in rebates from our regional and national vendor program, which contributed to the decrease in costs of home closings and increase in home closings gross margin for the
six months ended June 30, 2018
.
West:
Home closings gross margin percentage increased to
17.9%
from
15.9%
for the
three months ended June 30, 2018
and 2017, respectively, and increased to
18.5%
from
15.9%
for the
six months ended June 30, 2018
and 2017, respectively. The increases were partially due to product mix contributing to higher average selling prices during the current year, as well as larger rebates from our regional and national vendor program across several markets within the West region. In addition, home closings in the prior year had higher land and development costs resulting in lower margins.
Financial Services
Our Financial Services segment provides mortgage lending through our subsidiary, TMHF, and title services through our subsidiary, Inspired Title. The following is a summary for the periods presented of financial services income before income taxes as well as supplemental data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(In thousands, except the number of loan originations)
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
Mortgage operations revenue
|
|
$
|
13,658
|
|
|
$
|
13,749
|
|
|
(0.7
|
)%
|
|
$
|
25,978
|
|
|
$
|
26,406
|
|
|
(1.6
|
)%
|
Mortgage operations revenue - Other
|
|
680
|
|
|
387
|
|
|
75.7
|
|
|
1,152
|
|
|
762
|
|
|
51.2
|
|
Title services revenue
|
|
1,928
|
|
|
1,498
|
|
|
28.7
|
|
|
3,342
|
|
|
2,715
|
|
|
23.1
|
|
Total financial services revenue
|
|
16,266
|
|
|
15,634
|
|
|
4.0
|
%
|
|
30,472
|
|
|
29,883
|
|
|
2.0
|
%
|
Financial services equity in income of unconsolidated entities
|
|
2,039
|
|
|
2,160
|
|
|
(5.6
|
)
|
|
3,698
|
|
|
3,496
|
|
|
5.8
|
|
Total revenue
|
|
18,305
|
|
|
17,794
|
|
|
2.9
|
|
|
34,170
|
|
|
33,379
|
|
|
2.4
|
|
Financial services expenses
|
|
11,152
|
|
|
10,102
|
|
|
10.4
|
|
|
21,196
|
|
|
18,804
|
|
|
12.7
|
|
Financial services income before income taxes
|
|
$
|
7,153
|
|
|
$
|
7,692
|
|
|
(7.0
|
)%
|
|
$
|
12,974
|
|
|
$
|
14,575
|
|
|
(11.0
|
)
|
Total originations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
1,055
|
|
|
1,114
|
|
|
(5.3
|
)%
|
|
1,971
|
|
|
2,060
|
|
|
(4.3
|
)%
|
Principal
|
|
$
|
363,429
|
|
|
$
|
379,225
|
|
|
(4.2
|
)%
|
|
$
|
680,765
|
|
|
$
|
700,896
|
|
|
(2.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Supplemental data:
|
|
|
|
|
|
|
|
|
Average FICO score
|
|
746
|
|
|
745
|
|
|
746
|
|
|
744
|
|
Funded origination breakdown:
|
|
|
|
|
|
|
|
|
Government (FHA,VA,USDA)
|
|
16
|
%
|
|
18
|
%
|
|
15
|
%
|
|
19
|
%
|
Other agency
|
|
69
|
%
|
|
66
|
%
|
|
71
|
%
|
|
65
|
%
|
Total agency
|
|
85
|
%
|
|
84
|
%
|
|
86
|
%
|
|
84
|
%
|
Non-agency
|
|
15
|
%
|
|
16
|
%
|
|
14
|
%
|
|
16
|
%
|
Total funded originations
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
Financial services revenue increased by 4.0% and 2.0%, respectively, for the
three and six months ended June 30, 2018
compared to the same periods in the prior year. The increases were primarily driven by the expansion of our title services to North and South Carolina and the increases in the number of homes closed.
Sales, Commissions and Other Marketing Costs
Sales, commissions and other marketing costs, as a percentage of home closings revenue, net, decreased slightly to
6.8%
from
6.9%
and to
7.0%
from
7.1%
for the
three and six months ended June 30, 2018
compared to the same periods in 2017. These decreases were primarily driven by an increase in homebuilding revenue, net as well as efficiencies we achieved and maintained as a result of previous investments we made in our sales and marketing functions.
General and Administrative Expenses
General and administrative expenses as a percentage of home closings revenue, net, decreased slightly to
3.7%
from
3.8%
for the three months ended June 30, 2018. For the six months ended June 30, 2018, general and administrative expenses as a percentage of home closings revenue, net remained flat at
4.1%
compared to the same period in the prior year. The relatively consistent general and administrative expenses as a percentage of home closings revenue, net, were primarily driven by an increase in homebuilding revenues net, and our efforts to utilize our scalable platform, providing leverage with existing infrastructure to maintain stable operating costs.
Equity in Income of Unconsolidated Entities
Equity in income of unconsolidated entities was
$4.0 million
and
$3.1 million
for the
three months ended June 30, 2018
and 2017, respectively, and
$7.3 million
and
$4.2 million
for the
six months ended June 30, 2018
and
2017
, respectively. The increases were primarily due to increased activity in our homebuilding unconsolidated joint ventures as they mature in their life cycle.
Interest Income, Net
Interest income, net was
$276 thousand
and
$89 thousand
for the
three months ended June 30, 2018
and 2017, respectively, and
$619 thousand
and
$179 thousand
for the
six months ended June 30, 2018
and
2017
, respectively. Interest income, net includes interest earned on cash balances offset by interest incurred but not capitalized on our long-term debt and other borrowings.
Other Expense, Net
Other expense, net was
$3.7 million
and
$0.8 million
for the
three months ended June 30, 2018
and 2017, respectively, and was
$4.1 million
and
$0.4 million
for the
six months ended June 30, 2018
and
2017
, respectively. The expense in the current year relates primarily to pre-acquisition costs on abandoned land projects and expenses related to the acquisition of AV Homes, offset by an increase in the number of recoveries from our captive insurance claims.
Income Tax Provision
The effective tax rate for the
three and six months ended June 30, 2018
was
25.2%
and
22.9%
, respectively, compared to
28.7%
and
31.1%
for the same periods in
2017
, respectively. The effective tax rate for the
three and six months ended June 30, 2018
was based on the U.S. federal statutory income tax rate and was affected primarily by state income taxes, changes in valuation
allowances, and certain deductions and credits relating to homebuilding activities. The effective tax rate for the
six months ended June 30, 2018
was favorably impacted by the reduction in the federal corporate tax rate from
35%
to
21%
as a result of the Tax Cuts and Jobs Act (“Tax Act”), the relevant provisions of which became effective on
January 1, 2018
.
Net Income
Net income before allocation to non-controlling interests and diluted earnings per share for the
three months ended June 30, 2018
was
$59.3 million
and
$0.52
, respectively. Net income before allocation to non-controlling interests and diluted earnings per share for the
three months ended June 30, 2017
was
$55.9 million
and
$0.46
, respectively. The increase in net income and earnings per share from the prior year is attributable to higher gross margin dollars due to a result of an increase in the number of homes closed, as well as a decrease in our income tax provision due to a lower effective tax rate for the
three months ended June 30, 2018
compared to the same period in the prior year.
Liquidity and Capital Resources
Liquidity
We finance our operations through the following:
|
|
•
|
Borrowings under our Revolving Credit Facility (as defined below);
|
|
|
•
|
Our various series of Senior Notes (as defined below);
|
|
|
•
|
Mortgage warehouse facilities;
|
|
|
•
|
Project-level financing (including non-recourse loans);
|
|
|
•
|
Performance, payment and completion surety bonds, and letters of credit; and
|
|
|
•
|
Cash generated from operations.
|
We believe that we can fund our current and foreseeable liquidity needs for the next 12 months from:
|
|
•
|
Cash generated from operations; and
|
|
|
•
|
Borrowings under our Revolving Credit Facility.
|
We may also access the capital markets to obtain additional liquidity through debt and equity offerings on an opportunistic basis. Our principal uses of capital for the
six months ended June 30, 2018
and
2017
were land purchases, lot development, home construction, operating expenses, payment of debt service, income taxes, investments in joint ventures, and the payment of various liabilities. In addition, all net proceeds from our equity offerings during 2018 and 2017, were used to purchase partnership units in New TMM along with shares of our Class B common stock, held by our Former Principal Equityholders. During the first quarter of 2018, capital was also used to purchase partnership units in New TMM shares and shares of our Class B Common Stock from our Remaining Principal Equityholders.
Cash flows for each of our communities depend on the status of the development cycle, and can differ substantially from reported earnings. Early stages of development or expansion require significant cash expenditures for land acquisitions, on and off-site development, construction of model homes, general landscaping and other amenities. Because these costs are a component of our inventory and are not recognized in our statement of operations until a home closes, we incur significant cash outflows prior to recognition of earnings.
The table below summarizes our total cash and liquidity as of the dates indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
(Dollars in thousands)
|
|
June 30, 2018
|
|
December 31, 2017
|
Total Cash, excluding Restricted Cash
|
|
$
|
320,102
|
|
|
$
|
573,925
|
|
|
|
|
|
|
Total Revolving Credit Facility
|
|
600,000
|
|
|
500,000
|
|
Letters of Credit Outstanding
|
|
(48,414
|
)
|
|
(47,126
|
)
|
Revolving Credit Facility Borrowings Outstanding
|
|
—
|
|
|
—
|
|
Revolving Credit Facility Availability
|
|
551,586
|
|
|
452,874
|
|
|
|
|
|
|
Total Liquidity
|
|
$
|
871,688
|
|
|
$
|
1,026,799
|
|
Cash Flow Activities
Operating Cash Flow Activities
Our net cash provided by operating activities was
$10.5 million
for the
six months ended June 30, 2018
compared to
$100.0 million
provided by operating activities for the
six months ended June 30,
2017
. The primary driver of the decrease in cash provided by operating activities compared to the prior period is increased spending on real estate inventory and land deposits and a decrease in accounts payable, accrued expenses and other liabilities, partially offset by an increase in the number of homes closed and a lower effective tax rate resulting in higher net income.
Investing Cash Flow Activities
Net cash used in investing activities was
$2.0 million
for the
six months ended June 30,
2018
, as compared to net cash used in investing activities of
$21.2 million
for the
six months ended June 30,
2017
. The primary driver of the change between periods was higher investments of capital into our unconsolidated joint ventures in the prior year period.
Financing Cash Flow Activities
Net cash used in financing activities was
$262.6 million
for the
six months ended June 30,
2018
, as compared to net cash used in financing activities of
$132.5 million
for the
six months ended June 30,
2017
. The cash used in financing activities in 2018 was primarily attributable to repurchases of New TMM Units from our Remaining Principal Equityholders as part of our secondary equity offerings completed in January.
Debt Instruments
Senior Notes:
The following table summarizes our outstanding senior unsecured notes (collectively, the “Senior Notes”) as of
June 30, 2018
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Date Issued
|
|
Principal
Amount
|
|
Initial Offering
Price
|
|
Interest Rate
|
|
Original Net
Proceeds
|
|
Original Debt
Issuance
Cost
|
Senior Notes due 2021
|
|
April 16, 2013
|
|
550,000
|
|
|
100.0
|
%
|
|
5.250
|
%
|
|
541,700
|
|
|
8,300
|
|
Senior Notes due 2023
|
|
April 16, 2015
|
|
350,000
|
|
|
100.0
|
%
|
|
5.875
|
%
|
|
345,500
|
|
|
4,500
|
|
Senior Notes due 2024
|
|
March 5, 2014
|
|
350,000
|
|
|
100.0
|
%
|
|
5.625
|
%
|
|
345,300
|
|
|
4,700
|
|
Total
|
|
|
|
$
|
1,250,000
|
|
|
|
|
|
|
$
|
1,232,500
|
|
|
$
|
17,500
|
|
2021 Senior Notes
On
April 16, 2013
, we issued
$550.0 million
aggregate principal amount of
5.25%
Senior Notes due 2021 (the “2021 Senior Notes”).
The 2021 Senior Notes mature on April 15, 2021. The 2021 Senior Notes are guaranteed by TMM Holdings Limited Partnership (“TMM Holdings”), Taylor Morrison Holdings, Inc., Taylor Morrison Communities II, Inc. and their homebuilding
subsidiaries (collectively, the “Guarantors”) which are all subsidiaries directly or indirectly of TMHC. The 2021 Senior Notes and the related guarantees are senior unsecured obligations and are not subject to registration rights. The indenture for the 2021 Senior Notes contains covenants that limit (i) the making of investments, (ii) the payment of dividends and the redemption of equity and junior debt, (iii) the incurrence of additional indebtedness, (iv) asset dispositions, (v) mergers and similar corporate transactions, (vi) the incurrence of liens, (vii) prohibitions on payments and asset transfers among the issuers and restricted subsidiaries and (viii) transactions with affiliates, among others. The indenture governing the 2021 Senior Notes contains customary events of default. If we do not apply the net cash proceeds of certain asset sales within specified deadlines, we will be required to offer to repurchase the 2021 Senior Notes at par (plus accrued and unpaid interest) with such proceeds. We are also required to offer to repurchase the 2021 Senior Notes at a price equal to 101% of their aggregate principal amount (plus accrued and unpaid interest) upon certain change of control events.
The 2021 Senior Notes are redeemable at scheduled redemption prices, currently at 102.625%, of their principal amount (plus accrued and unpaid interest).
There are no financial maintenance covenants for the 2021 Senior Notes.
2023 Senior Notes
On
April 16, 2015
, we issued
$350.0 million
aggregate principal amount of
5.875%
Senior Notes due 2023 (the “2023 Senior Notes”). The 2023 Senior Notes and the related guarantees are senior unsecured obligations and are not subject to registration rights.
The 2023 Senior Notes mature on April 15, 2023. The 2023 Senior Notes are guaranteed by the same Guarantors that guarantee the 2021 Senior Notes. The indenture governing the 2023 Senior Notes contains covenants that limit our ability to incur debt secured by liens and enter into certain sale and leaseback transactions. The indenture governing the 2023 Senior Notes contains events of default that are similar to those contained in the indenture governing the 2021 Senior Notes. The change of control provisions in the indenture governing the 2023 Senior Notes are similar to those contained in the indenture governing the 2021 Senior Notes, but a credit rating downgrade must occur in connection with the change of control before the repurchase offer requirement is triggered for the 2023 Senior Notes.
Prior to January 15, 2023, the 2023 Senior Notes are redeemable at a price equal to
100%
plus a “make-whole” premium for payments through January 15, 2023 (plus accrued and unpaid interest). Beginning January 15, 2023, the 2023 Senior Notes are redeemable at par (plus accrued and unpaid interest).
There are no financial maintenance covenants for the 2023 Senior Notes.
2024 Senior Notes
On
March 5, 2014
, we issued
$350.0 million
aggregate principal amount of
5.625%
Senior Notes due 2024 (the “2024 Senior Notes”).
The 2024 Senior Notes mature on March 1, 2024. The 2024 Senior Notes are guaranteed by the same Guarantors that guarantee the 2021 and 2023 Senior Notes. The 2024 Senior Notes and the related guarantees are senior unsecured obligations and are not subject to registration rights. The indenture governing the 2024 Senior Notes contains covenants that limit our ability to incur debt secured by liens and enter into certain sale and leaseback transactions similar to the 2023 Senior Notes. The indenture governing the 2024 Senior Notes contains events of default that are similar to those contained in the indenture governing the 2021 and 2023 Senior Notes. The change of control provisions in the indenture governing the 2024 Senior Notes are similar to those contained in the indenture governing the 2023 Senior Notes.
Prior to December 1, 2023, the 2024 Senior Notes are redeemable at a price equal to
100%
plus a “make-whole” premium for payments through December 1, 2023 (plus accrued and unpaid interest). Beginning on December 1, 2023, the 2024 Senior Notes are redeemable at par (plus accrued and unpaid interest).
There are no financial maintenance covenants for the 2024 Senior Notes.
TMHC Compared to TMM Holdings
TMM Holdings is a parent guarantor of certain of our debt facilities. The financial information of TMHC is substantially identical to the financial performance and operations of TMM Holdings except for certain SEC and regulatory fees which are attributable to TMHC.
Revolving Credit Facility
On January 26, 2018, we amended our
$500.0 million
Revolving Credit Facility to extend the maturity date from April 12, 2019 to
January 26, 2022
. On June 29, 2018, we further amended the Revolving Credit Facility to increase the amount available to
$600.0 million
. Other immaterial changes were also made to the structure of the Revolving Credit Facility. The Revolving Credit Facility is guaranteed by the same Guarantors that guarantee the 2021, 2023, and 2024 Senior Notes.
The Revolving Credit Facility contains certain “springing” financial covenants, requiring us and our subsidiaries to comply with a maximum debt to capitalization ratio of not more than
0.60
to
1.00
and a minimum consolidated tangible net worth level of at least
$1.7 billion
. The financial covenants would be in effect for any fiscal quarter during which any (a) loans under the Revolving Credit Facility are outstanding during the last day of such fiscal quarter or on more than five separate days during such fiscal quarter or (b) undrawn letters of credit (except to the extent cash collateralized) issued under the Revolving Credit Facility in an aggregate amount greater than
$40.0 million
or unreimbursed letters of credit issued under the Revolving Credit Facility are outstanding on the last day of such fiscal quarter or for more than five consecutive days during such fiscal quarter. For purposes of determining compliance with the financial covenants for any fiscal quarter, the Revolving Credit Facility provides that we may exercise an equity cure by issuing certain permitted securities for cash or otherwise recording cash contributions to our capital that will, upon the contribution of such cash to the borrower, be included in the calculation of consolidated tangible net worth and consolidated total capitalization. The equity cure right is exercisable up to twice in any period of four consecutive fiscal quarters and up to five times overall.
The Revolving Credit Facility contains certain restrictive covenants including limitations on incurrence of liens, dividends and other distributions, asset dispositions and investments in entities that are not guarantors, limitations on prepayment of subordinated indebtedness and limitations on fundamental changes. The Revolving Credit Facility contains customary events of default, subject to applicable grace periods, including for nonpayment of principal, interest or other amounts, violation of covenants (including financial covenants, subject to the exercise of an equity cure), incorrectness of representations and warranties in any material respect, cross default and cross acceleration, bankruptcy, material monetary judgments, ERISA events with material adverse effect, actual or asserted invalidity of material guarantees and change of control. As of
June 30, 2018
, we were in compliance with all of the covenants under the Revolving Credit Facility.
Mortgage Warehouse Borrowings
The following is a summary of our mortgage warehouse borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
As of June 30, 2018
|
Facility
|
|
Amount Drawn
|
|
Facility Amount
|
|
Interest Rate
|
|
Expiration Date
|
|
Collateral
(1)
|
Flagstar
|
|
$
|
1,692
|
|
|
$
|
5,000
|
|
(2)
|
LIBOR + 2.25%
|
|
30 days written notice
|
|
Mortgage Loans
|
Comerica
|
|
18,334
|
|
|
50,000
|
|
|
LIBOR + 2.25%
|
|
On Demand
|
|
Mortgage Loans
|
J.P. Morgan
|
|
29,792
|
|
|
100,000
|
|
|
LIBOR + 2.375%
|
|
September 24, 2018
(3)
|
|
Mortgage Loans and Restricted Cash
|
Total
|
|
$
|
49,818
|
|
|
$
|
155,000
|
|
|
|
|
|
|
|
(1)
The mortgage warehouse borrowings outstanding as of
June 30, 2018
were collateralized by a)
$99.6 million
of mortgage loans held for sale, which comprised the balance of mortgage loans held for sale and b) approximately
$1.3 million
of cash which is included in restricted cash in the accompanying Condensed Consolidated Balance Sheets.
(2)
We amended our warehouse agreement with Flagstar during the three months ended June 30, 2018 and reduced our capacity from $39.0 million to $5.0 million. From time to time we have the ability to increase or decrease capacity to accommodate funding needs
(3)
We expect to renew the J.P. Morgan facility during the third quarter of 2018.
Loans Payable and Other Borrowings
Loans payable and other borrowings as of
June 30, 2018
consist of project-level debt due to various land sellers and seller financing notes from current and prior year acquisitions. Project-level debt is generally secured by the land that was acquired and the principal payments generally coincide with corresponding project lot sales or a principal reduction schedule. Loans payable bear interest at rates that ranged from
0%
to
8%
at each of
June 30, 2018
and
December 31, 2017
. We impute interest for loans with no stated interest rates.
Letters of Credit, Surety Bonds and Financial Guarantees
The following table summarizes our letters of credit and surety bonds as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
(Dollars in thousands)
|
|
June 30, 2018
|
|
December 31, 2017
|
Letters of credit
(1)
|
|
$
|
48,414
|
|
|
$
|
47,126
|
|
Surety bonds
|
|
292,547
|
|
|
284,617
|
|
Total outstanding letters of credit and surety bonds
|
|
$
|
340,961
|
|
|
$
|
331,743
|
|
(1)
As of
June 30, 2018
there was
$160 million
total capacity for letters of credit available under our Revolving Credit Facility.
Off-Balance Sheet Arrangements as of
June 30, 2018
Investments in Land Development and Homebuilding Joint Ventures or Unconsolidated Entities
We participate in strategic land development and homebuilding joint ventures with related and unrelated third parties. The use of these entities, in some instances, enables us to acquire land to which we could not otherwise obtain access, or could not obtain access on terms that are as favorable. Our partners in these joint ventures historically have been land owners/developers, other homebuilders and financial or strategic partners. Joint ventures with land owners/developers have given us access to sites owned or controlled by our partners. Joint ventures with other homebuilders have provided us with the ability to bid jointly with our partners for large or expensive land parcels. Joint ventures with financial partners have allowed us to combine our homebuilding expertise with access to our partners’ capital.
In certain of our unconsolidated joint ventures, we enter into loan agreements, whereby one of our subsidiaries will provide the lenders with customary guarantees, including completion, indemnity and environmental guarantees subject to usual non-recourse terms.
For the
six months ended June 30, 2018
, total net capital invested in unconsolidated joint ventures was
$3.4 million
.
Land Purchase and Land Option Contracts
We enter into land purchase and option contracts to procure land or lots for the construction of homes in the ordinary course of business. Lot option contracts enable us to control significant lot positions with a minimal initial capital investment and substantially reduce the risks associated with land ownership and development. As of
June 30, 2018
, we had outstanding land purchase and lot option contracts of
$350.0 million
. We are obligated to close the transaction under our land purchase contracts. However, our obligations with respect to the option contracts are generally limited to the forfeiture of the related non-refundable cash deposits and/or letters of credit provided to obtain the options. At
June 30, 2018
, we had non-refundable deposits totaling
$40.5 million
.
Seasonality
Our business is seasonal. We have historically experienced, and in the future expect to continue to experience, variability in our results on a quarterly basis. We generally have more homes under construction, close more homes and have greater revenues and operating income in the third and fourth quarters of the year. Therefore, although new home contracts are obtained throughout the year, a higher portion of our home closings occur during the third and fourth calendar quarters. Our revenue therefore may fluctuate significantly on a quarterly basis, and we must maintain sufficient liquidity to meet short-term operating requirements. Factors expected to contribute to these fluctuations include:
|
|
•
|
the timing of the introduction and start of construction of new projects;
|
|
|
•
|
the timing of project sales;
|
|
|
•
|
the timing of closings of homes, lots and parcels;
|
|
|
•
|
the timing of receipt of regulatory approvals for development and construction;
|
|
|
•
|
the condition of the real estate market and general economic conditions in the areas in which we operate;
|
|
|
•
|
construction timetables;
|
|
|
•
|
the prevailing interest rates and the availability of financing, both for us and for the purchasers of our homes;
|
|
|
•
|
the cost and availability of materials and labor; and
|
|
|
•
|
weather conditions in the markets in which we build.
|
As a result of seasonal activity, our quarterly results of operations and financial position are not necessarily representative of the results we expect for the full year.
Inflation
We and the homebuilding industry in general may be adversely affected during periods of high inflation, primarily because of higher land, financing, labor and construction material costs. In addition, higher mortgage interest rates can significantly affect the affordability of permanent mortgage financing to prospective homebuyers. We attempt to pass through to our customers increases in our costs through increased sales prices. However, during periods of soft housing market conditions, we may not be able to offset our cost increases with higher selling prices.
Critical Accounting Policies
In January 2018, we adopted ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
, which provides new guidance for revenue recognition and elected to use the modified retrospective approach to account for prior periods. Refer to
Note 2 - Summary of Significant Accounting Policies
for additional discussion. There have been no other significant changes to our critical accounting policies during the
six months ended June 30, 2018
as compared to those we disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Our operations are interest rate sensitive. We monitor our exposure to changes in interest rates and incur both fixed rate and variable rate debt. At
June 30, 2018
, approximately
97%
of our debt was fixed rate and
3%
was variable rate. None of our market sensitive instruments were entered into for trading purposes. For fixed rate debt, changes in interest rates generally affect the fair value of the debt instrument, but not our earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact the fair value of the debt instrument but may affect our future earnings and cash flows, and may also impact our variable rate borrowing costs, which principally relate to any borrowings under our Revolving Credit Facility and borrowings by TMHF under its various warehouse facilities. As of
June 30, 2018
, we had no outstanding borrowings under our Revolving Credit Facility. We had
$551.6 million
of additional availability for borrowings and
$111.6 million
of additional availability for letters of credit (giving effect to
$48.4 million
of letters of credit outstanding as of such date). Our 2021 Senior Notes are subject to a requirement that we offer to purchase such notes at par with certain proceeds of asset sales (to the extent not otherwise applied in accordance with the indenture governing such notes). We are also required to offer to purchase all of our outstanding Senior Notes at 101% of their aggregate principal amount upon the occurrence of specified change of control events. Other than in those circumstances, we do not have an obligation to prepay fixed rate debt prior to maturity and, as a result, we would not expect interest rate risk and changes in fair value to have a significant impact on our cash flows related to our fixed rate debt until such time as we are required to refinance, repurchase or repay such debt.
The following table sets forth principal cash flows by scheduled maturity and effective weighted average interest rates and estimated fair value of our debt obligations as of
June 30, 2018
. The interest rate for our variable rate debt represents the weighted average interest rate on our borrowings under our mortgage warehouse facilities. Because the mortgage warehouse facilities are secured by certain mortgage loans held for sale which are typically sold within approximately 20 - 30 days, its outstanding balance is included as a variable rate maturity in the most current period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected Maturity Date
|
|
Fair
Value
|
(In millions, except percentage data)
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
Total
|
|
Fixed Rate Debt
|
|
$
|
54.0
|
|
|
$
|
58.3
|
|
|
$
|
13.7
|
|
|
$
|
555.2
|
|
|
$
|
5.3
|
|
|
$
|
700.0
|
|
|
$
|
1,386.5
|
|
|
$
|
1,377.1
|
|
Weighted average interest rate
(1)
|
|
3.5
|
%
|
|
3.5
|
%
|
|
3.5
|
%
|
|
5.5
|
%
|
|
3.5
|
%
|
|
5.5
|
%
|
|
5.3
|
%
|
|
|
Variable Rate Debt
(2)
|
|
$
|
49.8
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
$
|
49.8
|
|
|
$
|
49.8
|
|
Weighted average interest rate
|
|
3.9
|
%
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3.9
|
%
|
|
|
(1)
Represents the coupon rate of interest on the full principal amount of the debt.
(2)
Based upon the amount of variable rate debt outstanding at
June 30, 2018
, and holding the variable rate debt balance constant, each 1% increase in interest rates would increase the interest incurred by us by approximately
$0.5 million
per year.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our principal executive officer, principal financial officer and principal accounting officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of
June 30, 2018
. Based on this evaluation, our principal executive officer, principal financial officer and principal accounting officer concluded that, as of
June 30, 2018
, the Company’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended
June 30, 2018
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are involved in various litigation and legal claims in the normal course of our business operations, including actions brought on behalf of various classes of claimants. We are also subject to a variety of local, state, and federal laws and regulations related to land development activities, house construction standards, sales practices, mortgage lending operations, employment practices, and protection of the environment. As a result, we are subject to periodic examination or inquiry by various governmental agencies that administer these laws and regulations. We establish liabilities for legal claims and regulatory matters when such matters are both probable of occurring and any potential loss is reasonably estimable. We accrue for such matters based on the facts and circumstances specific to each matter and revise these estimates as the matters evolve. In such cases, there may exist an exposure to loss in excess of any amounts currently accrued. In view of the inherent difficulty of predicting the outcome of these legal and regulatory matters, we generally cannot predict the ultimate resolution of the pending matters, the related timing or the eventual loss. While the outcome of such contingencies cannot be predicted with certainty, we do not believe that the resolution of such matters will have a material adverse impact on our results of operations, financial position, or cash flows. However, to the extent the liability arising from the ultimate resolution of any matter exceeds the estimates reflected in the recorded reserves relating to such matter, we could incur additional charges that could be significant.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors set forth in Part I, Item 1A. of our Annual Report. These risk factors may materially affect our business, financial condition or results of operations. You should carefully consider the risk factors set forth in our Annual Report and the other information set forth elsewhere in this quarterly report. You should be aware that these risk factors and other information may not describe every risk facing our Company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
|
|
|
|
Exhibit
No.
|
|
Description
|
|
|
2.1
|
|
Agreement and Plan of Merger, dated June 7, 2018, among Taylor Morrison Home Corporation, Taylor Morrison Communities, Inc., Thor Merger Sub, Inc. and AV Homes, Inc. (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K, filed on June 7, 2018, and incorporated herein by reference).†
|
|
|
|
3.1
|
|
Amended and Restated Certificate of Incorporation (included as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on May 31, 2018, and incorporated herein by reference).
|
|
|
|
3.2
|
|
Amended and Restated By-laws (included as Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed on April 15, 2013, and incorporated herein by reference).
|
|
|
|
10.1
|
|
Voting Agreement, dated June 7, 2018, by and between Taylor Morrison Home Corporation and TPG Capital (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on June 7, 2018, and incorporated herein by reference).†
|
|
|
|
10.2*
|
|
Amendment No. 6 to the Second Amended and Restated Credit Agreement.
|
|
|
|
10.3*
|
|
Form of Omnibus Amendment to the Restricted Stock Unit Agreements and Employee Nonqualified Option Award Agreement for use with the 2013 Taylor Morrison Home Corporation Omnibus Equity Award Plan (Amended as of June 14, 2018)
|
|
|
|
10.4
‡*
|
|
Amended and Restated Employment Agreement, dated June 15, 2018, between Taylor Morrison, Inc. and Sheryl D. Palmer.
|
|
|
|
10.5
‡
*
|
|
Amended and Restated Employment Agreement, dated June 15, 2018, between Taylor Morrison, Inc. and C. David Cone.
|
|
|
|
10.6
‡
*
|
|
Amended and Restated Employment Agreement, dated June 15, 2018, between Taylor Morrison, Inc. and Darrell C. Sherman.
|
|
|
|
31.1*
|
|
Certification of Sheryl D. Palmer, Chief Executive Officer, pursuant to Section 302 of the Sarbanes–Oxley Act of 2002.
|
|
|
31.2*
|
|
Certification of C. David Cone, Chief Financial Officer, pursuant to Section 302 of the Sarbanes–Oxley Act of 2002.
|
|
|
32.1**
|
|
Certification of Sheryl D. Palmer, Chief Executive Officer, pursuant to Section 906 of the Sarbanes–Oxley Act of 2002.
|
|
|
32.2**
|
|
Certification of C. David Cone, Chief Financial Officer, pursuant to Section 906 of the Sarbanes–Oxley Act of 2002.
|
|
|
101.INS
|
|
XBRL Instance Document.
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
* Filed herewith
** Furnished herewith
† Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the SEC.
‡ Management contract or compensatory plan in which directors and/or executive officers are eligible to participate.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
EXHIBIT INDEX
|
|
|
|
Exhibit
No.
|
|
Description
|
|
|
|
|
|
Agreement and Plan of Merger, dated June 7, 2018, among Taylor Morrison Home Corporation, Taylor Morrison Communities, Inc., Thor Merger Sub, Inc. and AV Homes, Inc. (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K, filed on June 7, 2018, and incorporated herein by reference).†
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document.
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
* Filed herewith
** Furnished herewith
† Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the SEC.
‡ Management contract or compensatory plan in which directors and/or executive officers are eligible to participate.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
SIGNATURES
Pursuant to the requirements 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.
|
|
|
|
|
|
|
|
TAYLOR MORRISON HOME CORPORATION
|
|
|
|
Registrant
|
DATE:
|
August 1, 2018
|
|
|
|
|
|
/s/ Sheryl D. Palmer
|
|
|
|
Sheryl D. Palmer
|
|
|
|
Chairman of the Board of Directors and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
|
|
/s/ C. David Cone
|
|
|
|
C. David Cone
|
|
|
|
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
|
|
|
/s/ Joseph Terracciano
|
|
|
|
Joseph Terracciano
|
|
|
|
Chief Accounting Officer
(Principal Accounting Officer)
|
EXECUTION VERSION
AMENDMENT NO. 6 dated as of June 29, 2018 (this “
Amendment
”), to the SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of July 13, 2011 (as amended, supplemented or otherwise modified prior to the date hereof, the “
Credit Agreement
”), among TAYLOR MORRISON COMMUNITIES, INC., a Delaware corporation (the “
U.S.
Borrower
”), TMM HOLDINGS LIMITED PARTNERSHIP, a
British Columbia limited partnership (“
Holdings
”), TAYLOR MORRISON HOLDINGS II, INC., a company continued under the laws of the province of British Columbia (“
Canada Holdings
”), TAYLOR MORRISON HOLDINGS, INC., a Delaware corporation (“
U.S. Holdings
”), TAYLOR MORRISON FINANCE, INC., a
Delaware corporation (“
U.S. FinCo
”), each lender from time to time party thereto (each individually referred to therein as a “
Lender
” and collectively as “
Lenders
”) and CREDIT SUISSE AG, as administrative agent for the Lenders (in such capacity, the “
Administrative Agent
”).
A.
Holdings has requested that (i) the aggregate Commitments under the Credit Agreement be increased by an amount equal to $100,000,000 (the “
Commitment Increase
”), which Commitment Increase will be provided, severally and not jointly, by the lenders listed on
Exhibit A
hereto (the “
Commitment Increase Lenders
”) (and which Commitment Increase shall not reduce the Additional Facilities Amount under the Credit Agreement) and (ii) the Credit Agreement be amended as set forth herein.
B.
The Commitment Increase Lenders are willing to provide such additional Commitments, and the Lenders are willing to so amend the Credit Agreement, in each case on the terms and subject to the conditions set forth herein.
Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1.
Defined Terms.
Capitalized terms used and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. The rules of interpretation set forth in Section 1.2A of the Credit Agreement are hereby incorporated by reference herein,
mutatis mutandis
.
SECTION 2.
Commitment Increase.
(a) Subject to the terms and conditions set forth herein, the Lenders party hereto (including the Commitment Increase Lenders) hereby agree that, effective as of the Amendment Effective Date (as defined below), the aggregate amount of the Commitments shall be $600,000,000, and the Commitments of the Lenders shall be as set forth on
Exhibit B
.
(b)
On the Amendment Effective Date, the participations in respect of Letters of Credit shall be reallocated so that such participations are held ratably among the Lenders in accordance with their commitments after giving effect to the Commitment Increase.
(c)
Each Lender party hereto, by delivering its signature page to this Amendment on the Amendment Effective Date, shall be deemed to have acknowledged receipt of, and consented to and approved, each Loan Document and each other document required to be delivered to, or be approved by or satisfactory to, the Administrative Agent or any Lender on the Amendment Effective Date. Each Commitment Increase Lender shall be a “Lender” for all purposes of the Credit Agreement and the other Loan Documents, with all the rights and obligations of a Lender under the Credit Agreement.
SECTION 3.
Amendments
. Effective as of the Amendment Effective Date:
(a)
The Credit Agreement is hereby amended to delete the stricken text (indicated textually in the same manner as the following example:
stricken text
) and to add the underlined text (indicated textually in the same manner as the following example:
underlined text
) as set forth in
Annex I
hereto.
(b)
Schedule 2.1 of the Credit Agreement is hereby amended and restated in its entirety with Schedule 2.1 attached as
Exhibit B
to this Amendment.
SECTION 4.
Representations and Warranties.
To induce the other parties hereto to enter into this Agreement, each of Holdings, U.S. Holdings, Canada Holdings, U.S. FinCo and the U.S. Borrower, jointly and severally, hereby represents and warrants to the Administrative Agent and each of the other parties hereto that:
(a)
As of the Amendment Effective Date, each Loan Party has duly executed and delivered and authorized this Amendment and this Amendment constitutes the legal, valid and binding obligation of such Loan Party enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization and other similar laws relating to or affecting creditors’ rights generally and general principles of equity (whether considered in a proceeding in equity or law).
(b)
As of the Amendment Effective Date, (i) the representations and warranties set forth in Section 5 of the Credit Agreement and in the other Loan Documents are true and correct in all material respects (unless qualified as to materiality or Material Adverse Effect, in which case such representations and warranties shall be true and correct in all respects) on and as of the Amendment Effective Date to the same extent as though made on and as of such date, except (x) to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties were true and correct in all material
respects (unless qualified as to materiality or Material Adverse Effect, in which case such representations and warranties were true and correct in all respects)
on and as of such earlier date, and (y) the reference to the Restatement Effective Date in Section 5.12 of the Credit Agreement shall, for purposes of this Section 4(b), be deemed to refer to the Amendment Effective Date, and (ii) no Default or Event of Default has occurred and is continuing.
SECTION 5.
Conditions to Effectiveness.
The effectiveness of this Amendment is subject to the satisfaction or waiver, on or prior to June 29, 2018, of the following conditions precedent (the date on which all such conditions are satisfied or waived, the “
Amendment Effective Date
”):
(a)
The Administrative Agent (or its counsel) shall have received from each Loan Party, each Existing Lender party hereto (which shall constitute the Requisite Lenders) and each Commitment Increase Lender either (i) a counterpart of this Agreement signed on behalf of such parties or (ii) written evidence satisfactory to the Administrative Agent (which may include facsimile or other electronic transmission of a signed signature page of this Agreement) that such parties have signed a counterpart of this Agreement.
(b)
The Administrative Agent shall have received reimbursement of all costs and expenses required to be paid by the Loan Parties in connection with the transactions contemplated hereby.
(c)
The representations and warranties set forth in Section 4 shall be true and correct, and the Administrative Agent shall have received a certificate to that effect dated as of the Amendment Effective Date and executed by a Responsible Officer of Holdings.
(d)
The Administrative Agent and its counsel shall have received executed copies of favorable written opinions of Paul, Weiss, Rifkind, Wharton & Garrison LLP, counsel for the Loan Parties, and each local counsel listed on
Exhibit C
, in each case, in form and substance reasonably satisfactory to the Administrative Agent and its counsel, dated as of the Amendment Effective Date.
(e)
On or before the Amendment Effective Date, each Loan Party shall deliver or cause to be delivered to the Administrative Agent and each of the Lenders the following, each, unless otherwise noted, dated the Amendment Effective Date:
(i)
Certified copies of the certificate of incorporation, organization or formation, together with a good standing certificate, certificate of status or certificate of compliance (as applicable) from the applicable Governmental Authority of its jurisdiction of incorporation, organization or formation, each dated a recent date prior to the Amendment Effective Date (or, in lieu of such certificate of incorporation, organization or formation, a certification by a Responsible Officer that there has been no change to such certificate of incorporation, organization or formation since the most recent copy delivered
to the Administrative Agent, together with a good standing certificate, certificate of status or certificate of compliance
(as applicable) from the applicable Governmental Authority of its jurisdiction of incorporation, organization or formation dated a recent date prior to the Amendment Effective Date);
(ii)
Copies of its Organizational Documents, other than such Organizational Documents required to be delivered under clause (i) above, certified as of the Amendment Effective Date by its corporate secretary or an assistant secretary (or, in lieu of such Organizational Documents, a certification by a Responsible Officer that there has been no change to such Organizational Documents since the most recent copy delivered to the Administrative Agent);
(iii)
A certification by a Responsible Officer, certified as of the Amendment Effective Date, that board resolutions or similar authorizing documents authorizing the execution, delivery and performance of this Amendment have been approved by the board of directors or similar governing body of each Loan Party and that such resolutions or documents are in full force and effect without modification or amendment; and
(iv)
An incumbency certificate of its Responsible Officers executing this Amendment (or, in lieu of such incumbency certificate, a certification by a Responsible Officer that there has been no change to such incumbency certificate since the most recent copy delivered to the Administrative Agent).
(f)
The Borrower shall have paid to the Administrative Agent, for the account of each Commitment Increase Lender, an upfront fee in an amount equal to 0.30% of the amount set forth opposite such Commitment Increase Lender’s name on
Exhibit A
.
(g)
To the extent that the Borrower qualifies as a “legal entity customer” under 31 C.F.R. § 1010.230 (the “
Beneficial Ownership Regulation
”), at least five days prior to the Amendment Effective Date, the Borrower shall have delivered to the Administrative Agent and each Lender that so requests a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation in relation to the Borrower.
(h)
The Borrower shall execute and deliver any Notes (or applicable replacements thereof) as any Lender may request prior to the Amendment Effective Date.
The Administrative Agent shall notify the U.S. Borrower and the Lenders of the Amendment Effective Date, and such notice shall be conclusive and binding.
SECTION 6.
Consent and Reaffirmation.
Each of the Loan Parties hereby
(i)
consents to this Amendment and the transactions contemplated hereby, (ii) agrees that, notwithstanding the effectiveness of this Amendment, the Guaranty and each of the other Loan Documents continues to be in full force and effect, (iii) affirms and confirms its
guarantee (in the case of a Guarantor) of the Obligations pursuant to the Guaranty, all as provided in the Loan Documents, and (iv) acknowledges and agrees that such guarantee
continues in full force and effect in respect of, the Obligations under the Credit Agreement and the other Loan Documents. The parties hereto expressly acknowledge that it is not their intention that this Amendment or any of the other Loan Documents executed or delivered pursuant hereto constitute a novation of any of the obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, but a modification thereof pursuant to the terms contained herein.
SECTION 7.
Loan Documents.
This Amendment shall constitute a “Loan Document” for all purposes of the Credit Agreement and the other Loan Documents.
SECTION 8.
Counterparts.
This Amendment may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or other electronic transmission shall be as effective as delivery of an original executed counterpart of this Amendment.
SECTION 9.
Governing Law.
THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 10.
Headings.
Section headings used herein are for convenience of reference only, are not part of this Amendment and shall not affect the construction of, or be taken into consideration in interpreting, this Amendment.
SECTION 11.
Tax Matters
. For purposes of determining withholding Taxes imposed under FATCA, from and after the Amendment Effective Date, the U.S. Borrower and the Administrative Agent shall treat (and the Lenders hereby authorize the Administrative Agent to treat) the Credit Agreement as not qualifying as a “grandfathered obligation” within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers or representatives as of the day and year first above written.
SIGNATURE PAGE TO AMENDMENT NO. 6 TO THE TAYLOR MORRISON COMMUNITIES INC. SECOND AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF JULY 13, 2011, AS
AMENDED
NAME OF LENDER: CITIBANK, N.A.
[Signature Page to Amendment No. 6]
(INY CORP
:
3855355vl0: 06/2612018- 02
:
08 PM
II
SIGNATURE PAGE TO AMENDMENT NO. 6 TO THE TAYLOR MORRISON COMMUNITIES INC. SECOND AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF JULY 13, 2011, AS
AMENDED
*For any Lender requiring a second signature.
[Signature Page to Amendment No. 6]
[[NYCORP:3855355v9:06/19/2018--01:24 PM]]
SIGNATURE PAGE TO AMENDMENT NO. 6 TO THE TAYLOR MORRISON COMMUNITIES INC. SECOND AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF JULY 13, 2011, AS
AMENDED
NAME OF LENDER: WELLS FARGO BANK, N.A.
[Signature Page to Amendment No. 6}
[[NYCORP:3855355v9:06/l9/2018--0
!
:24 PMJ]
SIGNATURE PAGE TO AMENDMENT NO. 6 TO THE TAYLOR MORRISON COMMUNITIES INC. SECOND AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF JULY 13, 2011, AS
AMENDED
NAME OF LENDER: U.S. BANK NATIONAL ASSOCIATION
SIGNATURE PAGE TO AMENDMENT NO. 6 TO THE TAYLOR MORRISON COMMUNITIES INC. SECOND AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF JULY 13, 2011, AS
AMENDED
NAMEOFLENDER: COMERICABANK
[Signature Page to Amendment No. 6]
S
I
GN ATURE
PAGE
TO AMENDMENT NO
.
6
TO THE
T
A YLOR MORRISON COMMUNIT
I
ES
I
NC. SECOND AMENDED AND RESTATED CREDIT AGREEMENT
DATED
AS
OF JULY
13, 201
1
,
AS
AMENDED
[Signature Page to Amendment No
.
6]
SIGNATURE PAGE TO AMENDMENT NO. 6 TO THE
TAYLOR
MORRISON COMMUNITIES INC. SECOND
AMENDED
AND RESTATED CREDIT AGREEMENT DATED AS OF JULY 13, 2011, AS
AMENDED
NAME
OF
LENDER
:
MIZUHO
BANK
,
LTD.
[Signature
Page to
Amendment
No
.
6
]
SIGNATURE PAGE TO AMENDMENT NO. 6 TO THE TAYLOR MORRISON COMMUNITIES INC. SECOND AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF JULY 13, 2011, AS
AMENDED
NAME OF LENDER: Texas Capital Bank
*For any Lender requiring a second signature.
[Signature Page to Amendment No. 6]
EXHIBIT A
|
|
|
Commitment Increase Lenders
|
Additional Commitments
|
Citibank, N.A.
|
$12,500,000
|
Goldman Sachs Bank USA
|
$36,000,000
|
Wells Fargo Bank, N.A.
|
$16,000,000
|
U.S. Bank National Association
|
$11,000,000
|
Comerica Bank
|
$8,500,000
|
Bank of America, N.A.
|
$6,500,000
|
Mizuho Bank, Ltd.
|
$6,000,000
|
Texas Capital Bank
|
$3,500,000
|
EXHIBIT B
Schedule 2.1
Commitments
|
|
|
|
|
Lender
|
Commitment
|
Citibank, N.A.
|
|
$87,500,000
|
|
Credit Suisse AG, Cayman Islands Branch
|
|
$75,000,000
|
|
U.S. Bank National Association
|
|
$75,000,000
|
|
Goldman Sachs Bank USA
|
|
$70,000,000
|
|
JPMorgan Chase Bank, N.A.
|
|
$70,000,000
|
|
Mizuho Bank, Ltd.
|
|
$55,000,000
|
|
Wells Fargo Bank, N.A.
|
|
$55,000,000
|
|
Bank of America, N.A.
|
|
$37,500,000
|
|
Comerica Bank
|
|
$37,500,000
|
|
Texas Capital Bank
|
|
$37,500,000
|
|
EXHIBIT C
Local Counsel
|
|
1.
|
Armbrust & Brown, PLLC, Texas counsel
|
|
|
2.
|
GrayRobinson, P.A., Florida counsel
|
|
|
3.
|
Holland & Hart LLP, Colorado counsel
|
|
|
4.
|
Stikeman Elliot LLP, Canada counsel
|
|
|
5.
|
Cox, Castle & Nicholson LLP, California counsel
|
|
|
6.
|
Brier, Irish, Hubbard & Erhart, P.L.C., Arizona counsel
|
|
|
7.
|
Meltzer, Purtill & Stelle LLC, Illinois counsel
|
|
|
8.
|
Alexander Ricks PLLC, North Carolina counsel
|
|
|
9.
|
Schreeder, Wheeler & Flint, LLP, Georgia counsel
|
EXHIBIT D
Subsidiary Guarantors
ATPD, LLC
DARLING HOMES OF TEXAS, LLC DFP TEXAS (GP), LLC
TAYLOR MORRISON, INC.
TAYLOR MORRISON AT CRYSTAL FALLS, LLC TAYLOR MORRISON HOLDINGS OF ARIZONA, INC. TAYLOR MORRISON MARBLEHEAD HOLDINGS, LLC TAYLOR MORRISON OF CALIFORNIA, LLC
TAYLOR MORRISON OF CAROLINAS, INC. TAYLOR MORRISON OF COLORADO, INC. TAYLOR MORRISON OF FLORIDA, INC. TAYLOR MORRISON OF GEORGIA, LLC TAYLOR MORRISON OF ILLINOIS, INC. TAYLOR MORRISON OF TEXAS, INC.
TAYLOR MORRISON PACIFIC POINT HOLDINGS, LLC TAYLOR MORRISON SERVICES, INC.
TAYLOR MORRISON TRAMONTO HOLDINGS, LLC TAYLOR MORRISON/ARIZONA, INC.
TAYLOR WOODROW COMMUNITIES – LEAGUE CITY, LTD. TAYLOR WOODROW COMMUNITIES AT MIRASOL, LTD. TAYLOR WOODROW COMMUNITIES AT PORTICO, L.L.C.
TAYLOR WOODROW COMMUNITIES AT ST. JOHNS FOREST, L.L.C. TAYLOR WOODROW HOMES – CENTRAL FLORIDA DIVISION, L.L.C. TAYLOR WOODROW HOMES – SOUTHWEST FLORIDA DIVISION, L.L.C. TAYLOR WOODROW COMMUNITIES AT ARTISAN LAKES, L.L.C.
TM CALIFORNIA SERVICES, INC. TM HOMES OF ARIZONA, INC. TW ACQUISITIONS, INC. TWC/FALCONHEAD WEST, L.L.C. TWC/MIRASOL, INC. TWC/STEINER RANCH, LLC
TM OYSTER HARBOR, LLC
TAYLOR MORRISON ESPLANADE NAPLES, LLC
EXECUTION VERSION
ANNEX I TO AMENDMENT NO. 6
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
dated as of July 13, 2011
as amended and restated as of April 13, 2012,
as thereafter amended as of August 15, 2012 and December 27, 2012, and as further amended and restated as of April 12, 2013
Among
TAYLOR MORRISON COMMUNITIES, INC.,
as U.S. Borrower MONARCH CORPORATION,
as Canadian Borrower
TMM HOLDINGS LIMITED PARTNERSHIP,
as Holdings MONARCH COMMUNITIES INC.,
as Canada Holdings
MONARCH PARENT INC.,
as Canada Intermediate Holdings
TAYLOR MORRISON HOLDINGS, INC.,
as U.S. Holdings
TAYLOR MORRISON FINANCE, INC.
as U.S. FinCo
THE LENDERS PARTY HERETO,
as Lenders and
CREDIT SUISSE AG,
as Administrative Agent
CREDIT SUISSE SECURITIES (USA) LLC and CITIGROUP GLOBAL MARKETS INC.,
as Joint Lead Arrangers and Joint Bookrunners
$
500,000,000
600,000,000
REVOLVING CREDIT FACILITY
[[3659503]]
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS
2
|
|
1.1
|
Certain Defined Terms
2
|
|
|
1.2
|
Defined Terms; Accounting Terms; Utilization of GAAP for Purposes of
|
Calculations Under Agreement
47
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
48
|
|
2.1
|
Commitments; Loans
48
|
|
|
2.2
|
Interest on the Loans
52
|
|
|
2.4
|
Repayments and Prepayments; General Provisions Regarding Payments
56
57
|
|
|
2.6
|
Special Provisions Governing Eurodollar Rate Loans
60
|
|
|
2.7
|
Increased Costs; Taxes
62
|
|
|
2.8
|
Mitigation Obligations; Replacement of Lenders
67
|
|
|
2.9
|
Loan Modification Offers
68
|
SECTION 3. LETTERS OF CREDIT
69
|
|
3.1
|
Issuance of Letters of Credit and Lenders’ Purchase of Participations Therein
69
|
|
|
3.2
|
Letter of Credit Fees
72
71
|
|
|
3.3
|
Drawings and Payments and Reimbursement of Amounts Drawn or Paid Under
|
Letters of Credit 72
|
|
3.4
|
Obligations Absolute
74
|
|
|
3.5
|
Nature of Issuing Bank’s Duties
75
|
|
|
3.6
|
Defaulting Lenders
76
|
|
|
3.7
|
Resignation of an Issuing Bank
78
|
SECTION 4. CONDITIONS
78
|
|
4.2
|
Conditions to All Loans
78
|
|
|
4.3
|
Conditions to Letters of Credit
79
|
SECTION 5. REPRESENTATIONS AND WARRANTIES
79
|
|
5.1
|
Corporate Status; Corporate Power and Authority; Enforceability; Subsidiaries
79
|
|
|
5.2
|
No Violation; Governmental Approvals
80
|
|
|
5.3
|
Financial Statements
81
|
|
|
5.4
|
No Material Adverse Change
81
|
|
|
5.5
|
Title to Properties; Liens; Intellectual Property
81
|
|
|
5.6
|
Litigation; Compliance with Laws
82
81
|
|
|
5.8
|
Governmental Regulation
82
|
|
|
5.9
|
Compliance with ERISA and Similar Applicable Law
82
|
|
|
5.10
|
Environmental Matters
83
|
|
|
5.11
|
Employee Matters
84
83
|
|
|
5.14
|
True and Complete Disclosure
84
|
|
|
5.15
|
Anti-Corruption Laws; Sanctions
84
|
SECTION 6. AFFIRMATIVE COVENANTS
85
|
|
6.1
|
Financial Statements and Other Reports
86
85
|
|
|
6.2
|
Consolidated Corporate Franchises
90
|
|
|
6.4
|
Maintenance of Properties; Insurance
91
90
|
|
|
6.5
|
Inspection; Books and Records
91
|
|
|
6.6
|
Compliance with Statutes
92
91
|
|
|
6.7
|
Execution of Guaranty by Future Guarantors
92
|
|
|
6.9
|
Transactions with Affiliates
92
|
|
|
6.10
|
End of Fiscal Years; Fiscal Quarters
93
|
|
|
6.12
|
Changes in Business
94
|
|
|
6.13
|
Designation of Subsidiaries
94
|
|
|
6.15
|
Anti-Money Laundering Legislation
95
|
SECTION 7. NEGATIVE COVENANTS
95
|
|
7.2
|
Limitation on Liens, etc
95
|
|
|
7.3
|
Investments; Joint Ventures
99
|
|
|
7.4
|
Restricted Payments
102
|
|
|
7.5
|
Financial Covenants
104
105
|
|
|
7.6
|
Restriction on Fundamental Changes; Asset Sales
105
|
|
|
7.9
|
Limitation on Debt Payments
108
|
SECTION 8. EVENTS OF DEFAULT
108
|
|
8.1
|
Failure to Make Payments When Due
108
109
|
|
|
8.2
|
Default in Other Agreements
108
109
|
|
|
8.3
|
Breach of Certain Covenants
109
|
|
|
8.4
|
Breach of Warranty 109
|
8.5 Bankruptcy, etc
109
110
|
|
8.7
|
Judgments and Attachments
110
|
8.8 Employee Benefit Plans
110
111
|
|
8.9
|
Change in Control 111
|
|
|
8.10
|
Invalidity of the Guaranty
111
112
|
8.11 [Reserved]
111
112
8.12 Borrowers’ Right to Cure
112
SECTION 9. AGENTS
113
9.1 Appointment 113
9.2 Rights as a Lender
113
114
9.3 Exculpatory Provisions
114
9.4 Reliance by the Administrative Agent
114
115
|
|
9.5
|
Delegation of Duties
115
|
|
|
9.6
|
Resignation of Administrative Agent
115
|
|
|
9.7
|
Release of Guarantors
116
|
|
|
9.8
|
Non-Reliance on Administrative Agent and Other Lenders
116
|
|
|
9.9
|
Duties of Other Named Entities
116
117
|
SECTION 10. MISCELLANEOUS
116
117
|
|
10.1
|
Assignments and Participations in Loans
116
117
|
|
|
10.2
|
Expenses; Indemnity; Damage Waiver
121
|
|
|
10.3
|
Right of Set-Off
123
|
|
|
10.4
|
Sharing of Payments by Lenders
123
|
|
|
10.5
|
Amendments and Waivers
124
|
|
|
10.6
|
Independence of Covenants
126
|
|
|
10.8
|
Survival of Representations, Warranties and Agreements
127
|
|
|
10.9
|
Failure or Indulgence Not Waiver; Remedies Cumulative
127
|
|
|
10.10
|
Marshalling; Payments Set Aside
127
|
10.11 Severability
127
128
|
|
10.12
|
Obligations Several; Independent Nature of the Lenders’ Rights
128
|
|
|
10.16
|
Successors and Assigns
129
|
|
|
10.17
|
Consent to Jurisdiction and Service of Process
129
|
|
|
10.18
|
Waiver of Jury Trial
130
|
10.19 Confidentiality
130
131
10.20 Integration; Effectiveness; Electronic Execution
132
10.21 USA Patriot Act Notification
132
133
|
|
10.22
|
Agency of the U.S. Borrower for each other Loan Party
133
|
|
|
10.23
|
No Fiduciary Duties
133
|
|
|
10.24
|
Judgment Currency 134
|
|
|
10.25
|
Additional Borrowing Subsidiaries
134
135
|
|
|
10.26
|
Effect of Certain Inaccuracies
135
136
|
|
|
10.27
|
Acknowledgment
Acknowldgement
and Consent to Bail-In of EEA Financial
|
Institutions
.
135
136
EXHIBITS
I
FORM OF NOTICE OF BORROWING
II
FORM OF NOTICE OF CONVERSION/CONTINUATION
III
FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT IV FORM OF NOTE
V
FORM OF GUARANTY
VI
FORM OF OFFICER’S CERTIFICATE
VII
FORM OF BORROWING BASE CERTIFICATE VIII FORM OF ASSIGNMENT AGREEMENT
IX FORM OF BORROWING SUBSIDIARY AGREEMENT X FORM OF BORROWING SUBSIDIARY TERMINATION
SCHEDULES
2.1 COMMITMENTS
3.1 LETTER OF CREDIT COMMITMENTS
5.1C SUBSIDIARIES OF HOLDINGS
5.16 INSURANCE
6.9 TRANSACTIONS WITH AFFILIATES
|
|
7.2
|
CERTAIN EXISTING LIENS
|
|
|
7.3
|
CERTAIN EXISTING INVESTMENTS
|
iv
CREDIT AGREEMENT
CREDIT AGREEMENT
This
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
is dated
as of July 13, 2011, amended and restated as of April 13, 2012, as thereafter amended as of August 15, 2012 and December 27, 2012, and as further amended and restated as of April 12, 2013, and entered into by and among
TAYLOR MORRISON COMMUNITIES, INC.
, a Delaware corporation (the “
U.S. Borrower
”), as co-borrower,
MONARCH CORPORATION
1
, an Ontario corporation (the “
Canadian Borrower
” and, together with the U.S. Borrower, the “
Co-Borrowers
”),
TMM HOLDINGS LIMITED PARTNERSHIP
, a British Columbia limited partnership (“
Holdings
”),
MONARCH COMMUNITIES INC.
2
, a company continued under the laws of the province of British Columbia (“
Canada Holdings
”),
MONARCH PARENT INC.
3
, a company incorporated under the laws of the province of British Columbia (“
Canada Intermediate Holdings
”),
TAYLOR MORRISON HOLDINGS, INC.
, a Delaware corporation (“
U.S. Holdings
”),
TAYLOR MORRISON FINANCE, INC.
, a Delaware corporation (“
U.S. FinCo
”),
EACH LENDER FROM TIME TO TIME PARTY HERETO
(each individually referred to herein as a “
Lender
” and collectively as “
Lenders
”) and
CREDIT SUISSE AG
, as administrative agent for the Lenders (in such capacity, the “
Administrative Agent
”).
R E C I T A L S
A.
WHEREAS
, capitalized terms used and not defined in these recitals shall have the meanings assigned to such terms in Section 1.1;
B.
WHEREAS
, the Co-Borrowers, Holdings, Canada Holdings, Canada Intermediate Holdings, U.S. Holdings, U.S. FinCo, the lenders party thereto and Credit Suisse AG, as administrative agent, collateral agent, swing line lender and issuing bank, have previously entered into a Credit Agreement dated as of July 13, 2011, as amended and restated as of April 13, 2012, and as thereafter amended as of August 15, 2012 and December 27, 2012 (the “
Existing Credit Agreement
”), pursuant to which the Co-Borrowers requested (a) the Lenders (as defined in the Existing Credit Agreement) to extend credit in the form of Revolving Loans (as defined in the Existing Credit Agreement), (b) the Issuing Banks (as defined in the Existing Credit Agreement) to issue Letters of Credit and (c) the Swing Line Lender (as defined in the Existing Credit Agreement) to extend credit in the form of Swing Line Loans (as defined in the Existing Credit Agreement), in each case on the terms and subject to the conditions set forth therein;
C.
WHEREAS
, the proceeds of the Loans have been and shall be used, and Letters of Credit have been and shall be issued, solely for the purposes set forth in Section 2.5;
D.
WHEREAS
, the Lenders are willing to continue to extend credit in the form of Loans, and the Issuing Banks are willing to issue Letters of Credit for the accounts of the Co-Borrowers, in each case on the terms and subject to the conditions set forth herein; and
1
Released from its obligations as a Borrower and as a Guarantor pursuant to Amendment No. 1, which, among other things, effected a deemed amendment to the Credit Agreement and the other Loan Documents to remove references to the Canadian Borrower and to make conforming changes.
2
Now known as Taylor Morrison Holdings II, Inc.
3
Amalgamated into Taylor Morrison Holdings II, Inc. following Amendment No. 4.
CREDIT AGREEMENT
Agent upon its request, the rate of interest shall be determined on the basis of the quotations of the remaining Reference Lenders.
“
Base Rate Loans
” means Loans bearing interest at rates determined by reference to the Base Rate as provided in Section 2.2A.
“Beneficial Ownership Certification” means a certification regarding beneficial
ownership as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“
Board
” means the Board of Governors of the Federal Reserve System of the United States (or any successor).
“
Board of Directors
” means (a) with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board, (b) with respect to a partnership, the board of directors of the general partner of the partnership, (c) with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof and (d) with respect to any other Person, the board or committee of such Person serving a similar function.
“
Borrowers
” means the U.S. Borrower, the Canadian Borrower and any additional Subsidiary of a Co-Borrower that becomes a Borrower under this Agreement pursuant to Section 10.25.
“
Borrowing Base
” means, as of any date, an amount calculated as follows:
(a)
100% of Unrestricted Cash and Cash Equivalents in excess of $10,000,000, plus
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(b)
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100% of the amount of Escrow Proceeds Receivable, plus
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(c)
90% of the book value of Units Under Contract, plus
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(d)
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85% of the book value of Units Under Construction, plus
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(e)
subject to the limitations set forth below, 85% of the book value of Speculative Units, plus
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(f)
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subject to the limitation set forth below, 90% of the book value of Model Units, plus
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(g)
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65% of the book value of Finished Lots, plus
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(h)
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65% of the book value of Lots Under Development; plus
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(i)
subject to the limitations set forth below, 50% of the book value of Entitled Land that is not included in the Borrowing Base clauses (a) through (h).
Notwithstanding the foregoing:
(i) the advance rate for Speculative Units shall decrease to 65% for any Unit that has been a Speculative Unit for more than 360 days;
such date shall be the rate that would be applicable to Canadian Dollar bankers’ acceptances quoted by the Administrative Agent at its principal office in Toronto, Ontario (or such other office selected by the Administrative Agent in which its Canadian lending operations are conducted) as of 10:00 a.m. (Toronto time) on such date or, if such date is not a Business Day, on the immediately preceding Business Day;
provided
further
that, if such rate shall be less than zero, such rate shall be deemed to be zero.
“
CDOR Rate Loan
” means a Loan denominated in Canadian Dollars the rate of interest applicable to which is based on the CDOR Rate.
“
Change in Control” has the meaning assigned to that term in Section 8.9.
“
Change in Law
” means the occurrence, after the Restatement Effective Date, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority;
provided
that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, regulations or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines, regulations or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued, in each case to the extent materially different from that in effect on the Restatement Effective Date.
“
Class
”, when used in reference to any Loans or Commitments, means each of the following classes of Loans or Commitments: (a) the Commitments and the Loans, (b) if any additional Commitments are made pursuant to Section 2.1A(iii) that are Other Credit Extensions, such additional Commitments and Other Credit Extensions (it being understood that any Other Credit Extensions (together with the Commitments in respect thereof) having different terms shall each be construed to be a different Class) or (c) if any Loan Modification Offers are made and accepted pursuant to Section 2.9, the Commitments of the Accepting Lenders and the Loans made thereunder (it being understood that the Loans of Accepting Lenders (together with the Commitments in respect thereof) having different terms shall each be construed to be a different Class);
provided
,
however
, that at no time shall there be more than six Classes of Loans or Commitments outstanding under this Agreement.
“
Co-Borrowers
” has the meaning assigned to that term in the preamble to this Agreement. “
Code
” means the Internal Revenue Code of 1986, as amended to the Restatement Effective
Date and from time to time thereafter and any successor statute.
“
Combination Loan
” means a single loan that is (a) used for both acquisition and construction purposes and (b) satisfies the requirements contained in the definition of “Assumed Purchase Money Loan” or “Seller Purchase Money Loan”, as the case may be, and the definition of “Construction Loan”. A Combination Loan (x) shall be considered an Assumed Purchase Money Loan or a Seller Purchase Money Loan, as the case may be, with respect to the portion of such Combination Loan used for acquisition purposes, and a Construction Loan with respect to the portion of such Combination Loan used for construction purposes, (y) shall be treated as a single loan for purposes of the definition
required to be established pursuant to the terms and conditions of such amendment, modification, extension or refinancing (less any reserves returned to such Loan Party in connection with such amendment, modification, extension or refinancing) and (ii) such loan (as amended, modified, extended or refinanced) shall not be secured by the assets of any Loan Party other than such Real Property Inventory and improvements constructed thereon and/or an Equity Pledge. Notwithstanding anything to the contrary herein, (A) a loan that satisfies the foregoing requirements set forth in this definition shall be a “Construction Loan” regardless of whether such loan otherwise constitutes Non-Recourse Indebtedness and (B) the obligations under such loan may be guaranteed by a Non-Recourse Indemnity Guaranty or Non-Recourse Payment Guaranty.
“
Contingent Obligation
” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person (a) with respect to any Indebtedness, lease, dividend or other obligation of another if the primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof,
(b) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or (c) under Hedge Agreements. Contingent Obligations shall include (i) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (ii) the obligation to make take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an agreement and
(iii) any liability of such Person for the obligation of another through any agreement (contingent or otherwise) (A) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (B) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclause (A) or (B) of this sentence, the primary purpose or intent thereof is as described in the preceding sentence;
provided
,
however
, that the term “Contingent Obligation” shall not include (x) obligations (including indemnity obligations but excluding Indebtedness for borrowed money) incurred in the ordinary course of business, including in respect of land acquisition contracts,
(y) endorsements of instruments for deposit or collection in the ordinary course of business and (z) mortgage loan repurchase obligations of any Mortgage Subsidiary. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if less, the amount to which such Contingent Obligation is specifically limited.
“
Continuing Directors
” means the directors of the Board of Directors of TMHC on the Restatement Effective Date, after giving effect to the Transactions and the other transactions contemplated thereby, and each other director if, in each case, such other director’s nomination for election to the Board of Directors of
TMHC
Parent
is recommended by at least a majority of the then Continuing Directors or the election of such other director is approved by one or more Sponsors.
“
Contractual Obligation
” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound other than the Obligations.
“
Cure Amount
” has the meaning assigned to that term in Section 8.12A. “
Cure Right
” has the meaning assigned to that term in Section 8.12A.
import, under any applicable Environmental Law; and (c) any other chemical, material or substance, that is prohibited, limited or regulated by any Environmental Law.
“
Hedge Agreements
” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement or any other master agreement (any such master agreement, together with any related schedules, a “
Master Agreement
”), including any such obligations or liabilities under any Master Agreement.
“
Hedge Bank
” means any Person that is a Lender, the Administrative Agent or an Affiliate of a Lender or the Administrative Agent at the time it enters into a Hedge Agreement or that is a Lender or the Administrative Agent or an Affiliate of a Lender or the Administrative Agent at any time after it has entered into a Hedge Agreement, in its capacity as a party thereto.
“
Historical Financial Statements
” means audited consolidated balance sheets and related consolidated statements of income and cash flows of Holdings and its consolidated Subsidiaries for the 2011 and 2012 Fiscal Years.
“
Holdings
” has the meaning assigned to that term in the preamble to this Agreement.
“Holdings Direct Owner” means Parent or any Parent Intermediate Holding Company,
in each case, that directly owns Capital Stock of Holdings.
“
Housing Unit
” means a detached or attached (including townhouse condominium or condominium) single-family house (but excluding mobile homes) owned by a Co-Borrower or a Subsidiary of a Co-Borrower (i) which is completed or for which there has been a start of construction and (ii) which has been or is being constructed on any Real Estate which immediately prior to the start of construction constituted a Real Property Inventory hereunder.
“
Immaterial Subsidiary
” means, at any date of determination, any Restricted Subsidiary (a) whose total assets at the last day of the Test Period ending on the last day of the most recent fiscal period for which Section 6.1 Financials have been delivered were less than 5% of the Consolidated Total Assets of Holdings, U.S. Holdings, Canada Holdings, Canada Intermediate Holdings, U.S. FinCo, the Co-Borrowers and the Restricted Subsidiaries at such date, and (b) whose gross revenues for such Test Period were less than 5% of the consolidated gross revenues of Holdings, U.S. Holdings, Canada Holdings, Canada Intermediate Holdings, U.S. FinCo, the Co-Borrowers and the Restricted Subsidiaries for such period, in each case determined in accordance with GAAP.
“
Indebtedness
” means, as applied to any Person, without duplication, (a) all indebtedness for borrowed money, (b) that portion of obligations with respect to Capital Leases that is properly
“
Letter of Credit Commitment
” means, with respect to each Issuing Bank, the commitment of such Issuing Bank to issue Letters of Credit hereunder as set forth on Schedule 3.1. The aggregate Letter of Credit Commitments of all Issuing Banks on the Amendment No. 5 Effective Date is
$160,000,000.
“
Letter of Credit Issuing Office
” means, as to any Issuing Bank, the address from time to time specified in writing by such Issuing Bank to the Borrowers and the Administrative Agent as its letter of credit issuing office.
“
Letter of Credit Usage
” means, as at any date of determination, the sum of, without duplication, (a) the Canadian LC Exposure
plus
(b) the U.S. LC Exposure.
“
Lien
” means any mortgage, pledge, security interest, hypothecation, assignment, lien (statutory or other) or similar encumbrance, and any easement, right-of-way, license, restriction (including zoning restrictions), defect, exception or irregularity in title or similar charge or encumbrance (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof);
provided
that in no event shall an operating lease be deemed to be a Lien.
“
Loan Documents
” means this Agreement, the Amendment Agreement, the Notes and the Guaranty.
“
Loan Parties
” means Holdings, Canada Holdings, U.S. Holdings, Canada Intermediate Holdings, U.S. FinCo, each Borrower and each Subsidiary Guarantor.
“
Loans
” means the loans made by the Lenders to any Borrower pursuant to Section 2.1A(i) or 2.1A(iii), if applicable.
“
Loan Modification Offer
” has the meaning assigned to that term in Section 2.9A.
“
Lots Under Development
” means Entitled Land where physical site improvement has commenced but which is not a Finished Lot, Unit Under Construction, Completed Unit, Speculative Unit, Model Unit or Unit Under Contract.
“
Management Agreements
” means (1) the Sponsor Management Services Agreement dated as of the Initial Effective Date, among U.S. Holdings, Canada Holdings, Canada Intermediate Holdings, TPG Capital, L.P. and OCM FIE, LLC and (2) JHI Management Services Agreement dated as of the Initial Effective Date, by and among JHI Investments Inc., U.S. Holdings, Canada Holdings and Canada Intermediate Holdings.
“
Management Investors
” means the (a) management officers, directors and employees of
TMHC
Parent
or any of its Subsidiaries who
are
were
investors in (i) TMHC or New TMM or (ii) one or more investment funds managed by any of the Sponsors that
is
was
an investor in TMHC or New TMM, in each case as of the Restatement Effective Date or (b) management-level employees or directors who
become
became
investors in the foregoing within 60 days of the Restatement Effective Date in connection with the Transactions;
provided
that not more than 25 management-level employees and directors who were not Management Investors as of the Restatement Effective Date shall become “Management Investors” following the Restatement Effective Date.
joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and, if applicable, any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.
“
Other Connection Taxes
” means, with respect to any Lender or Issuing Bank, Taxes imposed as a result of a present or former connection between such Lender or Issuing Bank, as applicable, and the jurisdiction imposing such Taxes (other than a connection arising from such Lender or Issuing Bank having executed, delivered, enforced, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, or engaged in any other transaction pursuant to, any Loan Document).
“
Other Credit Extensions
” has the meaning assigned to that term in Section 2.1A(iii). “
Other Taxes
” means all present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies arising from any payment made hereunder or any other Loan
Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.
“
PAPA
” means an arrangement, other than with an Affiliate of any Loan Party, which may be unsecured or secured by a Lien granted in conjunction with purchase contracts for the purchase of Real Estate and which provides for future payments due to the sellers of such Real Estate, which future payments may be made at the time of the sale of homes constructed on such Real Estate (or on a date related to the sale or failure to sell such homes) and which payments may be contingent on the sale price of such homes, which arrangement may include (a) adjustments to the land purchase price, (b) profit participations, (c) community marketing fees and community enhancement fees and (d) reimbursable costs paid by the land developer.
“
Parent” means TMHC or any other Person who becomes the ultimate holding
company of Holdings and whose ownership of Holdings does not result in a Change in Control.
“Parent Intermediate Holding Company” means any Subsidiary of Parent that is a
direct or indirect owner of any Capital Stock of Holdings.
“
Participant
” has the meaning assigned to that term in Section 10.1D.
“
Participant Register
” has the meaning specified in Section 10.1D.
“
PBGC
” means the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA (or any successor thereto).
“
Pension Act
” means the Pension Protection Act of 2006, as amended.
“
Performance Letter of Credit
” means any letter of credit of any Co-Borrower or any Subsidiary of a Co-Borrower that is issued for the benefit of a municipality, other Governmental Authority, utility, water or sewer authority, or other similar entity for the purpose of assuring such beneficiary of the letter of credit of the proper and timely completion of construction work.
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
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A.
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(i) Each Lender severally agrees, subject to the limitations set forth below with
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respect to the maximum amount of Loans permitted to be outstanding from time to time, to lend to the Borrowers from time to time in U.S. Dollars and/or Canadian Dollars during the period on and from the Initial Effective Date to but excluding the Commitment Termination Date an aggregate amount not exceeding its Pro Rata Share of the aggregate amount of the Commitments, to be used for the purposes identified in Section 2.5A. The aggregate amount of the Commitments as of the Amendment Effective Date (as defined in Amendment No.
3
6
to this Agreement dated as of
April 24, 2015,
June 29, 2018,
among the U.S. Borrower, Holdings, Canada Holdings,
Canada Intermediate Holdings,
U.S. Holdings, U.S. FinCo, the Lenders and the Administrative Agent) is $
500,000,000.
600,000,000.
Subject to Section 2.9, each Lender’s Commitment (other than Other Credit Extensions or any Commitments amended by Permitted Amendments pursuant to a Loan Modification Offer) shall expire on the Commitment Termination Date and all Loans (other than Other Credit Extensions or any Loans amended by Permitted Amendments pursuant to a Loan Modification Offer) and all other amounts owed hereunder with respect to the Loans and the Commitments (other than Other Credit Extensions or any Commitments or Loans amended by Permitted Amendments pursuant to a Loan Modification Offer) shall be paid in full not later than that date. Amounts borrowed under this Section 2.1A(i) may be repaid and reborrowed, subject to the limitations and conditions set forth herein, up to but excluding the Commitment Termination Date.
Notwithstanding anything contained herein to the contrary, in no event shall (i) the Total Utilization of Commitments at any time exceed the Availability Amount then in effect or (ii) the aggregate Canadian Revolving Exposure at any time exceed 105% of the Canadian Sublimit then in effect.
(ii)
[Reserved].
(iii)
Additional Commitments.
The Co-Borrowers may from time to time after the
Restatement Effective Date, by notice to the Administrative Agent, request that, on the terms and subject to the conditions contained in this Agreement, Qualified Additional Lenders provide up to the Additional Facilities Amount in the aggregate in additional Commitments;
provided
that (i) no Default or Event of Default shall have occurred and be continuing or would occur after giving effect to such additional Commitments, (ii) the loans under such additional Commitments shall rank pari passu with the Loans to be made pursuant to Section 2.1A(i), (iii) the representations and warranties in Section 5 shall be true and correct in all material respects prior to and after giving effect to such additional Commitments, (iv) the maturity date of any additional Commitments shall be no earlier than, and no scheduled mandatory commitment reduction shall be required prior to, the maturity date of the existing Commitments (or any Other Credit Extensions constituting Commitments), (v) the terms (other than with respect to pricing or maturity) of any additional Commitments and the Loans to be made thereunder, to the extent not consistent with the Commitments and the Loans extended under this Agreement pursuant to Section 2.1A(i), shall be reasonably satisfactory to the Administrative Agent and
(vi) if the Initial Yield applicable to the additional Commitments extended pursuant to this Section 2.1A(iii) exceeds by more than 50 basis points the Revolving Loan Yield at such time
shall not include projections, pro forma financial information or information of a general economic or general industry nature.
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B.
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Projections and Pro Forma Financial Information.
The projections and pro forma
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financial information contained in the information and data referred to in paragraph A of this Section
5.14
were prepared in good faith based upon assumptions believed by Holdings and the Co-Borrowers to be reasonable at the time made, it being recognized by the Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results and such differences may be material.
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5.15
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Anti-Corruption Laws; Sanctions.
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A.
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Anti Corruption Laws.
Holdings, U.S. Holdings, Canada Holdings, Canada
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Intermediate Holdings, U.S. FinCo, the U.S. Borrower, and each of their respective Subsidiaries and, to the Knowledge of Holdings and the Borrower, any director, officer, agent or employee of Holdings,
U.S. Holdings, Canada Holdings, Canada Intermediate Holdings, U.S. FinCo, the Borrower or any of their respective Subsidiaries are in compliance with all applicable sanctions administered or enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“
OFAC
”), the U.S. Department of State, the United Nations Security Council, the European Union or Her Majesty’s Treasury (“
Sanctions
”) and with the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “
FCPA
”) and any other applicable anti-corruption law, in all material respects. Holdings, U.S. Holdings, Canada Holdings, Canada Intermediate Holdings, U.S. FinCo, the Borrower, and each of their respective Subsidiaries have instituted and maintain policies and procedures designed to ensure continued compliance with applicable Sanctions, the FCPA and any other applicable anti-corruption laws.
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B.
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None of Holdings, U.S. Holdings, Canada Holdings, Canada Intermediate Holdings,
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U.S. FinCo, the Borrower or any of their respective Subsidiaries nor, to the Knowledge of Holdings or the U.S. Borrower, any director, officer, agent or employee of Holdings, U.S. Holdings, Canada Holdings, Canada Intermediate Holdings, U.S. FinCo, the Borrower or any of their respective Subsidiaries is currently (i) the target of any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department or (ii) located, organized or resident in a country or territory that is, or whose government is, the target of comprehensive Sanctions.
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C.
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The Borrower will not, directly or indirectly, use the proceeds of the Loans or use the
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Letters of Credit, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of the FCPA or any other applicable anti-corruption law, or (ii) (A) to fund any activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the target of Sanctions, or (B) in any other manner that would result in a violation of Sanctions by any Person (including any Person participating in the Loans or Letters of Credit, whether as Administrative Agent, Arranger, Issuing Bank, Lender, underwriter, advisor, investor, or otherwise).
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5.16
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Insurance.
Schedule 5.16 sets forth a true, complete and correct description of all material insurance policies maintained by or on behalf of U.S. FinCo, the Co-Borrowers and the Subsidiary Guarantors as of the Restatement Effective Date. As of such date, such insurance is in full force and effect and all premiums have been duly paid. U.S. FinCo, the Co-Borrowers, Holdings, Canada Holdings, U.S. Holdings, Canada Intermediate Holdings and the Subsidiary
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Guarantors have insurance in such amounts and covering such risks and liabilities as are in accordance with normal industry practice.
SECTION 6.
AFFIRMATIVE COVENANTS
Each of Holdings, U.S. Holdings, Canada Holdings, Canada Intermediate Holdings, U.S. FinCo and the Co-Borrowers covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations (other than contingent indemnification obligations, Guaranteed Hedge Obligations or Cash Management Obligations, in each case, not then due and payable) and the cancellation or expiration of all Letters of Credit (or the making of other arrangements with respect to such Letters of Credit reasonably satisfactory to the Administrative Agent and each relevant Issuing Bank), unless the Requisite Lenders shall otherwise give prior written consent, each of Holdings, U.S. Holdings, Canada Holdings, Canada Intermediate Holdings, U.S. FinCo and the Co-Borrowers shall perform, and shall cause each of their respective Subsidiaries (to the extent applicable) to perform, all covenants in this Section 6.
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6.1
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Financial Statements and Other Reports.
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Holdings will furnish to the Administrative Agent for prompt further distribution to each
Lender:
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(i)
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Quarterly Financials.
As soon as available and in any event on or before the
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date on which such financial statements are required to be filed with the SEC with respect to each of the first three quarterly accounting periods in each Fiscal Year of Holdings (or, if such financial statements are not required to be filed with the SEC, on or before the date that is 45 days after the end of each such quarterly accounting period), the consolidated balance sheet of Holdings and its consolidated Subsidiaries as at the end of such quarterly period and the related consolidated statement of operations for such quarterly accounting period and for the elapsed portion of the Fiscal Year ended with the last day of such quarterly period, and the related consolidated statement of cash flows for the elapsed portion of the Fiscal Year ended with the last day of such quarterly period, and setting forth comparative consolidated figures for the related periods in the prior Fiscal Year or, in the case of such consolidated balance sheet, for the last day of the prior Fiscal Year, subject to changes resulting from audit, normal year-end audit adjustments and the absence of footnotes. Notwithstanding the foregoing, the obligations in this clause (i) may be satisfied with respect to financial information of Holdings and its consolidated Subsidiaries by furnishing (A) the applicable financial statements of
TMHC
Parent
or (B)
TMHC
Parent
’s Form 10-K or 10-Q, as applicable, filed with the SEC;
provided
that, with respect to each of clauses (A) and (B), such information is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to
TMHC
Parent
, on the one hand, and the information relating to Holdings and its consolidated Subsidiaries on a stand-alone basis, on the other hand.
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(ii)
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Year-End Financials.
As soon as available and in any event on or before the
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date on which such financial statements are required to be filed with the SEC (or, if such financial statements are not required to be filed with the SEC, on or before the date that is 90 days after the end of each such Fiscal Year), the consolidated balance sheet of Holdings and its consolidated Subsidiaries as at the end of such Fiscal Year, and the related consolidated statement of operations and cash flows for such Fiscal Year, setting forth comparative
consolidated figures for the preceding Fiscal Year, and certified by independent registered public accountants of recognized national standing whose opinion shall not be qualified as to the scope of audit or as to the status of Holdings and its consolidated Subsidiaries as a going concern, together in any event with a certificate of the accounting firm providing the audit opinion required by this Section 6.1(ii) stating that in the course of its regular audit of the business of Holdings and its consolidated Subsidiaries, which audit was conducted in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge of any Event of Default relating to Section 7.5 that has occurred and is continuing or, if in the opinion of such accounting firm such an Event of Default has occurred and is continuing, a statement as to the nature thereof. Notwithstanding the foregoing, the obligations in this Section 6.1(ii) may be satisfied with respect to financial information of Holdings and its consolidated Subsidiaries by furnishing (A) the applicable financial statements of
TMHC
Parent
or (B)
TMHC
Parent
’s Form 10-K or 10-Q, as applicable, filed with the SEC;
provided
that, with respect to each of clauses (A) and (B), (x) such information is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to
TMHC
Parent
, on the one hand, and the information relating to Holdings and its consolidated Subsidiaries on a stand-alone basis, on the other hand, and (y) to the extent such information is in lieu of information required to be provided under this Section 6.1(ii), such materials are accompanied by an opinion of an independent registered public accounting firm of recognized national standing, which opinion shall not be qualified as to the scope of audit or as to the status of the direct or indirect parent of Holdings, as applicable) and its consolidated Subsidiaries as a going concern.
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(iii)
|
Officer’s Certificates.
At the time of the delivery of the Section 6.1 Financials,
|
an Officer’s Certificate in the form annexed hereto as
Exhibit VI
to the effect that no Event of Default exists or, if any Event of Default does exist, specifying the nature and extent thereof, which certificate shall set forth (A) solely with respect to each Measurement Quarter, the calculations required to establish whether Holdings, U.S. Holdings, Canada Holdings, Canada Intermediate Holdings, U.S. FinCo, the Co-Borrowers and the Restricted Subsidiaries were in compliance with the provisions of Section 7.5 as at the end of such Fiscal Year or period, as the case may be, (B) a specification of any change in the identity of the Restricted Subsidiaries and Unrestricted Subsidiaries as at the end of such Fiscal Year or period, as the case may be, from the Restricted Subsidiaries and Unrestricted Subsidiaries, respectively, provided to the Lenders on the Restatement Effective Date or the most recent Fiscal Year or period, as the case may be and (C) the Capitalization Ratio at the end of the Fiscal Year or period to which such Officer’s Certificate relates. If such Officer’s Certificate demonstrates an Event of Default resulting from a violation of Section 7.5, any of the Sponsors may deliver, together with such Officer’s Certificate, notice of their intent to cure (a “
Notice of Intent to Cure
”) such Event of Default pursuant to Section 8.12.
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(iv)
|
Borrowing Base Certificates
. (a) If the Capitalization Ratio as of the last day of
|
any Fiscal Year or period, as the case may be, exceeds 0.55 to 1.00, at the time of the delivery of the Section 6.1 Financials for such Fiscal Year or period, a Borrowing Base Certificate, which certificate shall set forth the calculation of the Borrowing Base and the Borrowing Base Availability as of the close of business on the last day of such Fiscal Year or period, (b) at the Co-Borrowers’ option, on any date, a Borrowing Base Certificate, which certificate shall set forth the calculation of the Borrowing Base and the Borrowing Base Availability as of the close of business on such date and (c) at the Co-Borrowers’ option, in connection with the
All such notices shall describe in reasonable detail the nature of the Environmental Claim, condition, occurrence or removal, remedial action and the response thereto. The term “
Real
Estate
” means land, buildings and improvements at any time owned or leased by Holdings, the Co-Borrowers or any of their Subsidiaries, but excluding all operating fixtures and equipment, whether or not incorporated into improvements.
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(ix)
|
Other Information.
Promptly upon filing thereof, copies of any filings
|
(including on Form 10-K, 10-Q or 8-K) or registration statements with, and reports to, the SEC or any analogous Governmental Authority in any relevant jurisdiction by
TMHC
Parent
, New TMM, Holdings, U.S. Holdings, Canada Holdings, Canada Intermediate Holdings, U.S. FinCo, the Co-Borrowers or any of the Restricted Subsidiaries (other than amendments to any registration statement (to the extent such registration statement, in the form it becomes effective, is delivered to the Administrative Agent for further delivery to the Lenders), exhibits to any registration statement and, if applicable, any registration statements on Form S-8) and copies of all financial statements, proxy statements, notices and reports that Holdings, U.S. Holdings, Canada Holdings, Canada Intermediate Holdings, U.S. FinCo, the Co-Borrowers or any of the Restricted Subsidiaries shall send to the holders of any publicly issued debt of Holdings, U.S. Holdings, Canada Holdings, Canada Intermediate Holdings, U.S. FinCo, the Co-Borrowers and/or any of the Restricted Subsidiaries in their capacity as such holders (in each case to the extent not theretofore delivered to the Administrative Agent for further delivery to the Lenders pursuant to this Agreement) and, with reasonable promptness, such other information (financial or otherwise) as the Administrative Agent on their own behalf or on behalf of any Lender may reasonably request in writing from time to time.
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(x)
|
Beneficial Ownership Certification. To the extent that any Loan Party
|
qualifies as a “legal entity customer” under the Beneficial Ownership Regulation,
promptly after a Responsible Officer of such Loan Party obtains actual knowledge
thereof, a Beneficial Ownership Certification or notice of any change in the information
provided in the then-current Beneficial Ownership Certification that would result in a
change to the list of beneficial owners identified in such Beneficial Ownership
Certification.
Documents required to be delivered pursuant to Sections 6.1(i), (ii), (vii) and (ix) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically in accordance with Section
10.7B
;
provided
that: (x) upon written request by the Administrative Agent, Holdings or the Co-Borrowers shall deliver paper copies of such documents to the Administrative Agent for further distribution to each Lender until a written request to cease delivering paper copies is given by the Administrative Agent and (y) Holdings or the Co-Borrowers shall notify (which may be by facsimile or electronic mail) the Administrative Agent of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (
i.e.
, soft copies) of such documents. Each Lender shall be solely responsible for timely accessing posted documents or requesting delivery of paper copies of such documents from the Administrative Agent and maintaining its copies of such documents.
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6.2
|
Consolidated Corporate Franchises.
|
Holdings, U.S. Holdings, Canada Intermediate Holdings, Canada Holdings, U.S. FinCo and each Co-Borrower will do, and will cause each Subsidiary Guarantor to do, or cause to be done, all things necessary to preserve and keep in full force and effect its existence, corporate rights and
contained in such other class of Capital Stock are at least as advantageous to the Lenders as those contained in the Capital Stock redeemed thereby;
|
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(iii)
|
Holdings may declare and pay Dividends to
New TMM
any Holdings Direct
|
Owner
, the proceeds of which are used to redeem, acquire, retire or repurchase shares of the Capital Stock of
New TMM or TMHC
Parent or any Parent Intermediate Holding
Company
(or any options, warrants, stock appreciation rights or phantom-based equity issued with respect to any of such Capital Stock) held by current or former officers, managers, consultants, directors and employees (or their respective spouses, former spouses, successors, executors, administrators, heirs, legatees or distributees) of
TMHC
Parent
and its Subsidiaries, upon the death, disability, retirement or termination of employment of any such Person or otherwise in accordance with any equity, stock option, stock appreciation rights or phantom equity-based plan, any management, director and/or employee stock ownership or option plan, stock subscription plan, employment termination agreement or any employment agreements or stockholders’ agreement;
provided
that except with respect to non-discretionary repurchases, acquisitions, retirement, or redemptions pursuant to the terms of any equity, stock option, stock appreciation rights or phantom equity-based plan, any management, director or employee stock ownership or option plan, stock subscription plan, employment termination agreement or any employment or shareholder agreement, the aggregate amount of all cash paid in respect of all such shares of Capital Stock so redeemed, acquired, retired or repurchased in any calendar year does not exceed the sum of (A) $10,000,000
plus
(ii) all amounts obtained by
TMHC
Parent
and contributed to any Co-Borrower during such calendar year from the sale of such Capital Stock to other present or former officers, consultants, employees and directors in connection with any permitted compensation and incentive arrangements
plus
(iii) all amounts obtained from any key-man life insurance policies received during such calendar year; notwithstanding the foregoing, 100% of the unused amount of payments in respect of this clause (iii) may be carried forward to succeeding Fiscal Years and utilized to make payments pursuant to this clause (iii);
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(vi)
|
Holdings may make additional Dividends so long as (a) no Default or Event of
|
Default shall have occurred and be continuing or would result therefrom, (b) Holdings would be in compliance with the Financial Performance Covenants on a Pro Forma Basis after giving effect thereto as of the last day of the most recent Fiscal Quarter for which Section 6.1 Financials have been or were required to be delivered (if, on a Pro Forma Basis, such Fiscal Quarter would have been a Measurement Quarter) and (c) Holdings would be in compliance with Section 2.4A(iii)(b) on a Pro Forma Basis after giving effect thereto as of the last day of the most recent Test Period for which Section 6.1 Financials have been or were required to be delivered (if, on a Pro Forma Basis, the Capitalization Ratio as of the last day of such Test Period would have resulted in a Borrowing Base Trigger Event);
|
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(vii)
|
Holdings may make and pay Dividends to
New TMM
any Holdings Direct
|
Owner
, the proceeds of which are used to repurchase Capital Stock of
TMHC
Parent
deemed to occur upon cashless exercise of stock options or warrants held by individuals who are or
were officers, managers, consultants, directors and/or employees of
TMHC
Parent
or any of its Subsidiaries (or their respective spouses, former spouses, executors, administrators, heirs or legatees) if such Capital Stock represents a portion of the exercise price, or withholding taxes payable in connection with the exercise, of such options or warrants;
|
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(viii)
|
Holdings may make and pay Dividends to
New TMM
any Holdings Direct
|
Owner
(or, at the election of
New TMM
such Holdings Direct Owner
and to the extent that such payment would otherwise be permitted as a Dividend to
New TMM
such Holdings
Direct Owner
, may make payments to such other Persons as
New TMM
such Holdings
Direct Owner
may specify for the account of
New TMM
such Holdings Direct Owner
):
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(a)
|
(x) with respect to any taxable period for which Holdings is a
|
member of a consolidated, combined, affiliated, unitary or similar income tax
group for U.S. federal and/or applicable state or local income tax purposes of
which a direct or indirect parent of Holdings is the common parent, or for
which Holdings is a disregarded entity for U.S. federal income tax purposes
that is wholly-owned (directly or indirectly) by a C corporation for U.S. federal
and/or applicable state or local income tax purposes,
the proceeds of which will be used to pay the tax liability to each relevant jurisdiction
in respect of New TMM
of
such consolidated, combined, affiliated, unitary or similar income tax group in
an amount not to exceed the amount of any U.S. federal, state and/or local
income taxes that Holdings and/or its Subsidiaries, as applicable, would have
paid for such taxable period had Holdings and/or its Subsidiaries, as
applicable, been a stand-alone corporate taxpayer or a stand-alone corporate
group; and (y) with respect to any taxable period for which Holdings is a
partnership for U.S. federal income tax purposes or for which Holdings is a
disregarded entity for U.S. federal income tax purposes that is wholly-owned
(directly or indirectly) by a partnership for U.S. federal and/or applicable state
or local income tax purposes the proceeds of which will be used to pay the tax
liability to each relevant jurisdiction in respect of Holdings or the partnership
of which Holdings is a disregarded entity (including New TMM)
or
, in each
case,
its direct and indirect limited partners, but only to the extent of an amount equal to the greater of the amount of such parties’ (i) U.S. federal, state and local income taxes or (ii) Canadian federal or provincial income taxes, in each case with respect to such parties’ allocable share of any Holdings net taxable income and gain for such fiscal period, determined by assuming (without regard to such parties’ actual tax liability) that such income or gain, as applicable, is taxable to such parties at the greater of (
x
X
) the highest marginal U.S. federal income tax rate then in effect (including any tax on “net investment income”), and a state and local income tax rate equal to the highest marginal rate then in effect for an individual or (if higher) a corporation that is a resident of San Francisco, California, and (
y
Y
) the highest combined provincial and federal income tax rate applicable to an individual or (if higher) a corporation that is a resident of Canada and is subject to tax in the province of Canada that has the highest income tax rate, in each case taking into account the character of such income or gain and the deductibility of state and local income taxes for U.S. federal income tax purposes and provincial income taxes for Canadian federal income tax purposes, provided that no payments shall be permitted under this
Section 7.4(viii)(a) at any time that either Holdings or New TMM is taxable as an entity other than a pass-through for U.S. federal income tax purposes;
|
|
(b)
|
the proceeds of which shall be used by New TMM
or TMHC
, Parent
|
or any other direct or indirect parent of Holdings to pay its operating expenses incurred in the ordinary course of business and other corporate overhead costs and expenses (including administrative, legal, accounting and similar expenses provided by third parties), which are reasonable and customary and incurred in the ordinary course of business, in an aggregate amount not to exceed $2,500,000 in any Fiscal Year plus any actual, reasonable and customary indemnification claims made by directors or officers of New TMM or
TMHC
Parent
;
|
|
(c)
|
the proceeds of which shall be used by New TMM
or TMHC
, Parent
|
or any other direct or indirect parent of Holdings to pay franchise taxes and other fees, taxes and expenses required to maintain its corporate existence; and
|
|
(d)
|
the proceeds of which shall be used by New TMM
or TMHC
, Parent
|
or any other direct or indirect parent of Holdings to pay fees and expenses (other than to Affiliates) related to any unsuccessful equity or debt offering permitted or not otherwise prohibited by this Agreement; and
|
|
(ix)
|
Holdings may make payments described in Sections 6.9(b), 6.9(d), 6.9(f),
|
6.9(g), 6.9(h), 6.9(n) and 6.9(o); and
|
|
(x)
|
Holdings may declare and pay Dividends on its common stock of up to 6% per
|
annum of the cash proceeds received by or contributed to Holdings in or from the IPO.
|
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7.5
|
Financial Covenants.
For each Fiscal Quarter of Holdings (i) during which any Loans are outstanding on the last day of such Fiscal Quarter or on more than five separate days during such Fiscal Quarter or (ii) the aggregate Stated Amount of undrawn Letters of Credit (except to the extent cash collateralized) exceeds $40,000,000 or there are any Unpaid Drawings in respect of Letters of Credit on the last day of such Fiscal Quarter or for more than five consecutive days during such Fiscal Quarter (each such Fiscal Quarter, a “
Measurement Quarter
”), Holdings, U.S. Holdings, Canada Holdings, Canada Intermediate Holdings, U.S. FinCo and the Co-Borrowers shall ensure that:
|
A.
Capitalization Ratio
. The ratio of (i) Consolidated Total Debt as of the last day of any Measurement Quarter (any such day being a “
Calculation Date
”) to (ii) Consolidated Total Capitalization as of such Calculation Date (such ratio, the “
Capitalization Ratio
”) shall not exceed 0.60:1.00:
B.
Consolidated Tangible Net Worth
. Consolidated Tangible Net Worth as of any Calculation Date shall not be less than $1,000,655,978
plus
the sum of (i) 50% of Consolidated Net Income since December 31, 2012, if positive,
plus
(ii) 50% of the cash proceeds of any Equity Issuance received by Holdings since December 31, 2012 (with respect to this subclause (ii), (a) the amount of the cash proceeds received by Holdings directly or indirectly from any officer, director or employee of
TMHC
Parent
or any of its Subsidiaries shall be reduced (but not below zero) by the aggregate amount paid by Holdings to directly or indirectly repurchase the Capital Stock of any direct or indirect parent of Holdings from officers, directors or employees of
TMHC
Parent
or any of its
(a)
(i) any Person, or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) (but excluding any employee benefit plan of such Person or “group” and its Subsidiaries and any Person acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), other than the Sponsors and the Management Investors, shall at any time have acquired direct or indirect beneficial ownership (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act) of a percentage of the outstanding Voting Stock of
TMHC
Parent
that exceeds the percentage of such Voting Stock then beneficially owned, in the aggregate, by the Sponsors and the Management Investors and (ii) such person, entity or “group” shall at any time directly or indirectly beneficially own at least 35% of the outstanding Voting Stock of
TMHC
Parent
, unless the Sponsors and the Management Investors have, at such time, the right or the ability by voting power, contract or otherwise to elect or designate for election at least a majority of the Board of Directors of
TMHC
Parent
; and/or (b) at any time a majority of the Board of Directors of
TMHC
Parent
shall not be Continuing Directors; and/or
(c) a change of control, as contemplated by the definitive documentation governing the Senior Unsecured Notes or any other Indebtedness in excess of $35,000,000 in the aggregate, shall have occurred; and/or (d) (i) Holdings shall cease to have direct or indirect ownership of all the Voting Stock of any Co-Borrower or U.S. FinCo, (ii) U.S. Holdings shall cease to have direct or indirect ownership of all the Voting Stock of the U.S. Borrower, (iii) U.S. Holdings shall cease to have direct or indirect ownership of all of the Voting Stock of U.S. FinCo, (iv) [reserved], (v) the General Partner shall cease to be the general partner of Holdings
,
and/or
(vi)
New TMM
Parent
shall cease to have direct or indirect ownership of all the Voting Stock of Holdings
and/or (vii) TMHC shall cease to have direct or indirect ownership of all the Voting Stock of New TMM
(the occurrence of any of the foregoing, a “Change in Control”)
;
provided
that none of the fundamental changes permitted by Section 7.6A shall constitute a Change in Control; or
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8.10
|
Invalidity of the Guaranty.
|
The Guaranty or any material provision thereof shall cease to be in full force or effect or any Guarantor thereunder or any Loan Party shall deny or disaffirm in writing any Guarantor’s obligations under the Guaranty; or
THEN
and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent shall, upon the written request of the Requisite Lenders, by written notice to the U.S. Borrower, take any or all of the following actions, without prejudice to the rights of the Administrative Agent or any Lender to enforce its claims against the Borrowers, except as otherwise specifically provided for in this Agreement (
provided
that, if an Event of Default specified in Section 8.5 shall occur with respect to Holdings, U.S. Holdings, Canada Holdings, Canada Intermediate Holdings, U.S. FinCo, any of the Co-Borrowers or any Subsidiary Guarantor, the result that would occur upon the giving of written notice by the Administrative Agent as specified in clauses (i), (ii), (iii) and (iv) below shall occur automatically without the giving of any such notice): (i) declare all Commitments terminated and whereupon the Commitments, if any, of each Lender shall forthwith terminate immediately and any fees theretofore accrued shall forthwith become due and payable without any other notice of any kind, (ii) declare the principal of and any accrued interest and fees in respect of all Loans and all Obligations owing hereunder and thereunder to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers; (iii) terminate any Letter of Credit that may be
FORM OF
OMNIBUS AMENDMENT TO RESTRICTED STOCK UNIT AGREEMENTS AND EMPLOYEE NONQUALIFIED OPTION AWARD AGREEMENTS UNDER THE TAYLOR MORRISON HOME CORPORATION 2013 OMNIBUS EQUITY AWARD PLAN (“
AMENDMENT
”)
WHEREAS, Taylor Morrison Home Corporation (the “
Company
”), a Delaware corporation, previously granted to [ ] (“
Participant
”) awards of (i) restricted stock units and (ii) stock options relating to the Company’s Common Stock under the Company’s 2013 Omnibus Equity Award Plan (as amended, restated, or modified from time to time, the “
Plan
”);
WHEREAS, the Compensation Committee of the Company’s Board of Directors (the “
Committee
”) has the authority to establish the terms and conditions of awards under the Plan, and the Committee desires to amend the terms of certain restricted stock units and stock options and the agreements related thereto;
WHEREAS, Participant’s currently outstanding agreements with respect to previous awards of restricted stock units and stock options under the Plan include (i) [each agreement covering an award of restricted stock units that vest based on both the completion of a period of service and the satisfaction of a performance condition (each such award, a “
Performance-Based RSU
” and each such agreement, a “
Performance-Based RSU Agreement
”), (ii)] each agreement covering an award of restricted stock units that vest based on the completion of a period of service, only (each such award, a “
Time-Based RSU
” and each such agreement, a “
Time-Based RSU Agreement
”), and [(iii)] each agreement covering an award of stock options that vest based on the completion of a period of service (each such award, a “
Time-Based Option
” and each such agreement, a “
Time-Based Option Agreement
,” and together with the Performance-Based RSU Agreements and Time-Based RSU Agreements, the “
Award Agreements
”); and
WHEREAS, capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Plan or the Award Agreements, as applicable.
NOW, THEREFORE, effective as of June 14, 2018 (the “
Amendment Date
”), in consideration of the mutual agreements, provisions, and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, (i) [each Performance-Based RSU Agreement, (ii)] each Time-Based RSU Agreement, and [(iii)] each Time-Based Option Agreement, in each case, that relates to Participant’s awards of stock options or restricted stock units granted under the Plan on or prior to, and outstanding as of, the Amendment Date (except as otherwise specified below), is amended as follows:
1.
[Amendment to Section 2 (“Vesting”) of the Performance-Based RSU Agreements
. The text of Section 2 of each Performance-Based RSU Agreement that follows the title “Vesting,” is hereby redesignated as subsection (a) (“
Generally
”) and a new subsection (b) is hereby added to such Section 2 as follows:
(b)
Change in Control
. Notwithstanding anything to the contrary contained in the Plan or this Agreement, upon a Change in Control, the Performance Period shall end, and the Participant shall be eligible to vest in the PSUs on the last date stated in the first sentence of Section 2(a) (the “
Vesting Date
”), with the Performance Goal deemed achieved at the “target” level (subject to Participant’s continued Employment through the Vesting Date);
provided
, however, if the Participant’s Employment with the Company is terminated by the Company without Cause [
NEOs
: or by the Participant for Good Reason, in each case at any time (x) following the execution of a definitive agreement with a third party that, if consummated, would result in a Change in Control, but before such transaction is consummated (and subject to such consummation), or (y) within twenty-four (24) months following a Change in Control][
Non-NEOs
: at any time (x) following the execution of a definitive agreement that contemplates a Change in Control, but before such transaction is consummated (and subject to such consummation), or (y) within twenty-four (24) months following a Change in Control, or the Participant resigns with Good Reason], then the Participant shall remain eligible to vest in the PSUs as described in this sentence, but the Vesting Date shall occur on the date of such termination (or, if later, the date of such Change in Control). For the avoidance of doubt, the Vesting Date shall be deemed to be the “Determination Date.” For purposes of this Agreement, “
Cause
” shall have the same meaning given such term (or term of similar import) in any employment, consulting, change-in-control, severance or any other similar agreement between the Participant and the Company or any of its Affiliates that is in effect at the time of the Participant’s termination of Employment, or in absence of such definition or any such agreement, “
Cause
” shall have the meaning set forth in the Plan. For purposes of this Agreement, “
Good Reason
” shall have the same meaning given such term (or term of similar import) in any employment, consulting, change-in-control, severance or any other similar agreement between the Participant and the Company or any of its Affiliates that is in effect at the time of the Participant’s termination of Employment, or in absence of such definition or any such agreement, “Good Reason” means any of the following actions are taken by the Company or any of its Affiliates without the Participant’s consent[
Non-NEOs
:, in each case, within twenty-four (24) months following a Change in Control]: (i) any material diminution in the nature of the Participant’s duties, responsibilities or authority, (ii) any material diminution in the Participant’s annual base salary or annual target bonus opportunity, other than a decrease in base salary or bonus opportunity that applies to a similarly situated class of employees of the Company or its Affiliates, (iii) a material breach of the Company’s obligations under this Agreement, or (iv) a change of the Participant’s principal place of employment to a location more than fifty (50) miles from its location as of immediately prior to the Change in Control (which change increases the Participant’s one-way commute);
provided
,
however
, that none of the events described in the foregoing clauses shall constitute Good Reason unless the Participant has notified the Company in writing describing the events that constitute Good Reason within ninety (90) days following the first occurrence of such events and then only if the Company fails to cure such events within thirty (30) days after the Company’s receipt of such written notice, and the Participant shall have terminated the Participant’s Employment with the Company promptly following the expiration of such cure period.]
2.
[
Amendment to Section 4 (“Termination of Employment”) of Certain Performance-Based RSU Agreements
. The text of Section 4 of each Performance-Based RSU Agreement, solely with respect to Performance-Based RSUs granted on or after February 12, 2018 (but prior to the Amendment Date), that follows the title “Termination of Employment,” is hereby redesignated as subsection (a) (“
Generally
”) and a new subsection (b) is hereby added to such Section 4 as follows:
(b)
Retirement
. If the Participant terminates his or her Employment due to the Participant’s Retirement, then, notwithstanding anything to the contrary in the Plan or in this Agreement, the PSUs will continue to remain eligible to vest in accordance with Section 2 hereof. Each PSU that vests in accordance with this Section 4(b) shall be settled in accordance with the terms of Section 3 hereof. For purposes of this Section 4(b), “
Retirement
” shall mean the Participant’s voluntary termination of his or her Employment following the Participant attaining the Retirement Age at a time when the Company or any of its Affiliates does not have Cause to terminate the Participant’s Employment;
provided
, that in order for the PSUs to be eligible for the continued vesting described in this Section 4(b) upon a Retirement, (i) the Participant must have (x) completed a minimum of five (5) years of Employment and (y) attained at least fifty-five (55) years of age, and (ii) such Retirement must occur at least twelve (12) months following the Date of Grant. For purposes of this Section 4(b), the “
Retirement Age
” shall be the date on which the sum of the Participant’s age plus the Participant’s years of consecutive Employment is equal to at least 70.]
3.
[
Amendment to Section 7 (“Restrictive Covenants”) of Certain Performance-Based RSU Agreements
. The first sentence of Section 7 of each Performance-Based RSU Agreement, solely with respect to Performance-Based RSUs granted on or after February 12, 2018 (but prior to the Amendment Date), that follows the title “Restrictive Covenants,” is hereby amended and restated in its entirety as follows: “In consideration of the grant of the PSUs, Participant agrees that Participant will comply with noncompetition, nonsolicitation, nondisparagement, confidentiality, and any similar restrictions set forth in any restrictive covenant agreement, employment agreement or similar agreement between Participant and the Company or any of its Affiliates, or any such agreement that the Company or any of its Affiliates requires Participant to enter into as a condition to receipt of the PSUs;
provided
, that, notwithstanding anything to the contrary in any of the foregoing agreements, upon the Participant’s Retirement, any such noncompetition, nonsolicitation, nondisparagement, confidentiality, or similar restrictions shall survive until the later of (x) the Settlement Date, or (y) the date that such restrictions would otherwise expire by their terms.”]
4.
Amendment to Section 2 (“Vesting”) of the Time-Based RSU Agreements
. The text of Section 2 of each Time-Based RSU Agreement that follows the title “Vesting,” is hereby redesignated as subsection (a) (“
Generally
”) and a new subsection (b) is hereby added to such Section 2 as follows:
(b)
Change in Control
. Notwithstanding anything to the contrary contained in the Plan or this Agreement, if the Participant’s Employment with the Company is terminated by the Company without Cause [
NEOs
: or by the Participant for Good Reason in each case at any time (x) following the execution of a definitive agreement with a third party that, if consummated, would result in a Change in Control, but before such transaction is consummated (and subject to such consummation), or (y) within twenty-four (24) months following a Change in Control][
Non-NEOs
: at any time (x) following the execution of a definitive agreement that contemplates a Change in Control, but before such transaction is consummated (and subject to such consummation), or (y) within twenty-four (24) months following a Change in Control, or the Participant resigns with Good Reason] then the Participant shall vest in full in any unvested portion of the RSUs on the date of such termination of Employment (or, if later, the date of the applicable Change in Control). For purposes of this Agreement, “
Cause
” shall have the same meaning given such term (or term of similar import) in any employment, consulting, change-in-control, severance or any other similar agreement between the Participant and the Company or any of its Affiliates that is in effect at the time of the Participant’s termination of Employment, or in absence of such definition or any such agreement, “
Cause
” shall have the meaning set forth in the Plan. For purposes of this Agreement, “
Good Reason
” shall have the same meaning given such term (or term of similar import) in any employment, consulting, change-in-control, severance or any other similar agreement between the Participant and the Company or any of its Affiliates that is in effect at the time of the Participant’s termination of Employment, or in absence of such definition or any such agreement, “Good Reason” means any of the following actions are taken by the Company or any of its Affiliates without the Participant’s consent [
Non-NEOs
:, in each case, within twenty-four (24) months following a Change in Control]: (i) any material diminution in the nature of the Participant’s duties, responsibilities or authority, (ii) any material diminution in the Participant’s annual base salary or annual target bonus opportunity, other than a decrease in base salary or bonus opportunity that applies to a similarly situated class of employees of the Company or its Affiliates, (iii) a material breach of the Company’s obligations under this Agreement, or (iv) a change of the Participant’s principal place of employment to a location more than fifty (50) miles from its location as of immediately prior to the Change in Control (which change increases the Participant’s one-way commute);
provided
,
however
, that none of the events described in the foregoing clauses shall constitute Good Reason unless the Participant has notified the Company in writing describing the events that constitute Good Reason within ninety (90) days following the first occurrence of such events and then only if the Company fails to cure such events within thirty (30) days after the Company’s receipt of such written notice, and the Participant shall have terminated the Participant’s Employment with the Company promptly following the expiration of such cure period.
5.
Amendment to Section 4 (“Termination of Employment”) of Certain Time-Based RSU Agreements
. The text of Section 4 of each Time-Based RSU Agreement, solely with respect to Time-Based RSUs granted on or after February 12, 2018 (but prior to the Amendment Date), that follows the title “Termination of Employment,” is hereby redesignated as subsection (a) (“
Generally
”) and a new subsection (b) is hereby added to such Section 4 as follows:
(b)
Retirement
. If the Participant terminates his or her Employment due to the Participant’s Retirement, then, notwithstanding anything to the contrary in the Plan or in this Agreement, the Participant shall vest in full in any unvested portion of the RSUs on the date of such termination of Employment. Each RSU that vests in accordance with this Section 4(b) shall be settled in accordance with the terms of Section 3 hereof. For purposes of this Section 4(b), “
Retirement
” shall mean the Participant’s voluntary termination of his or her Employment following the Participant attaining the Retirement Age at a time when the Company or any of its Affiliates does not have Cause to terminate the Participant’s Employment;
provided
, that in order for the RSUs to be eligible for the full vesting described in this Section 4(b) upon a Retirement, (i) the Participant must have (x) completed a minimum of five (5) years of Employment and (y) attained at least fifty-five (55) years of age, and (ii) such Retirement must occur at least twelve (12) months following the Date of Grant. For purposes of this Section 4(b), the “
Retirement Age
” shall be the date on which the sum of the Participant’s age plus the Participant’s years of consecutive Employment is equal to at least 70.
6.
Amendment to Section 2 (“Vesting”) of the Time-Based Option Agreements
. The text of Section 2 of each Time-Based Option Agreement that follows the title “Vesting,” is hereby redesignated as subsection (a) (“
Generally
”) and a new subsection (b) is hereby added to such Section 2 as follows:
(b)
Change in Control
. Notwithstanding anything to the contrary contained in the Plan or this Agreement, if the Participant’s Employment with the Company is terminated by the Company without Cause [
NEOs
: or by the Participant for Good Reason in each case at any time (x) following the execution of a definitive agreement with a third party that, if consummated, would result in a Change in Control, but before such transaction is consummated (and subject to such consummation), or (y) within twenty-four (24) months following a Change in Control][
Non-NEOs
: at any time (x) following the execution of a definitive agreement that contemplates a Change in Control, but before such transaction is consummated (and subject to such consummation), or (y) within twenty-four (24) months following a Change in Control, or the Participant resigns with Good Reason], then the Participant shall vest in full in any unvested portion of the Option on the date of such termination of Employment (or, if later, the date of the applicable Change in Control). For purposes of this Agreement, “
Cause
” shall have the same meaning given such term (or term of similar import) in any employment, consulting, change-in-control, severance or any other similar agreement between the Participant and the Company or any of its Affiliates that is in effect at the time of the Participant’s termination of Employment, or in absence of such definition or any such agreement, “
Cause
” shall have the meaning set forth in the Plan. For purposes of this Agreement, “
Good Reason
” shall have the same meaning given such term (or term of similar import) in any employment, consulting, change-in-control, severance or any other similar agreement between the Participant and the Company or any of its Affiliates that is in effect at the time of the Participant’s termination of Employment, or in absence of such definition or any such agreement, “Good Reason” means any of the following actions are taken by the Company or any of its Affiliates without the Participant’s consent [
Non-NEOs
: , in each case, within twenty-four (24) months following a Change in Control]: (i) any material diminution in the nature of the Participant’s duties, responsibilities or authority, (ii) any material diminution in the Participant’s annual base salary or annual target bonus opportunity, other than a decrease in base salary or bonus opportunity that applies to a similarly situated class of employees of the Company or its Affiliates, (iii) a material breach of the Company’s obligations under this Agreement, or (iv) a change of the Participant’s principal place of employment to a location more than fifty (50) miles from its location as of immediately prior to a Change in Control (which change increases the Participant’s one-way commute);
provided
,
however
, that none of the events described in the foregoing clauses shall constitute Good Reason unless the Participant has notified the Company in writing describing the events that constitute Good Reason within ninety (90) days following the first occurrence of such events and then only if the Company fails to cure such events within thirty (30) days after the Company’s receipt of such written notice, and the Participant shall have terminated the Participant’s Employment with the Company promptly following the expiration of such cure period.
7.
Amendment to Section 3 (“Termination of Employment”) of Certain Time-Based Option Agreements
. The text of Section 3 of each Time-Based Option Agreement, solely with respect to Time-Based Options granted on or after February 12, 2018 (but prior to the Amendment Date), that follows the title “Termination of Employment,” is hereby redesignated as subsection (a) (“
Generally
”) and a new subsection (b) is hereby added to such Section 3 as follows:
(b)
Retirement
. If the Participant terminates his or her Employment due to the Participant’s Retirement, then, notwithstanding anything to the contrary in the Plan or in this Agreement, the Participant shall vest in full in any unvested portion of the Option on the date of such Retirement. For purposes of this Section 3(b) and Section 4(e), “
Retirement
” shall mean the Participant’s voluntary termination of his or her Employment following the Participant attaining the Retirement Age at a time when the Company or any of its Affiliates does not have Cause to terminate the Participant’s Employment;
provided
, that in order for the Option to be eligible for the full vesting described in this Section 3(b) upon a Retirement, (i) the Participant must have (x) completed a minimum of five (5) years of Employment and (y) attained at least fifty-five (55) years of age, and (ii) such Retirement must occur at least twelve (12) months following the Date of Grant. For purposes of this Section 3(b) and Section 4(e), the “
Retirement Age
” shall be the date on which the sum of the Participant’s age plus the Participant’s years of consecutive Employment is equal to at least 70.
8.
Amendment to Section 4 (“Expiration”) of Certain Time-Based Option Agreements
. Solely with respect to Time-Based Options granted on or after February 12, 2018 (but prior to the Amendment Date), a new subsection (e) shall be added to Section 4 of each Time-Based Option Agreement as follows:
(e)
Retirement
. Notwithstanding anything to the contrary herein, if the Participant’s Employment is terminated prior to the end of the Option Period on account of his or her Retirement, the Option shall expire on the earlier of the last day of the Option Period and the date that is one (1) year
after the date of the Participant’s termination of Employment on account of Retirement.
9.
Remainder of Award Agreements
. Except as specifically set forth in this Amendment, all other provisions of the Award Agreements shall remain in full force and effect as originally set forth therein. By executing this Amendment, neither party waives or relinquishes any right which arose under or that relates to the terms of the Award Agreements prior to this Amendment.
10.
Construction
. On and after the date that this Amendment is effective, each reference to the Award Agreements shall mean and be a reference to each such Award Agreement as amended hereby, and this Amendment and each such Award Agreement shall be read together and construed as a single instrument.
11.
Further Assurances
. Each party hereby agrees to execute and deliver all such further instruments and documents and take all such other actions as the other party may reasonably request in order to carry out the intent and purposes of this Amendment.
12.
Counterparts
. This Amendment may be executed in one or more counterparts (including via facsimile and electronic image scan/portable document format (PDF)), each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties hereto.
[signature page follows]
IN WITNESS WHEREOF, the Company and Participant have executed this Amendment as set forth below.
TAYLOR MORRISON HOME CORPORATION
By:
Name: Sheryl D. Palmer
Title: Chairman & Chief Executive Officer
Date: [
]
Agreed to and Accepted by:
_________________________
[Participant Name]
EXECUTION VERSION
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the
"Agreement'),
entered into on June 15, 2018 (the
"Effective Date"),
is made by and between Sheryl D. Palmer (the
"Executive")
and Taylor Morrison, Inc., a Delaware corporation (the
"Company")
.
RECITALS
A.
It is the desire of the Company to assure itself of the continued services of the Executive by continuing to engage the Executive to perform services under the terms hereof.
B.
The Executive desires to continue to provide services to the Company and to Taylor Morrison Home Corporation, a Delaware corporation and the indirect parent of the Company (including any successor parent,
"TMHC")
on the terms herein provided.
C.
This Agreement is intended to supersede any prior agreements or understandings, whether formal or informal, between the Executive and the Company or any of its Affiliates (as defined below).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the parties hereto agree as follows:
(a)
"Accountants"
shall have the meaning set forth in Section 1 l(b ).
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(b)
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"Accrued Obligations"
shall have the meaning set forth in Section 5(a).
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(c)
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'Action"
shall have the meaning set forth in Section 9.
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(d)
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"Affiliate"
shall have meaning ascribed thereto in the Equity Plan.
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(e)
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"Agreement"
shall have the meaning set forth in the preamble hereto.
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(f)
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'Annual Base
Salary"
shall have the meaning set forth in Section 3(a).
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(g)
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"Annual Bonus"
shall have the meaning set forth in Section 3(b).
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(h)
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"Board."
shall mean the Board of Directors of TMHC.
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(i)
The Company shall have
"Cause"
to terminate the Executive's employment pursuant to Section 4(a)(iii) hereunder upon: (i) a material breach by the Executive of this Agreement, any award agreement executed by the Executive and issued under the Equity Plan or any policy of the Company or its Affiliates:
provided,
that, the Company shall permit the Executive up to fifteen (15) days after notice from the Company to cure such breach if reasonably susceptible to cure; (ii) the Executive's gross negligence or willful misconduct, which is injurious to the Company or any of its Affiliates:
provided,
that, the Company shall permit the Executive up to
fifteen (15) days after notice from the Company to cure such breach if reasonably susceptible to cure; or (iii) the Executive's conviction of, or guilty plea (or plea of
nolo contendere)
or confession to, a felony or other crime involving dishonesty, fraud, breach of any fiduciary obligation to the Board or any equity holder of TMHC, or unethical business conduct.
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(j)
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"280G Change in Control"
shall have the meaning set forth in Section 1 l(a).
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(k)
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"Change
in
Control"
shall have the meaning set forth in the Equity Plan.
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(1)
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"Code"
shall mean the Internal Revenue Code of 1986, as amended.
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(m)
"Company"
shall, except as otherwise provided in Section 7, have the meaning set forth in the preamble hereto.
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(n)
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"Confidential
Information"
shall have the meaning set forth in Section 7(a)
.
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(o)
"Date of
Termination"
shall mean (i) if the Executive's employment is terminated by the Executive's death, the date of the Executive's death, or (ii) if the Executive's employment is terminated pursuant to Section 4(a)(ii)-(vi), the date specified or otherwise effective pursuant to Section 4(b).
(p)
"Disability
' shall mean the disability of the Executive caused by any physical or mental injury, illness or incapacity as a result of which the Executive has been unable to effectively perform the essential functions of the Executive's duties for a continuous period of at least one hundred eighty (180) days.
If
any question shall arise as to whether a Disability exists, the Executive may, and at the request of the Company shall, submit to a medical examination by a physician selected by the Company to determine whether a Disability exists and such determination shall for the purposes of this Agreement be conclusive of the issue.
If
such question shall arise and the Executive shall fail to submit to such medical examination, the Company's determination of the issue shall be binding on the Executive.
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(q)
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"Effective
Date"
shall have the meaning set forth in the preamble hereto.
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(r)
"Equity
Plan"
shall mean the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan, as amended from time to time, or any successor plan thereto.
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(s)
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"Excise
Tax"
shall have the meaning set forth in Section l l(a).
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(t)
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"Executive"
shall have the meaning set forth in the preamble hereto.
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(u)
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"Full
Payment"
shall have the meaning set forth in Section 1 l(a).
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(v)
The Executive shall have
"Good Reason"
to resign from employment pursuant to Section 4(a)(v) in the event that any of the following actions are taken by the Company or any of its Affiliates without the Executive's consent: (i) any material diminution in the nature or status of the Executive's title, duties, responsibilities or authority, including by reason of the Executive's no longer being the most senior executive of a publicly traded company following a Change in Control, (ii) any material diminution in the Executive's Annual Base Salary or Target Bonus, other
than a decrease in base salary or bonus opportunity that applies to a similarly situated class of employees of the Company or its Affiliates, (iii) a material breach of the Company's obligations under this Agreement, or (iv) a change of the Executive's principal place of employment to a location more than fifty (50) miles from its present location (which change increases the Executive's one-way commute);
provided, however,
that none of the events described in the foregoing clauses shall constitute Good Reason unless the Executive has notified the Company in writing describing the events that constitute Good Reason within ninety (90) days following the first occurrence of such events and then only if the Company fails to cure such events within thirty
(30) days after the Company's receipt of such written notice, and the Executive shall have terminated the Executive's employment with the Company promptly following the expiration of such cure period.
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(w)
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"Inventions"
shall have the meaning set forth in Section 7(c).
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(x)
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''Notice
of Termination"
shall have the meaning set forth in Section 4(b)
.
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(y)
"
Person"
shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.
(z)
"Proprietmy
Rights"
shall have the meaning set forth in Section 7(c). (aa)
'Reduced
Payment"
shall have the meaning set forth in Section l l(a). (bb)
'
'
Section4 09A"
shall have the meaning set forth in Section l0(a).
(cc)
"Severance
Payments"
shall have the meaning set forth in Section 5(b)(i). (dd)
"Severance
Period"
shall have the meaning set forth in Section 5(b)(i). (ee)
"Target
Bonus"
shall have the meaning set forth in Section 3(b).
(ff)
"Term"
shall have the meaning set forth in Section 2(b).
(gg)
"TMHC"
shall have the meaning set forth in the preamble hereto.
(hh)
"Transaction
Payment"
shall have the meaning set forth in Section l l(a).
(a)
In General
.
The Company shall continue to employ the Executive, and the Executive shall continue in the employ of the Company, for the period set forth in Section 2(b), in the position set forth in Section 2(c), and upon the other terms and conditions herein provided.
(b)
Term
of Employment.
The term of employment (the
"Term")
under this Agreement shall be for the period beginning on the Effective Date and ending on the Date of Termination.
(i)
Position.
During the Term, the Executive shall serve as President and Chief Executive Officer of the Company and TMHC, with duties, responsibilities and authority customary for such position and as may be reasonably assigned by the Board from time to time. Such duties, responsibilities and authority may include services for one or more subsidiaries or Affiliates of the Company. The Executive shall report to the Board. The Executive agrees to observe and comply with the Company's and its Affiliates' rules and policies as adopted from time to time. The Executive shall devote the Executive's full business time, skill, attention and best efforts to the performance of the Executive's duties hereunder;
provided, however,
that the Executive shall be entitled to manage the Executive's personal, financial and legal affairs, or reasonably engage in charitable endeavors, so long as such activities do not interfere with the Executive's performance of the Executive's duties and responsibilities to the Company and its Affiliates as provided hereunder, are not in conflict with the business interests of the Company or its Affiliates and do not otherwise compete with the business of the Company or its Affiliates. For the avoidance of doubt, except as specifically provided in this Section 2(c), during the Term, the Executive shall not be permitted to become engaged in or render services for any Person other than the Company and its Affiliates without the consent of the Board.
(ii)
Board Service
. The Executive is currently a member of the Board. During the Term, the Company shall nominate the Executive for re-election as a director on the Board upon the expiration of the Executive's current term as a director and upon the expiration of each subsequent term thereafter.
(iii)
Principal Office
. During the Term, the principal place of the Executive's employment shall be the Company's corporate headquarters in Scottsdale, Arizona. The Executive shall perform the Executive's duties and responsibilities to the Company at such principal place of employment and at such other location(s) to which the Company may reasonably require the Executive to travel for Company business purposes.
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3.
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Compensation
a.nd Related Matters.
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(a)
Annual
Base Salary
. During the Term, the Executive shall receive a base salary at a rate of one million dollars ($1,000,000) per annum, which shall be paid in accordance with the customary payroll practices of the Company, subject to review and adjustment in accordance with the Company's or TMHC's compensation policies and practices, overall financial condition and other business factors (the
"Annual Base Salary")
.
(b)
Annual Bonus.
With respect to each calendar year that ends during the Term, the Executive shall be eligible to receive an annual cash bonus (the
"Annual Bonus")
under TMHC's annual bonus program, with a target Annual Bonus amount equal to two hundred percent (200%) of the Annual Base Salary (the
"Target Bonus").
The Executive's actual Annual Bonus for a given year, if any, shall be determined by the Board (or a subcommittee thereof) on the basis of the Executive's, the Company's and/or TMHC's attainment of objective financial and/or other subjective or objective criteria established by the Board (or a subcommittee thereof). Each such Annual Bonus shall be payable at such time and in such manner that annual bonuses are paid to other senior executives of the Company after results have been determined for the calendar year to which the Annual Bonus, if any, relates. Notwithstanding the foregoing, except as expressly provided in Section 5 hereof, no Annual Bonus shall be payable with respect to any calendar year
unless the Executive remains continuously employed with the Company through the date of payment of such Annual Bonus.
(c)
Benefits.
During the Term, the Executive shall be entitled to participate in the employee benefit plans, programs and arrangements of the Company now (or, to the extent determined by the Company, hereafter) in effect, subject to and in accordance with their terms, including pension benefits and medical and welfare benefits, as such benefit plans, programs or arrangements may be amended or terminated from time to time in accordance with their terms (including, without limitation, any automobile allowance or similar benefit).
(d)
Vacation. Sick Leave and Holidays.
During the Term, the Executive shall be entitled to paid vacation, paid sick leave and paid holidays in accordance with applicable laws and the Company's policies in force from time to time.
(i)
Eligibility
. During the Term, the Executive shall be eligible to receive equity-based compensation awards under the Equity Plan from time to time, as determined by the Board (or a subcommittee thereof) in its sole discretion.
(ii)
Vesting of Performance-Based Equity
A
wards.
Notwithstanding anything to the contrary contained in the Equity Plan or any award agreement issued thereunder, upon a Change in Control, the performance period (or term of similar meaning) applicable to any equity based compensation awarded to the Executive under the Equity Plan that vests in whole or in part upon the achievement of one or more performance goals
("Performance
Awards"),
whether granted prior to, on or after the date hereof, shall end on the date of the Change in Control, and the Executive shall be eligible to vest in all such Performance Awards on the last date of the service period applicable to each such Performance Award (the
"Vesting
Date"),
with all applicable performance goals deemed achieved at the "target" level, subject to the Executive's continued employment through such Vesting Date;
provided, however,
that if the Executive is terminated without Cause pursuant to Section 4(a)(iv) or resigns with Good Reason pursuant to Section 4(a)(v), in each case at any time (x) following the execution of a definitive agreement with a third party that, if consummated, would result in a Change in Control, but before such transaction is consummated (and subject to such consummation), or (y) within twenty-four (24) months following a Change in Control ((x) or (y), as applicable, a
"CIC Quali
fying
Termination")
,
then the Executive shall remain eligible to vest in such Performance Awards as described in this sentence, but the Vesting Date shall occur on the date of such CIC Qualifying Termination (or, if later, the date of such Change in Control). For the avoidance of doubt, the Vesting Date shall be deemed to be the "Determination Date" (or term of similar meaning, if applicable), as defined in the applicable award agreement(s) pursuant to which such Performance Awards were granted under the Equity Plan.
(iii)
Vesting of Time-Ba ed Equity Awards.
Notwithstanding anything to the contrary contained in the Equity Plan or any award agreement issued thereunder, if the Executive is terminated in a CIC Qualifying Termination, then the Executive shall vest in full in any equity based compensation awarded to the Executive under the Equity Plan (other than Performance
Awards), whether granted prior to, on or after the date hereof, on the date of such CIC Qualifying Termination (or, if later, the date of the applicable Change in Control).
(f)
Expenses.
During the Term, the Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by the Executive in the performance of the Executive's duties to the Company, in accordance with the Company's expense reimbursement policies and procedures.
(g)
No Additional
Compensation.
Except as otherwise provided herein, the Executive shall not be entitled to any additional compensation for service as a member of the Board (or any subcommittee thereof) or other positions or titles the Executive may hold with any subsidiary or Affiliate of the Company to the extent the Executive is so appointed.
4.
Termination.
The Executive's employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:
(a)
Circumstance
.
(i) Executive's death.
Death
. The Executive's employment hereunder shall terminate upon the
(ii)
Disability.
If
the Executive has incurred a Disability, the Company may give the Executive written notice of its intention to terminate the Executive's employment. In that event, the Executive's employment with the Company shall terminate effective on the later of the thirtieth (30
th
)
day after receipt of such notice by the Executive and the date specified in such notice;
provided,
that within the thirty (30) day period following receipt of such notice, the Executive shall not have returned to full-time performance of the Executive's duties hereunder.
(iii)
Termination
with
Cause
. The Company may terminate the Executive's employment with Cause.
(iv)
Termination
without
Cause
.
The Company may terminate the Executive's employment without Cause.
(v)
Resignation
with Good Reason.
The Executive may resign from the Executive's employment with Good Reason.
(vi)
Resignation without Good Reason.
The Executive may resign from the Executive's employment without Good Reason upon not less than thirty (30) days' advance written notice to the Board.
(b)
Notice
of
Terminati0n.
Any termination of the Executive's employment by the Company or by the Executive under this Section 4 (other than termination pursuant to Section 4(a)(i)) shall be communicated by a written notice to the other party hereto (i) indicating the specific termination provision in this Agreement relied upon, (ii) except with respect to a termination pursuant to Section 4(a)(iv) or (vi), setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the
provision so indicated and (iii) specifying a Date of Termination as provided herein (a
"Notice
of
Termination")
.
If the Company delivers a Notice of Termination under Section 4(a)(ii), the Date of Termination shall be at least thirty (30) days following the date of such notice;
provided,
however,
that such notice need not specify a Date of Termination, in which case the Date of Termination shall be determined pursuant to Section 4(a)(ii).
If
the Company delivers a Notice of Termination under Section 4(a)(iii) or4(a)(iv), the Date of Termination shall be, in the Company's sole discretion, the date on which the Executive receives such notice or any subsequent date selected by the Company.
If
the Executive delivers a Notice of Termination under Section 4(a)(v), the Date of Termination shall be at least thirty (30) days following the date of such notice;
provided,
however,
that the Company may, in its sole discretion, accelerate the Date of Termination to any date that occurs following the Company's receipt of such notice, without changing the characterization of such termination as voluntary, even if such date is prior to the date specified in such notice and without having to pay any compensation or benefits for the balance of such notice period. The failure by the Company or the Executive to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Cause or Good Reason shall not waive any right of the Company or the Executive hereunder or preclude the Company or the Executive from asserting such fact or circumstance in enforcing the Company's or the Executive's rights hereunder.
(c)
Termination of AU Positions.
Upon termination of the Executive's employment for any reason, the Executive agrees to resign, as of the Date of Termination or such other date requested by the Company, from all positions on the Board and all committees thereof (and, if applicable, from the board of directors or similar governing bodies (and all committees thereof) of all other Affiliates of the Company) and from all other positions and offices that the Executive then holds with the Company and its subsidiaries and Affiliates. The Executive agrees to promptly execute such documents as the Company, in its sole discretion, shall reasonably deem necessary to effect such resignations.
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5.
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Company Obligations upon Termination of Employment.
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(a)
In General
. Subject to Section lO(b), upon termination of the Executive's employment for any reason, the obligations of the Company to pay or provide the Executive with compensation and benefits under Section 3 shall cease, and the Company shall have no further obligations to provide compensation or benefits to the Executive hereunder, except the Executive (or the Executive's estate) shall be entitled to receive (i) any amount of the Executive's Annual Base Salary earned through the Date of Termination not theretofore paid, (ii) any amount arising from the Executive's participation in, or benefits under, any employee benefit plans, programs or arrangements under Section 3(c) (other than severance plans, programs or arrangements) or the Equity Plan (subject to the terms and conditions of the Equity Plan and any applicable award agreement thereunder, as modified by Section 3(e)(ii) or (iii) herein), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements including, where applicable, any death and disability benefits, (iii) any accrued vacation pay owed to the Executive pursuant to Section 3(d), (iv) any expenses owed to the Executive under Section 3(±), and (v) subject to the Executive's (or the Executive's estate's) satisfaction of the Release Requirement (as defined below), any Annual Bonus for the year prior to the year in which the Date of Termination occurred that was earned but not yet paid (the
"Accrued Obligations")
. Notwithstanding anything to the contrary, upon a termination with Cause
or a resignation without Good Reason, the Accrued Obligations shall not include the amount set forth in clause (v) of the preceding sentence.
(b)
Termi
nation
w
ith
out Ca
u
se
or
R
es
ig
n
a
t
i
on
witb G
oo
d R
eas
on
. Subject to Section lO(b) and subject to the Executive's continued compliance with the covenants contained in Sections 6 and 7, if the Company terminates the Executive's employment without Cause pursuant to Section 4(a)(iv) or if the Executive resigns from employment with Good Reason pursuant to Section 4(a)(v), the Company shall, in addition to the Accrued Obligations:
(i)
pay to the Executive an aggregate amount equal to the product of (A) two and one-half (2.5) and (B) the Annual Base Salary, in equal installments in accordance with the Company's customary payroll practices during the thirty (30)-month period (the
"S
ev
e
rance
P
e
ri
o
d")
beginning on the Date of Termination and ending on the earlier to occur of (A) the expiration of the Severance Period and (B) the first date that the Executive violates any covenant contained in Section 6 and 7 (the
"S
evera
n
ce
P
a
y
me
n
ts
');
p
rovided
, h
owever
, that if such termination is a CIC Qualifying Termination, then (x) the aggregate Severance Payments shall instead be equal to the product of (A) two and one-half (2.5) and (B) the sum of the Annual Base Salary and the higher of (1) the Target Bonus and (2) the average of the Annual Bonuses paid in or payable in respect of (whichever results in the higher average) the three (3) completed calendar years that precede the Date of Termination, and (y) such Severance Payments shall instead be payable in a single lump sum on the Company's first regular payroll date that follows the sixtieth
(60
th
day following the Date of Termination;
p
rov
id
ed
, further,
that, if any portion of such
)
Severance Payments would be subject to any additional tax, interest or penalties under Section 409A if payable in such a single lump sum (after taking into account all applicable exceptions and exemptions under Section 409A, including, without limitation, the "separation pay plan" and "short term deferral" exceptions), then such portion shall instead be placed into a "rabbi trust" for the benefit of the Executive upon the Executive's termination and be payable to the Executive in installments (at the same times and in the same amounts) as such portion would have been payable under this Section 5(b)(i) absent a Change in Control;
(ii)
subject to the Executive's timely election of (and continued eligibility for) continued health coverage pursuant to the federal law known as "COBRA," the Company shall pay, during the thirty (30)-month period following the Date of Termination (or until the Executive becomes eligible for comparable coverage under the health plans of a successor employer, if earlier) (the
"
C
OB
RA
P
erio
d"),
the applicable COBRA premiums for the Executive and any eligible dependents who participated in the Company's health plan as of immediately prior to the Date of Termination;
pr
ov
id
e
d,
that in the event the Company would be subject to any excise tax under Section 4980D of the Code or other penalty or liability pursuant to the provisions of the Patient Protection and Affordable Care Act of 2010 (as amended from time to time) or other applicable law (or to the extent such COBRA subsidy is not permitted under the terms of the applicable benefit plan or applicable law), and in lieu of providing the COBRA subsidy described above, the Company shall instead pay to the Executive a fully taxable monthly cash payment in an amount such that, after payment by the Executive of all taxes on such payment, the Executive retains an amount equal to the applicable COBRA premiums for such month (or the last month in which COBRA coverage was available to the Executive), with such monthly payment being made on the last day of each month for the remainder of the COBRA Period. For the avoidance of doubt,
the Executive's health benefit coverage from the Company during the COBRA Period shall run concurrent with the health continuation coverage period mandated by Section 4980B of the Code;
(iii)
pay the Executive a prorated portion of the Annual Bonus payable with respect to the calendar year in which such termination occurs, determined on a daily basis, based solely on the actual level of achievement of the applicable performance goals for such year, and payable if and when annual bonuses are paid to other senior executives of the Company with respect to such year:
provided,
that if such termination is a CIC Qualifying Termination, then such payment shall instead be a prorated portion of the Target Bonus applicable to the calendar year in which such termination occurs, determined on a daily basis, payable when annual bonuses are paid to other senior executives of the Company with respect to such year; and
(iv)
provide the Executive with up to twelve (12) months of outplacement assistance through the Company's then-current outplacement vendor (or, if no such vendor exists, through an outplacement vendor of the Company's choice);
provided, however,
that notwithstanding the foregoing, (A) the amounts payable to the Executive under this Section 5(b) shall be contingent upon and subject to the Executive's execution and non revocation of a general waiver and release of claims agreement (the
"Release")
in the Company's customary form attached hereto as
Exhibit A
(and the expiration of any applicable revocation period), on or prior to the sixtieth (60
th
)
day following the Date of Termination (the
"Release
Requirement");
and (B) any installment payments pursuant to this Section 5(b) shall commence on the first payroll period following the effective date of such Release, and the initial installment shall include a lump-sum payment of all amounts accrued under this Section 5(b) from the Date of Termination through the date of such initial payment.
(c)
Special
Retirement Bonus.
Subject to Section lO(b), if the Executive voluntarily terminates employment in connection with the Executive's retirement from the homebuilding industry, then, in addition to the Accrued Obligations and subject to both (i) the Executive's satisfaction of the Release Requirement, and (ii) the Executive's providing the Company with written notice of the Executive's intent to retire at least ninety (90) days prior to the Date of Termination, the Company shall pay to the Executive a special retirement bonus (the
"Special
Retirement
Bonus")
equal to one million dollars ($1,000,000) in equal installments in accordance with the Company's customary payroll practices commencing on the first payroll period following the effective date of the Release (and at the same times and in the same amounts as the first one million dollars ($1,000,000) would have been payable to the Executive under Section 5(b)(i) upon a termination without Cause or resignation with Good Reason absent a Change in Control). For purposes of this Agreement, "retirement from the homebuilding industry" shall mean that the Executive shall not be employed in any capacity by any company engaged in homebuilding within five (5) years following the Date of Termination, and in connection therewith, if the Executive does not remain so retired for such period, the Executive agrees that the Executive shall be required to repay the Company all amounts received under this Section 5(c). For the avoidance of doubt, the Special Retirement Bonus shall not be payable upon any circumstances under which severance benefits are payable under Section 5(b) above.
(d)
Survival
. The expiration or termination of the Term shall not impair the rights or obligations of any party hereto, which shall have accrued prior to such expiration or termination.
(e)
No Other Severance.
The Executive expressly acknowledges that any severance payments and benefits under this Section 5 are in lieu of any other payments or benefits that the Executive may otherwise be eligible to receive under any Company plan, policy or program providing for severance, separation pay or salary continuation payments or benefits.
6.
Non-Competition: Non-Solicitation; Non-Hire.
Notwithstanding anything to the contrary set forth herein, the Restrictive Covenants Agreement, by and between the Company and the Executive, dated as of July 13, 2011, and attached as Exhibit C to that certain Employment Agreement, by and between the Executive and the Company, dated as of July 13, 2011 (as amended from time to time, the
"Prior
Agreement"),
and that certain Restrictive Covenants Agreement, by and between the Company and the Executive, dated as of December 15, 2011, shall each survive and remain in full force and effect following the Effective Date, and are incorporated by reference as though fully set forth herein.
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7.
|
Non-Disclosure of Confidential
Information; Non-Disparagement Cntellectual Property.
|
(a)
Non-Disclosure of Confidential
lnformation; Return
of Property.
(i)
Confidential Information.
Except as required in the faithful performance of the Executive's duties hereunder, during the Term and in perpetuity thereafter, the Executive shall maintain in confidence and shall not directly, indirectly or otherwise, use, disseminate, disclose or publish, or use for the Executive's benefit or the benefit of any Person, any confidential or proprietary information or trade secrets of or relating to the Company or any of its Affiliates, including, without limitation, information with respect to the Company's or any of its Affiliates' operations, protocols, processes, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, compensation paid to employees or other terms of employment
("Confidential
lnfonnation")
,
or deliver to any Person any document, record, notebook, computer program or similar repository of or containing any such Confidential Information;
provided,
that the Executive's good faith performance of the Executive's duties and responsibilities for the Company and its Affiliates during employment shall not be deemed a breach of this Section 7(a). Upon the Executive's termination of employment for any reason, the Executive shall promptly deliver to the Company all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents or any other documents concerning the Company's or any ofits Affiliates' Confidential Information, customers, business plans, marketing strategies, products or processes. The Executive may respond to a lawful and valid subpoena or other legal process but shall give the Company the earliest possible notice thereof, shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought and shall assist such counsel in resisting or otherwise responding to such process.
(ii)
Penn is
si
ble
Disclosure of Confidential Information.
Notwithstanding anything to the contrary contained herein, nothing
in
this Agreement shall prohibit the Executive from reporting possible violations of federal law or regulation to or otherwise cooperating with or providing information requested by any governmental agency or entity, including, but not limited to, the Department of Justice, the Securities and Exchange Commission, the Congress and any agency Inspector General, or making other disclosures that are protected under the whistleblower
provisions of federal law or regulation. The Executive does not need the prior authorization of the Company to make any such reports or disclosures and the Executive is not required to notify the Company that the Executive has made such reports or disclosures.
(b)
Non-Disparagement.
The Executive shall not, at any time during the Executive's employment and following the Executive's termination of employment for any reason, make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage or be damaging to the Company, its subsidiaries or Affiliates or their respective officers, directors, employees, advisors, businesses or reputations. The Company shall use reasonable efforts to advise its executive officers not to make any statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, regarding the Executive that are disparaging or damaging to the Executive's reputation. Notwithstanding the foregoing, nothing in this Agreement shall preclude the Executive, the Company or the Company's executive officers from making truthful statements that are required by applicable law, regulation or legal process.
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(c)
|
Intellectual Property Rights
.
|
(i)
Inventions and Prop1ietary Rights.
The Executive agrees that the results and proceeds of the Executive's services for the Company or its subsidiaries or Affiliates (including, but not limited to, any trade secrets, products, services, processes, know-how, designs, developments, innovations, analyses, drawings, reports, techniques, formulas, methods, developmental or experimental work, improvements, discoveries, inventions, ideas, source and object codes, programs, matters of a literary, musical, dramatic or otherwise creative nature, writings and other works of authorship) resulting from services performed while an employee of the Company and any works in progress, whether or not patentable or registrable under copyright or similar statutes, that were made, developed, conceived or reduced to practice or learned by the Executive, either alone or jointly with others (collectively,
" Inventions
"
),
shall be works-made for-hire and the Company (or, if applicable or as directed by the Company, any of its subsidiaries or Affiliates) shall be deemed the sole owner throughout the universe of any and all trade secret, patent, copyright and other intellectual property rights (collectively,
"Proprietary Rights
') of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed, with the right to use the same in perpetuity in any manner the Company determines in its sole discretion, without any further payment to the Executive whatsoever.
If,
for any reason, any of such results and proceeds shall not legally be a work-made-for-hire and/or there are any Proprietary Rights which do not accrue to the Company (or, as the case may be, any of its subsidiaries or Affiliates) under the immediately preceding sentence, then the Executive hereby irrevocably assigns and agrees to assign any and all of the Executive's right, title and interest thereto, including, without limitation, any and all Proprietary Rights of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed, to the Company (or, if applicable or as directed by the Company, any of its subsidiaries or Affiliates), and the Company or such subsidiaries or Affiliates shall have the right to use the same in perpetuity throughout the universe in any manner determined by the Company or such subsidiaries or Affiliates without any further payment to the Executive whatsoever. As to any Invention that the Executive is required to assign, the Executive shall promptly and fully disclose to the Company all information known to the Executive concerning such Invention. The Executive hereby waives and quitclaims to the Company any and all claims, of any nature whatsoever, that the Executive
now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company.
(ii)
Executive
As
s
istance
. The Executive agrees that, from time to time, as may be requested by the Company and at the Company's sole cost and expense, the Executive shall do any and all things that the Company may reasonably deem useful or desirable to establish or document the Company's exclusive ownership throughout the United States of America or any other country of any and all Proprietary Rights in any such Inventions, including, without limitation, the execution of appropriate copyright and/or patent applications or assignments. To the extent the Executive has any Proprietary Rights in the Inventions that cannot be assigned in the manner described above, the Executive unconditionally and irrevocably waives the enforcement of such Proprietary Rights. This Section 7(c) is subject to and shall not be deemed to limit, restrict or constitute any waiver by the Company of any Proprietary Rights of ownership to which the Company may be entitled by operation of law by virtue of the Executive's employment with the Company. The Executive further agrees that, from time to time, as may be requested by the Company and at the Company's sole cost and expense, the Executive shall assist the Company in every proper and lawful way to obtain and from time to time enforce Proprietary Rights relating to Inventions in any and all countries. To this end, the Executive shall execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, the Executive shall execute, verify and deliver assignments of such Proprietary Rights to the Company or its designees. The Executive's obligation to assist the Company with respect to Proprietary Rights relating to such Inventions in any and all countries shall continue beyond the termination of the Executive's employment with the Company.
(iii)
Pern1issibJe Disclosure of
Trade
Secrets
.
Notwithstanding anything to the contrary contained herein, the Executive shall not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made: (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and
(B) solely for the purpose of reporting or investigating a suspected violation of law; or is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If the Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, the Executive may disclose the Company's trade secrets to the Executive's attorney and use the trade secret information in the court proceeding if the Executive: (
1)
files any document containing the trade secret under seal; and (2) does not disclose the trade secret, except pursuant to court order.
(d)
Company Defined.
As used in this Section 7, the term
"Company"
shall include the Company and any direct or indirect subsidiaries and Affiliates thereof and any successors thereto.
8.
Indemnification
. The Executive shall be entitled to indemnification in accordance with the terms of that certain (i) Indemnification Agreement, by and among Taylor Morrison Holdings, Inc., Monarch Communities Inc., and the Executive, dated as of April 9, 2013, and (ii) Indemnification Agreement, by and between TMHC and the Executive, dated as of April 9, 2013, each of which is incorporated by reference as though fully set forth herein
.
9.
Cooperation.
The Executive agrees that during and after the Executive's employment with the Company, the Executive shall assist the Company and its Affiliates in the defense of any claims or potential claims that may be made or threatened to be made against the Company or any of its Affiliates in any action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise, that are not adverse to the Executive (each, an
"Action"),
and shall assist the Company and its Affiliates in the prosecution of any claims that may be made by the Company or any of its Affiliates in any Action, to the extent that such claims may relate to the Executive's employment or the period of the Executive's employment by the Company and its Affiliates. The Executive agrees, unless precluded by law, to promptly inform the Company if the Executive is asked to participate (or otherwise become involved) in any such Action. The Executive also agrees, unless precluded by law, to promptly inform the Company if the Executive is asked to assist in any investigation (whether governmental or otherwise) of the Company or any of its Affiliates (or their actions) to the extent that such investigation may relate to the Executive's employment or the period of the Executive's employment by the Company, regardless of whether a lawsuit has then been filed against the Company or any of its Affiliates with respect to such investigation. The Company or one of its Affiliates shall reimburse the Executive for all of the Executive's reasonable out-of-pocket expenses associated with such cooperation following the Executive's Date of Termination;
provided,
that any such cooperation occurring after the termination of the Executive's employment shall be scheduled to the extent reasonably practicable so as not to unreasonably interfere with the Executive's business or personal affairs.
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10.
|
Section 409A of the Code
.
|
(a)
General.
The parties hereto acknowledge and agree that, to the extent applicable, this Agreement shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the Code and the Department of Treasury Regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date
("Section
409A
'). Notwithstanding any provision of this Agreement to the contrary, in the event that the Company determines that any amounts payable hereunder will be taxable currently to the Executive under Section 409A(a)(l)(A) of the Code and related Department of Treasury guidance, the Company and the Executive shall cooperate in good faith to (i) adopt such amendments to this Agreement and appropriate policies and procedures, including amendments and policies with retroactive effect, that they mutually determine to be necessary or appropriate to preserve the intended tax treatment of the benefits provided by this Agreement, to preserve the economic benefits of this Agreement and to avoid less favorable accounting or tax consequences for the Company, and/or (ii) take such other actions as mutually determined to be necessary or appropriate to exempt the amounts payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder;
provided, however,
that this Section lO(a) does not create an obligation on the part of the Company to modify this Agreement and does not guarantee that the amounts payable hereunder will not be subject to interest or penalties under Section 409A, and in no event whatsoever shall the Company or any of its Affiliates be liable for any additional tax, interest or penalties that may be imposed on the Executive as a result of Section 409A or any damages for failing to comply with Section 409A.
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(b)
|
Special
Rules.
Notwithstanding any provision to the contrary in this Agreement:
|
(i) no amount shall be payable pursuant to Section 5 unless the termination of the Executive's
employment constitutes a "separation from service" within the meaning of Section 1.409A-1(h) of the Department of Treasury Regulations; (ii) if the Executive is deemed at the time of the Executive's separation from service to be a "specified employee" for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent that delayed commencement of any portion of the termination benefits to which the Executive is entitled under this Agreement (after taking into account all exclusions applicable to such termination benefits under Section 409A), including, without limitation, any portion of the additional compensation awarded pursuant to Section 5, is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of the Executive's termination benefits shall not be provided to the Executive prior to the earlier of (A) the expiration of the six (6)-month period measured from the date of the Executive's "separation from service" with the Company (as such term is defined in the Department of Treasury Regulations issued under Section 409A) and (B) the date of the Executive's death:
provided,
that upon the earlier of such dates, all payments deferred pursuant to this Section 10(b)(ii) shall be paid to the Executive in a lump sum, and any remaining payments due under this Agreement shall be paid as otherwise provided herein; (iii) the determination of whether the Executive is a "specified employee" for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of the Executive's separation from service shall be made by the Company in accordance with the terms of Section 409A and applicable guidance thereunder (including, without limitation, Section 1.409A-l(i) of the Department of Treasury Regulations and any successor provision thereto); (iv) for purposes of Section 409A, the Executive's right to receive installment payments pursuant to Section 5 shall be treated as a right to receive a series of separate and distinct payments; and (v) to the extent that any reimbursement of expenses or in-kind benefits constitutes "deferred compensation" under Section 409A, (A) such reimbursement or benefit shall be provided no later than December 31 of the year following the year in which the expense was incurred, (B) the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, (C) the amount of any in-kind benefits provided in one year shall not affect the amount of in-kind benefits provided in any other year and (D) the right to any benefits or reimbursements or in-kind benefits may not be liquidated or exchanged for any other benefit. Neither the Executive nor any of the Executive's creditors or beneficiaries shall have the right to subject any "deferred compensation" under Section 409A payable under this Agreement to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A, any "deferred compensation" under Section 409A payable to the Executive or for the Executive's benefit may not be reduced by, or offset against, any amount owing by the Executive to the Company or any of its Affiliates.
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11.
|
Section 280G of the Code
.
|
(a)
If there is a change of ownership or effective control or change in the ownership of a substantial portion of the assets of a corporation (within the meaning of Section 280G of the Code) (a
"2800
Change in Control")
and any payment or benefit (including payments and benefits pursuant to this Agreement) that the Executive would receive from the Company, TMHC or otherwise
("Transaction
Payment")
would (i) constitute a "parachute payment" within the meaning of Section 2800 of the Code and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the
"Excise
Tax"),
then the Company shall cause to be determined, before any amounts of the Transaction Payment are paid to the Executive, which of the following two alternative forms of payment would result in the Executive's receipt, on an after-tax basis, of
the greater amount of the Transaction Payment notwithstanding that all or some portion of the Transaction Payment may be subject to the Excise Tax: (A) payment in full of the entire amount of the Transaction Payment (a
"Full
Payment"),
or (B) payment of only a part of the Transaction Payment so that the Executive receives the largest payment possible without the imposition of the Excise Tax (a
"Reduced Payment").
For purposes of determining whether to make a Full Payment or a Reduced Payment, the Company shall cause to be taken into account all applicable federal, state and local income and employment taxes and the Excise Tax (all computed at the highest applicable marginal rate, net of the maximum reduction in federal income taxes which could be obtained from a deduction of such state and local taxes).
If
a Reduced Payment is made, the reduction in payments and/or benefits will occur in the following order: (1) first, reduction of cash payments, in reverse order of scheduled payment date (or if necessary, to zero), (2) then, reduction of non-cash and non-equity benefits provided to the Executive, on a pro rata basis (or if necessary, to zero) and (3) then, cancellation of the acceleration of vesting of equity award compensation in the reverse order of the date of grant of the Executive's equity awards.
(b)
Unless the Executive and the Company otherwise agree in writing, any determination required under this section shall be made in writing by the Company's independent public accountants (the
"Accountants")
, whose determination shall be conclusive and binding upon the Executive and the Company for all purposes. For purposes of making the calculations required by this section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Accountants shall provide detailed supporting calculations to the Company and the Executive as requested by the Company or the Executive. The Executive and the Company shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 11.
12.
Assignment and Successors
. The Company may assign its rights and obligations under this Agreement to any of its Affiliates, and shall require any successor to all or substantially all the assets of the Company, by merger or otherwise, to assume this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. The Company may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and
its
Affiliates. The Executive may not assign the Executive's rights or obligations under this Agreement to any individual or entity. This Agreement shall be binding upon and inure to the benefit of the Company and the Executive and their respective successors, assigns, personnel, legal representatives, executors, administrators, heirs, distributees, devisees and legatees, as applicable. In the event of the Executive's death following a termination of the Executive's employment, all unpaid amounts otherwise due the Executive (including under Section 5) shall be paid to the Executive's estate.
13.
Governing Law
. This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Arizona, without reference to the principles of conflicts of law of Arizona or any other jurisdiction, and where applicable, the laws of the United States.
14.
Validity.
The invalidity or unenforceability of any provision or prov1s10ns of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
15.
Notices.
Any notice, request, claim, demand, document and other communication hereunder to any party hereto shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by nationally recognized overnight courier, or certified or registered mail, postage prepaid, to the following address (or at any other address as any party hereto shall have specified by notice in writing to the other party hereto):
(a)
If
to the Company:
Taylor Morrison, Inc. 4900 N. Scottsdale Road Suite 2000
Scottsdale, AZ 85251 Attention: General Counsel
(b)
If
to the Executive, at the Executive's most recent address on the payroll records of the Company.
16.
Counterparts.
This Agreement may be executed in several counterparts (including by facsimile transmission or electronic image scan (PDF)), each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.
17.
Entire Agreement.
The terms of this Agreement (together with any other agreements and instruments contemplated hereby or referred to herein) is intended by the parties hereto to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement (including, except as expressly set forth herein, the Prior Agreement). The parties hereto further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative or other legal proceeding to vary the terms of this Agreement.
18.
Amendments; Waivers.
This Agreement may not be modified, amended or terminated except by an instrument in writing signed by the Executive and a duly authorized officer of Company (other than the Executive) that expressly identifies the amended provision of this Agreement. By an instrument in writing similarly executed and similarly identifying the waived compliance, the Executive or a duly authorized officer of the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform;
provided, however,
that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure to comply or perform. No failure to exercise and no delay in exercising any right, remedy or power hereunder shall preclude any other or further exercise of any other right, remedy or power provided herein or by law or in equity.
19.
No Inconsistent Actions.
The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.
20.
Construction.
This Agreement shall be deemed drafted equally by both of the parties hereto. Its language shall be construed as a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any party shall not apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary: (a) the plural includes the singular, and the singular includes the plural; (b) "and" and "or" are each used both conjunctively and disjunctively; (c) "any," "all," "each," or "every" means "any and all," and "each and every"; (d)
"includes" and
"including"
are each
"without
limitation"·
'
and (e)
"herein ""hereof
'
."
"hereunder
'
" and other similar compounds of the word "here" refer to the entire Agreement and not to any
particular paragraph, subparagraph, section or subsection.
21.
Dispute Resolution.
The parties understand and agree that except as otherwise expressly provided in this Agreement, any claim of any nature whatsoever, including those arising out of or connected with the Executive's employment with the Company, including but not limited to wrongful termination, breach of contract, defamation, and claims of discrimination (including age, disability, sex, religion, national origin, race, color, etc.), harassment or retaliation whether under federal, state or local laws, regulations, or Executive Orders, common law, or in equity, shall be decided by submission to final and binding arbitration in Scottsdale, Arizona. The arbitrator shall be a retired or former state or federal court judge. The parties further agree that the performance of the Executive's duties as contemplated by this Agreement involves commerce. This arbitration provision shall be governed by the Federal Arbitration Act. The arbitrator shall apply the law (including applicable filing limitations periods and exhaustion of administrative remedies) to the same extent and with same force and effect as would an Arizona court or a federal court sitting in Arizona. The arbitration shall be pursuant to rules and procedures adopted by the Company, and failing such adoption, the Federal Rules of Civil Procedure. Judgment shall be final upon the award rendered by the arbitrator and may be entered in any court having jurisdiction thereof, and each of the parties shall be responsible for its respective legal fees and expenses. The parties further understand and agree that actions seeking temporary injunctions are hereby excluded from arbitration and, therefore, may be sought in a court of appropriate jurisdiction without resort to arbitration, even though resolution of the underlying claim must be submitted to arbitration.
EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING INSTITUTED BY OR AGAINST SUCH PARTY IN RESPECT OF ITS RIGHTS OR OBLIGATIONS HEREUNDER.
22.
Enforcement.
If
any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable, this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision were never a part of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.
23.
Withhold from.
The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local and foreign withholding and other taxes and charges that the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.
24.
E
mployee R
e
pre
s
entations
. The Executive represents, warrants and covenants that (a) the Executive has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained
in
writing herein and has entered into this Agreement freely based on the Executive's own judgment, (b) the Executive has the full right, authority and capacity to enter into this Agreement and perform the Executive's obligations hereunder, (c) the Executive is not bound by any agreement that conflicts with or prevents or restricts the full performance of the Executive's duties and obligations to the Company hereunder during or after the Term and (d) the execution and delivery of this Agreement shall not result in any breach or violation of, or a default under, any existing obligation, commitment or agreement to which the Executive is subject.
[
signature page follows]
The parties have executed this Agreement as of the date first written above.
TAYLOR MORRISON, INC.
[Signature Page to Taylor Morrison Amended and Restated Employment Agreement]
EXHIBIT A
Form of Release of Claims
This Release of Claims is provided by me, the undersigned, pursuant to the Amended and Restated Employment Agreement between me and Taylor Morrison, Inc., dated as of June 15, 2018 (the
"Employment Agreement").
All capitalized terms used in this Release of Claims, but not defined herein, shall have the meaning ascribed to those terms in the Employment Agreement.
1.
In consideration of the pay and benefits to be provided to me in connection with the termination of my employment, as set forth in Section 5(a)(v) [and (b)]/[and (c)]
1
of the Employment Agreement (the
"Severance Payments"),
which are conditioned upon my signing (and not revoking) this Release of Claims and to which I am not otherwise entitled, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, I, on my own behalf and on behalf of my heirs, executors, beneficiaries and personal representatives, successors and assigns, and all others connected with or claiming through me (collectively, the
"Releas
ors")
,
hereby release and forever discharge the Company and TMHC, and their subsidiaries and other Affiliates and all of their respective past, present and future officers, directors, shareholders, parents, employees, agents, general and limited partners, members, managers, joint venturers, trustees, employee benefit plans and their administrators and fiduciaries, representatives, agents, predecessors, successors and assigns, and all others connected with any of them, both individually and in their official capacities (collectively, the
"Released Patties"),
from any and all causes of action, rights and claims, of any nature or type, known or unknown, fixed or contingent, in law or in equity, which I have had in the past, now have, or might now have, through the date of my signing of this Release of Claims, including, but not limited to, any such causes of action, rights or claims in any way resulting from, arising out of or connected with my employment by or other relationship with the Released Parties or the termination of that employment and/or relationship or pursuant to any federal, state or local law, regulation or other requirement (including, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act
("ADEA,"
a law which prohibits discrimination on the basis of age), the Older Workers Benefit Protection Act, the National Labor Relations Act, the Civil Rights Act of 1991, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974, the Family and Medical Leave Act, the Worker Adjustment Retraining and Notification Act and similar state laws, the Equal Pay Act, the Fair Labor Standards Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Arizona Wage Act, the Arizona Equal Pay Act, the Arizona Employment Protection Act, the Arizona Civil Rights Act, the Arizona Occupational Health and Safety Act, the Arizona Right to Work Act, the Arizona Drug Testing of Employees Act, the Arizona Medical Marijuana Act, the Arizona criminal code, the Americans with Disabilities Act, and any other federal, state and local laws relating to discrimination on the basis
of
age, sex or other protected class, express or implied breach of contract, wrongful discharge, defamation, intentional infliction of emotional distress, and any related claims for attorneys' fees and costs, each as amended from time to time);
provided,
that nothing herein shall release any claim arising after the effective date of the termination of my employment.
1
To
be
updated,
as applicable.
Excluded from the scope of this Release of Claims are: (i) any rights of indemnification or contribution that I have pursuant to Section 8 of the Employment Agreement, the articles of incorporation or by-laws of the Company, TMHC or any of their subsidiaries, (ii) any right I have to the Severance Payments, (iii) vested rights to benefits under employee benefit plans of the Company, TMHC or their subsidiaries and (iv) rights that cannot be released as a matter of law (collectively,
"Unrel
e
ased Claim
s
").
2.
I acknowledge and agree that this Release of Claims may be pleaded as a full defense to any action
,
suit, arbitration or other proceeding covered by the terms hereof which is or may be initiated by any of the Releasors.
3.
I acknowledge that neither I nor any of the Releasors has filed any complaint, charge, claim or proceeding against any of the Released Parties before any local, state, federal or foreign agency, court, arbitrator, mediator, arbitration or mediation panel or other body (each individually, a
"Proc
e
eding").
I represent that I am not aware of any basis on which such a Proceeding could reasonably be instituted, except as I have expressly disclosed to the Company in writing. I (i) acknowledge that I shall not initiate or cause to be initiated on my behalf
,
and shall not participate in, any Proceeding (except with respect to an Unreleased Claim), except as required by law, and (ii) waive any right that I may have to benefit in any manner from any relief (whether monetary or otherwise) arising out of any Proceeding, including any Proceeding conducted by the Equal Employment Opportunity Commission
("EEOC").
Further, I understand that, by executing this Release of Claims
,
I shall be limiting the availability of certain remedies that I may have against the Company and limiting also my ability to pursue certain claims against the Released Parties. Notwithstanding the above, nothing in Section 1 of this Release of Claims shall prevent me from (a) initiating or causing to be initiated on my behalf any complaint, charge, claim or proceeding against the Company before any local, state or federal agency, court or other body challenging the validity of the waiver of my claims under ADEA contained in Section I of this Release of Claims (but no other portion of such waiver), or (b) initiating or participating in an investigation or proceeding conducted by the EEOC.
4.
I represent and warrant that I have returned to the Company any and all Confidential Information and other property of the Company and its Affiliates that I had in my possession, custody or control on the date my employment with the Company terminated and that I have retained no such property. Without limiting the foregoing, I also represent and warrant that I have retained no copy of any such documents, materials or information
.
5.
In signing this Release of Claims, I acknowledge that I have had a reasonable amount of time to consider the terms of this Release of Claims and that I am signing this Release of Claims voluntarily and with a full understanding of its terms. I acknowledge my understanding that I may not sign this Release of Claims prior to the termination of my employment, but that I may consider the terms of this Release of Claims for up to [twenty-one (21)][forty-five (45)]
2
days (or such longer period as the Company may specify in order to render this Release of Claims fully effective) from the date I receive this Release of Claims. I also acknowledge that I am advised by
2
To be selected based on whether applicable termination was
"
in connection with an exit incentive or other employment termination program
"
(as such phrase is defined in the Age Discrimination in Employment Act of 1967)
.
the Company, TMHC and their Affiliates to seek the advice of an attorney prior to signing this Release of Claims and that I have, in fact, consulted with an attorney prior to signing this Release of Claims; that I have had sufficient time to consider this Release of Claims and to consult with an attorney, if I wished to do so, or to consult with any other person of my choosing before signing; and that I am signing this Release of Claims voluntarily and with a full understanding of its terms.
6.
I further acknowledge that, in signing this Release of Claims, I have not relied on any promises or representations, express or implied, that are not set forth expressly herein. I understand that I may revoke this Release of Claims at any time within seven (7) days of the date of my signing by written notice to the Company in accordance with Section 15 of the Employment Agreement and that neither the Company nor any other person is obligated to provide any of the Severance Payments to me until eight (8) days have passed since my signing of this Release of Claims without my having revoked this Release of Claims.
If
I revoke this Release of Claims, I shall be deemed not to have accepted the terms of this Release of Claims, and no action shall be required of any of the Released Parties under any section of this Release of Claims.
7.
I acknowledge and agree that I continue to be bound by the provisions of Sections 6, 7, and 9 of the Employment Agreement, which shall survive my termination of employment with the Company and remain in full force and effect in accordance with their terms. On the date of my termination, the Company hereby agrees to use reasonable efforts to advise its executive officers not to make any statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, regarding me that are disparaging or damaging to my reputation.
8.
This Release of Claims does not constitute an admission of liability or wrongdoing of any kind by the Company or me.
9.
In accordance with Section 4(c) of the Employment Agreement, I hereby resign from all positions on the Board and all committees thereof (and, if applicable, from the board of directors or similar governing bodies (and all committees thereof) of all other Affiliates of the Company) and from all other positions and offices that I hold with the Company and its subsidiaries and Affiliates. I agree to promptly execute such further documents as the Company, in its sole discretion, shall reasonably deem necessary to effect the foregoing.
10.
The provisions of this Release of Claims shall be binding upon my heirs, executors, administrators, legal representatives and assigns. A failure of any of the Released Parties to insist on strict compliance with any provision of this Release of Claims shall not be deemed a waiver of such provision or any other provision hereof.
If
any provision of this Release of Claims is determined to be so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable, and in the event that any provision is determined to be entirely unenforceable, such provision shall be deemed severable, such that all other provisions of this Release of Claims shall remain valid and binding upon me. For the avoidance of doubt, each of the Released Parties shall be a third-party beneficiary to this Release of Claims and shall be entitled to enforce this Release of Claims in accordance with its terms.
11.
With respect to the matters herein stated as the subject of release, I do hereby waive and relinquish any and all rights which I may have under the laws of the State of Arizona.
12.
This Release of Claims shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Arizona, without reference to the principles of conflicts of law of Arizona or any other jurisdiction, and where applicable, the laws of the United States.
* * * * *
Intending to be legally bound
,
I have signed this Release of Claims as of the date written
below.
A-4
EXECUTION VERSION
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the
"Agreement"),
entered into on June 15, 2018 (the
"Effective Date"),
is made by and between C. David Cone (the
"Executive")
and Taylor Morrison, Inc., a Delaware corporation (the
"Company").
RECITALS
A.
It
is the desire of the Company to assure itself of the continued services of the Executive by continuing to engage the Executive to perform services under the terms hereof.
B.
The Executive desires to continue to provide services to the Company and to Taylor Morrison Home Corporation, a Delaware corporation and the indirect parent of the Company (including any successor parent,
"TMHC")
on the terms herein provided.
C.
This Agreement is intended to supersede any prior agreements or understandings, whether formal or informal, between the Executive and the Company or any of its Affiliates (as defined below).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the parties hereto agree as follows:
1.
Certain Definitions.
(a)
"Accountants"
shall have the meaning set forth in Section 1 l(b ).
|
|
(b)
|
"Accrued Obligations"
shall have the meaning set forth in Section 5(a).
|
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(c)
|
"Action"
shall have the meaning set forth in Section 9.
|
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(d)
|
"Affiliate
' shall have meaning ascribed thereto in the Equity Plan.
|
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(e)
|
"Agreement"
shall have the meaning set forth in the preamble hereto.
|
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(f)
|
"Annual Base Salary"
shall have the meaning set forth in Section 3(a).
|
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(g)
|
"Annual Bouu
"shall
have the meaning set forth in Section 3(b).
|
|
|
(h)
|
"Board"
shall mean the Board of Directors of TMHC.
|
(i)
The Company shall have
"Cause"
to terminate the Executive's employment pursuant to Section 4(a)(iii) hereunder upon: (i) a material breach by the Executive of this Agreement, any award agreement executed by the Executive and issued under the Equity Plan or any policy of the Company or its Affiliates;
provided,
that, the Company shall permit the Executive up to fifteen (15) days after notice from the Company to cure such breach if reasonably susceptible to cure; (ii) the Executive's gross negligence or willful misconduct, which is injurious to the Company or any of its Affiliates;
provided,
that, the Company shall permit the Executive up to
fifteen (15) days after notice from the Company to cure such breach if reasonably susceptible to cure; or (iii) the Executive's conviction of, or guilty plea (or plea of
nolo contendere)
or confession to, a felony or other crime involving dishonesty, fraud, breach of any fiduciary obligation to the Board or any equity holder of TMHC, or unethical business conduct.
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(j)
|
"280G Change in Control"
shall have the meaning set forth in Section 1 l(a).
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(k)
|
"Change
in Control"
shall have the meaning set forth in the Equity Plan.
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(1)
|
"Code"
shall mean the Internal Revenue Code of 1986, as amended.
|
(m)
"Company"
shall, except as otherwise provided in Sections 6 and 7, have the meaning set forth in the preamble hereto.
(n)
"Confidential Information"
shall have the meaning set forth in Section 7(a).
(o)
'Date
of Termination"
shall mean (i) if the Executive's employment is terminated by the Executive's death, the date of the Executive's death, or (ii) if the Executive's employment is terminated pursuant to Section 4(a)(ii)-(vi), the date specified or otherwise effective pursuant to Section 4(b).
(p)
"Disability"
shall mean the disability of the Executive caused by any physical or mental injury, illness or incapacity as a result of which the Executive has been unable to effectively perform the essential functions of the Executive's duties for a continuous period of at least one hundred eighty (180) days.
If
any question shall arise as to whether a Disability exists, the Executive may, and at the request of the Company shall, submit to a medical examination by a physician selected by the Company to determine whether a Disability exists and such determination shall for the purposes of this Agreement be conclusive of the issue.
If
such question shall arise and the Executive shall fail to submit to such medical examination, the Company's determination of the issue shall be binding on the Executive.
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(q)
|
"Effective Date"
shall have the meaning set forth in the preamble hereto.
|
(r)
"Equity
Plan"
shall mean the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan, as amended from time to time, or any successor plan thereto.
|
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(s)
|
"Excise
Tax"
shall have the meaning set forth in Section 1l(a).
|
|
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(t)
|
"E
xecutive
"
shall have the meaning set forth in the preamble hereto.
|
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(u)
|
'FuU
Payment"
shall have the meaning set forth in Section 1 l(a).
|
(v)
The Executive shall have
"Good Reason"
to resign from employment pursuant to Section 4(a)(v) in the event that any of the following actions are taken by the Company or any of its Affiliates without the Executive's consent: (i) any material diminution in the nature or status of the Executive's title, duties, responsibilities or authority, including by reason of the Executive's no longer being the most senior employee responsible for oversight of the finances of a publicly traded company following a Change in Control, (ii) any material diminution in the Executive's
Annual Base Salary or Target Bonus, other than a decrease in base salary or bonus opportunity that applies to a similarly situated class of employees of the Company or its Affiliates, (iii) a material breach of the Company's obligations under this Agreement, or (iv) a change of the Executive's principal place of employment to a location more than fifty (50) miles from its present location (which change increases the Executive's one-way commute);
provided, however,
that none of the events described in the foregoing clauses shall constitute Good Reason unless the Executive has notified the Company in writing describing the events that constitute Good Reason within ninety (90) days following the first occurrence of such events and then only if the Company fails to cure such events within thirty (30) days after the Company's receipt of such written notice, and the Executive shall have terminated the Executive's employment with the Company promptly following the expiration of such cure period.
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(w)
|
"Inventions"
shall have the meaning set forth in Section 7(c).
|
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(x)
|
''Notice
of Termination"
shall have the meaning set forth in Section 4(b)
.
|
(y)
'Person"
shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.
(z)
"Prop1ietary
Rights"
shall have the meaning set forth in Section 7(c). (aa)
"Reduced
Payment"
shall have the meaning set forth in Section 1 l(a). (bb)
"Section
409A"
shall have the meaning set forth in Section lO(a).
(cc)
'Severance
Payments"
shall have the meaning set forth in Section 5(b)(i). (dd)
"Severance
Period"
shall have the meaning set forth in Section 5(b)(i). (ee)
"Target Bonus"
shall have the meaning set forth in Section 3(b).
(ff)
"Term"
shall have the meaning set forth in Section 2(b).
(gg)
"TMHC"
shall have the meaning set forth in the preamble hereto.
(hh)
"Transaction
Payment"
shall have the meaning set forth in Section 1 l(a).
(a)
In
General.
The Company shall continue to employ the Executive, and the Executive shall continue in the employ of the Company, for the period set forth in Section 2(b), in the position set forth in Section 2(c), and upon the other terms and conditions herein provided.
(b)
Term of Employment.
The term of employment (the
"Term")
under this Agreement shall be for the period beginning on the Effective Date and ending on the Date of Termination.
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(c)
|
Position and
Du
t
ies.
|
(i)
Position.
During the Term, the Executive shall serve as Executive Vice President and Chief Financial Officer of the Company and TMHC, with duties, responsibilities and authority customary for such position and as may be reasonably assigned by the Board or the Chief Executive Officer of TMHC from time to time. Such duties, responsibilities and authority may include services for one or more subsidiaries or Affiliates of the Company. The Executive shall report to the Chief Executive Officer of TMHC. The Executive agrees to observe and comply with the Company's and its Affiliates' rules and policies as adopted from time to time. The Executive shall devote the Executive's full business time, skill, attention and best efforts to the performance of the Executive's duties hereunder;
provided, however,
that the Executive shall be entitled to manage the Executive's personal, financial and legal affairs, or reasonably engage in charitable endeavors, so long as such activities do not interfere with the Executive's performance of the Executive's duties and responsibilities to the Company and its Affiliates as provided hereunder, are not in conflict with the business interests of the Company or its Affiliates and do not otherwise compete with the business of the Company or its Affiliates. For the avoidance of doubt, except as specifically provided in this Section 2(c), during the Term, the Executive shall not be permitted to become engaged in or render services for any Person other than the Company and its Affiliates without the consent of the Board
.
(ii)
Principal Office
. During the Term, the principal place of the Executive's employment shall be the Company's corporate headquarters in Scottsdale, Arizona. The Executive shall perform the Executive's duties and responsibilities to the Company at such principal place of employment and at such other location(s) to which the Company may reasonably require the Executive to travel for Company business purposes.
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3.
|
Compensation
and Related Matters.
|
(a)
Annual Base Salary
. During the Tenn, the Executive shall receive a base salary at a rate of five hundred fifty thousand dollars ($550,000) per annum, which shall be paid in accordance with the customary payroll practices of the Company, subject to review and adjustment in accordance with the Company's or TMHC's compensation policies and practices, overall financial condition and other business factors (the
"Annual
Base Salary")
.
(b)
Annual Bonus.
With respect to each calendar year that ends during the Term, the Executive shall be eligible to receive an annual cash bonus (the
"Annual Bonus')
under TMHC's annual bonus program, with a target Annual Bonus amount equal to one hundred fifty percent (150%) of the Annual Base Salary (the
"Target Bonus").
The Executive's actual Annual Bonus for a given year, if any, shall be determined by the Board (or a subcommittee thereof) on the basis of the Executive's, the Company's and/or TMHC's attainment of objective financial and/or other subjective or objective criteria established by the Board (or a subcommittee thereof). Each such Annual Bonus shall be payable at such time and in such manner that annual bonuses are paid to other senior executives of the Company after results have been determined for the calendar year to which the Annual Bonus, if any, relates. Notwithstanding the foregoing, except as expressly provided in Section 5 hereof, no Annual Bonus shall be payable with respect to any calendar year unless the Executive remains continuously employed with the Company through the date of payment of such Annual Bonus.
(c)
Benefits.
During the Term, the Executive shall be entitled to participate in the employee benefit plans, programs and arrangements of the Company now (or, to the extent determined by the Company, hereafter) in effect, subject to and in accordance with their terms, including pension benefits and medical and welfare benefits, as such benefit plans, programs or arrangements may be amended or terminated from time to time in accordance with their terms.
(d)
Vacation, Sick Leave and Holidays.
During the Term, the Executive shall be entitled to paid vacation, paid sick leave and paid holidays in accordance with applicable laws the Company's policies in force from time to time.
(i)
Eligibility.
During the Term, the Executive shall be eligible to receive equity-based compensation awards under the Equity Plan from time to time, as determined by the Board (or a subcommittee thereof) in its sole discretion.
(ii)
Vesting
of
Performance-Based
Equity
Awards.
Notwithstanding anything to the contrary contained in the Equity Plan or any award agreement issued thereunder, upon a Change in Control, the performance period (or term of similar meaning) applicable to any equity based compensation awarded to the Executive under the Equity Plan that vests in whole or in part upon the achievement of one or more performance goals
("Performance Awards"),
whether granted prior to, on or after the date hereof, shall end on the date of the Change in Control, and the Executive shall be eligible to vest in all such Performance Awards on the last date of the service period applicable to each such Performance Award (the
"Vesting Date"),
with all applicable performance goals deemed achieved at the "target" level, subject to the Executive's continued employment through such Vesting Date;
provided, however,
that if the Executive is terminated without Cause pursuant to Section 4(a)(iv) or resigns with Good Reason pursuant to Section 4(a)(v), in each case at any time (x) following the execution of a definitive agreement with a third party that, if consummated, would result in a Change in Control, but before such transaction is consummated (and subject to such consummation), or (y) within twenty-four (24) months following a Change in Control ((x) or (y), as applicable, a
"CIC Qualifying
Termination")
,
then the Executive shall remain eligible to vest in such Performance Awards as described in this sentence, but the Vesting Date shall occur on the date of such CIC Qualifying Termination (or, if later, the date of such Change in Control). For the avoidance of doubt, the Vesting Date shall be deemed to be the "Determination Date" (or term of similar meaning, if applicable), as defined in the applicable award agreement(s) pursuant to which such Performance Awards were granted under the Equity Plan.
(iii)
Vesting
of
Time-Based
Equity
Awards.
Notwithstanding anything to the contrary contained in the Equity Plan or any award agreement issued thereunder, if the Executive is terminated in a CIC Qualifying Termination, then the Executive shall vest in full in any equity based compensation awarded to the Executive under the Equity Plan (other than Performance Awards), whether granted prior to, on or after the date hereof, on the date of such CIC Qualifying Termination (or, if later, the date of the applicable Change in Control).
(f)
Expenses.
During the Term, the Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by the Executive in the performance of the
Executive's duties to the Company, in accordance with the Company's expense reimbursement policies and procedures.
(g)
No Addit
i
onal Compensation.
Except as otherwise provided herein, the Executive shall not be entitled to any additional compensation for service as a member of the Board (or any subcommittee thereof) or other positions or titles the Executive may hold with any subsidiary or Affiliate of the Company to the extent the Executive is so appointed.
4.
Termination.
The Executive's employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:
(a)
Circumstances
.
(i) Executive's death.
Death
. The Executive's employment hereunder shall terminate upon the
(ii)
Disability.
If
the Executive has incurred a Disability, the Company may give the Executive written notice of its intention to terminate the Executive's employment. In that event, the Executive's employment with the Company shall terminate effective on the later of the thirtieth (30
th
)
day after receipt of such notice by the Executive and the date specified in such notice;
provided,
that within the thirty (30) day period following receipt of such notice, the Executive shall not have returned to full-time performance of the Executive's duties hereunder.
(iii)
Termination
with Cause
. The Company may terminate the Executive's employment with Cause.
(iv)
Tem1ination without Cause
.
The Company may terminate the Executive's employment without Cause.
(v)
Resignation
with Good Reason.
The Executive may resign from the Executive's employment with Good Reason.
(vi)
Resignation
without Good Reason.
The Executive may resign from the Executive's employment without Good Reason upon not less than sixty (60) days' advance written notice to the Board.
(b)
Notice of Termination.
Any termination of the Executive's employment
by
the Company or by the Executive under this Section 4 (other than termination pursuant to Section 4(a)(i)) shall be communicated by a written notice to the other party hereto (i) indicating the specific termination provision in this Agreement relied upon, (ii) except with respect to a termination pursuant to Section 4(a)(iv) or (vi), setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) specifying a Date of Termination as provided herein (a
"Notice
of Term
i
nation").
If
the Company delivers a Notice of Termination under Section 4(a)(ii), the Date of Termination shall be at least thirty (30) days following the date of such notice;
provided,
however,
that such notice need not specify a Date of Termination, in which case the Date of Termination shall be determined pursuant to Section 4(a)(ii).
If
the Company delivers a Notice of
Termination under Section 4(a)(iii) or 4(a)(iv), the Date of Termination shall be, in the Company's sole discretion, the date on which the Executive receives such notice or any subsequent date selected by the Company. If the Executive delivers a Notice of Termination under Section 4(a)(v), the Date of Termination shall be at least thirty (30) days following the date of such notice;
provided, however,
that the Company may, in its sole discretion, accelerate the Date of Termination to any date that occurs following the Company's receipt of such notice, without changing the characterization of such termination as voluntary, even if such date is prior to the date specified in such notice and without having to pay any compensation or benefits for the balance of such notice period. The failure by the Company or the Executive to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Cause or Good Reason shall not waive any right of the Company or the Executive hereunder or preclude the Company or the Executive from asserting such fact or circumstance in enforcing the Company's or the Executive's rights hereunder.
(c)
Termination of Ali Positions.
Upon termination of the Executive's employment for any reason, the Executive agrees to resign, as of the Date of Termination or such other date requested by the Company, from all positions on the Board and all committees thereof (and, if applicable, from the board of directors or similar governing bodies (and all committees thereof) of all other Affiliates of the Company) and from all other positions and offices that the Executive then holds with the Company and its subsidiaries and Affiliates. The Executive agrees to promptly execute such documents as the Company, in its sole discretion, shall reasonably deem necessary to effect such resignations.
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5.
|
Company Obligations upon
Termination
of
Employment.
|
(a)
In General
. Subject to Section lO(b), upon termination of the Executive's employment for any reason, the obligations of the Company to pay or provide the Executive with compensation and benefits under Section 3 shall cease, and the Company shall have no further obligations to provide compensation or benefits to the Executive hereunder, except the Executive (or the Executive's estate) shall be entitled to receive (i) any amount of the Executive's Annual Base Salary earned through the Date of Termination not theretofore paid, (ii) any amount arising from the Executive's participation in, or benefits under, any employee benefit plans, programs or arrangements under Section 3(c) (other than severance plans, programs or arrangements) or the Equity Plan (subject to the terms and conditions of the Equity Plan and any applicable award agreement thereunder, as modified by Section 3(e)(ii) or (iii) herein), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements including, where applicable, any death and disability benefits, (iii) any accrued vacation pay owed to the Executive pursuant to Section 3(d), (iv) any expenses owed to the Executive under Section 3(f), and (v) subject to the Executive's (or the Executive's estate's) satisfaction of the Release Requirement (as defined below), any Annual Bonus for the year prior to the year in which the Date of Termination occurred that was earned but not yet paid (the
"Accrued Obligations")
. Notwithstanding anything to the contrary, upon a termination with Cause or a resignation without Good Reason, the Accrued Obligations shall not include the amount set forth in clause (v) of the preceding sentence.
(b)
Termination
without Cause or Resignation
with
Good Reason.
Subject to Section lO(b) and subject to the Executive's continued compliance with the covenants contained
in Sections 6 and 7, if the Company terminates the Executive's employment without Cause pursuant to Section 4(a)(iv) or if the Executive resigns from employment with Good Reason pursuant to Section 4(a)(v), the Company shall, in addition to the Accrued Obligations:
(i)
pay to the Executive an aggregate amount equal to the Annual Base Salary in equal installments in accordance with the Company's customary payroll practices during the twelve (12)-month period (the
" S
everance Perio
d")
beginning on the Date of Termination and ending on the earlier to occur of (A) the expiration of the Severance Period and (B) the first date that the Executive violates any covenant contained in Section 6 and 7 (the
"S
everance
Paym
e
nt
s
");
prov
ided, h
oweve
r,
that if such termination is a CIC Qualifying Termination, then (x) the aggregate Severance Payments shall instead be equal to the product of (A) one and one-half (1.5) and (B) the sum of the Annual Base Salary and the higher of (1) the Target Bonus and (2) the average of the Annual Bonuses paid in or payable in respect of (whichever results in the higher average) the three
(3) completed calendar years that precede the Date of Termination, and (y) such Severance Payments shall instead be payable in a single lump sum on the Company's first regular payroll date that follows the sixtieth (60
th
)
day following the Date of Termination;
(ii)
subject to the Executive's timely election of (and continued eligibility for) continued health coverage pursuant to the federal law known as "COBRA," the Company shall pay, during the twelve (12)-month period following the Date of Termination (or until the Executive becomes eligible for comparable coverage under the health plans of a successor employer, if earlier) (the
"COBRA P
e
ri
od
")
, the applicable COBRA premiums for the Executive and any eligible dependents who participated in the Company's health plan as of immediately prior to the Date of Termination;
p
rovi
ded,
that in the event the Company would be subject to any excise tax under Section 4980D of the Code or other penalty or liability pursuant to the provisions of the Patient Protection and Affordable Care Act of 2010 (as amended from time to time) or other applicable law (or to the extent such COBRA subsidy is not permitted under the terms of the applicable benefit plan or applicable law), and in lieu of providing the COBRA subsidy described above, the Company shall instead pay to the Executive a fully taxable monthly cash payment in an amount such that, after payment by the Executive of all taxes on such payment, the Executive retains an amount equal to the applicable COBRA premiums for such month (or the last month in which COBRA coverage was available to the Executive), with such monthly payment being made on the last day of each month for the remainder of the COBRA Period. For the avoidance of doubt, the Executive's health benefit coverage from the Company during the COBRA Period shall run concurrent with the health continuation coverage period mandated by Section 4980B of the Code;
(iii)
pay the Executive a prorated portion of the Annual Bonus payable with respect to the calendar year in which such termination occurs, determined on a daily basis, based solely on the actual level of achievement of the applicable performance goals for such year, and payable if and when annual bonuses are paid to other senior executives of the Company with respect to such year;
pro
v
i
d
ed,
that if such termination is a CIC Qualifying Termination, then such payment shall instead be a prorated portion of the Target Bonus applicable to the calendar year in which such termination occurs, determined on a daily basis, payable when annual bonuses are paid to other senior executives of the Company with respect to such year; and
(iv)
provide the Executive with up to twelve (12) months of outplacement assistance through the Company's then-current outplacement vendor (or, if no such vendor exists, through an outplacement vendor of the Company's choice);
provided, however,
that notwithstanding the foregoing, (A) the amounts payable to the Executive under this Section 5(b) shall be contingent upon and subject to the Executive's execution and non revocation of a general waiver and release of claims agreement (the
"Release")
in the Company's customary form attached hereto as
Exhibit A
(and the expiration of any applicable revocation period), on or prior to the sixtieth (60
th
)
day following the Date of Termination (the
"Release
Requirement");
and
(B)
any installment payments pursuant to this Section 5(b) shall commence on the first payroll period following the effective date of such Release, and the initial installment shall include a lump-sum payment of all amounts accrued under this Section 5(b) from the Date of Termination through the date of such initial payment.
(c)
Survival
. The expiration or termination of the Term shall not impair the rights or obligations of any party hereto, which shall have accrued prior to such expiration or termination.
(d)
No
Other
Severance
.
The Executive expressly acknowledges that any severance payments and benefits under this Section 5 are in lieu of any other payments or benefits that the Executive may otherwise be eligible to receive under any Company plan, policy or program providing for severance, separation pay or salary continuation payments or benefits.
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6.
|
Non-Competition
:
Non-Solicitation
:
Non-Hire.
|
(a)
Survival of Restrictive Covenants Agreement.
Notwithstanding anything to the contrary set forth herein, the Restrictive Covenants Agreement, by and between the Company and the Executive, dated as of December 7, 2012, shall survive and remain in full force and effect following the Effective Date, and is incorporated by reference as though fully set forth herein.
(b)
Non-Solicitation
of Customers and Suppliers
.
The Executive agrees that the Company's relationships with its customers and suppliers are solely the assets and property of the Company, and therefore the Executive agrees that for a period of two (2) years following termination of the Executive's employment with the Company for any reason, the Executive shall not directly or through others solicit or attempt to solicit any of the Company's customers and/or suppliers for the purpose of providing products or services competitive to those offered by the Company. For purposes of this Section 6(b), the terms "customer" and "supplier" shall also include prospective customers and suppliers of the Company.
(c)
Non-So
l
icitation o
f
Employees.
The Executive agrees that the Company has invested substantial time and effort in assembling and training its present staff of personnel. Accordingly, the Executive agrees that for a period of two (2) years following termination of the Executive's employment with the Company for any reason, the Executive will not directly or indirectly induce or solicit, or seek to induce or solicit, on behalf of the Executive or other persons or entities any of the Company's employees to leave employment with the Company if such employee was employed by the Company during the last six (6) months of the Executive's employment.
(d)
Company Defined.
As used in this Section 6, the term "Company" shall include the Company and any direct or indirect subsidiaries and Affiliates thereof and any successors thereto.
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7.
|
Non-Disclosure of Confidential
Information: Non-Disparagement: Intellectual
Property.
|
(a)
Non-Disclosure of
Confidentia
l
Information: Renun
.
of Property
.
(i)
Confidential Information.
Except as required in the faithful performance of the Executive's duties hereunder, during the Term and in perpetuity thereafter, the Executive shall maintain in confidence and shall not directly, indirectly or otherwise, use, disseminate, disclose or publish, or use for the Executive's benefit or the benefit of any Person, any confidential or proprietary information or trade secrets of or relating to the Company or any of its Affiliates, including, without limitation, information with respect to the Company's or any of its Affiliates' operations, protocols, processes, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, compensation paid to employees or other terms of employment
("Confidential Information")
, or deliver to any Person any document, record, notebook, computer program or similar repository of or containing any such Confidential Information;
provided,
that the Executive's good faith performance of the Executive's duties and responsibilities for the Company and its Affiliates during employment shall not be deemed a breach of this Section 7(a). Upon the Executive's termination of employment for any reason, the Executive shall promptly deliver to the Company all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents or any other documents concerning the Company's or any of its Affiliates' Confidential Information, customers, business plans, marketing strategies, products or processes. The Executive may respond to a lawful and valid subpoena or other legal process but shall give the Company the earliest possible notice thereof, shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought and shall assist such counsel in resisting or otherwise responding to such process.
(ii)
Permissible Disclosure of Confidential
Information.
Notwithstanding anything to the contrary contained herein, nothing in this Agreement shall prohibit the Executive from reporting possible violations of federal law or regulation to or otherwise cooperating with or providing information requested by any governmental agency or entity, including, but not limited to, the Department of Justice, the Securities and Exchange Commission, the Congress and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. The Executive does not need the prior authorization of the Company to make any such reports or disclosures and the Executive is not required to notify the Company that the Executive has made such reports or disclosures.
(b)
Non-Disparagement
. The Executive shall not, at any time during the Executive's employment and following the Executive's termination of employment for any reason, make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage or be damaging to the Company, its subsidiaries or Affiliates or their respective officers, directors, employees, advisors, businesses or reputations. Notwithstanding the foregoing, nothing in this Agreement shall
preclude the Executive from making truthful statements that are required by applicable law, regulation or legal process.
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(c)
|
Intellectual Property Rights
.
|
(i)
Inventions and Proprietary Rights.
The Executive agrees that the results and proceeds of the Executive's services for the Company or its subsidiaries or Affiliates (including, but not limited to, any trade secrets, products, services, processes, know-how, designs, developments, innovations, analysis, drawings, reports, techniques, formulas, methods, developmental or experimental work, improvements, discoveries, inventions, ideas, source and object codes, programs, matters of a literary, musical, dramatic or otherwise creative nature, writings and other works of authorship) resulting from services performed while an employee of the Company and any works in progress, whether or not patentable or registrable under copyright or similar statutes, that were made, developed, conceived or reduced to practice or learned by the Executive, either alone or jointly with others (collectively,
"Invention
"), shall be works-made for-hire and the Company (or, if applicable or as directed by the Company, any of its subsidiaries or Affiliates) shall be deemed the sole owner throughout the universe of any and all trade secret, patent, copyright and other intellectual property rights (collectively,
"Proprietary Rights")
of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed, with the right to use the same in perpetuity in any manner the Company determines in its sole discretion, without any further payment to the Executive whatsoever. If, for any reason, any of such results and proceeds shall not legally be a work-made-for-hire and/or there are any Proprietary Rights which do not accrue to the Company (or, as the case may be, any of its subsidiaries or Affiliates) under the immediately preceding sentence, then the Executive hereby irrevocably assigns and agrees to assign any and all of the Executive's right, title and interest thereto, including, without limitation, any and all Proprietary Rights of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed, to the Company (or, if applicable or as directed by the Company, any of its subsidiaries or Affiliates), and the Company or such subsidiaries or Affiliates shall have the right to use the same in perpetuity throughout the universe in any manner determined by the Company or such subsidiaries or Affiliates without any further payment to the Executive whatsoever. As to any Invention that the Executive is required to assign, the Executive shall promptly and fully disclose to the Company all information known to the Executive concerning such Invention. The Executive hereby waives and quitclaims to the Company any and all claims, of any nature whatsoever, that the Executive now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company.
(ii)
Executive Assistance.
The Executive agrees that, from time to time, as may be requested by the Company and at the Company's sole cost and expense, the Executive shall do any and all things that the Company may reasonably deem useful or desirable to establish or document the Company's exclusive ownership throughout the United States of America or any other country of any and all Proprietary Rights in any such Inventions, including, without limitation, the execution of appropriate copyright and/or patent applications or assignments. To the extent the Executive has any Proprietary Rights in the Inventions that cannot be assigned in the manner described above, the Executive unconditionally and irrevocably waives the enforcement of such Proprietary Rights. This Section 7(c) is subject to and shall not be deemed to limit, restrict or constitute any waiver by the Company of any Proprietary Rights of ownership
to which the Company may be entitled by operation of law by virtue of the Executive's employment with the Company. The Executive further agrees that, from time to time, as may be requested by the Company and at the Company's sole cost and expense, the Executive shall assist the Company in every proper and lawful way to obtain and from time to time enforce Proprietary Rights relating to Inventions in any and all countries. To this end, the Executive shall execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, the Executive shall execute, verify and deliver assignments of such Proprietary Rights to the Company or its designees. The Executive's obligation to assist the Company with respect to Proprietary Rights relating to such Inventions in any and all countries shall continue beyond the termination of the Executive's employment with the Company.
(iii)
Pe1missible Disclosure of Trade Secrets
.
Notwithstanding anything to the contrary contained herein, the Executive shall not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made: (A)
in
confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and
(B) solely for the purpose of reporting or investigating a suspected violation of law; or is made
in
a complaint or other document that is filed under seal in a lawsuit or other proceeding.
If
the Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, the Executive may disclose the Company's trade secrets to the Executive's attorney and use the trade secret information in the court proceeding if the Executive: (1) files any document containing the trade secret under seal; and (2) does not disclose the trade secret, except pursuant to court order.
(d)
Company
Defined.
As used in this Section 7, the term "Company" shall include the Company and any direct or indirect subsidiaries and Affiliates thereof and any successors thereto.
8.
Indemnification
. The Executive shall be entitled to indemnification in accordance with the terms of that certain Indemnification Agreement, by and among TMHC, Taylor Morrison Holdings, Inc., Monarch Communities Inc., and the Executive, dated as of April 12, 2013, which is incorporated by reference as though fully set forth herein.
9.
Cooperation.
The Executive agrees that during and after the Executive's employment with the Company, the Executive shall assist the Company and its Affiliates in the defense of any claims or potential claims that may be made or threatened to be made against the Company or any of its Affiliates in any action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise, that are not adverse to the Executive (each, an
"Action"),
and shall assist the Company and its Affiliates in the prosecution of any claims that may be made by the Company or any of its Affiliates in any Action, to the extent that such claims may relate to the Executive's employment or the period of the Executive's employment by the Company and its Affiliates. The Executive agrees, unless precluded by law, to promptly inform the Company if the Executive is asked to participate (or otherwise become involved) in any such Action. The Executive also agrees, unless precluded by law, to promptly inform the Company if the Executive is asked to assist in any investigation (whether governmental or otherwise) of the Company or any of its Affiliates (or their actions) to the extent that such investigation may relate to the Executive's employment or the period of the Executive's employment by the Company, regardless of whether
a lawsuit has then been filed against the Company or any of its Affiliates with respect to such investigation. The Company or one of its Affiliates shall reimburse the Executive for all of the Executive's reasonable out-of-pocket expenses associated with such cooperation following the Executive's Date of Termination;
provided,
that any such cooperation occurring after the termination of the Executive's employment shall be scheduled to the extent reasonably practicable so as not to unreasonably interfere with the Executive's business or personal affairs.
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10.
|
Section 409A of the Code
.
|
(a)
General
The parties hereto acknowledge and agree that, to the extent applicable, this Agreement shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the Code and the Department of Treasury Regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date
("Section 409A").
Notwithstanding any provision of this Agreement to the contrary, in the event that the Company determines that any amounts payable hereunder will be taxable current!y to the Executive under Section 409A(a)(1)(A) of the Code and related Department of Treasury guidance, the Company and the Executive shall cooperate in good faith to (i) adopt such amendments to this Agreement and appropriate policies and procedures, including amendments and policies with retroactive effect, that they mutually determine to be necessary or appropriate to preserve the intended tax treatment of the benefits provided by this Agreement, to preserve the economic benefits of this Agreement and to avoid less favorable accounting or tax consequences for the Company, and/or (ii) take such other actions as mutually determined to be necessary or appropriate to exempt the amounts payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder;
provided, however,
that this Section lO(a) does not create an obligation on the part of the Company to modify this Agreement and does not guarantee that the amounts payable hereunder will not be subject to interest or penalties under Section 409A, and in no event whatsoever shall the Company or any of its Affiliates be liable for any additional tax, interest or penalties that may be imposed on the Executive as a result of Section 409A or any damages for failing to comply with Section 409A.
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(b)
|
Special
Rules.
Notwithstanding any provision to the contrary in this Agreement:
|
(i) no amount shall be payable pursuant to Section 5 unless the termination of the Executive's employment constitutes a "separation from service" within the meaning of Section l.409A-l(h) of the Department of Treasury Regulations; (ii) if the Executive is deemed at the time of the Executive's separation from service to be a
"specified
employee" for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent that delayed commencement of any portion of the termination benefits to which the Executive is entitled under this Agreement (after taking into account all exclusions applicable to such termination benefits under Section 409A), including, without limitation, any portion of the additional compensation awarded pursuant to Section 5, is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of the Executive's termination benefits shall not be provided to the Executive prior to the earlier of (A) the expiration of the six (6)-month period measured from the date of the Executive's "separation from service" with the Company (as such term is defined in the Department of Treasury Regulations issued under Section 409A) and (B) the date of the Executive's death;
provided,
that upon the earlier of such dates, all payments deferred pursuant to this Section lO(b)(ii) shall be paid to the Executive in a lump sum, and any remaining payments
due under this Agreement shall be paid as otherwise provided herein; (iii) the determination of whether the Executive is a "specified employee" for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of the Executive's separation from service shall be made by the Company in accordance with the terms of Section 409A and applicable guidance thereunder (including, without limitation, Section 1.409A-l(i) of the Department of Treasury Regulations and any successor provision thereto); (iv) for purposes of Section 409A, the Executive's right to receive installment payments pursuant to Section 5 shall be treated as a right to receive a series of separate and distinct payments; and (v) to the extent that any reimbursement of expenses or in-kind benefits constitutes "deferred compensation" under Section 409A, (A) such reimbursement or benefit shall be provided no later than December 31 of the year following the year in which the expense was incurred, (B) the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, (C) the amount of any in-kind benefits provided in one year shall not affect the amount of in-kind benefits provided in any other year and (D) the right to any benefits or reimbursements or in-kind benefits may not be liquidated or exchanged for any other benefit. Neither the Executive nor any of the Executive's creditors or beneficiaries shall have the right to subject any "deferred compensation" under Section 409A payable under this Agreement to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A, any "deferred compensation" under Section 409A payable to the Executive or for the Executive's benefit may not be reduced by, or offset against, any amount owing by the Executive to the Company or any of its Affiliates.
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11.
|
Section 280G of the Code
.
|
(a)
If
there is a change of ownership or effective control or change in the ownership of a substantial portion of the assets of a corporation (within the meaning of Section 280G of the Code) (a
"280G
Change
i
n Control")
and any payment or benefit (including payments and benefits pursuant to this Agreement) that the Executive would receive from the Company, TMHC or otherwise
("Transaction
Payment")
would (i) constitute a "parachute payment" within the meaning of Section 280G of the Code and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the
"Excise
Tax"),
then the Company shall cause to be determined, before any amounts of the Transaction Payment are paid to the Executive, which of the following two alternative forms of payment would result in the Executive's receipt, on an after-tax basis, of the greater amount of the Transaction Payment notwithstanding that all or some portion of the Transaction Payment may be subject to the Excise Tax: (A) payment in full of the entire amount of the Transaction Payment (a
"Full
Payment"),
or (B) payment of only a part of the Transaction Payment so that the Executive receives the largest payment possible without the imposition of the Excise Tax (a
"Reduced
Payment").
For purposes of determining whether to make a Full Payment or a Reduced Payment, the Company shall cause to be taken into account all applicable federal, state and local income and employment taxes and the Excise Tax (all computed at the highest applicable marginal rate, net of the maximum reduction in federal income taxes which could be obtained from a deduction of such state and local taxes).
If
a Reduced Payment is made, the reduction in payments and/or benefits will occur in the following order: (1) first, reduction of cash payments, in reverse order of scheduled payment date (or if necessary, to zero), (2) then, reduction of non-cash and non-equity benefits provided to the Executive, on a pro rata basis (or if necessary, to zero) and (3) then, cancellation of the acceleration of vesting of equity award compensation in the reverse order of the date of grant of the Executive's equity awards.
(b)
Unless the Executive and the Company otherwise agree in wntmg, any determination required under this section shall be made in writing by the Company's independent public accountants (the
"Accountants")
, whose determination shall be conclusive and binding upon the Executive and the Company for all purposes. For purposes of making the calculations required by this section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Accountants shall provide detailed supporting calculations to the Company and the Executive as requested by the Company or the Executive. The Executive and the Company shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 11.
12.
Ass
ignm
ent and
Successors
. The Company may assign its rights and obligations under this Agreement to any of its Affiliates, and shall require any successor to all or substantially all the assets of the Company, by merger or otherwise, to assume this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. The Company may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and its Affiliates. The Executive may not assign the Executive's rights or obligations under this Agreement to any individual or entity. This Agreement shall be binding upon and inure to the benefit of the Company and the Executive and their respective successors, assigns, personnel, legal representatives, executors, administrators, heirs, distributees, devisees and legatees, as applicable. In the event of the Executive's death following a termination of the Executive's employment, all unpaid amounts otherwise due the Executive (including under Section 5) shall be paid to the Executive's estate.
13.
Governing
Law.
This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Arizona, without reference to the principles of conflicts of law of Arizona or any other jurisdiction, and where applicable, the laws of the United States.
14.
Validity.
The invalidity or unenforceability of any provision or prov1s1ons of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
15.
Notices.
Any notice, request, claim, demand, document and other communication hereunder to any party hereto shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by nationally recognized overnight courier, or certified or registered mail, postage prepaid, to the following address (or at any other address as any party hereto shall have specified by notice in writing to the other party hereto):
(a)
If to the Company:
Taylor Morrison, Inc. 4900 N. Scottsdale Road Suite 2000
Scottsdale,
AZ
85251
Attention: General Counsel
(b)
If
to the Executive, at the Executive's most recent address on the payroll records of the Company.
16.
Counterparts.
This Agreement may be executed in several counterparts (including by facsimile transmission or electronic image scan (PDF)), each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.
17.
Entire Agreement.
The terms of this Agreement (together with any other agreements and instruments contemplated hereby or referred to herein) is intended by the parties hereto to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement (including, without limitation, that certain Employment Agreement, by and between the Executive and the Company, dated as of January 1, 2013, as amended from time to time). The parties hereto further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative or other legal proceeding to vary the terms of this Agreement.
18.
Amendments; Waivers.
This Agreement may not be modified, amended or terminated except by an instrument in writing signed by the Executive and a duly authorized officer of Company (other than the Executive) that expressly identifies the amended provision of this Agreement. By an instrument in writing similarly executed and similarly identifying the waived compliance, the Executive or a duly authorized officer of the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform;
provided, however,
that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure to comply or perform. No failure to exercise and no delay in exercising any right, remedy or power hereunder shall preclude any other or further exercise of any other right, remedy or power provided herein or by law or in equity.
19.
No
Inconsistent Actions.
The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.
20.
onstmction.
This Agreement shall be deemed drafted equally by both of the parties hereto. Its language shall be construed as a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any party shall not apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary: (a) the plural includes the singular, and the singular includes the plural; (b) "and" and "or" are each used both conjunctively and
disjunctively; (c) "any," "all," "each," or "every" means "any and all," and "each and every"; (d) "includes" and "including" are each "without limitation"· and (e) "herein ""hereof" "hereunder"
' ' '
'
and other similar
compounds
of the word "here" refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection.
21.
Dispute Resolution.
The parties understand and agree that except as otherwise expressly provided in this Agreement, any claim of any nature whatsoever, including those arising out of or connected with the Executive's employment with the Company, including but not limited to wrongful termination, breach of contract, defamation, and claims of discrimination (including age, disability, sex, religion, national origin, race, color, etc.), harassment or retaliation whether under federal, state or local laws, regulations, or Executive Orders, common law, or in equity, shall be decided by submission to final and binding arbitration in Scottsdale, Arizona. The arbitrator shall be a retired or former state or federal court judge. The parties further agree that the performance of the Executive's duties as contemplated by this Agreement involves commerce. This arbitration provision shall be governed by the Federal Arbitration Act. The arbitrator shall apply the law (including applicable filing limitations periods and exhaustion of administrative remedies) to the same extent and with same force and effect as would an Arizona court or a federal court sitting in Arizona. The arbitration shall be pursuant to rules and procedures adopted by the Company, and failing such adoption, the Federal Rules of Civil Procedure. Judgment shall be final upon the award rendered by the arbitrator and may be entered in any court having jurisdiction thereof, and each of the parties shall be responsible for its respective legal fees and expenses. The parties further understand and agree that actions seeking temporary injunctions are hereby excluded from arbitration and, therefore, may be sought in a court of appropriate jurisdiction without resort to arbitration, even though resolution of the underlying claim must be submitted to arbitration.
EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING INSTITUTED BY OR AGAINST SUCH PARTY IN RESPECT OF ITS RIGHTS OR OBLIGATIONS HEREUNDER.
22.
Enforcement.
If
any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable, this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision were never a part of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.
23.
WithJ1olding.
The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local and foreign withholding and other taxes and charges that the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.
24.
Employee
Representations
. The Executive represents, warrants and covenants that (a) the Executive has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein and has entered into this Agreement freely based on the Executive's own judgment, (b) the Executive has the full right
,
authority and capacity to enter into this Agreement
and perform the Executive's obligations hereunder, (c) the Executive is not bound by any agreement that conflicts with or prevents or restricts the full performance of the Executive's duties and obligations to the Company hereunder during or after the Term and (d) the execution and delivery of this Agreement shall not result in any breach or violation of, or a default under, any existing obligation, commitment or agreement to which the Executive is subject.
[
signature page follows]
The parties have executed this Agreement as of the date first written above.
[Signature Page to Taylor Morrison Amended and Restated Employment Agreement]
EXHIBIT A
Form of Release of Claims
This Release of Claims is provided by me, the undersigned, pursuant to the Amended and Restated Employment Agreement between me and Taylor Morrison, Inc., dated as of June 15, 2018 (the
"Employm
e
nt Agr
ee
m
e
n
t
").
All capitalized terms used in this Release of Claims, but not defined herein, shall have the meaning ascribed to those terms in the Employment Agreement.
1.
In consideration of the pay and benefits to be provided to me in connection with the termination of my employment, as set forth in Section 5(a)(v) [and (b)]
1
of the Employment Agreement (the
"S
e
v
e
ran
ce
Paym
en
t
s
"),
which are conditioned upon my signing (and not revoking) this Release of Claims and to which I am not otherwise entitled, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, I, on my own behalf and on behalf of my heirs, executors, beneficiaries and personal representatives, successors and assigns, and all others connected with or claiming through me (collectively, the
"R
e
l
easors
"),
hereby release and forever discharge the Company and TMHC, and their subsidiaries and other Affiliates and all of their respective past, present and future officers, directors, shareholders, parents, employees, agents, general and limited partners, members, managers, joint venturers, trustees, employee benefit plans and their administrators and fiduciaries, representatives, agents, predecessors, successors and assigns, and all others connected with any of them, both individually and in their official capacities (collectively, the
" R
ele
a
se
d Pa
rties
"),
from any and all causes of action, rights and claims, of any nature or type, known or unknown, fixed or contingent, in law or in equity, which I have had in the past, now have, or might now have, through the date of my signing of this Release of Claims, including, but not limited to, any such causes of action, rights or claims in any way resulting from, arising out of or connected with my employment by or other relationship with the Released Parties or the termination of that employment and/or relationship or pursuant to any federal, state or local law, regulation or other requirement (including, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act
("ADEA,"
a law which prohibits discrimination on the basis of age), the Older Workers Benefit Protection Act, the National Labor Relations Act, the Civil Rights Act of 1991, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974, the Family and Medical Leave Act, the Worker Adjustment Retraining and Notification Act and similar state laws, the Equal Pay Act, the Fair Labor Standards Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Arizona Wage Act, the Arizona Equal Pay Act, the Arizona Employment Protection Act, the Arizona Civil Rights Act, the Arizona Occupational Health and Safety Act, the Arizona Right to Work Act, the Arizona Drug Testing of Employees Act, the Arizona Medical Marijuana Act, the Arizona criminal code, the Americans with Disabilities Act, and any other federal, state and local laws relating to discrimination on the basis of age, sex or other protected class, express or implied breach of contract, wrongful discharge, defamation, intentional infliction of emotional distress, and any related claims for attorneys' fees and costs, each as amended from time to time);
pro
vi
d
e
d,
that nothing herein shall release any claim arising after the effective date of the termination of my employment.
1
To be updated, as applicable.
Excluded from the scope of this Release of Claims are: (i) any rights of indemnification or contribution that I have pursuant to Section 8 of the Employment Agreement, the articles of incorporation or by-laws of the Company, TMHC or any of their subsidiaries, (ii) any right I have to the Severance Payments, (iii) vested rights to benefits under employee benefit plans of the Company, TMHC or their subsidiaries and (iv) rights that cannot be released as a matter of law (collectively,
''Unreleased Claims").
2.
I acknowledge and agree that this Release of Claims may be pleaded as a full defense to any action, suit, arbitration or other proceeding covered by the terms hereof which is or may be initiated by any of the Releasors.
3.
I acknowledge that neither I nor any of the Releasors has filed any complaint, charge, claim or proceeding against any of the Released Parties before any local, state, federal or foreign agency, court, arbitrator, mediator, arbitration or mediation panel or other body (each individually, a
"Proceeding")
.
I represent that I am not aware of any basis on which such a Proceeding could reasonably be instituted, except as I have expressly disclosed to the Company in writing. I (i) acknowledge that I shall not initiate or cause to be initiated on my behalf, and shall not participate in, any Proceeding (except with respect to an Unreleased Claim), except as required by law, and (ii) waive any right that I may have to benefit in any manner from any relief (whether monetary or otherwise) arising out of any Proceeding, including any Proceeding conducted by the Equal Employment Opportunity Commission
("EEOC").
Further, I understand that, by executing this Release of Claims, I shall be limiting the availability of certain remedies that I may have against the Company and limiting also my ability to pursue certain claims against the Released Parties. Notwithstanding the above, nothing in Section 1 of this Release of Claims shall prevent me from (a) initiating or causing to be initiated on my behalf any complaint, charge, claim or proceeding against the Company before any local, state or federal agency, court or other body challenging the validity of the waiver of my claims under ADEA contained in Section 1 of this Release of Claims (but no other portion of such waiver), or (b) initiating or participating in an investigation or proceeding conducted by the EEOC.
4.
I represent and warrant that I have returned to the Company any and all Confidential Information and other property of the Company and its Affiliates that I had in my possession, custody or control on the date my employment with the Company terminated and that I have retained no such property. Without limiting the foregoing, I also represent and warrant that I have retained no copy of any such documents, materials or information.
5.
In signing this Release of Claims, I acknowledge that I have had a reasonable amount of time to consider the terms of this Release of Claims and that I am signing this Release of Claims voluntarily and with a full understanding of its terms. I acknowledge my understanding that I may not sign this Release of Claims prior to the termination of my employment, but that I may consider the terms of this Release of Claims for up to [twenty-one (21)][forty-five (45)]
2
days (or such longer period as the Company may specify in order to render this Release of Claims fully effective) from the date I receive this Release of Claims. I also acknowledge that I am advised by
2
To be selected based on whether
applicable
termination was "in connection with an exit incentive or other
employment
termination program" (as such phrase is defined in the Age Discrimination in Employment Act of 1967).
the Company, TMHC and their Affiliates to seek the advice of an attorney prior to signing this Release of Claims and that I have, in fact, consulted with an attorney prior to signing this Release of Claims; that I have had sufficient time to consider this Release of Claims and to consult with an attorney, if I wished to do so, or to consult with any other person of my choosing before signing; and that I am signing this Release of Claims voluntarily and with a full understanding of its terms.
6.
I further acknowledge that, in signing this Release of Claims, I have not relied on any promises or representations, express or implied, that are not set forth expressly herein. I understand that I may revoke this Release of Claims at any time within seven (7) days of the date of my signing by written notice to the Company in accordance with Section 15 of the Employment Agreement and that neither the Company nor any other person is obligated to provide any of the Severance Payments to me until eight (8) days have passed since my signing of this Release of Claims without my having revoked this Release of Claims.
If
I revoke this Release of Claims, I shall be deemed not to have accepted the terms of this Release of Claims, and no action shall be required of any of the Released Parties under any section of this Release of Claims.
7.
I acknowledge and agree that I continue to be bound by the provisions of Sections 6, 7, and 9 of the Employment Agreement, which shall survive my termination of employment with the Company and remain in full force and effect in accordance with their terms. On the date of my termination, the Company hereby agrees to use reasonable efforts to advise its executive officers not to make any statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, regarding me that are disparaging or damaging to my reputation.
8.
This Release of Claims does not constitute an admission of liability or wrongdoing of any kind by the Company or me.
9.
In accordance with Section 4(c) of the Employment Agreement, I hereby resign from all positions on the Board and all committees thereof (and, if applicable, from the board of directors or similar governing bodies (and all committees thereof) of all other Affiliates of the Company) and from all other positions and offices that I hold with the Company and its subsidiaries and Affiliates. I agree to promptly execute such further documents as the Company, in its sole discretion, shall reasonably deem necessary to effect the foregoing.
10.
The provisions of this Release of Claims shall be binding upon my heirs, executors, administrators, legal representatives and assigns. A failure of any of the Released Parties to insist on strict compliance with any provision of this Release of Claims shall not be deemed a waiver of such provision or any other provision hereof.
If
any provision of this Release of Claims is determined to be so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable, and in the event that any provision is determined to be entirely unenforceable, such provision shall be deemed severable, such that all other provisions of this Release of Claims shall remain valid and binding upon me. For the avoidance of doubt, each of the Released Parties shall be a third-party beneficiary to this Release of Claims and shall be entitled to enforce this Release of Claims in accordance with its terms.
11.
With respect to the matters herein stated as the subject of release, I do hereby waive and relinquish any and all rights which I may have under the laws of the State of Arizona.
12.
This Release of Claims shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Arizona, without reference to the principles of conflicts of law of Arizona or any other jurisdiction, and where applicable, the laws of the United States.
* *
* *
*
Intending to be legally bound, I have signed this Release of Claims as of the date written
below.
A-4
EXECUTION VERSION
AMENDEDANDRESTATEDEMPLOYMENTAGREEMENT
This Amended and Restated Employment Agreement (the
"Agreement"),
entered into on June 15, 2018 (the
"Effective Date"),
is made by and between Darrell Sherman (the
"Executive")
and Taylor Morrison, Inc., a Delaware corporation (the
"Company").
RECITALS
A.
It is the desire of the Company to assure itself of the continued services of the Executive by continuing to engage the Executive to perform services under the terms hereof.
B.
The Executive desires to continue to provide services to the Company and to Taylor Morrison Home Corporation, a Delaware corporation and the indirect parent of the Company (including any successor parent,
"TMHC")
on the terms herein provided.
C.
This Agreement is intended to supersede any prior agreements or understandings, whether formal or informal, between the Executive and the Company or any of its Affiliates (as defined below).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the parties hereto agree as follows:
(a)
"Accountants"
shall have the meaning set forth in Section l l(b).
|
|
(b)
|
"Accrued Obligations'
shall have the meaning set forth in Section 5(a).
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(c)
|
"Action"
shall have the meaning set forth in Section 9.
|
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(d)
|
"Affiliate"
shall have meaning ascribed thereto in the Equity Plan.
|
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(e)
|
"Agreement
"
shall have the meaning set forth in the preamble hereto.
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(f)
|
"Annual Ba
e
Sala1y"
shall have the meaning set forth in Section 3(a).
|
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(g)
|
"Annual Bonus"
shall have the meaning set forth in Section 3(b).
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(h)
|
"Board"
shall mean the Board of Directors of TMHC.
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(i)
The Company shall have
"Cause"
to terminate the Executive's employment pursuant to Section 4(a)(iii) hereunder upon: (i) a material breach by the Executive of this Agreement, any award agreement executed by the Executive and issued under the Equity Plan or any policy of the Company or its Affiliates:
provided,
that, the Company shall permit the Executive up to fifteen (15) days after notice from the Company to cure such breach if reasonably susceptible to cure; (ii) the Executive's gross negligence or willful misconduct, which is injurious to the Company or any of
its
Affiliates;
provided,
that, the Company shall permit the Executive up to
fifteen (15) days after notice from the Company to cure such breach if reasonably susceptible to cure; or (iii) the Executive's conviction of, or guilty plea (or plea of
nolo contendere)
or confession to, a felony or other crime involving dishonesty, fraud, breach of any fiduciary obligation to the Board or any equity holder of TMHC, or unethical business conduct.
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(j)
|
"280G
Change
in
Control"
shall have the meaning set forth in Section 1l(a).
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(k)
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'
Change
in Control"
shall have the meaning set forth in the Equity Plan.
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(1)
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"Code"
shall mean the Internal Revenue Code of 1986, as amended.
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(m)
"Company"
shall, except as otherwise provided in Sections 6 and 7, have the meaning set forth in the preamble hereto.
(n)
"Confide11tial Information"
shall have the meaning set forth in Section 7(a)
.
(o)
'Date
of Termination"
shall mean (i) if the Executive's employment is terminated by the Executive's death, the date of the Executive's death, or (ii) if the Executive's employment is terminated pursuant to Section 4(a)(ii)-(vi), the date specified or otherwise effective pursuant to Section 4(b).
(p)
'Disability"
shall mean the disability of the Executive caused by any physical or mental injury, illness or incapacity as a result of which the Executive has been unable to effectively perform the essential functions of the Executive's duties for a continuous period of at least one hundred eighty (180) days. If any question shall arise as to whether a Disability exists, the Executive may, and at the request of the Company shall, submit to a medical examination by a physician selected by the Company to determine whether a Disability exists and such determination shall for the purposes of this Agreement be conclusive of the issue.
If
such question shall arise and the Executive shall fail to submit to such medical examination, the Company's determination of the issue shall be binding on the Executive.
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(q)
|
"Effective Date"
shall have the meaning set forth in the preamble hereto.
|
(r)
"Equity
Plan"
shall mean the Taylor Morrison Home Corporation 2013 Omnibus Equity Award Plan, as amended from time to time, or any successor plan thereto.
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(s)
|
"Excise
Tax"
shall have the meaning set forth in Section 1 l(a).
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(t)
|
"Executive"
shall have the meaning set forth in the preamble hereto.
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(u)
|
"Full Payment"
shall have the meaning set forth in Section 1 l(a).
|
(v)
The Executive shall have
"Good Reason
' to resign from employment pursuant to Section 4(a)(v) in the event that any of the following actions are taken by the Company or any of its Affiliates without the Executive's consent: (i) any material diminution in the nature or status of the Executive's title, duties, responsibilities or authority, including by reason of the Executive's no longer being the most senior employee responsible for oversight of the legal functions of a publicly traded company following a Change in Control, (ii) any material diminution in the
Executive's Annual Base Salary or Target Bonus, other than a decrease in base salary or bonus opportunity that applies to a similarly situated class of employees of the Company or its Affiliates,
(iii)
a material breach of the Company's obligations under this Agreement, or (iv) a change of the Executive's principal place of employment to a location more than fifty (50) miles from its present location (which change increases the Executive's one-way commute);
provided, however,
that none of the events described in the foregoing clauses shall constitute Good Reason unless the Executive has notified the Company in writing describing the events that constitute Good Reason within ninety (90) days following the first occurrence of such events and then only if the Company fails to cure such events within thirty (30) days after the Company's receipt of such written notice, and the Executive shall have terminated the Executive's employment with the Company promptly following the expiration of such cure period.
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(w)
|
"Inventions
' shall have the meaning set forth in Section 7(c).
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(x)
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"Notice of
Terminati
on"
shall have the meaning set forth in Section 4(b).
|
(y)
"Person"
shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.
(z)
"Proprietary Rights"
shall have the meaning set forth in Section 7(c). (aa)
"Reduced Payment"
shall have the meaning set forth in Section 1l(a). (bb)
"Section
409A"
shall have the meaning set forth in Section lO(a).
(cc)
"Severance Payments"
shall have the meaning set forth in Section 5(b)(i). (dd)
'Severance Period"
shall have the meaning set forth in Section 5(b)(i). (ee)
''Target Bonu "shall
have the meaning set forth in Section 3(b).
(ff)
"Term"
shall have the meaning set forth in Section 2(b).
(gg)
"TMHC"
shall have the meaning set forth in the preamble hereto.
(hh) shall have the meaning set forth in Section 1 l(a).
"Transactio n
.
Payment"
(a)
In
General
. The Company shall continue to employ the Executive, and the Executive shall continue in the employ of the Company, for the period set forth in Section 2(b), in the position set forth in Section 2(c), and upon the other terms and conditions herein provided.
(b)
Tem1
of Employment.
The term of employment (the
"Term")
under this Agreement shall be for the period beginning on the Effective Date and ending on the Date of Termination.
(i)
Position.
During the Term, the Executive shall serve as Executive Vice President and Chief Legal Officer of the Company and TMHC, with duties, responsibilities and authority customary for such position and as may be reasonably assigned by the Board or the Chief Executive Officer of TMHC from time to time. Such duties, responsibilities and authority may include services for one or more subsidiaries or Affiliates of the Company. The Executive shall report to the Chief Executive Officer of TMHC. The Executive agrees to observe and comply with the Company's and its Affiliates' rules and policies as adopted from time to time. The Executive shall devote the Executive's full business time, skill, attention and best efforts to the performance of the Executive's duties hereunder;
provided, however,
that the Executive shall be entitled to manage the Executive's personal, financial and legal affairs, or reasonably engage in charitable endeavors, so long as such activities do not interfere with the Executive's performance of the Executive's duties and responsibilities to the Company and its Affiliates as provided hereunder, are not in conflict with the business interests of the Company or its Affiliates and do not otherwise compete with the business of the Company or its Affiliates
.
For the avoidance of doubt, except as specifically provided in this Section 2(c), during the Term, the Executive shall not be permitted to become engaged in or render services for any Person other than the Company and its Affiliates without the consent of the Board
.
(ii)
Principal Office
. During the Term, the principal place of the Executive's employment shall be the Company's corporate headquarters in Scottsdale, Arizona. The Executive shall perform the Executive's duties and responsibilities to the Company at such principal place of employment and at such other location(s) to which the Company may reasonably require the Executive to travel for Company business purposes.
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3.
|
Compensation and Related Matters.
|
(a)
Annual Base Salary
. During the Term, the Executive shall receive a base salary at a rate of four hundred seventy-five thousand dollars ($475,000) per annum, which shall be paid in accordance with the customary payroll practices of the Company, subject to review and adjustment in accordance with the Company's or TMHC's compensation policies and practices, overall financial condition and other business factors (the
"Annual Ba e Salary")
.
(b)
Annual Bonus.
With respect to each calendar year that ends during the Term, the Executive shall be eligible to receive an annual cash bonus (the
"Annual Bonus")
under TMHC's annual bonus program, with a target Annual Bonus amount equal to one hundred fifty percent (150%) of the Annual Base Salary (the
"Target Bonus
"). The Executive's actual Annual Bonus for a given year, if any, shall be determined by the Board (or a subcommittee thereof) on the basis of the Executive's, the Company's and/or TMHC's attainment of objective financial and/or other subjective or objective criteria established by the Board (or a subcommittee thereof). Each such Annual Bonus shall be payable at such time and in such manner that annual bonuses are paid to other senior executives of the Company after results have been determined for the calendar year to which the Annual Bonus, if any, relates. Notwithstanding the foregoing, except as expressly provided in Section 5 hereof, no Annual Bonus shall be payable with respect to any calendar year unless the Executive remains continuously employed with the Company through the date of payment of such Annual Bonus
.
(c)
Benefits.
During the Term, the Executive shall be entitled to participate in the employee benefit plans, programs and arrangements of the Company now (or, to the extent determined by the Company, hereafter) in effect, subject to and in accordance with their terms, including pension benefits and medical and welfare benefits, as such benefit plans, programs or arrangements may be amended or terminated from time to time in accordance with their terms.
(d)
Vacation, Sick
Leave
and Holidays.
During the Term, the Executive shall be entitled to paid vacation, paid sick leave and paid holidays in accordance with applicable laws the Company's policies in force from time to time.
(i)
E
lig
ibility.
During the Term, the Executive shall be eligible to receive equity-based compensation awards under the Equity Plan from time to time, as determined by the Board (or a subcommittee thereof) in its sole discretion.
(ii)
Vesting of Performance-Based
Equity
Awards.
Notwithstanding anything to the contrary contained in the Equity Plan or any award agreement issued thereunder, upon a Change in Control, the performance period (or term of similar meaning) applicable to any equity based compensation awarded to the Executive under the Equity Plan that vests in whole or in part upon the achievement of one or more performance goals
("Perfo1mance Awards"),
whether granted prior to, on or after the date hereof, shall end on the date of the Change in Control, and the Executive shall be eligible to vest in all such Performance Awards on the last date of the service period applicable to each such Performance Award (the
"Vesting
Date"),
with all applicable performance goals deemed achieved at the "target" level, subject to the Executive's continued employment through such Vesting Date;
provided, however,
that if the Executive is terminated without Cause pursuant to Section 4(a)(iv) or resigns with Good Reason pursuant to Section 4(a)(v), in each case at any time (x) following the execution of a definitive agreement with a third party that, if consummated, would result in a Change in Control, but before such transaction is consummated (and subject to such consummation), or (y) within twenty-four (24) months following a Change in Control ((x) or (y), as applicable, a
"CIC Qualifying Termination")
, then the Executive shall remain eligible to vest in such Performance Awards as described in this sentence, but the Vesting Date shall occur on the date of such CIC Qualifying Termination (or, if later, the date of such Change in Control). For the avoidance of doubt, the Vesting Date shall be deemed to be the "Determination Date" (or term of similar meaning, if applicable), as defined in the applicable award agreement(s) pursuant to which such Performance Awards were granted under the Equity Plan.
(iii)
Vesting
of
Time-Based
Equity
Awards.
Notwithstanding anything to the contrary contained in the Equity Plan or any award agreement issued thereunder, if the Executive is terminated in a CIC Qualifying Termination, then the Executive shall vest in full in any equity based compensation awarded to the Executive under the Equity Plan (other than Performance Awards), whether granted prior to, on or after the date hereof, on the date of such CIC Qualifying Termination (or, if later, the date of the applicable Change in Control).
(f)
Expenses.
During the Term, the Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by the Executive in the performance of the
Executive's duties to the Company, in accordance with the Company's expense reimbursement policies and procedures.
(g)
No
Additional
Compensation
.
Except as otherwise provided herein, the Executive shall not be entitled to any additional compensation for service as a member of the Board (or any subcommittee thereof) or other positions or titles the Executive may hold with any subsidiary or Affiliate of the Company to the extent the Executive is so appointed.
4.
Termination.
The Executive's employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:
(a)
Circumstances
.
(i) Executive's death.
Death
. The Executive's employment hereunder shall terminate upon the
(ii)
Disability.
If
the Executive has incurred a Disability, the Company may give the Executive written notice of its intention to terminate the Executive's employment. In that event, the Executive's employment with the Company shall terminate effective on the later of the thirtieth (30
th
)
day after receipt of such notice by the Executive and the date specified in such notice;
·
provided,
that within the thirty (30) day period following receipt of such notice, the Executive shall not have returned to full-time performance of the Executive's duties hereunder.
(iii)
Termination
with Cause
. The Company may terminate the Executive's employment with Cause.
(iv)
Termination
without
Cause
.
The Company may terminate the Executive's employment without Cause.
(v)
Resignation
with Good Reason.
The Executive may resign from the Executive's employment with Good Reason.
(vi)
Resignation without Good Rea on
. The Executive may resign from the Executive's employment without Good Reason upon not less than sixty (60) days' advance written notice to the Board.
(b)
Notice
of Termination.
Any termination of the Executive's employment by the Company or by the Executive under this Section 4 (other than termination pursuant to Section 4(a)(i)) shall be communicated by a written notice to the other party hereto (i) indicating the specific termination provision in this Agreement relied upon, (ii) except with respect to a termination pursuant to Section 4(a)(iv) or (vi), setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) specifying a Date of Termination as provided herein (a
"Notice of
Termination")
.
If
the Company delivers a Notice of Termination under Section 4(a)(ii), the Date of Termination shall be at least thirty (30) days following the date of such notice;
provided, however,
that such notice need not specify a Date of Termination, in which case the Date of Termination shall be determined pursuant to Section 4(a)(ii).
If
the Company delivers a Notice of
Termination under Section 4(a)(iii) or 4(a)(iv), the Date of Termination shall be, in the Company's sole discretion, the date on which the Executive receives such notice or any subsequent date selected by the Company. If the Executive delivers a Notice of Termination under Section 4(a)(v), the Date of Termination shall be at least thirty (30) days following the date of such notice;
provided, however,
that the Company may, in its sole discretion, accelerate the Date of Termination to any date that occurs following the Company's receipt of such notice, without changing the characterization of such termination as voluntary, even if such date is prior to the date specified in such notice and without having to pay any compensation or benefits for the balance of such notice period. The failure by the Company or the Executive to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Cause or Good Reason shall not waive any right of the Company or the Executive hereunder or preclude the Company or the Executive from asserting such fact or circumstance in enforcing the Company's or the Executive's rights hereunder.
(c)
Termination of All Positions.
Upon termination of the Executive's employment for any reason, the Executive agrees to resign, as of the Date of Termination or such other date requested by the Company, from all positions on the Board and all committees thereof (and, if applicable, from the board of directors or similar governing bodies (and all committees thereof) of all other Affiliates of the Company) and from all other positions and offices that the Executive then holds with the Company and its subsidiaries and Affiliates. The Executive agrees to promptly execute such documents as the Company, in its sole discretion, shall reasonably deem necessary to effect such resignations.
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5.
|
Company
Obligations upon
Termination of Employment.
|
(a)
bl General.
Subject to Section IO(b), upon termination of the Executive's employment for any reason, the obligations of the Company to pay or provide the Executive with compensation and benefits under Section 3 shall cease, and the Company shall have no further obligations to provide compensation or benefits to the Executive hereunder, except the Executive (or the Executive's estate) shall be entitled to receive (i) any amount of the Executive's Annual Base Salary earned through the Date of Termination not theretofore paid, (ii) any amount arising from the Executive's participation in, or benefits under, any employee benefit plans, programs or arrangements under Section 3(c) (other than severance plans, programs or arrangements) or the Equity Plan (subject to the terms and conditions of the Equity Plan and any applicable award agreement thereunder, as modified by Section 3(e)(ii) or (iii) herein), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements including, where applicable, any death and disability benefits, (iii) any accrued vacation pay owed to the Executive pursuant to Section 3(d), (iv) any expenses owed to the Executive under Section 3(f), and (v) subject to the Executive's (or the Executive's estate's) satisfaction of the Release Requirement (as defined below), any Annual Bonus for the year prior to the year in which the Date of Termination occurred that was earned but not yet paid (the
"Accrued Obligations")
. Notwithstanding anything to the contrary, upon a termination with Cause or a resignation without Good Reason, the Accrued Obligations shall not include the amount set forth in clause (v) of the preceding sentence.
(b)
Termination
without Cause or Resignation with Good Reason.
Subject to Section IO(b) and subject to the Executive's continued compliance with the covenants contained
in Sections 6 and 7, if the Company terminates the Executive's employment without Cause pursuant to Section 4(a)(iv) or if the Executive resigns from employment with Good Reason pursuant to Section 4(a)(v), the Company shall, in addition to the Accrued Obligations:
(i)
pay to the Executive an aggregate amount equal to the Annual Base Salary in equal installments in accordance with the Company's customary payroll practices during the twelve (12)-month period (the
" S
e
v
e
ranc
e
P
e
riod")
beginning on the Date of Termination and ending on the earlier to occur of (A) the expiration of the Severance Period and (B) the first date that the Executive violates any covenant contained in Section 6 and 7 (the
"Se
v
eranc
e
Payments"); provided, however,
that if such termination is a CIC Qualifying Termination, then (x) the aggregate Severance Payments shall instead be equal to the product of (A) one and one-half (1.5) and (B) the sum of the Annual Base Salary and the higher of (1) the Target Bonus and (2) the average of the Annual Bonuses paid in or payable in respect of (whichever results in the higher average) the three
(3) completed calendar years that precede the Date of Termination, and (y) such Severance Payments shall instead be payable in a single lump sum on the Company's first regular payroll date that follows the sixtieth (60
th
)
day following the Date of Termination;
(ii)
subject to the Executive's timely election of (and continued eligibility for) continued health coverage pursuant to the federal law known as "COBRA," the Company shall pay, during the twelve (12)-month period following the Date of Termination (or until the Executive becomes eligible for comparable coverage under the health plans of a successor employer, if earlier) (the
"COBRA P
e
riod")
, the applicable COBRA premiums for the Executive and any eligible dependents who participated in the Company's health plan as of immediately prior to the Date of Termination;
provided,
that in the event the Company would be subject to any excise tax under Section 4980D of the Code or other penalty or liability pursuant to the provisions of the Patient Protection and Affordable Care Act of 2010 (as amended from time to time) or other applicable law (or to the extent such COBRA subsidy is not permitted under the terms of the applicable benefit plan or applicable law), and in lieu of providing the COBRA subsidy described above, the Company shall instead pay to the Executive a fully taxable monthly cash payment in an amount such that, after payment by the Executive of all taxes on such payment, the Executive retains an amount equal to the applicable COBRA premiums for such month (or the last month in which COBRA coverage was available to the Executive), with such monthly payment being made on the last day of each month for the remainder of the COBRA Period. For the avoidance of doubt, the Executive's health benefit coverage from the Company during the COBRA Period shall run concurrent with the health continuation coverage period mandated by Section 4980B of the Code;
(iii)
pay the Executive a prorated portion of the Annual Bonus payable with respect to the calendar year in which such termination occurs, determined on a daily basis, based solely on the actual level of achievement of the applicable performance goals for such year, and payable if and when annual bonuses are paid to other senior executives of the Company with respect to such year;
provided,
that if such termination is a CIC Qualifying Termination, then such payment shall instead be a prorated portion of the Target Bonus applicable to the calendar year in which such termination occurs, determined on a daily basis, payable when annual bonuses are paid to other senior executives of the Company with respect to such year; and
(iv)
provide the Executive with up to twelve (12) months of outplacement assistance through the Company's then-current outplacement vendor (or, if no such vendor exists, through an outplacement vendor of the Company's choice);
provided, however,
that notwithstanding the foregoing, (A) the amounts payable to the Executive under this Section 5(b) shall be contingent upon and subject to the Executive's execution and non revocation of a general waiver and release of claims agreement (the
"Release")
in the Company's customary form attached hereto as
Exhibit
A
(and the expiration of any applicable revocation period), on or prior to the sixtieth (60
th)
day following the Date of Termination (the
"Release
Requirement");
and (B) any installment payments pursuant to this Section 5(b) shall commence on the first payroll period following the effective date of such Release, and the initial installment shall include a lump-sum payment of all amounts accrued under this Section 5(b) from the Date of Termination through the date of such initial payment.
(c)
Survival
. The expiration or termination of the Term shall not impair the rights or obligations of any party hereto, which shall have accrued prior to such expiration or termination.
(d)
No Other Severance
. The Executive expressly acknowledges that any severance payments and benefits under this Section 5 are in lieu of any other payments or benefits that the Executive may otherwise be eligible to receive under any Company plan, policy or program providing for severance, separation pay or salary continuation payments or benefits.
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6.
|
Non-Competition;
Non-Solicitati n:
Non-Hire.
|
(a)
Survival
of
Restrictive Covenants Agreement.
Notwithstanding anything to the contrary set forth herein, the Restrictive Covenants Agreement, by and between the Company and the Executive, dated as of December 15, 2011, shall survive and remain in full force and effect following the Effective Date, and is incorporated by reference as though fully set forth herein.
(b)
Non-Solicitation
of
Customers and Suppliers
. The Executive agrees that the Company's relationships with its customers and suppliers are solely the assets and property of the Company, and therefore the Executive agrees that for a period of two (2) years following termination of the Executive's employment with the Company for any reason, the Executive shall not directly or through others solicit or attempt to solicit any of the Company's customers and/or suppliers for the purpose of providing products or services competitive to those offered by the Company. This restriction applies only to those customers and/or suppliers with whom the Executive had material contact on behalf of the Company. "Material contact" means: (i) direct personal contact with a supplier or customer for the purpose of, respectively, purchasing real estate, materials or services for use by the Company or selling the Company's real estate, products or services to customers or (ii) any direct supervision of direct personal contacts other employees of the Company may have with suppliers and/or customers. For purposes of this Section 6(b), the terms "customer" and "supplier" shall also include prospective customers and suppliers of the Company.
(c)
Non-Solicitation
of Employees.
The Executive agrees that the Company has invested substantial time and effort in assembling and training its present staff of personnel. Accordingly, the Executive agrees that for a period of two (2) years following termination of the
Executive's employment with the Company for any reason, the Executive will not directly or indirectly induce or solicit, or seek to induce or solicit, on behalf of the Executive or other persons or entities any of the Company's employees to leave employment with the Company if such employee was employed by the Company during the last six (6) months of the Executive's employment.
(d)
Company Defined.
As used in this Section 6, the term "Company" shall include the Company and any direct or indirect subsidiaries and Affiliates thereof and any successors thereto.
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7.
|
Non-Disclosure of Confidential Information: Non-Di
s
paragement; In
t
ellec tual Property.
|
(a)
Non-Disclosure of Confid
e
ntial Information: R
e
turn of Prop
e
rty
.
(i)
Confidential Infonnation.
Except as required in the faithful performance of the Executive's duties hereunder, during the Term and in perpetuity thereafter, the Executive shall maintain in confidence and shall not directly, indirectly or otherwise
,
use, disseminate, disclose or publish, or use for the Executive's benefit or the benefit of any Person, any confidential or proprietary information or trade secrets of or relating to the Company or any of its Affiliates, including, without limitation, information with respect to the Company
'
s or any of its Affiliates
'
operations, protocols, processes, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, compensation paid to employees or other terms of employment
("Confid
e
ntial Information")
, or deliver to any Person any document
,
record
,
notebook
,
computer program or similar repository of or containing any such Confidential Information;
pr
o
vided,
that the Executive's good faith performance of the Executive's duties and responsibilities for the Company and its Affiliates during employment shall not be deemed a breach of this Section 7(a). Upon the Executive's termination of employment for any reason, the Executive shall promptly deliver to the Company all correspondence
,
drawings
,
manuals
,
letters
,
notes
,
notebooks, reports, programs, plans, proposals, financial documents or any other documents concerning the Company's or any of its Affiliates' Confidential Information, customers
,
business plans, marketing strategies, products or processes. The Executive may respond to a lawful and valid subpoena or other legal process but shall give the Company the earliest possible notice thereof, shall, as much in advance of the return date as possible
,
make available to the Company and its counsel the documents and other information sought and shall assist such counsel in resisting or otherwise responding to such process.
(ii)
P
e
nni
s
sibl
e
D i
s
clo
s
ure o
f
Con
fi
d
e
ntial In
fo
rma tion
. Notwithstanding anything to the contrary contained herein
,
nothing in this Agreement shall prohibit the Executive from reporting possible violations of federal law or regulation to or otherwise cooperating with or providing information requested by any governmental agency or entity
,
including, but not limited to
,
the Department of Justice
,
the Securities and Exchange Commission, the Congress and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions offederal law or regulation. The Executive does not need the prior authorization of the Company to make any such reports or disclosures and the Executive is not required to notify the Company that the Executive has made such reports or disclosures.
(b)
on-Disparagement
. The Executive shall not, at any time during the Executive's employment and following the Executive's termination of employment for any reason, make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage or be damaging to the Company, its subsidiaries or Affiliates or their respective officers, directors, employees, advisors, businesses or reputations. Notwithstanding the foregoing, nothing in this Agreement shall preclude the Executive from making truthful statements that are required by applicable law, regulation or legal process.
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(c)
|
Intellectual Property Rights.
|
(i)
Invention
and
Proprietary Rights.
The Executive agrees that the results and proceeds of the Executive's services for the Company or its subsidiaries or Affiliates (including, but not limited to, any trade secrets, products, services, processes, know-how, designs, developments, innovations, analyses, drawings, reports, techniques, formulas, methods, developmental or experimental work, improvements, discoveries, inventions, ideas, source and object codes, programs, matters of a literary, musical, dramatic or otherwise creative nature, writings and other works of authorship) resulting from services performed while an employee of the Company and any works in progress, whether or not patentable or registrable under copyright or similar statutes, that were made, developed, conceived or reduced to practice or learned by the Executive, either alone or jointly with others (collectively,
"Inventions")
, shall be works-made for-hire and the Company (or, if applicable or as directed by the Company, any of its subsidiaries or Affiliates) shall be deemed the sole owner throughout the universe of any and all trade secret, patent, copyright and other intellectual property rights (collectively,
''Prop1ietarv
Rights")
of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed, with the right to use the same in perpetuity in any manner the Company determines in its sole discretion, without any further payment to the Executive whatsoever.
If,
for any reason, any of such results and proceeds shall not legally be a work-made-for-hire and/or there are any Proprietary Rights which do not accrue to the Company (or, as the case may be, any of its subsidiaries or Affiliates) under the immediately preceding sentence, then the Executive hereby irrevocably assigns and agrees to assign any and all of the Executive's right, title and interest thereto, including, without limitation, any and all Proprietary Rights of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed, to the Company (or, if applicable or as directed by the Company, any of its subsidiaries or Affiliates), and the Company or such subsidiaries or Affiliates shall have the right to use the same in perpetuity throughout the universe in any manner determined by the Company or such subsidiaries or Affiliates without any further payment to the Executive whatsoever. As to any Invention that the Executive is required to assign, the Executive shall promptly and fully disclose to the Company all information known to the Executive concerning such Invention. The Executive hereby waives and quitclaims to the Company any and all claims, of any nature whatsoever, that the Executive now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company.
(ii)
Executiv
e Assistance.
The Executive agrees that, from time to time, as may be requested by the Company and at the Company's sole cost and expense, the Executive shall do any and all things that the Company may reasonably deem useful or desirable to establish or document the Company's exclusive ownership throughout the United States of America or any
other country of any and all Proprietary Rights in any such Inventions, including, without limitation, the execution of appropriate copyright and/or patent applications or assignments. To the extent the Executive has any Proprietary Rights in the Inventions that cannot be assigned in the manner described above, the Executive unconditionally and irrevocably waives the enforcement of such Proprietary Rights. This Section 7(c) is subject to and shall not be deemed to limit, restrict or constitute any waiver by the Company of any Proprietary Rights of ownership to which the Company may be entitled by operation of law by virtue of the Executive's employment with the Company. The Executive further agrees that, from time to time, as may be requested by the Company and at the Company's sole cost and expense, the Executive shall assist the Company in every proper and lawful way to obtain and from time to time enforce Proprietary Rights relating to Inventions in any and all countries. To this end, the Executive shall execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, the Executive shall execute, verify and deliver assignments of such Proprietary Rights to the Company or its designees. The Executive's obligation to assist the Company with respect to Proprietary Rights relating to such Inventions in any and all countries shall continue beyond the termination of the Executive's employment with the Company.
(iii)
Permissible Di
closure
of Trade Secrets
. Notwithstanding anything to the contrary contained herein, the Executive shall not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made: (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and
(B) solely for the purpose of reporting or investigating a suspected violation of law; or is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding.
If
the Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, the Executive may disclose the Company's trade secrets to the Executive's attorney and use the trade secret information in the court proceeding if the Executive: (1) files any document containing the trade secret under seal; and (2) does not disclose the trade secret, except pursuant to court order
.
(d)
Company Defined.
As used in this Section 7, the term "Company" shall include the Company and any direct or indirect subsidiaries and Affiliates thereof and any successors thereto.
8.
Indemnification
.
The Executive shall be entitled to indemnification in accordance with the terms of that certain Indemnification Agreement, by and among TMHC, Taylor Morrison Holdings, Inc., Monarch Communities Inc., and the Executive, dated as of April 12, 2013, which is incorporated by reference as though fully set forth herein.
9.
Cooperation.
The Executive agrees that during and after the Executive's employment with the Company, the Executive shall assist the Company and its Affiliates in the defense of any claims or potential claims that may be made or threatened to be made against the Company or any of its Affiliates in any action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise, that are not adverse to the Executive (each, an
"Action"),
and shall assist the Company and its Affiliates in the prosecution of any claims that may be made by the Company or any of its Affiliates in any Action, to the extent that such claims may relate to the Executive's employment or the period of the Executive's employment by the Company and its Affiliates. The
Executive agrees, unless precluded by law, to promptly inform the Company if the Executive is asked to participate (or otherwise become involved) in any such Action. The Executive also agrees, unless precluded by law, to promptly inform the Company if the Executive is asked to assist in any investigation (whether governmental or otherwise) of the Company or any of its Affiliates (or their actions) to the extent that such investigation may relate to the Executive's employment or the period of the Executive's employment by the Company, regardless of whether a lawsuit has then been filed against the Company or any of its Affiliates with respect to such investigation. The Company or one of its Affiliates shall reimburse the Executive for all of the Executive's reasonable out-of-pocket expenses associated with such cooperation following the Executive's Date of Termination;
provided,
that any such cooperation occurring after the termination of the Executive's employment shall be scheduled to the extent reasonably practicable so as not to unreasonably interfere with the Executive's business or personal affairs.
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10.
|
Section 409A of the Code
.
|
(a)
General.
The parties hereto acknowledge and agree that, to the extent applicable, this Agreement shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the Code and the Department of Treasury Regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date
("Section 409A
'). Notwithstanding any provision of this Agreement to the contrary, in the event that the Company determines that any amounts payable hereunder will be taxable currently to the Executive under Section 409A(a)(l)(A) of the Code and related Department of Treasury guidance, the Company and the Executive shall cooperate in good faith to (i) adopt such amendments to this Agreement and appropriate policies and procedures, including amendments and policies with retroactive effect, that they mutually determine to be necessary or appropriate to preserve the intended tax treatment of the benefits provided by this Agreement, to preserve the economic benefits of this Agreement and to avoid less favorable accounting or tax consequences for the Company, and/or (ii) take such other actions as mutually determined to be necessary or appropriate to exempt the amounts payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder;
prov
i
ded, h
o
weve r,
that this Section lO(a) does not create an obligation on the part of the Company to modify this Agreement and does not guarantee that the amounts payable hereunder will not be subject to interest or penalties under Section 409A, and in no event whatsoever shall the Company or any of its Affiliates be liable for any additional tax
,
interest or penalties that may be imposed on the Executive as a result of Section 409A or any damages for failing to comply with Section 409A.
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(b)
|
Special Rules.
Notwithstanding any provision to the contrary in this Agreement:
|
(i) no amount shall be payable pursuant to Section 5 unless the termination of the Executive's employment constitutes a "separation from service" within the meaning of Section l.409A-l(h) of the Department of Treasury Regulations; (ii) if the Executive is deemed at the time of the Executive's separation from service to be a "specified employee" for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent that delayed commencement of any portion of the termination benefits to which the Executive is entitled under this Agreement (after taking into account all exclusions applicable to such termination benefits under Section 409A), including, without limitation, any portion of the additional compensation awarded pursuant to Section 5, is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code,
such portion of the Executive's termination benefits shall not be provided to the Executive prior to the earlier of (A) the expiration of the six (6)-month period measured from the date of the Executive's "separation from service" with the Company (as such term is defined in the Department of Treasury Regulations issued under Section 409A) and (B) the date of the Executive's death;
provided,
that upon the earlier of such dates, all payments deferred pursuant to this Section l0(b)(ii) shall be paid to the Executive in a lump sum, and any remaining payments due under this Agreement shall be paid as otherwise provided herein; (iii) the determination of whether the Executive is a "specified employee" for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of the Executive's separation from service shall be made by the Company in accordance with the terms of Section 409A and applicable guidance thereunder (including, without limitation, Section 1.409A-l(i) of the Department of Treasury Regulations and any successor provision thereto); (iv) for purposes of Section 409A, the Executive's right to receive installment payments pursuant to Section 5 shall be treated as a right to receive a series of separate and distinct payments; and (v) to the extent that any reimbursement of expenses or in-kind benefits constitutes "deferred compensation" under Section 409A, (A) such reimbursement or benefit shall be provided no later than December 31 of the year following the year in which the expense was incurred, (B) the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, (C) the amount of any in-kind benefits provided in one year shall not affect the amount of in-kind benefits provided in any other year and (D) the right to any benefits or reimbursements or in-kind benefits may not be liquidated or exchanged for any other benefit. Neither the Executive nor any of the Executive's creditors or beneficiaries shall have the right to subject any "deferred compensation" under Section 409A payable under this Agreement to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A, any "deferred compensation" under Section 409A payable to the Executive or for the Executive's benefit may not be reduced by, or offset against, any amount owing by the Executive to the Company or any of its Affiliates.
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11.
|
Section 280G of the Code
.
|
(a)
Ifthere is a change of ownership or effective control or change in the ownership of a substantial portion of the assets of a corporation (within the meaning of Section 280G of the Code) (a
"280G
Change
in Control")
and any payment or benefit (including payments and benefits pursuant to this Agreement) that the Executive would receive from the Company, TMHC or otherwise
("Transaction Payment")
would (i) constitute a
"parachute
payment" within the meaning of Section 280G of the Code and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the
"Excise Tax"),
then the Company shall cause to be determined, before any amounts of the Transaction Payment are paid to the Executive, which of the following two alternative forms of payment would result in the Executive's receipt, on an after-tax basis, of the greater amount of the Transaction Payment notwithstanding that all or some portion of the Transaction Payment may be subject to the Excise Tax: (A) payment in full of the entire amount of the Transaction Payment (a
"Full
Payment"),
or (B) payment of only a part of the Transaction Payment so that the Executive receives the largest payment possible without the imposition of the Excise Tax (a
"Reduced Payment").
For purposes of determining whether to make a Full Payment or a Reduced Payment, the Company shall cause to be taken into account all applicable federal, state and local income and employment taxes and the Excise Tax (all computed at the highest applicable marginal rate, net of the maximum reduction in federal income taxes which could be
obtained from a deduction of such state and local taxes). If a Reduced Payment is made, the reduction in payments and/or benefits will occur in the following order: (1) first, reduction of cash payments, in reverse order of scheduled payment date (or if necessary, to zero), (2) then, reduction of non-cash and non-equity benefits provided to the Executive, on a pro rata basis (or if necessary, to zero) and (3) then, cancellation of the acceleration of vesting of equity award compensation in the reverse order of the date of grant of the Executive's equity awards.
(b)
Unless the Executive and the Company otherwise agree in writing, any determination required under this section shall be made in writing by the Company's independent public accountants (the
"Accountants")
,
whose determination shall be conclusive and binding upon the Executive and the Company for all purposes. For purposes of making the calculations required by this section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 2800 and 4999 of the Code. The Accountants shall provide detailed supporting calculations to the Company and the Executive as requested by the Company or the Executive. The Executive and the Company shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 11.
12.
A
sigrunent
and Successor
. The Company may assign its rights and obligations under this Agreement to any of its Affiliates, and shall require any successor to all or substantially all the assets of the Company, by merger or otherwise, to assume this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. The Company may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and its Affiliates. The Executive may not assign the Executive's rights or obligations under this Agreement to any individual or entity. This Agreement shall be binding upon and inure to the benefit of the Company and the Executive and their respective successors, assigns, personnel, legal representatives, executors, administrators, heirs, distributees, devisees and legatees, as applicable. In the event of the
Executive's
death following a termination of the Executive's employment, all unpaid amounts otherwise due the Executive (including under Section 5) shall be paid to the Executive's estate.
13.
Governing Law
. This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Arizona, without reference to the principles of conflicts of law of Arizona or any other jurisdiction, and where applicable, the laws of the United States.
14.
VaJjdity.
The invalidity or unenforceability of any provision or prov1s10ns of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
15.
otices
.
Any notice, request, claim, demand, document and other communication hereunder to any party hereto shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by nationally recognized overnight courier, or certified or registered mail, postage prepaid, to the following address (or at any other address as any party hereto shall have specified by notice in writing to the other party hereto):
(a)
If
to the Company:
Taylor Morrison, Inc. 4900 N
.
Scottsdale Road Suite 2000
Scottsdale,
AZ
85251 Attention: General Counsel
(b)
If
to the Executive, at the Executive's most recent address on the payroll records of the Company.
16.
Counterparts.
This Agreement may be executed in several counterparts (including by facsimile transmission or electronic image scan (PDF)), each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.
17.
Entire
Agreement.
The terms of this Agreement (together with any other agreements and instruments contemplated hereby or referred to herein) is intended by the parties hereto to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement (including, without limitation, that certain Employment Agreement, by and between the Executive and the Company, dated as of February 1, 2011, as amended from time to time). The parties hereto further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative or other legal proceeding to vary the terms of this Agreement.
18.
Am ndments
:
Waiver
.
This Agreement may not be modified, amended or terminated except by an instrnment in writing signed by lhe Executive and a duly authorized officer of Company (other than the Executive) that expressly identifies the amended provision of this Agreement. By an instrument in writing similarly executed and similarly identifying the waived compliance, the Executive or a duly authorized officer of the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform;
provided, however,
that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure to comply or perform. No failure to exercise and no delay in exercising any right, remedy or power hereunder shall preclude any other or further exercise of any other right, remedy or power provided herein or by law or in equity.
19.
o Inconsistent Actions.
The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.
20.
Construction.
This Agreement shall be deemed drafted equally by both of the parties hereto. Its language shall be construed as a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any party shall not apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or
subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary: (a) the plural includes the singular, and the singular includes the plural; (b) "and" and "or" are each used both conjunctively and disjunctively; (c)
"any,"
"all," "each," or "every" means "any and all," and "each and every"; (d)
"includes" and
"including"
are each "without limitation"·
'
and (e) "herein
'
" "here
,
of"
"hereunder
'
" and other similar compounds of the word "here" refer to the entire Agreement and not to any
particular paragraph, subparagraph, section or subsection.
21.
Di pute Resolution.
The parties understand and agree that except as otherwise expressly provided in this Agreement, any claim of any nature whatsoever, including those arising out of or connected with the Executive's employment with the Company, including but not limited to wrongful termination, breach of contract, defamation, and claims of discrimination (including age, disability, sex, religion, national origin, race, color, etc.), harassment or retaliation whether under federal, state or local laws, regulations, or Executive Orders, common law, or in equity, shall be decided by submission to final and binding arbitration in Scottsdale, Arizona. The arbitrator shall be a retired or former state or federal court judge. The parties further agree that the performance of the Executive's duties as contemplated by this Agreement involves commerce. This arbitration provision shall be governed by the Federal Arbitration Act. The arbitrator shall apply the law (including applicable filing limitations periods and exhaustion of administrative remedies) to the same extent and with same force and effect as would an Arizona court or a federal court sitting in Arizona. The arbitration shall be pursuant to rules and procedures adopted by the Company, and failing such adoption, the Federal Rules of Civil Procedure. Judgment shall be final upon the award rendered by the arbitrator and may be entered in any court having jurisdiction thereof, and each of the parties shall be responsible for its respective legal fees and expenses
.
The parties further understand and agree that actions seeking temporary injunctions are hereby excluded from arbitration and, therefore, may be sought in a court of appropriate jurisdiction without resort to arbitration, even though resolution of the underlying claim must be submitted to arbitration.
EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING INSTITUTED BY OR AGAINST SUCH PARTY IN RESPECT OF ITS RIGHTS OR OBLIGATIONS HEREUNDER.
22.
Enforcement.
If
any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable, this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision were never a part of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.
23.
Withholding.
The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local and foreign withholding and other taxes and charges that the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.
24.
Employee Representations
. The Executive represents, warrants and covenants that (a) the Executive has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein and has entered into this Agreement freely based on the Executive's own judgment, (b) the Executive has the full right, authority and capacity to enter into this Agreement and perform the Executive's obligations hereunder, (c) the Executive is not bound by any agreement that conflicts with or prevents or restricts the full performance of the Executive's duties and obligations to the Company hereunder during or after the Term and (d) the execution and delivery of this Agreement shall not result in any breach or violation of, or a default under, any existing obligation, commitment or agreement to which the Executive is subject.
[
signature page follows]
The parties have executed this Agreement as of the date first written above
.
[Signature Page to Taylor Morrison Amended and Restated Employment Agreement]
EXHIBIT A
Form of Release of Claims
This Release of Claims is provided by me, the undersigned, pursuant to the Amended and Restated Employment Agreement between me and Taylor Morrison, Inc., dated as of June 15, 2018 (the
"Employment Agreement").
All capitalized terms used in this Release of Claims, but not defined herein, shall have the meaning ascribed to those terms in the Employment Agreement.
1.
In consideration of the pay and benefits to be provided to me in connection with the termination of my employment, as set forth in Section 5(a)(v) [and (b)]
1
of the Employment Agreement (the
"Severance Payments"),
which are conditioned upon my signing (and not revoking) this Release of Claims and to which I am not otherwise entitled, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, I, on my own behalf and on behalf of my heirs, executors, beneficiaries and personal representatives, successors and assigns, and all others connected with or claiming through me (collectively, the
"Releasors"),
hereby release and forever discharge the Company and TMHC, and their subsidiaries and other Affiliates and all of their respective past, present and future officers, directors, shareholders, parents, employees, agents, general and limited partners, members, managers, joint venturers, trustees, employee benefit plans and their administrators and fiduciaries, representatives, agents, predecessors, successors and assigns, and all others connected with any of them, both individually and in their official capacities (collectively, the
"Released Partie
"), from any and all causes of action, rights and claims, of any nature or type, known or unknown, fixed or contingent, in law or in equity, which I have had in the past, now have, or might now have, through the date of my signing of this Release of Claims, including, but not limited to, any such causes of action, rights or claims in any way resulting from, arising out of or connected with my employment by or other relationship with the Released Parties or the termination of that employment and/or relationship or pursuant to any federal, state or local law, regulation or other requirement (including, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act
("ADEA,"
a law which prohibits discrimination on the basis of age), the Older Workers Benefit Protection Act, the National Labor Relations Act, the Civil Rights Act of 1991, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974, the Family and Medical Leave Act, the Worker Adjustment Retraining and Notification Act and similar state laws, the Equal Pay Act, the Fair Labor Standards Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Arizona Wage Act, the Arizona Equal Pay Act, the Arizona Employment Protection Act, the Arizona Civil Rights Act, the Arizona Occupational Health and Safety Act, the Arizona Right to Work Act, the Arizona Drug Testing of Employees Act, the Arizona Medical Marijuana Act, the Arizona criminal code, the Americans with Disabilities Act, and any other federal, state and local laws relating to discrimination on the basis of age, sex or other protected class, express or implied breach of contract, wrongful discharge, defamation, intentional infliction of emotional distress, and any related claims for attorneys' fees and costs, each as amended from time to time);
provided,
that nothing herein shall release any claim arising after the effective date of the termination of my employment.
1
To be
updated
,
as
applicable.
Excluded from the scope of this Release of Claims are: (i) any rights of indemnification or contribution that I have pursuant to Section 8 of the Employment Agreement, the articles of incorporation or by-laws of the Company, TMHC or any of their subsidiaries, (ii) any right I have to the Severance Payments, (iii) vested rights to benefits under employee benefit plans of the Company, TMHC or their subsidiaries and (iv) rights that cannot be released as a matter of law (collectively,
"Unreleased Claims").
2.
I acknowledge and agree that this Release of Claims may be pleaded as a full defense to any action, suit, arbitration or other proceeding covered by the terms hereof which is or may be initiated by any of the Releasors.
3.
I acknowledge that neither I nor any of the Releasors has filed any complaint, charge, claim or proceeding against any of the Released Parties before any local, state, federal or foreign agency, court, arbitrator, mediator, arbitration or mediation panel or other body (each individually, a
"Proceedjng")
. I represent that I am not aware of any basis on which such a Proceeding could reasonably be instituted, except as I have expressly disclosed to the Company in writing. I (i) acknowledge that I shall not initiate or cause to be initiated on my behalf, and shall not participate in, any Proceeding (except with respect to an Unreleased Claim), except as required by law, and (ii) waive any right that I may have to benefit in any manner from any relief (whether monetary or otherwise) arising out of any Proceeding, including any Proceeding conducted by the Equal Employment Opportunity Commission
("EEOC").
Further, I understand that, by executing this Release of Claims, I shall be limiting the availability of certain remedies that I may have against the Company and limiting also my ability to pursue certain claims against the Released Parties
.
Notwithstanding the above
,
nothing in Section 1 of this Release of Claims shall prevent me from (a) initiating or causing to be initiated on my behalf any complaint, charge, claim or proceeding against the Company before any local, state or federal agency, court or other body challenging the validity of the waiver of my claims under ADEA contained in Section 1 of this Release of Claims (but no other portion of such waiver), or (b) initiating or participating in an investigation or proceeding conducted by the EEOC.
4.
I represent and warrant that I have returned to the Company any and all Confidential Information and other property of the Company and its Affiliates that I had in my possession, custody or control on the date my employment with the Company terminated and that I have retained no such property. Without limiting the foregoing, I also represent and warrant that I have retained no copy of any such documents, materials or information.
5.
In signing this Release of Claims, I acknowledge that I have had a reasonable amount of time to consider the terms of this Release of Claims and that I am signing this Release of Claims voluntarily and with a full understanding of its terms. I acknowledge my understanding that I may not sign this Release of Claims prior to the termination of my employment, but that I may consider the terms of this Release of Claims for up to [twenty-one (21)][forty-five (45)]
2
days (or such longer period as the Company may specify in order to render this Release of Claims fully effective) from the date I receive this Release of Claims. I also acknowledge that I am advised by
2
To be selected based on whether applicable termination was "in connection with an exit incentive or other employment termination program'' (as such phrase is defined in the Age Discrimination in Employment Act of 1967).
the Company, TMHC and their Affiliates to seek the advice of an attorney prior to signing this Release of Claims and that I have, in fact, consulted with an attorney prior to signing this Release of Claims; that I have had sufficient time to consider this Release of Claims and to consult with an attorney, if I wished to do so, or to consult with any other person of my choosing before signing; and that I am signing this Release of Claims voluntarily and with a full understanding of its terms.
6.
I further acknowledge that, in signing this Release of Claims, I have not relied on any promises or representations, express or implied, that are not set forth expressly herein. I understand that I may revoke this Release of Claims at any time within seven (7) days of the date of my signing by written notice to the Company in accordance with Section 15 of the Employment Agreement and that neither the Company nor any other person is obligated to provide any of the Severance Payments to me until eight (8) days have passed since my signing of this Release of Claims without my having revoked this Release of Claims.
If
I revoke this Release of Claims, I shall be deemed not to have accepted the terms of this Release of Claims, and no action shall be required of any of the Released Parties under any section of this Release of Claims.
7.
I acknowledge and agree that I continue to be bound by the provisions of Sections 6, 7, and 9 of the Employment Agreement, which shall survive my termination of employment with the Company and remain in full force and effect in accordance with their terms. On the date of my termination, the Company hereby agrees to use reasonable efforts to advise its executive officers not to make any statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, regarding me that are disparaging or damaging to my reputation.
8.
This Release of Claims does not constitute an admission of liability or wrongdoing of any kind by the Company or me.
9.
In accordance with Section 4(c) of the Employment Agreement, I hereby resign from all positions on the Board and all committees thereof (and, if applicable, from the board of directors or similar governing bodies (and all committees thereof) of all other Affiliates of the Company) and from all other positions and offices that I hold with the Company and its subsidiaries and Affiliates. I agree to promptly execute such further documents as the Company, in its sole discretion, shall reasonably deem necessary to effect the foregoing.
10.
The provisions of this Release of Claims shall be binding upon my heirs, executors, administrators, legal representatives and assigns. A failure of any of the Released Parties to insist on strict compliance with any provision of this Release of Claims shall not be deemed a waiver of such provision or any other provision hereof.
If
any provision of this Release of Claims is determined to be so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable, and in the event that any provision is determined to be entirely unenforceable, such provision shall be deemed severable, such that all other provisions of this Release of Claims shall remain valid and binding upon me. For the avoidance of doubt, each of the Released Parties shall be a third-party beneficiary to this Release of Claims and shall be entitled to enforce this Release of Claims in accordance with its terms.
11.
With respect to the matters herein stated as the subject of release, I do hereby waive and relinquish any and all rights which I may have under the laws of the State of Arizona.
12.
This Release of Claims shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Arizona, without reference to the principles of conflicts of law of Arizona or any other jurisdiction, and where applicable, the laws of the United States.
*
*
*
*
*
Intending to be legally bound
,
I have signed this Release of Claims as of the date written
below
.
A-4
EXHIBIT 31.1
CEO CERTIFICATION
PURSUANT TO SECTION 302 OF THE
SARBANES – OXLEY ACT OF 2002
I, Sheryl D. Palmer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Taylor Morrison Home Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:
August 1, 2018
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By:
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/s/ Sheryl D. Palmer
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Sheryl D. Palmer
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Chairman of the Board of Directors and Chief Executive Officer
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Taylor Morrison Home Corporation
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EXHIBIT 31.2
CFO CERTIFICATION
PURSUANT TO SECTION 302 OF THE
SARBANES – OXLEY ACT OF 2002
I, C. David Cone, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Taylor Morrison Home Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:
August 1, 2018
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By:
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/s/ C. David Cone
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C. David Cone
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Executive Vice President and Chief Financial Officer
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Taylor Morrison Home Corporation
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Taylor Morrison Home Corporation (the “Company”) for the period ending
June 30, 2018
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sheryl D. Palmer, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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August 1, 2018
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/s/ Sheryl D. Palmer
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Sheryl D. Palmer
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Chairman of the Board of Directors and Chief Executive Officer
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Taylor Morrison Home Corporation
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EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Taylor Morrison Home Corporation (the “Company”) for the period ending
June 30, 2018
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, C. David Cone, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
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(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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August 1, 2018
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/s/ C. David Cone
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C. David Cone
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Executive Vice President and Chief Financial Officer
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Taylor Morrison Home Corporation
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