SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report(Date of earliest event reported): September 16, 1997
Toll Brothers, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 001-09186 23-2416878
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
3103 Philmont Avenue, Huntingdon Valley, PA 19006
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:(215) 938-8000
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Item 5. Other Events.
The Registrant is filing this Current Report on Form 8-K solely for
the purpose of filing the Exhibits listed in Item 7(c) below.
Item 7(c). Exhibits.
The following Exhibits are filed as part of this Current Report on
Form 8-K:
Exhibit
No. Item
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1 Terms Agreement, dated as of September 17, 1997, among Toll
Corp., as Issuer, Toll Brothers Corp., as Guarantor, and NBD
Bank, as Trustee.*
4.1 Form of Authorizing Resolutions relating to $100,000,000
principal amount of 7 3/4% Senior Subordinated Notes due 2007
of Toll Corp., guaranteed on a senior subordinated
basis by Toll Brothers, Inc.*
*Filed electronically herewith.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TOLL BROTHERS, INC.
Dated: September 17, 1997 By: /s/ Joseph R. Sicree
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Joseph R. Sicree
Vice President
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Exhibit Index
The following Exhibits are filed as part of this Current Report on Form 8-K:
Exhibit
No. Item
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1 Terms Agreement, dated as of September 17, 1997, among Toll
Corp., as Issuer, Toll Brothers Corp., as Guarantor, and NBD
Bank, as Trustee.*
4.1 Form of Authorizing Resolutions relating to $100,000,000
principal amount of 7 3/4% Senior Subordinated Notes due 2007
of Toll Corp., guaranteed on a senior subordinated
basis by Toll Brothers, Inc.*
*Filed electronically herewith.
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TERMS AGREEMENT
September 17, 1997
TOLL CORP.
TOLL BROTHERS, INC.
3103 Philmont Avenue
Huntington Valley, PA 19006
Dear Sirs:
We understand that Toll Corp., A Delaware corporation (the
"Issuer"), proposes to issue and sell $100,000,000 aggregate principal amount of
its debt securities (the "Underwritten Securities"), to be guaranteed by Toll
Brothers, Inc. (the "Guarantor"). Subject to the terms and conditions set forth
herein or incorporated by reference herein, we offer to purchase all of the
Underwritten Securities. The Closing Date shall be September 22, 1997, at 10:00
a.m., at the offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New
York.
All of the provisions contained in the Underwriting Agreement
Basic Provisions of the Issuer and the Guarantor (the "Basic Provisions"), a
copy of which you have previously received, are herein incorporated by reference
in their entirety and shall be deemed to be a part of this Terms Agreement to
the same extent as if the Basic Provisions had been set forth in full herein.
Terms defined in the Basic Provisions are used herein as therein defined.
The Underwritten Securities shall have the following terms:
Title: 7 3/4% Senior Subordinated Notes due 2007.
Maturity: September 15, 2007.
Interest Rate: 7 3/4%.
Interest payment dates: March 15 and September 15 of each
year, commencing March 15, 1998.
Interest will accrue from September
22, 1997.
Interest record dates: March 1 and September 1.
Redemption provisions:
The Underwritten Securities may be redeemed at the
option of the Issuer, in whole or in part, at any
time on or after September 15, 2002, at the
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redemption prices (together with accrued and unpaid
interest) set forth below, if redeemed during the
12-month period beginning September 15 of the
following years:
Years Percentage
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2002...................................................... 103.875%
2003...................................................... 102.583%
2004...................................................... 101.292%
2005 and thereafter....................................... 100.000%
Purchase Price: 98.435% of the principal amount thereof.
Public Offering Price: 99.935% of the principal amount thereof.
Additional Terms:
The Issuer and the Guarantor will be subject to the
same covenants contained in the 8 3/4% Senior
Subordinated Notes of the Issuer and as set forth in
the Prospectus Supplement.
The Notes and the Guarantee will be subordinated in
right of payment to Senior Indebtedness of the Issuer
and Senior Indebtedness of the Guarantor,
respectively, as set forth in the Prospectus
Supplement and the accompanying Prospectus.
For a period of 90 days from the date hereof, each of
the Issuer and the Guarantor agree not to sell or
otherwise dispose of any Debt Securities to the
public without the Underwriter's prior written
consent.
The obligations of the Underwriter to purchase and
pay for the Notes are subject to the condition that
subsequent to the date of this Terms Agreement, there
shall not have been any decrease in the rating, or
change in outlook, of any of the Guarantor's debt
securities by Moody's Investor Service, Inc. or
Standard & Poor's Corporation or any notice given of
any intended or potential decrease in any such rating
or outlook.
The Issuer and the Guarantor agree that the Chief
Financial Officer of the Guarantor will participate,
as mutually agreed, in either "road shows" or
conference calls for not more than two days in order
to facilitate the
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distribution of the Underwritten Securities upon
reasonable request of the Underwriter.
Please accept this offer no later than 11:00 a.m. on September
17, 1997, by signing a copy of this Terms Agreement in the space set forth below
and returning the signed copy to us.
Very truly yours,
SMITH BARNEY INC.
By: /s/ Richard L. Moriarty
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Name: Richard L. Moriarty
Title: Director
Accepted
TOLL CORP.
By: /s/ Joel H. Rassman
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Name: Joel H. Rassman
Title: Vice President
TOLL BROTHERS, INC.
By: /s/ Joel H. Rassman
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Name: Joel H. Rassman
Title: Vice President
Form of
Joint Resolutions of
the Board of Directors
of
Toll Corp.
and
the Shelf Terms Committee
of
Toll Brothers, Inc.
Relating to $100,000,000 Principal Amount of
7 3/4% Senior Subordinated Notes
of Toll Corp. due 2007 and
Guaranteed on a Senior Subordinated Basis by Toll Brothers, Inc.
WHEREAS, Toll Brothers, Inc. (the "Guarantor") and Toll Corp.
(the "Company") previously filed a Registration Statement on Form S-3 (File Nos.
33-51775 and 33-51775-01) with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), relating to the "shelf
registration" of the Guarantor's Common Shares, Preferred Shares, and Guarantees
and the Company's Debt Securities for a proposed public offering or offerings in
the aggregate amount up to $250,000,000 (the "Shelf Registration Statement");
and
WHEREAS, in January 1994, the Company sold $57,500,000
principal amount of 4 3/4% Convertible Senior Subordinated Notes of the Company,
guaranteed on a senior subordinated basis by the Guarantor pursuant to the Shelf
Registration Statement.
WHEREAS, in November 1996, the Company sold $100,000,000
principal amount of 8 3/4% Senior Subordinated Notes of the Company, guaranteed
on a senior subordinated basis by the Guarantor pursuant to the Shelf
Registration Statement.
WHEREAS, Rule 462(b) under the Act permits registration of
additional securities in an amount and at a price that together represent no
more than 20% of the maximum aggregate offering price set forth for each class
of securities in the cover page table contained in the Shelf Registration
Statement, by means of the filing of a short form new registration statement on
Form S-3 ("Rule 462(b) Registration Statement").
WHEREAS, in September 1997, the Guarantor and the Company
filed a Rule 462(b) Registration Statement registering additional securities in
an aggregate amount up to $18,500,000, representing 20% of the maximum aggregate
amount of securities remaining on the Shelf Registration Statement.
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WHEREAS, the Company and the Guarantor desire to sell
$100,000,000 principal amount of a new series of Senior Subordinated Notes of
the Company, guaranteed on a senior subordinated basis by the Guarantor (the
"Securities"), pursuant to the Shelf Registration Statement and the Rule 462(b)
Registration Statement.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors of
the Company (the "Toll Board") and the Shelf Terms Committee of the Board of
Directors of the Guarantor (the "Shelf Committee") hereby approve the
establishment and the issuance of the Securities to be issued as a series
pursuant to an Indenture, in the form included as Exhibit 4.1 to the Current
Report on Form 8-K of the Guarantor, dated as of November 15, 1996, among the
Company, as the issuer, the Guarantor, as the Guarantor, and NBD Bank, a
Michigan banking corporation, as Trustee (the "Trustee"), (the "Base
Indenture"), as the same is supplemented by these resolutions.
RESOLVED, FURTHER, that the Toll Board and the Shelf Committee
hereby approve the following terms and provisions which shall supplement the
terms and provisions of the Base Indenture (said supplemented terms and
provisions and the Base Indenture are hereinafter collectively referred to as
the "Indenture" and each reference herein to the "Indenture" is a reference to
the Base Indenture as the same is supplemented by the terms and provisions of
these joint resolutions):
Paragraph 1. The title of the Securities shall be "7 3/4%
Senior Subordinated Notes due 2007".
Paragraph 2. The aggregate principal amount at maturity of the
Securities which may be authenticated and delivered under the Indenture shall be
$100,000,000 (except for any Securities authenticated and delivered upon
registration of the transfer of, or in exchange for, or in lieu of other
Securities pursuant to the terms of the Indenture). The Securities will be
issued only in registered form in denominations of $1,000 and integral multiples
thereof.
Paragraph 3. The principal amount of the Securities is due and
payable in full on September 15, 2007, subject to earlier redemption as referred
to in the Indenture.
Paragraph 4. The Securities shall bear interest at the rate of
7 3/4% per annum (computed on the basis of a 360-day year of twelve 30-day
months), from September 22, 1997 to maturity or early redemption; and interest
will be payable semi-annually on March 15 and September 15 in each year,
commencing March 15, 1998, to the persons in whose name such Securities are
registered at the close of business on the March 1 or September 1, as the case
may be, preceding such interest payment date.
Paragraph 5. The Securities are redeemable, in whole or in
part from time to time on or after September 15, 2002 and prior to maturity, at
the option of the Company upon
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not less than 30 nor more than 60 days' notice mailed by first-class mail to
each Holder of record at such Holder's last address as it appears on the
registration books of the Registrar. Redemption of the Securities made at the
election of the Company shall be made at the following respective redemption
prices (expressed as a percentage of principal amount), plus accrued and unpaid
interest to the redemption date, if redeemed during the 12-month period
beginning September 15 of the years indicated:
Year Percentage
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2002 103.875%
2003 102.583%
2004 101.292%
2005 and thereafter 100.000%
Paragraph 6. Principal of and interest on the Securities shall
be payable in accordance with Section 4.01 of the Indenture.
Paragraph 7. The Securities shall not be convertible into the
Company's or the Guarantor's Common Stock.
Paragraph 8. The payment of the principal of, premium, if any,
and interest on the Securities 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 the Company (referred to in the Indenture as
"Senior Indebtedness of the Company" and as further defined herein) whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed. The term "Senior Indebtedness of the Company" as used in
the Indenture shall mean: (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 (as defined in the Indenture), (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 Securities. Senior Indebtedness of the Company, as such term is
used in the Indenture, 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 the Company to the
Guarantor or any Subsidiary for money borrowed or advances from such entities,
(c) the Company's 8 3/4% Senior Subordinated Notes due 2006 (which shall rank
pari passu in right of payment with the Securities), (d) the Company's 9 1/2%
Senior Subordinated Notes due 2003 (which shall rank pari passu in right of
payment with the Securities), (e) the Company's 4 3/4% Convertible Senior
Subordinated Notes due 2004 (which shall rank pari passu in right of
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payment with the Securities), and (f) the Securities. For purposes hereof, a
"capitalized lease" shall be deemed to mean a lease of real or personal property
which, in accordance with generally accepted accounting principles, has been
capitalized.
Paragraph 9. The payment of the principal of, premium, if any,
and interest on the Securities pursuant to the Guarantee (as such term is
defined in the Indenture) 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 Guarantor (referred to in the Indenture
as "Senior Indebtedness of the Guarantor" and as further defined herein),
whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. The term "Senior Indebtedness of the Guarantor"
as used in the Indenture shall mean: (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 Guarantor, (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 Securities pursuant to the Guarantee. Senior Indebtedness of
the Guarantor, as such term is used in the Indenture, shall not include (a) the
Guarantee, (b) indebtedness of the Guarantor to any Subsidiary for money
borrowed or advances from such Subsidiary, (c) the Guarantor's guarantee of the
Company's 8 3/4% Senior Subordinated Notes due 2006 (which shall rank pari passu
in right of payment with the Guarantee), (d) the Guarantor's guarantee of the
Company's 9 1/2% Senior Subordinated Notes due 2003 (which shall rank pari passu
in right of payment with the Guarantee) and (e) the Guarantor's guarantee of the
Company's 4 3/4% Convertible Senior Subordinated Notes due 2004 (which shall
rank pari passu in right of payment with the Guarantee). For purposes hereof, a
"capitalized lease" shall be deemed to mean a lease of real or personal property
which, in accordance with generally accepted accounting principles, has been
capitalized.
Paragraph 10. As used in the Indenture, the following terms
shall have the respective meanings set forth below:
"Consolidated Adjusted Net Worth" of the Guarantor means the
Consolidated Net Worth of the Guarantor less the stockholders' equity of each of
the Unrestricted Subsidiaries, as determined in accordance with generally
accepted accounting principles.
"Consolidated Fixed Charge Ratio" of the Guarantor means the
ratio of (i) the aggregate amount of Consolidated Net Income Available for
Fixed Charges of such Person for the four fiscal quarters for which financial
information in respect thereof is available immediately prior to the date of the
transaction giving rise to the need to calculate the
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Consolidated Fixed Charge Ratio (the "Transaction Date") to (ii) the
aggregate Consolidated Interest Expense of such Person for the four fiscal
quarters for which financial information in respect thereof is available
immediately prior to the Transaction Date.
"Consolidated Income Tax Expense" of the Guarantor means, for
any period for which the determination thereof is to be made, the aggregate of
the income tax expense of the Guarantor and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with generally accepted
accounting principles.
"Consolidated Interest Expense" of the Guarantor means, for
any period for which the determination thereof is to be made, the Interest
Expense of the Guarantor and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with generally accepted
accounting principles.
"Consolidated Net Adjusted Income" of the Guarantor means, for
any period for which the determination thereof is to be made taken as one
accounting period, the aggregate Consolidated Net Income of the Guarantor and
its Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles, adjusted by excluding (to the extent not
otherwise excluded in calculating Consolidated Net Income) any net extraordinary
gain or any net extraordinary loss, as the case may be, during such period.
"Consolidated Net Income" for any period means the aggregate
of the Net Income of the Guarantor and its consolidated subsidiaries for such
period, on a consolidated basis, determined in accordance with generally
accepted accounting principles, provided that (i) the Net Income of any person
in which the Guarantor or any consolidated Subsidiary has a joint interest with
the third party or which is organized outside of the United States shall be
included only to the extent of the lesser of (A) the amount of dividends or
distributions paid to the Guarantor or a consolidated subsidiary or (B) the
Guarantor's direct or indirect proportionate interest in the Net Income of such
Person, provided that, so long as the Guarantor or a consolidated subsidiary has
an unqualified legal right to require the payment of a dividend or distribution,
Net Income shall be determined solely pursuant to clause (B); (ii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, and (iii) the
Net Income of any Unrestricted Subsidiary shall be included only to the extent
of the amount of dividends or distributions (the fair value of which, if other
than in cash, to be determined by the Board of Directors, in good faith) by such
Subsidiary to the Guarantor or to any of its consolidated Restricted
Subsidiaries.
"Consolidated Net Income Available for Fixed Charges" means,
for any period for which the determination thereof is to be made, the sum of the
amounts for such period of (i) Consolidated Net Adjusted Income, (ii)
Consolidated Interest Expense (excluding capitalized interest) and (iii)
Consolidated Income Tax Expense, all as determined on a consolidated basis
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for the Guarantor and its Subsidiaries in conformity with generally
accepted accounting principles.
"Designated Senior Debt of the Guarantor" means any single
issue of Indebtedness of the Guarantor constituting Senior Indebtedness of the
Guarantor which at the time of determination has an aggregate principal amount
outstanding of at least $25,000,000 and is specifically designated in the
instrument or instruments creating, governing or evidencing such Senior
Indebtedness of the Guarantor as "Designated Senior Debt of Toll Brothers, Inc."
(it being understood that the Guarantor's guarantee of the Revolving Credit
Agreement shall be considered a single issue of Indebtedness of the Guarantor
for purposes of this definition).
"Designated Senior Debt of the Company" means any single issue
of Indebtedness of the Company constituting Senior Indebtedness of the Company
which at the time of determination has an aggregate principal amount outstanding
of at least $25,000,000 and is specifically designated in the instrument or
instruments creating, governing or evidencing such Senior Indebtedness of the
Company as "Designated Senior Debt of Toll Corp." (it being understood that the
Company's guarantee of the Revolving Credit Agreement shall be considered a
single issue of Indebtedness of the Company for purposes of this definition).
"Excluded Debt" means any Indebtedness of the Guarantor and
any Indebtedness or preferred stock of the Company, whether outstanding on the
date of the Indenture or thereafter created, which is (i) subordinated in right
of payment to the Securities or the Guarantee (upon liquidation or otherwise)
and (ii) matures after, and is not redeemable, mandatorily or at the option of
the holder thereof prior to the date of maturity of the Securities.
"Indebtedness," for the purpose of the covenants described in
Sections 4.07 and 4.08, and certain definitions, means without duplication (i)
any liability of any Person (a) for borrowed money or evidenced by a bond, note,
debenture or similar instrument (including a purchase money obligation) given in
connection with the acquisition of any businesses, properties or assets of any
kind (other than a trade payable or current liability arising in the ordinary
course of business) to the extent it would appear as a liability upon a balance
sheet of such Person prepared on a consolidated basis in accordance with
generally accepted accounting principles, or (b) for the payment of money
relating to a capitalized lease obligation; (ii) any liability of any Person
under any obligation incurred under letters of credit; and (iii) any liability
of others described in clause (i) or (ii) with respect to which such Person has
made a guarantee or similar arrangement, directly or indirectly (to the extent
of such guarantee or arrangement).
"Interest Expense" of any Person means, for any period for
which the determination thereof is to be made, the sum of the aggregate amount
of (i) interest in respect of indebtedness (including all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing), (ii) all but the principal component of rentals in
respect of capitalized lease obligations, paid, accrued or scheduled to be paid
or
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accrued by such Person during such period and (iii) capitalized interest, all as
determined in accordance with generally accepted accounting principles, minus
(iv) interest expense attributable to such Person's directly or indirectly
majority-owned mortgage finance Affiliates.
"Net Income" of any Person means the net income (loss) of such
Person, determined in accordance with generally accepted accounting principles;
excluding, however, from the determination of Net Income all gain (to the extent
that it exceeds all losses) realized upon the sale or other disposition
(including, without limitation, dispositions pursuant to sale leaseback
transactions) of any real property or equipment of such Person, which is not
sold or otherwise disposed of in the ordinary course of business, or of any
capital stock of such Person or its subsidiaries owned by such Person.
"Restricted Subsidiary" means any Subsidiary that is not an
Unrestricted Subsidiary.
"Unrestricted Subsidiary" means (a) any Subsidiary which, in
accordance with the provisions of the Indenture, has been designated in a Board
Resolution of the Guarantor as an Unrestricted Subsidiary, in each case unless
and until such Subsidiary shall, in accordance with the provisions of the
Indenture, be designated by Board Resolution as a Restricted Subsidiary; and (b)
any Subsidiary a majority of the voting stock of which shall at the time be
owned directly or indirectly by one or more Unrestricted Subsidiaries.
"Unrestricted Subsidiary Investment" means any loan, advance,
capital contribution or transfer (including by way of guarantee or other similar
arrangement) in or to any Unrestricted Subsidiary. For the purposes of the
covenant described in Section 4.04, (i) "Unrestricted Subsidiary Investment"
shall include the fair market value of the net assets of any Subsidiary at the
time that such Subsidiary is designated an Unrestricted Subsidiary and (ii) any
property transferred to an Unrestricted Subsidiary shall be valued at a fair
market value at the time of such transfer, in each case as determined by the
Board of Directors of the Guarantor in good faith. "Unrestricted Subsidiary
Investment" does not include the fair market value of the net assets of an
Unrestricted Subsidiary that is designated as a Restricted Subsidiary (as
determined by the Board of Directors of the Guarantor in good faith), provided
that such designation is then permitted pursuant to the terms of the Indenture.
Capitalized terms not otherwise defined herein shall have the
meanings given to them in the Indenture.
Paragraph 11. The Securities shall be entitled to the benefit
of each of the covenants in Article 4 of the Base Indenture and each of the
following additional covenants (each of which shall be deemed to be a provision
of the Indenture and, when referred to as a provision of the Indenture, shall be
identified by reference to the Section number which is set forth immediately
preceding such covenant):
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Section 4.04. Limitation on Restricted Payments. The Guarantor
may not declare or pay any dividend or make any distribution or payment on its
Capital Stock or to its shareholders, as shareholders (other than dividends or
distributions payable in its Capital Stock), or purchase, redeem or otherwise
acquire or retire for value, or permit any Restricted Subsidiary to purchase or
otherwise acquire for value, any Capital Stock of the Guarantor (collectively,
"Restricted Payments"), or make or permit any Restricted Subsidiary to make (I)
any loan, advance, capital contribution or transfer other than for fair market
value (as determined by a majority of the disinterested members of the Board of
Directors of the Guarantor or the relevant Restricted Subsidiary, which shall be
evidenced by a written resolution of such Board of Directors) in or to any
Affiliate (which term does not include joint ventures (whether in corporate,
partnership or other form) with an unaffiliated party or parties) other than a
Restricted Subsidiary or the Guarantor or (II) any Unrestricted Subsidiary
Investment (collectively, "Restricted Investments"), if, at the time of such
Restricted Payment or Restricted Investment, or after giving effect thereto, (i)
a Default or an Event of Default shall have occurred and be continuing, or (ii)
the sum of (x) the aggregate amount expended for such Restricted Payments (the
amount expended for such purposes, if other than in cash, to be determined by
the Board of Directors of the Guarantor, whose determination shall be conclusive
and evidenced by a resolution of such Board of Directors filed with the Trustee)
subsequent to October 31, 1991, and (y) the amount by which the aggregate book
value of all property (net of any previous write-downs or reserves in respect of
such property) subject to Non-Recourse Indebtedness which has been accelerated
or is in default is in excess of such Non-Recourse Indebtedness and (z) the
aggregate amount of Restricted Investments then outstanding, shall exceed the
sum of (a) 50% of the aggregate Consolidated Net Income (or, in case such
aggregate Consolidated Net Income shall be a deficit, minus 100% of such
deficit) of the Guarantor accrued on a cumulative basis subsequent to October
31, 1991, and (b) the aggregate net proceeds, including the fair market value of
property other than cash (as determined by the Board of Directors of the
Guarantor, whose determination shall be conclusive and evidenced by a resolution
of such Board of Directors filed with the Trustee), received by the Guarantor
from the issue or sale after October 31, 1991 of Capital Stock of the Guarantor,
including capital stock of the Guarantor issued upon the conversion of
indebtedness of the Guarantor, other than Capital Stock that is redeemable at
the option of the holder or is mandatorily redeemable and (c) $20,000,000, or
(iii) the Guarantor would be unable to incur an additional $1.00 of Indebtedness
(other than Excluded Debt) pursuant to Section 4.07; provided, however, that the
foregoing shall not prevent (A) the payment of any dividend within 60 days after
the date of declaration thereof, if at said date of declaration the making of
such payment would have complied with the provisions hereof, (B) the retirement
of any shares of the Guarantor's Capital Stock by exchange for, or out of
proceeds of the substantially concurrent sale of, other shares of its Capital
Stock (other than Capital Stock that is redeemable at the option of the holder
or is mandatorily redeemable), or (C) the payment or advance of cash
compensation or any compensation pursuant to or in connection with any employee
benefit plan of the Guarantor and the Subsidiaries paid or payable to any person
in his or her capacity as an employee, officer or director, and neither such
retirement nor the proceeds
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of any such sale or exchange nor the payment or advance of any such compensation
shall be included in any computation made under clause (ii) of this Section
4.04.
Section 4.05. Limitation on Restrictions on Payment of
Dividends by Subsidiaries. The Guarantor will not, and will not permit any
Subsidiary to, enter into any agreement or amendment of any existing agreement
if such agreement or amendment would restrict the payment of dividends or the
making of other distributions on any Subsidiary's Capital Stock, provided that a
Subsidiary may enter into such an agreement or amendment if, immediately prior
thereto either (i) (A) the Consolidated Net Worth of the Guarantor (excluding
the Consolidated Net Worth of such Subsidiary and any other Subsidiaries which
have such agreements) is at least $50,000,000 and (B) the Consolidated Net Worth
of such Subsidiary and any other Subsidiaries which have such agreements does
not account for more than 20% of the Consolidated Net Worth of the Guarantor
(including such Subsidiary and any other Subsidiaries which have such
agreements) or (ii) the Consolidated Net Worth of the Guarantor (excluding the
Consolidated Net Worth of such Subsidiary and any other Subsidiaries which have
such agreements) is at least $70,000,000.
Section 4.06. Maintenance of Consolidated Net Worth. If the
Consolidated Net Worth of the Guarantor and its Subsidiaries at the end of any
two consecutive fiscal quarters is less than $55,000,000, then the Guarantor
shall cause the Company to offer to acquire (the "Offer") on the last day of the
fiscal quarter next following such second fiscal quarter, or, if such second
fiscal quarter ends on the last day of the Guarantor's fiscal year, 120 days
following the last day of such second fiscal quarter (the "Purchase Date")
$7,500,000 aggregate principal amount of Securities (or such lesser amount as
may be outstanding at the time, such amount being referred to as the "Offer
Amount") at a purchase price equal to their principal amount plus accrued and
unpaid interest to the Purchase Date. The Company may credit against its
obligation to offer to repurchase Securities on a Purchase Date the principal
amount of (i) Securities acquired by the Company and surrendered for
cancellation otherwise than pursuant to this Section and (ii) Securities
redeemed or called for redemption, in each case at least 60 days before such
Purchase Date. In no event shall the failure to meet the minimum Consolidated
Net Worth stated above at the end of any fiscal quarter be counted toward the
making of more than one Offer.
The Company shall provide the Trustee with notice of the Offer
at least 60 days before any such Purchase Date and at least 10 days before the
notice of any Offer is mailed to Holders. The Company shall notify the Trustee
promptly after the occurrence of any of the events specified in this Section.
Notice of an Offer shall be mailed by the Trustee not less
than 30 days nor more than 60 days before the Purchase Date to the Holders of
the Securities at their last registered address. The Offer shall remain open
from the time of mailing until 5 days before the Purchase Date. The notice shall
be accompanied by a copy of the information regarding the Guarantor
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<PAGE>
required to be contained in a Quarterly Report on Form 10-Q for the second
fiscal quarter referred to above if such second fiscal quarter is one of the
Guarantor's first three fiscal quarters. If such second fiscal quarter is the
Guarantor's last fiscal quarter, a copy of the information required to be
contained in an Annual Report to Shareholders pursuant to Rule 14a-3 under the
Exchange Act for the fiscal year ending with such second fiscal quarter shall
either accompany the notice or be mailed to Holders not less than 15 days before
the Purchase Date. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Securities pursuant to the Offer. The
notice, which shall govern the terms of the Offer, shall state:
(1) that the Offer is being made pursuant to this Section
4.06;
(2) the Offer Amount, the purchase price and the Purchase
Date;
(3) that any Security not tendered or accepted for payment
will continue to accrue interest;
(4) that any Security accepted for payment pursuant to the
Offer shall cease to accrue interest after the Purchase Date;
(5) that Holders electing to have a Security purchased
pursuant to an Offer will be required to surrender the Security, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Security
completed, to the Paying Agent at the address specified in the notice at least 5
days before the Purchase Date;
(6) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than three days prior to the Purchase
Date, a telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Security the Holder delivered for
purchase and a statement that such Holder is withdrawing his election to have
the Security purchased;
(7) that if Securities in a principal amount in excess of the
Offer Amount are tendered pursuant to the Offer, the Company shall purchase
Securities on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securities in denominations of $1,000 or
integral multiples of $1,000 shall be acquired); and
(8) that Holders whose Securities were purchased only in part
will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered.
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<PAGE>
Before a Purchase Date the Company shall (i) accept for
payment Securities or portions thereof properly tendered pursuant to the Offer
(on a pro rata basis if required pursuant to paragraph (7) above), (ii) deposit
with the Paying Agent money sufficient to pay the purchase price of all
Securities or portions thereof so accepted and (iii) deliver to the Trustee
Securities so accepted together with an Officers' Certificate stating the
Securities or portions thereof accepted for payment by the Company. The Paying
Agent shall promptly mail or deliver to Holders of Securities so accepted
payment in an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security equal in
principal amount to any unpurchased portion of the Security surrendered. Any
Securities not so accepted shall be promptly mailed or delivered by the Company
to the Holder thereof. The Company will publicly announce the results of the
Offer on the Purchase Date. For purposes of this Section 4.06, the Trustee shall
act as the Paying Agent.
Section 4.07. Limitation on Additional Indebtedness. The
Guarantor will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, incur, issue, assume, guarantee or in any other manner become
liable, contingently or otherwise, with respect to any Indebtedness (or, with
respect to Restricted Subsidiaries only, any preferred stock) (whether in
liquidation or otherwise) other than Excluded Debt, unless, after giving effect
thereto, either (A) the Consolidated Fixed Charge Ratio of the Guarantor exceeds
1.5:1 or (B) the ratio of Indebtedness (and, if applicable, Restricted
Subsidiary preferred stock) of such Persons (excluding, for purposes of this
calculation, purchase money mortgages that are Non-Recourse Indebtedness,
obligations incurred under letters of credit, escrow agreements and surety bonds
in the ordinary course of business, Indebtedness of the Guarantor's directly or
indirectly majority-owned mortgage finance Affiliates and Excluded Debt) to
Consolidated Adjusted Net Worth of the Guarantor is less than 4.5:1.
Notwithstanding the foregoing, the Guarantor and its Restricted Subsidiaries may
incur, issue, assume, guarantee or otherwise become liable with respect to: (i)
purchase money mortgages that are Non-Recourse Indebtedness, (ii) obligations
incurred under letters of credit, escrow agreements and surety bonds in the
ordinary course of business, (iii) Indebtedness of the Guarantor's directly or
indirectly majority-owned mortgage finance Affiliates and (iv) Indebtedness
solely for the purpose of refinancing or repaying any existing Indebtedness or
Restricted Subsidiary preferred stock so long as after giving effect to such
refinancing or repayment, the sum of total consolidated Indebtedness of the
Guarantor and its Restricted Subsidiaries and the aggregate liquidation
preference of Restricted Subsidiary preferred stock is not increased (provided
that for purposes of this subsection 4.07(iv), application of the proceeds from
the sale of assets of the Guarantor or its Restricted Subsidiaries in the
ordinary course of business to reduce Indebtedness or Restricted Subsidiary
preferred stock and the subsequent reborrowing to purchase assets in the
ordinary course of business shall be deemed to be a refinancing).
Section 4.08. Restrictions on Permitting Restricted
Subsidiaries to Become Unrestricted Subsidiaries and Unrestricted Subsidiaries
to Become Restricted Subsidiaries.
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<PAGE>
(a) The Guarantor will not permit any Restricted Subsidiary to
be designated as an Unrestricted Subsidiary unless the Guarantor and its
Restricted Subsidiaries would thereafter be permitted to (i) incur at least
$1.00 of Indebtedness (other than Excluded Debt) pursuant to Section 4.07 and
(ii) make a Restricted Payment or Restricted Investment of at least $1.00
pursuant to Section 4.04.
(b) The Guarantor will not permit any Unrestricted Subsidiary
to be designated as a Restricted Subsidiary unless such Subsidiary has
outstanding no Indebtedness except such Indebtedness as the Guarantor could
permit it to become liable for immediately after becoming a Restricted
Subsidiary under the provisions of Section 4.07.
(c) Promptly after the adoption of any Board Resolution
designating a Restricted Subsidiary as an Unrestricted Subsidiary or an
Unrestricted Subsidiary as a Restricted Subsidiary, a copy thereof shall be
filed with the Trustee, together with a Officers' Certificate stating that the
provisions of this Section have been complied with in connection with such
designation.
(d) The Guarantor will not designate the Company an
Unrestricted Subsidiary.
(e) At the date of this Indenture all of the Subsidiaries are,
and shall be permitted to be, Restricted Subsidiaries.
Section 4.09. When the Company and the Guarantor May Merge,
Etc. Neither the Company nor the Guarantor 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 of the District of Columbia and expressly
assumes by supplemental indenture all the obligations of the Company or the
Guarantor under the Indenture and either the Securities or the Guarantee, as the
case may be; (ii) immediately after giving effect to such transaction no Default
or Event of Default shall have occurred and be continuing; (iii) the
Consolidated Net Worth of the surviving corporation is equal to or greater than
the Consolidated Net Worth of the Company or the Guarantor, as the case may be,
immediately prior to such merger or transfer of assets and (iv) the surviving
corporation would be able to incur at least an additional $1.00 of Indebtedness
(other than Excluded Debt) under Section 4.07. Thereafter all such obligations
of a predecessor corporation shall terminate.
Paragraph 12. The Securities shall be represented by one or
more global Securities (each a "Global Security") deposited with the Trustee on
behalf of The Depositary Trust Company ("DTC") and registered in the name of
Cede & Co. or in the name of such other nominee of DTC as is requested by an
authorized representative of DTC. Unless and until a Global Security registered
in the name of DTC or a nominee of DTC is exchanged in whole or in part for
certificated Securities in definitive form, such Global Security may not be
transferred
-12-
<PAGE>
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC. The Securities represented by the Global Securities will
not be exchangeable for certificated Securities, provided that if DTC is at any
time unwilling, unable or ineligible to continue as a depositary for the
Securities and a successor depositary is not appointed by the Company within 90
days, the Company shall cause the Trustee to issue individual Securities in
definitive form in exchange for each Global Security then registered in the name
of DTC or a nominee of DTC. The Company shall be entitled at any time and in its
sole discretion to determine not to have Global Securities and, in such event,
shall cause the Trustee to issue individual Securities in definitive form in
exchange for each Global Security then representing all such Securities. In
either instance, an owner of a beneficial interest in a Global Security shall be
entitled to physical delivery of Securities in definitive form equal in
principal amount to such beneficial interest and to have such Securities
registered in its name. Individual Securities so issued in definitive form shall
be issued in denominations of $1,000 and any larger amount that is an integral
multiple of $1,000 and shall be issued in registered form only, without coupons.
Payments of principal of and interest on a Global Security registered in the
name of DTC or a nominee of DTC shall be made by the Company through the Trustee
to DTC or its nominee, as the case may be, as the registered owner of such
Global Security. If a Global Security is issued in the name of a depositary
other than DTC or such other depositary's nominee, the terms and provisions of
this Paragraph 12 which are applicable to DTC and its nominee shall be
applicable to, and each reference to DTC and its nominee shall be deemed to be a
reference to such other depositary and its nominee, respectively, with respect
to the Global Security registered in the name of such other depositary or its
nominee.
Paragraph 13. Except as otherwise indicated, each reference
herein to a "Paragraph" shall refer to a Paragraph hereof, and each reference
herein to a "Section" shall refer to a Section of the Indenture.
FURTHER RESOLVED, that the Chairman, President, Chief
Financial Officer or Chief Accounting Officer of the Company (each a "Company
Designated Officer"), and the Chairman, President, Chief Financial Officer or
Chief Accounting Officer of the Guarantor (each a "Guarantor Designated Officer"
and together with each Company Designated Officer, each a "Designated Officer"),
acting alone or with any other officer, be and they hereby are, authorized and
empowered, for and on behalf of the Company and the Issuer, respectively, to
execute and deliver the Terms Agreement dated September 17, 1997 among the
Company, the Guarantor and Smith Barney Inc. (the "Terms Agreement") relating to
the issuance and sale of the Securities.
FURTHER RESOLVED, that any two of the Company Designated
Officers be, and they hereby are, authorized and empowered, for and on behalf of
the Company, to execute and deliver a Global Security in the form attached
hereto as Attachment A, in the principal amount of $100,000,000 and payable to
Cede & Co., with such changes thereto as such officers shall approve (the
"Authorized Global Security"), their execution of the Authorized Global Security
to be conclusive evidence of such approval;
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<PAGE>
FURTHER RESOLVED, that any two of the Company Designated
Officers be, and they hereby are, authorized and empowered, for and on behalf of
the Company, to execute and deliver certificated Securities in definitive form,
in substantially the same form as the Authorized Global Security, provided,
however, that the legends appearing on the face of the Authorized Global
Security shall not be included in such certificated Securities;
FURTHER RESOLVED, that any two of the Guarantor Designated
Officers be, and they hereby are, authorized and empowered, for and on behalf of
the Guarantor, to execute and deliver the Guarantee of the Authorized Global
Security in the form of the Guarantee included in Attachment A, with such
changes thereto as such officers shall approve (the "Authorized Guarantee"),
their execution of the Authorized Guarantee to be conclusive evidence of such
approval;
FURTHER RESOLVED, that any two of the Guarantor Designated
Officers be, and they hereby are, authorized and empowered, for and on behalf of
the Guarantor, to execute and deliver certificated Securities in definitive
form, in substantially the same form as the Authorized Global Security,
provided, however, that the legends appearing on the face of the Authorized
Global Security shall not be included in such certificated Securities;
FURTHER RESOLVED, that the Company Designated Officers be, and
each of them hereby is, authorized and directed in the name and on behalf of the
Company and under its manual or facsimile seal, and the Guarantor Designated
Officers be, and each of them hereby is, authorized and directed in the name and
on behalf of the Guarantor, to execute, acknowledge and deliver the Base
Indenture; and
FURTHER RESOLVED, that a Designated Officer, acting alone or
with any other officer of the Company or the Guarantor, as the case may be, be
and he hereby is authorized, empowered and directed with the advice of counsel,
for and on behalf of the Company or the Guarantor, as the case may be, to
prepare, execute and file any other documents, instruments, or certificates, to
perform any acts and to do any and all other things on behalf of the Company or
the Guarantor, as the case may be, that said officer shall deem appropriate in
order to effectuate the foregoing resolutions and complete and consummate the
offering of the Securities pursuant to the terms of the Terms Agreement and the
Indenture, and to qualify the Securities for sale to the public in accordance
with any law, rule or regulation of any federal or state governmental body.
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<PAGE>
ATTACHMENT A
CUSIP No.______________
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to Toll Corp., or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
No. 1
TOLL CORP.
promises to pay to Cede & Co.
or registered assigns
the principal sum of One Hundred Million Dollars on September 15, 2007
7 3/4% SENIOR SUBORDINATED NOTE DUE 2007
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
Authenticated: Dated: September 22, 1996
TOLL CORP.
[Seal]
By:
----------------------------
Joel H. Rassman
Chief Financial Officer
NBD Bank,
as Trustee, certifies that this
is one of the Securities referred
to in the within mentioned Indenture. By:
----------------------------
Joseph R. Sicree
Chief Accounting Officer
By:
----------------------------
Authorized Signatory
<PAGE>
(REVERSE OF SECURITY)
TOLL CORP.
7 3/4% SENIOR SUBORDINATED NOTES DUE 2007
1. Interest.
Toll Corp. (the "Company"), a Delaware corporation, promises to pay
interest on the principal amount of this Security at the rate per annum shown
above. The Company will pay interest semi-annually on September 15 and March 15
of each year (the "Interest Payment Date"), commencing on March 15, 1998.
Interest on the Security will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from September 22, 1996,
provided that, if there is no existing default in the payment of interest, and
if this Security is authenticated between a record date referred to on the face
hereof (the "Record Date") and the next succeeding Interest Payment Date,
interest shall accrue from such Interest Payment Date. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment.
The Company will pay interest on the Securities (except defaulted
interest) to the persons who are registered holders of Securities at the close
of business on the Record Date next preceding the Interest Payment Date. Holders
must surrender Securities to a Paying Agent to collect principal payments. The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
However, the Company may pay principal and interest by wire transfer or by its
check payable in such money. It may mail an interest check to a holder's
registered address.
3. Paying Agent and Registrar.
Initially, NBD Bank, a Michigan banking corporation (the "Trustee"),
will act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-registrar without notice. The Company or any of its subsidiaries
may act as Paying Agent, Registrar or co-registrar.
4. Indenture.
The Company issued the Securities under an Indenture dated as of
November 12, 1996, among the Company, Toll Brothers, Inc. (the "Guarantor") and
the Trustee, as supplemented by the Authorizing Resolutions approved by the
Company and the Guarantor as of September 16, 1997 (collectively, the
"Indenture"). The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S. Code ss.ss.77aaa-77bbbb) (the "Trust Indenture Act") as in effect
on the date of the Indenture and as may be amended from time to time. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and the Trust Indenture Act for a
<PAGE>
statement of them. Payment of the Securities is guaranteed on a senior
subordinated basis by the Guarantor (the "Guarantee").
5. Optional Redemption.
The Company may redeem the Securities at any time on or after September
15, 2002 in whole, or in part from time to time, at the following redemption
prices (expressed as a percentage of principal amount), plus accrued and unpaid
interest to the redemption date:
If redeemed during the 12-month period beginning September 15,
Year Percentage
---- ----------
2002 . . . . . . . . . . . . . . . . . . . . . . . . 103.875%
2003 . . . . . . . . . . . . . . . . . . . . . . . . 102.583%
2004 . . . . . . . . . . . . . . . . . . . . . . . . 101.292%
2005 and thereafter . . . . . . . . . . . . . . . . .100.000%
6. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Securities to be redeemed
at its, his or her registered address. Securities in denominations larger than
$1,000 may be redeemed in part. On and after the redemption date interest ceases
to accrue on Securities or portions of them called for redemption, provided that
if the Company shall default in the payment of such Security at the redemption
price together with accrued interest, interest shall continue to accrue at the
rate borne by the Securities.
7. Selection for Redemption.
If less than all of the Securities are to be redeemed, selection of the
Securities to be redeemed will be made by the Trustee, if the Securities are
listed on a national securities exchange, in accordance with the rules of such
exchange, or if the Securities are not so listed, on either a pro rata basis or
by lot or by another method that the Trustee deems fair and appropriate.
8. Subordination.
The Securities will be subordinated in right of payment to the prior
payment in full of all Senior Indebtedness of the Company (as defined in the
Indenture). The Guarantee will be subordinated in right of payment to the prior
payment in full of all Senior Indebtedness of the Guarantor (as defined in the
Indenture).
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<PAGE>
9. Denominations, Transfer, Exchange.
The Securities are in registered form without coupons in denominations
of $1,000 and integral multiples thereof. A holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture. The
Registrar need not transfer or exchange any Securities selected for redemption.
Also, it need not transfer or exchange any Securities for a period of 15 days
before a selection of Securities to be redeemed is scheduled.
10. Person Deemed Owner.
The registered holder of a Security may be treated as the owner of it
for all purposes.
11. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed for
two years, the Trustee or Paying Agent will pay the money back to the Company at
its request. After that, holders entitled to the money must look to the Company
or, if applicable, the Guarantor for payment unless an abandoned property law
designates another person.
12. Discharge Prior to Redemption or Maturity.
The Indenture will be discharged and canceled except for certain
Sections thereof, subject to the terms of the Indenture, upon the payment of all
the Securities or upon the deposit with the Trustee, within not more than one
year prior to the maturity or redemption of the Securities, of funds sufficient
for such payment or redemption. In the case of such a deposit, Securityholders
must look to the deposited money for payment.
13. Amendment, Supplement, Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the holders of at least a majority
in principal amount of the Securities, and any past default or compliance with
any provision may be waived with the consent of the holders of a majority in
principal amount of the Securities. Without the consent of any Securityholder,
the Company may amend or supplement the Indenture or the Securities to cure any
ambiguity, defect or inconsistency; to comply with Article 5 of the Indenture
(providing for the assumption of the obligations of the Company or the Guarantor
under the Indenture by a successor corporation); to provide for uncertificated
Securities in addition to or in place of certificated Securities; or to make any
change that does not adversely affect the rights of any Securityholder.
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<PAGE>
14. Successor Corporation.
When a successor corporation assumes all the obligations of its
predecessor under the Securities and the Indenture, the predecessor corporation
will be released from those obligations.
15. Defaults and Remedies.
An Event of Default is: (i) failure of the Company or the Guarantor to
pay (whether or not prohibited by any subordination provision) interest for 30
days or principal or premium, if any, when due; (ii) failure of the Company or
Guarantor to perform any other covenant under the Indenture for 60 days after
receipt of notice; (iii) default in the payment of indebtedness of the Company,
the Guarantor 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 10 days after such acceleration, provided
that, subject to the terms of the Indenture, the term "indebtedness" shall not
include an acceleration of or default on certain Non-Recourse Indebtedness (as
defined in the Indenture); (iv) entry of a final judgment for the payment of
money in an amount in excess of $2,000,000 against the Company, the Guarantor 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 the Company's 10 1/2% Senior Subordinated Notes
due 2002 (and any related guarantee) are no longer outstanding, shall not
include a Non- Recourse Judgment (as defined in the Indenture) unless the book
value of all property (net of any previous write-downs or reserves in respect of
such property) subject to such Non-Recourse Judgment exceeds the amount of such
Non-Recourse Judgment by more than $5,000,000; (v) certain events of bankruptcy,
insolvency or reorganization with respect to the Company or the Guarantor; or
(vi) the Guarantee shall for any reason (other than pursuant to its terms) cease
to be in full force and effect.
The Indenture provides that the Trustee will, within 90 days after the
occurrence of a Default known to the Trustee, give the Holders 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 interest on any of the 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 Securityholders.
In case an Event of Default (other than an Event of Default resulting
from certain events of bankruptcy, insolvency or reorganization with respect to
the Company or the Guarantor) occurs and is continuing, either the Trustee or
the holders of not less than 25% in aggregate principal amount of the Securities
then outstanding, by notice in writing to the Company (and to the Trustee if
given by the Securityholders), may declare the unpaid principal of and accrued
and unpaid interest on all the Securities to be due and payable (i) if (a) no
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<PAGE>
Designated Senior Debt of the Company or the Guarantor (as defined in the
Indenture) is outstanding, or (b) the Securities are not subordinated to other
indebtedness of the Company, immediately, or (ii) if Designated Senior Debt of
the Company or the Guarantor is outstanding and the Securities are subordinated
to other indebtedness of the Company, upon the earlier of (A) ten days after
such Acceleration Notice is received by the Company and (B) the acceleration of
any Senior Indebtedness of the Company or the Guarantor. In case an Event of
Default arising out of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or the Guarantor occurs and is
continuing, the outstanding principal of and accrued and unpaid interest on the
Securities shall ipso facto become and be due and payable immediately, without
declaration or any further act on the part of the Trustee or any Securityholder.
Such declaration or acceleration and its consequences may be rescinded
by holders of a majority in principal amount of outstanding Securities if all
existing Events of Default have been cured and waived (except non-payment of
principal or interest that has become due solely because of the acceleration)
and if the rescission would not conflict with any judgment or decree.
Defaults (except a default in payment of principal of, or premium, if
any, or interest on the Securities or a default with respect to a provision
which cannot be modified under the terms of the Indenture without the consent of
each Securityholder affected) may be waived on behalf of all holders by the
holders of a majority in principal amount of outstanding Securities upon the
conditions provided in the Indenture.
The Indenture requires the Guarantor to file periodic reports with the
Trustee as to the absence of defaults.
16. Trustee, Dealings with Company.
NBD Bank, a Michigan banking corporation, the Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company, the Guarantor or their
affiliates, and may otherwise deal with the Company, the Guarantor or their
affiliates, as if it were not Trustee.
17. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company
or the Guarantor shall not have any liability for any obligations of the Company
or the Guarantor under the Securities, the Guarantee or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Securityholder by accepting a Security waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.
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<PAGE>
18. Authentication.
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
19. Abbreviations.
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Securityholder upon written request and
without charge a copy of the Indenture. Requests may be made to: Secretary, Toll
Brothers, Inc., 3103 Philmont Avenue, Huntingdon Valley, Pennsylvania 19006.
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to have this Security purchased by the Company pursuant to
Section 4.06 of the Indenture, check the box |_|
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 of the Indenture, state the amount: $____
Date: Your Signature:
---------------- ----------------------------------
(sign exactly as your name appears
on the other side of this Security)
Signature Guarantee:
Note: Signature(s) must be guaranteed by a member firm of a major stock exchange
or a commercial bank or trust company.
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<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Security, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Security to
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
- ------------------------------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Date: Your Signature:
----------------- -------------------------------------
(sign exactly as your name appears
on the other side of this Security)
Note: Signature(s) must be guaranteed by a member firm of a major stock exchange
or a commercial bank or trust company.
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<PAGE>
GUARANTEE
Toll Brothers, Inc. (hereinafter referred to as the "Guarantor," which
term includes any successor person under the Indenture (the "Indenture")
referred to in the Security upon which this notation is endorsed), has
unconditionally guaranteed on a senior subordinated basis (i) the due and
punctual payment of the principal of and interest on the Securities, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
on the overdue principal of and interest, if any, on the Securities, to the
extent lawful, and the due and punctual performance of all other obligations of
the Company to the Holders or the Trustee under the Indenture and the Security
all in accordance with the terms set forth in Article 7 of the Indenture and
(ii) in case of any extension of time of payment or renewal of any Securities or
any of such other obligations, that the same will be promptly paid in full when
due or performed in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration or otherwise.
The obligations of the Guarantor to the Holders of the Securities and
to the Trustee pursuant to the Guarantee and the Indenture are expressly set
forth and are expressly subordinated and subject in right of payment to the
prior payment in full of all Senior Indebtedness of the Guarantor, to the extent
and in the manner provided in Article 7 of the Indenture and reference is hereby
made to the Indenture for the precise terms of the Guarantee and the
subordination thereof therein made.
No stockholder, officer, director or incorporator, as such, past,
present or future, of the Guarantor shall have any personal liability under the
Guarantee by reason of his or its status as such stockholder, officer, director
or incorporator.
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Securities upon which this Guarantee is
endorsed shall have been executed by the Trustee under the Indenture by the
manual signature of one of its authorized officers.
Guarantor
TOLL BROTHERS, INC.
By
---------------------------------
Joel H. Rassman
Chief Financial Officer
By
---------------------------------
Joseph R. Sicree
Chief Accounting Officer
(Seal)
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