<PAGE> 1
As filed pursuant to Rule 424(b)(2)
under the Securities Act of 1933
Registration Nos. 333-14977 and 33-50732
PROSPECTUS SUPPLEMENT
- ---------------------
(TO PROSPECTUS DATED NOVEMBER 12, 1996)
$125,000,000
KAUFMAN AND BROAD HOME CORPORATION
9 5/8% SENIOR SUBORDINATED NOTES DUE 2006
------------------------
Interest on the 9 5/8% Senior Subordinated Notes due 2006 (the "Notes") of
Kaufman and Broad Home Corporation (the "Company") offered hereby is payable
semi-annually on May 15 and November 15 of each year, commencing May 15, 1997.
The Notes will mature on November 15, 2006 and may be redeemed at the option of
the Company, in whole or in part, at any time on or after November 15, 2001 at
the redemption prices set forth herein, together with accrued and unpaid
interest thereon. The Company will be obligated to make an offer to purchase
Notes if a Change of Control occurs or if, under certain circumstances, the
Company fails to maintain a minimum Consolidated Net Worth. See "Description of
the Notes."
The Notes will be unsecured obligations of the Company and will be
subordinated to all existing and future Senior Indebtedness (as defined) of the
Company. As of October 31, 1996, the Company had $420.0 million of Senior
Indebtedness outstanding. In addition, the Notes offered hereby will be
effectively subordinated to all existing and future guarantees and liabilities
(whether or not for borrowed money) of the Company's consolidated subsidiaries,
which liabilities totaled approximately $103.8 million (excluding collateralized
mortgage obligations of $69.6 million) at October 31, 1996. See "Description of
the Notes -- General" and "-- Senior Subordinated Debt."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Underwriter has agreed to purchase the Notes from the Company at
99.525% of the principal amount thereof (resulting in $124,406,250 aggregate net
proceeds to the Company), subject to the terms and conditions set forth in the
Purchase Agreement. See "Underwriting."
The Underwriter proposes to offer the Notes from time to time for sale in
one or more negotiated transactions or otherwise, at market prices prevailing at
the time of sale, prices related to such market prices or negotiated prices. The
Company has agreed to indemnify the Underwriter against certain liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
------------------------
The Notes are being offered by the Underwriter, subject to prior sale,
when, as and if issued to and accepted by the Underwriter, subject to approval
of certain legal matters by counsel for the Underwriter and certain other
conditions. The Underwriter reserves the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Notes will be made in New York, New York on or about November
19, 1996.
------------------------
MERRILL LYNCH & CO.
------------------------
The date of this Prospectus Supplement is November 14, 1996.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE COMPANY
The Company is a builder of single-family homes with domestic operations in
seven western states, and international operations in France and Mexico.
Domestically, the Company is the largest home builder west of the Mississippi
River, delivering more single-family homes than any other builder in the region.
Founded in 1957, the Company builds innovatively designed homes which cater
primarily to first-time home buyers, generally in medium-sized developments
close to major metropolitan areas. Internationally, the Company is among the
largest builders in greater metropolitan Paris, France, based on the number of
homes delivered. In France, the Company also builds commercial projects and
high-density residential properties, such as condominium and apartment
complexes. The Company provides mortgage banking services to domestic home
buyers through its wholly owned subsidiary, Kaufman and Broad Mortgage Company.
The Company is a Delaware corporation and maintains its principal executive
offices at 10990 Wilshire Boulevard, Los Angeles, California 90024. Its
telephone number is (310) 231-4000. As used herein, the term "Company" refers to
Kaufman and Broad Home Corporation and its subsidiaries, unless otherwise
expressly stated or the context indicates otherwise.
USE OF PROCEEDS
The estimated net proceeds from the sale of the Notes are $124,406,250.
Proceeds from the sale of the Notes will be initially used by the Company for
the repayment of existing indebtedness under the Company's domestic revolving
credit facility. Thereafter, the Company may borrow further amounts under the
revolving credit facility or otherwise which may be used for general corporate
purposes. At November 14, 1996 the interest rate for borrowings under such
revolving credit facility was 6.84%.
S-2
<PAGE> 3
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
and its consolidated subsidiaries at August 31, 1996, and as adjusted to give
effect to the sale of the Notes offered hereby (including the application of the
estimated net proceeds of the Notes, as described in "Use of Proceeds").
<TABLE>
<CAPTION>
AT AUGUST 31, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
<S> <C> <C>
(DOLLARS IN MILLIONS)
Construction:
Mortgages and notes payable(1)...................................... $ 306.6 $ 182.2
10 3/8% Senior Notes................................................ 100.0 100.0
9 3/8% Senior Subordinated Notes.................................... 173.9 173.9
9 5/8% Senior Subordinated Notes due 2006 offered hereby............ -- 124.4(2)
Mortgage banking:
Notes payable....................................................... 131.9 131.9
Collateralized mortgage obligations secured by mortgage-backed
securities....................................................... 70.9 70.9
-------- -----------
Total debt.................................................. 783.3 783.3
-------- -----------
Stockholders' equity:
Preferred Stock -- $1.00 par value; authorized, 10,000,000 shares;
none outstanding................................................. -- --
Common Stock -- $1.00 par value; authorized, 100,000,000 shares;
38,872,836 shares outstanding(3)................................. 38.9 38.9
Paid-in capital..................................................... 183.9 183.9
Retained earnings................................................... 96.4 96.4
Cumulative foreign currency translation adjustments................. 6.1 6.1
-------- -----------
Total stockholders' equity.................................. 325.3 325.3
-------- -----------
Total debt and stockholders' equity................................... $1,108.6 $ 1,108.6
======= =========
</TABLE>
- ---------------
(1) The Company has a $630 million domestic revolving credit facility (of which
$110 million is a term facility). Borrowings outstanding under the credit
facility were $326.6 million at November 14, 1996. As of November 14, 1996
the interest rate for borrowings under such revolving credit facility was
6.84%.
(2) Net of unamortized discount of $0.6 million.
(3) Does not include 2,716,268 shares of Common Stock issuable upon exercise of
outstanding stock options issued pursuant to employee stock option plans.
S-3
<PAGE> 4
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial data of the
Company. The data (other than housing, commercial and land revenues, unit
deliveries and the ratios of earnings to fixed charges and of earnings to
combined fixed charges and preferred stock dividends) for the fiscal years ended
November 30, 1995, 1994, 1993, 1992 and 1991 are derived from the financial
statements for those years which have been audited by Ernst & Young LLP,
independent auditors. Data related to housing, commercial and land revenues,
unit deliveries and the ratios of earnings to fixed charges and of earnings to
combined fixed charges and preferred stock dividends are derived from unaudited
statements. Selected unaudited financial data at August 31, 1996 and 1995 and
for each of the nine month periods ended August 31, 1996 and 1995 reflect, in
the opinion of the Company, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results of operations for
these periods. The results of operations for the nine months ended August 31,
1996 are not necessarily indicative of results to be expected for the full year.
The following data should be read in conjunction with the financial statements
and the related notes thereto incorporated by reference in the accompanying
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
AUGUST 31, YEARS ENDED NOVEMBER 30,
-------------------- --------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Housing.................................... $1,178.9 $ 877.7 $1,328.1 $1,263.0 $1,097.6 $ 849.2 $ 799.1
Commercial................................. 12.1 10.2 20.5 17.4 94.2 191.1 354.2
Land....................................... 51.4 9.2 18.3 27.2 8.0 12.2 23.1
Mortgage banking........................... 23.8 20.5 29.7 28.7 38.1 41.6 44.6
-------- -------- -------- -------- -------- -------- --------
Total revenues......................... $1,266.2 $ 917.6 $1,396.6 $1,336.3 $1,237.9 $1,094.1 $1,221.0
======= ======= ======= ======= ======= ======= =======
Construction:
Revenues................................... $1,242.4 $ 897.1 $1,366.9 $1,307.6 $1,199.8 $1,052.5 $1,176.4
Costs and expenses......................... (1,179.5) (864.1) (1,301.4) (1,219.3) (1,113.2) (993.6) (1,100.4)
Non-cash charge for impairment of
long-lived assets........................ (170.8) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Operating income (loss).................... (107.9) 33.0 65.5 88.3 86.6 58.9 76.0
Interest income............................ 1.9 1.6 2.1 2.0 3.5 4.4 3.7
Interest expense, net of amounts
capitalized.............................. (27.7) (20.6) (27.5) (17.8) (16.8) (17.6) (16.1)
Minority interests in pretax income of
consolidated joint ventures.............. (.2) (.4) (.6) (.9) (10.2) (11.7) (21.3)
Equity in pretax income (loss) of
unconsolidated joint ventures............ (1.7) (1.3) (3.4) (3.7) (6.3) 6.9 (3.2)
-------- -------- -------- -------- -------- -------- --------
Construction pretax income (loss).......... (135.6) 12.3 36.1 67.9 56.8 40.9 39.1
-------- -------- -------- -------- -------- -------- --------
Mortgage banking:
Revenues................................... 23.8 20.5 29.7 28.7 38.1 41.6 44.6
Expenses................................... (15.0) (15.2) (20.3) (22.7) (30.6) (37.0) (40.2)
-------- -------- -------- -------- -------- -------- --------
Mortgage banking pretax income............. 8.8 5.3 9.4 6.0 7.5 4.6 4.4
-------- -------- -------- -------- -------- -------- --------
Total pretax income (loss)................... (126.8) 17.6 45.5 73.9 64.3 45.5 43.5
Income taxes................................. 45.7 (6.5) (16.4) (27.3) (24.4) (17.3) (17.0)
-------- -------- -------- -------- -------- -------- --------
Net income (loss)............................ $ (81.1) $ 11.1 $ 29.1 $ 46.6 $ 39.9 $ 28.2 $ 26.5
======= ======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges(1)........ -- (2) 1.03x 1.35x 2.09x 2.07x 1.88x 1.51x
Ratio of earnings to combined fixed charges
and
preferred stock dividends(1)............... -- (2) -- (2) 1.12x 1.64x 1.80x 1.88x 1.51x
OTHER OPERATING DATA:
California unit deliveries................... 3,807 3,721 5,430 6,238 5,745 3,944 3,095
Other United States unit deliveries.......... 3,059 1,250 1,800 834 207 -- --
France unit deliveries....................... 436 345 574 685 657 839 1,140
Canada unit deliveries....................... 10 37 53 67 155 170 221
Mexico unit deliveries....................... 3 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total unit deliveries.................. 7,315 5,353 7,857 7,824 6,764 4,953 4,456
======= ======= ======= ======= ======= ======= =======
CASH FLOW FROM OPERATING ACTIVITIES DATA:
Equity in pretax (income) loss of
unconsolidated joint ventures.............. $ 1.7 $ 1.3 $ 3.4 $ 3.7 $ 6.3 $ (6.9) $ 3.2
Minority interests in pretax income of
consolidated joint ventures................ .2 .4 .6 .9 10.2 11.7 21.3
Depreciation and amortization................ 7.8 4.6 6.3 3.4 2.6 3.4 3.3
Previously capitalized interest amortized to
cost of sales.............................. 15.8 12.0 18.5 16.2 17.6 19.1 12.2
Provision for deferred income taxes.......... (35.0) (3.2) (6.9) 4.5 (42.1) 11.8 .6
Capitalized interest......................... (21.7) (27.7) (37.1) (27.6) (24.4) (23.4) (29.5)
</TABLE>
S-4
<PAGE> 5
<TABLE>
<CAPTION>
AT AUGUST 31, AT NOVEMBER 30,
-------------------- --------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Assets:
Construction assets........................ $1,102.4 $1,271.3 $1,269.2 $1,167.2 $ 983.5 $ 987.1 $ 916.0
Mortgage banking assets.................... 246.5 273.1 305.0 287.3 355.9 444.6 457.0
-------- -------- -------- -------- -------- -------- --------
Total assets........................... $1,348.9 $1,544.4 $1,574.2 $1,454.5 $1,339.4 $1,431.7 $1,373.0
======= ======= ======= ======= ======= ======= =======
Liabilities and Stockholders' Equity:
Construction liabilities:
Accounts payable, accrued expenses and
other liabilities...................... $ 229.6 $ 197.8 $ 246.3 $ 219.0 $ 233.5 $ 216.2 $ 224.1
Mortgages and notes payable.............. 580.6 694.4 639.6 565.0 313.4 258.2 230.6
-------- -------- -------- -------- -------- -------- --------
810.2 892.2 885.9 784.0 546.9 474.4 454.7
Mortgage banking liabilities............... 211.1 218.8 245.4 232.0 304.8 390.4 400.8
LYONs...................................... -- -- -- -- -- 162.0 149.8
Deferred income taxes...................... -- 28.2 24.5 31.4 26.9 68.9 57.1
Minority interests in consolidated joint
ventures................................. 2.3 2.0 2.9 2.3 16.5 17.6 52.5
Stockholders' equity....................... 325.3 403.2 415.5 404.8 444.3 318.4 258.1
-------- -------- -------- -------- -------- -------- --------
Total liabilities and stockholders'
equity............................... $1,348.9 $1,544.4 $1,574.2 $1,454.5 $1,339.4 $1,431.7 $1,373.0
======= ======= ======= ======= ======= ======= =======
</TABLE>
- ---------------
(1) For purposes of calculating the ratio of earnings to fixed charges and the
ratio of earnings to combined fixed charges and preferred stock dividends,
earnings are computed by adding fixed charges (except capitalized interest
and the effect of preferred stock dividends) and amortization of previously
capitalized interest to pretax earnings (excluding undistributed earnings of
unconsolidated joint ventures). Fixed charges consist of interest expense
plus capitalized interest and the portion of rental expense considered to be
interest and for the ratio of earnings to combined fixed charges and
preferred stock dividends include the effect of preferred stock dividends on
the Company's Series B Mandatory Conversion Premium Dividend Preferred
Stock. On April 1, 1996, all shares of the Company's only outstanding series
of preferred stock, the Series B Mandatory Conversion Premium Dividend
Preferred Stock, were mandatorily converted to shares of Common Stock and no
future preferred stock dividends will be paid or are payable with respect to
such preferred stock.
In computing the ratio of earnings to fixed charges and the ratio of
earnings to combined fixed charges and preferred stock dividends, interest
expense excludes interest incurred by the Company's wholly owned limited
purpose financing subsidiaries with respect to their outstanding
collateralized mortgage obligations. If interest on such collateralized
mortgage obligations were included, the ratio of earnings to fixed charges
for the nine months ended August 31, 1996 would have been a deficit, and
for the remaining periods presented would have been 1.03x, 1.31x, 1.88x,
1.77x, 1.55x and 1.31x, respectively, and the ratio of earnings to combined
fixed charges and preferred stock dividends for the nine months ended
August 31, 1996 and 1995 would have been a deficit, and for the remaining
periods presented would have been 1.11x, 1.54x, 1.60x, 1.54x, and 1.31x,
respectively.
The amount of earnings used in the calculation of the ratio of earnings to
fixed charges and the ratio of earnings to combined fixed charges and
preferred stock dividends for the nine months ended August 31, 1996
includes the $170.8 million pretax non-cash charge for impairment of
long-lived assets recorded by the Company in the second quarter of 1996. If
the non-cash charge for impairment of long-lived assets were excluded, the
ratio of earnings to fixed charges and the ratio of earnings to combined
fixed charges and preferred stock dividends for the nine months ended
August 31, 1996 would have been 1.65x and 1.46x, respectively.
(2) Earnings for the nine months ended August 31, 1996 are inadequate to cover
fixed charges by $132.8 million. Earnings for the nine months ended August
31, 1996 and 1995 are inadequate to cover combined fixed charges and
preferred stock dividends by $140.5 million and $9.8 million, respectively.
S-5
<PAGE> 6
DESCRIPTION OF THE NOTES
The Notes are issuable under a Senior Subordinated Indenture dated as of
November 19, 1996 (the "Indenture"), between the Company and SunTrust Bank,
Atlanta, as trustee (the "Trustee"). This description of the particular terms of
the Notes supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities and the
Indentures set forth in the accompanying Prospectus under the heading
"Description of the Debt Securities", to which description reference is hereby
made. The following description of certain terms of the Notes does not purport
to be complete and is qualified in its entirety by reference to the Indenture, a
copy of the form of which has been filed as an exhibit to the Registration
Statement of which the accompanying Prospectus is a part. Terms (whether or not
capitalized) used but not defined herein or in the accompanying Prospectus have
the meanings given to them in the Indenture. The Indenture is referred to in the
Prospectus as the "Senior Subordinated Debt Indenture" and sometimes
collectively with the Senior and the Subordinated Indentures as the
"Indentures". The Notes are "senior subordinated Debt Securities" as that term
is used in the Prospectus and are also referred to in the Prospectus as the
"Offered Debt Securities". As used in this "Description of the Notes", the
"Company" refers to Kaufman and Broad Home Corporation and does not include its
subsidiaries, except as otherwise provided or as the context otherwise requires.
GENERAL
The Notes will constitute senior subordinated debt of the Company, will
constitute a single series of Debt Securities for purposes of the Indenture and
will be limited to $125,000,000 aggregate principal amount. The Notes will bear
interest from the date of issue at the rate per annum shown on the front cover
of this Prospectus and will mature on November 15, 2006. Interest on the Notes
will be payable semi-annually in arrears on May 15 and November 15, commencing
May 15, 1997, to the Persons in whose names the Notes are registered at the
close of business on May 1 and November 1, as the case may be, next preceding
such May 15 and November 15, respectively. Interest on the Notes will be
calculated on the basis of a 360-day year of twelve 30-day months. The Company
has appointed the Trustee under the Indenture as the initial paying agent and
transfer agent of the Notes. The Notes initially may be presented for payment,
registration or transfer and exchange at the office of the Trustee in Atlanta
and at the agent of the Trustee in The City of New York at First Chicago Trust
Company of New York, 14 Wall Street, New York, NY 10005.
The Notes will be general unsecured obligations of the Company and will be
issued in fully registered form without coupons in denominations of $1,000 and
any amount in excess thereof that is an integral multiple of $1,000. The Notes
will be denominated in, and the principal of, premium, if any, and interest on
the Notes will be payable in, United States dollars. The Notes are not subject
to the benefit of any mandatory sinking fund.
The Company is a holding company, which currently conducts its operations
through consolidated and unconsolidated subsidiaries. All of the operating
assets of the Company are owned by its subsidiaries, effectively subordinating
the Notes to all existing and future guarantees and other liabilities (whether
or not for borrowed money) of the Company's subsidiaries. Therefore, the
Company's rights and the rights of its creditors, including holders of Notes, to
participate in the assets of any subsidiary upon the latter's liquidation or
recapitalization will be subject to the prior claims of the subsidiary's
creditors, except to the extent that the Company may itself be a creditor with
recognized claims against the subsidiary, in which case the claims of the
Company would still be effectively subordinate to any security interests in the
assets of such subsidiary and would be subordinate to any indebtedness of such
subsidiary senior to that held by the Company. See "-- Senior Subordinated
Debt." In addition, dividends, loans and advances from certain subsidiaries to
the Company may be subject to certain contractual, statutory or regulatory
restrictions, are contingent upon the results of operations of such subsidiaries
and are subject to various business considerations.
SENIOR SUBORDINATED DEBT
The Notes will be subordinate and junior in right of payment, to the extent
and in the manner set forth in the Indenture, to all "Senior Indebtedness" of
the Company. See "Description of the Debt Securities --
S-6
<PAGE> 7
Senior Subordinated Debt" in the Prospectus. The Notes will rank pari passu with
the Companies 9 3/8% Senior Subordinated Notes due 2003. As of October 31, 1996,
the Company had $420.0 million of Senior Indebtedness outstanding. In addition,
the Notes offered hereby will be effectively subordinated to all existing and
future guarantees and liabilities (whether or not for borrowed money) of the
Company's consolidated subsidiaries, which liabilities totaled approximately
$103.8 million (excluding collateralized mortgage obligations of $69.6 million)
at October 31, 1996. Although the Indenture will contain limitations on the
amount of Indebtedness that the Company and its Restricted Subsidiaries may
incur, the Company and its subsidiaries will retain the ability to incur
additional indebtedness. The Company will not issue any Debt which is expressly
subordinated in right of payment to any other Debt of the Company and which is
not expressly made pari passu with, or subordinated and junior in right of
payment to, the Notes.
OPTIONAL REDEMPTION
The Notes will be redeemable at the Company's option, in whole or in part,
on any date on or after November 15, 2001 and prior to maturity, upon not less
than 30 nor more than 60 days' notice given in accordance with the provisions of
the Indenture, at the redemption prices (expressed as percentages of principal
amount) set forth below, together with accrued and unpaid interest to the date
fixed for redemption, if redeemed during the 12-month period beginning November
15 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2001.............................................................. 104.8125%
2002.............................................................. 103.2125%
2003.............................................................. 101.6125%
2004 and thereafter............................................... 100%
</TABLE>
If less than all of the Notes are called for redemption, the Trustee shall
select, in such manner as it deems appropriate and fair, the Notes (or portions
thereof) to be redeemed.
CERTAIN COVENANTS
Change of Control
If at any time there occurs a Change of Control with respect to the
Company, each Holder of Notes will have the right, at such Holder's option, to
require the Company to repurchase all of such Holder's Notes, or a portion
thereof which is $1,000 or any integral multiple thereof, on the date (the
"Change of Control Repurchase Date") that is 30 Change of Control Business Days
after the date of the Change of Control at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest to the Change of
Control Repurchase Date.
Within 15 Change of Control Business Days after the occurrence of a Change
of Control, the Company or, at the request of the Company, the Trustee will mail
to all Holders of the Notes a notice (the "Change of Control Notice") of the
occurrence of such Change of Control and of the Company's offer to repurchase
Notes pursuant to the repurchase right arising as a result thereof. Such notice
will contain instructions and materials necessary to enable Holders to tender
their Notes to the Company.
Any offer to repurchase Notes following a Change of Control will be
conducted in compliance with applicable securities laws and regulations,
including but not limited to Section 14(e) of the 1934 Act (and the rules
thereunder) and other applicable tender offer rules.
The Company's Existing Credit Facility (as defined below) permits the banks
party thereto to require that the Company repay all indebtedness thereunder, and
the Company's 10 3/8% Senior Notes and the Company's 9 3/8% Senior Subordinated
Notes permit the holders thereof to require the Company to repurchase the
10 3/8% Senior Notes and the 9 3/8% Senior Subordinated Notes upon the
occurrence of certain events generally the same as those that would constitute a
Change of Control. Although the Company would be obligated to repurchase all
Notes tendered by the Holders thereof if a Change of Control were to occur (and
the failure of the Company to repurchase such Notes would constitute a default
with respect to the Notes), there can be no assurance that the Company would
have sufficient funds to do so in view of, among
S-7
<PAGE> 8
other things, the change of control provisions and the restrictive covenants and
acceleration provisions under the Existing Credit Facility, the 10 3/8% Senior
Notes and the 9 3/8% Senior Subordinated Notes.
A "Change of Control" shall be deemed to have occurred at such time as
either of the following events shall occur: (i) there shall be consummated any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which the Voting Stock (as
defined below) would be converted into cash, securities or other property, other
than a merger of the Company in which the holders of Voting Stock immediately
prior to the merger have the same or greater proportionate ownership, directly
or indirectly, of the Voting Stock of the surviving corporation immediately
after such merger as they had of the Voting Stock immediately prior to such
merger; or (ii) there is a report filed by any Person, including its Affiliates
and Associates, on Schedule 13D or 14D-1 (or any successor schedule, form or
report) pursuant to the Exchange Act, disclosing that such Person (for the
purposes of this definition only, the term "Person" shall include a "person"
within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act
or any successor provision to either of the foregoing) has become the beneficial
owner (as the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of 50% or more
of the voting power of the Company's Voting Stock then outstanding; provided,
however, that a Person shall not be deemed beneficial owner of, or to own
beneficially, (A) any securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or exchange
thereunder, or (B) any securities if such beneficial ownership (1) arises solely
as a result of a revocable proxy delivered in response to a proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and
regulations under the Exchange Act, and (2) is not also then reportable on
Schedule 13D (or any successor schedule, form or report) under the Exchange Act.
Notwithstanding the foregoing provisions, a Change of Control shall not be
deemed to have occurred if at any time the Company, any Subsidiary of the
Company, any employee stock ownership plan or any other employee benefit plan of
the Company or any Subsidiary of the Company, or any Person holding Voting Stock
for or pursuant to the terms of any such employee benefit plan, files or becomes
obligated to file a report under or in response to Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report) under the Exchange Act
disclosing beneficial ownership by it of shares of Voting Stock, whether in
excess of 50% or otherwise.
"10 3/8% Senior Notes" means the Company's 10 3/8% Senior Notes due 1999
issued under an indenture dated as of September 1, 1992 between the Company and
NBD Bank, N.A.
"9 3/8% Senior Subordinated Notes" means the Company's 9 3/8% Senior
Subordinated Notes due 2003 issued under an indenture dated as of May 1, 1993
between the Company and The First National Bank of Boston.
"Associate" shall have the meaning ascribed to such term in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as in effect on the
date of the Indenture.
"Change of Control Business Day" means a day on which banking institutions
are not authorized or required by law or regulation to close in The City of New
York.
"Voting Stock" means, with respect to any Person, the capital stock of such
Person having general voting power under ordinary circumstances to elect at
least a majority of the board of directors, managers or trustees of such Person
(irrespective of whether or not at the time capital stock of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency).
Limitation on Incurrence of Additional Indebtedness
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee, extend the maturity of or in any other manner become liable with
respect to, or otherwise become responsible for the payment of (collectively,
"incur"), any Indebtedness unless after giving effect to the incurrence thereof
and the receipt and application of the net proceeds therefrom either (i) the
Consolidated Fixed Charge Coverage Ratio of the Company (determined on a pro
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forma basis for the last four fiscal quarters of the Company for which financial
statements are available at the date of determination) is at least 2 to 1 or
(ii) the ratio of Indebtedness of the Company and its Restricted Subsidiaries to
Consolidated Net Worth of the Company is less than 3.25 to 1.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may incur: (i) Refinancing Indebtedness; (ii) Non-Recourse Indebtedness incurred
for the acquisition or improvement of real property and secured by mortgage
Liens on such real property or improvements; (iii) Indebtedness to the Company
or to Restricted Subsidiaries; (iv) Indebtedness under the Existing Credit
Facility in an aggregate principal amount at any one time of not more than $350
million; and (v) Excluded Debt.
Limitation on Restrictions on Distributions from Restricted Domestic
Subsidiaries
The Company will not, and will not permit any of its Restricted Domestic
Subsidiaries to, directly or indirectly, create, assume or otherwise cause or
permit to exist or to become effective any consensual encumbrance or restriction
on the ability of any Restricted Domestic Subsidiary to: (i) pay dividends or
make any other distributions on its Capital Stock or on any other interest or
participation in, or measured by, its profits, owned by the Company or any of
its other Restricted Subsidiaries, or pay interest on or principal of any
Indebtedness owed to the Company or any of its other Restricted Subsidiaries;
(ii) make loans or advances to the Company or any of its other Restricted
Subsidiaries; or (iii) transfer any of its properties or assets to the Company
or any of its other Restricted Subsidiaries, except for encumbrances or
restrictions on the payment of cash by any Restricted Domestic Subsidiary which
does not exceed $10,000 in the aggregate and encumbrances and restrictions
existing or created under or by reason of (a) applicable law; (b) covenants or
restrictions contained in Existing Indebtedness; (c) customary provisions
restricting subletting or assignment of any contract or of any lease governing a
leasehold interest of the Company or any Restricted Domestic Subsidiary; (d)
restrictions under any instrument creating or evidencing any Acquired
Indebtedness that was permitted to be incurred pursuant to the Indenture and the
Notes and which (1) only apply to assets that were subject to such restrictions
and encumbrances prior to the acquisition of such assets by the Company or its
Restricted Domestic Subsidiaries and (2) were not created in connection with, or
in contemplation of, such acquisition; (e) restrictions replacing those
permitted by clause (b) or (d) which are not more restrictive than, and do not
extend to any Persons or assets other than the Persons or assets subject to, the
restrictions and encumbrances so replaced; (f) restrictions under any instrument
creating or evidencing any Refinancing Indebtedness which are not more
restrictive than those under, and do not extend to any Persons or assets other
than the Persons or assets subject thereto under, the instrument creating or
evidencing the Indebtedness being refunded, extended or refinanced by such
Refinancing Indebtedness; (g) any Permitted Lien or any agreement restricting
the sale or other disposition of property securing Indebtedness permitted by the
Indenture and the Notes if such Permitted Lien or agreement, as the case may be,
does not by its terms expressly restrict the ability of a Restricted Domestic
Subsidiary of the Company to make any of the dividends, payments, distributions,
loans, advances or transfers referred to in clauses (i), (ii) or (iii) above;
(h) reasonable and customary borrowing base covenants set forth in credit
agreements evidencing Indebtedness otherwise permitted by the Indenture and the
Notes which covenants restrict or limit the distribution of revenues or sale
proceeds from real estate or a real estate project based upon the amount of
Indebtedness outstanding on such real estate or real estate project and the
value of some or all of the remaining real estate or the project's remaining
assets; (i) customary agreements entered into in the ordinary course of business
restricting the ability of a joint venture to make distributions or payments of
cash or property to participants in such joint venture; or (j) the Existing
Credit Facility or a Substitute Credit Facility but only so long as no such
encumbrance or restriction under the Existing Credit Facility or a Substitute
Credit Facility by its terms expressly restricts the ability of a Restricted
Domestic Subsidiary of the Company to make any of the dividends, payments,
distributions, loans, advances or transfers referred to in clauses (i), (ii) or
(iii) above (it being understood that covenants requiring or having the effect
of requiring the maintenance of a specified level of net worth which do not by
their terms expressly restrict the ability of a Restricted Domestic Subsidiary
of the Company to make any such dividends, payments, distributions, loans,
advances or transfers referred to in clauses (i), (ii) or (iii) above shall be
permitted under this clause (j)).
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Maintenance of Consolidated Net Worth
If the Consolidated Net Worth of the Company at the end of each of any two
consecutive fiscal quarters (the last day of such second fiscal quarter being
referred to as the "Trigger Date") is less than $195 million, then the Company
will make an offer (a "Net Worth Offer"), on a date (a "Net Worth Repurchase
Date") falling on or before the last day of the next following fiscal quarter,
to acquire Notes in an aggregate principal amount equal to 10% of the aggregate
principal amount of the Notes initially issued (or such lesser amount of Notes
as may be outstanding at the time such Net Worth Offer is made) at a purchase
price equal to 100% of principal amount thereof, plus accrued and unpaid
interest to the Net Worth Repurchase Date. The Company may credit against its
obligation to purchase Notes on a Net Worth Repurchase Date the principal amount
of Notes acquired by the Company and surrendered for cancellation through
optional purchase, optional redemption or optional exchange subsequent to the
related Trigger Date. In no event shall the failure to meet the minimum
Consolidated Net Worth requirement set forth above at the end of any fiscal
quarter be counted toward the making of more than one Net Worth Offer.
The Company or, at the request of the Company, the Trustee will mail a Net
Worth Offer to acquire Notes as described above not less than 30 days nor more
than 60 days prior to the Net Worth Repurchase Date to each Holder at its
registered address. Such notice will contain instructions and materials
necessary to enable Holders to tender their Notes to the Company. Notes may be
surrendered for repurchase in whole or in part in integral multiples of $1,000.
If any Net Worth Offer to acquire Notes is oversubscribed, the Company shall
acquire Notes pro rata (subject to rounding).
The Company will comply with the applicable securities laws and regulations
in connection with each Net Worth Offer.
Limitation on Restricted Payments
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment if, after
giving effect thereto, (i) a Default or an Event of Default shall have occurred
and be continuing; or (ii) the aggregate amount of Restricted Payments (the
amount of any Restricted Payment, if other than in cash, to be determined by the
Board of Directors of the Company, whose reasonable determination shall be
conclusive and evidenced by a Board Resolution certified by an Officers'
Certificate and filed with the Trustee) made by the Company and its Restricted
Subsidiaries from and after the date of the Indenture would exceed the sum of
(a) 50% of the Consolidated Net Income of the Company accrued on a cumulative
basis for the period commencing on September 1, 1996 (the "Commencement Date")
and ending on the last day (the "Reference Day") of the Company's last fiscal
quarter ending prior to the date of such proposed Restricted Payment (or, in the
event such Consolidated Net Income as so determined on a cumulative basis shall
be a deficit, minus 100% of such deficit), (b) the aggregate net proceeds,
including the fair market value of property other than cash (such fair market
value to be determined by a majority of the disinterested members of the full
Board of Directors of the Company, whose reasonable determination shall be
conclusive and evidenced by a Board Resolution certified by an Officers'
Certificate and filed with the Trustee), received by the Company from any Person
(other than a Restricted Subsidiary) after the Commencement Date and on or prior
to the Reference Date from the issue or sale of Qualified Capital Stock of the
Company, or any options, warrants or other rights (other than convertible or
exchangeable debt securities except as provided below) to purchase Qualified
Capital Stock of the Company, or from the issuance or sale of debt securities of
the Company which are converted into or exchanged for Qualified Capital Stock of
the Company, and (c) $75 million; or (iii) the Company would be unable to incur
an additional $1.00 of Indebtedness pursuant to the first paragraph of the
covenant described above under "Description of the Notes -- Certain
Covenants -- Limitation on Incurrence of Additional Indebtedness"; provided,
however, that the foregoing provisions shall not prevent (a) the payment of any
dividend or distribution within 60 days after the date of declaration thereof,
if the payment would have complied with the foregoing provisions on the date of
such declaration or (b) the repurchase or redemption of shares of Capital Stock
from any officer, director or employee of the Company or its Restricted
Subsidiaries whose employment has been terminated or who has died or become
disabled in an aggregate amount not to exceed $5,000,000 for any fiscal year of
the
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Company; provided that amounts paid pursuant to this clause (b) shall reduce
amounts available for future Restricted Payments.
Mergers and Sales of Assets
The Company will not merge or consolidate with or into any other Person and
will not sell, lease or convey all or substantially all of its assets to any
other Person, unless (i) either the Company shall be the continuing corporation,
or the successor corporation or the Person that acquires by sale, lease or
conveyance all or substantially all the assets of the Company shall be a
corporation organized and existing under the laws of the United States of
America or any State thereof or the District of Columbia and shall expressly
assume the due and punctual payment of the principal of and interest on all the
Notes, according to their tenor, and the due and punctual performance and
observance of all of the covenants and conditions in the Indenture and the Notes
to be performed or observed by the Company, by supplemental indenture
satisfactory to the Trustee, executed and delivered to the Trustee by such
corporation, (ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing, (iii)
immediately after giving effect to such transaction, the Company or such
corporation, as the case may be, would be able to incur at least $.50 of
additional Indebtedness pursuant to the first paragraph of the covenant
described under "Description of the Notes -- Certain Covenants -- Limitation on
Incurrence of Additional Indebtedness", and (iv) the Company shall have
delivered to the Trustee an Officers' Certificate and Opinion of Counsel, each
stating that such transaction and such supplemental indenture comply with the
Indenture and the Notes, and that all conditions precedent relating to such
transaction have been complied with. Upon the assumption of the Company's
obligation by such a corporation in such circumstances, the Company shall
(except in the case of a lease) be discharged from all obligations under the
Notes and the Indenture.
Limitations on Transactions with Officers, Directors and Employees
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, (i) make any loan, advance, guarantee
or capital contribution to, or for the benefit of, or (ii) sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or for the benefit
of, or (iii) purchase or lease any property or assets from, or (iv) enter into
or amend any contract, agreement or understanding with, or for the benefit of,
(a) any officer, director or employee of the Company, (b) any officer, director
or employee of a Subsidiary of the Company (provided that clause (iv) above
shall not apply with respect to this clause (b)) or (c) any former officer or
director of the Company or any of its Subsidiaries who owns, directly or
indirectly, 7.5% or more of the voting power of the Common Stock of the Company
(each an "Affiliate Transaction"), except on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary, as the case may be, than
those that could have been obtained in a comparable transaction on an arm's
length basis from a Person that is not such an officer, director or employee.
Notwithstanding the foregoing, the term "Affiliate Transaction" shall not
include any transaction with an officer, director or employee of the Company or
of any Subsidiary of the Company in their capacity as officer, director or
employee entered into in the ordinary course of business or which is consistent
with past practice (including compensation and employee benefit arrangements
with any officer, director or employee of the Company or of any Subsidiary of
the Company) and shall not include the acquisition by any officer, director or
employee of the Company of any securities of the Company in the open market in
arm's length transactions.
Limitation on Investments in Restricted Foreign Subsidiaries, Unrestricted
Subsidiaries and Equity Method Persons
The Company will not, and will not permit any of its Restricted Domestic
Subsidiaries to, directly or indirectly, make any Investment in any Restricted
Foreign Subsidiary, Unrestricted Subsidiary or Equity Method Person (each, a
"Subject Entity") if, after giving effect thereto, the aggregate amount of all
such Investments made after the date of the Indenture would exceed the sum of
(i) $110 million, (ii) the aggregate amount of cash dividends and distributions
received by the Company after the date of the Indenture from Subject Entities,
(iii) in the case of any such Investment made after the date of the Indenture as
a loan or advance to, or purchase (or other acquisition for consideration) of
Indebtedness or other debt securities of, a
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Subject Entity, the amount of all cash repayments of principal of such loans,
advances, Indebtedness or debt securities paid to the Company or any of its
Restricted Domestic Subsidiaries (or to a Person designated by the Company or
any of its Restricted Domestic Subsidiaries, which Person is not a Subsidiary or
Affiliate of the Company) by such Subject Entity, (iv) in the case of any such
Investment made after the date of the Indenture as a capital contribution to, or
purchase (or other acquisition for consideration) of Capital Stock or other
equity securities of, a Subject Entity, the aggregate cash amount paid to the
Company or any of its Restricted Domestic Subsidiaries (or to a Person
designated by the Company or any of its Restricted Domestic Subsidiaries, which
Person is not a Subsidiary or Affiliate of the Company) by such Subject Entity
as a return of such capital or to repurchase such Capital Stock or other equity
securities (not to exceed the respective amount paid to purchase such Capital
Stock or equity securities), and (v) in the case of any other such Investment
made in a Subject Entity after the date of the Indenture, the cash amount paid
to the Company or any of its Restricted Domestic Subsidiaries (or to a Person
designated by the Company or any of its Restricted Domestic Subsidiaries, which
Person is not a Subsidiary or Affiliate of the Company) by such Subject Entity
as a repayment or reimbursement of such Investment.
EVENTS OF DEFAULT
An Event of Default with respect to the Notes will be defined as any of the
following: (i) default for 30 days in the payment of any interest on the Notes
when due; (ii) default in the payment of any principal of the Notes when due,
either at maturity, upon redemption at the option of the Company or repurchase
at the option of the Holders, by declaration of acceleration or otherwise; (iii)
default in the observance or performance by the Company of any of its other
covenants or agreements contained in the Indenture (other than a covenant or
agreement contained in the Indenture solely for the benefit of a series of Debt
Securities other than the Notes) or the Notes for 60 days (or for 10 days in the
case of any of the other covenants described above under "Description of the
Notes -- Certain Covenants -- Change of Control") after notice from the Trustee
or the Holders of at least 25% in aggregate principal amount of the Notes then
outstanding; (iv) a default under any mortgage, indenture or other instrument or
agreement under which there may be issued or by which there may be secured or
evidenced any Indebtedness (other than Non-Recourse Indebtedness) of the Company
or any Restricted Subsidiary, whether such Indebtedness existed on the date of
the Indenture or shall be created thereafter, if (a) such default results from
the failure to pay any such Indebtedness when due (provided that no such failure
to pay Indebtedness when due shall be deemed to have occurred so long as the
Company or such Restricted Subsidiary, as the case may be, shall be contesting
whether such Indebtedness is due in good faith by appropriate proceedings) or as
a result of such default the maturity of such Indebtedness has been accelerated
prior to its expressed maturity and (b) the sum of (x) the principal amount of
such Indebtedness plus (y) the aggregate principal amount of all other such
Indebtedness in default for failure to pay any such Indebtedness when due or the
maturity of which has been so accelerated, equals $20,000,000 or more,
individually, or $40,000,000 or more, in the aggregate, without such
Indebtedness having been discharged or such acceleration having been rescinded
or annulled within a period of 30 days after notice to the Company from the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding; and (v) certain events of bankruptcy, insolvency or
reorganization relating to the Company or any of its Restricted Significant
Subsidiaries.
The Indenture provides that, if an Event of Default shall have occurred and
be continuing, either the Trustee or the Holders of not less than 25% in
principal amount of the Notes then outstanding may declare the principal of all
Notes and interest accrued thereon to be due and payable immediately. Upon
certain conditions such declaration may be annulled and past defaults may be
waived by the Holders of a majority in principal amount of the Notes then
outstanding.
The Indenture contains a provision entitling the Trustee, subject to the
duty of the Trustee during a default to act with the required standard of care,
to be indemnified by the Holders of the Notes before proceeding to exercise any
right or power under the Indenture at the request of such Holders. Subject to
such provisions in the Indenture for the indemnification of the Trustee and
certain other limitations, the Holders of a majority in principal amount of the
Notes then outstanding may direct the time, method and place of
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conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee.
The Indenture provides that no Holder of Notes may institute any action
against the Company under the Indenture (except actions for payment of overdue
principal or interest) unless such Holder previously shall have given to the
Trustee written notice of default and continuance thereof and unless the Holders
of not less than 25% in principal amount of the Notes then outstanding shall
have requested the Trustee to institute such action and shall have offered the
Trustee reasonable indemnity, the Trustee shall not have instituted such action
within 60 days of such request and the Trustee shall not have received any
direction inconsistent with such written request by the Holders of a majority in
principal amount of the Notes then outstanding.
DEFEASANCE AND DISCHARGE
The Company may be discharged from its obligation to comply with the
covenants described above (including its obligation to offer to repurchase Notes
following a Change of Control and as described above under "Certain
Covenants -- Maintenance of Consolidated Net Worth"), and also may be discharged
from all of its obligations under the Indenture (including such covenants and
its obligations to pay the principal of and interest on the Notes), as set forth
below. (Section 10.1)
The Company may discharge its obligations under the Indenture (excluding
its obligation to pay principal and interest on the Notes when due and certain
other obligations thereunder, but including its obligations under the covenants
described under "Certain Covenants") that have not already been delivered to the
Trustee for cancellation and that have either become due and payable or are by
their terms due and payable within one year (or scheduled for redemption within
one year) by irrevocably depositing with the Trustee cash or U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, as trust
funds in an amount certified to be sufficient to pay at maturity (or upon
redemption or repayment at the option of the holder) the principal and interest
on the Notes.
The Company may also discharge its obligations to holders of the Notes
(including its obligations to pay the principal and interest thereon and its
obligations under the Indenture, including the covenants described above under
"Certain Covenants") ("defeasance"), but will remain obligated to register the
transfer or exchange of the Notes, to replace any temporary, mutilated,
destroyed, lost, or stolen Notes and to maintain an office or agency in respect
of the Notes and certain other obligations. The Company may instead be
discharged with respect to the Notes from the obligations imposed by the
covenants described above under "Certain Covenants" (other than its obligation
to pay the principal of and interest on the Notes when due), and omit to comply
with each such covenant (other than as aforesaid) without creating an Event of
Default ("covenant defeasance"). Defeasance or covenant defeasance of the Notes
may be effected only if, among other things: (i) the Company irrevocably
deposits with the Trustee cash or U.S. Government Obligations, or a combination
thereof, as trust funds in an amount certified to be sufficient to pay at
maturity (or upon redemption or repayment at the option of the holders) the
principal of and interest on all outstanding Notes; (ii) the Company delivers to
the Trustee an opinion of counsel to the effect that the holders of the Notes
will not recognize income, gain or loss for United States federal income tax
purposes as a result of such defeasance or covenant defeasance and that
defeasance or covenant defeasance will not otherwise alter such holders' United
States federal income tax treatment of principal and interest payments on the
Notes; and (iii) (a) no event or condition shall exist that, pursuant to certain
provisions described under "Senior Subordinated Debt" above, would prevent the
Company from making payments of principal and interest on the Notes at the date
of the irrevocable deposit referred to above or at any time during the period
ending on the 91st day after such deposit date and (b) the Company delivers to
the Trustee an opinion of counsel to the effect that (1) the trust funds will
not be subject to any rights of holders of Senior Indebtedness and (2) after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally, except that if a court were to rule under
any such law in any case or proceeding that the trust funds remained property of
the Company, then the Trustee and the holders of the Notes would be entitled to
certain rights as secured creditors in such trust funds.
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MODIFICATION OF THE INDENTURE
The Indenture will provide that the Company and the Trustee may enter into
supplemental indentures without the consent of the Holders of the Notes as
described in the Prospectus in the first paragraph under "Description of the
Debt Securities -- Modification of the Indentures". In addition, the Indenture
will contain provisions permitting the Company and the Trustee, with the consent
of the Holders of not less than a majority in principal amount of the Notes then
outstanding, to add any provisions to, or change in any manner or eliminate any
of the provisions of, the Indenture insofar as it relates to the Notes or modify
in any manner the rights of the Holders of the Notes; provided that the Company
and the Trustee may not, without the consent of the Holder of each outstanding
Note affected thereby, (i) extend the stated maturity of the principal of any
Note or any date on which the Change of Control Repurchase Price or Net Worth
Repurchase Price is payable or reduce the principal amount thereof or premium,
if any, thereon or reduce the rate or extend the time of payment of interest
thereon, or reduce any amount payable on redemption or repayment thereof, or
make the principal thereof, or premium, if any, or interest thereon payable in
any coin or currency other than U.S. dollars, or modify the percentage of
Holders required to waive any default or rescind and annul any declaration of
acceleration, or impair the right to institute suit for the enforcement of any
payment on any Note when due or any right of repayment, repurchase or redemption
at the option of the Holder thereof, or (ii) reduce the aforesaid percentage of
Notes, the consent of the Holders of which is required for any such
modification.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means (i) with respect to any Person (except a
Person formed or organized by or on behalf of the Company for purposes other
than to act as an acquisition vehicle) that becomes a Subsidiary of the Company
after the date of the Indenture, Indebtedness of such Person and its
Subsidiaries existing at the time such Person becomes a Subsidiary of the
Company that was not incurred in connection with, or in contemplation of, such
Person becoming a Subsidiary of the Company, (ii) with respect to the Company or
any of its Subsidiaries, any Indebtedness incurred by the Company or any of its
Subsidiaries in connection with the acquisition of an asset from another Person
after the date of the Indenture that was not incurred in connection with, or in
contemplation of, such acquisition.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
when used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) in or of the equity
(which includes, but is not limited to, common stock, preferred stock and
partnership and joint venture interests) of such Person.
"Capitalized Lease Obligation" means an obligation under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP and the amount of Indebtedness represented by such obligation shall be the
capitalized amount of such obligation determined in accordance with GAAP.
"Common Stock" of any Person means all Capital Stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management and policies of such Person.
"Consolidated Adjusted Net Income" of the Company means, for any period,
the Consolidated Net Income of the Company and its Restricted Subsidiaries for
such period, provided that (i) 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 (ii) the Net Income of any Person which is not
a Restricted Subsidiary or is an Equity Method Person shall be included only to
the extent of the amount of cash dividends or distributions paid by it to the
Company or a Restricted Subsidiary during such period.
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"Consolidated Fixed Charge Coverage Ratio" means, for any period, the ratio
of (i) the sum, without duplication, of Consolidated Adjusted Net Income,
Consolidated Interest Expense (but only to the extent that such Consolidated
Interest Expense reduces such Consolidated Adjusted Net Income for such period),
Consolidated Tax Expense, depreciation and amortization (including, without
limitation, previously capitalized interest amortized to cost of sales), in each
case for such period, of the Company and its Restricted Subsidiaries (determined
on a consolidated basis in accordance with GAAP) to (ii) Consolidated Interest
Expense of the Company and its Restricted Subsidiaries for such period;
provided, however, that in making such computation, the Consolidated Interest
Expense attributable to interest on any Indebtedness computed on a pro forma
basis and bearing a floating interest rate shall be computed as if the rate in
effect on the date of computation had been the applicable rate for the entire
period unless such interest rate has been fixed by hedging or other similar
contracts or agreements, in which case such interest rate shall be deemed to be
equal to such fixed rate of interest.
"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest which, in conformity with GAAP, would be set forth opposite the
caption "interest expense" or any like caption on a consolidated income
statement of the Company and its Restricted Subsidiaries (including, but not
limited to, imputed interest on Capitalized Lease Obligations, all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, the net costs associated with hedging
obligations, amortization of other financing fees and expenses, the interest
portion of any deferred payment obligation, amortization of discount or premium,
if any, and all other non-cash interest expense (other than previously
capitalized interest amortized to cost of sales)) plus, without duplication, all
capitalized interest of the Company and its Restricted Subsidiaries for such
period and all interest incurred or paid by the Company or any of its Restricted
Subsidiaries under any guarantee of Indebtedness (including a guarantee of
principal, interest or any combination thereof) of any Person for such period,
in each case determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" of the Company means, for any period, the
consolidated Net Income of the Company and its Restricted Subsidiaries for such
period, determined in accordance with GAAP.
"Consolidated Net Worth" means the consolidated shareholders' equity of the
Company.
"Consolidated Tax Expense" of the Company means, for any period, the
consolidated federal, state, local and foreign tax expense of the Company and
its Restricted Subsidiaries for such period, determined in accordance with GAAP.
"Default" means any event or condition which is or, with notice or lapse of
time or both, would be an Event of Default.
"Disqualified Capital Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable other than solely for Qualified Capital Stock, pursuant to a sinking
fund obligation or otherwise, or is redeemable or required to be repurchased or
repaid at the option of the holder thereof for consideration other than solely
for Qualified Capital Stock, in whole or in part, on or prior to the final
maturity date of the Notes; provided that, in the case of any Restricted
Domestic Subsidiary through which the Company conducts any real estate joint
venture, the fact that any participant in such joint venture who holds Capital
Stock of such Restricted Domestic Subsidiary may have the right, pursuant to a
"buy-sell" agreement or similar arrangement, to require that the Company or any
other Subsidiary of the Company purchase such Capital Stock from such joint
venturer, shall not cause such Capital Stock to be deemed Disqualified Capital
Stock.
"Equity Method Person" means, as of any date of determination, any Person
(other than a Subsidiary of the Company) which is or is required to be accounted
for by the Company by the equity method of accounting in the Company's
consolidated financial statements in accordance with GAAP.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
S-15
<PAGE> 16
"Excluded Debt" means any Indebtedness of the Company or its Restricted
Subsidiaries which is (i) subordinated (subject to the rights of holders of
Senior Indebtedness) in right of payment to the Notes (upon liquidation or
otherwise) at least to the extent that the Notes are subordinated to the Senior
Indebtedness and (ii) matures after, and is not redeemable mandatorily or at the
option of the holder thereof prior to, the final maturity date of the Notes.
"Existing Credit Facility" means the Fourth Amended and Restated Loan
Agreement dated as of February 28, 1996 among the Company, the banks party
thereto, Bank of America National Trust and Savings Association, as
administrative agent, The First National Bank of Chicago, as documentation
agent, and the other parties thereto, and any credit facility which is an
extension or renewal thereof (including, in each case, any increase in the
amount of credit available thereunder).
"Existing Indebtedness" means all Indebtedness of the Company and its
Restricted Subsidiaries that is outstanding on the date of the Indenture.
"GAAP" means generally accepted accounting principles as in effect and
implemented by the Company from time to time.
A "guarantee" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Indebtedness of any other
Person including, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person to
purchase or pay principal of or interest on (or advance or supply funds or
pledge assets for the purchase or payment of or payment of interest on)
Indebtedness of such other Person (whether by agreement to provide additional
capital or to maintain financial condition or other similar agreement).
"incur" has the meaning set forth under "Description of the
Notes -- Certain Covenants -- Limitation on Additional Indebtedness".
"Indebtedness" means (i) any liability of any Person (a) for borrowed money
or for the deferred purchase price of property or services (other than current
liabilities, including trade payables, arising in the ordinary course of
business) or which is evidenced by a note, bond, debenture or similar
instrument, and which would appear as a liability upon a balance sheet of such
Person prepared on a consolidated basis in accordance with GAAP, or (b) for the
payment of money relating to a Capitalized Lease Obligation; (ii) any liability
of such Person in respect of letters of credit or other similar instruments (or
reimbursement obligations with respect thereto), but this clause (ii) does not
include letters of credit provided in the ordinary course of business and
securing performance (and not financial) obligations and performance,
completion, surety or similar bonds or obligations provided in the ordinary
course of business; (iii) any liability or obligation 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), but this clause (iii) does not include obligations in respect of
banker's acceptances and performance, completion, surety or similar bonds or
obligations provided in the ordinary course of business; and (iv) all
Indebtedness of others secured by a Lien (other than assessment district and
similar Liens arising in connection with municipal financings) on any asset of
such Person, whether or not such Indebtedness is assumed by such Person. The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations described above and the
maximum liability of such Person for any such contingent obligations at such
date. To the extent such Person guarantees the obligation of another Person to
pay interest on Indebtedness owed by such other Person, then a designated
percentage of the interest guaranteed or the principal amount of the underlying
Indebtedness, as the case may be, shall be deemed Indebtedness of the referent
Person. For purposes of this definition, the amount of such deemed Indebtedness
of the referent Person shall be equal to the lesser of (a) the aggregate
principal amount of the underlying Indebtedness relating to such interest
guarantee and (b) the aggregate amount of interest due and payable over the term
of such Indebtedness (or the term of the Notes, if shorter) determined based
upon the rate of interest in effect as of the date of such determination,
together with the maximum prepayment premium or penalty which could become due
or payable with respect to such Indebtedness if such Indebtedness were prepaid
prior to the maturity of the Notes.
S-16
<PAGE> 17
"Investment" of any Person means (i) all investments by such Person in any
other Person in the form of loans, advances or capital contributions, (ii) all
payments of Indebtedness or other obligations of any other Person by such
Person, (iii) all purchases (or other acquisitions for consideration) by such
Person of Indebtedness, Capital Stock or other securities of any other Person,
and (iv) all other items that would be classified as investments (including,
without limitation, purchases of assets outside the ordinary course of business)
on a balance sheet of such Person prepared in accordance with GAAP.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or other similar encumbrance of any kind in respect of
such asset, whether or not filed, recorded or otherwise perfected under
applicable law (including, without limitation, any conditional sale or other
title retention agreement and any lease in the nature thereof, any option or
other agreement to sell, and any filing of, or agreement to give, any financing
statement under the Uniform Commercial Code (or equivalent statute) of any
jurisdiction).
"Mortgage Finance Subsidiary" means Kaufman and Broad Mortgage Company, an
Illinois corporation.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP, excluding, however, (i) any
gain (but not loss) realized upon the sale or other disposition (including,
without limitation, dispositions pursuant to sale and 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, and (ii) any gain (but not loss)
realized upon the sale or other disposition of any Capital Stock of such Person
or any of its Restricted Subsidiaries owned by such Person.
"Non-Recourse Indebtedness" means Indebtedness secured by a Lien on
property to the extent that the liability for such Indebtedness (and any
interest thereon) is limited to the security of such property without liability
on the part of the Company or any of its Subsidiaries for any deficiency,
including liability by reason of any agreement by the Company or any of its
Subsidiaries to provide additional capital or maintain the financial condition
of or otherwise support the credit of the Person incurring such Indebtedness.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"principal", whenever used with reference to the Notes or any Note or any
portion thereof, shall be deemed to include "and premium, if any".
"Qualified Capital Stock" means Capital Stock other than Disqualified
Capital Stock.
"Refinancing Indebtedness" means Indebtedness that solely refunds,
refinances or extends, and is incurred within six months of the scheduled
maturity date or a mandatory repurchase date or optional redemption date of, any
Notes, Existing Indebtedness (excluding any Existing Indebtedness repaid with
the proceeds from the sale of the Notes) or other Indebtedness incurred by the
Company or its Restricted Subsidiaries pursuant to the terms of the Indenture
and the Notes, but only to the extent that (i) if the Indebtedness being
refunded, refinanced or extended is subordinated to the Notes, the Refinancing
Indebtedness is also subordinated to the Notes at least to the extent and in the
manner as such Indebtedness, (ii) if the Indebtedness being refunded, refinanced
or extended is subordinated to the Notes, the Refinancing Indebtedness (a) is
scheduled to mature either no earlier than the Indebtedness being refunded,
refinanced or extended or after the scheduled maturity date of the Notes and (b)
has a Weighted Average Life to Maturity at the time such Refinancing
Indebtedness is incurred that is equal to or greater than the Weighted Average
Life to Maturity of the Indebtedness being refunded, refinanced or extended,
(iii) such Refinancing Indebtedness is in an aggregate principal amount that is
equal to or less than the aggregate principal amount then outstanding under the
Indebtedness being refunded, refinanced or extended and (iv) such Refinancing
Indebtedness is incurred by the same Person that initially incurred the
Indebtedness being refunded, refinanced or extended except that (a) the Company
may incur Refinancing Indebtedness to refund, refinance or extend Indebtedness
of any Restricted Subsidiary and (b) any Restricted Subsidiary may incur
Refinancing Indebtedness to refund, refinance or extend Indebtedness of any
other Restricted Subsidiary.
"Restricted Domestic Subsidiary" means, as of any date of determination, a
Restricted Subsidiary (i) that is organized under the laws of the United States
of America or any state thereof or the District of Columbia and (ii) the
majority of the assets of which (as reflected on a balance sheet of such
Subsidiary prepared in accordance with GAAP) is located in the United States of
America.
S-17
<PAGE> 18
"Restricted Foreign Subsidiary" means, as of any date of determination, a
Restricted Subsidiary that is not a Restricted Domestic Subsidiary.
"Restricted Payment" means, with respect to any Person, (i) the declaration
or payment of any dividend or the making of any other payment or distribution of
cash, securities or other property in respect of such Person's Capital Stock or
in respect of any warrants, options or other rights (other than convertible or
exchangeable debt securities of such Person) to purchase or acquire such
Person's Capital Stock (except that a dividend payable solely in Qualified
Capital Stock of the Company shall not constitute a Restricted Payment), (ii)
any payment on account of the purchase, redemption, retirement or other
acquisition for value of such Person's Capital Stock or any warrants, options or
other rights (other than convertible or exchangeable debt securities of such
Person) to purchase or acquire such Person's Capital Stock, or any other payment
or distribution made in respect thereof, either directly or indirectly, or (iii)
any principal payment, redemption, repurchase, defeasance or other acquisition
or retirement, prior to scheduled principal payment or scheduled maturity, of
Indebtedness (other than collateralized mortgage obligations issued by
Subsidiaries of the Mortgage Finance Subsidiary) of the Company or any of its
Subsidiaries which is subordinated in right of payment to the Notes; provided,
however, that with respect to the Company and its Restricted Subsidiaries,
Restricted Payments shall not include (a) any payment described in clause (i) or
(ii) above made to the Company or any of its Restricted Subsidiaries by any of
the Company's other Restricted Subsidiaries, (b) any exchange offer, but only to
the extent the Company exchanges solely Capital Stock of the Company (other than
Disqualified Stock) for Indebtedness of the Company or a Restricted Subsidiary
in such exchange offer or (c) any redemption, repurchase or retirement of
Indebtedness (the Indebtedness being so redeemed, repurchased or retired being
hereinafter called "Subject Indebtedness") described in clause (iii) above if
made from the proceeds of Indebtedness which (x) is subordinated to the Notes to
the same extent as the Subject Indebtedness, (y) is scheduled to mature either
no earlier than the Subject Indebtedness or after the scheduled maturity date of
the Notes and (z) has a Weighted Average Life to Maturity at the time such
Indebtedness is incurred that is equal to or greater than the Weighted Average
Life to Maturity of the Subject Indebtedness.
"Restricted Significant Subsidiary" means any Restricted Subsidiary which
is a "significant subsidiary" as defined in Rule 1-02(v) of Regulation S-X under
the Securities Act of 1933, as amended and the Securities Exchange Act of 1934,
as amended (as such Regulation S-X was in effect on June 1, 1996).
"Restricted Subsidiary" means a Subsidiary of the Company which is not, as
of the determination date, an Unrestricted Subsidiary.
"Subsidiary" of any Person means (i) any corporation of which at least a
majority of the aggregate voting power of the Common Stock of which is owned by
such Person, directly or through one or more other Subsidiaries of such Person,
and (ii) any entity other than a corporation at least a majority of the Common
Stock of which is owned by such Person, directly or through one or more other
Subsidiaries of such Person.
"Substitute Credit Facility" means any credit facility of the Company which
is created subsequent to the date of the Indenture and which replaces all or
part of the Existing Credit Facility or a Substitute Credit Facility (and which
may provide for an increase in the amount of credit available thereunder), so
long as the Company is the borrower under such Substitute Credit Facility.
"Unrestricted Subsidiary" means (a) the Mortgage Finance Subsidiary, (b)
any Subsidiary of the Mortgage Finance Subsidiary on the date of the Indenture,
(c) any other Subsidiary of the Company which is designated as an Unrestricted
Subsidiary by the Company's Board of Directors as provided below and (d) any
Subsidiary of an Unrestricted Subsidiary; provided that, in each case referred
to in clause (a), (b), (c) or (d), the creditors of such Subsidiary have no
direct or indirect recourse (including, but not limited to, recourse with
respect to the payment of principal of or interest on Indebtedness of such
Subsidiary) to the Company or any of its Restricted Subsidiaries. The Board of
Directors of the Company may designate an Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that no such designation shall result in any
Restricted Subsidiary becoming a Subsidiary of any Unrestricted Subsidiary; and
provided, further that (i) any such designation shall be deemed to be an
incurrence by the Company and its Restricted Subsidiaries, as of the date of
such designation, of the consolidated Indebtedness (if any) of such designated
Subsidiary and its
S-18
<PAGE> 19
Subsidiaries (if any) which are or are being designated as Restricted
Subsidiaries, determined in accordance with GAAP, for purposes of the covenant
described above under "Description of the Notes -- Certain
Covenants -- Limitation on Incurrence of Additional Indebtedness", (ii)
immediately after giving effect to such designation and the deemed incurrence of
any such additional Indebtedness (A) no Default or Event of Default shall have
occurred and shall be continuing, (B) the Company could incur $1.00 of
additional Indebtedness pursuant to the first paragraph of the covenant
described above under "Description of the Notes -- Certain
Covenants -- Limitation on Incurrence of Additional Indebtedness" and (C)
without limitation to clause (A) above, such designated Subsidiary and its
Subsidiaries (if any) which are or are being designated as Restricted
Subsidiaries are in compliance with the covenant described above under
"Description of the Notes -- Certain Covenants -- Limitation on Restrictions on
Distributions from Restricted Domestic Subsidiaries". Subject to the foregoing,
the Board of Directors of the Company also may designate any Restricted
Subsidiary (together with its Subsidiaries (if any) to be an Unrestricted
Subsidiary; provided that (i) the consolidated shareholders' equity (determined
in accordance with GAAP) of such designated Subsidiary and its Subsidiaries (if
any) at the time of such designation shall be deemed to be an Investment by the
Company in an Unrestricted Subsidiary at the time of such designation and shall
reduce the amount of Investments which the Company and its Restricted Domestic
Subsidiaries shall be permitted to make under the covenant described above under
"Description of the Notes -- Certain Covenants -- Limitation on Investments in
Restricted Foreign Subsidiaries, Unrestricted Subsidiaries and Equity Method
Persons" and (ii) immediately after giving effect to such designation and
reduction of amounts available for Investments under such covenant, (A) no
Default or Event of Default shall have occurred and shall be continuing, (B) the
Company could incur $1.00 of additional Indebtedness pursuant to the first
paragraph of the covenant described above under "Description of the
Notes -- Certain Covenants -- Limitation on Incurrence of Additional
Indebtedness" and (C) the Company could make $1.00 of additional Investments in
Unrestricted Subsidiaries pursuant to the covenant described above under
"Description of the Notes -- Certain Covenants -- Limitation on Investments in
Restricted Foreign Subsidiaries, Unrestricted Subsidiaries and Equity Method
Persons". Any designation by the Board of Directors described above shall be
evidenced to the Trustee by the filing with the Trustee of a certified copy of
the resolution of the Company's Board of Directors giving effect to such
designation and an Officer's Certificate certifying that such designation
complied with the foregoing conditions and setting forth the underlying
calculations supporting such certification. As of the date of this Prospectus,
the only Unrestricted Subsidiaries are the Mortgage Finance Subsidiary and its
Subsidiaries.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
or portion thereof at any date, the number of years obtained by dividing (i) the
then outstanding principal amount of such Indebtedness or portion thereof, as
the case may be, into (ii) the sum of the products obtained by multiplying (a)
the amount of each then remaining installment, sinking fund, serial maturity or
other required payment of principal of such Indebtedness or portion thereof, as
the case may be, including payment at final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment.
CONCERNING THE TRUSTEE
SunTrust Bank, Atlanta, is one of a number of banks with which the Company
and its subsidiaries maintain ordinary banking relationships and with which the
Company and its subsidiaries maintain credit facilities, including the Existing
Credit Facility.
S-19
<PAGE> 20
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement") between the Company and Merrill Lynch, Pierce, Fenner &
Smith Incorporated (the "Underwriter"), the Company has agreed to sell to the
Underwriter, and the Underwriter has agreed to purchase from the Company, the
entire principal amount of the Notes. In the Purchase Agreement, the Underwriter
has agreed, subject to the terms and conditions set forth therein, to purchase
all of the Notes offered hereby if any are purchased.
The Underwriter has advised the Company that the Underwriter proposes to
offer the Notes from time to time for sale in one or more negotiated
transactions or otherwise, at market prices prevailing at the time of sale,
prices related to such market prices or negotiated prices. The Underwriter may
effect such transactions by selling the Notes to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the Underwriter or purchasers of the Notes for whom they may
act as agent.
The Notes will not be listed on any securities exchange, and there can be
no assurance that there will be a secondary market for the Notes. The
Underwriter has advised the Company that it intends to make a market in the
Notes; however, such market-making may be discontinued at any time.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments the Underwriter may be required to make in respect of
such liabilities. The Underwriter has agreed to reimburse the Company for a
portion of its expenses relating to the offering of the Notes.
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by Davis Polk
& Wardwell. Brown & Wood LLP, will act as counsel for the Underwriter.
EXPERTS
The consolidated financial statements of the Company at November 30, 1995
and 1994 and for each of the three years in the period ended November 30, 1995
incorporated by reference in the Company's Annual Report on Form 10-K for the
year ended November 30, 1995 and the financial statements of Rayco, Ltd. (A
Limited Partnership) at December 31, 1995 and 1994 and for each of the three
years in the period ended December 31, 1995 included in the Company's Current
Report on Form 8-K dated March 12, 1996 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon dated January 4,
1996 and January 30, 1996 included therein and incorporated herein by reference.
Such financial statements are incorporated herein in reliance upon such reports
given upon the authority of Ernst & Young LLP as experts in accounting and
auditing.
S-20
<PAGE> 21
PROSPECTUS
- ----------
KAUFMAN AND BROAD HOME CORPORATION
DEBT SECURITIES, PREFERRED STOCK,
COMMON STOCK
AND
WARRANTS TO PURCHASE THE ABOVE SECURITIES
Kaufman and Broad Home Corporation, a Delaware corporation (the "Company"),
may offer and issue from time to time (i) its debt securities ("Debt
Securities"), consisting of debentures, notes or other evidences of indebtedness
representing unsecured obligations of the Company, which may be either senior
Debt Securities, senior subordinated Debt Securities or subordinated Debt
Securities, (ii) shares of its Preferred Stock, par value $1.00 per share
("Preferred Stock"), (iii) shares of its Common Stock, par value $1.00 per share
("Common Stock"), or (iv) warrants to purchase Debt Securities, Preferred Stock
or Common Stock ("Warrants"). The Debt Securities, Preferred Stock, Common Stock
and Warrants are herein collectively referred to as the "Securities". The
Securities may be offered in one or more separate classes or series, in amounts,
at prices and on terms to be determined by market conditions at the time of sale
and to be set forth in a supplement or supplements to this Prospectus (a
"Prospectus Supplement"). Any Securities may be offered with other Securities or
separately. Debt Securities or Preferred Stock may be convertible into shares of
Common Stock. The aggregate offering price of the Securities will not exceed
$300,000,000.
Certain terms of any Debt Securities in respect of which this Prospectus is
being delivered will be set forth in the accompanying Prospectus Supplement
including, without limitation, the specific designation (including whether such
Debt Securities are senior, senior subordinated or subordinated and whether such
Debt Securities are convertible), aggregate principal amount, purchase price,
currency, denomination, maturity, interest rate (which may be fixed or variable)
and time of payment of interest (if any), terms (if any) for the subordination,
redemption or conversion thereof, listing (if any) on a securities exchange and
any other specific terms of the Debt Securities. Certain terms of any Preferred
Stock in respect of which this Prospectus is being delivered will be set forth
in the accompanying Prospectus Supplement including, without limitation, the
designation, number of shares, liquidation preference, purchase price,
dividends, voting, redemption and conversion provisions and any listing on a
securities exchange. The purchase price of any Common Stock in respect of which
this Prospectus is being delivered will be set forth in the accompanying
Prospectus Supplement. Certain terms of any Warrants in respect of which this
Prospectus is being delivered will be set forth in the accompanying Prospectus
Supplement, including the specific designation, number, duration, purchase price
and terms thereof, any listing of the Warrants or the underlying securities on a
securities exchange and any other terms in connection with the offering, sale
and exercise of the Warrants, as well as the terms on which and the securities
for which such Warrants may be exercised. The Prospectus Supplement will also
contain information, where applicable, about certain United States federal
income tax considerations relating to the Securities covered by the Prospectus
Supplement.
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol KBH.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Securities may be sold on a negotiated or competitive bid basis to or
through underwriters or dealers designated from time to time or to other
purchasers directly or through agents designated from time to time. Certain
terms of the offering and sale of the Securities, including, where applicable,
the names of the underwriters, dealers or agents, if any, the principal amount
or number of shares or Warrants to be purchased, the purchase price of the
Securities and the proceeds to the Company from such sale, and any applicable
commissions, discounts and other items constituting compensation of such
underwriters, dealers or agents, will also be set forth in the accompanying
Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 12, 1996
<PAGE> 22
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained or incorporated by
reference in this Prospectus or any Prospectus Supplement, and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Company or by any underwriter, agent or dealer. This
Prospectus and any Prospectus Supplement shall not constitute an offer to sell
or a solicitation of an offer to buy any of the Securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus and
any Prospectus Supplement nor any sale made thereunder shall, under any
circumstances, create any implication that the information herein or therein is
correct as of any time subsequent to the date thereof.
TABLE OF CONTENTS
<TABLE>
<CAPTION> PAGE PAGE
---- ----
<S> <C> <C> <C>
Available Information................. 2 Description of the Debt Securities.... 5
Incorporation of Certain Information Limitations on Issuance of Bearer Debt
by Reference........................ 3 Securities.......................... 13
The Company........................... 4 Description of Capital Stock.......... 14
Use of Proceeds....................... 4 Description of Warrants............... 18
Consolidated Ratios of Earnings to Plan of Distribution.................. 19
Fixed Charges and of Earnings to Experts............................... 20
Combined Fixed Charges and Preferred Legal Matters......................... 20
Stock Dividends..................... 4
</TABLE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 or at its Regional
Offices located at Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60661-2511 and at Seven World Trade Center, 13th
Floor, New York, New York 10048, and copies of such material can be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov. The Company's Common Stock is listed on the New York Stock
Exchange, Inc. (the "New York Stock Exchange"). In addition, reports, proxy
statements and other information concerning the Company can be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
This Prospectus constitutes a part of Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus omits certain of the information
set forth in such Registration Statement in accordance with the rules and
regulations of the Commission. Reference is hereby made to such Registration
Statement and to the exhibits relating thereto for further information with
respect to the Company and the Securities. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and in
each instance reference is made to the copy of such document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission for a more
complete description of the matter involved. Each such statement is qualified in
its entirety by such reference.
2
<PAGE> 23
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which have been filed with the Commission, are
hereby incorporated by reference:
1. Annual Report on Form 10-K of the Company for the year ended November
30, 1995; and
2. Quarterly Reports on Form 10-Q of the Company for the quarters ended
February 29, 1996, May 31, 1996 and August 31, 1996, as amended; and
3. Current Reports on Form 8-K of the Company dated March 12, 1996 (filed
March 14, 1996), May 23, 1996 (filed May 23, 1996) and October 29, 1996
(filed October 29, 1996).
All documents filed by the Company after the date of this Prospectus
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the termination of the offering of the Securities offered hereby, shall be
deemed to be incorporated herein by reference and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein (or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein) modifies or
supersedes such statement. Any statements so modified or superseded shall be
deemed to constitute a part of this Prospectus, except as so modified or
superseded.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon written
or oral request of such person, a copy of any or all of the documents referred
to above which have been or may be incorporated by reference in this Prospectus
(other than certain exhibits to such documents). Requests for such documents
should be directed to Kaufman and Broad Home Corporation, 10990 Wilshire
Boulevard, Los Angeles, California 90024, Attention: Investor Relations
(telephone (310) 231-4010).
3
<PAGE> 24
THE COMPANY
The Company is a builder of single-family homes with domestic operations in
seven western states, and international operations in France and Mexico.
Domestically, the Company is the largest home builder west of the Mississippi
River, delivering more single-family homes than any other builder in the region.
Founded in 1957, the Company builds innovatively designed homes which cater
primarily to first-time home buyers, generally in medium-sized developments
close to major metropolitan areas. Internationally, the Company is among the
largest builders in greater metropolitan Paris, France, based on the number of
homes delivered. In France, the Company also builds commercial projects and
high-density residential properties, such as condominium and apartment
complexes. The Company provides mortgage banking services to domestic home
buyers through its wholly owned subsidiary, Kaufman and Broad Mortgage Company.
The Company is a Delaware corporation and maintains its principal executive
offices at 10990 Wilshire Boulevard, Los Angeles, California 90024. Its
telephone number is (310) 231-4000. As used herein, the term "Company" refers to
Kaufman and Broad Home Corporation and its subsidiaries, unless the context
indicates otherwise.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement,
proceeds from the sale of the Securities will be used by the Company for general
corporate purposes, which may include, among other things, the development of
new residential properties and commercial projects, the repayment of existing
indebtedness, as well as possible land and corporate acquisitions.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
AND OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the consolidated ratios of earnings to fixed
charges and earnings to combined fixed charges and preferred stock dividends of
the Company for each of the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED AUGUST 31, YEAR ENDED NOVEMBER 30,
--------------------- -------------------------------------
1996 1995 1995 1994 1993 1992 1991
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges
(1)............................... --(2)(3) 1.03x 1.35x 2.09x 2.07x 1.88x 1.51x
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends (1)..................... --(2)(3) -- (3) 1.12x 1.64x 1.80x 1.88x 1.51x
</TABLE>
- ---------------
(1) For purposes of calculating the ratio of earnings to fixed charges and the
ratio of earnings to combined fixed charges and preferred stock dividends,
earnings are computed by adding fixed charges (except capitalized interest
and the effect of preferred stock dividends) and amortization of previously
capitalized interest to pretax earnings (excluding undistributed earnings of
unconsolidated joint ventures). Fixed charges consist of interest expense
plus capitalized interest and the portion of rental expense considered to be
interest and for the ratio of earnings to combined fixed charges and
preferred stock dividends include the effect of preferred stock dividends on
the Company's Series B Mandatory Conversion Premium Dividend Preferred
Stock. On April 1, 1996, all shares of the Company's only outstanding series
of preferred stock, the Series B Mandatory Conversion Premium Dividend
Preferred Stock, were mandatorily converted to shares of Common Stock and no
future preferred stock dividends will be paid or are payable with respect to
such preferred stock.
In computing the ratio of earnings to fixed charges and the ratio of
earnings to combined fixed charges and preferred stock dividends, interest
expense excludes interest incurred by the Company's wholly owned limited
purpose financing subsidiaries with respect to their outstanding
collateralized mortgage obligations. If interest on such collateralized
mortgage obligations were included, the ratio of earnings to fixed charges
for the nine months ended August 31, 1996 would have been a deficit, and
for the remaining periods presented would have been 1.03x, 1.31x, 1.88x,
1.77x, 1.55x and 1.31x, respectively, and the ratio
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<PAGE> 25
of earnings to combined fixed charges and preferred stock dividends for the
nine months ended August 31, 1996 and 1995 would have been a deficit, and
for the remaining periods presented would have been 1.11x, 1.54x, 1.60x,
1.54x, and 1.31x, respectively.
(2) The amount of earnings used in the calculation of the ratio of earnings to
fixed charges and the ratio of earnings to combined fixed charges and
preferred stock dividends for the nine months ended August 31, 1996 includes
the $170.8 million pretax non-cash charge for impairment of long-lived
assets recorded by the Company in the second quarter of 1996. If the
non-cash charge for impairment of long-lived assets were excluded, the ratio
of earnings to fixed charges and the ratio of earnings to combined fixed
charges and preferred stock dividends for the nine months ended August 31,
1996 would have been 1.65x and 1.46x, respectively.
(3) Earnings for the nine months ended August 31, 1996 are inadequate to cover
fixed charges by $132.8 million. Earnings for the nine months ended August
31, 1996 and 1995 are inadequate to cover combined fixed charges and
preferred stock dividends by $140.5 million and $9.8 million, respectively.
DESCRIPTION OF THE DEBT SECURITIES
The following sets forth certain general terms and provisions of the
indentures under which the Debt Securities are to be issued. If so issued, the
particular terms of the Debt Securities will be set forth in a Prospectus
Supplement relating to such Debt Securities which will accompany this
Prospectus.
The Debt Securities will constitute either senior, senior subordinated or
subordinated debt of the Company and will be issued, in the case of Debt
Securities that will be senior debt, under a Senior Indenture (the "Senior Debt
Indenture"), in the case of Debt Securities that will be senior subordinated
debt, under a Senior Subordinated Indenture (the "Senior Subordinated Debt
Indenture"), and, in the case of Debt Securities that will be subordinated debt,
under a Subordinated Indenture (the "Subordinated Debt Indenture"), each such
indenture to be executed by the Company and one or more trustees (each a
"Trustee"). The Senior Debt Indenture, the Senior Subordinated Debt Indenture
and the Subordinated Debt Indenture are sometimes hereinafter referred to
individually as an "Indenture" and collectively as the "Indentures." The
Indentures will be in the form that has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part, subject to such
amendments or supplements as are adopted from time to time. The following
summaries of certain provisions of the Indentures and the Debt Securities do not
purport to be complete and such summaries are subject to the detailed provisions
of the applicable Indenture to which reference is hereby made for a full
description of such provisions, including the definition of certain terms used
herein, and for other information regarding the Debt Securities. Numerical
references in parentheses below are to sections in the applicable Indenture.
Wherever particular sections or defined terms of the applicable Indenture are
referred to, such sections or defined terms are incorporated herein by reference
as part of the statement made, and the statement is qualified in its entirety by
such reference. The Indentures are substantially identical, except for the
provisions relating to subordination. See "Senior Subordinated Debt" and
"Subordinated Debt." The Debt Securities offered by this Prospectus and the
accompanying Prospectus Supplement are referred to herein as the "Offered Debt
Securities."
GENERAL
None of the Indentures limits the amounts of additional indebtedness the
Company or any of its subsidiaries may incur, except as may be provided in the
Prospectus Supplement. The Debt Securities will be unsecured senior, senior
subordinated or subordinated obligations of the Company. The Company is a
holding company, which currently conducts its operations through consolidated
and unconsolidated subsidiaries. All of the operating assets of the Company are
owned by its subsidiaries, effectively subordinating the Debt Securities to all
existing and future guarantees and other liabilities (whether or not for
borrowed money) of the Company's subsidiaries. Therefore, the Company's rights
and the rights of its creditors, including holders of Debt Securities, to
participate in the assets of any subsidiary upon the latter's liquidation or
recapitalization will be subject to the prior claims of the subsidiary's
creditors, except to the extent that the Company may itself be a creditor with
recognized claims against the subsidiary, in which case the claims of the
Company would still be effectively subordinate to any third party security
interests in the assets of such subsidiary and
5
<PAGE> 26
would be subordinate to any liabilities of such subsidiary senior to that held
by the Company. In addition, dividends, loans and advances from certain
subsidiaries to the Company may be subject to certain contractual, statutory or
regulatory restrictions, are contingent upon the results of operations of such
subsidiaries and are subject to various business considerations.
The Indentures provide that Debt Securities may be issued from time to time
in one or more series and may be denominated and payable in U.S. dollars or
foreign currencies or units based on or relating to foreign currencies,
including European Currency Units ("ECUs"). Special United States federal income
tax considerations applicable to any Debt Securities so denominated are
described in the relevant Prospectus Supplement.
Reference is made to the Prospectus Supplement for the following terms of
and information relating to the Offered Debt Securities (to the extent such
terms are applicable to such Offered Debt Securities): (i) classification as
senior, senior subordinated or subordinated Debt Securities, the specific
designation, aggregate principal amount, purchase price and denomination; (ii)
currency or units based on or relating to currencies in which such Offered Debt
Securities are denominated and/or in which principal (and premium, if any)
and/or any interest will or may be payable; (iii) any date of maturity; (iv)
interest rate or rates (or the method by which such rate will be determined), if
any; (v) the date from which interest will accrue and dates on which any such
interest will be payable; (vi) the place or places where the principal of,
premium, if any, and interest, if any, on the Offered Debt Securities will be
payable; (vii) any redemption, repayment or sinking fund provisions; (viii) the
terms, if any, on which such Debt Securities may be converted into or exchanged
for stock or other securities of the Company or other entities, any specific
terms relating to the adjustment thereof and the period during which such Debt
Securities may be so converted or exchanged; (ix) whether the Offered Debt
Securities will be issuable in registered form or bearer form ("Bearer
Securities") or both, and if Bearer Securities are issuable, any restrictions
applicable to the exchange of one form for another and to the offer, sale and
delivery of Bearer Securities; (x) any applicable United States federal income
tax consequences, including whether and under what circumstances the Company
will pay additional amounts on Offered Debt Securities held by a person who is
not a U.S. person (as defined in the Prospectus Supplement) in respect of any
tax, assessment or governmental charge withheld or deducted and, if so, whether
the Company will have the option to redeem such Offered Debt Securities rather
than pay such additional amounts; and (xi) any other specific terms of the
Offered Debt Securities, including any additional events of default or covenants
provided for with respect to such Offered Debt Securities, and any terms that
may be required by or advisable under applicable laws or regulations.
Debt Securities may be presented for exchange and registered Debt
Securities may be presented for transfer in the manner, at the places and
subject to the restrictions set forth in the applicable Indenture and the
Prospectus Supplement. Such services will be provided without charge, other than
any tax or other governmental charge payable in connection therewith, but
subject to the limitations provided in the applicable Indenture. Debt Securities
in bearer form and the coupons, if any, appertaining thereto will be
transferable upon delivery. (Section 2.8)
Debt Securities will bear interest at a fixed rate (a "Fixed Rate
Security") or a floating rate (a "Floating Rate Security"). Debt Securities
bearing no interest or interest at a rate that at the time of issuance is below
the prevailing market rate will be sold at a discount below their stated
principal amount. Special United States federal income tax considerations
applicable to any such discounted Debt Securities or to certain Debt Securities
issued at par that are treated as having been issued at a discount for United
States federal income tax purposes are described in the relevant Prospectus
Supplement.
Debt Securities may be issued, from time to time, with the principal amount
payable on any principal payment date, or the amount of interest payable on any
interest payment date, to be determined by reference to one or more currency
exchange rates, commodity prices, equity indices or other factors. Holders of
such Debt Securities may receive a principal amount on any principal payment
date, or a payment of interest on any interest payment date, that is greater
than or less than the amount of principal or interest otherwise payable on such
dates, depending upon the value on such dates of the applicable currency,
commodity, equity index or other factors. Information as to the methods for
determining the amount of principal, premium, if any, or
6
<PAGE> 27
interest payable on any date, the currencies, commodities, equity indices or
other factors to which the amount payable on such date is linked and certain
additional tax considerations will be set forth in the applicable Prospectus
Supplement.
GLOBAL SECURITIES
Registered Global Security. The registered Debt Securities of a series may
be issued in the form of one or more fully registered global securities (each, a
"Registered Global Security") that will be deposited with a depositary (a
"Depositary"), or with a nominee for a Depositary, identified in the Prospectus
Supplement relating to such series and registered in the name of the Depositary
or a nominee thereof. In such case, one or more Registered Global Securities
will be issued in a denomination or aggregate denominations equal to the portion
of the aggregate principal amount of outstanding registered Debt Securities of
the series to be represented by such Registered Global Security or Securities.
Unless and until it is exchanged in whole for Debt Securities in definitive
registered form, a Registered Global Security may not be transferred except as a
whole by the Depositary for such Registered Global Security to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor of such Depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Registered Global
Security will be described in the Prospectus Supplement relating to such series.
The Company anticipates that the following provisions will apply to all
arrangements with a Depositary for the Registered Global Securities. The
information concerning such depositary arrangements has been obtained from
sources the Company believes to be reliable, but the Company takes no
responsibility for the accuracy thereof.
Beneficial ownership of interests in a Registered Global Security will be
limited to persons that have accounts with the Depositary for such Registered
Global Security ("participants") or persons that may hold interests through
participants. Upon the issuance of a Registered Global Security, the Depositary
for such Registered Global Security will credit, on its book-entry registration
and transfer system, the participants' accounts with the respective principal
amounts of the Debt Securities represented by such Registered Global Security
beneficially owned by such participants. The participants' accounts to be
credited shall be designated by any dealers, underwriters or agents
participating in the distribution of such Debt Securities. Ownership of
beneficial interests in such Registered Global Security will be shown on, and
the transfer of such ownership interests will be effected only through, records
maintained by the Depositary for such Registered Global Security (with respect
to interests of participants) and on the records of participants (with respect
to interests of persons holding through participants). The laws of some states
may require that certain purchasers of securities take physical delivery of such
securities in definitive form. These laws may impair the ability to own,
transfer or pledge beneficial interests in Registered Global Securities.
So long as the Depositary for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depositary or
nominee, as the case may be, will be considered the sole owner or holder of the
Debt Securities represented by such Registered Global Security for all purposes
under the applicable Indenture. Except as set forth below, owners of beneficial
interests in a Registered Global Security will not be entitled to have the Debt
Securities represented by such Registered Global Security registered in their
names, will not receive or be entitled to receive physical delivery of such Debt
Securities in definitive form and will not be considered the owners or holders
thereof under the applicable Indenture. Accordingly, each person owning a
beneficial interest in a Registered Global Security must rely on the procedures
of the Depositary for such Registered Global Security and, if such person is not
a participant, on the procedures of the participant through which such person
owns its interest, to exercise any rights of a holder under the applicable
Indenture. Under existing industry practices, if the Company requests any action
of beneficial owners or if an owner of a beneficial interest in a Registered
Global Security desires to give or take any action that a holder is entitled to
give or take under the applicable Indenture, the Depositary for such Registered
Global Security would authorize the participants holding the relevant beneficial
interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instructions of beneficial owners holding
through them.
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<PAGE> 28
Principal, premium, if any, and interest payments on Debt Securities
represented by a Registered Global Security registered in the name of a
Depositary or its nominee will be made to such Depositary or its nominee, as the
case may be, as the registered owner of such Registered Global Security. None of
the Company, the Trustee or any other agent of the Company or agent of the
Trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial owners of interests in
such Registered Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Company expects that the Depositary for any Debt Securities represented
by a Registered Global Security, upon receipt of any payment of principal,
premium, if any, or interest in respect of such Registered Global Security, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in such Registered Global Security as
shown on the records of such Depositary. The Company also expects that payments
by participants to owners of beneficial interest in such Registered Global
Security held through such participants will be governed by standing customer
instructions and customary practices, as is now the case with the securities
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of such participants.
If the Depositary for any Debt Securities represented by a Registered
Global Security is at any time unwilling or unable to continue as Depositary or
ceases to be a clearing agency registered under the Exchange Act, and a
successor Depositary registered as a clearing agency under the Exchange Act is
not appointed by the Company within 90 days, the Company will issue such Debt
Securities in definitive form in exchange for such Registered Global Security.
In addition, the Company may at any time and in its sole discretion determine
not to have any of the Debt Securities of a series represented by one or more
Registered Global Securities and, in such event, will issue Debt Securities of
such series in definitive form in exchange for all of the Registered Global
Security or Securities representing such Debt Securities. Any Debt Securities
issued in definitive form in exchange for a Registered Global Security will be
registered in such name or names as the Depositary shall instruct the relevant
Trustee. It is expected that such instructions will be based upon directions
received by the Depositary from participants with respect to ownership of
beneficial interests in such Registered Global Security.
Bearer Global Security. The Debt Securities of a series may also be issued
in the form of one or more bearer global Securities (a "Bearer Global Security")
that will be deposited with a common depositary for Morgan Guaranty Trust
Company of New York, as operator of the Euroclear system, and Cedel Bank,
societe anonyme, or with a nominee for such depositary identified in the
Prospectus Supplement relating to such series. The specific terms and
procedures, including the specific terms of the depositary arrangement, with
respect to any portion of a series of Debt Securities to be represented by a
Bearer Global Security will be described in the Prospectus Supplement relating
to such series.
SENIOR DEBT
The Debt Securities and, in the case of Bearer Securities, any coupons
appertaining thereto (the "Coupons") that will constitute part of the senior
debt of the Company will be issued under the Senior Debt Indenture and will rank
pari passu with all other unsecured and unsubordinated debt of the Company.
SENIOR SUBORDINATED DEBT
The Debt Securities and Coupons that will constitute part of the senior
subordinated debt of the Company, if issued, will be issued under the Senior
Subordinated Debt Indenture and will be subordinate and junior in right of
payment, to the extent and in the manner set forth in the Senior Subordinated
Debt Indenture, to all "Senior Indebtedness" of the Company. The Senior
Subordinated Debt Indenture defines "Senior Indebtedness" as the principal of
and premium, if any, and unpaid interest (including post-petition interest) or
accrued original issue discount on and other amounts due on or in connection
with any Debt (as defined below) incurred, assumed or guaranteed by the Company,
whether outstanding on the date of the Indenture or thereafter incurred, assumed
or guaranteed, and all renewals, extensions and refundings of any such Debt;
provided, however, that the following will not constitute Senior Indebtedness:
(i) any Debt as to
8
<PAGE> 29
which, in the instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is expressly provided that such Debt is subordinate
in right of payment to all other Debt of the Company not expressly subordinated
to such Debt; (ii) any Debt which by its terms refers explicitly to the senior
subordinated Debt Securities and states that such Debt shall not be senior in
right of payment thereto; (iii) any Debt in respect of the senior subordinated
Debt Securities; (iv) any Debt of the Company to any Subsidiary of the Company;
(v) any Debt to any joint venture or partnership, which joint venture or
partnership is required, under generally accepted accounting principles, to be
consolidated in the Company's consolidated financial statements; and (vi) any
Debt of the Company which by its terms ranks pari passu with or subordinate to
the senior subordinated Debt Securities. (Senior Subordinated Debt Indenture;
Section 13.1) The Company will not incur any Debt which is subordinated by the
terms of the instrument creating such Debt in right of payment to any other Debt
of the Company and which is not expressly by the terms of the instrument
creating such Debt made pari passu with, or subordinate and junior in right of
payment to, the senior subordinated Debt Securities. (Senior Subordinated Debt
Indenture; Section 3.7) Debt is defined in the Senior Subordinated Debt
Indenture to mean, with respect to any person at any date, without duplication,
(A) all obligations of such person for borrowed money, (B) all obligations of
such person evidenced by bonds, debentures, notes or other similar instruments,
(C) all Debt of others secured by a lien on any asset of such person, whether or
not such Debt is assumed by such person, (D) all Debt of others for the payment
of which such person is responsible or liable as obligor or guarantor, (E) all
obligations of such person in respect of letters of credit or other similar
instruments (or reimbursement obligations with respect thereto), (F) all
obligations of such person to pay the deferred purchase price of property or
services, except Trade Payables, and (G) all obligations of such person as
lessee under Capital Leases. (Senior Subordinated Debt Indenture; Section 1.1)
By reason of such subordination, in the event of dissolution, insolvency,
bankruptcy or other similar proceedings, upon any distribution of assets of the
Company, (i) holders of Senior Indebtedness will be entitled to be paid in full
before payments may be made on the senior subordinated Debt Securities and the
holders of senior subordinated Debt Securities will be required to pay over
their share of such distribution to the holders of Senior Indebtedness until
such Senior Indebtedness is paid in full and (ii) creditors of the Company who
are neither holders of senior subordinated Debt Securities nor holders of Senior
Indebtedness may recover less, ratably, than holders of Senior Indebtedness and
may recover more, ratably, than the holders of the senior subordinated Debt
Securities. (Senior Subordinated Debt Indenture; Section 13.2)
In the event the senior subordinated Debt Securities are declared or become
due and payable prior to their maturity by reason of the occurrence of an Event
of Default, then the Company is obligated to promptly notify holders of Senior
Indebtedness of such acceleration. The Company may not pay or acquire the senior
subordinated Debt Securities until 135 days have passed after such acceleration
occurs and may thereafter pay or acquire the senior subordinated Debt Securities
only if the terms of the Senior Subordinated Debt Indenture otherwise permit
payment or acquisition at that time. (Senior Subordinated Debt Indenture;
Section 13.3)
No payment of principal, premium, if any, interest, or any other amount
owing with respect to any of the senior subordinated Debt Securities may be
made, nor may the Company acquire any senior subordinated Debt Securities except
as set forth in the Senior Subordinated Debt Indenture, if any default with
respect to Senior Indebtedness occurs and is continuing that permits the
acceleration of the maturity thereof and, unless such default relates to a
failure by the Company to make any payment in respect of such Senior
Indebtedness when due or within any applicable grace period (a "Payment
Default"), such default is either the subject of judicial proceedings or the
Company receives notice of the default. Notwithstanding the foregoing, the
Company may resume payments in respect of the senior subordinated Debt
Securities and may acquire senior subordinated Debt Securities if: (i)(a) 135
days pass after, in the case of such a Payment Default, the later of the date
such payment was due and the expiration of any applicable grace period for such
payment or, in the case of any other such default, the date that the related
judicial proceedings commence or that notice of the default is given to the
Company, as the case may be, and (b) the Senior Indebtedness in respect of which
such default exists has not been declared due and payable in its entirety within
such 135 day period or, if declared
9
<PAGE> 30
due and payable, such declaration has been rescinded, waived or annulled; or
(ii) the default with respect to the Senior Indebtedness is cured or waived and,
in each case described in the foregoing clauses (i) and (ii), the terms of the
Senior Subordinated Debt Indenture otherwise permit the payment or acquisition
of the senior subordinated Debt Securities at that time. (Senior Subordinated
Debt Indenture; Section 13.4) If this Prospectus is being delivered in
connection with a series of senior subordinated Debt Securities, the
accompanying Prospectus Supplement or the information incorporated herein by
reference will set forth the approximate amount of Senior Indebtedness
outstanding as of a date no earlier than the end of the most recent fiscal
quarter.
SUBORDINATED DEBT
The Debt Securities and Coupons that will constitute part of the
subordinated debt of the Company will be issued under the Subordinated Debt
Indenture and will be subordinate and junior in right of payment, to the extent
and in the manner set forth in the Subordinated Debt Indenture, to all "Senior
Indebtedness" of the Company. The Subordinated Debt Indenture defines "Senior
Indebtedness" as the principal of (and premium, if any) and unpaid interest
(including post-petition interest) or accrued original issue discount on and
other amounts due on or in connection with any Debt (as defined below) incurred,
assumed or guaranteed by the Company, whether outstanding on the date of the
Indenture or thereafter incurred, assumed or guaranteed, and all renewals,
extensions and refundings of any such Debt; provided, however, that the
following will not constitute Senior Indebtedness: (i) any Debt as to which, in
the instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is expressly provided that such Debt is subordinate in right of
payment to all other Debt not expressly subordinated to such Debt; (ii) any Debt
which by its terms refers explicitly to the subordinated Debt Securities and
states that such Debt shall not be senior in right of payment thereto; (iii) any
Debt in respect of the subordinated Debt Securities; (iv) any Debt of the
Company to any Subsidiary of the Company; and (v) any Debt to any joint venture
or partnership, which joint venture or partnership is required, under generally
accepted accounting principles, to be consolidated in the Company's consolidated
financial statements. (Subordinated Debt Indenture; Section 13.1) The definition
of Debt in the Subordinated Debt Indenture is the same as in the Senior
Subordinated Debt Indenture and is described above under "Senior Subordinated
Debt." (Subordinated Debt Indenture; Section 1.1) There is no provision in the
Subordinated Debt Indenture preventing the Company from issuing any Debt which
is subordinated in right of payment to any other debt of the Company and which
is not expressly made pari passu with, or subordinate and junior in right of
payment to, the subordinated debt securities.
By reason of such subordination, in the event of dissolution, insolvency,
bankruptcy or other similar proceedings, upon any distribution of assets of the
Company, (i) holders of Senior Indebtedness will be entitled to be paid in full
before payments may be made on the subordinated Debt Securities and the holders
of subordinated Debt Securities will be required to pay over their share of such
distribution to the holders of Senior Indebtedness until such Senior
Indebtedness is paid in full and (ii) creditors of the Company who are neither
holders of subordinated Debt Securities nor holders of Senior Indebtedness may
recover less, ratably, than holders of Senior Indebtedness and may recover more,
ratably, than the holders of the subordinated Debt Securities. (Subordinated
Debt Indenture; Section 13.2)
In the event the subordinated Debt Securities are declared or become due
and payable prior to their maturity by reason of the occurrence of an Event of
Default, then the Company is obligated to promptly notify holders of Senior
Indebtedness of such acceleration. The Company may not pay or acquire the
subordinated Debt Securities until 135 days have passed after such acceleration
occurs and may thereafter pay or acquire the subordinated Debt Securities only
if the terms of the Subordinated Debt Indenture otherwise permit payment or
acquisition at that time. (Subordinated Debt Indenture; Section 13.3)
The conditions and limitations on payments by the Company with respect to
any of the subordinated Debt Securities in the event of any default with respect
to any Senior Indebtedness are the same as are provided for under the Senior
Subordinated Debt Indenture and are described above under "Senior Subordinated
Debt." (Subordinated Debt Indenture; Section 13.4) If this Prospectus is being
delivered in connection with a series of subordinated Debt Securities, the
accompanying Prospectus Supplement or the information incorporated herein by
reference will set forth the approximate amount of Senior Indebtedness
outstanding as of a date no earlier than the end of the most recent fiscal
quarter.
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<PAGE> 31
CERTAIN COVENANTS OF THE COMPANY
Merger, Consolidation, Sale, Lease or Conveyance. Each Indenture provides
that the Company will not merge or consolidate with or into any other person and
will not sell, lease or convey all or substantially all its assets to any
person, unless the Company shall be the continuing corporation, or the successor
corporation or person that acquires all or substantially all the assets of the
Company shall be a corporation organized and existing under the laws of the
United States or a State thereof or the District of Columbia and shall expressly
assume all obligations of the Company under such Indenture and the Debt
Securities issued thereunder, and immediately after such merger, consolidation,
sale, lease or conveyance, the Company, such person or such successor
corporation shall not be in default in the performance of the covenants and
conditions of such Indenture to be performed or observed by the Company.
(Indentures; Section 9.1)
EVENTS OF DEFAULT
An Event of Default is defined under each Indenture with respect to Debt
Securities of any series issued under such Indenture as being: (i) default for
30 days in payment of any interest on any Debt Securities of such series; (ii)
default in payment of any principal of the Debt Securities of such series,
either at maturity (or upon any redemption), by declaration of acceleration or
otherwise; (iii) default in payment of any sinking fund installment due under
the terms of the Debt Securities of such series; (iv) default in the
performance, or breach, of any other covenant or warranty of the Company in
respect of the Debt Securities of such series for 60 days after written notice
to the Company by the Trustee or to the Company and the Trustee by the holders
of at least 25% in aggregate principal amount of the outstanding Securities of
all series affected thereby; (v) certain events of bankruptcy, insolvency or
reorganization; or (vi) any other Event of Default provided in any relevant
Supplemental Indenture or resolution of the Board of Directors or officers'
certificate under which such series of Debt Securities is issued or in the form
of Debt Security for such series. (Indentures; Section 5.1)
Each Indenture provides that (i) if an Event of Default due to the default
in payment of principal of, premium, if any, or interest on, or sinking fund
installment in respect of any series of Debt Securities issued under such
Indenture or due to the default in the performance or breach of any other
covenant or warranty of the Company applicable to the Debt Securities of such
series but not applicable to all outstanding Debt Securities issued under such
Indenture shall have occurred and be continuing, either the Trustee, or the
holders of not less than 25% in principal amount of the Debt Securities of such
series (voting as a separate class) issued under such Indenture and then
outstanding may then declare the principal of all Debt Securities of such series
and interest accrued thereon to be due and payable immediately; and (ii) if an
Event of Default due to a cross-default or cross-acceleration or a default in
the performance or breach of any other of the covenants or agreements in such
Indenture applicable to all outstanding Debt Securities issued thereunder and
then outstanding or due to certain events of bankruptcy, insolvency and
reorganization of the Company shall have occurred and be continuing, either the
Trustee or the holders of not less than 25% in principal amount of all Debt
Securities issued under such Indenture and then outstanding (treated as one
class) may declare the principal of all such Debt Securities and interest
accrued thereon to be due and payable immediately. Upon certain conditions such
declarations may be annulled and past defaults may be waived (except a
continuing default in payment of principal of (or premium, if any) or interest
on such Debt Securities) by the holders of a majority in principal amount of the
Debt Securities of all such affected series then outstanding, voting as a
separate class or as a single class, as applicable. (Indentures; Sections 5.1
and 5.10)
Each Indenture contains a provision entitling the Trustee, subject to the
duty of the Trustee during a default to act with the required standard of care,
to be indemnified by the holders of Debt Securities issued under such Indenture
before proceeding to exercise any right or power under such Indenture at the
request of such holders. (Indentures; Section 6.2) Subject to such provisions in
each Indenture for the indemnification of the Trustee and certain other
limitations, the holders of a majority in principal amount of the Debt
Securities of each series affected (with each series voting as a separate class)
issued under such Indenture and then outstanding may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee. (Indentures; Section
5.9)
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Each Indenture provides that no holder of Debt Securities of any series
issued under such Indenture may institute any action against the Company under
such Indenture (except actions for payment of overdue principal or interest)
unless such holder previously shall have given to the Trustee written notice of
default and continuance thereof and unless the holders of not less than 25% in
principal amount of the Debt Securities of such series issued under such
Indenture and then outstanding shall have requested the Trustee to institute
such action and shall have offered the Trustee reasonable indemnity, the Trustee
shall not have instituted such action within 60 days of such request and the
Trustee shall not have received direction inconsistent with such written request
by the holders of a majority in principal amount of the Debt Securities of each
affected series (with each series voting as a separate class) issued under such
Indenture and then outstanding. (Indentures; Sections 5.6 and 5.9)
Each Indenture contains a covenant that the Company will file annually with
the Trustee a certificate as to the Company's compliance with the covenants and
conditions under such Indenture. (Indentures; Section 3.5)
DEFEASANCE AND DISCHARGE
The Company can discharge or defease its obligations under each Indenture
as set forth below. (Indentures; Section 10)
The Company may discharge certain obligations to holders of any series of
Debt Securities issued under an Indenture (excluding its obligation to pay the
principal of, premium, if any, and interest on the Debt Securities of such
series) that have not already been delivered to the Trustee for cancellation and
that have either become due and payable or are by their terms due and payable
within one year (or scheduled for redemption within one year) by irrevocably
depositing with the Trustee cash or, in the case of Debt Securities payable only
in U.S. dollars, U.S. Government Obligations (as defined in such Indenture), or
a combination thereof, as trust funds in an amount certified to be sufficient to
pay at maturity (or upon redemption or repayment at the option of the holder)
the principal of, premium, if any, and interest on such Debt Securities.
The Company may also discharge all of its obligations to holders of any
series of Debt Securities issued under an Indenture at any time (including its
obligations to pay principal, premium, if any, and interest thereon when due)
("defeasance"), except its duty to register the transfer or exchange of such
series of Debt Securities, to replace any temporary, mutilated, destroyed, lost
or stolen series of Debt Securities or to maintain an office or agency in
respect of such series of Debt Securities and certain other obligations. The
Company may instead be released with respect to any outstanding series of Debt
Securities issued under the relevant Indenture from the obligations imposed by
the covenants specified in the accompanying Prospectus Supplement (other than
its obligation to pay the principal, premium, if any, and interest on the Debt
Securities of such series when due), and omit to comply with such covenants
without creating an Event of Default ("covenant defeasance"). Defeasance or
covenant defeasance may be effected only if, among other things: (i) the Company
irrevocably deposits with the Trustee cash or, in the case of Debt Securities
payable only in U.S. dollars, U.S. Government Obligations, or a combination
thereof, as trust funds in an amount certified to be sufficient to pay at
maturity (or upon redemption or repayment at the option of the holders) the
principal of and interest on all outstanding Debt Securities of such series
issued under such Indenture; (ii) the Company delivers to the Trustee an opinion
of counsel to the effect that the holders of such series of Debt Securities will
not recognize income, gain or loss for United States federal income tax purposes
as a result of such defeasance or covenant defeasance and that defeasance or
covenant defeasance will not otherwise alter such holders' United States federal
income tax treatment of principal, premium, if any, and interest payments on
such series of Debt Securities; and (iii) (a) in the case of the Senior
Subordinated and Subordinated Debt Indentures, no event or condition shall exist
that, pursuant to certain provisions described under "Senior Subordinated Debt"
and "Subordinated Debt" above, would prevent the Company from making payments of
principal of (and premium, if any) and interest on the relevant Debt Securities
at the date of the irrevocable deposit referred to above or at any time during
the period ending on the 91st day after such deposit date and (b) the Company
delivers to the Trustee an opinion of counsel to the effect that (1) in the case
of the Senior Subordinated and Subordinated Debt Indentures, the trust funds
will not be subject to any rights of holders of Senior Indebtedness (as defined
in the applicable Indenture) and (2) in the case of all Debt Securities, after
the 91st day following the deposit, the trust funds will not be subject to the
effect of any applicable
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bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, except that if a court were to rule under any such law in any
case or proceeding that the trust funds remained property of the Company, then
the Trustee and the holders of the relevant Debt Securities would be entitled to
certain rights as secured creditors in such trust funds.
MODIFICATION OF THE INDENTURES
Each Indenture provides that the Company and the Trustee may enter into
supplemental indentures without the consent of the holders of Debt Securities
to: (i) secure any Debt Securities; (ii) evidence the assumption by a successor
corporation of the obligations of the Company; (iii) add covenants for the
protection of the holders of Debt Securities; (iv) cure any ambiguity or correct
any inconsistency in such Indenture; (v) establish the forms or terms of Debt
Securities of any series; (vi) evidence the acceptance of appointment by a
successor trustee; or (vii) add to, change or eliminate any provisions of the
relevant Indenture, provided that any such addition, change or elimination shall
not apply to any Debt Security of any series created prior to the execution of
such supplemental indenture and entitled to the benefit of such provision or
modify the rights of the holder of any such Debt Security with respect to such
provision. (Indentures; Section 8.1)
Each Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
principal amount of Debt Securities of all series issued under such Indenture
then outstanding and affected (voting as one class), to add any provisions to,
or change in any manner or eliminate any of the provisions of, such Indenture or
modify in any manner the rights of the holders of the Debt Securities of each
series so affected; provided that the Company and the Trustee may not, without
the consent of the holder of each outstanding Debt Security affected thereby,
(i) extend the stated maturity of the principal of any Debt Security, or reduce
the principal amount thereof or reduce the rate or extend the time of payment of
interest thereon, or reduce any amount payable on redemption or repayment
thereof or make the principal thereof (including any amount in respect of
original issue discount), or interest thereon payable in any coin or currency
other than that provided in the Debt Securities or reduce the amount of any
original issue discount security payable upon acceleration or provable in
bankruptcy or modify the percentage of holders required to waive any default or
rescind and annul any declaration of acceleration or impair the right to
institute suit for the enforcement of any payment on any Debt Security when due
or if the Debt Securities provide therefor, any right of repayment of the holder
thereof, or (ii) reduce the aforesaid percentage of Debt Securities of any
series issued under such Indenture, the consent of the holders of which is
required for any such modification. (Indentures; Section 8.2)
The Senior Subordinated and Subordinated Debt Indentures may not be amended
to alter the subordination of any outstanding Debt Securities issued under such
Indenture without the consent of each holder of Senior Indebtedness (as defined
therein) then outstanding that would be adversely affected thereby. (Indentures;
Section 8.6)
APPLICABLE LAW
The Indentures will provide that the Debt Securities and the Indentures
will be governed by and construed in accordance with the laws of the State of
New York. (Indentures; Section 11.8)
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES
Except as may otherwise be provided in the Prospectus Supplement applicable
thereto, in compliance with United States federal income tax laws and
regulations, Bearer Securities (including Bearer Securities in global form) will
not be offered, sold, resold or delivered, directly or indirectly, in the United
States or its possessions or to United States persons (as defined below), except
as otherwise permitted by the United States Treasury Regulations Section
1.163-5(c)(2)(i)(D). Any underwriters, agents and dealers participating in the
offerings of Bearer Securities, directly or indirectly, must agree that they
will not, in connection with the original issuance of any Bearer Securities or
during the restricted period (as defined in United States Treasury Regulations
Section 1.163-5(c)(2)(i)(D)(7)) (the "restricted period"), offer, sell, resell
or deliver,
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directly or indirectly, any Bearer Securities in the United States or its
possessions or to United States persons (other than as permitted by the
applicable Treasury Regulations described above). In addition, any such
underwriters, agents and dealers must have procedures reasonably designed to
ensure that its employees or agents that are directly engaged in selling Bearer
Securities are aware of the above restrictions to the offering, sale, resale or
delivery of Bearer Securities. Moreover, Bearer Securities (other than temporary
global Debt Securities and Bearer Securities that satisfy the requirements of
United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(3)(iii)) and any
Coupons appertaining thereto will not be delivered in definitive form unless the
Company has received a signed certificate in writing (or an electronic
certificate described in United States Treasury Regulations Section
1.163-5(2)(i)(D)(3)(ii)) stating that on such date such Bearer Security (i) is
owned by a person that is not a United States person, (ii) is owned by a United
States person that (a) is a foreign branch of a United States financial
institution (as defined in the United States Treasury Regulations Section
1.165-12(c)(1)(v)) (a "financial institution") purchasing for its own account or
for resale, or (b) is acquiring such Bearer Security through a foreign branch of
a United States financial institution and that holds the bearer Security through
such financial institution through such date (and in either case (a) or (b),
each such United States financial institution agrees, on its own behalf or
through its agent, that the Company may be advised that it will comply with the
requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of
1986, as amended, and the regulations thereunder) or (iii) is owned by a United
States or foreign financial institution for the purposes of resale during the
restricted period and, in addition, if the owner of such Bearer Security is a
United States or foreign financial institution described in clause (iii) above
(whether or not also described in clause (i) or (ii)), such financial
institution certifies that it has not acquired the Bearer Security for purposes
of resale directly or indirectly to a United States person or to a person within
the United States or its possessions.
Bearer Securities (other than temporary global Debt Securities) and any
Coupons appertaining thereto will bear a legend substantially to the following
effect: "Any United States person who holds this obligation will be subject to
limitations under the United States federal income tax laws, including the
limitations provided in Sections 165(j) and 1287(a) of the United States
Internal Revenue Code." The sections referred to in such legend provide that,
with certain exceptions, a United States person will not be permitted to deduct
any loss, and will not be eligible for capital gain treatment with respect to
any gain, realized on the sale, exchange or redemption of such Bearer Security
or Coupon.
As used herein "United States person" means a citizen, national or resident
of the United States, a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, or an estate or trust the income of which is subject to United States
federal income taxation regardless of its source.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue (i) 100,000,000 shares of Common Stock,
of which 38,827,586 shares were outstanding as of November 8, 1996, (ii)
25,000,000 shares of Special Common Stock, none of which is outstanding and
(iii) 10,000,000 shares of preferred stock, par value $1.00 per share
("Preferred Stock"), none of which is outstanding. At November 8, 1996, there
were 2,182 holders of record of the Common Stock. The following summaries of
certain provisions of the Company's Certificate of Incorporation and Shareholder
Rights Plan do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, the Company's Certificate of Incorporation
and Shareholder Rights Plan, copies of which have been incorporated by reference
as exhibits to the Registration Statement of which this Prospectus is a part.
COMMON STOCK AND SPECIAL COMMON STOCK
The holders of Common Stock and Special Common Stock generally have
identical rights except that holders of Common Stock are entitled to one vote
per share while holders of Special Common Stock are entitled to one-tenth of a
vote per share on all matters to be voted on by stockholders. Holders of shares
of Common Stock and Special Common Stock are not entitled to cumulate their
votes in the election of
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directors. Generally all matters to be voted on by stockholders must be approved
by a majority of the combined voting power of the outstanding shares of Common
Stock and Special Common Stock, voting together as a single class, subject to
any voting rights of holders of outstanding Preferred Stock, if any. Amendments
to the Company's Certificate of Incorporation must be approved by a majority of
the combined voting power of all shares of Common Stock and Special Common
Stock, voting together as a single class. However, amendments to the Company's
Certificate of Incorporation (i) that adversely affect the rights of the Common
Stock or Special Common Stock also must be approved by a majority of the shares
of such class voting as a separate class, (ii) that modify the classified board
provisions contained in the Certificate of Incorporation must be approved by an
80% supermajority of the combined voting power of all shares of outstanding
capital stock (including Common Stock and any outstanding Special Common Stock
and voting Preferred Stock) and (iii) that modify the "fair price" provisions
contained in the Company's Certificate of Incorporation must likewise be
approved by an 80% supermajority of the combined voting power of all shares of
outstanding voting stock excluding voting stock held by a Related Person (see
"Additional Provisions of the Company's Certificate of Incorporation") and its
Affiliates and Associates (as defined in the Certificate of Incorporation).
Preemptive Rights; Redemption; Nonassessable. The holders of Common Stock
and Special Common Stock have no preemptive or other subscription or conversion
rights and there are no redemption provisions with respect to such shares. All
the outstanding shares of Common Stock are fully paid and nonassessable and the
shares of Special Common Stock if issued will be fully paid and nonassessable.
Dividends. Subject to the prior dividend rights of holders of outstanding
Preferred Stock, if any, the holders of Common Stock and Special Common Stock
are entitled to receive such dividends and distributions, if any, as may be
declared from time to time by the Board of Directors in its discretion from
funds legally available therefor, and shall share equally in all such dividends
and distributions on a per share basis. In the case of dividends or other
distributions payable in capital stock other than Preferred Stock (including
stock splits) only shares of Common Stock shall be distributed with respect to
Common Stock and only shares of Special Common Stock shall be paid or
distributed with respect to Special Common Stock, in each case in an amount per
share equal to the amount per share distributed with respect to the Common Stock
or the Special Common Stock, as the case may be. In the case of any combination
or reclassification of Common Stock or special Common Stock, the shares of each
such class shall be combined or reclassified in such manner so as to retain the
proportionate interest of each such class after giving effect to such
combination or reclassification.
Distributions on Liquidation. The holders of Common Stock and Special
Common Stock are entitled to share pro rate in any distribution upon the
liquidation, dissolution or winding up of the Company, after giving effect to
any liquidation preference of any Preferred Stock.
Reorganization, Consolidation or Merger. In the event of a reorganization,
consolidation or merger of the Company, each holder of a share of Common Stock
shall be entitled to receive the same kind and amount of property receivable by
a holder of a share of Special Common Stock and each holder of a share of
Special Common Stock shall be entitled to receive the same kind and amount of
property receivable by a holder of Common Stock.
PREFERRED STOCK
The Company is authorized to issue Preferred Stock in one or more series
with such designations, rights, preferences and limitations as the Board of
Directors may determine, including the consideration to be received therefor,
the number of shares comprising each series, dividend rates, redemption
provisions, liquidation preferences, mandatory retirement provisions, conversion
rights and voting rights, all without any stockholder approval. The future
issuance of Preferred Stock with voting rights could make an acquisition of
control of the Company more difficult and could adversely affect the rights of
holders of Common Stock. Preferred stockholders typically would be entitled to
satisfaction in full of specified dividend and liquidation rights before any
payment of dividends or distribution of assets on liquidation is made to holders
of the Common Stock. If voting rights are granted to the holders of Preferred
Stock, the voting power of the Common Stock will be diluted and under some
circumstances control of the Company would shift from the
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holders of the Common Stock to the holders of Preferred Stock. Certain
fundamental matters requiring stockholder approval (such as mergers, sale of
assets, and certain amendments to the Certificate of Incorporation) may require
approval by the separate vote of the holders of the Common Stock and the
Preferred Stock.
SHAREHOLDER RIGHTS PLAN
On January 11, 1989, the Board of Directors declared a dividend of one
Preferred Stock share purchase right (a "Right") for each share of Common Stock
outstanding on March 7, 1989. Each Right entitles the registered holder, subject
to the occurrence of certain events, to purchase from the Company one one-
hundredth of a share (a "Unit") of Series A Participating Cumulative Preferred
Stock of the Company (the "Rights Preferred Stock"), at a purchase price of
$30.00 per Unit subject to adjustment. The terms of the Rights are set forth in
a rights agreement (the "Shareholder Rights Plan") between the Company and the
Bank of America National Trust and Savings Association, successor-by-merger to
Security Pacific National Bank, as Rights Agent.
Until the Rights Distribution Date (as defined below) or the earlier
redemption, expiration or termination of the Rights, (i) the Rights are
evidenced by the Common Stock certificates and are transferred with, and only
with, such certificates which contain a notation incorporating the Shareholder
Rights Plan by reference and (ii) the surrender for transfer of any certificates
for Common Stock constitutes a transfer of the Rights associated with the Common
Stock represented by such certificate. The Rights will separate from the Common
Stock and will be distributed on the date (the "Rights Distribution Date") which
occurs upon the earlier of (a) ten days following the date (the "Stock
Acquisition Date") of a public announcement that a person has become an
Acquiring Person (as defined below) or (b) ten business days following the
commencement of a tender offer or exchange offer that would result in a person
becoming an Acquiring Person. Under the Shareholder Rights Plan, an "Acquiring
Person" means any person who or which, together with all Affiliates and
Associates (as defined in the Shareholder Rights Plan) of such person,
beneficially owns 20% or more of the aggregate voting power of the outstanding
Common Stock, but does not include (x) the Company or any of its subsidiaries or
any of their respective employee benefit plans or (y) a specifically designated
individual formerly affiliated with the Company or certain of his Affiliates or
Associates.
The Rights are not exercisable until the Rights Distribution Date and will
expire at the close of business on March 7, 1999, unless earlier redeemed by the
Company as described below.
As soon as practicable after the Rights Distribution Date, Rights
Certificate will be mailed to holders of Record of the Common Stock as of the
close of business on the Rights Distribution Date and, thereafter, the separate
Rights Certificates alone will represent the Rights. Except (i) in connection
with the exercise of employee stock options or under any employee benefit plan
or arrangement, (ii) in connection with the exercise, conversion or exchange of
securities issued by the Company after the date of the Shareholder Rights Plan
and (iii) as otherwise determined by the Board of Directors, only Common Stock
issued prior to the Rights Distribution Date will be issued with Rights.
Notwithstanding the foregoing, no such Rights shall be issued (i) if, and to the
extent that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company or
the person to whom such Rights would be issued, (ii) if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof and (iii) after the earlier of the redemption and expiration of the
Rights.
If at any time following the Stock Acquisition Date, (i) the Company is
acquired in a merger or other business combination transaction or (ii) 50% or
more of the Company's assets or earning power is sold, each holder of a Right
shall thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the current purchase price
of the Right.
If (i) any person becomes an Acquiring Person or (ii) the Company is the
surviving corporation in a merger with an Acquiring Person and the Common Stock
is not changed or exchanged, proper provision will be made so that each holder
of a Right originally issued to a holder of Common Stock, other than Rights that
are, or (under certain circumstances specified in the Shareholder Rights Plan)
were, beneficially owned by an Acquiring Person (which will thereafter be void),
will thereafter have the right to receive upon exercise that
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<PAGE> 37
number of shares of Common Stock (the "Exercise Number") having a market value
equal to two times the exercise price of the Right. The events described in this
and the immediately preceding paragraph are referred to as the "Triggering
Events."
The purchase price payable for a Unit and the number of Units issuable upon
exercise of the Rights is subject to adjustment from time to time in certain
cases. In addition, the number of Rights associated with each share of Common
Stock is subject to adjustment from time to time in the event of a stock
dividend on, or a subdivision or combination of, Common Stock.
With certain exceptions, no adjustment in the purchase price will be
required until cumulative adjustments amount to at least one percent of the
purchase price. No fractional shares of Common Stock will be issued and in lieu
thereof, an adjustment in cash will be made based on the market price of the
Common Stock on the last trading date prior to the date on which such fractional
shares would have been otherwise issuable.
The Board of Directors may redeem the Rights in whole, but not in part, at
the redemption price of $.01 per Right at any time prior to the expiration of a
ten day period following the Stock Acquisition Date. The foregoing redemption
period can be extended by a majority of Continuing Directors (as defined in the
Shareholder Rights Plan) at any time prior to the date on which the Rights would
otherwise become nonredeemable. Immediately upon the action of the Board of
Directors ordering redemption of the Rights, the Rights will terminate, no
further Rights will be issued and the only right of the holders of Rights will
be to receive the redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
Prior to the Rights Distribution Date, the Company may, subject to certain
exceptions, amend any provision of the Shareholder Rights Plan without the
approval of any holders of Common Stock.
ADDITIONAL PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION
The Company's Certificate of Incorporation contains "fair price" provisions
which are intended to protect the Company's stockholders from certain possible
pricing abuses in connection with, among other things, unsolicited attempts to
gain control of the Company. These provisions require the affirmative vote of
the holders of 80% of the outstanding shares of voting stock of the Company held
by persons other than a Related Person in order to permit certain mergers and
other major corporate transactions involving the Company and a Related Person,
unless the merger or other transaction is approved by at least two-thirds of the
Continuing Directors (as defined in the Certificate of Incorporation) or certain
"fair price" criteria are met. A "Related Person" is defined as any individual,
corporation, partnership or entity that, together with its Affiliates and
Associates (as defined in the Certificate of Incorporation), beneficially owns
in the aggregate 20% or more of the Company's outstanding voting stock, except
for (i) any person or entity whose acquisition of such voting stock was approved
in advance by at least two-thirds of the Continuing Directors, (ii) any
fiduciary in respect of any employee benefit plan of the Company or its
subsidiaries or (iii) a specifically designated corporation formerly affiliated
with the Company or any of its Affiliates or Associates. The "fair price"
provisions are deemed to have been satisfied if, in general, the cash or other
consideration received per share by holders of each class or series of the
Company's outstanding voting stock in the merger or other transaction is not
less than the highest price paid at any time by the Related Person in acquiring
stock of such class or series, as determined by two-thirds of the Continuing
Directors. The term "Continuing Director" means a director of the Company who
was a member of the Board of Directors prior to the time that a Related Person
involved in a merger or other major corporate transaction became a Related
Person.
The Company has also adopted certain defensive measures that include
classifying the Board of Directors into three classes of directors, requiring a
supermajority vote of the Company's stockholders to effect certain amendments to
its Certificate of Incorporation and bylaws, restricting stockholders' ability
to call special meetings of stockholders, implementing the Shareholder Rights
Plan and amending the Certificate of
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Incorporation to provide that Section 203 of the Delaware General Corporation
Law shall apply to the Company. In addition, the Certificate of Incorporation
prohibits stockholder action by written consent.
The foregoing defensive measures, together with the provisions of the
Shareholder Rights Plan and the Certificate of Incorporation, in certain
circumstances could require a potential acquiror of the Company to pay a higher
price than might otherwise be the case or to obtain the approval of a larger
percentage of the stockholders than might otherwise be the case, any of which
may have the effect of discouraging a proxy contest or making more difficult a
merger involving the Company, or a tender offer, open-market purchase program or
other purchase of the Company's shares, in circumstances that would give
stockholders the opportunity to realize a premium over the then-prevailing
market prices for their shares.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
As a Delaware corporation, the Company is subject to the provisions of
Section 203 of the General Corporation Law of the State of Delaware. Section 203
generally provides that if a person or group acquires 15% or more of a
corporation's voting stock (thereby becoming an "interested stockholder")
without prior board approval, such interested stockholder may not, for a period
of three years, engage in a wide range of business combination transactions with
the corporation. However, this restriction does not apply to a person who
becomes an interested stockholder in a transaction resulting in the interested
stockholder owning at least 85% of the corporation's voting stock (excluding
from the outstanding shares, shares held by officer-directors or pursuant to
employee stock plans without confidential tender offer decisions), or to a
business combination approved by the board of directors and authorized by the
affirmative vote of at least 66 2/3% of the outstanding voting stock not owned
by the interested stockholder. In addition, Section 203 does not apply to
certain business combinations proposed subsequent to the public announcement of
specified business combination transactions which are not opposed by the board
of directors.
TRANSFER AGENT
The transfer agent and registrar for the Company's Common Stock is
ChaseMellon Shareholder Services, L.L.C.
DESCRIPTION OF WARRANTS
The Company may issue warrants to purchase Debt Securities (the "Debt
Warrants"), Preferred Stock (the "Preferred Stock Warrants") or Common Stock
(the "Common Stock Warrants", collectively with the Debt Warrants and the
Preferred Stock Warrants, the "Warrants"). Warrants may be issued independently
or together with any Securities and may be attached to or separate from such
Securities. The Warrants are to be issued under warrant agreements (each a
"Warrant Agreement") to be entered into between the Company and a bank or trust
company, as warrant agent (the "Warrant Agent"), all as shall be set forth in
the Prospectus Supplement relating to the Warrants being offered pursuant
thereto.
DEBT WARRANTS
The applicable Prospectus Supplement will describe the terms of Debt
Warrants offered thereby, the Warrant Agreement relating to such Debt Warrants
and the debt warrant certificates representing such Debt Warrants, including the
following: (i) the title of such Debt Warrants; (ii) the aggregate number of
such Debt Warrants; (iii) the price or prices at which such Debt Warrants will
be issued; (iv) the designation, aggregate principal amount and terms of the
Debt Securities purchasable upon exercise of such Debt Warrants, and the
procedures and conditions relating to the exercise of such Debt Warrants; (v)
the date, if any, on and after which such Debt Warrants and the related Debt
Securities will be separately transferable; (vi) the principal amount of Debt
Securities purchasable upon exercise of each Debt Warrant, and the price at
which such principal amount of Debt Securities may be purchased upon such
exercise; (vii) the date on which the right to exercise such Debt Warrants shall
commence, and the date on which such right shall expire; (viii) the maximum or
minimum number of such Debt Warrants which may be exercised at any time; (ix) a
discussion
18
<PAGE> 39
of material federal income tax considerations, if any; and (x) any other terms
of such Debt Warrants and terms, procedures and limitations relating to the
exercise of such Debt Warrants.
Debt Warrant certificates will be exchangeable for new Debt Warrant
certificates of different denominations, and Debt Warrants may be exercised at
the corporate trust office of the Warrant Agent or any other office indicated in
the Prospectus Supplement. Prior to the exercise of their Debt Warrants, holders
of Debt Warrants will not have any of the rights of holders of the securities
purchasable upon such exercise and will not be entitled to payments of principal
of (or premium, if any) or interest, if any, on the securities purchasable upon
such exercise.
OTHER WARRANTS
The applicable Prospectus Supplement will describe the following terms of
Preferred Stock Warrants and Common Stock Warrants in respect of which this
Prospectus is being delivered: (i) the title of such Warrants; (ii) the
Securities for which such Warrants are exercisable; (iii) the price or prices at
which such Warrants will be issued; (iv) the number of such Warrants issued with
each share of Preferred Stock or Common Stock; (v) any provisions for adjustment
of the number or amount of shares of Preferred Stock or Common Stock receivable
upon exercise of such Warrants or the exercise price of such Warrants; (vi) if
applicable, the date on and after which such Warrants and the related Preferred
Stock or Common Stock will be separately transferable; (vii) if applicable, a
discussion of material federal income tax considerations; (viii) any other terms
of such Warrants, including terms, procedures and limitations relating to the
exchange and exercise of such Warrants; (ix) the date on which the right to
exercise such Warrants shall commence, and the date on which such right shall
expire; (x) the maximum or minimum number of such Warrants which may be
exercised at any time.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder of Warrants to purchase for cash such
principal amount of Debt Securities or shares of Preferred Stock or Common Stock
at such exercise price as shall in each case be set forth in, or be determinable
as set forth in, the Prospectus Supplement relating to the Warrants offered
thereby. Warrants may be exercised at any time up to the close of business on
the expiration date set forth in the Prospectus Supplement relating to the
Warrants offered thereby. After the close of business on the expiration date,
unexercised Warrants will become void.
Warrants may be exercised as set forth in the Prospectus Supplement
relating to the Warrants offered thereby. Upon receipt of payment and the
warrant certificate properly completed and duly executed at the corporate trust
office of the Warrant Agent or any other office indicated in the Prospectus
Supplement, the Company will, as soon as practicable, forward the Debt
Securities or shares of Preferred Stock or Common Stock purchasable upon such
exercise. If less than all of the Warrants represented by such warrant
certificate are exercised, a new warrant certificate will be issued for the
remaining Warrants.
PLAN OF DISTRIBUTION
The Securities may be sold (i) through agents, (ii) through underwriters,
(iii) through dealers or (iv) directly to purchasers (through a specific bidding
or auction process or otherwise). The distribution of Securities may be effected
from time to time in one or more transactions at a fixed price or prices, which
may be changed, or at market prices prevailing at the time of sale, at prices
relating to such prevailing market prices or at negotiated prices.
Offers to purchase the Securities may be solicited by agents designated by
the Company from time to time. Any such agent involved in the offer or sale of
the Securities will be named, and any commissions payable by the Company to such
agent will be set forth, in the Prospectus Supplement. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment. Any such agent may be deemed to
be an underwriter, as that term is defined in the Securities Act, of the
Securities so offered and sold.
19
<PAGE> 40
If an underwriter or underwriters are utilized in the sale of Securities,
the Company will execute an underwriting agreement with such underwriter or
underwriters at the time an agreement for such sale is reached, and the names of
the specific managing underwriter or underwriters, as well as any other
underwriters, and the terms of the transactions, including compensation of the
underwriters and dealers, if any, will be set forth in the Prospectus
Supplement, which will be used by the underwriters to make resales of the
Securities.
If a dealer is utilized in the sale of the Securities, the Company will
sell such Securities to the dealer, as principal. The dealer may then resell
such Securities to the public at varying prices to be determined by such dealer
at the time of resale. The name of the dealer and the terms of the transactions
will be set forth in the Prospectus Supplement relating thereto.
Offers to purchase the Securities may be solicited directly by the Company
and sales thereof may be made by the Company directly to institutional investors
or others. The terms of any such sales, including the terms of any bidding or
auction process, if utilized, will be described in the Prospectus Supplement
relating thereto.
Agents, underwriters and dealers may be entitled under agreements which may
be entered into with the Company to indemnification by the Company against
certain liabilities, including liabilities under the Securities Act, and any
such agents, underwriters or dealers, or their affiliates may be customers of,
engage in transactions with or perform services for the Company in the ordinary
course of business.
If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters to solicit offers by certain institutions to purchase
Debt Securities from the Company at the public offering price set forth in the
Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on the date stated in the Prospectus
Supplement. Such Contracts will be subject to only those conditions set forth in
the Prospectus Supplement. A commission indicated in the Prospectus Supplement
will be paid to underwriters and agents soliciting purchases of Debt Securities
pursuant to Contracts accepted by the Company.
EXPERTS
The consolidated financial statements of the Company included in the Annual
Report on Form 10-K of the Company for the year ended November 30, 1995 and the
financial statements of Rayco, Ltd. (A Limited Partnership) included in the
Company's Current Report on Form 8-K dated March 12, 1996 have been audited by
Ernst & Young LLP, independent auditors, as stated in its reports dated January
4, 1996 and January 30, 1996 and are incorporated herein by reference in
reliance upon the reports of such firm, which reports are given upon their
authority as experts in accounting and auditing.
Any financial statements and schedules hereafter incorporated by reference
in the registration statement of which this prospectus is a part that have been
audited and are the subject of a report by independent auditors will be
incorporated herein by reference in reliance upon such reports and upon the
authority of such firms as experts in accounting and auditing to the extent
covered by consents filed with the Commission.
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon for the
Company by Davis Polk & Wardwell, New York, New York.
20
<PAGE> 41
==============================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. NEITHER THE DELIVERY
OF THIS PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCE, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
<S> <C>
The Company............................... S-2
Use of Proceeds........................... S-2
Capitalization............................ S-3
Selected Consolidated Financial Data...... S-4
Description of the Notes.................. S-6
Underwriting.............................. S-20
Legal Matters............................. S-20
Experts................................... S-20
PROSPECTUS
Available Information..................... 2
Incorporation of Certain Information by
Reference............................... 3
The Company............................... 4
Use of Proceeds........................... 4
Consolidated Ratios of Earnings to Fixed
Charges and of Earnings to Combined
Fixed Charges and Preferred Stock
Dividends............................... 4
Description of the Debt Securities........ 5
Limitations on Issuance of Bearer Debt
Securities.............................. 13
Description of Capital Stock.............. 14
Description of Warrants................... 18
Plan of Distribution...................... 19
Experts................................... 20
Legal Matters............................. 20
================================================
</TABLE>
================================================
$125,000,000
KAUFMAN AND BROAD
HOME CORPORATION
9 5/8% SENIOR SUBORDINATED NOTES
DUE 2006
---------------------------------------
PROSPECTUS SUPPLEMENT
---------------------------------------
MERRILL LYNCH & CO.
NOVEMBER 14, 1996
=================================================
