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): April 13, 1999
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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 April 13,
1999, among Toll Corp., as Issuer, Toll
Brothers, Inc., as Guarantor, and
Goldman, Sachs & Co.*
4.1 Form of Authorizing Resolution relating to
$100,000,000 principal amount of 8%
Senior Subordinated Notes due 2009 of Toll
Corp., guaranteed on a senior subordinated
basis by Toll Brothers, Inc.*
12 Statement of Computation of Ratios of Earnings to
Fixed Charges.*
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*Filed electronically herewith.
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Signatures
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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: April 14, 1999 By: /s/ Joseph R. Sicree
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Joseph R. Sicree
Vice President
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EXHIBIT INDEX
Exhibit No. Description
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1 Terms Agreement, dated as of April 13,
1999, among Toll Corp., as Issuer, Toll
Brothers, Inc., as Guarantor, and
Goldman, Sachs & Co.*
4.1 Form of Authorizing Resolution relating to
$100,000,000 principal amount of 8%
Senior Subordinated Notes due 2009 of Toll
Corp., guaranteed on a senior subordinated
basis by Toll Brothers, Inc.*
12 Statement of Computation of Ratios of Earnings to
Fixed Charges.*
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*Filed electronically herewith.
TERMS AGREEMENT
April 13, 1999
TOLL CORP.
TOLL BROTHERS, INC.
3103 Philmont Avenue
Huntingdon 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 April 16, 1999, 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: 8% Senior Subordinated Notes due 2009.
Maturity: May 1, 2009.
Interest Rate: 8%.
Interest payment dates: May 1 and November 1 of each year, commencing
November 1, 1999. Interest will accrue from
April 16, 1999.
Interest record dates: April 15 and October 15.
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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 May 1, 2004, at
the redemption prices (together with accrued and unpaid interest) set
forth below, if redeemed during the 12-month period beginning May 1 of
the following years:
Years Percentage
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2004............................... 104.000%
2005............................... 102.667%
2006............................... 101.333%
2007 and thereafter................ 100.000%
Purchase Price: 99.147% of the principal amount thereof.
Public Offering: At the market.
Additional Terms:
The Issuer and the Guarantor will be subject to the same covenants
contained in the 8 1/8% Senior Subordinated Notes of the Issuer and as
set forth in the Prospectus Supplement. The Issuer and the Guarantor
will have the right to issue additional Notes and Guarantees of the
same series in an aggregate amount not to exceed $75,000,000.
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 75 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
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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 Investors 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 distribution of the Underwritten Securities upon
reasonable request of the Underwriter.
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Please accept this offer no later than 11:00 a.m. on April 14, 1999,
by signing a copy of this Terms Agreement in the space set forth below and
returning the signed copy to us.
Very truly yours,
GOLDMAN, SACHS & CO.
By: /s/ Goldman, Sachs & Co.
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Name: Kathleen G. Jennings
Title: Vice President
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
Joint Resolutions Adopted by
the Board of Directors
of
Toll Corp.
and by
the Shelf Terms Committee
of
Toll Brothers, Inc.
As of April 13, 1999
Relating to $100,000,000 Principal Amount of
8% Senior Subordinated Notes
of Toll Corp. due 2009 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.
333-38347 and 333-38347-01) with the Securities and Exchange Commission (the
"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 $300,000,000 (the "Shelf Registration
Statement"), including, pursuant to Rule 429 under the Act, $11,000,000 of
securities previously registered by the Guarantor and the Issuer pursuant to a
Registration Statement on Form S-3 (File Nos. 333-51775 and 333-51775-01);
WHEREAS, the Shelf Registration Statement was declared effective by the
Commission on December 3, 1997; and
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"),
which series may be reopened for issuances of additional Securities of such
series not to exceed the principal amount of $75,000,000, pursuant to the Shelf
Registration Statement and any subsequent shelf 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
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"), to be executed in the form included as Exhibit 4.1 to the Shelf
Registration Statement, as the same is supplemented by these resolutions.
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RESOLVED, FURTHER, that the Toll Board and the Shelf Committee hereby
approve, ratify and confirm the appointment of NBD Bank, a Michigan banking
corporation, as trustee under the Indenture relating to the Securities.
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 "8% Senior Subordinated
Notes due 2009".
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); provided, however, that this
series of Securities may be reopened for issuances of additional Securities not
to exceed the principal amount of $75,000,000. 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 May 1, 2009, subject to earlier redemption as referred to in the
Indenture.
Paragraph 4. The Securities shall bear interest at the rate of 8% per annum
(computed on the basis of a 360-day year of twelve 30-day months), from April
16, 1999 to maturity or early redemption; and interest will be payable
semi-annually on May 1 and November 1 in each year, commencing November 1, 1999,
to the persons in whose name such Securities are registered at the close of
business on April 15 or October 15, 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 May 1, 2004 and prior to maturity, at the option of the
Company upon 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 May 1 of the years indicated:
Year Percentage
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2004 104.000%
2005 102.667%
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2006 101.333%
2007 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, and 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, and 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 (as defined in the Indenture) 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 7 3/4% Senior Subordinated Notes due
2007 (which shall rank pari passu in right of payment with the Securities), (e)
the Company's 81/8% Senior Subordinated Notes due 2009 (which shall rank pari
passu 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,
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and 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 7 3/4% Senior Subordinated Notes
due 2007 (which shall rank pari passu in right of payment with the Guarantee),
and (e) the Company's 8 1/8% Senior Subordinated Notes due 2009 (which shall
rank pari passu with 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 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 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.
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"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 a 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 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
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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 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
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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 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):
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
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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 of this limitation on dividends,
or (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 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
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less than $55,000,000, then the Guarantor shall cause the Company to offer to
repurchase (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 an Offer and
(ii) Securities redeemed or called for redemption, in each case at least 60 days
before the 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 prior to the Purchase Date to each Holder of the Securities at
its 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 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
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<PAGE>
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.
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
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<PAGE>
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.
(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.
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<PAGE>
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 or 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 issued thereunder, 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 obligor of the Securities
immediately after such transaction is not less than the Consolidated Net Worth
of the Company or the Guarantor, as applicable, immediately prior to such
transaction 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 initially 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 except as a whole by DTC to a nominee of DTC or by a nominee of DTC
to DTC or another nominee of DTC. 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. In the
event a beneficial owner of a Security represented by a Global Security requests
to have such beneficially owned Security (a "DTC Withdrawn Security") issued in
definitive form in exchange for the beneficial interest in the Global Security
representing the DTC Withdrawn Security, such owner shall be entitled to
physical delivery of a Security in definitive form equal in principal amount to
such DTC Withdrawn Security and to have such Security registered in its name.
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
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<PAGE>
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,
Chief Accounting Officer, Vice President - Controller or Vice President -
Finance of the Company (each a "Company Designated Officer"), and the Chairman,
President, Chief Financial Officer, Chief Accounting Officer, Vice President -
Controller or Vice President - Finance 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 April 13,
1999 among the Company, the Guarantor and Goldman, Sachs & Co. (the "Terms
Agreement"), a copy of which is attached hereto as Attachment B, 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;
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
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<PAGE>
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
GLOBAL SECURITY
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.
0No. 1
TOLL CORP.
promises to pay to Cede & Co.
or registered assigns
the principal sum of one hundred million dollars on May 1, 2009
8% SENIOR SUBORDINATED NOTE DUE 2009
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
Authenticated: Dated:_________, 1999
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
Vice President
Chief Accounting Officer
By:
-------------------------------
Authorized Signatory
<PAGE>
(REVERSE OF SECURITY)
TOLL CORP.
8% SENIOR SUBORDINATED NOTES DUE 2009
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 May 1 and November 1 of
each year (the "Interest Payment Date"), commencing on November 1, 1999.
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 April 16, 1999, 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 January
27, 1999, among the Company, Toll Brothers, Inc. (the "Guarantor") and the
Trustee, as supplemented by the Authorizing Resolution approved by the Company
and the Guarantor as of April 13, 1999 (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,
<PAGE>
and Securityholders are referred to the Indenture and the Trust Indenture Act
for a 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 May 1, 2004
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 May 1,
Year Percentage
---- ----------
2004 .......................................... 104.000%
2005 .......................................... 102.667%
2006 .......................................... 101.333%
2007 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" 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
Designated Senior Debt of the Company or the Guarantor (as defined in the
Indenture) is
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<PAGE>
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 o
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.
-7-
<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.
-8-
<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
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Joel H. Rassman
Chief Financial Officer
By
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Joseph R. Sicree
Vice President
Chief Accounting Officer
(Seal)
-9-
STATEMENT OF COMPUTATION OF RATIOS
TOLL BROTHERS, INC. AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in thousands, except ratios)
<TABLE>
<CAPTION>
Three Months Ended
Year Ended October 31, January 31,
--------------------------- ------------------
1994 1995 1996 1997 1998 1998 1999
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income before income taxes and extraordinary gain
(loss) and change in accounting........................... $56,840 $ 79,739 $ 85,793 $107,646 $134,293 $25,316 $27,569
Homebuilding:
Interest expense........................................ 20,136 22,473 24,646 29,746 36,052 7,049 7,754
Rent expense............................................ 71 93 151 193 293 65 88
Amortization............................................ 785 801 705 667 610 180 144
Collateralized mortgage financing:
Interest expense........................................ 624 376 300 233 184 56 11
Amortization............................................ 157 29 -- -- -- -- --
------- -------- -------- -------- -------- ------- -------
$78,613 $103,511 $111,595 $138,485 $171,432 $32,666 $35,566
======= ======== ======== ======== ======== ======= =======
Fixed charges:
Homebuilding:
Interest incurred:...................................... $21,701 $ 25,780 $ 27,695 $ 35,242 $ 38,331 $10,353 $10,126
Rent expense............................................ 71 93 151 193 293 65 88
Amortization.............................................. 785 801 705 667 610 180 144
Collateralized mortgage financing:
Interest incurred....................................... 624 376 300 233 184 56 11
Amortization............................................ 157 29 -- -- -- -- --
------- -------- -------- -------- -------- ------- -------
$23,338 $ 27,079 $ 28,851 $ 36,335 $ 39,418 $10,654 $10,369
======= ======== ======== ======== ======== ======= =======
Ratio, including collateralized mortgage financing(1)..... 3.37 3.82 3.87 3.81 4.35 3.07 3.43
======= ======== ======== ======== ======== ======= =======
</TABLE>
