<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 19, 1994
REGISTRATION NO. 33-52245
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------
M.D.C. HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6550 84-0622967
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION NUMBER)
ORGANIZATION) ----------------
RICHMOND AMERICAN HOMES OF CALIFORNIA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
COLORADO 6550 77-0084376
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION NUMBER)
ORGANIZATION) ----------------
RICHMOND AMERICAN HOMES OF MARYLAND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 6550 52-0814857
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION NUMBER)
ORGANIZATION) ----------------
RICHMOND AMERICAN HOMES OF NEVADA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
COLORADO 6550 88-0227698
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION NUMBER)
ORGANIZATION) ----------------
RICHMOND AMERICAN HOMES OF VIRGINIA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
VIRGINIA 6550 54-0570445
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION NUMBER)
ORGANIZATION) ----------------
RICHMOND AMERICAN HOMES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6550 86-0277026
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION NUMBER)
ORGANIZATION) ----------------
RICHMOND HOMES, INC. I
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6550 84-1256155
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION NUMBER)
ORGANIZATION) ----------------
RICHMOND HOMES, INC. II
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6550 84-1128886
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION NUMBER)
ORGANIZATION) ----------------
3600 SOUTH YOSEMITE STREET
SUITE 900
DENVER, COLORADO 80237
(303) 773-1100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
EACH REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
<PAGE>
SPENCER I. BROWNE
PRESIDENT AND CHIEF OPERATING OFFICER
M.D.C. HOLDINGS, INC.
3600 SOUTH YOSEMITE STREET
SUITE 900
DENVER, COLORADO 80237
(303) 773-1100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
NESA E. HASSANEIN PARIS G. REECE III
BROWNSTEIN HYATT FARBER & STRICKLAND, VICE PRESIDENT AND CHIEF FINANCIAL
P.C. OFFICER
410 SEVENTEENTH STREET M.D.C. HOLDINGS, INC.
22ND FLOOR 3600 SOUTH YOSEMITE STREET
DENVER, COLORADO 80202 SUITE 900
DENVER, COLORADO 80237
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
----------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [_]
EACH REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL SUCH REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
M.D.C. HOLDINGS, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS IN PART I OF FORM S-4
<TABLE>
<CAPTION>
ITEM LOCATION IN PROSPECTUS
---- ----------------------
<S> <C>
1. Forepart of Registration Facing page; Outside front cover page
Statement and Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Inside front and outside back cover pages
Cover Pages of Prospectus
3. Risk Factors, Ratio of Prospectus Summary; Risk Factors
Earnings to Fixed Charges and
Other Information
4. Terms of the Transaction The Exchange Offer; Certain Federal Income
Tax Consequences; Description of the
Senior Notes; Plan of Distribution
5. Pro Forma Financial N/A
Information
6. Material Contracts with the N/A
Company Being Acquired
7. Additional Information N/A
Required for Re-offering by
Persons and Parties Deemed to
be Underwriters
8. Interests of Named Experts and N/A
Counsel
9. Disclosure of Commission N/A
Position on Indemnification for
Securities Act Liabilities
10. Information with Respect to S- Available Information; Incorporation of
3 Registrants Certain Documents by Reference; Prospectus
Summary
11. Incorporation of Certain Available Information; Incorporation of
Information by Reference Certain Documents by Reference
12. Information with respect to S- N/A
2 or S-3 Registrants
13. Incorporation of Certain N/A
Information by Reference
14. Information with respect to N/A
Registrants other than S-3 or
S-2 Registrants
15. Information with respect to S- N/A
3 Companies
16. Information with respect to S- N/A
3 or S-2 Companies
17. Information with respect to N/A
Companies other than S-2 or S-3
Companies
18. Information if Proxies, N/A
Consents or Authorizations are
to be solicited
19. Information if Proxies, Available Information; Incorporation of
Consents or Authorizations are Certain Documents by Reference
not to be Solicited or in an
Exchange Offer
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
M.D.C. HOLDINGS, INC.
OFFER TO EXCHANGE ITS SERIES B 11 1/8% SENIOR NOTES
DUE 2003 FOR ANY AND ALL OF ITS 11 1/8% SENIOR NOTES DUE 2003
Payment of Principal and Interest Guaranteed on an Unsecured
Subordinated Basis by Certain Subsidiaries of
M.D.C. HOLDINGS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON JUNE 20, 1994, UNLESS EXTENDED.
----------
M.D.C. Holdings, Inc., a Delaware corporation, hereby offers, upon the terms
and subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (together, the "Exchange Offer"), to exchange $1,000
principal amount of its Series B 11 1/8% Senior Notes due 2003 (the "New
Notes"), for each $1,000 principal amount of its 11 1/8% Senior Notes due 2003
(the "Old Notes"). As of the date of this Prospectus, $190,000,000 principal
amount of Old Notes are outstanding.
The Exchange Offer is designed to provide to holders of the Old Notes
purchased other than pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), an opportunity to
acquire the New Notes which, unlike the Old Notes, will be freely transferable
at all times (provided that the holder is not an "affiliate" of the Company
within the meaning of the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holder's
business and such holders have no arrangement with any person to participate in
the distribution of such New Notes. It has come to the Company's attention that
the staff of the Securities and Exchange Commission (the "Commission")
interprets the preceding sentence to mean that any broker-dealer that receives
New Notes for its own account pursuant to the Exchange Offer must deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that, by delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act or that it is required to deliver a prospectus in connection
with any resale of New Notes. The Company has agreed that for a period of no
more than 180 days after the Expiration Date (as defined below), it will make
such a prospectus available to any broker-dealer for use in connection with any
such resale. This Prospectus, as it may be amended or supplemented from time to
time, may be used by broker-dealers that acquired Old Notes as a result of
market making activities or other trading activities in connection with any
such resale. See "Plan of Distribution." With the exception of the freely
transferable nature of the New Notes, the terms of the New Notes are identical
to those of the Old Notes, and thus, holders of Old Notes, upon exchange, will
hold New Notes that are freely transferable as described above, but otherwise
identical to the Old Notes. See "The Exchange Offer--Purpose and Effects."
The Company will accept for exchange any and all validly tendered Old Notes
on or prior to 5:00 p.m., New York time, on June 20, 1994, unless extended (the
"Expiration Date"). Tenders of the Old Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration Date. The Company has
agreed to pay the expenses of the Exchange Offer.
The New Notes will bear interest from their date of issuance (June 20, 1994,
unless the Exchange Offer is extended). Interest on the Old Notes which are
exchanged for the New Notes will cease to accrue on the day preceding the date
of issuance of the New Notes. Interest payable on December 15, 1994 with
respect to the New Notes will include accrued but unpaid interest due on the
Old Notes for the period from June 15, 1994 to June 19, 1994 and will be paid
to those who are holders of record of the New Notes as of December 1, 1994.
Interest is payable on the New Notes and the Old Notes (collectively, the
"Senior Notes") on December 15 and June 15 at the rate of 11 1/8% per annum.
The Old Notes were issued at 98.525% of their principal amount. See
"Description of the Senior Notes."
The Exchange Offer is not conditioned upon any minimum principal amount of
the Old Notes being tendered for exchange. However, the Exchange Offer is
subject to certain customary conditions. See "The Exchange Offer." The Old
Notes may be tendered only in integral multiples of $1,000.
The Senior Notes are not redeemable prior to December 15, 1998. On and after
that date, the Senior Notes are and will be redeemable at any time at the
option of the Company, in whole or in part, at the redemption prices set forth
herein, plus accrued interest to the redemption date. The Senior Notes are and
will be senior obligations of the Company, are and will rank pari passu in
right of payment to all of the Company's other senior indebtedness and are and
will be effectively subordinated to all indebtedness and preferred stock of the
Company's subsidiaries. The Senior Notes are and will be secured by a first
priority pledge of 100% of the capital stock owned by the Company of certain of
its subsidiaries. The Senior Notes also are and will be guaranteed on an
unsecured subordinated basis by certain of the Company's subsidiaries. The
Guaranties (as defined) are and will be subordinated to all existing and future
Guarantor Senior Indebtedness (as defined).
<PAGE>
Upon a Change of Control (as defined), holders of the Senior Notes will have
the right to require the Company to offer to repurchase their Senior Notes at
a price equal to 101% of the aggregate principal amount thereof plus accrued
and unpaid interest, if any, to the date of repurchase. In addition, the
Company will be required to offer to repurchase certain of the Senior Notes at
100% of the principal amount thereof, and pay accrued and unpaid interest to
the date of repurchase (i) if its Consolidated Net Worth (as defined)
decreases to less than $100,000,000 at the end of any two consecutive fiscal
quarters and (ii) from the proceeds of certain Asset Sales (as defined).
Prior to this offering, there has been no public market for either the Old
Notes or the New Notes. The Company has been advised by Friedman, Billings,
Ramsey & Co., Inc. ("FBR"), the placement agent in the Company's December 28,
1993 private placement (the "Private Placement") of the Old Notes, that FBR
intends to make a market in the New Notes, but FBR is not obligated to do so
and there can be no assurance that an active public market in the New Notes
will develop. If a market for the New Notes should develop, the New Notes
could trade at a discount from their face amount. The Company does not intend
to list the New Notes on any national securities exchange.
SEE "RISK FACTORS" FOR A DESCRIPTION OF CERTAIN RISKS TO BE CONSIDERED BY
HOLDERS OF THE SENIOR NOTES.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------
The date of this Prospectus is May 19, 1994
<PAGE>
AVAILABLE INFORMATION
The Company and the Guarantors have filed jointly with the Commission a
Registration Statement on Form S-4 under the Securities Act, with respect to
the New Notes offered by this Prospectus. For the purposes hereof, the term
"Registration Statement" means the original Registration Statement and any and
all amendments thereto. This Prospectus does not contain all of the information
set forth in the Registration Statement and the schedules and exhibits thereto,
to which reference hereby is made. Each statement made in this Prospectus
concerning a document filed as an exhibit to the Registration Statement is
qualified in its entirety by reference to such exhibit for a complete statement
of its provisions.
The Company is subject to the informational reporting requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information can
be inspected, without charge, at the public reference facilities of the
Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at its regional office at 500 W. Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th
Floor, New York, New York 10007. Any interested party may obtain copies of such
materials at prescribed rates from the Public Reference Section of the
Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549. In addition, such material can be inspected
at the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York and the Pacific Stock Exchange, 115 Sansome Street, Suite 1104, San
Francisco, California.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS FILED BY THE
COMPANY, INCLUDING EXHIBITS TO SUCH DOCUMENTS, ARE AVAILABLE UPON REQUEST, AND
WITHOUT CHARGE, FROM M.D.C. HOLDINGS, INC., 3600 SOUTH YOSEMITE STREET, SUITE
900, DENVER, COLORADO 80237, ATTENTION: PARIS G. REECE III, VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER (TELEPHONE (303) 773-1100). IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JUNE 13, 1994.
The following documents, which have been filed by the Company with the
Commission, are hereby incorporated by reference in this Prospectus:
(i) Annual Report on Form 10-K for the fiscal year ended December 31, 1993;
(ii) Form 10-K/A-1 dated April 13, 1994 amending the Annual Report on Form
10-K for the fiscal year ended December 31, 1993;
(iii) Quarterly Report on Form 10-Q dated May 16, 1994 for the three months
ended March 31, 1994;
(iv) Current Report on Form 8-K dated January 11, 1994;
(v) Current Report on Form 8-K dated March 23, 1994; and
(vi) Proxy Statement dated May 14, 1993 relating to the 1993 Annual Meeting
of Stockholders.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the New Notes shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
respective dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein, or in any subsequently filed document
that also is or is modified to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) appearing
elsewhere or incorporated by reference in this Prospectus. References herein to
"MDC" or the "Company," unless otherwise indicated, refer to M.D.C. Holdings,
Inc. and its subsidiaries.
THE COMPANY
The Company is a national home builder with major operations in Colorado,
northern Virginia and suburban Maryland (collectively "Mid-Atlantic") and
northern California, and smaller operations in Arizona, Nevada and southern
California. Principally through HomeAmerican Mortgage Corporation
("HomeAmerican"), a wholly-owned subsidiary, the Company originates mortgage
loans for its home buyers and for others. HomeAmerican also purchases loans
originated by unaffiliated loan correspondents. To a substantially lesser
extent, the Company owns and manages portfolios of mortgage-related assets.
In its home building segment, the Company's strategy is to build quality
homes at affordable prices. The Company, as the general contractor, supervises
the development and construction of all of its projects and employs
subcontractors for site development and home construction. The Company
emphasizes the building of single-family homes generally for the first-time and
move-up buyer. Homes are constructed according to basic designs based on
customer preferences in the location in which they are built. Single-family
homes are built and sold by the Company's subsidiaries using the name Richmond
American Homes and Richmond Homes.
HomeAmerican is a Federal Housing Administration, Veterans Administration,
Federal National Mortgage Association and Federal Home Loan Mortgage
Corporation authorized mortgage loan originator. Substantially all of the
mortgage loans originated by HomeAmerican are sold to private investors.
HomeAmerican initially retains the right to service these mortgage loans
selling the servicing at a later date, usually in bulk.
The Company's asset management operations (collectively, the "asset
management segment"), among other things, enable MDC to (i) manage the day-to-
day operations of two national securities exchange-listed real estate
investment trusts; (ii) own interests ("CMO Ownership Interests") in issuances
of collateralized mortgage obligations ("CMO bonds"); and (iii) own interests
in various other investments. The Company currently does not expect to acquire
additional CMO Ownership Interests in the future, except to the extent
attractive opportunities may be identified. As a result, future income from the
asset management segment primarily will be dependent on management fees.
The Company is a Delaware corporation originally incorporated in Colorado in
1972. The principal executive offices of the Company are located at 3600 South
Yosemite Street, Suite 900, Denver, Colorado 80237, and its telephone number is
(303) 773-1100.
RISK FACTORS
See "Risk Factors" for a discussion of certain risks involved in an
investment in the New Notes.
3
<PAGE>
THE EXCHANGE OFFER
THE OFFER................. The Company is offering to exchange $1,000
principal amount of New Notes for each $1,000
principal amount of Old Notes that are properly
tendered and accepted.
EXPIRATION DATE...........
5:00 p.m., New York City time, on June 20, 1994,
unless extended. See "The Exchange Offer--
Expiration Date; Extensions; Termination."
ACCRUED INTEREST ON THE
SENIOR NOTES.............
The New Notes will bear interest from their date of
issuance (June 20, 1994, unless the Exchange Offer
is extended). Interest on the Old Notes which are
exchanged for New Notes will cease to accrue on the
day preceding the date of issuance of the New
Notes. Interest payable on December 15, 1994 with
respect to the New Notes will include accrued but
unpaid interest due on the Old Notes for the period
from June 15, 1994 to June 19, 1994, and will be
paid to those who are holders of record of the New
Notes as of December 1, 1994.
CONDITIONS OF THE The Exchange Offer is subject to certain customary
EXCHANGE OFFER........... conditions, any or all of which may be waived by
the Company. See "The Exchange Offer--Conditions of
the Exchange Offer."
PROCEDURES FOR TENDERING
OLD NOTES................ Each holder of Old Notes wishing to accept the
Exchange Offer must complete and sign the Letter of
Transmittal, in accordance with the instructions
contained herein and therein, and forward or hand-
deliver such Letter of Transmittal to the Exchange
Agent identified below at the address set forth
herein and therein. Each exchanging holder will be
required to represent in the Letter of Transmittal
that such holder is acquiring the New Notes in the
ordinary course of business, is not engaged in, and
does not intend to engage in, a distribution of the
New Notes and has no arrangement or understanding
with any person to participate in any such
distribution of the New Notes, and is not an
affiliate of the Company or the Guarantors. Any
holder of Old Notes whose Old Notes are registered
in the name of brokers, dealers, commercial banks,
trust companies or nominees is urged to contact
such registered holders promptly if such holder
wishes to accept the Exchange Offer. Any brokers or
dealers that receive New Notes for its own account
in exchange for Old Notes must check the
Broker/Dealer box on the Letter of Transmittal and
deliver a Prospectus in connection with any resale
of such New Notes. See "The Exchange Offer--
Procedures for Tendering."
WITHDRAWAL OF TENDERS..... Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
Expiration Date. See "The Exchange Offer--
Withdrawal Rights."
ACCEPTANCE OF OLD NOTES
AND DELIVERY OF NEW
NOTES.................... The Company will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The New Notes issued
4
<PAGE>
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date. See "The
Exchange Offer--Acceptance of Old Notes for
Exchange; Delivery of New Notes."
CERTAIN FEDERAL INCOME
TAX CONSIDERATIONS.......
For a discussion of certain federal income tax
consequences of the exchange of the Old Notes, see
"Certain Federal Income Tax Considerations."
RIGHTS OF DISSENTING Holders of Old Notes do not have any appraisal or
NOTEHOLDERS.............. dissenters' rights under the Delaware General
Corporation Law in connection with the Exchange
Offer.
EXCHANGE AGENT............ First Bank National Association, 180 E. Fifth
Street, 3rd Floor, Bond Drop Window, St. Paul,
Minnesota 55101; telephone (612) 244-0444.
DESCRIPTION OF THE SENIOR NOTES
NEW NOTES SUBJECT TO THE
EXCHANGE OFFER...........
Up to $190,000,000 aggregate principal amount of
the New Notes. See "Description of the Senior
Notes."
COMPARISON WITH OLD The New Notes will be freely transferable under the
NOTES.................... Securities Act by holders who are not affiliates of
the Company. The holders of Old Notes currently are
entitled to certain registration rights pursuant to
a Registration Rights Agreement (the "Registration
Rights Agreement"), dated as of December 28, 1993,
among the Company, the Guarantors and the original
purchasers of the Old Notes. However, upon
consummation of the Exchange Offer, holders of the
Old Notes who do not exchange their Old Notes for
New Notes will no longer be entitled to any
registration rights and will not be able to re-
offer, resell or otherwise dispose of their Old
Notes, unless they are subsequently registered
under the Securities Act, which the Company and the
Guarantors will have no obligation to do, or unless
an exemption from the registration requirements of
the Securities Act is available. The New Notes
otherwise will be identical in all respects
(including interest rate, maturity, security,
guaranty and restrictive covenants) to the Old
Notes. See "The Exchange Offer--Purpose and
Effects."
INTEREST PAYMENT DATES.... June 15 and December 15
INTEREST RATE............. 11 1/8% per annum
MATURITY DATE............. December 15, 2003
GUARANTY.................. The Senior Notes are unconditionally guarantied on
an unsecured subordinated basis (the "Guaranties"),
jointly and severally, by Richmond American Homes
of California, Inc., Richmond American Homes of
Maryland, Inc., Richmond American Homes of Nevada,
Inc., Richmond American Homes of Virginia, Inc.,
Richmond American Homes, Inc., Richmond Homes, Inc.
I and Richmond Homes, Inc. II (collectively, the
"Guarantors"). The Guaranties will be subordinated
to all Guarantor Senior Indebtedness (as defined).
See "Description of the Senior Notes--Guaranty."
5
<PAGE>
SECURITY.................. The Senior Notes are secured by a first priority
pledge of 100% of the capital stock of Richmond
American Homes of California, Inc., Richmond
American Homes of Maryland, Inc., Richmond American
Homes of Nevada, Inc., Richmond American Homes of
Virginia, Inc., Richmond American Homes, Inc.,
Richmond Homes, Inc. I ("Richmond Homes") and
HomeAmerican, in each case, owned by the Company or
its subsidiaries (collectively, the "Pledged
Subsidiaries"). The pledge is subject to a
standstill agreement in favor of the senior lenders
to the Pledged Subsidiaries and the Company
restricting the Trustee in certain circumstances
from exercising its remedies under the pledge. See
"Description of the Senior Notes--Pledge of
Subsidiary Stock."
RANKING................... The Senior Notes are senior obligations of the
Company, ranking pari passu in right of payment to
all of the Company's other senior indebtedness. The
Senior Notes effectively are subordinate to all
indebtedness and preferred stock of the Company's
subsidiaries.
OFFERS TO PURCHASE........ In the event of a Change of Control (as defined),
holders of the Senior Notes will have the right to
require the Company to offer to purchase all Senior
Notes then outstanding at a purchase price equal to
101% of the aggregate principal of the Senior
Notes, plus accrued and unpaid interest, if any, to
the date of purchase. See "Description of the
Senior Notes--Certain Covenants--Repurchase of
Senior Notes at the Option of the Holder Upon a
Change of Control." The Company will be required to
offer to repurchase certain of the Senior Notes at
100% of the principal amount thereof, and pay
accrued and unpaid interest to the date of
repurchase (i) if its Consolidated Net Worth (as
defined) decreases to less than $100,000,000 at the
end of any two consecutive fiscal quarters and (ii)
from the proceeds of certain Asset Sales (as
defined). See "Description of the Senior Notes--
Certain Covenants--Maintenance of Consolidated Net
Worth" and "--Limitation on Asset Sales."
OPTIONAL REDEMPTION....... The Senior Notes are redeemable at the option of
the Company, in whole or in part, at any time on or
after December 15, 1998 at the redemption prices
set forth herein, plus accrued interest, if any, to
the date of redemption. See "Description of the
Senior Notes--Redemption."
CERTAIN COVENANTS......... The indenture governing the Senior Notes (the
"Senior Notes Indenture") contains certain
covenants which, among other things, limit the
incurrence of additional Indebtedness (as defined)
by the Company and Restricted Subsidiaries (as
defined); the payment of dividends; the repurchase
of capital stock or subordinated indebtedness; the
making of certain other distributions; certain
loans and investments; the ability to create
certain Liens (as defined); the creation of
restrictions on the ability of the Restricted
Subsidiaries to make payments to the Company and
the ability to enter into transactions with
Affiliates (as defined) or merge, consolidate or
transfer substantially all of the Company's or a
Guarantor's assets. See "Description of the Senior
Notes--Certain Covenants."
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------- ----------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $168,693 $115,885 $652,076 $511,568 $422,232 $512,695 $724,075
Income (loss) from
continuing operations.. 3,806 915 10,056 4,765 (12,903) (11,954) (90,091)
Income (loss) from
continuing operations
per primary
common share .......... $ .19 $ .04 $ .45 $ .22 $ (.62) $ (.63) $ (5.66)
Ratio of earnings to
fixed charges(1)....... 1.83 1.30 1.72 1.61 .53 .73 --
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
MARCH 31, DECEMBER 31,
1994 --------------------------------------------------
1993 1992 1991 1990 1989
--------- -------- -------- ---------- ---------- ----------
BALANCE SHEET DATA:
Total assets............ $ 733,224 $776,866 $858,944 $1,316,793 $1,477,146 $1,663,726
Total debt(2)........... 329,570 345,676 325,835 350,776 411,291 515,179
Stockholders' equity.... 178,270 175,854 164,182 160,488 157,261 150,474
</TABLE>
- --------
(1) In computing the ratio of earnings to fixed charges, fixed charges consist
of home building and corporate interest expense plus (i) amortization and
expensing of debt expenses; (ii) amortization of discount or premium
relating to indebtedness; and (iii) capitalized interest. Earnings are
computed by adding fixed charges (except capitalized interest) and
amortization of previously capitalized interest to pretax earnings from
continuing operations. In computing the ratio, interest expense incurred by
the Company's mortgage lending and asset management segments is excluded.
The ratio is not applicable for the year ended December 31, 1989 due to a
net loss incurred in this year. Earnings for the years ended December 31,
1991, 1990 and 1989, respectively, were inadequate to cover fixed charges
by $13,029,000, $10,159,000 and $118,004,000.
(2) Excludes CMO bond indebtedness.
7
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following considerations
in addition to the other information set forth in this Prospectus before making
an investment in the New Notes offered hereby.
LEVERAGE
The home building industry is capital intensive. The Company finances a
substantial portion of its land acquisition and residential construction
activities through the incurrence by its subsidiaries of secured indebtedness
and, as a result, the Company is highly leveraged. As of March 31, 1994, the
Company's total indebtedness (excluding CMO bond indebtedness) was $329,570,000
and the Company's debt-to-equity ratio was approximately 1.85 to 1. In
addition, the Senior Notes Indenture permits the Company to incur significant
additional indebtedness. See "Description of the Senior Notes."
Although the Company expects to generate sufficient cash flow from operations
to meet its debt service obligations, there can be no assurance that the
Company will be able to satisfy its obligations to repurchase, under certain
circumstances, all or a portion of the Senior Notes. See "Description of the
Senior Notes." The ability of the Company to meet its obligations will depend
upon the future performance of the Company and will be subject to financial,
business and other factors affecting the business and operations of the
Company, including general economic conditions.
HOLDING COMPANY ISSUER
Most of the operations of the Company are conducted through, and most of the
Company's assets are held by, its subsidiaries, and, therefore, the Company is
dependent on the cash flow of its subsidiaries to meet its debt obligations,
including its obligations under the Senior Notes. Except to the extent the
Company may itself be a creditor with recognized claims against its
subsidiaries, all claims of creditors and holders of preferred stock of the
subsidiaries will have priority with respect to the assets of such subsidiaries
over the claims of creditors of the Company, including holders of the Senior
Notes. At March 31, 1994, the Company's subsidiaries had $171,216,000 aggregate
principal amount of indebtedness and liquidation preference of preferred stock
outstanding. Instruments governing certain indebtedness of the Company's
subsidiaries contain restrictions on transfer of funds from such subsidiaries
to the Company.
THE HOME BUILDING INDUSTRY
The home building industry significantly is affected by changes in economic
conditions, the supply of homes, changes in governmental regulation (including
uncertainties involving the entitlement process in the improvement of
undeveloped land), increases in real estate taxes, energy costs and costs of
materials and labor, the availability and cost of suitable land, environmental
factors, weather and the availability of financing at rates and on terms
acceptable to home builders and home buyers. Beginning in 1992 through October
1993, home mortgage interest rates declined to their lowest levels in 25 years
to an average of 6.7% on a 30-year, fixed-rate mortgage. From October 1993 to
May 1994, these rates have increased to as high as 9%. Increases in mortgage
interest rates adversely affect the Company's home building and mortgage
lending segments. Higher mortgage interest rates (i) may reduce the demand for
homes and home mortgages; and (ii) generally will reduce home mortgage
refinancing activity. With the recent increases in mortgage interest rates
relative to levels in 1993, the Company, consistent with the rest of the
industry in general, has experienced a major decline in refinancing activity in
its mortgage lending operations. These events have affected adversely the spot
mortgage loan originations and the amount of mortgage loans purchased through
correspondents by the Company's mortgage lending segment, although increased
originations from the Company's home building operations have offset to a
significant degree these declines. The Company is unable to predict the extent
to which current or future increases in mortgage interest rates will adversely
affect the Company's operating activities and results of operations.
The housing industry is cyclical and significantly is affected by prevailing
economic conditions. The Company's business and earnings are dependent in large
part on its Colorado and Mid-Atlantic markets.
8
<PAGE>
The Colorado market was affected adversely beginning in 1986 through 1991 by
weaknesses in the state economy as well as by weaknesses in the housing
industry in this market. The Company experienced an increase in the number of
new contracts for the purchase of homes in Colorado beginning in 1991 which has
continued through March 31, 1994. There can be no assurance that the Company
will be able to maintain or increase this level of new sales contracts or
deliver an increasing number of homes in the future in its Colorado market.
From late 1988 through 1990, the Company's Mid-Atlantic market was affected
adversely by weaknesses in the housing industry in this market. The Company
experienced an increase in the number of new contracts for the purchase of
homes in its Mid-Atlantic market in 1991 which has continued through March 31,
1994, primarily due to (i) moderate growth in the region's economy; (ii) an
increase in the total number of subdivisions in which the Company is operating;
and (iii) the reduction in mortgage interest rates which began in 1991 and
continued to October 1993. There can be no assurance that the Company will be
able to maintain or increase this level of new sales contracts or deliver an
increasing number of homes in the future in its Mid-Atlantic market.
The adoption, in August 1989, of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 ("FIRREA"), as well as the national "credit crunch"
that commenced in mid-1989, and the enactment in August 1991 of the Federal
Deposit Insurance Corporation Improvements Act of 1991, affected adversely the
ability of home builders to acquire and develop land into finished sites for
homes. FIRREA, among other things, has reduced the amount of resources thrifts
allocate to acquisition, development and construction loans, which has
affected, and in the future may affect, adversely the Company's ability to
acquire and develop new properties and develop its current land inventory into
finished sites suitable for the construction of homes.
REGULATORY AND ENVIRONMENTAL FACTORS
The Company is subject to continuing compliance with various federal, state
and local statutes, ordinances, rules and regulations, including, among others,
zoning and land use ordinances, building, plumbing and electrical codes,
contractors' licensing laws and health and safety regulations and laws. Various
localities in which the Company operates have imposed (or may in the future
impose) fees on developers to fund, among other things, schools, road
improvements and low and moderate income housing.
From time to time, various municipalities in which the Company operates,
particularly in California and Nevada, restrict or place moratoriums on the
availability of water and sewer taps. Additionally, certain jurisdictions in
which the Company operates (particularly in California) have proposed or
enacted growth initiatives restricting the number of building permits available
in any given year. Although no assurance can be given as to future conditions
or future governmental action, in general, the Company believes that it has, or
under existing agreements and regulations ultimately can obtain, an adequate
number of water and sewer taps and building permits for its inventory of land
and land held for development. The Company's general policy is to acquire
finished building sites and land for development only in areas which have, or
will have upon completion of development, the availability of building permits,
access to utilities and other municipal service facilities necessary for
anticipated development requirements. Generally, the zoning of land is suitable
for its intended use when acquired.
The home building operations of the Company also are affected by
environmental considerations pertaining to, among other things, availability of
water, municipal sewage treatment capacity, land use, hazardous waste disposal,
naturally occurring radioactive materials, building materials, population
density and preservation of the natural terrain and vegetation (collectively,
"Environmental Laws"). The particular Environmental Laws which apply to any
given home building project vary greatly according to the site's location,
environmental conditions and present and former uses. These Environmental Laws
may result in delays, may cause the Company to incur substantial compliance and
other costs and may prohibit or severely restrict home building activity in
certain environmentally-sensitive regions or areas.
COMPETITION
The real estate industry is fragmented and highly competitive. In each of its
markets, the Company competes with numerous home builders, subdivision
developers and land development companies (a number
9
<PAGE>
of which build nationwide). Home builders not only compete for customers, but
also for, among other things, desirable financing, raw materials and skilled
labor. In a number of its markets, the Company competes with home builders that
are substantially larger and have greater financial resources than the Company.
Competition for home sales is based, among other factors, on price, style,
financing provided to prospective purchasers, location, quality, warranty
service and general reputation in the community.
The mortgage industry is fragmented and highly competitive. In each of the
areas in which it originates loans, HomeAmerican competes with numerous banks,
thrifts and mortgage bankers, many of which are larger and have greater
financial resources than HomeAmerican. Competition is based, among other
factors, on pricing, loan terms and underwriting criteria.
AFFILIATED TRANSACTIONS
The Company has entered into several transactions with affiliates, including
Larry A. Mizel, the Company's Chairman of the Board of Directors and Chief
Executive Officer, David D. Mandarich, Executive Vice President-- Real Estate
and a director of the Company and other members of the Board of Directors.
Material transactions between the Company and its officers and directors are
subject to review by the Company's Board of Directors. Such review includes a
review of the fairness of the transaction or an independent appraisal.
THRIFT INVESTIGATIONS
The Company understands that investigations are being conducted by Federal
grand juries and other government agencies in various states with regard to the
failures of a number of thrifts with which MDC had business transactions during
the period 1983 through mid-1988. The Company and its affiliates have received
and responded to subpoenas requesting documents and information in connection
with certain investigations and may in the future receive additional inquiries
or subpoenas. No indictments or charges have been brought against the Company
or any of its officials by any grand jury investigating the failure of any
savings and loan institutions. Although the Company believes there is no basis
for the imposition of criminal or civil liability in connection therewith, were
any indictment or charge to be brought against the Company, there could be a
material adverse effect upon the Company's financial position and liquidity.
TAX MATTERS
M.D.C. Holdings, Inc. and its wholly-owned subsidiaries file a consolidated
federal income tax return (the "MDC Consolidated Return"). Richmond Homes and
its subsidiaries filed (or will file) separate consolidated federal income tax
returns (the "Richmond Homes Consolidated Returns") from its inception
(December 28, 1989) through the date Richmond Homes was merged into a wholly-
owned subsidiary of MDC (February 2, 1994).
The Internal Revenue Service (the "IRS") has completed its examination of the
MDC Consolidated Returns for the years 1984 through 1987 and has proposed
certain adjustments to the taxable income reflected in such returns. A
substantial portion of the proposed adjustments concern the characterization of
$22,000,000 in gains on sales of property held for investment, which were
reported as capital gains. Certain of the other proposed adjustments would
shift the recognition of certain items of income and expense from one year to
another ("Timing Adjustments"). To the extent taxable income is increased by
proposed Timing Adjustments, taxable income may be reduced by a corresponding
amount in other years, nevertheless the Company would incur an interest charge
as a result of such adjustment. The Company currently is protesting many of
these proposed adjustments through the IRS appeals process and believes that
the amount of these adjustments will be reduced as a result. In the opinion of
management, adequate provision has been made for the additional income taxes
and interest which may arise as a result of the proposed adjustments.
The IRS currently is examining the MDC Consolidated Returns for the years
1988 through 1990 and the Richmond Homes Consolidated Returns for the years
1989 and 1990. No reports have been issued by the IRS in connection with these
examinations. In the opinion of management, adequate provision has been made
for additional income taxes and interest which may result from these
examinations.
10
<PAGE>
FRAUDULENT CONVEYANCE CONSIDERATIONS
The issuance by the Guarantors of guaranties of the Company's obligations
under the Senior Notes could be subject to review under relevant federal and
state fraudulent conveyance laws in a bankruptcy case or a lawsuit by or on
behalf of unpaid creditors of a Guarantor or a representative of such
creditors, such as a trustee or a Guarantor as debtor-in-possession. Under such
laws, if a court were to find that, at the time a Guarantor issued the
guaranties of the Senior Notes, either (a) the Guarantor issued such guaranties
with the intent of hindering, delaying or defrauding creditors, or (b) the
Guarantor received less than a reasonably equivalent value or fair
consideration for issuing such guaranties and the Guarantor (i) was insolvent
or rendered insolvent by reason of the issuance of such guaranties, (ii) was
engaged in business or a transaction, or was about to engage in business or a
transaction, for which any property remaining with the Guarantor after giving
effect to the issuance of such guaranties constituted an unreasonably small
amount of capital, or (iii) intended to incur, or believed that it would incur,
debts beyond its ability to pay as they matured, such court could avoid the
Guarantor's obligations under such guaranties and direct the repayment of any
amounts paid thereunder to the Guarantor or to a fund for the benefit of the
Guarantor's creditors, or take other action detrimental to the holders of the
Senior Notes.
The measure of insolvency for purposes of the foregoing will vary depending
upon the law of the jurisdiction which is being applied. Generally, however, an
entity will be considered insolvent for purposes of the foregoing if the sum of
its debts is greater than all of its property at a fair valuation, or if the
present fair salable value of its assets is less than the amount required to
pay its probable liabilities on its existing debts as they become absolute and
matured. The Guarantors believe that the indebtedness evidenced by their
guaranties of the Senior Notes was incurred without the intent of hindering,
delaying or defrauding creditors. Based upon management's analysis of internal
cash flow projections and other financial information and estimated values of
assets and liabilities of the Guarantors (excluding intercompany receivables
and payables), management believes that, immediately after the issuance of the
Senior Notes and the issuance of the guaranties of the Senior Notes, and after
giving effect to the terms of a certain Contribution Agreement (as defined),
the Guarantors were solvent, had sufficient capital to carry on their
businesses and were able to pay their debts as they mature. No assurance can be
given, however, that a court would reach the same conclusions with regard to
these matters.
SECURITY FOR THE NOTES
The Senior Notes are secured by a first priority pledge of 100% of the
capital stock of the Pledged Subsidiaries owned by the Company. However, there
can be no assurance that the proceeds of any sale of the collateral pursuant to
the Senior Notes Indenture following an acceleration after an Event of Default
(as defined in the Senior Notes Indenture) would be sufficient to satisfy
payments due on the Senior Notes. The pledge by the Company of the capital
stock of the Pledged Subsidiaries to secure the Company's obligations under the
Senior Notes will be subject to a standstill agreement restricting the Trustee
from exercising certain remedies under such pledge until 179 days after the
Trustee under the Senior Notes Indenture has given written notice to the
respective senior lender to the Company and the Pledged Subsidiaries lender
that an Event of Default and acceleration of the Senior Notes has occurred. See
"Description of the Senior Notes--Pledge of Subsidiary Stock."
ABSENCE OF PUBLIC MARKET; MARKET MAKING RESTRICTIONS
At present, the Old Notes are owned by a small number of investors. There can
be no assurance that an active public or private market for the New Notes or
Old Notes will develop. If a market for the New Notes or the Old Notes
develops, such Notes may trade at a discount from their principal amount. The
Company does not intend to list the New Notes on a national securities
exchange. Sellers of the New Notes and market makers in the New Notes, if any,
may be subject to certain rules and regulations with respect to market making
promulgated by the Securities and Exchange Commission under the Exchange Act;
such rules and regulations may affect the ability to make a market in the New
Notes and this may restrict the salability of the New Notes. The Company has
been advised by FBR, the placement agent in the Private Placement, that FBR
intends to make a market in the New Notes, but FBR is not obligated to do so
and there can be no assurance that an active public market in the New Notes
will develop.
11
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECTS
The Exchange Offer is designed to provide to holders of Old Notes an
opportunity to acquire New Notes which, unlike the Old Notes, will be freely
transferable at all times (provided that the holder is not an affiliate of the
Company).
The Old Notes were originally issued and sold on December 28, 1993, in the
principal amount of $190,000,000 in a transaction exempt from the registration
requirements of the Securities Act (pursuant to Regulation D promulgated
thereunder). The Old Notes may not be re-offered, resold or transferred unless
done so pursuant to a registration statement filed pursuant to the Securities
Act or unless an exemption from the registration requirements of the Securities
Act is available. Pursuant to Rule 144 promulgated under the Securities Act,
Old Notes may generally be resold (a) commencing two years after the date of
original issuance, in an amount up to, for any three-month period, the greater
of 1% of the Senior Notes then outstanding or the average weekly trading volume
of the Senior Notes during the four calendar weeks immediately preceding the
filing of the required notice of sale with the Commission and (b) commencing
three years after the date of original issuance, in any amount and otherwise
without restriction by a holder who is not, and has not been for the preceding
90 days, an affiliate of the Company. Additionally, under certain
circumstances, an exemption from the registration requirements of the
Securities Act may be available for the resale of the Old Notes to "Qualified
Institutional Buyers" under Rule 144A promulgated thereunder. Certain other
exemptions may also be available under other provisions of the federal
securities laws for the resale of the Old Notes.
Based on interpretations by the staff of the Commission set forth in "no-
action" letters issued by the staff in 1988 and 1991 (Exxon Capital Holdings
Corporation, avail. May 13, 1988; and Morgan Stanley & Co. Incorporated, avail.
June 5, 1991) (the Company has not requested or obtained a "no-action" letter
with respect to this Exchange Offer), New Notes issued pursuant to this
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by the holders thereof (other than any such holder which
is an affiliate of the Company) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in the distribution
of the New Notes. By delivering the Letter of Transmittal, a holder tendering
Old Notes for exchange represents and warrants to the Company that the holder
is acquiring the New Notes in the ordinary course of its business and that the
holder is not engaged in, and does not intend to engage in, a distribution of
the New Notes. The Company notes that a recent "no-action" letter issued by the
staff in 1993 (Sherman & Sterling, avail. July 2, 1993) interprets the
preceding sentence to mean that any broker-dealer that receives New Notes for
its own account pursuant to the Exchange Offer must deliver a prospectus in
connection with any resale of such New Notes. In addition, such broker-dealer
must check the appropriate box on the Letter of Transmittal indicating its
broker-dealer status. See "Plan of Distribution." ANY HOLDER USING THE EXCHANGE
OFFER TO PARTICIPATE IN A DISTRIBUTION OF THE NEW NOTES TO BE ACQUIRED IN THE
EXCHANGE OFFER (I) CANNOT RELY ON THE SEC STAFF POSITION ENUNCIATED IN THE
ABOVE-REFERENCED LETTERS AND (II) MUST COMPLY WITH THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH A
SECONDARY RESALE TRANSACTION.
The New Notes will be freely transferable by the holders thereof, subject to
the limitations described in the immediately preceding paragraph. The New Notes
otherwise will be identical in all respects (including interest rate, maturity,
security, guaranty and restrictive covenants) to the Old Notes for which they
may be exchanged pursuant to this Exchange Offer. HOLDERS WHO DO NOT EXCHANGE
THEIR OLD NOTES PURSUANT TO THIS EXCHANGE OFFER WILL CONTINUE TO HOLD OLD NOTES
WHICH ARE SUBJECT TO RESTRICTIONS ON TRANSFER.
TERMS OF THE EXCHANGE OFFER
The Company hereby offers, upon the terms and subject to the conditions set
forth herein and in the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of
12
<PAGE>
New Notes for each $1,000 principal amount of its outstanding Old Notes. New
Notes will be issued only in integral multiples of $1,000 to each tendering
holder of Old Notes whose Old Notes are accepted in the Exchange Offer.
The New Notes will bear interest from their date of issuance (June 20, 1994,
unless the Exchange Offer is extended). Interest on the Old Notes will cease to
accrue on the day preceding the date of issuance of the New Notes. Interest
payable on December 15, 1994 with respect to New Notes will include accrued but
unpaid interest due on the Old Notes so exchanged for the period from June 15,
1994 to June 19, 1994, and will be paid to those who are holders of record of
the New Notes as of December 1, 1994.
As of May 18, 1994, $190,000,000 aggregate principal amount of Old Notes were
outstanding. This Prospectus and the Letter of Transmittal are being sent to
all registered holders of Old Notes.
Tendering holders of Old Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of Old Notes pursuant
to the Exchange Offer. The Company will pay all charges and expenses, other
than certain transfer taxes which may be imposed, in connection with the
Exchange Offer. See "--Payment of Expenses" below.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Delaware General Corporation Law in connection with the Exchange Offer.
EXPIRATION DATE; EXTENSIONS; TERMINATION
The Exchange Offer will expire at 5:00 P.M., New York City time, on June 20,
1994, subject to extension by the Company by notice to the Exchange Agent as
herein provided. The Company reserves the right to extend the Exchange Offer at
its discretion, in which event the term "Expiration Date" shall mean the time
and date on which the Exchange Offer as so extended shall expire. The Company
shall notify the Exchange Agent of any extension by oral or written notice and
shall mail to the registered holders of Old Notes an announcement thereof, each
prior to 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date.
The Company reserves the right to extend or terminate the Exchange Offer and
not accept for exchange any Old Notes if any of the events set forth below
under the caption "--Conditions of the Exchange Offer" shall have occurred and
shall not have been waived by the Company, by giving oral or written notice of
such delay or termination to the Exchange Agent. The rights reserved by the
Company in this paragraph are in addition to the Company's right set forth
below under the caption "--Conditions of the Exchange Offer."
PROCEDURES FOR TENDERING
The acceptance by holders of Old Notes of the Exchange Offer pursuant to one
of the procedures set forth below will constitute an agreement between such
holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
To be tendered effectively, the Old Notes, together with the properly
completed Letter of Transmittal (or facsimile thereof), executed by the
registered holder thereof, and any other documents required by the Letter of
Transmittal, must be received by the Exchange Agent at the address set forth
below prior to 5:00 P.M., New York City time, on the Expiration Date. LETTERS
OF TRANSMITTAL AND OLD NOTES SHOULD NOT BE SENT TO THE COMPANY.
Each exchanging holder will be required to represent in the Letter of
Transmittal that such holder is acquiring the New Notes in the ordinary course
of business, is not engaged in, and does not intend to engage in, a
distribution of New Notes and has no arrangement or understanding with any
person to participate in any such distribution of the New Notes, and is not an
affiliate of the Company and the subsidiary Guarantors. An exchanging holder
that is a broker-dealer will also represent by signing the Letter of
Transmittal that the Old Notes to be exchanged for New Notes were acquired for
its own account as a result of market-making activities or other trading
activities, and will acknowledge that it will deliver a prospectus meeting the
13
<PAGE>
requirements of the Securities Act of 1933 in connection with any resale of the
New Notes obtained pursuant to the Exchange Offer. The Letter of Transmittal
includes a statement to the effect that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act of 1933.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes tendered pursuant thereto are
tendered (i) by a registered holder of Old Notes who has not completed the box
entitled "Special Issuance and Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution (as defined
below). In the event that signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantee
must be by a firm that is a member of a registered national securities exchange
or a member of the National Association of Securities Dealers, Inc. (the
"NASD") or by a commercial bank or trust company having an office in the United
States (an "Eligible Institution").
The method of delivery of Old Notes and other documents to the Exchange Agent
is at the election and risk of the holder, but if such delivery is by mail it
is suggested that the mailing be made sufficiently in advance of the Expiration
Date to permit delivery to the Exchange Agent before the Expiration Date.
If the Letter of Transmittal is signed by a person other than a registered
holder of any Old Note(s) listed, such Old Note(s) must be endorsed or
accompanied by appropriate bond powers, in either case signed exactly as the
name or names of the registered holder or holders appear on the Old Note(s).
If the Letter of Transmittal or any notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must
be so submitted.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be resolved by
the Company, whose determination will be final and binding. The Company
reserves the absolute right to reject any or all tenders that are not in proper
form or the acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right to waive any
irregularities or conditions of tender as to particular Old Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding. Unless waived, any irregularities in connection with tenders must be
cured within such time as the Company shall determine. Neither the Company nor
the Exchange Agent shall be under any duty to give notification of defects in
such tenders or shall incur liabilities for failure to give such notification.
Tenders of Old Notes received by the Exchange Agent that are not properly
tendered and as to which the irregularities have not been cured or waived will
be returned by the Exchange Agent to the tendering holder, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
The Company's acceptance for exchange of Old Notes tendered pursuant to the
Exchange Offer will constitute a binding agreement between the tendering person
and the Company upon the terms and subject to the conditions of the Exchange
Offer.
CONDITIONS OF THE EXCHANGE OFFER
In addition, and notwithstanding any other terms of the Exchange Offer, the
Company will not be required to accept for exchange, or exchange New Notes for,
any Old Notes tendered and may terminate or amend the Exchange Offer as
provided herein before the acceptance of any Old Notes, if any of the following
conditions exist:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer; or
14
<PAGE>
(b) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation which, in the sole judgment of the Company, might
materially impair the ability of the Company to proceed with the Exchange
Offer.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
conditions or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. If the Company waives or amends the
foregoing conditions, the Company will, if required by applicable law, extend
the Exchange Offer for a minimum of five business days from the date that the
Company first gives notice, by public announcement or otherwise, of such waiver
or amendment, if the Exchange Offer would otherwise expire within such five-
business-day period. Any determination by the Company concerning the events
described above will be final and binding upon all parties.
The Exchange Offer is not conditioned on, and does not require, any federal
or state regulatory approval. No proxies are being solicited in connection with
the Exchange Offer.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Tenders of Old Notes will be accepted only in principal amounts of $1,000 and
integral multiples thereof.
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will accept all Old Notes validly tendered and not withdrawn promptly
prior to 5:00 P.M. on the Expiration Date. The Company will deliver New Notes
in exchange for Old Notes as promptly as practicable following acceptance of
the Old Notes.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Notes when, as and if the Company has given oral
or written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering holders of Old Notes for the purposes of receiving the
New Notes. Under no circumstances will interest be paid by the Company or the
Exchange Agent by reason of any delay in making such payment or delivery.
If any tendered Old Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
any such unaccepted Old Notes will be returned, at the Company's expense, to
the tendering holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
WITHDRAWAL RIGHTS
Any holder of Old Notes who has tendered Old Notes may withdraw the tender at
any time prior to 5:00 P.M., New York City time, on the Expiration Date.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must (a) be timely received by the Exchange Agent at the
address set forth herein, (b) specify the name of the person having tendered
the Old Notes to be withdrawn, (c) indicate the Old Notes to which it relates
and the aggregate principal amount of Old Notes to be withdrawn and (d) be (i)
signed by the holder in the same manner as the original signature on the Letter
of Transmittal (including a guarantee of signature, if required) or (ii)
accompanied by evidence satisfactory to the Company that the holder withdrawing
such tender has succeeded to beneficial ownership of such Old Notes. If Old
Notes have been delivered or otherwise identified to the Exchange Agent, the
name of the registered holder and the serial numbers of the particular Old
Notes withdrawn must also be so furnished to the Exchange Agent as aforesaid
prior to the physical release of the withdrawn Old Notes. Withdrawals of
tenders of Old Notes may not be rescinded, and any Old Notes withdrawn will
thereafter be deemed not validly tendered for purposes of the Exchange Offer;
provided, however, that withdrawn Old Notes may be re-tendered by again
following one of the procedures described herein at any time prior to 5:00
P.M., New York City time, on the Expiration Date.
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<PAGE>
All questions as to the validity (including time of receipt) of notices of
withdrawal will be determined by the Company, whose determination will be final
and binding. Neither the Company, the Exchange Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
EXCHANGE AGENT
First Bank National Association has been appointed as Exchange Agent for the
Exchange Offer. All correspondence in connection with the Exchange Offer and
the Letter of Transmittal should be addressed to the Exchange Agent as follows:
BY FACSIMILE: 612-244-1145
BY HAND OR OVERNIGHT EXPRESS: [/R]
First Bank National Association BY TELEPHONE: 612-244-0444
Requests for additional copies of the Prospectus or the Letter of Transmittal
should be directed to the Exchange Agent or the Company.
180 E. Fifth Street
3rd Floor, Bond Drop Window
St. Paul, Minnesota 55101
PAYMENT OF EXPENSES
Attention: Specialized Finance
The Company will not make any payments to brokers, dealers or to others for
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
The Company will also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of the Prospectus and related documents to the beneficial
owners of the Old Notes, and in handling or forwarding tenders for exchange.
BY MAIL:
First Bank National Association
P.O. Box 64485
180 E. Fifth Street
St. Paul, Minnesota 55164-0485
Attention: Specialized Finance
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company, and are estimated in the aggregate to be approximately
$145,000.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, New Notes, or
substitute Old Notes for principal amounts not exchanged are to be delivered
to, or are to be registered or issued in the name of, any person other than the
registered holder of the Old Notes tendered hereby, or if tendered Old Notes
are registered in the name of any person other than the person signing the
Letter of Transmittal, or if a transfer tax is imposed for any reason other
than the exchange of Old Notes pursuant to the Exchange Offer, the amount of
any such transfer taxes (whether imposed on the registered holder or any other
person) will be payable by the tendering holder. If satisfactory evidence of
payments of such taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is the face value less unamortized discount, as reflected in the
Company's accounting records on the date of the exchange. Accordingly, no gain
or loss for accounting purposes will be recognized. The expenses of the
Exchange Offer will be expensed over the term of the New Notes.
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<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary is a general discussion of certain of the expected
federal income tax consequences of the Exchange Offer. This summary is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change. Proposed regulations addressing the treatment of debt
instruments with original issue discount were issued during 1986 (the "1986
Proposed Regulations"). New proposed regulations were issued on December 22,
1992, to revise and supersede certain provisions of the 1986 Proposed
Regulations (the "1992 Proposed Regulations"). The 1992 Proposed Regulations
were adopted, with certain modifications, as final regulations on January 27,
1994 (the "Final Regulations"), to be effective generally for debt instruments
issued after April 3, 1994. Taxpayers may rely upon certain provisions of the
Final Regulations for debt instruments issued between December 22, 1992 and
April 4, 1994, which is anticipated to include the New Notes as a result of the
Exchange Offer. This summary does not discuss all aspects of federal income
taxation that may be relevant to a particular holder in light of his personal
investment circumstances or to certain types of holders subject to special
treatment under the federal income tax laws (for example, life insurance
companies, tax-exempt organizations and foreign taxpayers) and does not discuss
any aspect of state, local or foreign tax laws. The discussion with respect to
exchanging holders is limited to those who have held the Old Notes and will
hold the New Notes as "capital assets" (generally property held for investment)
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended (the "Code").
EACH HOLDER IS ADVISED TO CONSULT HIS OWN ADVISER AS TO THE SPECIFIC TAX
CONSEQUENCES OF THE EXCHANGE OFFER TO SUCH HOLDER, INCLUDING THE APPLICATION
AND EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
EXCHANGE OF OLD NOTES FOR NEW NOTES
In light of the facts that the New Notes contain terms substantially
identical to the Old Notes and that the Exchange Offer is specifically
contemplated by the Senior Notes Indenture pursuant to which the Old Notes were
issued, an exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not be treated as an exchange for federal income tax purposes. Rather,
the issuance of New Notes in exchange for Old Notes should be characterized as
a continuation of the outstanding indebtedness previously represented by the
Old Notes. If so characterized, the issuance of New Notes in exchange for Old
Notes would have no independent tax significance and, therefore, an exchanging
Noteholder would not recognize income or loss in connection with the exchange,
his basis in the New Notes would be the same as his basis in the Old Notes
exchanged therefor, his holding period in the New Notes would include his
holding period in the Old Notes exchanged therefor and if the Old Notes are
considered to have been issued with original issue discount, an exchanging
holder will be required to include original issue discount in ordinary income
over the period that he holds the New Notes in advance of the receipt of cash
attributable thereto.
It is possible, however, that the Internal Revenue Service will assert that
the transaction should be treated for federal income tax purposes as an
exchange of Old Notes for New Notes. In that event, the exchange of Old Notes
for New Notes should qualify as a tax-free recapitalization under Section
368(a)(1)(E) of the Code, with the result that an exchanging holder generally
would not recognize any taxable gain or loss by reason of the exchange (except
possibly as discussed under "Market Discount" below). However, a portion of the
value of the New Notes received by the exchanging holder with a fair market
value equal to accrued interest on the Old Notes from the last interest payment
date, or the date the holder acquired the Old Notes if that is later, through
the date of the exchange might be required to be treated as interest which
would be taxable to the holder. An exchanging holder's basis in the New Notes
would be the same as his basis in the Old Notes exchanged therefor, except that
the basis in the portion of the New Notes treated as payment of accrued
interest would be their fair market value on the date of the exchange. An
exchanging holder's holding period for the New Notes would include the holding
period of the Old Notes exchanged therefor, except that the holding period of
the portion of the New Notes treated as payment of accrued interest would begin
on the day following the date of the exchange. Upon the receipt of a payment of
interest on the New Notes on
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<PAGE>
the first interest payment date following the date of the exchange, a holder
would not be required to recognize interest income to the extent such amount
was previously included in income on the date of the exchange.
The Company intends to treat the Exchange Offer as a transaction which is not
an exchange for federal income tax purposes.
TAX CONSEQUENCES TO NON-EXCHANGING NOTEHOLDER
There will be no federal income tax consequences to non-exchanging holders.
SALE OR REDEMPTION OF NEW NOTES
A holder generally will recognize gain or loss on a subsequent sale or
redemption of New Notes equal to the difference between the amount realized
from such sale or redemption (other than amounts attributable to accrued
interest, which would be taxable as interest) and his adjusted basis for such
New Notes. Except as discussed below under "Original Issue Discount" and
"Market Discount," such gain or loss generally will be capital gain or loss,
and will be long-term capital gain or loss if the holding period for the New
Notes is more than one year.
If New Notes are redeemed before maturity and the Company is found to have
had, at the time of issuance, an intention to call the New Notes before
maturity, gain realized by the holder will be treated as ordinary income to the
extent that total original issue discount exceeds the portion of original issue
discount previously included in income. Because the New Notes are publicly
offered under the Final Regulations, the intention to call rule should not
apply. In addition, it is possible that any premium over issue price paid on
redemption of New Notes could be treated as a contingent payment taxable as
interest.
ORIGINAL ISSUE DISCOUNT
If the Exchange Offer is treated as a transaction which is not an exchange
for federal income tax purposes, the New Notes should retain the status of the
Old Notes for original issue discount purposes. Because the stated redemption
price at maturity of the Old Notes exceeds their issue price by a de minimis
amount, the Old Notes will not be considered to have been issued at an original
issue discount. The New Notes should therefore also not be subject to the
original issue discount rules if the Exchange Offer is not treated as an
exchange for federal income tax purposes.
If the Exchange Offer is treated as an exchange for federal income tax
purposes, and either the New Notes or the Old Notes are considered to be traded
on an established securities market, the issue price of the New Notes would be
the fair market value of the Old Notes on the date of the exchange. The New
Notes would be issued with original issue discount if their stated redemption
price at maturity exceeds their issue price by more than 1/4 of 1% of their
stated redemption price at maturity multiplied by the number of full years
remaining until maturity.
If the Exchange Offer is treated as an exchange for federal income tax
purposes, but neither the Old Notes nor the New Notes are considered to be
traded on an established securities market within the sixty- day period ending
thirty days after issuance, under the Final Regulations, the issue price of the
New Notes would be their stated principal amount since the New Notes are
anticipated to bear adequate stated interest. In that event, the New Notes
would not be considered issued at an original issue discount.
Under the Final Regulations, an established securities market includes, for
this purpose, any over-the-counter market which is reflected by the existence
of an interdealer quotation system. An interdealer quotation system is defined
for this purpose as any system of general circulation to brokers and dealers
which regularly disseminates quotations of obligations by identified brokers or
dealers, other than a quotations sheet prepared and distributed by a broker or
dealer in the regular course of business and containing only quotations of such
broker or dealer. It is unclear whether the Old Notes or the New Notes will be
considered to be traded on an established securities market.
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<PAGE>
Original issue discount must be included in gross income over the term of the
instrument under a method embodying an economic accrual of such discount. In
general, original issue discount must be included in gross income in advance of
the receipt of cash representing that income, and such amount will increase
over the life of the instrument. A holder's basis in the instrument will be
increased by all original issue discount includable in income by him.
MARKET DISCOUNT
Market discount is the excess, if any, of an obligation's stated redemption
price at maturity over its basis in the hands of the acquirer immediately after
its acquisition. However, market discount will not be considered to exist if,
at the time of acquisition, the discount is less than 1/4 of 1% of the
obligation's stated redemption price at maturity multiplied by the number of
full years remaining until maturity.
When the acquirer disposes of a market discount obligation, the lesser of the
gain or the accrued market discount will be taxable to him as ordinary income
(and will generally be treated as interest). Accrued market discount at such
time is the total market discount multiplied by a fraction, the numerator of
which is the number of days the acquirer held the obligation and the
denominator of which is the number of days from the date he acquired the
obligation until its maturity date. As an alternative to this ratable method,
the acquirer may elect to compute the accrued market discount based upon an
economic yield to maturity.
Relevant legislative history provides that the Treasury Department is to
issue regulations excepting certain nonrecognition transactions, such as the
Exchange Offer, from the general rule requiring recognition of gain to the
extent of accrued market discount on the disposition of market discount
obligation. In the absence of such regulations, it is unclear whether, if the
Exchange Offer is treated as an exchange for federal income tax purposes, a
Noteholder who acquired an Old Note at a market discount would be required to
recognize gain, if any, to the extent of accrued market discount at the time of
the exchange for a New Note. If a holder acquired an Old Note at a market
discount, any market discount accrued with respect to the Old Note and not
taken into income by the holder prior to or at the time of the exchange will be
allocated to New Notes received and the amount so allocated will be treated as
market discount accrued on the New Notes.
An acquirer of a market discount obligation is generally required to defer
the deduction of that portion of the interest on any indebtedness incurred or
maintained to purchase or carry the obligation as exceeds the amount of
interest (including original issue discount) includable in gross income up to
the amount of market discount allocable to the number of days in the taxable
year the acquirer held the obligation, until he disposes of the obligation in a
taxable transaction. However, a taxpayer may elect to include market discount
in income as such discount occurs, in which event the above-described rules on
ordinary income recognition upon sale and interest deferral would be
inapplicable.
The Tax Reform Act of 1986 provides that, if principal on a debt is paid in
more than one installment, the holder may be required to include accrued market
discount in income with respect to each principal payment in advance of the
time otherwise required. That provision could apply to a holder of New Notes
with market discount that are redeemed in part.
BOND PREMIUM AND ACQUISITION PREMIUM
A holder who acquires a New Note for an amount in excess of the amount
payable at maturity may elect to amortize and deduct (on a constant yield
basis) the amount of such excess over the period from the acquisition date to
the maturity date, or an earlier "call date" if a smaller deduction would
result, with corresponding adjustment to such holder's tax basis in the debt
instrument. Amortizable bond premium is treated as an offset to interest
received on the obligation rather than as an interest deduction, except as may
be provided in Treasury Regulations.
BACKUP WITHHOLDING
Under federal income tax law, a holder of New Notes may, under certain
circumstances, be subject to "backup withholding" unless such holder (i) is a
corporation, or is otherwise exempt and, when required,
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<PAGE>
demonstrates this fact or (ii) provides a taxpayer identification number,
certifies that there has been no loss of exemption from backup withholding and
otherwise complies with applicable requirements of the backup withholding
rules. The withholding rate is 20% of "reportable payments," which include
interest and, under certain circumstances, principal payments.
OTHER TAX CONSIDERATIONS
There may be other federal, state, local or foreign tax considerations
applicable to the circumstances of a particular Noteholder as to which he
should consult his tax adviser. ACCORDINGLY, EACH NOTEHOLDER SHOULD CONSULT HIS
OWN TAX ADVISER AS TO PARTICULAR TAX CONSEQUENCES TO HIM OF EXCHANGING OLD
NOTES FOR NEW NOTES.
DESCRIPTION OF THE SENIOR NOTES
The New Notes will be issued under the Senior Notes Indenture, dated as of
December 15, 1993, as amended on February 2, 1994, among the Company, the
Guarantors and Pledgors named therein and First Bank National Association, as
trustee (the "Trustee"), pursuant to which the Old Notes were issued on
December 28, 1993. A copy of the Senior Notes Indenture and the amendments
thereto has been filed as an exhibit to the Registration Statement. The summary
of certain provisions of the Senior Notes Indenture hereunder does not purport
to be complete and is subject to, and qualified in its entirety by reference
to, all of the provisions of the Senior Notes Indenture and such other
documents, including the definitions therein of certain terms and those terms
made part of the Senior Notes Indenture by reference to the Trust Indenture Act
of 1939 as in effect on the date of the Senior Notes Indenture. Except as
otherwise indicated below, the following summary applies to both the Old Notes
and the New Notes offered hereby. For purposes of this Description of the
Senior Notes, unless otherwise indicated, the term "Company" shall mean M.D.C.
Holdings, Inc. and the term "Richmond Homes" shall mean Richmond Homes, Inc. I.
GENERAL
The Senior Notes are senior obligations of the Company, limited in aggregate
principal amount to $190,000,000. The Senior Notes rank pari passu with all
existing and future senior indebtedness of the Company. The New Notes will be
issued only in fully registered form, without coupons, in denominations of
$1,000 and integral multiples thereof.
The Senior Notes mature on December 15, 2003, and bear interest at the rate
of 11 1/8% per annum from the date of issuance or from the most recent Interest
Payment Date to which interest has been paid or provided for, payable
semiannually on December 15 and June 15 of each year, commencing June 15, 1994,
to the persons in whose names such Senior Notes are registered at the close of
business on the December 1 or June 1 preceding such Interest Payment Date.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
Principal of, premium, if any, and interest on the Senior Notes will be
payable, and the Senior Notes may be presented for registration of transfer or
exchange, at the office or agency of the Company maintained for such purpose.
At the option of the Company, payment of interest may be made by check mailed
to the Holders of the Senior Notes at the addresses set forth upon the registry
books of the Company. No service charge will be made for any registration of
transfer or exchange of Senior Notes, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith. Holders must surrender their Senior Notes to a Paying
Agent to collect principal payments. Initially, the Trustee will act as Paying
Agent and registrar. The Company may change any Paying Agent or Registrar
without notice. The corporate finance office of the Trustee is presently
located at 180 East Fifth Street, Suite 200, St. Paul, Minnesota 55101, c/o
Corporate Finance Department. First National Bank Association and certain of
its affiliates are lenders to certain subsidiaries of the Company.
GUARANTY
The Senior Notes are guaranteed, fully and unconditionally, jointly and
severally, on an unsecured subordinated basis (the "Guaranties") by Richmond
American Homes of California, Inc., Richmond
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American Homes of Maryland, Inc., Richmond American Homes of Nevada, Inc.,
Richmond American Homes of Virginia, Inc., Richmond American Homes, Inc.,
Richmond Homes and Richmond Homes, Inc. II (each a "Guarantor" and,
collectively, the "Guarantors"). Each Guaranty is subordinated to all existing
and future Guarantor Senior Indebtedness (as defined).
The Guarantors have entered into a contribution agreement (the "Contribution
Agreement") among themselves which provides that if any Guarantor is required
to make a payment on its Guaranty, such Guarantor will be entitled to seek
contribution from each of the other Guarantors. The obligation of each
Guarantor to make such a contribution will be based upon the fair value of its
net assets relative to the total fair value of the net assets of all the
Guarantors (exclusive, in each case, of intercompany receivables and payables).
"Guarantor Senior Indebtedness" with respect to the Guaranties is defined as
all monetary obligations (including post-petition interest) under one or more
credit agreements currently existing or to be entered into with financial
institutions (the "Senior Lenders") the proceeds of which were used or will be
used for acquisition, development or holding of real property or the
construction of improvements in connection with the home building, real estate
operations or related businesses of the Guarantor or its Subsidiaries, and any
bona fide renewals, refunding or refinancings thereof.
The Guaranties are subordinated in right of payment to the prior payment in
full of all Guarantor Senior Indebtedness. Upon any distribution of assets of
the Guarantor in any dissolution, winding up, total or partial liquidation or
reorganization of the Guarantor, payment in respect of the Guarantee will be
subordinated to the prior payment in full of all Guarantor Senior Indebtedness.
In the event of insolvency, funds which would otherwise be payable to the
holders of the Guaranty will be paid to the holders of Guarantor Senior
Indebtedness to the extent necessary to pay the Guarantor Senior Indebtedness
in full. Upon the occurrence of a payment default on, or the acceleration of
the maturity of, the Guarantor Senior Indebtedness, no payment may be made on
or in respect of the Guaranty until such default has been cured or waived or
such acceleration rescinded. Upon notice to the Guarantor of the occurrence of
a non-payment event of default on the Guarantor Senior Indebtedness pursuant to
which the maturity of such Guarantor Senior Indebtedness may be accelerated, no
payment may be made on or in respect of the Guaranty for a period (the "Payment
Blockage Period") commencing upon the date of such notice and ending 179 days
thereafter (unless in each case such Payment Blockage Period shall be earlier
terminated by the holders of the Guarantor Senior Indebtedness) or such earlier
date on which such event of default shall have been cured or waived. In no
event shall the aggregate of all Payment Blockage Periods with respect to any
particular payment on the Guaranty extend beyond 179 days from the date such
payment on the Guaranty was due. No nonpayment event of default existing on the
date of a payment blockage notice may be made the basis of a second payment
blockage notice, unless waived or cured for a period of at least 90 consecutive
days, and only one such notice may be given in any 365 day period. Nothing
contained in these subordination provisions shall prevent the holder or holders
of the Guaranty from accelerating the Senior Notes or pursuing other remedies
provided for therein.
Nothing in the Senior Notes Indenture or in the Senior Notes prevents any
consolidation or merger of a Guarantor with or into the Company or another
Guarantor, or prevents the transfer of all or substantially all of the assets
of a Guarantor to the Company or another Guarantor. Upon any such
consolidation, merger, transfer or sale, the Guaranty of such Guarantor shall
no longer have any force or effect. Subject to certain terms of the Senior
Notes Indenture, each of the Guarantors may consolidate with, merge with or
into, or transfer all or substantially all of its assets to any other Person;
provided, however, that, subject to the next paragraph, if such other Person is
not the Company or another Guarantor, such Guarantor's obligations under its
Guaranty must be expressly assumed by such other Person.
The Senior Notes Indenture provides that in the event of a sale or other
disposition of all or substantially all of the assets of any Guarantor, by way
of merger, consolidation or otherwise, or a sale or other disposition of all of
the Capital Stock of any Guarantor owned directly or indirectly by the Company,
with or to any Person not an Affiliate of the Company, then such Guarantor (in
the event of a sale or other disposition, by
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way of such a merger, consolidation or otherwise, of all of such Capital Stock
of such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all or substantially all of the assets of such
Guarantor) shall be released and relieved of any obligations under its
Guaranty; provided that the Net Cash Proceeds of such sale or other disposition
are or will be applied in accordance with the applicable provisions of the
Senior Notes Indenture. See "Limitation on Asset Sales."
PLEDGE OF SUBSIDIARY STOCK
The Senior Notes are secured by a first priority pledge of 100% of the
capital stock of Richmond American Homes of California, Inc., Richmond American
Homes of Maryland, Inc., Richmond American Homes of Nevada, Inc., Richmond
American Homes of Virginia, Inc., Richmond American Homes, Inc., Richmond
Homes, and HomeAmerican Mortgage Corporation, in each case owned by the Company
(the "Pledged Subsidiaries"). The pledge is subject to a standstill agreement
in favor of the senior lenders to the Pledged Subsidiaries and the Company
restricting the Trustee under the Senior Notes Indenture in certain
circumstances from exercising its remedies under the pledge. The pledge by the
Company of the capital stock of the Pledged Subsidiaries to secure the
Company's obligations under the Notes is subject to a standstill agreement in
favor of the senior lenders to the Company and the Pledged Subsidiaries and any
successors and assigns, including any lenders under a refinancing, refunding or
replacement facility or any subsequent refunding, refinancing, or replacement
facility or any subsequent refunding, refinancing or replacement thereof
restricting the Trustee, as collateral agent under the pledge agreement, from
exercising its remedies under such pledge until the 179 days after the Trustee
has given written notice to the respective lender that an Event of Default and
acceleration of the Senior Notes has occurred (such 179-day period to be tolled
during any period in which the automatic stay under the Bankruptcy Code
prevents such lender from exercising its remedies) regardless of whether or not
the Event of Default has been waived or cured or any acceleration is otherwise
rescinded. A period of 180 days must elapse after the termination of any such
standstill period before any subsequent standstill period may be effective.
Notwithstanding the foregoing, the Senior Notes Indenture provides by its
terms that a pledge of the Capital Stock of a Pledged Subsidiary shall be
automatically and unconditionally released and discharged upon any of (i) the
termination, release or discharge of the Guarantee of such Pledged Subsidiary,
except as a result of a partial payment under such Guarantee, (ii) any sale,
exchange or transfer, by consolidation, merger or otherwise, to any Person not
an Affiliate of the Company, of all of the Capital Stock owned, directly or
indirectly, by the Company in, or all or substantially all the assets of, such
Pledged Subsidiary which transaction is in compliance with the Senior Notes
Indenture, or (iii) the consolidation, merger or liquidation of such Pledged
Subsidiary into the Company or a Guarantor. In addition, in the event that the
Capital Stock of any Restricted Subsidiary of the Company is sold and the Net
Cash Proceeds are applied in accordance with the terms of the covenant entitled
"Limitation on Asset Sales," the Trustee shall release the Liens in favor of
the Trustee in the Capital Stock sold; provided, that the Trustee shall have
received from the Company an Officers' Certificate and an Opinion of Counsel
that such Net Cash Proceeds have been or will be so applied.
REDEMPTION
The Company does not have the right to redeem any Senior Notes prior to
December 15, 1998. On or after December 15, 1998, the Company has the right to
redeem all or any part of the Senior Notes in cash at the redemption prices
(expressed as a percentage of the principal amount thereof), in each case
including accrued and unpaid interest, if any, to the redemption date, for the
periods set forth below:
<TABLE>
<CAPTION>
IF REDEEMED DURING THE
12-MONTH PERIOD
BEGINNING DECEMBER 15, REDEMPTION PRICE
---------------------- ----------------
<S> <C>
1998.............................................. 107.0%
1999.............................................. 105.6%
2000.............................................. 104.2%
2001.............................................. 102.8%
2002 and thereafter............................... 101.4%
</TABLE>
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In the case of a partial redemption, the Trustee shall select the Senior
Notes or portions thereof for redemption on a pro rata basis, by lot or in such
other manner it deems appropriate and fair. The Senior Notes may be redeemed in
part only in multiples of $1,000 of principal amount.
The Senior Notes do not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first class mail, at least 15 days
and not more than 60 days prior to the date fixed for redemption to the Holder
of each Senior Note to be redeemed to such Holder's last address as then shown
upon the books of the registrar. Any notice that relates to a Senior Note to be
redeemed in part only must state the portion of the principal amount equal to
the unredeemed portion thereof and must state that on and after the date fixed
for redemption, upon surrender of such Senior Note, a new Senior Note or Senior
Notes in a principal amount equal to the unredeemed portion thereof will be
issued. On and after the date fixed for redemption, interest will cease to
accrue on the Senior Notes or portions thereof called for redemption.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms contained in the Senior
Notes Indenture. Reference is made to the Senior Notes Indenture for the full
definition of all such terms, as well as any other terms used herein for which
no definition is provided.
"Affiliate" means, with respect to any specified Person, (i) any other Person
directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person, or (ii) any officer,
director, a Person acting with respect to such Person in a similar capacity, or
controlling shareholder of such other Person. For purposes of this definition,
the term "control" means (a) the power to direct the management and policies of
a Person, either directly or through one or more intermediaries, whether
through the ownership of voting securities, by contract, or otherwise, or (b)
without limiting the foregoing, the beneficial ownership of 10% or more of the
voting power of the voting common equity of such Person (on a fully diluted
basis). Notwithstanding the foregoing, the term "Affiliate" will not include,
with respect to the Company or any Wholly Owned Restricted Subsidiary of the
Company, any Wholly Owned Restricted Subsidiary of the Company and, with
respect to Richmond Homes, any Wholly Owned Restricted Subsidiary of Richmond
Homes.
"Asset Sale" means, with respect to any Person, the sale, lease, conveyance
or other disposition (including, without limitation, by merger or
consolidation, and whether by operation of law or otherwise) of any of that
Person's assets (including, without limitation, the sale or other disposition
of Capital Stock of any Subsidiary of such Person, whether by such Person or by
such Subsidiary, not including the capital contribution to a joint venture of
consideration of the Company's or its Wholly Owned Restricted Subsidiaries'
interest in such joint venture), whether owned on the date of the Senior Notes
Indenture or subsequently acquired, in one transaction or a series of related
transactions, in which such Person and/or its Subsidiaries receive cash and/or
other consideration (including, without limitation, the unconditional
assumption of Indebtedness of such Person and/or its Subsidiaries) having an
aggregate fair market value of $10 million or more as to such transaction or
series of related transactions (each such transaction being referred to herein
as a "disposition"); provided, however, that the following transactions shall
not constitute an Asset Sale: (i) a transaction or series of related
transactions that results in a Change of Control; (ii) dispositions of land,
homes, infrastructure, other buildings, improvements, appurtenances and
entitlements and dispositions of mortgage loans, mortgage loan servicing and
mortgage-backed securities in the ordinary course of business and reasonably
consistent with past practices or industry trends; (iii) exchanges or swaps of
real estate by the Company in the ordinary course of business and reasonably
consistent with past practices or industry trends for real estate of
substantially equivalent value (or for real estate and cash Cash Equivalents
which, in the aggregate, have a substantially equivalent value); (iv)
dispositions between the Company and any of its Wholly Owned Restricted
Subsidiaries or among such Wholly Owned Restricted Subsidiaries and
dispositions from a Restricted Subsidiary to the Company; (v) a disposition
that is a Permitted Investment
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(to the extent such Permitted Investment may be deemed to constitute an Asset
Sale) or a Restricted Payment permitted under the Senior Notes Indenture; (vi)
dispositions between Richmond Homes and its Subsidiaries which are Restricted
Subsidiaries or among such Restricted Subsidiaries; and (vii) dispositions of
securities of the Company or its Restricted Subsidiaries held exclusively by
the Company or a Restricted Subsidiary of the Company and such disposition is
made to the issuer of such securities or a Wholly Owned Restricted Subsidiary
of such issuer which issuer is the Company or a Restricted Subsidiary
(regardless of whether such disposition is a direct disposition of the
securities or an indirect disposition through the sale of all of the Capital
Stock of a Wholly Owned Restricted Subsidiary of the Company or Richmond Homes
whose principal asset is the securities which are the subject of the
disposition).
"Capital Stock" means, with respect to any Person, any capital stock of such
Person and shares, interests, participations or other ownership interests
(however designated) of any Person and any rights (other than debt securities
convertible into corporate stock), warrants or options to purchase any of the
foregoing, including (without limitation) each class of common stock and
preferred stock of such Person if such Person is a corporation or membership
interests if such Person is a limited liability company and each general and
limited partnership interest of such Person if such Person is a partnership.
"Capitalized Lease Obligation" means obligations under a lease that are
required to be capitalized for financial reporting purposes in accordance with
GAAP (including Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board), and the amount of Indebtedness
represented by such obligations shall be the capitalized amount of such
obligations, as determined in accordance with GAAP.
"Consolidated EBITDA" of the Company for any period means (a) the
Consolidated Net Income of the Company for such period, plus (b) the sum,
without duplication (and only to the extent such amounts are deducted in
determining such Consolidated Net Income), of (i) the provision for income
taxes for such period for the Company and its Restricted Subsidiaries (except
to the extent of tax benefits associated with an extraordinary loss), (ii)
depreciation and amortization expense of the Company and its Restricted
Subsidiaries during such period, (iii) Consolidated Interest Expense of the
Company for such period, and (iv) all other noncash, nonextraordinary charges
reducing Consolidated Net Income during such period determined, in each case,
on a consolidated basis for the Company and its Restricted Subsidiaries in
accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" on any date (the "Transaction
Date") means, with respect to the Company, the ratio of (i) the aggregate
amount of Consolidated EBITDA of the Company attributable to continuing
operations and businesses for the Reference Period to (ii) the sum of (a) the
aggregate Consolidated Interest Incurred of the Company (exclusive of amounts
attributable to discontinued operations and businesses, but in each case only
to the extent that the obligations giving rise to such Consolidated Interest
Incurred would no longer be obligations contributing to the Company's
Consolidated Interest Incurred subsequent to the Transaction Date) for the
Reference Period, plus (b) dividends paid or accrued (unless paid to, or
accrued in favor of, the Company or its Wholly Owned Restricted Subsidiaries)
on Disqualified Capital Stock of the Company and Subsidiaries of the Company
(other than Unrestricted Subsidiaries) during the Reference Period; provided
that for purposes of such computation, in calculating Consolidated EBITDA and
Consolidated Interest Incurred, (w) the transaction giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio will be assumed to have
occurred (on a pro forma basis) on the first day of the Reference Period; (x)
the Incurrence of any Indebtedness or issuance of Disqualified Capital Stock
during the Reference Period or subsequent thereto and on or prior to the
Transaction Date (and the application of the proceeds therefrom to the extent
used to retire Indebtedness) will be assumed to have occurred (on a pro forma
basis) on the first day of such Reference Period; (y) Consolidated Interest
Incurred attributable to any Indebtedness being Incurred bearing a floating
interest rate shall be computed as if the rate in effect on the Transaction
Date had been the applicable rate for the entire period, unless the Company or
any of its Restricted Subsidiaries is a party to an Interest Swap Obligation
(which shall remain in effect for the 12-month period after the Transaction
Date) that has the effect of fixing the interest rate on the date of
computation, in which case such rate (whether higher or lower)
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<PAGE>
shall be used; and (z) all members of the consolidated group of the Company on
the Transaction Date that were acquired during the Reference Period or on or
prior to the Transaction Date shall be deemed to be members of the consolidated
group of the Company for the entire Reference Period.
"Consolidated Interest Expense" of the Company for any period means the
Interest Expense of the Company and its Restricted Subsidiaries (other than the
Company's mortgage lending and asset management segment Restricted
Subsidiaries) for such period, determined on a consolidated basis in accordance
with GAAP, plus the excess, if any, of Interest Expense over interest income of
the Company's mortgage lending Restricted Subsidiaries for such period
determined in accordance with GAAP.
"Consolidated Interest Incurred" of the Company for any period means the
Interest Incurred of the Company and its Restricted Subsidiaries (other than
the Company's mortgage lending and asset management segment Restricted
Subsidiaries) for such period, determined on a consolidated basis in accordance
with GAAP, plus the excess, if any, of Interest Expense over interest income of
the Company's mortgage lending Restricted Subsidiaries for such period
determined in accordance with GAAP.
"Consolidated Net Assets" of the Company as of any date means the total
amount of assets of the Company and its Restricted Subsidiaries (less
applicable reserves) on a consolidated basis at the end of the fiscal quarter
immediately preceding such date for which financial information is available,
as determined in accordance with GAAP, less mortgage collateral, net (if
positive), and related net assets (if positive) of the Company's asset
management segment, as reflected on the consolidated balance sheet of the
Company and its Restricted Subsidiaries as of the end of such fiscal quarter.
"Consolidated Net Income" of the Company for any period means the aggregate
net income (or loss) of the Company and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP; provided
that there will be excluded from such net income (to the extent otherwise
included therein), without duplication: (i) the net income (or loss) of any
Person (other than the Company or a Restricted Subsidiary) in which any Person
(including, without limitation, an Unrestricted Subsidiary) other than the
Company or a Restricted Subsidiary of the Company has an ownership interest,
except to the extent that any such income has actually been received (directly
or through one or more Subsidiaries of the Company) by the Company or any
Guarantor in the form of cash dividends or cash distributions during such
period, but not (when taken together with all other dividends and distributions
paid after the Issue Date to the Company or a Wholly Owned Restricted
Subsidiary of the Company) in excess of the Company's or the Guarantor's pro
rata share of such other Person's aggregate net income after the Issue Date
after taking into consideration the class of Capital Stock on which the
dividend or distribution has been paid; (ii) net extraordinary gains with
respect to CMO-related dispositions, if positive, and all other extraordinary
gains (but not extraordinary losses, other than extraordinary losses incurred
in connection with the Offering and the application of proceeds therefrom);
(iii) except to the extent includible in Consolidated Net Income pursuant to
the foregoing clause (i), the net income (or loss) of any Person that accrued
prior to the date that such Person which is an Unrestricted Subsidiary or is
acquired by the Company as a Restricted Subsidiary becomes a Restricted
Subsidiary or is merged into or consolidated with the Company or any of its
Restricted Subsidiaries; (iv) during any period that Richmond Homes is not a
Wholly Owned Restricted Subsidiary of the Company, the net income of Richmond
Homes and its Subsidiaries which are Restricted Subsidiaries, except (up to the
amount of the net income of Richmond Homes and its Subsidiaries which are
Restricted Subsidiaries) to the extent of cash actually received by the
Company, directly or indirectly, from Richmond Homes or its Subsidiaries which
are Restricted Subsidiaries that does not constitute a return of capital with
respect to the Company's investment in Richmond Homes or its Subsidiaries which
are Restricted Subsidiaries contributed after the Issue Date (other than notes
issued or increased as consideration for properties acquired by Richmond Homes
or its Subsidiaries under certain specific performance contracts to purchase
Additional Property (see "Certain Transactions--Richmond Homes, Inc. I and
Subsidiaries") existing on the Issue Date) and (v) the deductions for minority
interest in the income of Richmond Homes and its Subsidiaries. Notwithstanding
the foregoing, in calculating Consolidated Net Income, the Company
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<PAGE>
will be entitled to take into consideration the tax benefits associated with
any extraordinary loss, but only to the extent such tax benefits are recognized
by the Company in accordance with GAAP.
"Consolidated Net Worth" of the Company as of any date means the
stockholders' equity (including any preferred stock that is classified as
equity under GAAP, other than Disqualified Capital Stock) of the Company and
its Restricted Subsidiaries on a consolidated basis at the end of the fiscal
quarter immediately preceding such date for which financial information is
available, as determined in accordance with GAAP, adjusted to exclude the
cumulative effect of accounting changes required by GAAP after the Issue Date.
"Default" means any event or condition that is, or after notice or passage of
time or both would be, an Event of Default.
"Disqualified Capital Stock" means (i) with respect to any Person, any
Capital Stock of such Person or its Subsidiaries that, by its terms or by the
terms of any security into which it is convertible or exchangeable, is, or upon
the happening of an event or the passage of time would be, required to be
redeemed or repurchased by such Person or its Subsidiaries, including at the
option of the holder, in whole or in part, or has, or upon the happening of an
event or passage of time would have, a redemption or similar payment due on or
prior to the Maturity Date and (ii) with respect to any Restricted Subsidiary
of the Company, any Capital Stock (other than (a) Capital Stock owned by the
Company or a Wholly Owned Restricted Subsidiary of the Company and (b) common
stock with no preferences or privileges and with no redemption or repayment
provisions); provided that any Capital Stock which would not constitute
Disqualified Capital Stock but for provisions thereof giving holders thereof
the right to require the Company to repurchase or redeem such Capital Stock
upon the occurrence of a change of control of the Company occurring prior to
the final maturity of the Senior Notes will not constitute Disqualified Capital
Stock if the change of control provisions applicable to such Capital Stock are
no more favorable to the holders of such Capital Stock than the "Repurchase of
Senior Notes at the Option of the Holder Upon a Change of Control" covenant set
forth in the Senior Notes Indenture and such Capital Stock specifically
provides that the Company will not repurchase or redeem (or be required to
repurchase or redeem) any such Capital Stock pursuant to such provisions prior
to the Company's repurchase of Senior Notes pursuant to the "Repurchase of
Senior Notes at the Option of the Holder Upon a Change of Control" covenant set
forth in the Senior Notes Indenture.
"Equity Investment" by any Person in any other Person shall mean the
acquisition by such Person of capital stock, shares, interests, participations
or other ownership interests of such other Person (including any option,
warrant or right to acquire any such interest) or the making of any capital
contribution by such Person to such other Person.
"Equity Investor" with respect to any Person means any other Person that has
made an Equity Investment in such Person and owns a minority interest in such
Person.
"Excluded Person" means any beneficial holder of 10% or more of any class of
common stock of the Company outstanding immediately prior to the Issue Date.
"GAAP" means generally accepted accounting principles as in effect in the
United States applied on a basis consistent with that used in the preparation
of the audited financial statements of the Company for the fiscal year ended
December 31, 1993.
"Indebtedness" means, with respect to any Person (without duplication), (i)
all liabilities (other than trade payables and accrued expenses Incurred in the
ordinary course of business) of such Person (a) for borrowed money (whether or
not the recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof), (b) evidenced by bonds, notes, debentures or
similar instruments or letters of credit or representing the balance deferred
and unpaid of the purchase price of any property or services, (c) evidenced by
bankers' acceptances or similar instruments issued or accepted by financial
institutions or Interest Swap Obligations (other than those that fix or cap the
interest rate on variable rate indebtedness
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<PAGE>
otherwise permitted by the Indenture or that fix the exchange rate in
connection with indebtedness denominated in a foreign currency and otherwise
permitted by the Senior Notes Indenture, and other than the purchase of hedging
transactions in the ordinary course of business), or (d) for the payment of
money relating to a Capitalized Lease Obligation; (ii) reimbursement
obligations of such Person with respect to letters of credit; (iii) all
liabilities of others of the kind described in the preceding clause (i) or (ii)
that such Person has guaranteed or that is otherwise its legal liability and
all mandatory obligations (including at the option of the holder thereof) to
purchase, redeem or acquire any Disqualified Capital Stock; and (iv) all
obligations of others secured by a Lien (other than a Permitted Lien) to which
the property or assets (including, without limitation, leasehold interests and
any other tangible or intangible property rights) of such Person are subject,
whether or not the obligations secured thereby shall have been assumed by or
shall otherwise be such Person's legal liability. The amount of Indebtedness of
any Person at any date will be, in the case of clause (iv) (if the Indebtedness
referred to therein is not assumed by such Person), the lesser of the (a) fair
market value of all assets subject to the Lien securing the Indebtedness of
others on the date that the Lien attaches or (b) amount of the Indebtedness
secured.
"Interest Expense" of any Person for any period means, without duplication,
the aggregate amount of interest which, in conformity with GAAP, should be set
opposite the caption "interest expense" or any like caption on an income
statement for such Person (including, without limitation, imputed interest
included on Capitalized Lease Obligations, the interest portion of any deferred
payment obligation, amortization of discount or premium, if any, and all other
noncash interest expense) plus, with respect to the Company and its Restricted
Subsidiaries, without duplication (including duplication of the foregoing
items), amortization of issue costs on Indebtedness (other than Indebtedness
payable to a financial institution), all interest included as a component of
cost of sales for such period, and all commissions, discounts and other fees
and charges owed with respect to letters of credit securing financial
obligations and bankers' acceptance financing, and amortization and expensing
of other financing fees and expenses, and all interest actually paid by the
Company or a Restricted Subsidiary under any guaranty of Indebtedness
(including, without limitation, a guaranty of principal, interest or any
combination thereof) of any other Person during such period.
"Interest Incurred" of any Person for any period means, without duplication,
the aggregate amount of interest which, in conformity with GAAP, should be set
opposite the caption "interest expense" or any like caption on an income
statement for such Person (including, without limitation, imputed interest
included on Capitalized Lease Obligations, the interest portion of any deferred
payment obligation, amortization of discount or premium, if any, and all other
noncash interest expense) plus, with respect to the Company and its Restricted
Subsidiaries, without duplication (including duplication of the foregoing
items), all interest capitalized for such period, amortization of issue costs
on Indebtedness (other than Indebtedness payable to a financial institution),
all commissions, discounts and other fees and charges owed with respect to
letters of credit securing financial obligations and bankers' acceptance
financing, amortization and expensing of other financing fees and expenses, and
all interest actually paid by the Company or a Restricted Subsidiary under any
guaranty of Indebtedness (including, without limitation, a guaranty of
principal, interest or any combination thereof) of any other Person during such
period.
"Interest Swap Obligation" means any obligation of any Person pursuant to any
arrangement whereby, directly or indirectly, such Person is entitled to receive
from time to time periodic payments calculated by applying either a fixed or
floating rate of interest on a stated notional amount in exchange for periodic
payments made by such Person calculated by applying a fixed or floating rate of
interest on the same notional amount; provided that the term "Interest Swap
Obligation" shall also include interest rate exchange, collar, swap option,
futures contract or other similar agreements providing interest rate
protection.
"Investment" by any Person in any other Person means (without duplication)
(a) the acquisition by such Person (whether for cash, property, services,
securities or otherwise) of Capital Stock, bonds, notes, debentures,
partnership, or other ownership interests, or other securities of such other
Person, (b) the making by such Person of any deposit with, or advance, loan or
other extension of credit to, such other Person (including the purchase of
property from such other Person subject to an understanding or agreement,
27
<PAGE>
contingent or otherwise, to resell such property to such other Person), except
as part of a Related Business in the ordinary course of business with or to any
other Person who is not an Affiliate of such Person, (c) the entering into by
such Person of any guarantee of, or other contingent obligation with respect
to, Indebtedness or other liability of such other Person, or (d) the making of
any capital contribution by such Person to such other Person.
"Issue Date" means the date of first issuance of the Senior Notes under the
Senior Notes Indenture.
"Lien" means any mortgage, lien, pledge, charge, security interest, or other
encumbrance of any kind, whether or not filed, recorded, or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement and any lease deemed to constitute a security interest and any option
or other agreement to give any security interest).
"Material Subsidiary" means any Restricted Subsidiary of the Company which
accounted for 5% or more of the Consolidated Net Assets as of the end of the
fiscal quarter preceding the date of determination for which financial
information is available or Consolidated EBITDA of the Company and its
Restricted Subsidiaries for the Reference Period, except for Restricted
Subsidiaries substantially all of whose assets consist of interests in
issuances of CMOs.
"Net Cash Proceeds" means (i) cash (in U.S. dollars or freely convertible
into U.S. dollars) received by the Company or any Restricted Subsidiary from an
Asset Sale net of all (a) brokerage commissions, and all other fees and
expenses (including, without limitation, fees and expenses of counsel and
investment bankers) related to such Asset Sale, (b) provisions for all income
and other taxes measured by or resulting from such Asset Sale, (c) payments
made to retire Indebtedness where payment of such Indebtedness is required by
instruments governing such indebtedness and secured by the assets sold pursuant
to and in connection with such Asset Sale, (d) amounts required to be paid to
any Person (other than the Company or Subsidiary) owning a legal or beneficial
interest in the assets subject to the Asset Sale and (e) appropriate amounts to
be provided by the Company or any Restricted Subsidiary thereof, as the case
may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Restricted
Subsidiary thereof, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as reflected
in an Officers' Certificate delivered to the Trustee, and (ii) all noncash
consideration received by the Company or any of its Restricted Subsidiaries
from such Asset Sale promptly thereupon liquidated or converted into cash,
without duplication, net of all items enumerated in subclauses (a) through (e)
of clause (i) hereof.
"Net Proceeds" means the aggregate net cash proceeds or the aggregate fair
market value of property received by the Company or a Restricted Subsidiary of
the Company from the sale of Qualified Capital Stock of the Company (other than
to a Subsidiary) after payment of reasonable out-of-pocket expenses,
commissions and discounts incurred in connection therewith.
"Non-Recourse Indebtedness" means, with respect to any Person, Indebtedness
(or portion thereof) of such Person for which the sole legal recourse for
collection of principal, premium, and interest on such Indebtedness is against
the specific property identified in the instruments evidencing or securing such
Indebtedness, which property was acquired with the proceeds of such
Indebtedness or such Indebtedness was Incurred within 180 days after the
acquisition of such property, without any liability on the part of the Company
or any Restricted Subsidiary for any deficiency with respect to principal,
premium and interest.
"Permitted Investment" means (i) Investments in Cash Equivalents, (ii)
Investments in the Company or in its Wholly Owned Restricted Subsidiaries and
Investments by Richmond Homes in Restricted Subsidiaries and Investments in
Richmond Homes by its Subsidiaries, (iii) loans or advances made in the
ordinary course of business to officers, directors or employees of the Company
or any of its Restricted Subsidiaries, (iv) Investments in any receivables or
loans taken by the Company or a Subsidiary in connection with the sale of
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any asset otherwise permitted by the Indenture, (v) Investments in interests in
issuances of CMOs, mortgages, mortgage loan servicing or other mortgage related
assets, (vi) Investments in contract rights granted by, entitlements granted
by, interests in securities issued by, or tangible assets of, political
subdivisions or enterprises thereof related to the home building or real estate
operations of the Company or its Restricted Subsidiaries, (vii) Investments by
the Company or Restricted Subsidiaries in Richmond Homes and its Subsidiaries
that are Restricted Subsidiaries so long as Richmond Homes remains a Restricted
Subsidiary and such Investment is made in the form of a loan or is evidenced by
a note, payable in the amount of such Investment, (viii) Investments made prior
to the Issue Date and (ix) Investments in the form of guaranties to the extent
such guaranties are permitted to be Incurred under the covenant "Limitations on
Incurrence of Additional Indebtedness and Issuances of Disqualified Capital
Stock."
"Permitted Liens" means (i) Liens for taxes, assessments or governmental
charges or claims that either (a) are not yet delinquent, (b) are being
contested in good faith by appropriate proceedings and as to which appropriate
reserves have been established or other provisions have been made in accordance
with GAAP, or (c) solely encumber property abandoned or in the process of being
abandoned and with respect to which there is no recourse to the Company or any
Restricted Subsidiary, (ii) statutory Liens of landlords and carriers',
warehousemen's, mechanics', suppliers', materialmen's, repairmen's or other
Liens imposed by law and arising in the ordinary course of business and with
respect to amounts that, to the extent applicable, either (a) are not yet
delinquent or (b) are being contested in good faith by appropriate proceedings
and as to which appropriate reserves have been established or other provisions
have been made in accordance with GAAP, (iii) Liens incurred or deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security, (iv) Liens incurred
or deposits made to secure the performance of tenders, bids, leases, statutory
obligations, surety and appeal bonds, progress payments, government contracts,
utility services and other obligations of like nature in each case incurred in
the ordinary course of business of the Company and its Restricted Subsidiaries,
(v) attachment or judgment Liens with respect to judgments or proceedings
which, with the passage of time, would not constitute an Event of Default and
which are being contested in good faith by appropriate proceedings, (vi)
easements, rights-of-way, restrictions and other similar charges, encumbrances
or burdens not materially interfering with the ordinary course of business of
the Company and its Restricted Subsidiaries, (vii) leases or subleases granted
to others not materially interfering with the ordinary course of business of
the Company and its Restricted Subsidiaries, (viii) purchase money mortgages
(including, without limitation, Capitalized Lease Obligations and purchase
money security interests), (ix) Liens on assets securing Refinancing
Indebtedness which refinanced Indebtedness that was previously secured by such
assets, (x) Liens securing Indebtedness of the Company and its Restricted
Subsidiaries Incurred in compliance with the Senior Notes Indenture under
clause (g) of "Limitations on Incurrence of Additional Indebtedness and
Issuances of Disqualified Capital Stock," (xi) any interest in or title of a
lessor to property subject to any Capitalized Lease Obligations incurred in
compliance with the provisions of the Senior Notes Indenture, (xii) Liens
existing on the date of the Senior Notes Indenture, including without
limitation, Liens securing existing Indebtedness, (xiii) any option, contract
or other agreement to sell or purchase an asset or participate in the income or
revenue derived therefrom; (xiv) Liens securing Non-Recourse Indebtedness of
the Company or a Restricted Subsidiary thereof, (xv) Liens on property or
assets of any Subsidiary securing Indebtedness of such Subsidiary owing to the
Company or one or more Wholly Owned Restricted Subsidiaries, (xvi) Liens with
respect to any asset which Lien existed at the time such asset was acquired by
the Company or any of its Subsidiaries provided that such Liens only extend to
assets that were subject to Liens prior to the acquisition of such asset by
such Person, (xvii) any legal right of, or right granted in good faith to, a
lender or lenders to which the Company or a Restricted Subsidiary may be
indebted to offset against, or appropriate and apply to the payment of, such
Indebtedness any and all balances, credits, deposits, accounts or monies of the
Company or a Restricted Subsidiary with or held by such lender or lenders,
(xviii) any pledge or deposit of cash or property by the Company or any
Restricted Subsidiary in conjunction with obtaining surety and performance
bonds and letters of credit required to engage in constructing on-site and off-
site improvements or as otherwise required by political subdivisions or other
governmental authorities in the ordinary course of business or secured
indebtedness permitted to be Incurred in compliance with the Senior Notes
Indenture under clause
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(k) of "Limitations on Incurrence of Additional Indebtedness and Issuances of
Disqualified Capital Stock," (xix) Liens in favor of the Trustee arising
pursuant to the Indenture, (xx) Liens incurred in the ordinary course of
business as security for the Company's or its Restricted Subsidiaries'
obligations with respect to indemnification in favor of title insurance
providers, (xxi) letters of credit, bonds or other assets pledged to secure
insurance in the ordinary course of business, (xxii) Liens on assets securing
warehouse lines of credit and other credit facilities to finance the operations
of the Company's mortgage lending Restricted Subsidiaries and Liens related to
issuances of CMOs and mortgage-related securities, and (xxiii) Liens on
property or assets of any Subsidiary of Richmond Homes securing Indebtedness of
such Subsidiary owing to Richmond Homes or one or more of its Subsidiaries that
is a Restricted Subsidiary or Liens on property or assets of Richmond Homes
securing Indebtedness of Richmond Homes to one or more Restricted Subsidiaries
and (xxiv) any other Liens, provided that such Liens at any time do not attach
to property with fair value, in the aggregate, in excess of $5 million.
"Person" means any corporation, individual, limited liability company, joint
stock company, joint venture, partnership, unincorporated association,
governmental regulatory entity, country, state or political subdivision
thereof, trust, municipality or other entity.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Reference Period" with regard to any Person means the four full fiscal
quarters of such Person ended on or immediately preceding any date upon which
any determination is to be made pursuant to the terms of the Senior Notes or
the Senior Notes Indenture for which financial information is available.
"Refinancing Indebtedness" means Indebtedness that is an extension, renewal,
replacement or refunding permitted to be Incurred by the Indenture but only to
the extent that (i) the maximum principal amount of refinancing Indebtedness
(or, if such refinancing Indebtedness does not require cash payments prior to
maturity or is otherwise issued at a discount, the original issue price of such
refinancing indebtedness) permitted may not exceed the lesser of (x) the
principal amount of the Indebtedness being extended, renewed, replaced or
refunded plus reasonable financing fees and other associated reasonable out-of-
pocket expenses (collectively, "Refinancing Fees"), or (y) if such Indebtedness
being extended, renewed, replaced, or refunded was issued at an original issue
discount, the original issue price, plus amortization of the original issue
discount at the time of the Incurrence of the refinancing indebtedness plus
Refinancing Fees, (ii) except with respect to Indebtedness Incurred to finance
the acquisition, holding and/or development of real property and related
appurtenances and the construction of improvements thereon and Incurred in the
ordinary course of business and in compliance with the terms of the Senior
Notes Indenture, the refinancing Indebtedness has a Weighted Average Life and a
final maturity that is equal to or greater than the Indebtedness being
extended, renewed, replaced or refunded at the time of such extension, renewal,
replacement or refunding, (iii) the refinancing Indebtedness shall rank with
respect to the Senior Notes to an extent no less favorable in respect thereof
to the Holders than the Indebtedness being refinanced, (iv) refinancing
Indebtedness Incurred by a Restricted Subsidiary shall only be used to
refinance Indebtedness of such Subsidiary notwithstanding that there shall be
other Persons contingently liable with respect to such Subsidiary Indebtedness
being refinanced and (v) any Indebtedness described by clause (b) of the first
paragraph of the covenant as described under the caption "Limitation on
Issuance of Additional Indebtedness and Issuances of Disqualified Capital
Stock," is repaid with the Net Cash Proceeds from Asset Sales in accordance
with the procedures described under "Limitation on Asset Sales," such
Indebtedness may not be reincurred.
"Related Business" means any line or lines of business or business activity
reasonably related to (x) the real estate business or (y) a business segment of
the Company and its Restricted Subsidiaries conducted on the Issue Date.
"Restricted Investment" means any direct or indirect Investment with respect
to any Person by the Company or any Restricted Subsidiary of the Company other
than a Permitted Investment.
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"Restricted Payment" means, with respect to any Person, (i) any dividend or
other distribution on shares of Capital Stock of the Company or any Restricted
Subsidiary, (ii) any payment on account of the purchase, redemption or other
acquisition or retirement for value, or any payment in respect of any amendment
(in anticipation of or in connection with any such retirement, acquisition or
defeasance) in whole or in part, of any shares of Capital Stock of the Company
or any Restricted Subsidiary, (iii) any defeasance, redemption, repurchase, or
other acquisition or retirement for value, or any payment in respect of any
amendment (in anticipation of or in connection with any such retirement,
acquisition, or defeasance), in whole or in part, of any Indebtedness of the
Company or a Restricted Subsidiary that is subordinate in right of payment to
the Senior Notes or the respective Guarantees, as the case may be, but only if
such defeasance, redemption, repurchase or other acquisition or retirement is
made prior to the scheduled payment on such Indebtedness and (iv) any
Restricted Investment; provided, however, that the term "Restricted Payment"
does not include (a) any dividend, distribution, or other payment on shares of
Capital Stock of the Company or a Subsidiary of the Company solely in shares of
Qualified Capital Stock of the Company, (b) any dividend, distribution, or
other restricted payment to the Company or any of its Wholly Owned Restricted
Subsidiaries by any of its Subsidiaries, provided that Subsidiaries of Richmond
Homes may pay dividends or make distributions to Richmond Homes or any other
Restricted Subsidiary, (c) the purchase, redemption or other acquisition or
retirement for value of any shares of Capital Stock of a Subsidiary owned by
the Company, (d) any defeasance, redemption, repurchase or other acquisition or
retirement for value, in whole or in part, of (x) Indebtedness of the Company
payable solely in shares of Capital Stock or Subordinated Indebtedness of the
Company, (y) Indebtedness or Disqualified Capital Stock of a Restricted
Subsidiary payable solely in shares of Capital Stock of the Company or such
Restricted Subsidiary or Subordinated Indebtedness of the Company, or (z)
Indebtedness of the Company subordinated to the Senior Notes owed to its
Restricted Subsidiaries, or (e) any defeasance, redemption, repurchase, or
other acquisition or retirement for value, in whole or in part, of Indebtedness
of the Company or a Restricted Subsidiary that is subordinate in right of
payment to the Senior Notes and is existing on the Issue Date.
"Restricted Subsidiary" means each of the Subsidiaries of the Company which
is not an Unrestricted Subsidiary.
"Subordinated Indebtedness" means Indebtedness of the Company which is
subordinated in right of payment to the prior payment in full, including all
payment of principal, premium and all accrued interest (and post-petition
interest) on and all other amounts owing in connection with the Senior Notes
and which has a scheduled payment date which is after the final maturity date
of the Senior Notes.
"Subsidiary" of any Person means (i) any (A) corporation of which at least a
majority of the aggregate voting power of all classes of Capital Stock is
directly or indirectly beneficially owned by such Person, and (B) entity other
than a corporation of which such Person directly or indirectly beneficially
owns at least a majority of the Capital Stock, (ii) in the case of the Company,
Richmond Homes and its Subsidiaries for so long as the Company is required to
consolidate Richmond Homes and its Subsidiaries in its financial statements in
accordance with GAAP, and (iii) any Person (other than political subdivisions
or enterprises thereof or governmental agencies) required to be consolidated
for financial accounting purposes in accordance with GAAP. To the extent
Richmond Homes becomes, and for so long as Richmond Homes remains, a Wholly
Owned Restricted Subsidiary of the Company, all references in the Senior Notes
Indenture to Wholly Owned Restricted Subsidiaries of the Company shall include
Richmond Homes and its Wholly Owned Restricted Subsidiaries.
"Unrestricted Subsidiary" means each of the Subsidiaries of the Company so
designated by a resolution adopted by the Board of Directors of the Company as
provided below and whose creditors have no direct or indirect recourse
(including, without limitation, no recourse with respect to the payment of
principal or interest on Indebtedness of such Subsidiary) to the Company or a
Restricted Subsidiary. The Board of Directors of the Company may designate an
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that (i) any
such redesignation will be deemed to be an Incurrence by the Company and its
Restricted Subsidiaries of the Indebtedness (if any) of such redesignated
Subsidiary for purposes of the Senior Notes
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Indenture as of the date of such redesignation, and (ii) immediately after
giving effect to such redesignation and the Incurrence of any such additional
Indebtedness, the Company and its Restricted Subsidiaries could incur $1 of
additional Indebtedness pursuant to the second paragraph under the caption,
"Limitation on Issuances of Additional Indebtedness and Issuances of
Disqualified Capital Stock." Subject to the foregoing, the Board of Directors
of the Company also may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary; provided that (i) a Restricted Payment will be deemed
to be made at the time of such designation and such designation will reduce the
amount available for Restricted Payments under the "Limitations on Restricted
Payments" covenant set forth in the Senior Notes Indenture to the extent of the
amount of stockholders' equity of the Subsidiary being designated an
Unrestricted Subsidiary on a stand-alone basis, and (ii) immediately after
giving effect to such designation and reduction of amounts available for
Restricted Payments under the Senior Notes Indenture, the Company and its
Restricted Subsidiaries could incur $1 of additional Indebtedness pursuant to
the second paragraph under the caption "Limitation on Incurrence of Additional
Indebtedness and Issuances of Disqualified Capital Stock." Notwithstanding the
foregoing, the Company may at any time, but only once with regard to a specific
Subsidiary, designate a Restricted Subsidiary to be an Unrestricted Subsidiary.
Any such designation or redesignation by the Board of Directors of the Company
will be evidenced to the Trustee by the filing with the Trustee a certified
copy of the resolution of the Board of Directors of the Company giving effect
to such designation or redesignation and an Officers' Certificate certifying
that such designation or redesignation complied with the foregoing conditions
and setting forth the underlying calculations of such Officers' Certificate.
"Voting Stock" means Capital Stock of the Company having generally the right
to vote in the election of the directors of the Company.
"Weighted Average Life" means, as of the date of determination, with respect
to any debt instrument, the quotient obtained by dividing (i) the sum of the
products of the numbers of years from the date of determination to the dates of
each successive scheduled principal payment of such debt instrument multiplied
by the amount of such principal payment by (ii) the sum of all such principal
payments.
"Wholly Owned Restricted Subsidiary" of any Person means (i) a Subsidiary
(which, with respect to the Company, is a Restricted Subsidiary), of which 100%
of the common equity (except for (x) directors' qualifying shares, (y) certain
minority interests owned by other Persons solely due to local law requirements
that there be more than one stockholder, but which interest is not in excess of
what is required for such purpose and (z) shares required by law to be owned by
an individual holding a real estate broker license as a condition to such
Subsidiary being licensed as a real estate broker, but which interest is not in
excess of what is required for such purpose) is owned directly by such Person
or through one or more Wholly Owned Restricted Subsidiaries of such Person, or
(ii) any entity other than a corporation in which such Person, directly or
indirectly, owns all of the common equity of such entity.
COVENANTS
The Senior Notes Indenture contains, among others, the following covenants:
Repurchase of Senior Notes at the Option of the Holder Upon a Change of
Control. In the event that a Change of Control (as defined below) has occurred,
each Holder will have the right, at such Holder's option, subject to the terms
and conditions of the Indenture, to require the Company to repurchase all or
any part of such Holder's Senior Notes (provided that the principal amount of
such Notes must be $1,000 or an integral multiple thereof) on the date that is
no later than 60 Business Days (unless later required by applicable law) after
the occurrence of such Change of Control (the "Change of Control Payment
Date"), at a cash price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any (the "Change of Control Purchase Price"),
to the Change of Control Payment Date.
The Company shall notify the Trustee within 10 Business Days after the
Company knows or reasonably should know as a result of a public filing of the
occurrence of each Change of Control. Within 20 Business
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Days after the Company knows or reasonably should know as a result of a public
filing of the occurrence of each Change of Control, the Company will make an
unconditional offer (a "Change of Control Offer") to all Holders of Senior
Notes to purchase all of the Senior Notes at the Change of Control Purchase
Price by sending written notice of a Change of Control Offer, by first class
mail, to each Holder at its registered address, with a copy to the Trustee. The
notice to Holders will contain all instructions and materials required by
applicable law and will contain or make available to Holders other information
material to such Holders' decision to tender Senior Notes pursuant to the
Change of Control Offer.
On or before the Change of Control Payment Date, the Company will (i) accept
for payment Senior Notes or portions thereof properly tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the Change of Control Purchase Price (together with accrued
and unpaid interest) of all Senior Notes so tendered and (iii) deliver to the
Trustee Senior Notes so accepted together with an Officers' Certificate listing
the Senior Notes or portions thereof being purchased by the Company. The Paying
Agent will promptly mail to the Holders of Senior Notes so accepted payment in
an amount equal to the Change of Control Purchase Price (together with accrued
and unpaid interest), and the Trustee will promptly authenticate and mail or
deliver to such Holders a new Senior Note equal in principal amount to any
unpurchased portion of the Senior Note surrendered. Any Senior Notes not so
accepted will be promptly mailed or delivered by the Company to the Holder
thereof. The Company will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
"Change of Control" means (i) any sale, transfer or other conveyance (other
than to the Company or a wholly owned Subsidiary), whether direct or indirect,
of all or substantially all of the assets of the Company, on a consolidated
basis, to any "person" or "group" in one transaction or a series of related
transactions, provided that a transaction where the holders of all classes of
Voting Stock of the Company immediately prior to such transaction own, directly
or indirectly, 50% or more of the aggregate voting power of all classes of
Voting Stock of such "person" or "group" immediately after such transaction
will not be a Change of Control, or (ii) any "person" or "group," other than
the Management Group (as defined below) is or becomes the "beneficial owner,"
directly or indirectly, of more than 50% of the total voting power of the
Voting Stock then outstanding. The "Management Group" shall consist of at least
a majority of the executive officers of the Company as of the date of the
Senior Notes Indenture (see "Management"), members of their immediate families,
certain trusts for their benefit, and legal representatives of, or heirs,
beneficiaries or legatees receiving Common Stock (or securities convertible or
exchangeable for Common Stock) under any such person's estate.
The term "all or substantially all of the assets" is likely to be interpreted
by reference to state law at the time applicable and will be dependent on the
facts and circumstances existing at such time.
For the purpose of this definition, (i) the terms "person" and "group" shall
have the meanings used for purposes of Rules 13d-3 and 13d-5 of the Exchange
Act, whether or not applicable; provided that no Excluded Person and no person
or group controlled by Excluded Persons shall be deemed to be a "person" or
"group" and (ii) the term "beneficial owner" shall have the meaning used in
Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable, except
that a person shall be deemed to have "beneficial ownership" of all shares that
any such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time or upon the occurrence of certain
events.
The Change of Control purchase feature of the Senior Notes may make more
difficult or discourage a takeover of the Company, and, thus, the removal of
incumbent management. To the extent applicable and if required by law, the
Company will comply with Section 14 of the Exchange Act and the provisions of
Regulation 14E and any other tender offer rules under the Exchange Act and
other securities laws, rules and regulations which may then be applicable to
any offer by the Company to purchase the Senior Notes at the option of Holders
upon a Change of Control.
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Limitation on Incurrence of Additional Indebtedness and Issuances of
Disqualified Capital Stock. The Indenture provides that neither the Company nor
any Restricted Subsidiary may, directly or indirectly, create, incur, assume,
guarantee, or otherwise become liable for (to "Incur" or, as appropriate, an
"Incurrence"), any Indebtedness or issue any Disqualified Capital Stock (other
than Capital Stock of a Restricted Subsidiary of the Company issued to the
Company or a Wholly Owned Restricted Subsidiary of the Company), except (a)
Non-Recourse Indebtedness incurred in the ordinary course of a Related
Business; (b) Indebtedness evidenced by the Notes pursuant to the Indentures
relating thereto; (c) Indebtedness of the Company solely to any Restricted
Subsidiary of the Company, or Indebtedness of any Restricted Subsidiary of the
Company solely to the Company or to any Restricted Subsidiary of the Company,
provided that (i) any such Indebtedness of the Company (other than to the
Company's mortgage lending and asset management subsidiaries) is subordinate
and junior in right of payment to the Senior Notes, (ii) neither the Company
nor any Restricted Subsidiary of the Company shall become liable to any Person
with respect to such Indebtedness other than the Company or a Restricted
Subsidiary of the Company and (iii) such Indebtedness of the Company to
Richmond Homes and its Subsidiaries shall otherwise comply with the terms of
the Senior Notes Indenture; (d) the Company or any Restricted Subsidiary may
Incur Refinancing Indebtedness as an extension, renewal, replacement or
refunding of any of the Indebtedness permitted to be Incurred by clause (b)
above, this clause (d), clause (f), clause (g) or the immediately following
paragraph; (e) Indebtedness Incurred solely in respect of performance,
completion, guarantee and similar bonds and similar purpose undertakings and
Indebtedness under any earnest money notes, tenders, bids, leases, statutory
obligations, surety and appeal bonds, progress statements, government
contracts, letters of credit, escrow agreements and other obligations of like
nature and deposits made to secure performance of any of the foregoing, in each
case in the ordinary course of business in connection with the Company's
consolidated real estate and mortgage lending activities; (f) Indebtedness
outstanding on the Issue Date; (g) Indebtedness of the Company or its
Restricted Subsidiaries Incurred to finance the acquisition, holding and/or
development of real property and related appurtenances and the construction of
improvements, including homes, thereon in the ordinary course of business of
the Company or any of its Restricted Subsidiaries to the extent such
Indebtedness may be Incurred pursuant to the following paragraph; (h) (x)
Indebtedness which represents the assumption by the Company or a Guarantor of
Indebtedness of a Guarantor, provided that neither the Company nor a Guarantor
may assume Indebtedness of a Guarantor that is subordinate in right of payment
to the Guaranty of such Guarantor unless such Indebtedness when assumed by the
Company or the Guarantor, as applicable, is subordinate in right of payment to
the Senior Notes or the Guaranty of the Guarantor assuming the Indebtedness,
and (y) Indebtedness of a Guarantor represented by guarantees in respect of
Indebtedness of the Company or another Guarantor permitted to be Incurred
pursuant to the Senior Notes Indenture and Indebtedness of the Company
represented by guaranties in respect of Indebtedness of a Guarantor permitted
to be Incurred pursuant to the Senior Notes Indenture, provided that to the
extent the Company or a Guarantor guaranties Indebtedness that is subordinated
in right of payment to the Senior Notes or the Guaranty, as the case may be,
then the guarantee with respect to such subordinated Indebtedness shall be
subordinated in right of payment to the Senior Notes or the Guaranty, as
applicable; (i) Capitalized Lease Obligations; (j) Indebtedness under warehouse
lines of credit, repurchase agreements and Indebtedness secured by mortgage
loan servicing of mortgage lending Subsidiaries in the ordinary course of a
mortgage lending business; (k) obligations for, pledge of assets in respect of,
and guaranties of, bond financings of political subdivisions or enterprises
thereof in the ordinary course of business of the Company and its Restricted
Subsidiaries; (l) Indebtedness secured by mortgages and mortgage-related assets
and Indebtedness representing all mortgage-related liabilities in the ordinary
course of the Company's mortgage lending and asset management business; and (m)
Disqualified Capital Stock of Restricted Subsidiaries outstanding on the Issue
Date and which may from time to time be issued as required by laws governing
the Company's consolidated real estate business. In addition, the mere
extension of the term of the lender commitments to extend credit or funds to
the Company or any of its Subsidiaries pursuant to a revolving credit agreement
or similiar arrangement shall not be deemed to be an Incurrence of
Indebtedness.
Notwithstanding the foregoing provisions of this covenant, the Company may
Incur Indebtedness or Acquired Indebtedness (as defined below) or issue
Disqualified Capital Stock, and a Restricted Subsidiary
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may incur Indebtedness described in clause (g) above, if, at the time such
Indebtedness is Incurred or such Disqualified Capital Stock is issued, (A) no
Default or Event of Default shall have occurred and be continuing, or would
occur after giving effect to such transaction, and (B) immediately after giving
effect thereto (without duplication) on a pro forma basis, either (x) the
Consolidated Fixed Charge Coverage Ratio of the Company on the date of such
Incurrence or issuance is at least equal to 1.5 to 1 or (y) the ratio of
Indebtedness of the Company and its Restricted Subsidiaries on a consolidated
basis on the date of such Incurrence or issuance (excluding for purposes of
such calculation other Indebtedness specifically permitted to be Incurred
pursuant to the foregoing paragraph of this covenant, other than with respect
to clause (g) thereof) to Consolidated Net Worth of the Company is less than
(i) 3.25 to 1, if such determination is made on and after the Issue Date and on
or prior to December 31, 1994, (ii) 3.375 to 1, if such determination is made
on and after January 1, 1995 and on or prior to December 31, 1995, and (iii)
3.5 to 1, if such determination is made on January 1, 1996 and thereafter.
Indebtedness Incurred and Disqualified Capital Stock issued by any Person
that is not a Restricted Subsidiary of the Company, which Indebtedness or
Disqualified Capital Stock is outstanding at the time such Person becomes a
Restricted Subsidiary of the Company, or is merged into or consolidated with,
the Company or a Restricted Subsidiary of the Company ("Acquired Indebtedness")
shall be deemed to have been Incurred or issued, as the case may be, at the
time such Person becomes a Restricted Subsidiary of the Company, or is merged
into or consolidated with the Company or a Restricted Subsidiary of the
Company.
Limitation on Restricted Payments. The Senior Notes Indenture provides that
neither the Company nor any of its Restricted Subsidiaries will, directly or
indirectly, make any Restricted Payment, if, after giving effect thereto on a
pro forma basis, (a) the Consolidated Fixed Charge Coverage Ratio of the
Company on the last day of the Reference Period is less than 1.5 to 1, (b) a
Default or an Event of Default would occur or be continuing, or (c) the
aggregate amount of all Restricted Payments made by the Company and its
Restricted Subsidiaries, including such proposed Restricted Payment (if not
made in cash, then the fair market value of any property used therefor) from
and after the Issue Date and on or prior to the date of such Restricted
Payment, shall exceed the sum of (i) 50% of Consolidated Net Income of the
Company accrued for the period (taken as one accounting period), commencing
with the first full fiscal quarter which commenced after the Issue Date, to and
including the fiscal quarter ended immediately prior to the date of each
calculation (or, in the event Consolidated Net Income is a deficit, then minus
100% of such deficit), plus (ii) 100% of the amount of any Indebtedness of the
Company or a Restricted Subsidiary that is converted into or exchanged for
Qualified Capital Stock of the Company, plus (iii) 100% of the aggregate
amounts received by the Company or any Restricted Subsidiary upon the return
(including by way of dividend and any release of any guaranty) of any
Investment but only to the extent (x) not included in Consolidated Net Income
of the Company and (y) that the making of such Investment constituted a
Restricted Investment made pursuant to the Indenture, plus (iv) unless
accounted for pursuant to clause (ii) above, 100% of the aggregate Net Proceeds
received by the Company from the sale (other than to a Subsidiary of the
Company) of its Qualified Capital Stock after the Issue Date and on or prior to
the date of such Restricted Payment.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph will not prohibit (A) the payment of any dividend within 60
days after the date of its declaration if such dividend could have been made on
the date of its declaration in compliance with the foregoing provisions, (B)
the payment of cash dividends or other distributions to any Equity Investor or
joint venture participant of a Restricted Subsidiary of the Company (in each
case other than the Company or a Restricted Subsidiary of the Company) with
respect to a class of Capital Stock of such Restricted Subsidiary of the
Company owned by such Equity Investor so long as the Company or its Restricted
Subsidiaries simultaneously receive a dividend or distribution with respect to
their Investment in such Restricted Subsidiary either in U.S. Legal Tender or
the same form as the dividend or distribution received by such Equity Investor
or joint venture participant and in proportion to their proportionate interest
in the same class of Capital Stock of such Restricted Subsidiary, as the case
may be, (C) acquisitions or other retirement for value of, shares of Capital
Stock pursuant to the Base Assets Purchase Agreement and the Option Agreement
with Messrs. Mizel and
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Mandarich, (D) the retirement of Capital Stock of the Company or the retirement
of Indebtedness of the Company, in exchange for or out of the proceeds of a
substantially concurrent sale (other than a sale to a Subsidiary of the
Company) of, other shares of its Capital Stock (other than Disqualified Capital
Stock) and the retirement of Capital Stock or Indebtedness of a Restricted
Subsidiary of the Company in exchange for or out of the proceeds of a
substantially concurrent sale of its Capital Stock (other than Disqualified
Capital Stock), (E) the payment of cash dividends on, and acquisitions or other
retirement for value of, shares of Capital Stock of Restricted Subsidiaries
required to be held by employees thereof in accordance with the laws governing
the Company's consolidated real estate business in the ordinary course of
business, (F) Investments in joint ventures which are Restricted Subsidiaries,
(G) Restricted Payments not otherwise permitted above up to (x), with respect
to the period from the Issue Date to and including December 31, 1994, up to
$20,000,000 in the aggregate from the Issue Date through December 31, 1994, (y)
with respect to the period from January 1, 1995 to and including December 31,
1995, up to $40,000,000 in the aggregate from the Issue Date through December
31, 1995, and (z) with respect to the period from January 1, 1996 and
thereafter, up to $50,000,000 in the aggregate from the Issue Date, provided
that such Restricted Payments made under this clause (G) shall not be in the
form of cash dividends. The declaration or payment of each dividend paid in
accordance with this paragraph (other than pursuant to clause (B), (E) or (G))
shall be counted for purposes of computing amounts expended pursuant to clause
(c) in the immediately preceding paragraph.
Maintenance of Consolidated Net Worth. The Senior Notes Indenture provides
that if the Company's Consolidated Net Worth at the end of each of any two
consecutive fiscal quarters (the last day of the second such fiscal quarter
being referred to as a "Deficiency Date") is less than $100,000,000 (the
"Minimum Consolidated Net Worth"), then the Company shall, no later than 60
days after a Deficiency Date (or 120 days if a Deficiency Date is also the end
of the Company's fiscal year), offer to purchase (a "Net Worth Offer") 10% of
the principal amount of Senior Notes originally issued under the Senior Notes
Indenture (or such lesser amount as may be outstanding at the time the Net
Worth Offer is made) (the "Offer Amount") at a purchase price equal to 100% of
the aggregate principal amount thereof, plus accrued and unpaid interest to the
purchase date. The Net Worth Offer shall remain open for a period of 20
Business Days following its commencement and no longer, unless a longer period
is required by law (the "Offer Period"). Promptly after the termination of the
Offer Period (the "Payment Date"), the Company shall purchase and mail or
deliver payment for the Offer Amount of Senior Notes tendered, pro rated over
such tendered Senior Notes to the nearest $1,000 principal amount, or, if less
than the Offer Amount has been tendered, all Senior Notes tendered in response
to the Net Worth Offer. In no event shall the Company's failure to meet the
Minimum Consolidated Net Worth at the end of any fiscal quarter be counted
towards the making of more than one Net Worth Offer. The principal amount of
Senior Notes to be purchased pursuant to a Net Worth Offer may be reduced by
the principal amount of Senior Notes acquired by the Company subsequent to the
Deficiency Date and surrendered to the Trustee for cancellation through
purchase or redemption (other than pursuant to a Change of Control Offer). Any
Net Worth Offer shall be conducted in compliance with applicable tender offer
rules, including Section 14(e) of the Exchange Act and Rule 14e-1 thereunder.
Limitation on Restricting Restricted Subsidiary Dividends. The Senior Notes
Indenture provides that neither the Company nor any of its Restricted
Subsidiaries may, directly or indirectly, create, assume or suffer to exist any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary of the Company to pay dividends or make other distributions on the
Capital Stock of any Restricted Subsidiary of the Company or pay any obligation
to the Company or any of its Restricted Subsidiaries or otherwise transfer
assets or make or pay loans or advances to the Company or any of its Restricted
Subsidiaries, except encumbrances and restrictions existing under or contained
in (i) the Senior Notes Indenture and the Senior Notes or Refinancing
Indebtedness incurred to refinance the Senior Notes; provided that in the case
the Senior Notes are refinanced in part, such encumbrances and restrictions are
no more restrictive than those contained in the Senior Notes Indenture as in
effect on the Issue Date, (ii) applicable law, (iii) any agreement relating to
the financing of the acquisition, development or construction of real or
tangible personal property after the Issue Date, which encumbrance or
restriction relates only to the transfer of the property so acquired, (iv) any
agreement of a Person acquired by the Company or a Restricted Subsidiary of the
Company, which
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restrictions existed at the time of acquisition, were not put in place in
anticipation of such acquisition and are not applicable to any Person or
property other than the Person or any property of the Person so acquired, (v)
reasonable and customary covenants set forth in credit agreements evidencing
Indebtedness permitted by clauses (g), (j) and (l) of the covenant under the
caption "Limitation on the Incurrence of Additional Indebtedness and Issuances
of Disqualified Capital Stock" (including, but not limited to, covenants
limiting (x) dividends to a certain percentage of the net income of such
Restricted Subsidiary, (y) distributions after the occurrence of a default
under such Indebtedness and (z) transfers of assets by such Restricted
Subsidiary), (vi) covenants or restrictions contained in instruments evidencing
or securing existing Indebtedness of the Company or any of its Restricted
Subsidiaries as in effect on the date of the Senior Notes Indenture, provided
that any restrictions or encumbrances relating to or that arise under
Refinancing Indebtedness are not more restrictive than those under the
agreement creating or evidencing the Indebtedness being refunded or refinanced
thereby, (vii) any agreement restricting the sale or other disposition of
properties securing Indebtedness permitted by the Senior Notes Indenture if
such agreement does not expressly restrict the ability of a Restricted
Subsidiary of the Company to pay dividends or make loans or advances to the
Company, (viii) restrictions or encumbrances contained in any security
agreements permitted by the Senior Notes Indenture securing Indebtedness
permitted by the Senior Notes Indenture to the extent that such restrictions or
encumbrances restrict the transfer of assets subject to such security
agreement, and (ix) any restrictions or encumbrances with respect to a
Restricted Subsidiary of the Company imposed pursuant to an agreement which has
been entered into for the sale or disposition of the Capital Stock or assets of
such Restricted Subsidiary or such an agreement which has been entered into for
the sale or disposition of assets of the Company to the extent otherwise
permitted by the Senior Notes Indenture, as applicable only to such assets or
Capital Stock to be sold. Notwithstanding the foregoing, customary provisions
restricting subletting or assignment of any lease entered into in the ordinary
course of business shall not be considered a restriction on the ability of the
applicable Restricted Subsidiary to transfer such agreement or assets, as the
case may be.
Limitation on Transactions with Affiliates. The Senior Notes Indenture
provides that neither the Company nor any of its Subsidiaries may, make any
loan, advance, guaranty or capital contribution to or for the benefit of, or
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or for the benefit of, or purchase or lease any property or assets from, or
enter into or amend any contract, agreement or understanding with, or for the
benefit of any Affiliate which transaction involves or has a value in excess of
$250,000 (each an "Affiliate Transaction"), except for permitted Restricted
Payments and transactions made in good faith, the terms of which are at least
as favorable as the terms which could be obtained by the Company or such
Subsidiary, as the case may be, in a comparable transaction made on an arm's
length basis with Persons who are not Affiliates.
Notwithstanding the foregoing, (a) with respect to any Affiliate Transaction
or series of related Affiliate Transactions with an aggregate value in excess
of $1,000,000 , such transaction must first be approved, by a majority of the
independent directors of the Board of Directors of the Company pursuant to a
Board Resolution, on terms which are at least as favorable as the terms which
could be obtained on an arm's length basis with persons who are not Affiliates
and (b) with respect to any Affiliate Transaction or related series of
Affiliate Transactions with an aggregate value in excess of $10,000,000, the
Company must first obtain a favorable written opinion from an independent
financial advisor of national reputation as to the fairness from a financial
point of view of such transaction to the Company or such Subsidiary, as the
case may be.
Notwithstanding the foregoing, Affiliate Transactions shall not include (i)
transactions exclusively between or among the Company and its Wholly Owned
Restricted Subsidiaries, (ii) Restricted Payments otherwise excluded from such
covenant pursuant to clauses (B), (C) and (F) (in the case of clause (F), only
to the extent such Affiliate Transaction constitutes a capital contribution to
an entity upon its formation for the sole purpose of capitalizing such entity)
thereof, (iii) transactions in which the sole Participants are Wholly Owned
Restricted Subsidiaries of the Company or transactions between the Company and
its Wholly Owned Restricted Subsidiaries permitted by the provisions of the
covenant under the caption "Limitation on Merger, Sale or Consolidation," (iv)
any contract, agreement or understanding with, or for the benefit of, or
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planned for the benefit of, employees of the Company or any Subsidiaries (in
their capacity as such) that has been approved by the Board of Directors, (v)
Capital Stock issuances to members of the Board of Directors, officers and
employees of the Company or its Subsidiaries pursuant to plans approved by the
stockholders of the Company or the respective Subsidiary, (vi) home sales and
readily marketable mortgage loans to employees, officers and directors of the
Company and Subsidiaries in the ordinary course of business, (vii) payment of
regular fees and reimbursement of expenses to directors of the Company who are
not employees of the Company and wages and other compensation to officers of
the Company or any of its Restricted Subsidiaries, (viii) contractual
arrangements in effect on the Issue Date and renewals and extensions thereof
not involving modifications adverse to the Company or any Restricted Subsidiary
or (ix) normal banking relationships with an Affiliate on an arm's length
basis.
Limitation on Asset Sales. The Senior Notes Indenture provides that, subject
to the "Limitation on Merger, Sale or Consolidation" covenant, neither the
Company nor any of its Restricted Subsidiaries may, directly or indirectly,
consummate an Asset Sale, unless the Company (or the Restricted Subsidiary, as
the case may be) receives consideration at the time of such Asset Sale at least
equal to the fair market value (reasonably evidenced by a good faith resolution
of the Board of Directors) of the assets sold or otherwise disposed of,
provided that the aggregate fair market value of the consideration received
from any Asset Sale that is not in the form of cash or Cash Equivalents will
not, when aggregated with the fair market value of all other noncash
consideration received by the Company and its Restricted Subsidiaries from all
previous Asset Sales since the date of the Senior Notes Indenture that has not
been converted into cash or Cash Equivalents, exceed 10% of the Consolidated
Net Assets of the Company at the time of the Asset Sale under consideration;
and, provided, further, however, that the amount of (x) any liabilities of the
Company or any Restricted Subsidiary (other than liabilities that are incurred
in connection with or in contemplation of such Asset Sale) that are assumed by
the transferee of any such assets and (y) any notes or other obligations
received by the Company or any such Restricted Subsidiary from such transferee
that are promptly converted by the Company or such Restricted Subsidiary into
cash, shall be deemed to be cash (to the extent of the cash received) for
purposes of this provision.
The Senior Notes Indenture requires that within one year after any Asset
Sale, the Company (or such Restricted Subsidiary, as the case may be) shall
apply 100% of the Net Cash Proceeds from such Asset as follows: (A) to repay
any outstanding Guarantor Senior Indebtedness or other senior Indebtedness of
the Company, provided that the Company repay secured Indebtedness that is
otherwise pari passu with the Senior Notes only to the extent of the lesser of
the amount of such Indebtedness and the fair value of the property securing
such Indebtedness and, provided, further, that the Company may repay unsecured
Indebtedness that is pari passu in right of payment with the Senior Notes only
if the Company shall, prior to or simultaneously therewith, make an
irrevocable, unconditional offer to Holders of the Senior Notes to purchase
such Senior Notes on a pro rata basis in an amount equal to the Net Cash
Proceeds from such Asset Sale multiplied by a fraction, the numerator of which
is the principal amount of the Senior Notes then outstanding and the
denominator of which is the principal amount of the Senior Notes then
outstanding plus the aggregate amount of outstanding unsecured Indebtedness
other than the Senior Notes ranking pari passu in right of payment with the
Senior Notes that is to be repaid with such Net Cash Proceeds and, provided,
further, that the Company shall not be required to offer to repurchase the
Senior Notes unless the amount available for such repurchase is at least
$20,000,000; or (B) to replace the properties and assets that were the subject
of the Asset Sale, or to acquire or improve properties and assets that (as
determined by the Board of Directors of the Company,) will be used in a Related
Business of the Company or its Restricted Subsidiaries, provided that if an
Asset Sale consists of the sale or other disposition of all or substantially
all of the assets of a Guarantor or Pledged Subsidiary, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the
Capital Stock of a Guarantor or Pledged Subsidiary owned directly or indirectly
by the Company, with or to any Person not an Affiliate of the Company, then,
notwithstanding the foregoing in this clause (B) to the contrary, the Net Cash
Proceeds resulting from such Asset Sale shall be applied to acquire or improve
the properties and assets of a Related Business of a Guarantor, Pledged
Subsidiary or the Company.
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The Senior Notes Indenture will also provide that, notwithstanding the
foregoing, to the extent the Company or any of its Restricted Subsidiaries
receives securities or other noncash property or assets as proceeds of an Asset
Sale, the Company will not be required to make any application of such noncash
proceeds as described in the immediately preceding paragraph until it receives
cash or cash equivalent proceeds from a sale, repayment, exchange, redemption
or retirement of or extraordinary cash dividend or return of capital on, such
noncash property. Any amounts deferred pursuant to the preceding sentence will
be applied as described in the immediately preceding paragraph when cash
proceeds are thereafter received from a sale, repayment, exchange, redemption
or retirement of or an extraordinary cash dividend or return of capital on such
noncash property.
The Senior Notes Indenture also provides that to the extent the Company is
required to make an offer to purchase the Senior Notes pursuant to this
covenant (an "Asset Sale Offer"), the Company will so notify the Trustee in
writing by delivery of an Officers' Certificate and will offer to purchase from
all Holders, and will purchase from Holders accepting such Asset Sale Offer on
the date fixed for the closing of such Asset Sale Offer (the "Asset Sale Offer
Date"), the maximum principal amount (expressed as a multiple of $1,000) of
Senior Notes that may be purchased out of the Net Cash Proceeds, at an offer
price (the "Asset Sale Offer Price") in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to the Asset
Sale Offer Date, in accordance with the procedures as described below. To the
extent that the aggregate amount of Senior Notes tendered pursuant to an Asset
Sale Offer is less than the Net Cash Proceeds relating thereto, then the
Company may use such Excess Proceeds, or a portion thereof, for general
corporate purposes. Upon completion of an Asset Sale Offer, the amount of Net
Cash Proceeds will be reset to zero.
The Senior Notes Indenture also provides that:
(a) In the event the aggregate principal amount of Senior Notes
surrendered by Holders exceeds the amount of Net Cash Proceeds available to
such Holders, the Company will select the Senior Notes to be purchased on a
pro rata basis from all Senior Notes so surrendered, with such adjustments
as may be deemed appropriate by the Company so that only Senior Notes in
denominations of $1,000, or integral multiples thereof, will be purchased.
Holders whose Senior Notes are purchased only in part will be issued new
Senior Notes equal in principal amount to the unpurchased portion of the
Senior Notes surrendered.
(b) Not later than one Business Day prior to the Asset Sale Offer Date in
connection with which the Asset Sale Offer is being made, the Company will
(i) accept for payment Senior Notes or portions thereof tendered pursuant
to the Asset Sale Offer (on a pro rata basis if required pursuant to the
Indenture), (ii) deposit with the Paying Agent money sufficient, in
immediately available funds, to pay the purchase price of all Senior Notes
or portions thereof so accepted, and (iii) deliver to the Paying Agent an
Officers' Certificate identifying the Senior Notes or portions thereof
accepted for payment by the Company. The Paying Agent will promptly mail or
deliver to Holders so accepted payment in an amount equal to the Asset Sale
Offer Price of the Senior Notes purchased from each such Holder. Any Senior
Notes not so accepted will be promptly mailed or delivered by the Paying
Agent at the Company's expense to the Holder thereof.
Any Asset Sale Offer will be conducted by the Company in compliance with
applicable law, including, without limitation, Section 14(e) of the Exchange
Act and Rule 14e-1 thereunder, if applicable.
Limitations on Liens. The Senior Notes Indenture provides that the Company
may not and may not permit any Restricted Subsidiary to, directly or
indirectly, incur, or suffer to exist any Lien (other than Permitted Liens)
upon any of its property or assets, whether now owned or hereafter acquired.
Limitations on Line of Business. The Senior Notes Indenture provides that (a)
neither the Company nor any of its Restricted Subsidiaries shall directly or
indirectly engage to any substantial extent in any line or lines of business
activity other than in connection with a Related Business and (b) until such
time as the Company owns at least 80% of the outstanding common stock of
Richmond Homes, Richmond Homes shall
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not, nor shall it permit any of its Subsidiaries that are Restricted
Subsidiaries to, engage, directly or indirectly, in any line or lines of
business activity other than in the State of Colorado (excluding any property
owned by Richmond Homes or its Subsidiaries outside of Colorado on the Issue
Date).
Limitation on Status as Investment Company. The Senior Notes Indenture
prohibits the Company and its Restricted Subsidiaries from becoming "investment
companies" (as that term is defined in the Investment Company Act of 1940, as
amended), or from otherwise becoming subject to regulation under the Investment
Company Act.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Senior Notes Indenture provides that neither the Company nor any
Guarantor may consolidate with or merge with or into another Person or,
directly or indirectly, sell, lease or convey all or substantially all of its
assets (computed on a consolidated basis), whether in a single transaction or a
series of related transactions, to another Person or group of affiliated
Persons, unless (i) either (a) the Company or Guarantor, as the case may be, is
the continuing corporation or (b) the resulting, surviving or transferee entity
is a corporation or partnership organized under the laws of the United States,
any state thereof or the District of Columbia and expressly assumes by
supplemental indenture all of the obligations of the Company or such Guarantor,
as the case may be, under the Senior Notes and the Senior Notes Indenture or
the respective Guarantee; (ii) no Default or Event of Default shall exist or
shall occur immediately before or after giving effect to such transaction;
(iii) immediately after giving effect to such transaction on a pro forma basis,
the net worth of the surviving or transferee entity on a stand-alone basis is
at least equal to the net worth of the Company or such Guarantor, as the case
may be, on a stand-alone basis immediately prior to such transaction; and (iv)
the Company or the surviving or transferee entity thereof would immediately
thereafter be permitted to Incur at least $1.00 of additional Indebtedness
pursuant to the second paragraph under the caption "Limitation on Incurrence of
Additional Indebtedness and Issuances of Disqualified Capital Stock." The
provisions of clauses (iii) and (iv) above shall not apply to a transaction or
series of related transactions in which the sole participants are Wholly Owned
Restricted Subsidiaries of the Company or to a transaction between the Company
and its Wholly Owned Restricted Subsidiaries or between Richmond Homes and a
Wholly Owned Restricted Subsidiary. For purposes of this covenant, the
Consolidated Fixed Charge Coverage Ratio shall be determined on a pro forma
consolidated basis (giving effect to the transaction) for the Company and its
Restricted Subsidiaries for the Reference Period immediately preceding such
transaction. The foregoing shall be subject to certain provisions in the Senior
Notes Indenture that permit the Guarantees to be terminated in connection with
certain dispositions of the Guarantor or all or substantially all of its
assets. See "Guaranty."
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company or a Guarantor in accordance with the foregoing,
the successor corporation formed by such consolidation or into which the
Company or such Guarantor, as the case may be, is merged or to which such
transfer is made, shall succeed to, and be substituted for, and may exercise
every right and power of, the Company or such Guarantor, as the case may be,
under the Senior Notes Indenture with the same effect as if such successor
corporation had been named therein as the Company or such Guarantor, as the
case may be.
EVENTS OF DEFAULT AND REMEDIES
The Senior Notes Indenture defines an Event of Default as (i) the failure by
the Company to pay installments of interest on the Senior Notes as and when the
same become due and payable and the continuance of any such failure for 30
days, (ii) the failure by the Company to pay all or any part of the principal
or premium, if any, on the Senior Notes when and as the same become due and
payable at maturity, redemption, by acceleration or otherwise, including
payment of the Asset Sale Offer Price, the Offer Price, or the Change of
Control Purchase Price, (iii) the failure by the Company or any Restricted
Subsidiary to observe or perform any other covenant or agreement contained in
the Senior Notes or the Senior Notes Indenture and, subject to certain
exceptions, the continuance of such failure for a period of 45 days after
written notice is given to the Company by the Trustee or to the Company and the
Trustee by the Holders of
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at least 25% in aggregate principal amount of the Senior Notes outstanding,
(iv) certain events of bankruptcy, insolvency or reorganization in respect of
the Company or any of its Material Subsidiaries, (v)(A) the acceleration of any
Indebtedness (other than Non-Recourse Indebtedness) of the Company or any of
its Restricted Subsidiaries that has an outstanding principal amount of
$5,000,000 or more in the aggregate to be immediately due and payable; provided
that, in the event any such acceleration is withdrawn or otherwise rescinded
within a period of ten business days after such acceleration by the holders of
such Indebtedness, any Event of Default under this clause (v) will be deemed to
be cured and any acceleration under the Senior Notes Indenture will be deemed
withdrawn or rescinded; and (B) the failure by the Company or any of its
Restricted Subsidiaries to make any principal, premium, interest or other
required payment in respect of Indebtedness (other than Non-Recourse
Indebtedness) of the Company or any of its Restricted Subsidiaries with an
outstanding aggregate principal amount of $5,000,000 or more (after giving
effect to any applicable grace period set forth in the documents governing such
Indebtedness); and (vi) one or more final judgments in an amount not covered by
insurance or reserved for aggregating at least $5,000,000 at any one time
rendered against the Company or any of its Restricted Subsidiaries and not
bonded, satisfied or discharged for a period (during which execution shall not
be effectively stayed) of (A) 45 days after the judgment (which, if there is
more than one judgment, causes such judgments to exceed $5,000,000 in the
aggregate) becomes final and such court shall not have ordered or approved, and
the parties shall not have agreed upon, the payment of such judgment at a later
date or dates or (B) 45 days after all or any part of such judgment is payable
pursuant to any court order or agreement between the parties. The Senior Notes
Indenture provides that if a Default occurs and is continuing and if it is
known to the Trustee, the Trustee must, within 90 days after the occurrence of
such default, give to the Holders notice of such default; provided that, except
in the case of default in payment of principal of, premium, if any, or interest
on the Senior Notes, including a default in the payment of the Asset Sale Offer
Price, the Offer Price, or the Change of Control Purchase Price as required by
the Senior Notes Indenture, the Trustee will be protected in withholding such
notice if it in good faith determines that the withholding of such notice is in
the interest of the Holders.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (iv), above, relating to the Company or its
Restricted Subsidiaries), then in every such case, unless the principal of all
of the Senior Notes shall have already become due and payable, either the
Trustee or the Holders of 25% in aggregate principal amount of the Senior Notes
then outstanding, by notice in writing to the Company (and to the Trustee if
given by Holders) (an "Acceleration Notice"), may declare all principal,
determined as set forth below, including in each case accrued interest thereon,
or, as appropriate, the Change of Control Purchase Price (if due and unpaid) to
be due and payable immediately. If an Event of Default specified in clause (iv)
above, relating to the Company or any of its Material Subsidiaries occurs, all
principal and accrued interest thereon will be immediately due and payable on
all outstanding Senior Notes without any declaration or other act on the part
of the Trustee or the Holders. The Holders of no less than a majority in
aggregate principal amount of the Senior Notes then outstanding generally are
authorized to rescind such acceleration if all existing Events of Default,
other than the non-payment of the principal of, premium, if any, and interest
on the Senior Notes which have become due solely by such acceleration, have
been cured or waived.
Prior to the declaration of acceleration of the maturity of the Senior Notes,
the Holders of a majority in aggregate principal amount of the Senior Notes at
the time outstanding may waive on behalf of all the Holders any default, except
a default in the payment of principal of or interest on any Senior Note not yet
cured, or a default with respect to any covenant or provision which cannot be
modified or amended without the consent of the Holder of each outstanding
Senior Note affected. Subject to the provisions of the Senior Notes Indenture
relating to the duties of the Trustee, the Trustee is under no obligation to
exercise any of its rights or powers under the Senior Notes Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable security or indemnity. Subject to all
provisions of the Senior Notes Indenture and applicable law, the Holders of a
majority in aggregate principal amount of the Senior Notes at the time
outstanding have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee.
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SATISFACTION AND DISCHARGE OF THE SENIOR NOTES INDENTURE, COVENANT DEFEASANCE
The Company and the Guarantors may terminate their respective obligations
under the Senior Notes Indenture when (i) either (A) all outstanding Senior
Notes have been delivered to the Trustee for cancellation or (B) all such
Senior Notes not theretofore delivered to the Trustee for cancellation have
become due and payable or will become due and payable within one year and the
Company has irrevocably deposited or caused to be deposited with the Trustee
funds in an amount sufficient to pay and discharge the entire indebtedness on
the Senior Notes, not theretofore delivered to the Trustee for cancellation,
for principal of, premium, if any, and interest to the date of deposit or
Stated Maturity or redemption; (ii) the Company has paid or caused to be paid
all sums payable by the Company under the Senior Notes Indenture; and (iii) the
Company has delivered an Officer's Certificate and an Opinion of Counsel
relating to compliance with the conditions set forth in the Senior Notes
Indenture.
The Company will be deemed to have paid and discharged the entire
indebtedness on the Senior Notes and the Senior Notes Indenture shall cease to
be of further effect as to all outstanding Senior Notes (except as to (i)
rights of registration of transfer, substitution and exchange of Senior Notes
and the Company's right of optional redemption, (ii) rights of Holders to
receive payments of principal of, premium, if any, and interest on the Senior
Notes (but not the Change of Control Purchase Price of the Senior Notes) and
any other rights of the Holders with respect to such amounts, (iii) the rights,
obligations and immunities of the Trustee under the Indenture and (iv) certain
other specified provisions in the Senior Notes Indenture (the foregoing
exceptions (i) through (iv) are collectively referred to as the "Reserved
Rights")) after the irrevocable deposit by the Company with the Trustee, in
trust for the benefit of the Holders, of (A) money in an amount, (B) U.S.
Government Obligations which through the payment of interest and principal will
provide, not later than one day before the due date of payment in respect of
the Senior Notes, money in an amount, or (C) a combination thereof, sufficient
to pay and discharge the principal of and interest on the Senior Notes then
outstanding on the dates on which any such payments are due in accordance with
the terms of the Indenture and of the Senior Notes. Defeasance may only be
deemed to occur if certain conditions are satisfied, including, among other
things, delivery by the Company to the Trustee of an opinion of outside counsel
acceptable to the Trustee (who may be outside counsel to the Company). The
Senior Notes Indenture will not be discharged if, among other things, a default
or an Event of Default shall have occurred and be continuing on the date of
such deposit or shall occur on or before the 91st day (or one day after such
greater period of time in which any such deposit of trust funds may remain
subject to bankruptcy or insolvency laws) after the date of such deposit.
REPORTS
The Company is required to furnish to the Trustee, within 120 days after the
end of each fiscal year, an Officers' Certificate to the effect that such
officers have conducted or supervised a review of the activities of the Company
and its Subsidiaries and of performance under the Senior Notes Indenture and
that, to the best of such officers' knowledge, based on their review, the
Company has fulfilled all of its obligations under the Indenture or, if there
has been a Default, specifying each Default known to them, its nature and its
status.
The Company and each Guarantor shall deliver to the Trustee and to each
Holder, within 15 days after it files them with the Commission, copies of all
reports and information that the Company is required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act. If the Company
or a Guarantor is not subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act (or otherwise required to file reports pursuant to
the immediately preceding sentence), the Company and each Guarantor shall
deliver to the Trustee and to each Holder, within 15 days after it would have
been required to file such with the Commission, annual and quarterly financial
statements substantially equivalent to financial statements that would have
been included in reports filed with the Commission if the Company or the
Guarantor were subject to the requirements of Section 13 or 15(d) of the
Exchange Act, together with a management's discussion and analysis of financial
condition and results of operations which would be so required, provided that
the Guarantors shall not be obligated to present financial or other information
on a stand-alone basis unless they would have been required to do so pursuant
to Section 13 or 15(d) of the Exchange Act.
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AMENDMENTS AND SUPPLEMENTS
The Senior Notes Indenture contains provisions permitting the Company and the
Trustee to enter into a supplemental indenture for certain limited purposes
without the consent of the Holders. With the consent of the Holders of not less
than a majority in aggregate principal amount of the Senior Notes at the time
outstanding, the Company and the Trustee are permitted to amend or supplement
the Senior Notes Indenture or any supplemental indenture or modify the rights
of the Holders; provided, that no such modification may, without the consent of
each Holder affected thereby: (i) change the Stated Maturity of or the Change
of Control Payment Date or the Purchase Date on, any Senior Note, or reduce the
principal amount thereof or the rate (or extend the time for payment) of
interest thereon or any premium payable upon the redemption thereof, or change
the place of payment where, or the coin or currency in which, any Senior Note
or any premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the Stated
Maturity thereof (or, in the case of redemption, on or after the Redemption
Date), or reduce the Change of Control Purchase Price or alter the redemption
provisions or the provisions of the "Repurchase of Notes at the Option of the
Holder Upon a Change of Control" covenant in a manner adverse to the Holders,
or (ii) reduce the percentage in principal amount of the outstanding Senior
Notes, the consent of whose Holders is required for any such amendment,
supplemental indenture or waiver provided for in the Senior Notes Indenture, or
(iii) modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisions of the Senior Notes
Indenture cannot be modified or waived without the consent of the Holder of
each outstanding Senior Note affected thereby.
REGISTRATION RIGHTS
The holders of New Notes will not be entitled to any registration rights with
respect to the New Notes. Pursuant to the Registration Rights Agreement, a copy
of which has been filed as an exhibit to the Registration Statement, the
Company is required to have consummated this Exchange Offer no later than July
4, 1994. Assuming consummation of the Exchange Offer made hereby, all of the
Company's registration obligations with respect to the Old Notes under the
Registration Rights Agreement will have been fulfilled.
NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS, DIRECTORS
No stockholder, employee, officer or director, as such, past, present or
future of the Company or any Subsidiary or any successor corporation shall have
any personal liability in respect of the obligations of the Company under the
Senior Notes Indenture, the Senior Notes by reason of his or its status as such
stockholder, employee, officer or director.
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PLAN OF DISTRIBUTION
The resale of New Notes ("Resale Notes") received by any broker-dealer, as
that term is defined under the Securities Act (a "Dealer"), in exchange for
Old Notes held for its own account (such a Dealer being herein referred to as
a "Restricted Holder") may be effected from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Resale Notes (whether such options are
listed on an options exchange or otherwise), or a combination of such methods
of sale, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or negotiated prices. The Restricted Holders may
be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act and any commissions received by them and any profit on the
resale of the Resale Notes by them might be deemed to be underwriting
discounts and commissions under the Securities Act.
Restricted Holders are also required to deliver a copy of this Prospectus
(as it may be amended or supplemented) to each purchaser of Resale Notes. This
is in addition to the obligation of all Dealers effecting transactions in the
Senior Notes to deliver a copy of this Prospectus (as it may be amended or
supplemented) until August 18, 1994. The Company has agreed that for a period
of no more than 180 days after the Expiration Date, it will make such a
Prospectus available to any Dealer for use in connection with any such resale.
If any Restricted Holder is required to deliver this Prospectus after December
17, 1994, and this Prospectus must be amended or supplemented in order to
comply with the Securities Act and the rules thereunder, the cost of such
amendment or supplement must be borne by such Restricted Holder.
A broker-dealer may only participate in the Exchange Offer with respect to
Old Notes acquired for its own account as a result of market-making activities
or other trading activities. Pursuant to representations contained in the
Letter of Transmittal, each broker-dealer represents that it does not have any
arrangement or understanding with any person to participate in a distribution
of the New Notes.
LEGAL MATTERS
Certain matters with respect to the legality and binding nature of the New
Notes have been passed upon for the Company and the Guarantors by Brownstein
Hyatt Farber & Strickland, P.C., Denver, Colorado.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K for the year ended December 31, 1993, have been so
incorporated in reliance on the report of Price Waterhouse, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
With respect to the unaudited condensed consolidated balance sheet of M.D.C.
Holdings, Inc. and subsidiaries as of March 31, 1994, and the related
condensed consolidated statements of income and of cash flows for the three-
month periods ended March 31, 1994 and 1993 incorporated by reference in this
Prospectus, Price Waterhouse reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate report dated April 26, 1994 incorporated
by reference herein states that they did not audit and they do not express an
opinion on that unaudited consolidated financial information. Price Waterhouse
has not carried out any significant or additional audit tests beyond those
which would have been necessary if their report had not been included.
Accordingly, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
Price Waterhouse is not subject to the liability provisions of section 11 of
the Securities Act of 1933 for their report on the unaudited consolidated
financial information because that report is not a "report" or a "part" of the
registration statement prepared or certified by Price Waterhouse within the
meaning of sections 7 and 11 of the Act.
44
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UN-
DER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Prospectus Summary......................................................... 3
Risk Factors............................................................... 8
The Exchange Offer......................................................... 12
Certain Federal Income Tax Considerations.................................. 16
Description of the Senior Notes............................................ 20
Plan of Distribution....................................................... 44
Legal Matters.............................................................. 44
Experts.................................................................... 44
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$190,000,000
M.D.C. HOLDINGS, INC. AND SUBSIDIARIES
SERIES B 11 1/8% SENIOR NOTES
DUE 2003
----------------
PROSPECTUS
----------------
MAY 19, 1994
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-Laws and Certificates of Incorporation of the Company provide for
indemnification of the officers and directors of the Company and each of
Richmond American Homes, Inc., Richmond Homes, Inc. I and Richmond Homes, Inc.
II to the full extent permitted by applicable law. Section 145 of the Delaware
General Corporation Law provides in part that a corporation shall have the
power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Similar indemnity is authorized for such persons against expenses (including
attorneys's fees) actually and reasonably incurred in defense or settlement of
any threatened, pending or completed action or suit by or in the right of the
corporation, if such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and
provided further (unless a court of competent jurisdiction otherwise provides)
such person shall not have been adjudged liable to the corporation. Any such
indemnification may be made only as authorized in each specific case upon a
determination by the stockholders or disinterested directors that
indemnification is proper because the indemnitee has met the applicable
standard of conduct.
Additionally, the Certificates of Incorporation of the Company and each of
Richmond American Homes, Inc., Richmond Homes, Inc. I and Richmond Homes, Inc.
II eliminate in certain circumstances the monetary liability of directors for
breach of their fiduciary duty as directors. This provision does not eliminate
the liability of a director (i) for a breach of the director's duty of loyalty
to the respective corporation or its stockholders; (ii) for acts or omissions
by the director not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) for liability arising under Section 174 of the
Delaware General Corporation Law (relating to the declaration of dividends and
purchase or redemption of shares in violation of the Delaware General
Corporation Law); or (iv) for any transaction from which the director derived
an improper personal benefit.
Section 7-3-101.5 of the Colorado Corporation Code ("CCC") and, together,
Sections 13.1-697, -698, -699, -701, -702, -703 and -704 of the Virginia Stock
Corporation Act ("VSCA") each provide, generally and in part, that a
corporation may indemnify an individual made a party to a proceeding because
he is or was a director against liability incurred in the proceeding if he
conducted himself in good faith and reasonably believed, in the case of
conduct in his official capacity with the corporation, that his conduct was in
its best interests, or in all other cases, that his conduct was at least not
opposed to its best interests and, in the case of any criminal proceeding, he
had no reasonable cause to believe his conduct was unlawful; provided,
however, that a corporation may not indemnify a director in connection with a
proceeding by or in the right of the corporation in which the director was
adjudged liable to the corporation or in connection with any other proceeding
charging improper personal benefit to him in which he was adjudged liable.
Such indemnification in connection with a proceeding by or in the right of the
corporation is limited to reasonable expenses incurred in connection
therewith. Unless limited by a corporation's certificate of incorporation,
similar indemnity with respect to expenses incurred is mandatory under Section
7-3-101.5 of the CCC and the above-referenced Sections of the VSCA for a
director or officer who was wholly successful on the merits or otherwise, in
defense of any proceedings to which he was a party because he is or was a
director or officer, as the case may be. Any such indemnification may be made
only as authorized in each specific case after a determination by
disinterested directors, special legal counsel or disinterested shareholders
that
II-1
<PAGE>
indemnification is permissible because the indemnitee has met the applicable
standard of conduct. Directors and officers may also apply for court-ordered
indemnification. Pursuant to Section 7-3-101.5 of the CCC, a corporation may
also indemnify and advance expenses to officers, employees and agents who are
not directors to the extent provided by the corporation's certificate of
incorporation, by-laws, board resolutions or contract. Pursuant to Section
13.1-704 of the VSCA, a corporation may also indemnify and advance expenses to
any director, officer, employee or agent to the extent provided by the
corporation's certificate of incorporation, any by-law made by the shareholders
or any resolution adopted by the shareholders, except an indemnity against
willful misconduct or a knowing violation of the criminal law.
Section 2-418 of the Maryland General Corporation Law ("MGCL") provides,
generally and in part, that a corporation may indemnify any director made a
party to a proceeding by reason of the individual's service in that capacity
unless it is established that the director's act or omission (1) was material
to the matter giving rise to the proceeding; (2) was committed in bad faith; or
(3) was the result of active and deliberate dishonesty; or unless it is
established that the director actually received an improper personal benefit in
money, property or services. In the case of a criminal proceeding, indemnity is
permissible unless it is established that the director had reasonable cause to
believe that the act or omission was unlawful. Indemnification may be against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by the director in connection with the proceeding, but if the
proceeding was one by or in the right of the corporation, indemnification may
not be made in respect of any proceeding in which at the director shall have
been adjudged liable to the corporation or in connection with any other
proceeding charging improper personal benefit to him in which he was adjudged
liable. Such indemnification in connection with a proceeding by or in the right
of the corporation is limited to reasonable expenses incurred in connection
therewith. Unless limited by a corporation's certificate of incorporation,
similar indemnity with respect to expenses incurred is mandatory under Section
2-418 of the MGCL for a director or officer who was wholly successful in the
defense of any proceeding referred to in the first sentence of this paragraph
to which he was a party because he is or was a director or officer, as the case
may be. Any such indemnification may be made only as authorized in each
specific case after a determination by disinterested directors, special legal
counsel or disinterested shareholders that indemnification is permissible
because the indemnitee has met the applicable standard of conduct. Directors
and officers may also apply for court-ordered indemnification. Pursuant to
Section 7-3-101.5 of the CCC, a corporation may also indemnify and advance
expenses to officers, employees and agents who are not directors to the extent
provided by the corporation's certificate of incorporation, by-laws, board
resolutions or contract.
Neither the articles nor the by-laws of any of the Guarantors (excluding
those Guarantors incorporated in the State of Delaware) provide for the
indemnification of directors or officers against any liability which they may
incur in their capacities as such.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
3.1(a) Form of Amendment to the Certificate of Incorporation of M.D.C.
Holdings, Inc. (hereinafter sometimes referred to as "MDC", the
"Company" or the "Registrant") regarding director liability, filed
with the Delaware Secretary of State on July 1, 1987 (incorporated
by reference to Exhibit 3.1(a) of the Company's Quarterly Report
on Form 10-Q dated June 30, 1987).
3.1(b) Form of Certificate of Incorporation of MDC, as amended
(incorporated herein by reference to Exhibit 3.1(b) of the
Company's Quarterly Report on Form 10-Q dated June 30, 1987).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
4.1 Form of Certificate for shares of the Company's common stock
(incorporated herein by reference to Exhibit 4.1 of the Company's
Registration Statement on Form S-3, Registration No. 33-426).
4.2(a) Form of Indenture, dated as of June 15, 1984, between the Company
and The Royal Bank and Trust Company, with respect to the
Company's Subordinated Exchangeable Variable Rate Notes (the "1984
RBTC Indenture") (incorporated herein by reference to Exhibit 4.3
of the Company's Registration Statement on Form S-2, Registration
No. 2-90744).
4.2(b) First Supplemental Indenture, dated as of June 20, 1985, to the
1984 RBTC Indenture (incorporated herein by reference to Exhibit
4.13(a) of the Company's Registration Statement on Form S-3,
Registration No. 33-426).
4.2(c) Form of the Company's Subordinated Exchangeable Variable Rate
Notes (filed as Exhibits A and B to Exhibit 4.13 and incorporated
herein by reference to Exhibit 4.3 of the Company's Registration
Statement on Form S-2, Registration No. 2-90744).
4.3 Note Purchase Agreement, dated as of December 13, 1985, among the
Company, Yosemite Financial, Inc., a Colorado corporation and a
wholly-owned subsidiary of the Company, and City Investing Company
Liquidating Trust, including exhibits (incorporated herein by
reference to Exhibit 4.26 of the Company's Registration Statement
on Form S-2, Registration No. 33-2734).
4.4(a) Form of Senior Notes Indenture, dated as of December 15, 1993, by
and among the Company, the Guarantors and Pledgors named therein
and First Bank National Association, a National Association, as
Trustee, with respect to the Company's 11 1/8% Senior Notes due
2003, including form of Senior Note (the "Senior Notes Indenture")
(incorporated herein by reference to Exhibit 4.1 of the Company's
Form 8-K dated January 11, 1994).
4.4(b) First Supplemental Indenture, dated as of February 2, 1994, to the
Senior Notes Indenture (incorporated herein by reference to
Exhibit 4.4(b) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993).
4.5 Form of Convertible Notes Indenture, dated as of December 15,
1993, by and between the Company and First Bank National
Association, a National Association, as Trustee, with respect to
the Company's 8 3/4% Convertible Subordinated Notes due 2005,
including form of Convertible Note (incorporated herein by
reference to Exhibit 4.2 of the Company's Form 8-K dated January
11, 1994).
4.6 Form of Senior Notes Registration Rights Agreement, dated as of
December 28, 1993, by and among the Company, the Guarantors named
therein and the Purchasers who are signatories thereto, with
respect to the Company's Senior Notes (incorporated herein by
reference to Exhibit 4.3 of the Company's Form 8-K dated January
11, 1994).
4.7 Form of Convertible Notes Registration Rights Agreement, dated as
of December 28, 1993, by and between the Company and the
Purchasers who are signatories thereto, with respect to the
Company's Convertible Subordinated Notes (incorporated herein by
reference to Exhibit 4.4 of the Company's Form 8-K dated January
11, 1994).
5 Opinion of Brownstein Hyatt Farber & Strickland, P.C.
12 Statement regarding the earnings to fixed charges of the Company.
15 Letter regarding unaudited interim financial information.
23.1 Consent of Price Waterhouse.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
23.2 Consent of Brownstein Hyatt Farber & Strickland, P.C. (filed as
part of Exhibit 5 above).
*24 Power of Attorney.
*25 Statement of eligibility and qualification on Form T-1 of First
Bank National Association, dated February 8, 1994.
99.1 Agreement and Plan of Merger dated February 2, 1994 between
Richmond Acquisitions, Inc. and Richmond Homes (incorporated
herein by reference to Exhibit 99 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1993).
99.2 Form of Letter of Transmittal
</TABLE>
- --------
*Previously filed.
(b) Financial Statement Schedules
Schedule II
--Amounts Receivable From Related Parties and Underwriters,
Promoters and Employees Other Than Related Parties (incorporated
herein by reference to Schedule II to the Company's Annual Report
on Form 10-K for the year ended December 31, 1993).
Schedule
VIII
--Valuation and Other Qualifying Accounts (incorporated herein by
reference to Schedule VIII to the Company's Annual Report on Form
10-K for the year ended December 31, 1993).
Schedule IX
--Short-Term Borrowings (incorporated herein by reference to
Schedule IX to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993).
Schedule
XII
--Mortgage Loans (incorporated herein by reference to Schedule XII
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993).
II-4
<PAGE>
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding), is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned registrant hereby undertakes: (1) to file, during any period
in which offers or sales are being made, a post-effective amendment to this
registration statement: (i) to include any prospectus required by section
10(a)(3) of the Securities Act; (ii) to reflect in the prospectus any facts or
events arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement; (iii) to include any material information with respect
to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement; (2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and (3) to remove from registration by means of a post-
effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF DENVER, STATE OF COLORADO, ON MAY 19, 1994.
M.D.C. Holdings, Inc.
By: /s/ Paris G. Reece III
---------------------------------
Paris G. Reece III
Vice President, Secretary,
Treasurer and Chief Financial
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
*Larry A. Mizel Chairman of the
- ------------------------------------ Board and Chief May 19, 1994
Larry A. Mizel Executive Officer
President, Chief
*Spencer I. Browne Operating Officer May 19, 1994
[/R]------------------------------------ and Director [/R]
Spencer I. Browne
/s/ David D. Mandarich Executive Vice May 19, 1994
- ------------------------------------ President--Real [/R]
Estate and
David D. Mandarich [/R] Director [/R]
/s/ Paris G. Reece III Vice President,
- ------------------------------------ Secretary, May 19, 1994
Paris G. Reece III Treasurer and
Chief Financial
Officer (principal
financial and
accounting
officer)
*Gilbert Goldstein Director
- ------------------------------------ May 19, 1994
Gilbert Goldstein
*William B. Kemper Director
- ------------------------------------ May 19, 1994
William B. Kemper
*Steven J. Borick Director
- ------------------------------------ May 19, 1994
Steven J. Borick
/s/ Herbert T. Buchwald Director [/R] May 19, 1994
- ------------------------------------ [/R]
Herbert T. Buchwald
/s/ Paris G. Reece III
*By_________________________________
Paris G. Reece III
As Attorney In Fact
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF DENVER, STATE OF COLORADO, ON MAY 19, 1994.
Richmond American Homes of
California, Inc.
By: /s/ Paris G. Reece III
--------------------------------
Paris G. Reece III
Secretary and Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
*Spencer I. Browne Executive Vice
President and
Assistant May 19, 1994
- ------------------------------------ Secretary and
Spencer I. Browne Director
(principal
executive officer)
/s/ Paris G. Reece III
Secretary and
Treasurer
- ------------------------------------ (principal May 19, 1994
Paris G. Reece III financial officer
and principal
accounting
officer)
*By /s/ Paris G. Reece III
-------------------------------
Paris G. Reece III
As Attorney-in-Fact
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF DENVER, STATE OF COLORADO, ON MAY 19, 1994.
Richmond American Homes of Maryland,
Inc.
By: /s/ Paris G. Reece III
----------------------------------
Paris G. Reece III
Secretary and Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
Executive Vice
*Spencer I. Browne President and May 19, 1994
- ------------------------------------ Assistant [/R]
Spencer I. Browne Secretary and
Director
(principal
executive officer)
/s/ Paris G. Reece III Secretary and
- ------------------------------------ Treasurer May 19, 1994
Paris G. Reece III (principal
financial and
accounting
officer)
*By /s/ Paris G. Reece III
---------------------------- [/R]
Paris G. Reece III
As Attorney-in-Fact
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF DENVER, STATE OF COLORADO, ON MAY 19, 1994.
Richmond American Homes of Nevada,
Inc.
By: /s/ Paris G. Reece III
------------------------------
Paris G. Reece III
Secretary and Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
Executive Vice
*Spencer I. Browne President and May 19, 1994
- ------------------------------------- Assistant Secretary [/R]
Spencer I. Browne and Director
(principal
executive officer)
/s/ Paris G. Reece III Secretary and
- ------------------------------------- Treasurer May 19, 1994
Paris G. Reece III (principal
accounting and
financial officer)
*By /s/ Paris G. Reece III
----------------------------- [/R]
Paris G. Reece III
As Attorney-in-Fact
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF DENVER, STATE OF COLORADO, ON MAY 19, 1994.
Richmond American Homes of Virginia,
Inc.
/s/ Paris G. Reece III
By: -----------------------------
Paris G. Reece III
Secretary and Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
Executive Vice
*Spencer I. Browne President and May 19, 1994
- ------------------------------------ Assistant [/R]
Spencer I. Browne Secretary and
Director
(principal
executive officer)
/s/ Paris G. Reece III Secretary and
- ------------------------------------ Treasurer May 19, 1994
Paris G. Reece III (principal
financial and
accounting
officer)
/s/ Paris G. Reece III
*By --------------------------- [/R]
Paris G. Reece III
As Attorney-in-Fact
II-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF DENVER, STATE OF COLORADO, ON MAY 19, 1994.
Richmond American Homes, Inc.
By: /s/ Paris G. Reece III
---------------------------
Paris G. Reece III
Secretary and Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
Executive Vice
*Spencer I. Browne President and May 19, 1994
- ------------------------------------ Assistant [/R]
Spencer I. Browne Secretary and
Director
(principal
executive officer)
/s/ Paris G. Reece III Secretary and
- ------------------------------------ Treasurer May 19, 1994
Paris G. Reece III (principal
financial and
accounting
officer)
*By /s/ Paris G. Reece III
-------------------------
Paris G. Reece III
As Attorney-in-Fact
II-11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF DENVER, STATE OF COLORADO, ON MAY 19, 1994.
Richmond Homes, Inc. I
By: /s/ Brian A. Peterson
----------------------------------
Brian A. Peterson
Executive Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
*David D. Mandarich Chairman of the
- ------------------------------------ Board and May 19, 1994
David D. Mandarich President
(principal
executive officer)
/s/ Brian A. Peterson Executive Vice
- ------------------------------------ President, May 19, 1994
Brian A. Peterson Secretary and
Treasurer
(principal
financial and
accounting
officer)
*Larry A. Mizel Director
- ------------------------------------ May 19, 1994
Larry A. Mizel
*Spencer I. Browne Director
- ------------------------------------ May 19, 1994
Spencer I. Browne
*Steven J. Borick Director
- ------------------------------------ May 19, 1994
Steven J. Borick
/s/ Brian A. Peterson
*By: _______________________________
Brian A. Peterson
As Attorney In Fact
II-12
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF DENVER, STATE OF COLORADO, ON MAY 19, 1994.
Richmond Homes, Inc. II
/s/ Brian A. Peterson
By: __________________________________
Brian A. Peterson
Executive Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
*David D. Mandarich Chariman of the
- ------------------------------------ Board and May 19, 1994
David D. Mandarich President
(principal
executive officer)
/s/ Brian A. Peterson
- ------------------------------------ Executive Vice May 19, 1994
Brian A. Peterson President,
Secretary and
Treasurer
(principal
financial and
accounting
officer) [/R]
*Spencer I. Browne Director
- ------------------------------------ May 19, 1994
Spencer I. Browne
*Steven J. Borick Director
- ------------------------------------ May 19, 1994
Steven J. Borick
/s/ Brian A. Peterson
*By: _______________________________
Brian A. Peterson
As Attorney In Fact
II-13
<PAGE>
(LETTERHEAD OF BROWNSTEIN HYATT FARBER & STRICKLAND, P.C.
APPEARS HERE)
May 18, 1994
M.D.C. Holdings, Inc.
3600 South Yosemite Street
Suite 900
Denver, Colorado 80237
Ladies and Gentlemen:
M.D.C. Holdings, Inc. (the "Company") has filed with the Securities and
Exchange Commission a registration statement (the "Registration Statement") on
Form S-4 (Registration No. 33-52245), as amended, which relates to the exchange
of $1,000 principal amount of the Company's Series B 11 1/8% Senior Notes due
2003 (the "New Notes") and related guarantees (the "New Guarantees") made by
certain of the Company's subsidiaries, for each $1,000 principal amount of the
Company's 11 1/8% Senior Notes due 2003 (the "Old Notes") and related guarantees
made by certain of the Company's subsidiaries.
We have examined such corporate records of the Company and certain of its
subsidiaries (the names of which appear on the cover page of the Registration
Statement) and such other documents as we have deemed appropriate to render this
opinion.
Based upon the foregoing, we are of the opinion that the New Notes and New
Guarantees have been duly authorized and, when exchanged in accordance with the
exchange offer procedures set forth in the Registration Statement and the
Indenture relating to the New Notes and New Guarantees, will constitute valid
and binding agreements of the Company, in the case of the New Notes, and of the
respective guarantors, in the case of the New Guarantees.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the use of our name in the Prospectus that is a
part of the Registration Statement under the caption "Legal Matters."
Very truly yours,
Brownstein Hyatt Farber & Strickland, P.C.
/s/ Brownstein Hyatt Farber &
Strickland, P.C.
[33055]
<PAGE>
M.D.C. HOLDINGS, INC.
STATEMENT REGARDING THE EARNINGS TO FIXED CHARGES OF THE COMPANY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1993 1992 1991 1990 1989
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating Income (Loss) Before
Income Taxes....................... $15,032 $ 6,520 $(14,119) $(12,565) $(116,417)
Add Back Previously Capitalized Home
Building Interest Expense Included
in Cost of Sales................... 19,810 21,339 13,719 20,581 33,762
Corporate and Home Building Interest
Expense............................ 11,454 13,359 12,905 16,551 34,803
Other Debt Related Expenses......... 3,425 1,967 1,975 2,699 3,344
------- ------- -------- -------- ---------
Earnings Before Interest and
Taxes........................... $49,721 $43,185 $ 14,480 $ 27,266 $ (44,508)
======= ======= ======== ======== =========
Interest Incurred................... $25,505 $24,802 $ 25,534 $ 34,726 $ 70,152
Other Debt Related Expenses......... 3,425 1,967 1,975 2,699 3,344
------- ------- -------- -------- ---------
Total Fixed Charges............... $28,930 $26,769 $ 27,808 $ 37,425 $ 73,496
======= ======= ======== ======== =========
Ratio of Earnings to Fixed Charges.. 1.72 1.61 0.53 0.73 N/A
======= ====== ======== ======== =========
</TABLE>
<PAGE>
(PRICE WATERHOUSE LETTERHEAD AND LOGO APPEARS HERE)
Exhibit No. 15
May 19, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
We are aware that M.D.C. Holdings, Inc. has included our report dated
April 26, 1994 (issued pursuant to the provisions of Statement on Auditing
Standards No. 71) in the Prospectus constituting part of its Registration
Statement on Form S-4 to be filed on or about May 19, 1994. We are also
aware of our responsibilities under the Securities Act of 1933.
Yours very truly,
/s/ Price Waterhouse
Price Waterhouse
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of M.D.C.
Holdings, Inc. of our report dated February 10, 1994 appearing on page
F-2 of M.D.C. Holdings, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1993. We also consent to the reference to us under
the heading "Experts" in such Prospectus.
PRICE WATERHOUSE
Los Angeles, California
May 19, 1994
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER
11 1/8% SENIOR NOTES DUE 2003
PURSUANT TO THE EXCHANGE OFFER
DATED MAY 19, 1994
of
M.D.C. HOLDINGS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., JUNE 20, 1994,
NEW YORK CITY TIME, UNLESS EXTENDED
The Exchange Agent will be First Bank National Association, whose mailing
address, facsimile number and telephone number are as follows:
By Hand or Overnight Express: By Mail: [/R]
First Bank National Association
180 E. Fifth Street First Bank National
Association
3rd Floor, Bond Drop Window
P.O. Box 64485
St. Paul, Minnesota 55101
180 E. Fifth Street
Attn: Specialized Finance St. Paul, Minnesota 55164-
0485 [/R]
Attn: Specialized Finance
By Facsimile:
(612) 244-1145
By telephone:
(612) 244-0444
DESCRIPTION OF SECURITIES TENDERED
NAME AND ADDRESS OF REGISTERED HOLDER AS IT CERTIFICATE PRINCIPAL
APPEARS ON THE 11 1/8% SENIOR NOTES DUE 2003 NUMBER(S) OF AMOUNT OF OLD
("OLD NOTES") OLD NOTES NOTES
TRANSMITTED TRANSMITTED
- --------------------------------------------------------------------------------
$
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY.
<PAGE>
Gentlemen:
1. The undersigned hereby tenders to M.D.C. HOLDINGS, INC., a Delaware
corporation (the "Company"), the above-described 11 1/8% Senior Notes due 2003
(the "Old Notes") pursuant to the Company's offer of $1,000 principal amount of
Series B 11 1/8% Senior Notes due 2003 (the "New Notes") in exchange for each
$1,000 principal amount of Old Notes, upon the terms and subject to the
conditions contained in the Registration Statement on From S-4, as amended,
filed by the Company and its Subsidiaries named on the cover thereof
(collectively, the "Registrants") with the Securities and Exchange Commission
(the "Registration Statement") and the accompanying Prospectus dated May 19,
1994 (the "Prospectus"), receipt of which is hereby acknowledged.
2. The undersigned hereby represents and warrants that it has full authority
to tender the Old Notes described above. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Company to be
necessary or desirable to complete the tender of Old Notes.
3. The undersigned understands that the tender of the Old Notes pursuant to
all of the procedures set forth in the Prospectus will constitute an agreement
between the undersigned and the Company as to the terms and conditions set
forth in the Prospectus.
4. The undersigned hereby represents and warrants that (i) it is acquiring
the New Notes in the ordinary course of its business, (ii) it is not engaged
in, and does not intend to engage in, a distribution of the New Notes within
the meaning of the Securities Act of 1933, as amended (the "Securities Act")
and has no arrangement or understanding with any person to participate in any
such distribution of the New Notes, and (iii) that it is not an affiliate of
any Registrant. The undersigned also represents and warrants that if it is a
broker-dealer, the Old Notes to be exchanged for New Notes were acquired as a
result of market making activities or other trading activities and that the
undersigned will deliver a prospectus in connection with any resale of any New
Notes. By so acknowledging, the undersigned shall not be deemed to admit that,
by delivering a prospectus, it is an "underwriter" within the meaning of the
Securities Act or that the undersigned is required to deliver a prospectus in
connection with any resale of New Notes.
5. Any obligation of the undersigned hereunder shall be binding upon the
successors, assigns, executors, administrators, trustees in bankruptcy and
legal and personal representatives of the undersigned.
[_]
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: _____________________________________________________________________
Address: __________________________________________________________________
-------------------------------------------------------------------
<PAGE>
SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 1)
To be completed ONLY IF the New Notes are to be sent to someone other than
the undersigned or to the undersigned at an address other than that provided
above.
Mail to:
Name ___________________________________________________________________________
(Please Print)
Address ________________________________________________________________________
-------------------------------------------------------------------------
(Include Zip Code)
SIGNATURE
-----------------------------------------------------------------------------
(Name of Registered Holder)
By:
-----------------------------------------------------------------------------
Name:
Title:
Date: __________________________________________________________________________
(Must be signed by registered holder exactly as name appears on Old Notes. If
signature is by trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, please set forth full title.) (See Instruction 3)
Address ________________________________________________________________________
-------------------------------------------------------------------------
Telephone No. __________________________________________________________________
Taxpayer Identification No. ____________________________________________________
Signature Guaranteed By: _______________________________________________________
(See Instruction 1)
Title:
Name of Institution: ___________________________________________________________
Address: _______________________________________________________________________
Date: __________________________________________________________________________
PLEASE READ THE INSTRUCTIONS BELOW, WHICH FORM A PART OF THIS LETTER OF
TRANSMITTAL.
<PAGE>
INSTRUCTIONS
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal must be
guaranteed by a firm that is a member of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or
by a commercial bank or trust company having an office in the United States (an
"Eligible Institution") unless (i) the "Special Issuance and Delivery
Instructions" above have not been completed or (ii) the Old Notes described
above are tendered for the account of an Eligible Institution.
2. DELIVERY OF LETTER OF TRANSMITTAL AND OLD NOTES. The Old Notes, together
with a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof), should be mailed or delivered to the Exchange Agent at the
address set forth above.
The method of delivery of Old Notes and other documents is at the election
and risk of their respective holder. IF DELIVERY IS BY MAIL, REGISTERED MAIL
(WITH RETURN RECEIPT), PROPERLY INSURED, IS SUGGESTED.
3. SIGNATURES ON LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENTS. If this
Letter of Transmittal is signed by a person other than a registered holder of
any Old Notes, such Old Notes must be endorsed or accompanied by appropriate
bond powers, in either case signed exactly as the name or names of the
registered holder or holders appear on the Old Notes.
If this Letter of Transmittal or any Old Notes or bond power is signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must
be submitted.
4. MISCELLANEOUS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered Old Notes
will be resolved by the Company, whose determination will be final and binding.
The Company reserves the absolute right to reject any or all tenders that are
not in proper form or the acceptance of which would, in the opinion of counsel
for the Company, be unlawful. The Company also reserves the right to waive any
irregularities or conditions of tender as to particular Old Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in this Letter of Transmittal) will be final and
binding. Unless waived, any irregularities in connection with tenders or
consents must be cured within such time as the Company shall determine. Neither
the Company nor the Exchange Agent shall be under any duty to give notification
of defects in such tenders or shall incur liabilities for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendered holder thereof.
