FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 424(b)(2)
(FILE NUMBERS 33-51775 AND 33-51775-01)
<PAGE>
PROSPECTUS SUPPLEMENT [TOLL BROTHERS LOGO]
(To Prospectus Dated January 6, 1994)
$50,000,000
TOLL CORP.
4 3/4% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2004
GUARANTEED ON A SENIOR SUBORDINATED BASIS BY
TOLL BROTHERS, INC.
The Notes (the 'Notes') of Toll Corp. (the 'Issuer' or 'Toll') offered hereby
are an issue of the Debt Securities described in the accompanying Prospectus
(the 'Prospectus') to which this Prospectus Supplement relates. The Notes are
convertible at any time prior to maturity, unless previously redeemed, into
Common Stock of Toll Brothers, Inc. ('Toll Brothers' or the 'Company') at a
conversion price of $21.75 per share, subject to adjustment in certain events.
The Common Stock, $.01 par value per share, of the Company (the 'Common Stock')
is traded on the New York and Pacific Stock Exchanges under the symbol 'TOL.' On
January 12, 1994, the last reported sale price of the Common Stock on the New
York Stock Exchange was $17.50 per share. The Notes mature on January 15, 2004.
Interest will be payable semi-annually on January 15 and July 15 of each year,
commencing July 15, 1994.
The Notes will be fully and unconditionally guaranteed on a senior subordinated
basis (the 'Guarantee') by the Company, which owns 100% of the capital stock of
the Issuer. The Notes may be redeemed at the option of the Issuer, in whole or
in part, at any time on or after January 15, 1997, at the redemption prices set
forth herein, together with accrued and unpaid interest thereon. Upon a Change
of Control (as defined herein) of the Company, holders of the Notes will have
the right to require the Issuer to purchase the Notes at par plus accrued and
unpaid interest thereon.
The Notes will be unsecured obligations of the Issuer, and will be subordinated
in right of payment to all existing and future Senior Indebtedness of Toll (as
defined herein). The Guarantee will be an unsecured obligation of the Company
and will be subordinated in right of payment to all existing and future Senior
Indebtedness of the Company (as defined herein). The Notes and the Guarantee
will be effectively subordinated to all existing and future claims of creditors
of the Company's other subsidiaries. See 'Description of Notes -- Subordination
of Notes and Guarantee.' As of October 31, 1993, the amount of liabilities of
the Company and its subsidiaries ranking senior to the Notes (including Senior
Indebtedness of Toll and the Company and liabilities of the Company's
subsidiaries other than Toll, but excluding collateralized mortgage financing)
would have been $194,302,000.
The Notes have been approved for listing on the New York Stock Exchange, subject
to official notice of issuance.
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 ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT ISSUER ( 1 )( 2 )
<S> <C> <C> <C>
Per Note...................................................... 100.000% 3.000% 97.000%
Total ( 3 )................................................... $50,000,000 $1,500,000 $48,500,000
</TABLE>
(1) Plus accrued interest, if any, from January 20, 1994.
(2) Before deducting expenses, payable by the Issuer, estimated to be $250,000.
(3) The Issuer has granted the Underwriters an option, exercisable at any time
or from time to time within 30 days after the date hereof, to purchase up to
an additional $7,500,000 aggregate principal amount of Notes on the terms
set forth above to cover over-allotments, if any. If the Underwriters
exercise such option in full, the total Price to Public, Underwriting
Discount and Proceeds to Issuer will be $57,500,000, $1,725,000 and
$55,775,000, respectively. See 'Underwriting.'
The Notes are offered subject to receipt and acceptance by the Underwriters, to
prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Notes will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the facilities of The
Depository Trust Company, on or about January 20, 1994.
SALOMON BROTHERS INC
DILLON, READ & CO. INC.
KIDDER, PEABODY & CO.
INCORPORATED
The date of this Prospectus Supplement is January 12, 1994.
<PAGE>
[PHOTOGRAPH]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE NOTES OFFERED HEREBY OR THE COMPANY'S COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK OR
THE PACIFIC STOCK EXCHANGES, IN THE OVER-THE-COUNTER MARKET, OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere, or incorporated by reference, in this
Prospectus Supplement. Unless otherwise indicated, the information in this
Prospectus Supplement assumes the Underwriters' over-allotment option will not
be exercised.
THE COMPANY
Toll Brothers designs, builds, markets and arranges financing for single
family detached and attached homes in middle and high income residential
communities primarily located on land that the Company has developed. Currently,
Toll Brothers operates predominantly in major suburban residential areas in
southeastern Pennsylvania, central New Jersey, the Virginia and Maryland suburbs
of Washington, D.C., northern Delaware and the Boston, Massachusetts
metropolitan area. It is also developing communities in the Connecticut suburbs
of New York City and the Hartford, Connecticut market. In 1993, the Company
opened communities in Westchester County, New York and acquired a property in
Nassau County, New York, two other suburbs of New York City. The Company
recently acquired a property in Orange County, California which it expects to
open in early 1994.
The Company markets its homes primarily to upper-income buyers, emphasizing
high-quality construction and customer satisfaction. In the five years ended
October 31, 1993, Toll Brothers closed 4,422 homes in 91 communities. In
recognition of its achievements in homebuilding, Toll Brothers has received
numerous awards. Robert I. Toll, Chairman of the Board of Directors and Chief
Executive Officer, and Bruce E. Toll, President and Chief Operating Officer,
were selected as 'The Builder of the Year' for 1988 by Professional Builder
magazine, a leading publication in the homebuilding industry. In 1993, the
Company received numerous awards including the 'Spotlight on Building
Excellence' silver award from Builder Magazine and the National Association of
Homebuilders in recognition of the Company's demonstrated excellence in
marketing, product design, service and overall financial performance.
On October 31, 1993, the Company was offering homes for sale in 67
communities. Single-family detached homes were being offered at prices,
excluding customized options, generally ranging from $186,000 to $694,000, with
an average base sales price of $335,000. Attached home prices, excluding
customized options, generally range from $105,000 to $276,000, with an average
base sales price of $194,000.
As of October 31, 1993, the Company's contract backlog had an aggregate
sales value of approximately $285,441,000 (892 homes), representing an increase
of over 52% from the approximate $187,118,000 (621 homes) contract backlog on
October 31, 1992. The aggregate sales value of new contracts signed during the
fiscal year ended October 31, 1993 was approximately $490,883,000 (1,595 homes),
representing an increase of over 43% from approximately $342,811,000 (1,202
homes) for the prior fiscal year.
THE ISSUER
The Issuer was incorporated in Delaware on July 14, 1987 and is an
indirect, wholly-owned, consolidated subsidiary of the Company. Other than the
financing of other subsidiaries of the Company by lending the proceeds of the
Notes offered hereby and similar activities related to previous offerings of
debt securities, the Issuer has no independent operations and generates no
operating revenues. Accordingly, the Issuer has no source of revenue or funds to
make payments of principal or interest. Such funds will be derived from the
Company or its subsidiaries. There is no present intention to have the Issuer
engage in other activities.
S-3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Issuer.................................... Toll Corp., a Delaware corporation.
The Notes................................. $50,000,000 aggregate principal amount of 43/4% Convertible Senior
Subordinated Notes due 2004 (the 'Notes'), excluding $7,500,000
aggregate principal amount of Notes subject to the Underwriters'
over-allotment option. See 'Underwriting.'
Guarantee................................. Payment of principal and interest on the Notes will be fully and
unconditionally guaranteed on a senior subordinated basis by Toll
Brothers (the 'Guarantee').
Maturity.................................. The Notes will mature on January 15, 2004 unless earlier redeemed
or converted.
Payment of Interest....................... Interest on the Notes at the rate of 43/4% per annum is payable
semi-annually on January and July of each year, commencing July
15, 1994.
Conversion Rights......................... The Notes are convertible into Common Stock of the Company at the
option of the holder at any time prior to maturity, unless
previously redeemed, at a conversion price of $21.75 per share,
subject to adjustment in certain events.
Redemption at the Option of the Issuer.... On or after January 15, 1997 the Issuer may, upon at least 30 days
notice, redeem the Notes, in whole or in part, at the redemption
prices set forth herein, together with accrued and unpaid interest
thereon.
Change of Control......................... The Notes are required to be repurchased at 100% of their
principal amount together with accrued and unpaid interest
thereon, at the option of the holder, if a Change of Control (as
defined herein) occurs.
Subordination............................. The Notes will be unsecured obligations of the Issuer and will be
subordinated in right of payment to all existing and future Senior
Indebtedness of Toll (as defined herein). The Guarantee will be an
unsecured obligation of the Company and will be subordinated in
right of payment to all existing and future Senior Indebtedness of
the Company (as defined herein). The Notes and the Guarantee will
be effectively subordinated to all existing and future claims of
creditors of the Company's other subsidiaries. As of October 31,
1993, the amount of liabilities of the Company and its
subsidiaries effectively ranking senior in right of payment to the
Notes (including Senior Indebtedness of Toll and the Company and
liabilities of the Company's subsidiaries other than the Issuer,
but excluding collateralized mortgage financing) would have been
$194,302,000. See 'Description of Notes -- Subordination of Notes
and Guarantee.'
Use of Proceeds........................... Repayment of bank debt, acquisition of residential development
property and general corporate purposes.
</TABLE>
S-4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------
1989 1990 1991 1992 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Homebuilding Revenues.................................... $ 178,901 $ 200,198 $ 177,623 $ 281,755 $ 395,488
--------- --------- --------- --------- ---------
Costs and expenses
Land and housing construction.......................... 122,462 148,376 134,834 203,586 290,878
Selling, general and administrative.................... 28,002 27,335 26,416 32,973 43,326
Interest............................................... 6,699 9,356 9,920 16,048 17,129
--------- --------- --------- --------- ---------
157,163 185,067 171,170 252,607 351,333
--------- --------- --------- --------- ---------
Operating income......................................... 21,738 15,131 6,453 29,148 44,155
Collateralized mortgage financing operating loss, net.... (218) (167) (205) (284) (227)
--------- --------- --------- --------- ---------
Income before income taxes, extraordinary item and change
in accounting.......................................... $ 21,520 $ 14,964 $ 6,248 $ 28,864 $ 43,928
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income before extraordinary item and change in
accounting............................................. $ 13,127 $ 8,904 $ 3,717 $ 17,354 $ 27,419
Extraordinary gain (loss) from extinguishment of debt,
net of income taxes.................................... -- 1,084 1,296 (816) (668)
Cumulative effect of change in accounting................ -- -- -- -- 1,307
--------- --------- --------- --------- ---------
Net income............................................... $ 13,127 $ 9,988 $ 5,013 $ 16,538 $ 28,058
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income per share
Income before extraordinary item and change in
accounting........................................... $ .44 $ .30 $ .12 $ .52 $ .82
Extraordinary gain (loss).............................. -- .04 .04 (.02) (.02)
Cumulative effect of change in accounting.............. -- -- -- -- .04
--------- --------- --------- --------- ---------
Net Income............................................. $ .44 $ .34 $ .16 $ .50 $ .84
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
OTHER FINANCIAL DATA:
Homebuilding
Depreciation and amortization.......................... $ 2,233 $ 2,169 $ 2,075 $ 2,255 $ 2,453
Interest incurred...................................... $ 19,124 $ 17,795 $ 12,708 $ 14,757 $ 20,929
Ratio of earnings to fixed charges, including
consolidated mortgage financing partnerships(1)(2)... 1.36 1.28 1.20 2.63 2.72
Ratio of earnings to fixed charges, excluding
consolidated mortgage financing partnerships(1)(2)... 1.47 1.36 1.27 2.97 2.85
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------------------------------------------------------
1989 1990 1991 1992 1993 AS ADJUSTED(3)
--------- --------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Assets
Homebuilding............................. $ 291,190 $ 266,942 $ 269,849 $ 358,599 $ 464,056 $ 494,056
Collateralized mortgage financing........ 56,973 49,592 42,575 26,277 11,942 11,942
--------- --------- --------- --------- --------- ------------
Total.................................. $ 348,163 $ 316,534 $ 312,424 $ 384,836 $ 475,998 $ 505,998
--------- --------- --------- --------- --------- ------------
--------- --------- --------- --------- --------- ------------
Debt
Homebuilding
Loans payable.......................... $ 95,508 $ 71,707 $ 49,943 $ 25,756 $ 24,779 $ 4,779
Subordinated debt...................... 69,681 61,474 55,513 128,854 174,442 224,442
--------- --------- --------- --------- --------- ------------
Total................................ 165,189 133,181 105,456 154,610 199,221 229,221
Collateralized mortgage financing........ 52,617 45,988 39,864 24,403 10,810 10,810
--------- --------- --------- --------- --------- ------------
Total................................ $ 217,806 $ 179,169 $ 145,320 $ 179,013 $ 210,031 $ 240,031
--------- --------- --------- --------- --------- ------------
--------- --------- --------- --------- --------- ------------
Shareholders' equity....................... $ 85,400 $ 94,599 $ 117,925 $ 136,412 $ 167,006 $ 167,006
--------- --------- --------- --------- --------- ------------
--------- --------- --------- --------- --------- ------------
</TABLE>
- ------------------
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes, extraordinary gain (loss) and change
in accounting plus interest expense and fixed charges except interest
incurred. Fixed charges consist of interest incurred (whether expensed or
capitalized), the portion of rent expense that is representative of the
interest factor (one-third of rent expense), and amortization of debt
discount and issuance costs.
(2) The Company believes that an additional useful computation of the ratio of
earnings to fixed charges would exclude interest expense attributable to the
Company's consolidated mortgage financing partnerships.
(3) As adjusted to give effect to the sale of the Notes and the application of
the proceeds therefrom.
S-5
<PAGE>
SUMMARY OPERATING DATA OF THE COMPANY (1)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1989 1990 1991 1992 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Number of homes closed................................ 676 727 676 1,019 1,324
Number of homes contracted, net....................... 704 612 863 1,202 1,595
Sales value of homes contracted, net (000s)........... $ 185,255 $ 163,975 $ 230,324 $ 342,811 $ 490,883
Number of homes in backlog, end of year(2)............ 366 251 438 621 892
Sales value of backlog, end of year (000s)(2)......... $ 104,156 $ 69,795 $ 124,148 $ 187,118 $ 285,441
</TABLE>
- ------------------
(1) Includes all homes sold by a partnership which owned a community, completed
in 1989, in which the Company had a 50% interest.
(2) Backlog consists of homes which were under contract but not closed at the
end of the year.
S-6
<PAGE>
RECENT DEVELOPMENTS
On December 17, 1993 the Company's Board of Directors adopted the Toll
Brothers, Inc. Key Executives and Non-Employee Directors Stock Option Plan
(1993) (the '1993 Stock Option Plan') effective December 17, 1993, subject to
approval by the Company's shareholders on or before December 17, 1994, and the
Toll Brothers, Inc. Cash Bonus Plan (the 'Cash Bonus Plan'), subject to approval
by the Company's shareholders, to be effective as of November 1, 1994. Copies of
the Stock Option Plan and the Cash Bonus Plan have been filed as exhibits to the
Company's Current Report on Form 8-K filed on January 7, 1994.
KEY EXECUTIVES AND NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN (1993)
A subcommittee of the Board of Directors consisting of non-employee members
has approved the terms of the 1993 Stock Option Plan and will act as the
administrative committee for the 1993 Stock Option Plan with respect to options
for certain key executives other than Robert I. Toll and Bruce E. Toll. The
Board of Directors (excluding the non-employee members) will act as the
administrative committee for the 1993 Stock Option Plan with respect to option
grants to non-employee members of the Board of Directors.
Under the 1993 Stock Option Plan, options to purchase shares of the
Company's Common Stock may be granted to those employees who are designated as
'key executives' and to the non-employee members of the Board of Directors.
Options granted to employees may be either incentive stock options ('ISOs')
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, or non-qualified stock options; provided, however, that options granted
to non-employee members of the Board of Directors must be non-qualified stock
options.
The aggregate maximum number of shares of the Company's Common Stock
available for awards under the 1993 Stock Option Plan is 1,000,000 (subject to
adjustment upon the occurrence of certain events and conditions set forth in the
1993 Stock Option Plan). No 'key executive' may be granted options with respect
to more than 200,000 shares of the Company's Common Stock during any calendar
year. No grants of options can be made under the 1993 Stock Option Plan after
December 17, 2003.
Non-employee members of the Board of Directors are granted options in
accordance with a formula which provides for annual grants to each such member
of the Board of Directors of options to purchase 15,000 shares. Such options
will become exercisable in two equal installments on each of the first and
second anniversaries of the date of grant. All options granted to non-employee
members will terminate upon the occurrence of certain events or conditions but
in no event shall such options be exercisable after the tenth anniversary of the
date of grant.
The exercise price per share for options will be equal to the fair market
value per share of the Company's Common Stock determined on the date of grant;
provided, however, that under certain circumstances the exercise price per share
of an ISO may not be less than 110% of the fair market
value per share of the Company's Common Stock on the date of grant. The term of
an incentive stock option granted under the 1993 Stock Option Plan may not
exceed 10 years from the date of grant.
CASH BONUS PLAN
The Cash Bonus Plan provides annual performance-based cash bonus
compensation for Robert I. Toll and Bruce E. Toll in accordance with a formula
that is based on the financial success of the Company. The formula adopted in
the Cash Bonus Plan, as set forth below, is the same formula that has been in
effect since its adoption on January 11, 1990. No bonus will be payable under
the Cash Bonus Plan unless Income Before Income Taxes (as defined below) exceeds
10% of Shareholders' Equity (as defined below) as of the end of the Company's
prior fiscal year. The amount of the cash bonus payable to each of Robert I.
Toll and Bruce E. Toll is equal to the sum of: (i) 1.5% of all Income Before
Income Taxes in excess of 10% and up to 20% of Shareholders' Equity as of the
end of the Company's prior fiscal year; (ii) 2% of all Income Before Income
Taxes in excess of 20% and up to
S-7
<PAGE>
30% of Shareholders' Equity as of the end of
the Company's prior fiscal year; and (iii) 2.25% of all Income Before Income
Taxes in excess of 30% of Shareholders' Equity as of the end of the Company's
prior fiscal year.
The term 'Income Before Income Taxes' means the amount which would be
reported in conformity with generally accepted accounting principles in the
Company's audited consolidated financial statements for the Company's fiscal
year (before taking into account the bonus under the Cash Bonus Plan), and the
term 'Shareholders' Equity' means the amount reported as such in conformity with
generally accepted accounting principles in the Company's audited consolidated
financial statements as of the appropriate date.
A subcommittee of the Board of Directors consisting of 'outside directors'
(as defined in the Internal Revenue Code of 1986, as amended) has approved the
terms of the Cash Bonus Plan and will act as the administrative committee for
the Cash Bonus Plan. This administrative committee is required to certify that
the performance goals established under the Cash Bonus Plan have been met prior
to the payment of any bonus under the Cash Bonus Plan.
USE OF PROCEEDS
The net proceeds from the sale of the Notes are estimated to be $48,250,000
($55,525,000 if the Underwriters' over-allotment option is exercised in full).
The Company will use approximately $20 million to repay a portion of its
outstanding borrowings under the Revolving Credit Agreement (as defined herein).
A portion of such net proceeds is expected to be used to acquire residential
development property, either outright or through options. The remainder of the
net proceeds from the sale of the Notes will be used for general corporate
purposes and working capital needs. Pending these applications, the net proceeds
are expected to be invested in high-grade, short-term, marketable,
interest-bearing securities.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded principally on the New York Stock
Exchange and is also listed on the Pacific Stock Exchange (symbol: 'TOL'). The
following table sets forth, for the indicated periods, the high and low sales
closing prices of the Common Stock as reported on the New York Stock Exchange.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------
1992 1993 1994(1)
---------------------- ---------------------- ----------------------
HIGH LOW HIGH LOW HIGH LOW
------ ----- ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
First Quarter.............................................. $ 13 $ 6 $ 16 1/8 $ 8 7/8 $18 5/8 $14 1/8
Second Quarter............................................. 14 10 16 7/8 11 1/8 -- --
Third Quarter.............................................. 12 1/8 7 1/2 15 1/8 8 7/8 -- --
Fourth Quarter............................................. 11 3/8 7 5/8 16 1/8 10 3/4 -- --
</TABLE>
- ------------------
(1) First Quarter prices are as reported through January 12, 1994.
DIVIDEND POLICY
The Company has not paid any cash dividends on its Common Stock to date and
expects that for the foreseeable future it will follow a policy of retaining
earnings in order to finance the continued development of its business. Payment
of dividends is within the discretion of the Company's Board of Directors and
will depend upon the earnings, capital requirements and operating and financial
condition of the Company, among other factors. In addition, the Revolving Credit
Agreement contains covenants regarding the maintenance of minimum Shareholders'
Equity (as defined therein), thus limiting the amount of dividends the Company
may pay.
S-8
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at October 31, 1993 and as adjusted to give effect to the sale of the
Notes and the application of the estimated net proceeds therefrom. See 'Use of
Proceeds.'
<TABLE>
<CAPTION>
OCTOBER 31, 1993
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Homebuilding:
Loans payable (1).................................................................... $ 24,779 $ 4,779
10 1/2% Senior Subordinated Notes due 2002........................................... 100,000 100,000
9 1/2% Senior Subordinated Notes due 2003............................................ 74,442 74,442
4 3/4% Convertible Senior Subordinated Notes due 2004................................ -- 50,000
--------- ---------
Total............................................................................. 199,221 229,221
Collateralized mortgage financing...................................................... 10,810 10,810
--------- ---------
Total debt........................................................................ 210,031 240,031
--------- ---------
Shareholders' equity(2):
Preferred stock, par value $.01 per share; 15,000,000 shares authorized; none
issued............................................................................
Common stock; par value $.01 per share; 60,000,000 shares authorized; 33,318,760
shares issued..................................................................... 333 333
Additional paid-in capital........................................................... 35,206 35,206
Retained earnings.................................................................... 131,467 131,467
-------- ---------
Total shareholders' equity........................................................ 167,006 167,006
-------- ---------
Total debt and shareholders' equity............................................ $377,037 $407,037
-------- ---------
-------- ---------
</TABLE>
- ------------------
(1) The Company has a $150 million unsecured revolving credit facility with nine
banks which extends through October 1996, (the 'Revolving Credit
Agreement'). As of October 31, 1993, the Company had $21.3 million of loans
and approximately $50.9 million of letters of credit outstanding under that
facility. The Revolving Credit Agreement provides for extensions of the
maturity date.
(2) The Company amended its Certificate of Incorporation to reduce, and provide
for future increases in, the number of authorized shares of its Common
Stock. See 'Description of Capital Stock' in the Prospectus.
S-9
<PAGE>
[ MAP ]
S-10
<PAGE>
BUSINESS
GENERAL
Toll Brothers designs, builds, markets and arranges financing for
single-family detached and attached homes in middle and high income residential
communities primarily located on land that the Company has developed. Currently,
Toll Brothers operates predominantly in major suburban residential areas in
southeastern Pennsylvania, central New Jersey, the Virginia and Maryland suburbs
of Washington, D.C., northern Delaware and the Boston, Massachusetts
metropolitan area. It is also operating communities in the Connecticut suburbs
of New York City and the Hartford, Connecticut market. In 1993, the Company
opened communities in Westchester County, New York and acquired a property in
Nassau County, New York, two other suburbs of New York City. The Company also
recently acquired a property in Orange County, California and expects to begin
offering homes for sale there during early 1994.
The Company markets its homes primarily to upper-income buyers, emphasizing
high-quality construction and customer satisfaction. In the five years ended
October 31, 1993, Toll Brothers closed 4,422 homes in 91 communities. In
recognition of its achievements in homebuilding, Toll Brothers has received
numerous awards. Robert I. Toll, Chairman of the Board of Directors and Chief
Executive Officer, and Bruce E. Toll, President and Chief Operating Officer,
were selected as 'The Builder of the Year' for 1988 by Professional Builder
magazine, a leading publication in the homebuilding industry. In 1993, the
Company received numerous awards including the 'Spotlight on Building
Excellence' silver award from Builder Magazine and the National Association of
Homebuilders in recognition of the Company's demonstrated excellence in
marketing, product design, service and overall financial performance.
On October 31, 1993, the Company was offering homes for sale in 67
communities. Single-family detached homes were being offered at prices,
excluding customized options, generally ranging from $186,000 to $694,000, with
an average base sales price of $335,000. Attached home prices, excluding
customized options, generally range from $105,000 to $276,000 with an average
base sales price of $194,000.
As of October 31, 1993, the Company's contract backlog had an aggregate
sales value of approximately $285,441,000 (892 homes), representing an increase
of over 52% from the approximate $187,118,000 (621 homes) contract backlog on
October 31, 1992. The aggregate sales value of new contracts signed during the
fiscal year ended October 31, 1993 was approximately $490,883,000 (1,595 homes),
representing an increase of over 43% from approximately $342,811,000 (1,202
homes) for the prior fiscal year.
As of October 31, 1993, the Company owned, or controlled through options,
approximately 5,400 home sites in communities under development, as well as land
for approximately 4,600 planned home sites in proposed communities.
Co-founded by Robert I. Toll and Bruce E. Toll, the Company commenced its
business operations, through predecessor entities, in 1967. Robert I. Toll and
Bruce E. Toll continue to be principal shareholders of the Company and to make
significant contributions to the Company's operations. The loss of either
person's services might have a material adverse effect on the Company's business
and operations. The Company has developed, however, a substantial and capable
management team of twenty senior officers, with an average of over eight years
of experience with the Company, who are largely responsible for day-to-day
operations.
The Company generally attempts to reduce certain risks homebuilders
encounter by controlling land for future development through options (which
allows the Company to obtain the necessary government approvals before acquiring
title to the land), by beginning construction of homes after an agreement of
sale has been executed and by using subcontractors to perform home construction
and land development work on a fixed-price basis.
S-11
<PAGE>
THE COMMUNITIES
Toll Brothers' communities are generally located in suburban areas near
major highways with access to major cities. Through 1981, all communities were
located in southeastern Pennsylvania. The Company began selling homes in central
New Jersey in 1982, in northern Delaware and Massachusetts in 1987, in Maryland
in 1988, in Virginia and Connecticut in 1992 and in New York in 1993. As of
October 31, 1993, the Company had active community developments in Pennsylvania,
New Jersey, Maryland, Virginia, Massachusetts, Delaware, Connecticut and New
York. The Company recently acquired its first property in Orange County,
California and expects to begin offering homes for sale in early 1994.
The Company emphasizes its high-quality, detached, single-family homes,
which are marketed primarily to the 'upscale' luxury market, generally
consisting of persons who have previously owned a principal residence -- the
so-called 'move-up' market. The Company believes that its reputation as a
developer of homes for this market enhances its competitive position with
respect to the sale of more moderately priced detached homes, as well as
attached homes.
Each single-family home community offers several home plans, with the
opportunity to select various exterior styles. The communities are designed to
fit existing land characteristics, blending winding streets, cul-de-sacs and
underground utilities to establish a pleasant environment. The Company strives
to create a diversity of architectural style within an overall planned
community. This diversity arises from: (i) variations among the models offered
and in exterior design options of homes of the same basic floor plan; (ii) the
preservation of existing trees and foliage whenever practicable; and (iii) the
curving street layout, which allows relatively few homes to be seen from any
vantage point. Normally, homes of the same type or color may not be built next
to each other. The communities have attractive entrances with distinctive
signage and landscaping. This, the Company believes, avoids a 'development'
appearance and gives the community a diversified neighborhood look, so as to
enhance home values.
Attached home communities (townhomes, carriage homes and condominiums) are
generally one to three stories and provide for limited exterior options. These
communities have commonly-owned recreational acreage with swimming pools and
tennis courts, and have associations through which homeowners act jointly for
their common interest.
It is the Company's belief that the homes built by Toll Brothers in its
named communities provide homeowners with additional value upon resale.
THE HOMES
Most single-family detached home communities offer at least three different
home plans, each with several substantially different architectural styles. For
example, the same basic floor plan may be selected with a Colonial, Farmhouse,
Federal, Provincial or Tudor design, and exteriors may be varied further by the
use of stone, stucco, brick or siding. Attached home communities generally offer
two or three different floor plans with two or three bedrooms.
In all of Toll Brothers' communities, certain options are available to the
purchaser for an additional charge. The options typically are more numerous and
significant on the more expensive homes. Major options include three-car
garages, finished basements, finished lofts, and additional fireplaces. As a
result of the additional charges for such options, the average sales price
during fiscal 1993 was approximately 12.5% higher than the base sales price.
The range of base sales prices for the Company's lines of homes as of
October 31, 1993 was as follows:
<TABLE>
<S> <C>
Single-Family Detached Homes:
Executive.................................... $186,000 -- $620,000
Estate....................................... 340,000 -- 694,000
Attached Homes................................. 105,000 -- 276,000
</TABLE>
S-12
<PAGE>
Contracts for the sale of homes are at fixed prices. The prices at which
homes are offered have generally increased from time to time during the sellout
period for each community; however, there can be no assurance that sales prices
will increase in the future.
The Company uses some of the same basic home designs in similar
communities. However, the Company is continuously developing new designs to
replace or augment existing ones as part of its continuing efforts to assure
that its homes are responsive to current consumer preferences. For new designs,
the Company has its own architectural staff and occasionally engages
unaffiliated architectural firms.
RESIDENTIAL COMMUNITIES UNDER DEVELOPMENT
The Company generally constructs model homes at each of its communities.
Construction of single-family detached homes is usually commenced only after an
agreement of sale has been executed, while construction of attached home
buildings is generally commenced only after agreements of sale have been
executed for a majority of the homes in that building.
The following table summarizes certain information with respect to
residential communities of Toll Brothers under development as of October 31,
1993:
<TABLE>
<CAPTION>
HOMES UNDER
NUMBER OF HOMES HOMES CONTRACT AND HOME SITES
STATE COMMUNITIES APPROVED CLOSED NOT CLOSED AVAILABLE
- ----- ----------- -------- ------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Pennsylvania:
Philadelphia suburbs............................... 35 4,233 1,527 438 2,268
Allentown/Bethlehem................................ 3 148 127 14 7
New Jersey:
North central...................................... 9 451 111 58 282
Central............................................ 8 499 145 47 307
South central...................................... 4 410 206 41 163
Virginia............................................. 10 823 146 115 562
Delaware............................................. 5 545 245 41 259
Massachusetts........................................ 6 719 267 72 380
Maryland............................................. 2 132 72 11 49
Connecticut.......................................... 4 217 42 35 140
New York............................................. 3 161 3 20 138
--- ------ ----- --- -----
Total.............................................. 89(1) 8,338 2,891 892 4,555(2)
--- ------ ----- --- -----
--- ------ ----- --- -----
</TABLE>
- ------------------
(1) Of these 89 communities, 67 had homes being offered for sale, 11 had not yet
opened for sale, and 11 had been sold out, but not all closings had been
completed. Of the 67 communities in which homes were being offered for sale
as of October 31, 1993, 62 were single-family detached home communities
containing a total of 17 homes under construction but not under contract
(exclusive of model homes) and 5 were attached home communities containing a
total of 21 homes under construction but not under contract (exclusive of
model homes).
(2) On October 31, 1993, significant site improvements had not commenced on
approximately 2,671 of the 4,555 available home sites. Of the 4,555
available home sites, 375 were not owned, but were controlled through
options.
LAND POLICY
Before entering into a contract to acquire land, Toll Brothers completes
extensive comparative studies and analyses on detailed Company-designed forms
which assist the Company in evaluating the acquisition. Toll Brothers generally
follows a policy of acquiring options to purchase land for future communities.
These options or purchase agreements are generally on a non-recourse basis,
thereby limiting the Company's financial exposure to the amounts invested in
property and pre-development
S-13
<PAGE>
costs. This policy of land acquisition may somewhat raise the price of land that
the Company eventually acquires, but significantly reduces risk. This policy
generally allows the Company to obtain necessary development approvals before
acquisition of the land, thereby enhancing the value of the options and the land
eventually acquired.
The Company's purchase agreements are typically subject to numerous
conditions including, but not limited to, the Company's ability to obtain
necessary governmental approvals for the proposed community. Generally, the down
payment on the agreement will be returned to the Company if all approvals are
not obtained, although pre-development costs may not be recoverable. The Company
has the ability to extend many of these options for varying periods of time, in
some cases by the payment of an additional deposit, and in some cases, without
an additional payment. The Company has the right to cancel any of its land
agreements by forfeiture of the Company's down payment on the agreement. In such
instances, the Company generally is not able to recover any pre-development
costs.
During the past several years, the number of buyers competing for land in
the Company's market area has diminished, while the number of sellers has
increased, resulting in more advantageous prices and terms for potential land
acquisitions by the Company. Further, many of the land parcels being offered for
sale are fully approved, and often improved, subdivisions; in general, such
types of subdivisions previously have not been available for acquisition in the
Company's market area. The Company has purchased many of these subdivisions
outright and has acquired control of several others. In addition, the Company
acquired a number of loan assets (secured by liens on development property) from
the Resolution Trust Corporation and various banks with the intention of
converting a substantial portion of the value to land for new communities.
Included in the loan assets purchased, however, were certain loan assets which
the Company will not convert to new communities but will sell or collect. The
Company will continue to look to acquire additional loan assets to convert to
land for new communities.
The Company also continues to explore additional geographic areas for
expansion. In the Company's view, the rolling recession in the United States has
created a bottoming market in some parts of the nation as other markets become
strong. In some of the Company's existing geographic markets, the demand for
land is becoming more competitive, while in others, attractive opportunities
remain.
Accordingly, the continuation of the Company's development activities over
the long term will be dependent upon its continued ability to locate, enter into
contracts to acquire, obtain governmental approvals for, consummate the
acquisition of, and improve suitable parcels of land.
S-14
<PAGE>
The following is a summary of the parcels of land that the Company either
owns or controls through options at October 31, 1993 for proposed communities,
as distinguished from those currently under development:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF
STATE COMMUNITIES ACRES HOMES PLANNED
- ----- ----------- --------- -------------
<S> <C> <C> <C>
Pennsylvania........................................................... 8 838 867
New Jersey: (1)
North Central........................................................ 3 795 581
Central.............................................................. 12 1,823 2,016
Virginia (2)........................................................... 5 286 421
Maryland............................................................... 2 193 246
Massachusetts.......................................................... 1 54 63
Connecticut............................................................ 1 20 13
New York............................................................... 5 292 199
California............................................................. 1 50 162
--- ----- -----
Total................................................................ 38 4,351 4,568(3)
--- ----- -----
--- ----- -----
</TABLE>
- ------------------
(1) New Jersey includes two communities which contain plans for 170 'Mount
Laurel II' units which will either be rented or sold at lower than market
rentals or prices. See 'Business -- Regulation and Environmental Matters.'
(2) Virginia includes one community which contains plans for 30 affordable
dwelling units which will be sold at lower than market prices.
(3) Of these 4,568 planned home sites, 3,896 were not owned, 2,734 lots were
controlled through options and 1,162 lots were controlled through loan
assets secured by liens.
The aggregate option deposits and related pre-development costs for
proposed communities were approximately $37,645,000 at October 31, 1993. The
aggregate purchase price of land parcels under option at October 31, 1993 was
approximately $176,219,000. If all of the above land were to be developed, the
Company believes it would have sufficient land to maintain its development
activities at current levels for more than the next three years.
The Company regularly evaluates the economic and market feasibility of all
of the land it controls for proposed communities. During the year ended October
31, 1993, such feasibility analyses resulted in approximately $354,000 of
capitalized costs related to proposed communities being charged to expense
because they were no longer deemed to be recoverable.
There can be no assurance that the Company will be successful in securing
necessary development approvals for the land currently under its control or for
which the Company may acquire options in the future or, that upon obtaining such
development approvals, the Company will elect to complete its purchases under
such options. The Company has generally been successful in the past in obtaining
governmental approvals, has substantial land currently under its control for
which it is seeking such approvals (as set forth in the table above), and
devotes significant resources to locating suitable additional land and to
obtaining the required approvals on land under its control. Failure to locate
sufficient suitable land or to obtain necessary governmental approvals, however,
may impair the ability of the Company over the long term to maintain current
levels of development activities.
The Company generally has not purchased land for speculation or with the
contemplation of selling it for profit.
COMMUNITY DEVELOPMENT
The Company expends considerable effort in developing a concept for each
community, which includes determination of size, style and price range of the
homes, layout of the streets and individual lots, and overall community design.
Necessary governmental subdivision and other approvals are sought, which
typically require at least 24 months and sometimes several years to obtain. The
S-15
<PAGE>
Company then improves the land by grading and clearing the site, installing
roads, underground utility lines and pipes, erecting distinctive entrance
structures, and staking out individual home sites.
Each community is managed by a project manager who is located at the site.
Working with construction supervisors, marketing personnel and, when required,
other Company and outside professionals such as engineers, architects and legal
counsel, the project manager is responsible for supervising and coordinating the
various developmental steps from acquisition through the approval stage,
marketing, construction and customer service, including monitoring the progress
of work and controlling expenditures. Major decisions regarding each community
are made by senior members of the Company's management.
The Company recognizes revenue only upon the closing of home sales (the
point at which title and possession are transferred to the buyer), which
generally occurs shortly after construction is substantially completed. The most
significant variable affecting the timing of the Company's revenue stream, other
than housing demand, is receipt of final regulatory approvals, which, in turn,
permits the Company to begin the process of obtaining executed contracts for
sales of homes. Receipt of such final approvals is not seasonal. Although the
Company's sales and construction activities vary somewhat with the seasons,
affecting the timing of closings, any such seasonal effect is relatively
insignificant compared to the effect of receipt of final governmental approvals.
Subcontractors perform all home construction and land development work,
generally under fixed-price contracts. Toll Brothers acts as a general
contractor and purchases some, but not all, of the building supplies it requires
(see 'Panel Plant'). The Company is not, and does not anticipate, experiencing a
shortage of either subcontractors or supplies of building materials. The
Company's construction superintendents and assistant superintendents coordinate
subcontracting activities and supervise all aspects of construction work and
quality control. The Company seeks to achieve homebuyer satisfaction by
generally providing its construction superintendents with incentive compensation
arrangements based on each homebuyer's responses on pre-closing and post-closing
checklists.
The Company maintains insurance to protect against certain risks associated
with its activities. These insurance coverages include, among others, general
liability, 'all-risk' property, workers' compensation, automobile, and employee
fidelity. The Company believes the amounts and extent of such insurance
coverages are adequate.
MARKETING
The Company believes that its marketing strategy, which emphasizes its more
expensive 'Estate' and 'Executive' lines of homes, has enhanced the Company's
reputation as a builder-developer of high-quality upscale housing. The Company
believes this reputation results in greater demand for all of the Company's
lines of homes. The Company generally includes attractive decorative moldings
such as chair rails, crown moldings, dentil moldings and other aesthetic
features, even in its less expensive homes, on the basis that this additional
construction expense is important to its marketing effort.
In addition to relying on management's extensive experience, the Company
determines the prices for its homes through a Company-designed value analysis
program that compares a Toll Brothers home with homes offered by other builders
in the relevant marketing area. The Company accomplishes this by assigning a
positive or negative dollar value to differences in product features, such as
amenities, location and marketing.
Toll Brothers expends great effort in creating its model homes, which play
an important role in the Company's marketing. In its models, Toll Brothers
creates an attractive atmosphere, with bread baking in the oven, fires burning
in fireplaces, and background music. Interior decorations vary among the models
and are carefully selected based upon the lifestyles of the prospective buyers.
S-16
<PAGE>
The sales office located in each community is generally staffed by Company
sales personnel, who are compensated with salary and commission. In addition, a
significant portion of Toll Brothers' sales is derived from the introduction of
customers to its communities by local cooperating realtors.
The Company advertises extensively in newspapers, other local and regional
publications (including concert programs and hotel room magazines), and on
billboards. The Company also uses videotapes and attractive four-color brochures
to describe each community.
All Toll Brothers homes are sold under the Company's one-year limited
warranty as to workmanship and two-year limited warranty as to mechanical
equipment, supplemented by the Home Owners Warranty program, a privately insured
program sponsored by the National Association of Home Builders, which provides
to home purchasers a limited ten-year warranty as to structural integrity.
CUSTOMER FINANCING
The Company makes arrangements with a variety of mortgage lenders to
provide homebuyers a range of conventional mortgage financing programs. By
making available an array of attractive mortgage programs to qualified
purchasers, the Company is able to better coordinate and expedite the entire
sales transaction by ensuring that mortgage commitments are received and that
closings take place on a timely and efficient basis. During fiscal 1993,
approximately 68% of the Company's closings were financed through mortgage
programs offered or sponsored by the Company. In addition, during the same
period, the Company's homebuyers, on average, financed approximately 71% of the
purchase price of their home.
The Company secures the availability of a variety of competitive market
rate mortgage products from both national and regional lenders. Such
availability is generally obtained at no cost to the Company and is committed
for varying lengths of time and amounts.
The Company also obtains forward commitments for fixed and variable rate
mortgage financing which contain various rate protection features. Such
commitments generally cost the Company from zero to one percent of the mortgage
funds reserved and typically have terms of 9 to 18 months. As of October 31,
1993, there were approximately $22 million of such commitments available, which
expire at various dates through December 1994.
PANEL PLANT
Toll Brothers owns a facility of approximately 200,000 square feet in which
it manufactures open wall panels, roof and floor trusses, and certain interior
and exterior millwork to supply a portion of the Company's construction needs.
This operation also permits Toll Brothers to purchase wholesale lumber, plywood,
windows, doors, certain other interior and exterior millwork and other building
materials to supply its communities. The Company believes that increased
efficiency, cost savings and productivity result from the operation of this
plant and from such wholesale purchases of material. This plant generally does
not sell to or supply to any purchasers other than Toll Brothers. The property,
which is located in Morrisville, Pennsylvania, is adjacent to U.S. Route 1, a
major thoroughfare, and is served by rail.
COMPETITION
The homebuilding business is highly competitive and fragmented. The Company
competes with numerous homebuilders of varying size, ranging from local to
national in scope, some of which have greater sales and financial resources than
the Company. Resales of homes also provide competition. The Company competes
primarily on the basis of price, location, design, quality, service and
reputation; however, during the past several years, the Company's financial
stability, relative to others in its industry (some of which have gone out of
business), has become an increasingly favorable competitive factor.
S-17
<PAGE>
REGULATION AND ENVIRONMENTAL MATTERS
The Company is subject to various local, state and federal statutes,
ordinances, rules and regulations concerning zoning, building design,
construction and similar matters, including local regulations which impose
restrictive zoning and density requirements in order to limit the number of
homes that can eventually be built within the boundaries of a particular
locality. In addition, the Company is subject to registration and filing
requirements in connection with the construction, advertisement and sale of
homes in its communities in certain states and localities in which it operates.
These laws have not had a material effect on the Company, except to the extent
that application of such laws may have caused the Company to conclude that
development of a proposed community would not be economically feasible, even if
any or all necessary governmental approvals were obtained (See 'Business -- Land
Policy'). The Company may also be subject to periodic delays or may be precluded
entirely from developing communities due to building moratoriums in any of the
states in which it operates. Generally, such moratoriums relate to insufficient
water or sewage facilities or inadequate road capacity.
In January 1983, the New Jersey Supreme Court rendered a decision known as
the 'Mount Laurel II' decision, which has the effect of requiring certain
municipalities in New Jersey to provide housing for persons of low and moderate
income. In order to comply with such requirements, municipalities in that state
may require the Company, in connection with its future residential communities,
to contribute funds, on a per unit basis, or otherwise assist in providing a
fair share of such housing. The Company has developed one 'Mount Laurel II'
community in New Jersey, which has 32 units and which the Company has chosen to
rent at lower than market rentals. The Company also has two proposed communities
in New Jersey which contain plans for an aggregate of approximately 170 'Mount
Laurel II' units which will either be rented or sold at lower than market
rentals or prices. In addition, in 1985, New Jersey adopted the Fair Housing
Act. The Fair Housing Act and the regulations adopted pursuant to the Fair
Housing Act are designed to ensure that each municipality in New Jersey supplies
its fair share of regional affordable housing needs. In addition, other states
in which the Company operates impose restrictions and/or requirements for the
Company to provide affordable housing at below market rental or sales prices.
The impact on the Company will depend on how the various states and local
governments in which the Company engages or intends to engage in development
implement their programs for affordable housing.
The Company is also subject to a variety of local, state and federal
statutes, ordinances, rules and regulations concerning protection of health and
the environment ('environmental laws'), as well as effects of environmental
factors. The particular environmental laws which apply to any given community
vary greatly according to the community site, the site's environmental
conditions and the present and former uses of the site. These environmental laws
may result in delays, may cause the Company to incur substantial compliance and
other costs, and can prohibit or severely restrict development in certain
environmentally sensitive regions or areas.
The Company maintains a policy of engaging, prior to consummating the
purchase of land, independent environmental engineers to formally evaluate such
land for the presence of hazardous or toxic materials, wastes or substances.
Because it has generally obtained such analyses for the land it has purchased,
the Company has not been significantly affected to date by the potential
presence of such materials.
EMPLOYEES
As of October 31, 1993, the Company employed 873 full-time persons; of
these, 20 were in executive positions, 94 were engaged in sales activities, 73
in project management activities, 231 in administrative and clerical activities,
212 in construction activities, 44 in engineering activities and 199 in the
panel plant operations. The Company considers its employee relations to be good.
S-18
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The Notes offered hereby constitute a single series of Debt Securities (as
defined in the Prospectus) and will be limited to $50,000,000 aggregate
principal amount ($57,500,000 if the Underwriters' over-allotment option is
exercised in full). The Notes will be issued under an Indenture, as supplemented
by the Authorizing Resolutions (as defined in the Indenture) relating to the
Notes, (the 'Indenture') dated as of January 15, 1994, among the Issuer, the
Company and Security Trust Company, N.A., as Trustee (the 'Trustee'), which
Indenture is more fully described in the Prospectus. The Trustee is an affiliate
of a participant in the Revolving Credit Agreement. The Notes will bear interest
from the date of original issuance, at the rate per annum shown on the front
cover page of this Prospectus Supplement, payable on January 15 and July 15 of
each year, commencing July 15, 1994, to holders of record at the close of
business on the January 1 and July 1, as the case may be, immediately preceding
such interest payment date. The Notes will be due on January 15, 2004 and will
be issued only in fully registered form, in denominations of $1,000 and integral
multiples thereof.
The Notes are convertible at their principal amount or any portion thereof
which is an integral multiple of $1,000, at any time prior to the close of
business on January 15, 2004, subject to prior redemption at the option of the
Issuer or delivery of a Change of Control Purchase Notice (as defined herein)
with respect to such Notes which has not been withdrawn, into shares of Common
Stock, at the conversion price set forth on the front cover page of this
Prospectus Supplement, subject to adjustment as described in the Prospectus.
The Notes are subordinated in right of payment to all Senior Indebtedness
of Toll pursuant to the provisions described under 'Subordination of Notes and
Guarantee' below. The Company will unconditionally guarantee on a senior
subordinated basis the due and punctual payment of the principal of, premium, if
any, and interest on the Notes, when and as the same shall become due and
payable, whether at maturity, by declaration of acceleration, call for
redemption or otherwise. The Guarantee is subordinated in right of payment to
all Senior Indebtedness of the Company pursuant to the provisions described
under 'Subordination of Notes and Guarantee' below. The Notes and the Guarantee
are not senior to any indebtedness of Toll or the Company, respectively, and
have been designated 'senior subordinated' primarily because the Notes and the
Guarantee rank pari passu in right of payment with Toll's 101/2% Senior
Subordinated Notes due 2002 and 91/2% Senior Subordinated Notes due 2004 and the
Company's related guarantees.
The Issuer may pay principal and interest by wire transfer or by check and
may mail an interest check to the registered address of each holder of each
outstanding Note (each such holder being hereinafter referred to as a
'Noteholder' or 'Holder' and collectively as the 'Noteholders' or 'Holders').
Noteholders must surrender Notes to a Paying Agent to collect principal
payments.
Initially, the Trustee will act as Paying Agent and Registrar. The Issuer
may change any Paying Agent and Registrar without notice.
The terms of the Notes and the Guarantee include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the 'Trust Indenture Act'). The Notes and the
Guarantee are subject to all such terms, and the Holders are referred to the
Indenture and the Trust Indenture Act for a statement of them.
REDEMPTION
Optional Redemption. The Notes may be redeemed at any time on or after
January 15, 1997, and prior to maturity at the option of the Issuer, in whole,
or in part from time to time, on not less than 30 nor more than 60 days prior
notice, mailed by first-class mail to each Holder of record at such Holder's
last address as it shall appear upon the registration books of the Registrar, at
the following redemption prices (expressed as percentages of the principal
amount), in each such case with accrued and unpaid
S-19
<PAGE>
interest thereon to the redemption date, if redeemed during the 12-month period
beginning January 15 of the following years:
<TABLE>
<CAPTION>
YEARS PERCENTAGE
- ----- -----------
<S> <C>
1997....................................................................... 102.969%
1998....................................................................... 102.375%
1999....................................................................... 101.781%
2000....................................................................... 101.188%
2001....................................................................... 100.594%
2002 and thereafter........................................................ 100.000%
</TABLE>
Selection for Redemption. If less than all the Notes are to be redeemed,
selection of Notes for redemption will be made by the Trustee, if the Notes are
listed on a national securities exchange, in accordance with the rules of such
exchange, or if the Notes are not so listed, on a pro rata basis or by lot or in
such other manner as the Trustee shall deem appropriate and fair in its
discretion in denominations of $1,000 and integral multiples thereof.
SUBORDINATION OF NOTES AND GUARANTEE
The payment of the principal of, premium, if any, and interest on the Notes
is subordinated in right of payment, in the manner and to the extent set forth
in the Indenture, to the prior payment in full of all senior indebtedness of
Toll (herein, 'Senior Indebtedness of Toll' and referred to in the Indenture as
'Senior Indebtedness of the Company,' as further defined below) whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed. Upon (i) the maturity of any Senior Indebtedness of Toll
by lapse of time, acceleration (unless waived) or otherwise, or (ii) any
distribution of the assets of Toll upon any dissolution, winding up, liquidation
or reorganization of Toll, the holders of Senior Indebtedness of Toll will be
entitled to receive payment in full before the holders of the Notes will be
entitled to receive any payments on the Notes. If, in any of the situations
referred to in clause (i) or (ii) above, a payment is made to the Trustee or to
the Noteholders by Toll before all Senior Indebtedness of Toll has been paid in
full or provision has been made for such payment, the payment to the Trustee or
the Noteholders must be paid over to the holders of Senior Indebtedness of Toll.
Senior Indebtedness of Toll (referred to in the Indenture as 'Senior
Indebtedness of the Company') is defined as: (i) the principal of, premium, if
any, and interest on any indebtedness, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed by Toll, (a)
under the Revolving Credit Agreement, (b) for money borrowed from others
(including, for this purpose, all obligations incurred under capitalized leases
or purchase money mortgages or under letters of credit or similar commitments),
or (c) in connection with the acquisition by it of any other business, property
or entity and, in each case, all renewals, extensions and refundings thereof,
unless the terms of the instrument creating or evidencing such indebtedness
expressly provide that such indebtedness is not superior in right of payment to
the payment of the principal of, premium, if any, and interest on the Notes.
Senior Indebtedness of Toll shall not include (a) indebtedness or amounts owed
for compensation to employees, for goods or materials purchased in the ordinary
course of business, or for services, (b) indebtedness of Toll to the Company or
any Subsidiary (as defined in the Indenture) for money borrowed or advances from
such entities, (c) Toll's 10 1/2% Senior Subordinated Notes due 2002 (which
shall rank pari passu in right of payment with the Notes), (d) Toll's
9 1/2% Senior Subordinated Notes due 2003 (which shall rank pari passu in
right of payment with the Notes) and (e) the Notes.
The payment of the principal of, premium, if any, and interest on the Notes
pursuant to the Guarantee will be subordinated in right of payment, in the
manner and to the extent set forth in the Indenture, to the prior payment in
full of all senior indebtedness of the Company (herein, 'Senior Indebtedness of
the Company' and referred to in the Indenture as 'Senior Indebtedness of the
Guarantor', as further defined below), whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed. Upon (i) the
maturity of any Senior Indebtedness of the
S-20
<PAGE>
Company by lapse of time, acceleration (unless waived) or otherwise or (ii) any
distribution of the assets of the Company upon any dissolution, winding up,
liquidation or reorganization of the Company, the holders of Senior Indebtedness
of the Company will be entitled to receive payment in full before the holders of
the Notes will be entitled to receive any payments on the Notes pursuant to the
Guarantee. If, in any of the situations referred to in clause (i) or (ii) above,
a payment is made to the Trustee or to the Noteholders by the Company before all
Senior Indebtedness of the Company has been paid in full or provision has been
made for such payment, the payment to the Trustee or Noteholders must be paid
over to the holders of Senior Indebtedness of the Company.
Senior Indebtedness of the Company (referred to in the Indenture as 'Senior
Indebtedness of the Guarantor') is defined as: (i) the principal of, premium, if
any, and interest on any indebtedness, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed by the Company,
(a) under the Revolving Credit Agreement, or (b) for money borrowed from others
(including, for this purpose, all obligations incurred under capitalized leases
or purchase money mortgages or under letters of credit or similar commitments),
or (c) in connection with the acquisition by it of any other business, property
or entity, and, in each case, all renewals, extensions and refundings thereof,
unless the terms of the instrument creating or evidencing such indebtedness
expressly provide that such indebtedness is not superior in right of payment to
the payment of the Notes pursuant to the Guarantee. Senior Indebtedness of the
Company shall not include (a) the Guarantee, (b) indebtedness of the Company to
any Subsidiary for money borrowed or advances from such Subsidiary, (c) the
Company's guarantee of Toll's 10 1/2% Senior Subordinated Notes due 2002 (which
shall rank pari passu in right of payment with the Guarantee) and (d) the
Company's guarantee of Toll's 9 1/2% Senior Subordinated Notes due 2003 (which
shall rank pari passu in right of payment with the Guarantee).
As of October 31, 1993, the amount of outstanding indebtedness of the
Company and its subsidiaries effectively ranking senior in right of payment to
the Notes (excluding collateralized mortgage financing) would have been
$194,302,000.
REPURCHASE OF NOTES BY THE ISSUER AT THE OPTION OF THE HOLDER AFTER A CHANGE OF
CONTROL
In the event of any Change of Control of the Company (a 'Change of
Control', as hereinafter defined), each Noteholder will have the right, at the
Noteholder's option, subject to the terms and conditions of the Indenture, to
require the Issuer to purchase all or any part (provided that the principal
amount of such part must be $1,000 or an integral multiple thereof) of the
Holder's Notes on the date that is 35 Business Days (as defined in the
Indenture) after the occurrence of such Change of Control (the 'Change of
Control Purchase Date') at a price equal to 100% of the principal amount thereof
plus accrued and unpaid interest thereon to the Change of Control Purchase Date
(the 'Change of Control Purchase Price').
Within 15 Business Days after a Change of Control, the Issuer is obligated
to provide to all Noteholders at their addresses shown on the registry books of
the Issuer (and to beneficial owners if required by applicable law), a notice
(the 'Change of Control Purchase Notice') regarding the Change of Control, which
notice shall state, among other things, (i) the date of such Change of Control
and the events causing such Change of Control, (ii) the last date by which the
change of Control Purchase Notice must be given, (iii) the Change of Control
Purchase Date, (iv) the Change of Control Purchase Price, (v) the place to
surrender Notes in exchange for the Change of Control Purchase Price, (vi) the
current conversion price, (vii) that Notes as to which a Change of Control
Purchase Notice has been given may be converted into Common Stock only if the
Change of Control Purchase Notice has been withdrawn in accordance with the
terms of the Indenture, (viii) the procedures that a Noteholder must follow to
exercise these rights and (ix) the procedures for withdrawing a Change of
Control Purchase Notice.
To exercise the right to require the repurchase of Notes upon a Change of
Control, a Holder must deliver the Change of Control Purchase Notice to the
Issuer prior to the close of business on the Change of Control Purchase Date.
The Change of Control Purchase Notice shall state (i) the certificate
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<PAGE>
numbers of the Notes to be delivered by the Holder thereof for purchase by the
Issuer, (ii) the portion of the principal amount of Notes to be purchased, which
portion must be $1,000 or an integral multiple thereof and (iii) that such Notes
are to be purchased by the Issuer pursuant to the applicable provisions of the
Indenture.
Any Change of Control Purchase Notice may be withdrawn by the Holder by a
written notice of withdrawal delivered to the Issuer prior to the close of
business on the Change of Control Purchase Date. The notice of withdrawal shall
state the principal amount and the certificate numbers of the Notes as to which
the withdrawal notice relates and the principal amount, if any, that remains
subject to a Change of Control Purchase Notice.
Payment of the Change of Control Purchase Price for any Notes for which a
Change of Control Purchase Notice has been delivered and not validly withdrawn
is conditioned upon delivery of such Notes (together with necessary
endorsements) to the Issuer, any time (whether prior to, on or after the Change
of Control Purchase Date) after the delivery of such Change of Control Purchase
Notice. Payment of the Change of Control Purchase Price for such Notes will be
made promptly following the later of the Change of Control Purchase Date or the
time of delivery of such Notes.
Under the Indenture, a 'Change of Control' of the Company is deemed to have
occurred at such times as (i) any Person (as defined in the Indenture) including
its Affiliates and Associates (each as defined in the Indenture) other than (a)
the Company, (b) its Subsidiaries, (c) their employee benefit plans or (d)
Robert I. Toll, Bruce E. Toll, members of their respective immediate families,
their respective heirs at law or any trust in which either of them has a
material interest, serves as trustee, is settlor or of which members of their
respective immediate families or their respective heirs at law are the
beneficiaries, files or becomes obligated to file a Schedule 13D or 14D-1 (or
any successor schedule, form or report under the Exchange Act of 1934, as
amended (the 'Exchange Act')) disclosing that any such Person has become the
beneficial owner of 50% or more of the Company's Common Stock, (ii) there shall
be consummated any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which the Common
Stock of the Company would be converted into cash, securities or other property,
other than a merger of the Company in which the holders of the Common Stock of
the Company immediately prior to the merger have the same or greater
proportionate ownership, directly or indirectly, of common stock of the
surviving corporation immediately after the merger as they had of the Common
Stock of the Company immediately prior to such merger, or (iii) any sale,
transfer, lease or conveyance of all or substantially all of the properties and
assets of the Company to any Person (other than a Subsidiary). Clause (iii) of
the definition of 'Change of Control' includes a sale, transfer, lease or
conveyance of 'all or substantially all' of the properties and assets of the
Company to any Person (other than a Subsidiary). There is little case law
interpreting the phrase 'all or substantially all' in the context of an
indenture. Because there is no precise established definition of this phrase,
the ability of a Noteholder to require the Issuer to repurchase such Notes as a
result of a sale, transfer, lease, or conveyance of the Company's properties and
assets to any Person may be uncertain under the facts involved in the particular
situation.
No modification of the Change of Control provisions of the Indenture will
be effective against any Noteholder without such Noteholder's consent.
A Change of Control will not be triggered if a change of control of the
Company's Board of Directors occurs as a result of a proxy contest involving the
solicitation of revocable proxies.
The Boards of Directors of the Issuer and the Company do not have the right
to limit a Holder's right to receive the Change of Control Purchase Price by
approving a Change of Control, including any Change of Control involving the
Company's management.
The Issuer will comply with the provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act which may then be applicable and will
file Schedule 13e-4 or any other schedule required thereunder in connection with
any offer by the Issuer to purchase the Notes at the option of the Holders upon
a Change of Control.
S-22
<PAGE>
The Change of Control purchase feature of the Notes may in certain
circumstances make more difficult or discourage a takeover of the Company and,
thus, the removal of incumbent management. The Change of Control purchase
feature, however, is not the result of management's knowledge of any specific
effort to accumulate shares of Common Stock or to obtain control of the Company
by means of a merger, tender offer, solicitation or otherwise, or part of a plan
by management to adopt a series of anti-takeover provisions. Instead, the Change
of Control purchase feature is a term that the Issuer and the Company believe to
be standard and is contained in other convertible debt offerings that have been
marketed by the Underwriters, and the terms of such feature result from
negotiations between the Issuer and the Company and the Underwriters.
The Company's Revolving Credit Agreement currently provides that a change
of control occurs under such agreement if (i) Robert I. Toll and Bruce E. Toll
(and the executors, administrators or heirs of either or both of them in the
event of the death of either or both of them) shall together own less than 25%
of the Company's issued and outstanding Common Stock, or (ii) another
partnership, limited partnership, syndicate or other group which is deemed a
'person' within the meaning of Section 13(d)(3) of the Exchange Act owns more of
the Company's issued and outstanding Common Stock than is owned in the aggregate
by Robert I. Toll and Bruce E. Toll (and the executors, administrators or heirs
of either or both of them in the event of the death of either or both of them).
As of October 31, 1993, Messrs. Toll owned approximately 44% of the outstanding
Common Stock of the Company. A change of control under the Revolving Credit
Agreement would constitute a default under such agreement and, upon the taking
of certain actions by the lender banks, would require repayment of any loans
outstanding thereunder. Because a Person must become the beneficial owner of 50%
or more of the Common Stock to trigger a Change of Control under the Indenture,
it is possible for there to be a change of control (and consequent default)
under the Revolving Credit Agreement without there being a Change of Control
under the Indenture. The other events that could trigger a Change of Control
under the Indenture are prohibited under the Revolving Credit Agreement. As a
result, any Change of Control under the Indenture may constitute a default under
the Revolving Credit Agreement, unless such Change of Control is approved by the
lenders under the Revolving Credit Agreement. If a Change of Control under the
Indenture were to occur, there can be no assurance that the Issuer (or the
Company through the Guarantee) would have sufficient funds to pay the Change of
Control Purchase Price for all Notes tendered by the Holders thereof. In
addition, the ability of the Issuer (or the Company through the Guarantee) to
purchase Notes with cash may be limited by the terms of their respective then
existing borrowing agreements. A default by the Issuer and the Company on the
obligation to pay the Change of Control Purchase Price would result in a default
under the Indenture and could result in acceleration of the maturity of other
indebtedness of the Issuer and the Company at the time outstanding pursuant to
cross-default provisions. See 'Description of Debt Securities and Guarantees --
Events of Default and Notice Thereof' in the Prospectus. In such event, the
ability of a Holder to receive the Change of Control Purchase Price may be
limited unless and until such default or acceleration shall be cured or waived
or cease to exist. In general, however, no such default would occur as long as
the Issuer or the Company were permitted under its other loan agreements to
purchase the Notes tendered for purchase.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of federal income tax consequences to purchasers of
the Notes in this offering is for general information only. This summary is
based on the Internal Revenue Code of 1986, as amended to the date hereof (the
'Code'), existing and proposed Treasury Regulations, Internal Revenue Service
(the 'IRS') rulings, and court decisions now in effect, all of which are subject
to change. The tax treatment of the Holders of the Notes may vary depending upon
their particular situations. Certain Holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
entities and individuals who are not citizens or residents of the United States)
may be subject to special rules not discussed below. This summary also does not
discuss the tax consequences to subsequent purchasers of the Notes and is
limited to Noteholders who hold the Notes as capital assets within the meaning
of Section 1221 of the Code and in whose hands shares of the Common Stock
received upon an exchange of the Notes would be treated as capital assets. It
does not deal with special tax situations such as the holding of the Notes as
part of a straddle with other
S-23
<PAGE>
investments. EACH PURCHASER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF NOTES,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS,
AND ANY RECENT CHANGES IN APPLICABLE TAX LAWS.
INTEREST AND ORIGINAL ISSUE DISCOUNT
A Noteholder using the accrual method of accounting for tax purposes will
generally be required to include stated interest on the Note in ordinary income
as such interest accrues, while a cash basis Holder will be required to include
stated interest in income when cash payments are received (or made available for
receipt) by such Holder.
Current law is unclear as to whether the Notes will be deemed to bear
original issue discount ('OID') in addition to stated interest. If the right to
receive the Common Stock upon an exchange of the Notes were viewed, for Federal
income tax purposes, as a separate asset, the Notes would be bifurcated and
treated as two instruments: a deemed debt instrument and a deemed option to
receive the Common Stock. If this treatment were applicable to the Notes, each
Noteholder would be required to allocate the issue price of the Notes between
the deemed debt instrument and the deemed option. For Federal income tax
purposes, the difference between the portion of the issue price allocated to the
deemed debt instrument and the principal amount at maturity would constitute
OID. Therefore, in addition to stated interest income, Noteholders would be
required to include OID in income over the term of the Notes before receipt of
the consideration attributable to such income, and, as a separate consequence,
cash basis Noteholders would generally be required to recognize both stated
interest and OID on an accrual basis.
Current law is unclear as to whether the Notes will be required to be
bifurcated into a deemed debt instrument and a deemed option. Under judicial
opinions dealing with periods before the publication of certain proposed
Treasury Regulations, the Notes would not be bifurcated into deemed debt
instruments and deemed options. Moreover, under Proposed Regulation Section
1.1273-2(g), issued by the Internal Revenue Service (the 'Service') on December
22, 1992 (the '1992 Proposed Regulation') and proposed to be effective 60 days
after the regulation is issued in final form, the Notes would not be deemed to
have any OID, because a debt instrument that is convertible into the stock of
the issuer, or a related party, is treated as a single security, and the issue
price of the debt instrument includes any amount paid with respect to the
conversion privilege. The 1992 Proposed Regulation is inconsistent with a
proposed regulation issued in 1991 (the '1991 Proposed Regulation'), which was
proposed to be effective for debt instruments issued on or after February 20,
1991. The 1991 Proposed Regulation (which has not been withdrawn) apparently
would require that the issue price of the Notes be bifurcated. If bifurcation
were required, the Notes could be deemed to have OID, which would have to be
taken into account as income by the Noteholders over the term of the Notes.
Based upon the current state of the law and in the absence of final
regulations, the Company and the Issuer intend to report interest in a manner
consistent with the rule set forth in the 1992 Proposed Regulation and prior
judicial decisions and will not treat the Notes as having OID. It is assumed for
purposes of the remainder of this discussion under 'Certain Federal Income Tax
Consequences' that the IRS will not reverse the approach taken in the 1992
Proposed Regulation by issuing final regulations requiring that the Notes be
bifurcated.
CONVERSION OF NOTES
In general, it is expected that the conversion of a Note into Common Stock
of the Company will be treated as a taxable disposition and that a Noteholder
will be required to recognize taxable gain (or loss) to the extent that the fair
market value of the Common Stock of the Company received upon the conversion
exceeds (or is less than) the Noteholder's adjusted tax basis in the Note
immediately prior to such conversion. Except as discussed below with respect to
market discount, such gain or loss will be a capital gain or loss, and will be
long-term or short-term depending on whether such Note has been held for more
than one year. A Noteholder's basis in each share of Common Stock of the Company
received upon conversion of a Note will be the fair market value of such share
at the date of conversion
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<PAGE>
and such Noteholder's holding period in such share will commence the day after
the conversion and will not include such Noteholder's holding period for the
Note exchanged therefor.
ADJUSTMENTS TO CONVERSION PRICE
In general, adjustments in the conversion price of the Notes to reflect
stock dividends, stock splits, and recapitalizations that are not taxable to
holders of Common Stock will not be taxable to Noteholders. However, under
certain circumstances, adjustments in the conversion price of the Notes to
reflect distributions to holders of Common Stock may result in constructive
distribution to Noteholders taxable as dividends pursuant to Section 305 of the
Code.
DISPOSITION OF A NOTE OR COMMON STOCK
In general, the Holder of a Note or the Common Stock into which it was
converted will recognize gain or loss upon the sale, redemption, retirement or
other disposition of the Note or Common Stock measured by the difference between
the amount of cash and the fair market value of property received (except to the
extent the Holder recognizes ordinary income attributable to the payment of
accrued interest), and the Holder's tax basis in the Note or Common Stock.
Subject to the market discount rules discussed below, the gain or loss on the
sale or redemption of a Note or Common Stock will be long-term capital gain or
loss, provided the Note or Common Stock was held as a capital asset and had been
held for more than one year.
MARKET DISCOUNT ON DISPOSITION
Purchasers of the Notes should be aware that they may be affected by the
market discount provisions of the Code. These rules generally provide that if a
Holder of a Note purchases it at a market discount in excess of a statutorily
defined de minimis amount, and thereafter recognizes a gain upon a disposition
(including a gain upon a complete or partial redemption or, in general, upon
conversion) of the Note, the lesser of such gain or the portion of the market
discount that accrued while the Note was held by such Holder will be treated as
ordinary interest income at the time of the disposition. The rules also provide
that a Holder who acquires a Note at a market discount may be required to defer
a portion of any interest expense that may otherwise be deductible on any
indebtedness incurred or maintained to purchase or carry such Note until the
Holder disposes of such Note in a taxable transaction. If a Holder of a Note
elects to include market discount in income currently, neither of the foregoing
would apply.
AMORTIZABLE BOND PREMIUM
In the case of any Holder of a Note who purchases the Note at a premium,
such Holder may elect (or may be required by a prior election) to amortize on a
yield to maturity basis the excess, if any, of such Holder's basis in the Note
over the amount payable upon maturity (or the earlier redemption date, if use of
the redemption price will reduce the Holder's premium amortization), reduced by
any amount attributable to the conversion feature of the Note, as determined
under applicable Treasury Regulations. Any election to amortize bond premium
will apply to all bonds held by the Holder at the beginning of the first taxable
year in which the election applies and to all bonds thereafter acquired by the
Holder in the same year or subsequent years.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, payments of principal and interest, and the proceeds of sale of
a Note within the United States (i) will be subject to information reporting and
(ii) will be subject to backup withholding at a rate of 31%, if a Noteholder
fails to provide its taxpayer identification number on IRS Form W-9, fails to
establish an exemption from backup withholding or is otherwise subject to backup
withholding under Section 3406 of the Code.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
Basic Provisions and related Terms Agreement incorporated by reference therein
(together, the 'Underwriting Agreement'), the Issuer has agreed to sell to each
of the Underwriters named below (the 'Underwriters'), and each of the
Underwriters has severally agreed to purchase from the Issuer, the principal
amount of Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
------------- ----------
<S> <C>
Salomon Brothers Inc .................................................................. $16,666,668
Dillon, Read & Co. Inc................................................................. 16,666,666
Kidder, Peabody & Co. Incorporated..................................................... 16,666,666
-----------
Total............................................................................. $50,000,000
-----------
-----------
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed on the terms
and subject to the conditions set forth therein, to purchase all of the Notes
offered hereby if any of the Notes are purchased. In the event of a default by
an Underwriter, the Underwriting Agreement provides that, in certain
circumstances, purchase commitments of the nondefaulting Underwriter(s) may be
increased or the Underwriting Agreement may be terminated.
The Issuer has been advised by the Underwriters that they propose
initially to offer the Notes to the public at the public offering price
set forth on the front cover page of this Prospectus Supplement, and to
certain dealers at such price less a concession not in excess of .600% of
the principal amount of the Notes. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of .250% of the principal
amount of the Notes to certain other dealers. After the initial public
offering, the public offering price and such concessions may be changed
from time to time.
The Issuer has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus Supplement to purchase up to $7,500,000
principal amount of additional Notes to cover over-allotments, if any, at the
public offering price less the underwriting discount.
The Issuer has been advised by the Underwriters that the Underwriters
presently intend to make a market in the Notes offered hereby; however, they are
not obligated to do so. Any market making may be discontinued at any time, and
there can be no assurance that an active public market for the Notes will
develop.
The Company has agreed not to sell or otherwise dispose of any Common Stock
or any security convertible into or exchangeable for Common Stock (except in
certain limited circumstances) for a period of 90 days after the date of this
Prospectus Supplement without the prior written consent of the Underwriters.
The Underwriting Agreement provides that the Issuer and the Company,
jointly and severally, will indemnify the Underwriters against certain civil
liabilities under applicable securities laws or contribute to payments the
Underwriters may be required to make in respect thereof.
S-26
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents have been filed by the Company with the Securities
and Exchange Commission (the 'Commission') and are hereby incorporated herein by
reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1993; and
2. The Company's Current Report on Form 8-K filed January 7, 1994.
LEGAL MATTERS
Certain matters with respect to the Notes offered hereby, including certain
Federal income tax matters, are being passed upon for the Company and the Issuer
by Wolf, Block, Schorr and Solis-Cohen, Philadelphia, Pennsylvania. Certain
legal matters with respect to the Notes offered hereby are being passed upon for
the Underwriters by Cahill Gordon & Reindel (a partnership including a
professional corporation), New York, New York.
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<PAGE>
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<PAGE>
PROSPECTUS
[TOLL BROTHERS LOGO]
TOLL BROTHERS, INC.
COMMON STOCK
PREFERRED STOCK
GUARANTEES
TOLL CORP.
DEBT SECURITIES
------------------------
Toll Brothers, Inc. (the 'Company') may from time to time offer (i) shares
(the 'Common Shares') of its Common Stock , $.01 par value per share (the
'Common Stock'), (ii) shares (the 'Preferred Shares') of its Preferred Stock,
$.01 par value per share (the 'Preferred Stock'), or (iii) unconditional and
irrevocable guarantees ('Guarantees') of debt securities issued by Toll Corp.
('Toll'), a wholly-owned subsidiary of the Company. Toll may offer from time to
time debt securities (the 'Debt Securities'), consisting of debentures, notes
and/or other unsecured evidences of indebtedness in one or more series,
guaranteed by the Company. The foregoing securities are collectively referred to
as the 'Securities.' Any Securities may be offered with other Securities or
separately (except for Guarantees, which may only be offered with Debt
Securities issued by Toll). Securities may be sold for U.S. dollars, foreign
currency or currency units, including the European Currency Unit; amounts
payable with respect to any Securities may likewise be payable in U.S. dollars,
foreign currency or currency units, including the European Currency Unit -- in
each case, as the Company (or, in the case of Debt Securities, Toll)
specifically designates. The Securities will be offered at an aggregate initial
offering price not to exceed U.S. $250,000,000, or the equivalent thereof (based
on the applicable exchange rate at the time of sale) if Debt Securities of Toll
are issued in principal amounts denominated in one or more foreign currencies or
currency units as shall be designated by Toll, at prices and on terms to be
determined at the time of sale.
This Prospectus will be supplemented by one or more Prospectus Supplements,
which will set forth with regard to the particular Securities in respect of
which this Prospectus is being delivered (i) in the case of Common Shares, the
number of Common Shares and the terms of the offering thereof, (ii) in the case
of Preferred Shares, the number of Preferred Shares, the terms of the Preferred
Shares including, without limitation, conversion rights, if any, and the terms
of the offering thereof, and (iii) in the case of Debt Securities, the title,
aggregate principal amount, currency or currencies of denomination, initial
offering price, maturity, interest rate or rates, if any (which may be either
variable or fixed), and/or method of determination thereof, the time of payment
of any interest, any terms for redemption, extension or early repayment, any
provision for sinking fund payments, rank, any conversion or exchange rights,
whether such Debt Securities are issuable in individual registered form with or
without coupons, any listing on a securities exchange, the net proceeds to the
Company and any other specific terms, including any covenants, relating to such
series of Debt Securities. The Prospectus Supplement will also contain
information, as applicable, about certain United States Federal income tax
considerations relating to the Securities in respect of which this Prospectus is
being delivered.
The Company or Toll may sell the Securities to or through dealers or
underwriters, and also may sell the Securities directly to other purchasers or
through agents. See 'Plan of Distribution.' If an agent of the Company or Toll
or a dealer or an underwriter is involved in the sale of the Securities in
respect of which this Prospectus is being delivered, the agent's commission or
dealer's purchase price or underwriter's discount will be set forth in, or may
be calculated from, the Prospectus Supplement. Any underwriters, dealers or
agents participating in the offering of Securities may be deemed to be
'underwriters' within the meaning of the Securities Act of 1933, as amended. See
'Plan of Distribution' for possible indemnification arrangements for any agents,
dealers or underwriters.
------------------------
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 ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
The date of this Prospectus is January 6, 1994.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the 'Commission'). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission, Room 1024, 450 Fifth Street,
N.W., Washington, DC 20549, and at the following Regional Offices of the
Commission: New York Regional Office, 75 Park Place, 14th Floor, New York, New
York, 10007; and Chicago Regional Office, Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, DC 20549, at prescribed rates. In addition, reports,
proxy statements and other information concerning the Company may be inspected
at the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005 and the Pacific Stock Exchange, 301 Pine Street, San Francisco,
California 94104.
The Company and Toll have filed a Registration Statement (herein, together
with all amendments thereto, called the 'Registration Statement') under the
Securities Act of 1933, as amended (the 'Securities Act'), with the Commission,
with respect to the Securities covered by this Prospectus. Toll does not expect
that it will be required to file reports with the Commission pursuant to Section
15(d) of the Exchange Act. In this regard, Toll will not make available annual
reports to security holders. For further information with respect to Toll and
the Company and the Securities offered hereby, reference is hereby made to the
Registration Statement and exhibits thereto. Statements contained in this
Prospectus concerning the provisions of certain documents are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. Copies of all or any part of the
Registration Statement, including exhibits thereto, may be obtained, upon
payment of the prescribed fees, at the offices of the Commission as set forth
above.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company hereby incorporates by reference the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 1993 and the description of the
Company's Common Stock contained in its Registration Statement on Form 8-A dated
June 19, 1986. All documents filed by the Company pursuant to Sections 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 Securities shall be deemed
to be incorporated by reference in this Prospectus from the date of filing such
documents. Any statement in a document incorporated by reference herein shall be
deemed to be modified or superseded to the extent that a statement contained
herein (or in any other subsequently filed document which is also incorporated
by reference herein) modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part of this
Prospectus, except as so modified or superseded.
The Company will provide without charge to each person, including any
beneficial owner, to whom a Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the documents incorporated
herein by reference, other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference into such documents). All such
requests should be addressed to: Joseph R. Sicree, Director of Investor
Relations, Toll Brothers, Inc., 3103 Philmont Avenue, Huntingdon Valley, PA
19006, (215) 938-8000.
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THE COMPANY
The Company designs, builds, markets and arranges financing for
single-family detached and attached homes in middle and high income residential
communities primarily located on land that the Company has developed. The
Company operates predominantly in major suburban residential areas in
southeastern Pennsylvania, central New Jersey, the Virginia and Maryland suburbs
of Washington, D.C., northern Delaware and the Boston, Massachusetts
metropolitan area. The Company markets its homes primarily to upper-income
buyers, emphasizing high quality construction and customer satisfaction.
Co-founded by Robert I. Toll and Bruce E. Toll, the Company commenced its
business operations, through predecessor entities, in 1967. The Company is a
Delaware corporation that was formed in May 1986. Its principal executive
offices are located at 3103 Philmont Avenue, Huntingdon Valley, Pennsylvania
19006, and its telephone number is (215) 938-8000.
Toll Corp. ('Toll'), an indirect, wholly-owned subsidiary of the Company,
was incorporated in Delaware on July 14, 1987. Other than the financing of other
subsidiaries of the Company by lending the proceeds of the offering of the Debt
Securities and similar activities related to previous offerings of debt
securities, Toll has no independent operations and generates no operating
revenues. There is no present intention to have Toll engage in other activities.
Toll's principal executive offices are located at 3103 Philmont Avenue,
Huntingdon Valley, Pennsylvania 19006, and its telephone number is (215)
938-8000.
THE HOUSING INDUSTRY
Residential real estate developers, including the Company, are subject to
various risks, both on the national and regional levels, such as economic
recession, oversupply of homes, changes in governmental regulation, effects of
environmental factors, increases in real estate taxes and costs of materials and
labor, and the unavailability of construction funds or mortgage loans at rates
acceptable to builders and home buyers. The Company's business and earnings are
substantially dependent on its ability to obtain financing on acceptable terms
for its development activities. Increases in interest rates could reduce the
funds available to the Company for its future operations and would increase the
Company's expenses. In addition, increases in interest rates may have an adverse
effect upon the Company's sales and could affect the availability of home
financing to present and potential customers of the Company.
The housing industry has in the last several years become subject to
increased environmental, building, zoning and sales regulation by various
federal, state and local authorities. This regulation affects construction
activities as well as sales activities and other dealings with consumers. For
its development activities, the Company must obtain the approval of numerous
governmental authorities, and changes in local circumstances or applicable law
may necessitate the application for additional approvals or the modification of
existing approvals. Expansion of regulation has increased the time required to
obtain the necessary approvals to begin construction and has prolonged the time
between the initial acquisition of land or land options and the commencement and
completion of construction.
USE OF PROCEEDS
Except as otherwise set forth in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities for
general corporate purposes including acquisition of residential development
properties.
The specific use of proceeds of any series of Securities issued hereunder
will be more particularly set forth in the applicable Prospectus Supplement.
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RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's historical ratio of earnings
to fixed charges for the five years ended October 31, 1993:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio, including collateralized mortgage financing(1)................. 1.36 1.28 1.20 2.63 2.72
Ratio, excluding collateralized mortgage financing(1)(2).............. 1.47 1.36 1.27 2.97 2.85
</TABLE>
- ------------------
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes, extraordinary gain (loss) and change
in accounting plus interest expense and fixed charges except interest
incurred. Fixed charges consist of interest incurred (whether expensed or
capitalized), the portion of rent expense that is representative of the
interest factor, and amortization of debt discount and issuance costs.
(2) The Company believes that an additional useful computation of the ratio of
earnings to fixed charges would exclude interest expense attributable to the
Company's consolidated mortgage financing partnerships.
DESCRIPTION OF DEBT SECURITIES AND GUARANTEES
Debt Securities may be issued from time to time in one or more Series (as
hereinafter defined) by Toll. All Series of Debt Securities will be offered
together with unconditional Guarantees issued by the Company. The particular
terms of each series of Debt Securities, and the particular terms of the
Guarantees offered in connection therewith, will be set forth in the Indenture
(as hereinafter defined) and the Authorizing Resolution (as hereinafter defined)
relating to such Series of Debt Securities and will be described in the
applicable Prospectus Supplement.
The Debt Securities will be issued pursuant to a resolution adopted by the
Board of Directors (or an Officer or committee of Officers authorized by the
Board of Directors) of both Toll and the Company (the 'Authorizing Resolution')
under an indenture (the 'Indenture') to be entered into by the Company, Toll and
one or more Trustees prior to the issuance of such Debt Securities. Information
regarding the Trustee or Trustees with respect to any Series of Debt Securities
issued under the Indenture will be included in the related Prospectus
Supplement.
The following summaries of certain provisions of the Indenture do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the Indenture, including the
definitions therein of certain capitalized terms used in this Prospectus.
Wherever particular Sections, Articles or defined terms of the Indenture are
referred to herein or in a Prospectus Supplement, such Sections, Articles or
defined terms are incorporated herein or therein by reference. The following
sets forth certain general terms and provisions of the Debt Securities to which
any Prospectus Supplement may relate. The particular terms of the Debt
Securities offered by any Prospectus Supplement and the extent, if any, to which
such general provisions may apply to the Debt Securities so offered, will be
described in the Prospectus Supplement relating to such Debt Securities. To the
extent reference is made herein or in a Prospectus Supplement to the terms of
any Debt Securities, such descriptions do not purport to be complete and are
subject to and are qualified in their entirety by reference to, the Indenture
and the applicable Authorizing Resolution.
GENERAL
The Debt Securities will represent general unsecured obligations of Toll.
The Company will unconditionally guarantee (the 'Guarantee') the due and
punctual payment of the principal of, premium, if any, and interest, if any, on
the Debt Securities, when and as the same shall become due and payable, whether
at maturity, by declaration of acceleration, call for redemption or otherwise.
See '-- Guarantee of Debt Securities'. The Indenture does not limit the
aggregate principal amount of
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<PAGE>
Debt Securities which may be issued thereunder and provides that Debt Securities
may be issued from time to time in one or more Series.
Because Toll has no independent operations and generates no operating
revenues, funds required to pay the principal and interest on the Debt
Securities will be derived from the Company and its other Subsidiaries (as
defined in the Indenture). There are no legal or contractual restrictions on the
Company's or such other Subsidiaries' ability to provide such funds.
Unless otherwise provided in the applicable Authorizing Resolution and
Prospectus Supplement, the payment of principal, premium, if any, and interest
on the Debt Securities will be subordinated in right of payment, in the manner
and to the extent set forth in the Indenture, to the prior payment in full of
all senior indebtedness of Toll (referred to in the Indenture as 'Senior
Indebtedness of the Company', as further defined in the applicable Authorizing
Resolution and Prospectus Supplement), whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed.
Reference is made to the applicable Authorizing Resolution and Prospectus
Supplement relating to the particular series (a 'Series') of Debt Securities
offered thereby for the following terms: (1) the title of the Series; (2) the
aggregate principal amount of the Series; (3) the interest rate or method of
calculation of the interest rate; (4) the date from which interest will accrue;
(5) the Record Dates for interest payable on Debt Securities of the Series; (6)
the dates when, places where and manner in which principal and interest are
payable; (7) the Registrar and Paying Agent; (8) the terms of any mandatory or
optional redemption by Toll; (9) the terms of any redemption at the option of
holders of Debt Securities; (10) the denominations in which the Debt Securities
are issuable; (11) whether the Debt Securities will be issued in registered or
bearer form and the terms of any such forms of Debt Securities; (12) whether any
Debt Securities will be represented by a Global Security (as hereinafter
defined) and the terms of any Global Security (see '-- Book-Entry Debt
Securities'); (13) the currencies (including any composite currency) in which
principal or interest or both may be paid; (14) if payments of principal or
interest may be made in a currency other than that in which the Debt Securities
are denominated and the manner for determining such payments; (15) provisions
for electronic issuance of Debt Securities or issuance of Debt Securities in
uncertificated form; (16) any Events of Default or covenants in addition to or
in lieu of those set forth in the Indenture; (17) whether and upon what terms
Debt Securities may be defeased; (18) the form of the Debt Securities and the
Guarantees; (19) whether the Debt Securities of a Series will be convertible
into or exchangeable for Common Stock and the terms thereof (including without
limitation the conversion price, the conversion period and any other provision
in addition to or in lieu of those set forth in the Indenture); (20) whether the
Debt Securities and Guarantees of a Series shall be subordinated to any
obligations of Toll or the Company, and the obligations to which such
subordination will apply; (21) any terms that may be required by or advisable
under applicable law; and (22) any other terms of a Series of Debt Securities
not inconsistent with the Indenture.
In the event that any Debt Securities are to be issued at a discount, the
terms of such Debt Securities, certain special federal income tax and other
considerations applicable thereto will be described in the related Prospectus
Supplement.
GUARANTEE OF DEBT SECURITIES
The Company will unconditionally guarantee (the 'Guarantee') the due and
punctual payment of the principal of, premium, if any, and interest, if any, on
the Debt Securities, when and as the same shall become due and payable, whether
at maturity, by declaration of acceleration, call for redemption or otherwise.
Unless otherwise provided in the applicable Authorizing Resolution and
described in the related Prospectus Supplement, the payment of principal,
premium, if any, and interest on the Debt Securities pursuant to the Guarantee
will be subordinated in right of payment, in the manner and to the extent set
forth in the Indenture, to the prior payment in full of all senior indebtedness
of the Company (referred to in the Indenture as 'Senior Indebtedness of the
Guarantor', as further defined in the applicable
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<PAGE>
Authorizing Resolution and Prospectus (Supplement), whether outstanding on the
date of the Indenture or thereafter created, incurred, assumed or guaranteed.
Upon (i) the maturity of any senior indebtedness of the Company by lapse of
time, acceleration (unless waived) or otherwise or (ii) any distribution of the
assets of the Company upon any dissolution, winding up, liquidation or
reorganization of the Company, the holders of senior indebtedness of the Company
will be entitled to receive payment in full before the holders of any
outstanding Debt Securities will be entitled to receive any payments on such
Debt Securities pursuant to the Guarantee. If, in any of the situations referred
to in clause (i) or (ii) above, a payment is made to the Trustee or to holders
of the Debt Securities by the Company before all senior indebtedness of the
Company has been paid in full or provision has been made for such payment, the
payment to the Trustee or holders must be paid over to the holders of senior
indebtedness of the Company.
The Company's assets consist principally of the stock of its Subsidiaries.
Therefore, its rights and the rights of its creditors, including the holders of
the Debt Securities under the Indenture, to participate in the assets of any
Subsidiary (other than Toll) upon liquidation, recapitalization or otherwise
will be subject to the prior claims of the Subsidiary's creditors (including the
banks) that have provided and are providing to one of the Subsidiaries a
revolving credit facility under an agreement (the 'Revolving Credit Agreement')
pursuant to which the Company and the other Subsidiaries (including Toll) have
guaranteed or will guarantee the obligations owing to such banks under the
Revolving Credit Agreement, except to the extent that claims of the Company
itself as a creditor of the Subsidiary may be recognized.
CONVERSION OF DEBT SECURITIES
If so indicated in the applicable Authorizing Resolution and Prospectus
Supplement with respect to a particular Series of Debt Securities, such Series
will be convertible into Common Stock of the Company or other securities
(including rights to receive payments in cash or securities based on the value,
rate or price of one or more specified commodities, currencies, currency units
or indices) on the terms and conditions set forth therein.
Unless otherwise provided in the applicable Authorizing Resolution and
described in the related Prospectus Supplement, holders of Debt Securities of
any Series that are convertible will be entitled to convert the principal amount
or a portion of such principal amount which is an integral multiple of $1,000 at
any time prior to the date specified in the Debt Securities of such Series
(subject, if applicable, to prior redemption at the option of Toll) into Common
Shares at the conversion price set forth in the applicable Authorizing
Resolution and Prospectus Supplement, subject to adjustment as described below.
In the case of any Debt Security or portion thereof called for redemption,
conversion rights expire at the close of business on the day which is two
business days immediately preceding the redemption date. (Section 10.02)
The Company will not be required to issue fractional shares of Common Stock
upon conversion but will pay a cash adjustment in lieu thereof. (Section 10.04)
Except as otherwise provided in the Indenture, interest accrued shall not be
paid on Debt Securities that are converted. (Section 10.03)
The conversion price is subject to adjustment in certain events, including
(i) the subdivision, combination or reclassification of the outstanding Common
Stock of the Company, (ii) the issuance of Common Stock as a dividend or
distribution on Common Stock, (iii) the issuance of rights or warrants (expiring
within 45 days after the record date for such issuance) to all holders of Common
Stock entitling them to acquire shares of Common Stock (or securities
convertible into or exchangeable for Common Stock) at less than the then Current
Market Price (as defined in the Indenture) of the Common Stock, or (iv) the
distribution to all holders of Common Stock of shares of any class other than
Common Stock, or evidences of the Company's indebtedness or assets (excluding
certain cash dividends and certain other dividends or distributions payable in
stock or rights or warrants to subscribe to securities of the Company). There
will be no upward adjustment in the conversion price except in the event of a
reverse stock split. The Company is not required to make any adjustment in the
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<PAGE>
conversion price of less than 1%, but the same will be carried forward and taken
into account in the computation of any subsequent adjustment. (Section 10.05)
Conversion price adjustments or omissions in making such adjustments may,
under certain circumstances, be deemed to be distributions that could be taxable
as dividends under the Internal Revenue Code to holders of Debt Securities or to
holders of Common Stock.
In case of any reclassification (excluding those referred to above),
merger, consolidation or sale of substantially all the assets of the Company as
an entirety, the holder of each outstanding Debt Security shall have the right
to convert such Debt Security only into the kind and amount of shares of stock
and other securities and property (including cash) receivable by a holder of the
number of shares of Common Stock into which such Debt Securities might have been
converted immediately prior to the effective date of the transaction. (Section
10.10)
FORM, EXCHANGE, REGISTRATION, CONVERSION, TRANSFER AND PAYMENT
Unless otherwise indicated in the applicable Authorizing Resolution and
Prospectus Supplement, each Series of Debt Securities will be issued in
registered form only, without coupons. Unless otherwise indicated in the
applicable Authorizing Resolution and Prospectus Supplement, payment of
principal, premium, if any, and interest, if any, on the Debt Securities will be
payable, and the exchange, conversion and transfer of Debt Securities will be
registerable, at the office or agency of Toll maintained for such purposes and
at any other office or agency maintained for such purposes. (Section 2.03)
Subject to certain exceptions set forth in the Indenture, Toll may charge a
reasonable fee for any registration of transfer or exchange of the Debt
Securities (including payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith). (Section 2.06)
All monies paid by Toll to the Trustee and Paying Agent for the payment of
principal of, premium, if any, or interest on any Debt Security which remain
unclaimed for two years after such principal, premium or interest has become due
and payable may be repaid to Toll and thereafter the holder of such Debt
Security may look only to Toll or, if applicable, the Company, for payment
thereof. (Section 11.03)
BOOK-ENTRY DEBT SECURITIES
Unless otherwise indicated in the applicable Authorizing Resolution and
Prospectus Supplement, the Debt Securities of a Series may be issued in whole or
in part in the form of one or more global Debt Securities (the 'Global
Securities') that will be deposited with, or on behalf of, a depositary (the
'Depositary') or its nominee identified in the applicable Authorizing Resolution
and Prospectus Supplement relating to such Series. In such a case, one or more
Global Securities will be issued in a denomination or aggregate denomination
equal to the portion of the aggregate principal amount of Debt Securities of the
Series to be represented by such Global Security or Securities. Unless and until
it is exchanged in whole or in part for Debt Securities in registered form, a
Global Security may not be transferred or exchanged except as a whole by the
Depositary for such Global Security to a nominee of such Depositary or to a
successor Depositary. (Section 2.12)
The specific terms of the depositary arrangement with respect to a Series
of Debt Securities to be represented by a Global Security will be described in
the applicable Prospectus Supplement relating to such Series.
EVENTS OF DEFAULT AND NOTICE THEREOF
The term 'Event of Default' when used in the Indenture means any one of the
following: failure by the Company or Toll to pay (whether or not prohibited by
any subordination provisions) interest for 30 days or principal or premium, if
any, when due on the Debt Securities; failure by the Company or Toll to perform
any other covenant under the Indenture for 60 days after receipt of notice by
the Trustee or the holders of at least 25% in principal of the Debt Securities
of the Series affected; default
7
<PAGE>
in the payment of indebtedness of the Company or Toll or any Subsidiary under
the terms of the instrument evidencing or securing such indebtedness permitting
the holder thereof to accelerate the payment of in excess of an aggregate of
$2,000,000 in principal amount of such indebtedness (after the lapse of
applicable grace periods) or, in the case of non-payment defaults, acceleration
of any such indebtedness if such acceleration is not rescinded or annulled
within ten days after such acceleration, provided that, subject to certain
limitations as set forth in the Indenture, the term 'indebtedness' shall not
include an acceleration of or default on certain Non-Recourse Indebtedness (as
hereinafter defined); entry of a final judgment for the payment of money in an
amount in excess of $2,000,000 against Toll, the Company or any Subsidiary which
remains undischarged, or unstayed for a period of 60 days after the date on
which the right to appeal has expired, provided the term 'final judgment' at
such time as Toll's 10 1/2% Senior Subordinated Notes due 2002 (and any related
guarantee) is no longer outstanding, shall not include a Non-Recourse Judgment
(as hereinafter defined) unless the book value of all property (net of any
previous write-downs or reserves in respect of such property) subject to the
Non-Recourse Judgment exceeds the amount of such Non-Recourse Judgment by more
than $5,000,000; certain events of bankruptcy, insolvency or reorganization with
respect to the Company or Toll; or the Guarantee ceasing (other than pursuant to
its terms) to be in full force and effect. (Section 8.01)
'Non-Recourse Indebtedness' is defined in the Indenture as indebtedness or
other obligations secured by a lien on property to the extent that the liability
for such indebtedness or other obligations is limited to the security of the
property without liability on the part of the Company or any Subsidiary (other
than the Subsidiary which holds title to such property) for any deficiency.
'Non-Recourse Judgment' is defined in the Indenture as a judgment in
respect of indebtedness or other obligations secured by a lien on property to
the extent that the liability for (i) such indebtedness or other obligations and
(ii) such judgment is limited to such property without liability on the part of
the Company or any Subsidiary (other than the Subsidiary which holds title to
such property) for any deficiency.
The Indenture provides that if a default on a Series of Debt Securities
occurs and is continuing and is known to the Trustee for such Series, the
Trustee will, within 90 days after the occurrence of such Default, mail to the
Holders of Debt Securities issued thereunder notice of the Default (the term
'Default' to include the events specified above without grace or notice);
provided that, except in the case of Default in the payment of principal of, or
premium, if any, or interest on any of the Debt Securities, the Trustee shall 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 of such Debt
Securities. (Section 9.05)
If an Event of Default with respect to Debt Securities of any Series at the
time outstanding (other than an Event of Default resulting from certain events
of bankruptcy, insolvency or reorganization with respect to the Company or Toll)
occurs and is continuing, either the Trustee or the holders of at least 25% in
aggregate principal amount of the outstanding Debt Securities of that Series may
by notice to Toll (the 'Acceleration Notice') declare the principal amount of
and accrued and unpaid interest on all the Debt Securities of that Series to be
due and payable if, with respect to Debt Securities of such Series: (i)(a) no
designated senior debt of the Company or Toll (referred to in the Indenture as
'Designated Senior Debt of the Guarantor' and 'Designated Senior Debt of the
Company', respectively, as each such term is further defined in the applicable
Authorizing Resolution and Prospectus Supplement) is outstanding or (b) if the
Debt Securities of such Series are not subordinated to other indebtedness of
Toll, immediately; or (ii) if Designated Senior Debt of the Company or Toll is
outstanding and the Debt Securities of such Series are subordinated to other
indebtedness of Toll, upon the earlier of (A) ten days after such Acceleration
Notice is received by Toll or (B) the acceleration of any Senior Indebtedness of
the Guarantor or Toll. If an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization with respect to the Company or Toll
occurs with respect to a Series of Debt Securities, the unpaid principal amount
of and accrued and unpaid interest on the Debt Securities of such Series shall
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holder of Debt Securities. At any time after a
declaration of acceleration with respect to Debt Securities of any Series has
been made, but before a judgment or
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decree based on acceleration has been obtained, the holders of a majority in
aggregate principal amount of outstanding Debt Securities of that Series may
rescind such acceleration, provided that, among other things, all Events of
Default with respect to such Series, other than payment defaults caused by such
acceleration, have been cured or waived as provided in the Indenture. (Section
8.02)
Defaults with respect to a Series of Debt Securities (except a default in
payment of principal of, or premium, if any, or interest on the Debt Securities,
as the case may be) may be waived on behalf of all holders by the holders of a
majority in outstanding principal amount of the Debt Securities of that Series
issued under the Indenture, upon the terms and subject to the conditions
provided in the Indenture. (Section 8.04)
The Indenture includes a covenant that the Company will file annually with
the Trustee a signed statement regarding compliance by the Company and Toll with
the terms thereof and specifying any default of which the signers have
knowledge. (Section 4.03)
ADDITIONAL PROVISIONS
The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to perform any duty or to exercise any of its rights or powers under
the Indenture, unless the Trustee shall have received indemnity satisfactory to
it against any loss, liability or expense. (Section 9.01). Subject to such
provisions for the indemnification of the Trustee and certain other conditions,
the holders of a majority in aggregate principal amount of the outstanding Debt
Securities of any Series will 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, with respect to the Debt
Securities of that Series. (Section 8.05)
No holder of any Debt Security of any Series will have any right to pursue
any remedy with respect to the Indenture or the Debt Securities of that Series,
unless: (i) such holder shall have previously given to the Trustee written
notice of a continuing Event of Default; (ii) the holders of not less than 25%
in aggregate principal amount of the outstanding Debt Securities of such Series
make a written request to the Trustee to pursue the remedy; (iii) such holders
shall have offered the Trustee indemnity satisfactory to it against any loss,
liability or expense; (iv) the Trustee shall have failed to comply with such
holders' request within 60 days after receipt of such written request and offer
of indemnity; and (v) the Trustee shall not have received from the holders of a
majority in principal amount of the outstanding Debt Securities of that Series a
direction inconsistent with such request. (Section 8.06) However, the holder of
any Debt Security will have an absolute right to receive payment of the
principal of and interest on such Debt Security on or after the respective due
dates expressed in such Debt Security and to bring suit for the enforcement of
any such payment. (Section 8.07).
MERGER OR CONSOLIDATION
Neither the Company nor Toll shall consolidate with or merge into, or
transfer all or substantially all of its assets to, any other Person unless (i)
such other Person is a corporation organized and existing under the laws of the
United States or a state thereof or the District of Columbia and expressly
assumes by supplemental indenture all the obligations of the Company or Toll
under the Indenture and either the Guarantee or the Debt Securities, as the case
may be; (ii) immediately after giving effect to such transaction no Default or
Event of Default (as defined in the Indenture) shall have occurred and be
continuing, and (iii) the Consolidated Net Worth of the surviving corporation is
equal to or greater than the Consolidated Net Worth of the Company or Toll, as
the case may be. Thereafter, all such obligations of a predecessor corporation
shall terminate. (Section 5.01)
MODIFICATION OF THE INDENTURE
The obligations of the Company and Toll and the rights of the holders of
the Debt Securities may be modified under the Indenture with the consent of the
holders of a majority in outstanding principal amount of any Series of Debt
Securities affected by such modification; provided that no extension of
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<PAGE>
the maturity of any Debt Securities, no reduction in the rate or extension of
time of payment of interest thereon, no reduction of the principal amount
thereof or premium thereon, no change in the redemption provisions, no change
that adversely affects the right to convert or the conversion price for any
Series of Debt Securities, no reduction of the percentage required for any such
modification, no waiver of a default in the payment of the principal premium, if
any, or interest on any Series of Debt Securities, no modification of the
subordination or guarantee provisions in a manner adverse to holders of any
Series of Debt Securities, no change in the medium of payment other than stated
in the Debt Securities and no change in the provisions regarding amendments to
the Indenture or waiver of Defaults or Events of Default will be effective
against any holders of any Series of Debt Securities without such holder's
consent. (Section 12.02)
GOVERNING LAW
The Indenture, the Debt Securities and the Guarantee shall be governed by
the laws of the State of New York. (Section 13.09)
SATISFACTION AND DISCHARGE OF INDENTURE
Unless otherwise provided in the applicable Authorizing Resolution and
Prospectus Supplement, the Indenture will be discharged upon payment of all the
Series of Debt Securities issued thereunder or upon deposit with the Trustee,
within one year of the date of maturity or redemption of all of the Series of
Debt Securities issued thereunder, of funds sufficient for such payment or
redemption.
REPORTS TO HOLDERS OF DEBT SECURITIES
The Company and Toll will file with the Trustee copies of its annual
reports and other information, documents and reports as filed with the
Securities and Exchange Commission. So long as the Company's obligations to file
such reports or information with the Commission are suspended or terminated, the
Company will file with the Trustee audited annual financial statements prepared
in accordance with generally accepted accounting principles and unaudited
condensed quarterly financial statements. Such financial statements shall be
accompanied by management's discussion and analysis of the results of operations
and financial condition of the Company for the period reported upon in
substantially the form required under the rules and regulations of the
Commission currently in effect.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 40,000,000 shares of
Common Stock, $.01 par value per share, and 1,000,000 shares of Preferred Stock,
$.01 par value per share; however, subject to the limitations and procedures
described below, the Company's shareholders have authorized increases up to
60,000,000 shares of Common Stock and 15,000,000 shares of Preferred Stock. In
March 1993, to reduce applicable state taxes on authorized shares of capital
stock, the Company's shareholders approved a series of amendments to the
Company's Certificate of Incorporation pursuant to which: (i) the authorized
Common Stock was reduced from 60,000,000 shares to 40,000,000 shares and the
authorized Preferred Stock was reduced from 15,000,000 shares to 1,000,000
shares; and (ii) the authorized Common Stock and Preferred Stock could
subsequently be increased in five intermediate steps, over a five year period
ending March 11, 1998 up to the original levels, upon the filing of the
appropriate amendments by the Company's Board of Directors. If all such
amendments are filed before March 11, 1998, the Company's authorized Common
Stock and Preferred Stock will be restored to 60,000,000 shares and 15,000,000
shares, respectively.
COMMON STOCK
Subject to the rights and preferences of any holders of Preferred Stock (no
shares of which currently are outstanding), the holders of the Company's Common
Stock are entitled to one vote per share, to receive such dividends as legally
may be declared by the Board of Directors and to receive pro rata the net assets
of the Company upon liquidation. There are no cumulative voting, preemptive,
10
<PAGE>
conversion or redemption rights applicable to the Common Stock. Persons casting
a majority of the votes in the election of directors will be entitled to elect
all of the directors.
The Common Stock is listed on the New York Stock Exchange and the Pacific
Stock Exchange. The registrar and transfer agent for the Common Stock is Mellon
Securities Trust Company.
PREFERRED STOCK
As of the date of the Prospectus there are no outstanding shares of
Preferred Stock and there are no current plans to issue any such shares. The
Preferred Stock may be issued by resolutions of the Company's Board of Directors
from time to time without any action of the shareholders. Such resolutions may
authorize issuances in one or more classes or series, and may fix and determine
dividend and liquidation preferences, voting rights, conversion privileges,
redemption terms, and other privileges and rights of the shareholders of each
class or series so authorized. Such action could adversely affect the voting
power of the holders of Common Stock. The Preferred Stock could have the effect
of acting as an anti-takeover device to prevent a change in control of the
Company.
CLASSIFIED BOARD OF DIRECTORS AND RESTRICTIONS ON REMOVAL
Under the Company's Certificate of Incorporation, as amended, the Company's
Board of Directors is divided into three classes of directors serving staggered
terms of three years each. Each class is to be as nearly equal in number as
possible, with one class being elected each year. The Certificate of
Incorporation also provides that directors may be removed from office only for
cause and only with the affirmative vote of 66 2/3% of the voting power of the
voting stock; that any vacancy on the Board of Directors or any newly created
directorship shall be filled by the remaining Directors then in office, though
less than a quorum; that advance notice of shareholder nominations for the
elections of Directors shall be given in the manner provided by the By-Laws of
the Company. The required 66 2/3% shareholder vote necessary to alter, amend or
repeal these provisions of the Certificate of Incorporation, the related
amendments to the By-Laws and all other provisions of the By-Laws, or to adopt
any provisions relating to the classification of the Board of Directors and the
other matters described above may make it more difficult to change the
composition of the Company's Board of Directors and may discourage or make
difficult any attempt by a person or group to obtain control of the Company.
PLAN OF DISTRIBUTION
The Company may sell the Common Shares and Preferred Shares offered hereby:
(i) directly to purchasers; (ii) through agents; (iii) through underwriters;
(iv) through dealers; or (v) through a combination of any such methods of sale.
Toll may sell the Debt Securities, together with Guarantees issued by the
Company, being offered hereby: (i) directly to purchasers; (ii) through agents;
(iii) through underwriters; (iv) through dealers; or (v) through a combination
of any such methods of sale.
The distribution of Securities may be effected from time to time in one or
more transactions at a fixed price or prices, which may be changed, or at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices.
Each Prospectus Supplement will set forth the terms of the offering of the
particular issuance of Securities to which such Prospectus Supplement relates,
including (i) the name or names of any underwriters or agents with whom the
Company or Toll has entered into arrangements with respect to the sale of such
Securities, (ii) the initial public offering or purchase price of such
Securities, (iii) any underwriting discounts, commissions and other items
constituting underwriters' compensation from the Company or Toll and any other
discounts, concessions or commissions allowed or reallowed or paid by any
underwriters to other dealers, (iv) any commissions paid to any agents, (v) the
net proceeds to the Company or Toll, and (vi) the securities exchanges, if any,
on which such Securities will be listed.
11
<PAGE>
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company or Toll or from purchasers of Securities
for whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents that participate
in the distribution of Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company or Toll and any
profit on the resale of Securities by them may be deemed to be underwriting
discounts and commissions under the Securities Act. Any such underwriter or
agent will be identified, and any such compensation received from the Company or
Toll will be described, in the applicable Prospectus Supplement.
Under agreements which may be entered into by the Company or Toll,
underwriters and agents who participate in the distribution of Securities may be
entitled to indemnification by the Company or Toll against certain liabilities,
including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Securities from the Company
or Toll pursuant to contracts providing for payment and delivery on a future
date. Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the offered Securities shall not at the time of delivery be prohibited under the
laws of the jurisdiction to which such purchaser is subject. The underwriters
and such other agents will not have any responsibility in respect of the
validity or performance of such contracts.
The Company and, as applicable, Toll may grant underwriters who participate
in the distribution of Securities an option to purchase additional Securities to
cover over-allotments, if any.
The place and date of delivery for the Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Securities in respect of which this Prospectus is being delivered (other than
Common Shares) will be a new issue of securities, will not have an established
trading market when issued and will not be listed on any securities exchange.
Any underwriters or agents to or through whom such Securities are sold by the
Company or Toll for public offering and sale may make a market in such
Securities, but such underwriters or agents will not be obligated to do so and
may discontinue any market making at any time without notice. No assurance can
be given as to the liquidity of the trading market for any such Securities.
LEGAL MATTERS
Certain legal matters relating to the validity of the Securities will be
passed upon by Wolf, Block, Schorr and Solis-Cohen, Philadelphia, Pennsylvania.
Certain legal matters with respect to the Securities offered hereby will be
passed upon for the underwriters, if any, by Cahill Gordon & Reindel (a
partnership including a professional corporation), New York, New York.
EXPERTS
The consolidated financial statements and schedules of the Company included
in the Company's Annual Report (Form 10-K) for the year ended October 31, 1993,
have been audited by Ernst & Young, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements and schedules are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
12
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[PHOTOGRAPH]
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUER,
THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY IN ANY JURISDICTION IN WHICH OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER OR THE COMPANY SINCE
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
PROSPECTUS SUPPLEMENT
<S> <C>
Prospectus Supplement Summary.................. S-3
Recent Developments............................ S-7
Use of Proceeds................................ S-8
Price Range of Common Stock.................... S-8
Dividend Policy................................ S-8
Capitalization................................. S-9
Business....................................... S-11
Description of Notes........................... S-19
Certain Federal Income Tax
Consequences................................. S-23
Underwriting................................... S-26
Incorporation of Certain Information by
Reference.................................... S-27
Legal Matters.................................. S-27
PROSPECTUS
Available Information.......................... 2
Incorporation of Certain Information by
Reference.................................... 2
The Company.................................... 3
The Housing Industry........................... 3
Use of Proceeds................................ 3
Ratio of Earnings to Fixed Charges............. 4
Description of Debt Securities and
Guarantees................................... 4
Description of Capital Stock................... 10
Plan of Distribution........................... 11
Legal Matters.................................. 12
Experts........................................ 12
</TABLE>
$50,000,000
TOLL CORP.
4 3/4% CONVERTIBLE
SENIOR SUBORDINATED
NOTES DUE 2004
GUARANTEED ON A SENIOR SUBORDINATED BASIS BY
TOLL BROTHERS, INC.
[TOLL BROTHERS LOGO]
SALOMON BROTHERS INC
DILLON, READ & CO. INC.
KIDDER, PEABODY & CO.
INCORPORATED
PROSPECTUS SUPPLEMENT
DATED JANUARY 12, 1994
<PAGE>
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Pursuant to Rule 304 of Regulation S-T, the following table presents
fair and accurate narrative descriptions of graphic and image material
omitted from this EDGAR Submission File due to ASCII-incompatibility
and cross-references this material to the location of each occurrence in
the text.
DESCRIPTION OF OMITTED LOCATION OF GRAPHIC
GRAPHIC OR IMAGE OR IMAGE IN TEXT
---------------------- -------------------
A picture of one of Toll Brothers'
model homes in one of its
residential communities ........... Inside front cover of the
Prospectus Supplement
A map indicating the locations of
the residential communities
currently under development by
Toll Brothers and the locations
of Toll Brothers' proposed
residential communities. The states
shown are California, Connecticut,
Delaware, Maryland, Massachusetts,
New Jersey, New York, Pennsylvania,
and Virginia as well as Washington,
D.C. .............................. Page S-10 of the Prospectus Supplement
A picture of one of Toll Brothers'
model homes in one of its
residential communities............ Inside back cover of the
Prospectus Supplement
