<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 19, 1995
REGISTRATION NO. 33-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CONTINENTAL HOMES HOLDING CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 86-0554624
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
7001 N. SCOTTSDALE ROAD
SUITE 2050
SCOTTSDALE, ARIZONA 85253
(602) 483-0006
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
DONALD R. LOBACK
CHIEF EXECUTIVE OFFICER
7001 N. SCOTTSDALE ROAD
SUITE 2050
SCOTTSDALE, ARIZONA 85253
(602) 483-0006
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
JOHN P. MITCHELL, ESQ. VINCENT J. PISANO, ESQ.
CAHILL GORDON & REINDEL SKADDEN, ARPS, SLATE,
80 PINE STREET MEAGHER & FLOM
NEW YORK, NEW YORK 10005 919 THIRD AVENUE
(212) 701-3000 NEW YORK, NEW YORK 10022
(212) 735-3000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
% Convertible
Subordinated Notes
due 2005.............. $86,250,000(2) 100% $86,250,000 $29,742
- ---------------------------------------------------------------------------------------------
Common Stock reserved
for issuance upon
conversion of the %
Convertible
Subordinated Notes due
2005................... (3) -- -- --
- ---------------------------------------------------------------------------------------------
Total Registration Fee.. -- -- -- $29,742
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
(2) Includes $11,250,000 aggregate principal amount of Notes subject to the
Underwriters' over-allotment option.
(3) There are also being registered such number of shares of Common Stock
issuable upon conversion of the Notes, and pursuant to Rule 416, such
additional shares of Common Stock as may be issuable upon conversion of the
Notes pursuant to the anti-dilution provisions thereof.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 19, 1995
$75,000,000
CONTINENTAL HOMES HOLDING CORP.
% Convertible Subordinated Notes due 2005
----------
INTEREST PAYABLE MAY 1 AND NOVEMBER 1
----------
The Notes offered hereby will be convertible at the option of the holder into
Common Stock of the Company at any time prior to maturity, unless previously
redeemed or repurchased, at a conversion rate of shares of Common Stock
per $1,000 principal amount of Notes (equivalent to a conversion price of
approximately $ per share), subject to adjustment under certain
circumstances. The Company's Common Stock is listed on the New York Stock
Exchange under the symbol "CON". On October 18, 1995, the last reported sale
price of the Common Stock on the New York Stock Exchange was $21.25 per share.
Interest on the Notes at a rate of % per annum will be payable semi-
annually on May 1 and November 1 of each year, commencing May 1, 1996. The
Notes will mature on November 1, 2005. The Notes will be redeemable, in whole
or in part, at the option of the Company at any time on or after November 3,
1998, at the redemption prices set forth herein, plus accrued and unpaid
interest to the date of redemption. In certain circumstances involving a Change
in Control (as defined herein) of the Company, each holder of the Notes will
have the right to require the Company to repurchase all or any part of such
holder's Notes at a purchase price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest to the date of repurchase. See
"Description of Notes".
The Notes will be unsecured and subordinated in right of payment to all
existing and future Senior Indebtedness (as defined herein) of the Company, and
will also be effectively subordinated to all liabilities of the Company's
subsidiaries. As of August 31, 1995, as adjusted to give effect to the issuance
of the Notes and the application of the proceeds therefrom, approximately
$111,349,000 aggregate amount of Senior Indebtedness was outstanding and the
amount of trade payables and other indebtedness of the Company's subsidiaries
aggregated approximately $90,590,000. The Indenture will not prohibit or limit
the ability of the Company or any of its subsidiaries to incur additional
Senior Indebtedness or other indebtedness. See "Description of Notes".
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING
AN INVESTMENT IN THE NOTES, SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS
PROSPECTUS.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON
OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions(2) Company(1)(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note............................. % % %
- -------------------------------------------------------------------------------
Total................................ $ $ $
- -------------------------------------------------------------------------------
Total Assuming Full Exercise of Over-
Allotment Option(4)................. $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from November , 1995.
(2) See "Underwriting".
(3) Before deducting expenses payable by the Company estimated at $275,000.
(4) Assuming exercise in full of the 30-day option granted by the Company to
the Underwriters to purchase up to an additional $11,250,000 principal
amount of Notes on the same terms, solely to cover over-allotments, if any.
See "Underwriting".
----------
The Notes are offered by the Underwriters, subject to prior sale, when, as
and if delivered to and accepted by the Underwriters, and subject to their
right to reject orders in whole or in part. It is expected that delivery of the
Notes will be made in New York City on or about November , 1995.
----------
PAINEWEBBER INCORPORATED SMITH BARNEY INC.
----------
THE DATE OF THIS PROSPECTUS IS , 1995
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OR THE
COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
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 and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements and
other information filed by the Company with the Commission pursuant to the
informational requirements of the Exchange Act may be inspected and copied at
the Public Reference Section maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the following Regional Offices maintained
by the Commission: New York Regional Office, 7 World Trade Center, 15th Floor,
New York, New York 10048 and Chicago Regional Office, Northwest Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, reports, proxy statements and other information concerning the
Company (symbol "CON") can be inspected and copied at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Notes offered hereby and the shares of
Common Stock issuable upon conversion of the Notes. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. Reference is made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the
Notes and the Common Stock offered hereby.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents, heretofore filed by the Company with the Commission
pursuant to the Exchange Act, are hereby incorporated by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended May
31, 1995; and
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
August 31, 1995.
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of the offering shall be deemed to be incorporated by reference in this
Prospectus and shall be part hereof from the date of filing of such document.
Any statement contained herein or 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
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered, upon
the written or oral request of any such person, a copy of any document
described above (other than exhibits). Requests for such copies should be
directed to Continental Homes Holding Corp., 7001 N. Scottsdale Road, Suite
2050, Scottsdale, Arizona 85253, Attention: Secretary, telephone number (602)
483-0006.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements (including the notes thereto)
appearing elsewhere or incorporated by reference in this Prospectus. Unless
otherwise indicated, all data in this Prospectus assumes that the Underwriters'
over-allotment option is not exercised.
THE COMPANY
Continental Homes Holding Corp. (the "Company") designs, constructs and sells
high quality single-family homes targeted to entry-level and first-time move-up
homebuyers. As of August 31, 1995, the Company was offering homes for sale in
55 communities in six markets. The Company is geographically diversified,
currently operating in Phoenix, Arizona; Austin and San Antonio, Texas; Denver,
Colorado; South Florida; and Southern California.
The Company is a leading homebuilder in the Phoenix and Austin markets. The
Phoenix market is the Company's primary market and accounted for approximately
49% of the Company's revenues from homebuilding operations for the fiscal year
ended May 31, 1995. In calendar 1994, the Company continued to be the leading
non-retirement homebuilder in Phoenix for the tenth consecutive year. The
Phoenix market ranked third nationally for single-family housing starts in
calendar 1994 and second nationally in the six month period ended June 30,
1995. The Austin market contributed approximately 26% of the Company's revenues
from homebuilding operations for the fiscal year ended May 31, 1995. The
Company retained its number one ranking in Austin in calendar 1994 by
delivering more single-family homes than any other homebuilder. The Company
also has expanding operations in Denver, San Antonio, South Florida and
Southern California. The Company complements its homebuilding activities by
providing mortgage banking services in Arizona to its homebuyers and in Texas
to its homebuyers and to third parties.
The Company markets its homes by emphasizing quality housing at affordable
prices. The Company's operating strategy is to (i) design efficient floorplans
to minimize construction costs, (ii) negotiate favorable pricing and terms from
certain of its subcontractors which perform a high volume of work for the
Company and (iii) closely monitor construction costs using the Company's
custom-designed management information systems.
The Company believes that it will continue to capitalize on the operating
methods and strategy that it has successfully implemented in the different
geographical markets in which it operates. The Company entered the Austin, San
Antonio and South Florida markets in July 1993, January 1994 and November 1994,
respectively, through acquisitions of existing homebuilders. The Company will
continue to review opportunities to enter new housing markets that have
demonstrated periods of strong population and employment growth.
The Company has continued to experience improved demand for its homes. The
aggregate sales value of new contracts signed increased 74% in the three months
ended August 31, 1995 to approximately $166,183,000 representing 1,284 homes
(including approximately $7,784,000 in South Florida representing 57 homes) as
compared with approximately $95,768,000 representing 718 homes for the three
months ended August 31, 1994. At August 31, 1995, the Company had a backlog of
signed contracts of 1,748 homes with an aggregate sales value of approximately
$234,177,000 (including 118 homes in South Florida with an aggregate sales
value of approximately $16,731,000), as compared with 1,028 homes with an
aggregate sales value of approximately $139,822,000 at the same time last year.
The Company expects that substantially all homes under contract at August 31,
1995 will be delivered during the fiscal year ending May 31, 1996.
On September 18, 1995, Donald R. Loback, the Co-Chief Executive Officer of
the Company, became Chief Executive Officer and was appointed to the additional
position of Chairman, and W. Thomas Hickcox, the Chief Operating Officer of the
Company, was appointed to the additional position of President, each following
the resignations of Kathleen and Robert Wade (the "Wades") as Co-Chief
Executive Officer and President, respectively, of the Company. In connection
with the Wades' resignations, until January 19, 1996, the Company has the right
to buy from the Wades, and the Wades have the right to sell to the Company, up
to 488,000 shares of Common Stock of the Company held by the Wades at a price
of $20.50 per share.
The Company was incorporated in Delaware in June 1986. The Company's
executive offices are located at 7001 N. Scottsdale Road, Suite 2050,
Scottsdale, Arizona 85253; its telephone number is (602) 483-0006.
3
<PAGE>
THE OFFERING
Securities Offered.......... $75,000,000 principal amount of % Convertible
Subordinated Notes due 2005 (the "Notes").
Maturity Date............... November 1, 2005.
Interest Payment Dates...... May 1 and November 1, commencing May 1, 1996.
Conversion Rights........... Each Note will be convertible at any time prior
to maturity, unless previously redeemed or re-
purchased, into shares of Common Stock of the
Company, at a conversion rate of shares of
Common Stock for each $1,000 principal amount of
Notes (equivalent to a conversion price of ap-
proximately $ per share), subject to ad-
justment under certain circumstances.
Optional Redemption......... The Notes will be redeemable, in whole or in
part, at the option of the Company at any time
on or after November 3, 1998, at the redemption
prices set forth herein, plus accrued and unpaid
interest to the date of redemption.
Repurchase of Notes upon a
Change in Control..........
If a Change in Control (as defined herein) oc-
curs, each holder of the Notes will have the
right to require the Company to repurchase all
or any part of such holder's Notes at a price
equal to 100% of the principal amount thereof,
plus accrued and unpaid interest to the date of
repurchase. A Change in Control will occur, sub-
ject to certain limitations, when a person or
group of related persons (other than current
management) acquires beneficial ownership of at
least 50% of the total voting power of all
shares of capital stock of the Company entitled
to vote in elections of directors.
Subordination............... The Notes will be unsecured and subordinated in
right of payment to all existing and future Se-
nior Indebtedness (as defined herein) of the
Company, and will also be effectively subordi-
nated to all liabilities of the Company's sub-
sidiaries. As of August 31, 1995, as adjusted to
give effect to the issuance of the Notes and the
application of the proceeds therefrom, approxi-
mately $111,349,000 aggregate amount of Senior
Indebtedness was outstanding and the amount of
trade payables and other indebtedness of the
Company's subsidiaries aggregated approximately
$90,590,000. The Indenture (as defined herein)
will not prohibit or limit the ability of the
Company or any of its subsidiaries to incur ad-
ditional Senior Indebtedness or other indebted-
ness.
Use of Proceeds............. To redeem the Company's 6 7/8% Convertible Sub-
ordinated Notes due 2002 (the "Old Convertible
Notes"); to reduce certain other indebtedness;
and for working capital and general corporate
purposes. A portion of the net proceeds may be
used to acquire 488,000 shares of Common Stock
from the Wades.
Common Stock Traded......... The Common Stock is traded on the New York Stock
Exchange under the symbol "CON".
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table sets forth summary financial information regarding the
results of operations and financial position of the Company. The summary
financial information of the Company as of and for the five years ended May 31,
1995 has been derived from financial statements of the Company audited by
Arthur Andersen LLP. The summary financial information of the Company as of
August 31, 1995 and for the three months ended August 31, 1994 and 1995 have
been derived from unaudited financial statements which, in the opinion of
management, include all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of such information for the
unaudited interim periods. The operating results for the three months ended
August 31, 1995 are not necessarily indicative of results for the full fiscal
year. This information should be read in conjunction with "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
the Company's Consolidated Financial Statements and Notes thereto incorporated
by reference in this Prospectus.
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED MAY 31, AUGUST 31,
------------------------------------------------ ------------------
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues
Home sales............. $130,611 $164,815 $200,012 $340,031 $414,718 $105,100 $132,946
Land sales............. 4,977 3,114 4,113 1,095 10,658 -- 10,761
Mortgage banking and
title operations...... 2,930 1,905 2,426 6,967 6,707 1,866 2,586
Other income, net...... 97 590 482 527 369 77 112
-------- -------- -------- -------- -------- -------- --------
Total revenues.......... 138,615 170,424 207,033 348,620 432,452 107,043 146,405
-------- -------- -------- -------- -------- -------- --------
Costs and expenses
Homebuilding
Cost of home sales.... 106,463 135,141 161,960 277,878 339,288 85,617 108,426
Cost of land sales.... 4,994 3,156 4,766 1,499 10,958 75 10,831
Selling, general and
administrative
expenses............. 15,514 18,648 20,836 37,065 46,308 11,118 14,956
Interest, net......... 2,239 1,341 5,498 4,456 4,993 938 1,149
Inventory writedown... 5,000 7,500 -- -- -- -- --
Mortgage banking and
title operations
Selling, general and
administrative
expenses............. 2,637 1,713 1,544 4,818 5,639 1,439 1,724
Interest, net......... (51) (178) 14 (233) (199) (173) 55
-------- -------- -------- -------- -------- -------- --------
Total costs and
expenses............... 136,796 167,321 194,618 325,483 406,987 99,014 137,141
-------- -------- -------- -------- -------- -------- --------
Equity in loss of
unconsolidated joint
ventures............... (1,342) (948) (332) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Income before taxes and
extraordinary credits.. 477 2,155 12,083 23,137 25,465 8,029 9,264
Income taxes............ 361 863 4,983 10,054 11,644 3,513 4,040
-------- -------- -------- -------- -------- -------- --------
Income from operations.. 116 1,292 7,100 13,083 13,821 4,516 5,224
Extraordinary gain from
extinguishment of
debt(1)................ -- 5,299 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income.............. $ 116 $ 6,591 $ 7,100 $ 13,083 $ 13,821 $ 4,516 $ 5,224
======== ======== ======== ======== ======== ======== ========
Earnings per common
share:
Income from operations. $ .03 $ .27 $ 1.38 $ 2.11 $ 1.99 $ .65 $ .75
Net income(1).......... .03 1.39 1.38 2.11 1.99 .65 .75
Earnings per common
share assuming full
dilution:
Income from operations. N/A $ .27 $ 1.30 $ 1.88 $ 1.82 $ .58 $ .66
Net income(1).......... N/A 1.34 1.30 1.88 1.82 .58 .66
As adjusted earnings per
share(2)............... -- -- -- -- --
Cash dividends per
common share........... $ .20 $ .20 $ .20 $ .20 $ .20 $ .05 $ .05
Ratio of earnings to
fixed charges,
including mortgage
banking operations(3).. (4) 1.44x 1.91x 2.36x 1.99x 2.44x 2.44x
Ratio of earnings to
fixed charges,
excluding mortgage
banking
operations(3)(5)....... (4) 1.51 2.01 2.62 2.11 2.61 2.64
As adjusted ratio of
earnings to fixed
charges, including
mortgage banking
operations(3)(6)....... -- -- -- -- --
As adjusted ratio of
earnings to fixed
charges, excluding
mortgage banking
operations (3)(5)(6)... -- -- -- -- --
</TABLE>
(continued on following page)
5
<PAGE>
<TABLE>
<CAPTION>
MAY 31, AUGUST 31, 1995
-------------------------------------------- --------------------
AS
1991 1992 1993 1994 1995 ACTUAL ADJUSTED(7)
-------- -------- -------- -------- -------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Assets
Homes, lots and im-
provements in produc-
tion.................. $ 93,739 $116,450 $142,589 $205,369 $291,331 $287,183 $287,183
======== ======== ======== ======== ======== ======== ========
Total homebuilding as-
sets.................. $118,411 $140,598 $172,798 $266,384 $350,659 $349,602 $357,387
Mortgage banking as-
sets.................. 24,301 22,176 14,727 39,106 36,174 35,017 35,017
-------- -------- -------- -------- -------- -------- --------
Total assets.......... $142,712 $162,774 $187,525 $305,490 $386,833 $384,619 $392,404
======== ======== ======== ======== ======== ======== ========
Debt
Homebuilding........... $ 82,235 $ 81,293 $106,183 $144,048 $198,814 $187,986 $214,241
Mortgage banking....... 22,146 20,448 8,604 24,271 34,011 33,102 17,662
-------- -------- -------- -------- -------- -------- --------
Total debt............ $104,381 $101,741 $114,787 $168,319 $232,825 $221,088 $231,903
======== ======== ======== ======== ======== ======== ========
Stockholders' equity.... $ 28,562 $ 44,428 $ 51,550 $ 98,560 $110,479 $115,423 $115,423
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED MAY 31, AUGUST 31,
-------------------------------------------- -----------------
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
HOUSING DATA(8)
Deliveries.............. 1,249 1,470 1,769 2,831 3,202 826 1,029
New contracts, net...... 1,317 1,627 2,000 2,844 3,427 718 1,284
Backlog at end of period
(units)................ 486 669 900 1,136 1,493 1,028 1,748
Backlog at end of period
($ value).............. $ 53,180 $ 76,215 $107,499 $147,242 $198,126 $139,822 $234,177
</TABLE>
- --------
(1) Fiscal 1992 reflects the retirement of a note payable at an amount less
than par.
(2) Assumes conversion of $75,000,000 aggregate principal amount of the Notes
into shares of Common Stock and the use of proceeds thereof to reduce
debt and related interest expense, each as if it had occurred at the
beginning of the period.
(3) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of income from operations before income taxes plus fixed
charges (net of capitalized interest). Fixed charges include interest
expense plus capitalized interest and a portion of operating lease rental
expense deemed to be representative of interest.
(4) Fiscal 1991 includes a pre-tax writedown of $5,000,000. After giving effect
to such writedown, earnings for the fiscal year ended May 31, 1991 were
inadequate to cover fixed charges and resulted in a coverage deficiency of
$3,009,000.
(5) The Company believes that the ratio of earnings to fixed charges excluding
interest expense attributable to the Company's mortgage banking operations
may be helpful to investors in understanding the Company's ability to cover
fixed charges for its homebuilding operations. See "Business--Mortgage
Banking".
(6) As adjusted to give effect to the change in interest expense resulting from
the issuance and sale of the Notes and the application of the proceeds
therefrom to reduce other indebtedness.
(7) As adjusted to give effect to the issuance and sale by the Company of the
Notes and the application of the estimated net proceeds therefrom.
(8) Data for fiscal 1991 excludes the Company's proportionate share of homes
sold and closed in unconsolidated joint ventures.
6
<PAGE>
RISK FACTORS
Prospective purchasers of the Notes should consider carefully the factors set
forth below as well as the other information set forth or incorporated by
reference in this Prospectus prior to investing in the Notes.
THE HOUSING INDUSTRY
Homebuilders, including the Company, are subject to various risks, such as
economic recession, competitive overbuilding, changes in governmental
regulation, increases in real estate taxes, energy costs or costs of materials
and labor, the availability of suitable land, and the availability of
construction funds or mortgage loans at rates acceptable to builders and
homebuyers. In addition, increases in interest rates may have an adverse effect
upon the Company's sales and could affect the availability of home financing to
present and potential customers of the Company.
COMPETITION
The single-family residential housing industry is highly competitive and the
Company competes in each of its markets with numerous other national, regional
and local homebuilders, some of which have greater resources than the Company.
The Company's homes compete on the basis of quality, price, design, mortgage
financing terms and location. See "Business--Operating Strategy". The Company
also competes with developers of rental housing units and, to a lesser extent,
condominiums.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the Notes will,
to the extent set forth in the Indenture, be subordinated and subject in right
of payment to the prior payment in full of all Senior Indebtedness of the
Company, whether outstanding at the date of the Indenture or later incurred. In
the event of any default in the payment of the principal or interest with
respect to any Senior Indebtedness or any default permitting the acceleration
of Senior Indebtedness where notice of such default has been given to the
Company, no payment with respect to the principal of or interest on the Notes
will be made by the Company unless and until such default has been cured or
waived. Upon any payment or distribution of the Company's assets to creditors
upon any dissolution, winding up, liquidation, reorganization, bankruptcy,
insolvency, receivership or other proceedings relating to the Company, whether
voluntary or involuntary, the holders of Senior Indebtedness will first be
entitled to receive payment in full of all amounts due thereon before the
holders of the Notes will be entitled to receive any payment upon the principal
of or premium, if any, or interest on the Notes. By reason of such
subordination, in the event of the insolvency of the Company, holders of Notes
may recover less ratably than holders of Senior Indebtedness and other
creditors of the Company. See "Description of Notes--Subordination". As of
August 31, 1995, as adjusted to give effect to the issuance of the Notes and
the application of the proceeds therefrom, approximately $111,349,000 aggregate
amount of Senior Indebtedness was outstanding.
Substantially all operations of the Company are conducted through its
subsidiaries and substantially all of its assets are owned or leased by those
subsidiaries. Accordingly, the Company's cash flow and consequent ability to
meet its obligations will depend to a significant extent upon the earnings of
those subsidiaries and the availability of those earnings to the Company by way
of dividends, distributions or repayment of advances. Claims of creditors
(including trade creditors) of those subsidiaries may reduce significantly the
funds otherwise available from the operations of such subsidiaries. As of
August 31, 1995, as adjusted to give effect to the issuance of the Notes and
the application of the proceeds therefrom, the amount of trade payables and
other indebtedness of the Company's subsidiaries aggregated approximately
$90,590,000.
The Indenture will not prohibit or limit the ability of the Company or any of
its subsidiaries to incur additional Senior Indebtedness or other indebtedness.
7
<PAGE>
GROWTH THROUGH ACQUISITIONS
During the past three years, the Company has expanded its operations into new
housing markets primarily by means of acquisitions of existing homebuilders.
The Company entered the Austin, San Antonio and South Florida markets in July
1993, January 1994 and November 1994, respectively, through acquisitions of
existing homebuilders. The Company will continue to review opportunities to
enter new housing markets that have demonstrated periods of strong population
and employment growth. However, there can be no assurance that the Company will
be able to locate or acquire other suitable acquisition candidates on
acceptable terms, or that it will be successful in managing the operations of
the entities acquired and effectively and profitably integrating such
operations into the Company. Additionally, there can be no assurance that any
future acquisitions will not have a material adverse effect on the Company's
operating results, particularly during the period immediately following such
acquisitions.
DEPENDENCE ON KEY PERSONNEL
The Company's business is managed by a small number of executive officers.
The loss of the services of one or more of these executive officers could have
a material adverse effect on the business and operations of the Company.
REPURCHASE OF NOTES UPON A CHANGE IN CONTROL
Upon a Change in Control, the Company will be required to offer to repurchase
all of the outstanding Notes at a purchase price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest to the repurchase date. There
can be no assurance that the Company will have sufficient funds available or
will be permitted by its other indebtedness agreements to repurchase the Notes
upon the occurrence of a Change in Control. The Change in Control purchase
feature of the Notes may in certain circumstances make more difficult or
discourage a takeover of the Company and, thus, the removal of incumbent
management. The Change in Control purchase feature, however, is not the result
of management's knowledge of any specific effort to obtain control of the
Company by means of a merger, tender offer, solicitation or otherwise, or part
of a plan by management to adopt a series of anti-takeover provisions. See
"Description of Notes--Repurchase of Notes upon a Change in Control".
ABSENCE OF PUBLIC MARKET
The Notes are a new issue of securities which have no established trading
market. It is expected that the Notes will be sold to a limited number of
investors. The Company has been advised by the Underwriters that they intend to
make a market in the Notes after the consummation of this offering; however,
the Underwriters are not obligated to do so, and any such market-making, if
commenced, may be terminated at any time without notice. No assurance can be
given as to the liquidity of the trading market, if any, for the Notes.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes are estimated to
be $72,475,000 ($83,387,500 if the Underwriters' over-allotment option is
exercised in full). The Company intends to use the net proceeds as follows: (i)
approximately $33,250,000 will be used to redeem the Old Convertible Notes,
(ii) approximately $ will be used to reduce temporarily outstanding
amounts under certain of the Company's revolving lines of credit (bearing
interest at rates ranging from prime plus 1/4% to prime plus 1% at August 31,
1995) which were incurred for working capital purposes, (iii) approximately
$ will be used to reduce temporarily outstanding amounts under the Company's
warehouse line of credit (bearing interest at 9.0% per annum at August 31,
1995) and (iv) the balance will be used for working capital and general
corporate purposes. A portion of the net proceeds may be used to acquire
488,000 shares of Common Stock from the Wades. See "Prospectus Summary--The
Company". Although the Company is continually evaluating acquisition
opportunities, the Company currently has no agreements or understandings with
respect to the acquisition of any homebuilding operations.
8
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at August
31, 1995, and as adjusted to give effect to the issuance and sale by the
Company of the Notes and the application of the estimated net proceeds
therefrom. See "Use of Proceeds".
<TABLE>
<CAPTION>
AUGUST 31, 1995
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents(1)............................. $ 14,248 $ 22,033
======== ========
Debt(2)
Homebuilding
Notes payable (including current maturities of ap-
proximately $39,000,000)............................ $ 43,892 $ 27,892
12% Senior Notes due 1999 (net of unamortized dis-
count).............................................. 111,349 111,349
6 7/8% Convertible Subordinated Notes due 2002 (net
of unamortized discount)............................ 32,745 --
% Convertible Subordinated Notes due 2005......... -- 75,000
-------- --------
Total.............................................. 187,986 214,241
-------- --------
Mortgage banking
Notes payable due within one year.................... 15,440 --
Bonds payable........................................ 17,662 17,662
-------- --------
Total.............................................. 33,102 17,662
-------- --------
Total debt....................................... 221,088 231,903
-------- --------
Stockholders' equity
Common Stock, $.01 par value; 20,000,000 shares autho-
rized; 7,080,900 shares issued(3)..................... 71 71
Treasury stock, at cost, 150,130 shares(1)............. (526) (526)
Capital in excess of par value......................... 59,610 59,610
Retained earnings(4)................................... 56,268 56,268
-------- --------
Total stockholders' equity....................... 115,423 115,423
-------- --------
Total capitalization..................................... $336,511 $347,326
======== ========
</TABLE>
- --------
(1) If a portion of the net proceeds from the sale of the Notes is used to
acquire 488,000 shares of Common Stock from the Wades, Cash and cash
equivalents, as adjusted, would be $12,029,000 and Treasury stock, as
adjusted, would be $(10,530,000).
(2) See Note E of "Notes to Consolidated Financial Statements" incorporated
herein by reference for further information regarding the terms of the
Company's indebtedness.
(3) Excludes shares reserved for issuance upon conversion of the
Notes and 428,630 shares reserved for issuance pursuant to options granted
under the Company's stock option plans.
(4) The Company expects to record an extraordinary loss, net of taxes, of
approximately $937,000 due to the write-off of unamortized discount and
debt issuance costs relating to the redemption of the Old Convertible
Notes.
9
<PAGE>
PRICE RANGE OF COMMON STOCK
Since December 15, 1993, the Company's Common Stock has traded on the New
York Stock Exchange under the symbol "CON". Prior to that date, the Company's
Common Stock was traded on the American Stock Exchange. The following table
sets forth for each period indicated the high and low closing sales prices of
the Company's Common Stock, as reported by the New York Stock Exchange Monthly
Market Statistics Report or the American Stock Exchange Monthly Market
Statistics, as the case may be:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Fiscal Year Ended May 31, 1994:
First Quarter............................................ $22.50 $13.38
Second Quarter........................................... 23.75 20.63
Third Quarter............................................ 23.88 18.50
Fourth Quarter........................................... 21.38 13.88
Fiscal Year Ended May 31, 1995:
First Quarter............................................ $15.75 $13.38
Second Quarter........................................... 17.25 13.50
Third Quarter............................................ 14.13 11.63
Fourth Quarter........................................... 15.88 11.00
Fiscal Year Ended May 31, 1996:
First Quarter............................................ $21.13 $15.00
Second Quarter (through October 18, 1995)................ 21.88 19.38
</TABLE>
DIVIDEND POLICY
Since the first fiscal quarter of 1991, the Company has paid a quarterly cash
dividend of $.05 per share. Declarations of dividends are within the discretion
of the Board of Directors and are dependent upon various factors, including the
earnings, cash flow, capital requirements and operating and financial condition
of the Company. In addition, the Company's ability to pay dividends is
restricted by certain of its loan agreements and the indenture governing its
12% Senior Notes due 1999. See Note E of "Notes to Consolidated Financial
Statements" incorporated herein by reference.
10
<PAGE>
BUSINESS
The Company designs, constructs and sells high quality single-family homes
targeted to entry-level and first-time move-up homebuyers. As of August 31,
1995, the Company was offering homes for sale in 55 communities in six markets.
The Company is geographically diversified, currently operating in Phoenix,
Arizona; Austin and San Antonio, Texas; Denver, Colorado; South Florida; and
Southern California. The Company also offers mortgage banking services in
Arizona to its homebuyers and in Texas to its homebuyers and to third parties.
OPERATING STRATEGY
The following are the major elements of the Company's operating strategy:
Geographic Diversification. The Phoenix metropolitan area has been the
Company's primary market. The Company began diversifying its operations by
expanding into Denver in 1987 and Southern California in 1988. Over the last
three years, the Company entered the Austin, San Antonio and South Florida
markets through the acquisition of homebuilders with established operations.
The Company will continue to review opportunities to enter new housing markets
that have demonstrated periods of strong population and employment growth.
Product. The Company sells single-family homes targeted primarily to entry-
level and first-time move-up buyers. The Company emphasizes quality homes with
distinctive design features offered at affordable prices within each of its
markets. The Company believes that today's home buyers are particularly value-
oriented and that the entry-level and first-time move-up markets represent the
largest segments of the homebuilding market. During fiscal 1995, the average
sales price of the Company's homes was approximately $129,500. Additionally,
the Company recently entered into a joint venture to begin constructing
retirement homes in Phoenix. This represents the Company's first project in the
retirement market and may represent an area of future growth.
Cost Control. The Company controls the costs of construction through the
efficient design of its homes and the favorable pricing it receives from
certain subcontractors which perform a high volume of work for the Company. The
Company's custom-designed management information systems also assist in
controlling construction costs by making information available which allows the
Company to monitor subcontractor performance and expenditures for each house
built. As part of management's control of general and administrative expense,
internal operations are continually monitored to reduce overhead and improve
efficiency.
Inventory Management. The Company's objective is to maintain a supply of land
to meet anticipated homebuilding requirements for approximately two to three
years. At August 31, 1995, the Company had approximately 34 months of inventory
based on actual deliveries in fiscal 1995. To further control inventory, the
Company builds speculative units only to maintain a limited inventory of homes
available for quick delivery or to continue the construction sequence in a
particular subdivision.
Mortgage Banking. The Company's mortgage banking operations offer competitive
financing alternatives to many of its homebuyers in Arizona and Texas (and to
third parties in Texas), assisting customers through the loan application and
approval process. These operations augment the Company's earnings and assist in
home sales by enabling the Company to monitor the progress of mortgage
applications.
11
<PAGE>
LAND ACQUISITION AND DEVELOPMENT
As of August 31, 1995, the Company operated 17 subdivisions in Phoenix, 16
subdivisions in Austin, seven subdivisions in Denver, seven subdivisions in San
Antonio, four subdivisions in South Florida and four subdivisions in Southern
California. The following table summarizes the Company's available lot
inventory at August 31, 1995 by location:
AVAILABLE LOT INVENTORY
<TABLE>
<CAPTION>
SITES AVAILABLE
HOMES UNDER FOR FUTURE
CONSTRUCTION CONSTRUCTION
TOTAL LOTS --------------------- ----------------
AVAILABLE SOLD SPECS(1) MODELS UNSOLD SOLD
---------- ----- -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Phoenix....................... 3,472 833 176 49 2,244 170
Texas(2)...................... 4,771 398 165 43 4,143 22
Denver........................ 1,400 92 44 17 1,221 26
South Florida................. 1,340 73 11 14 1,197 45
Southern California........... 376 78 55 13 219 11
------ ----- --- --- -------- ------
Total......................... 11,359 1,474 451 136 9,024 274
====== ===== === === ======== ======
</TABLE>
- --------
(1) Speculative units are unsold homes under construction.
(2) Includes operations in Austin and San Antonio.
The Company's objective is to maintain a supply of land to meet anticipated
homebuilding requirements for approximately two to three years. At August 31,
1994 and 1995, the Company had an aggregate of 7,912 and 9,024 unsold lots,
respectively, which represents approximately 34 months of inventory based on
actual deliveries in each of fiscal 1994 and 1995. The Company believes that an
adequate supply of undeveloped land is available in its markets to maintain
current levels of homebuilding.
As of August 31, 1995, the Company also owned 417 acres in Carlsbad,
California, located in San Diego County. Discretionary city entitlements for
this project, which will result in approximately 760 dwelling units, were
approved by the Carlsbad City Council in March 1995. The Company is currently
working with state and federal governmental agencies regarding environmental
issues with regard to the property and is preparing final improvement plans for
the project. The Company is unable to predict the date on which all additional
approvals necessary to commence development will be received, but it is
currently actively seeking these additional approvals and will commence
development as soon as the aforementioned approvals are received and financing
is obtained.
PRODUCT LINES
The product line constructed by the Company in a particular subdivision is
dependent upon many factors, including the housing generally available in the
area, the needs of the particular market and the Company's cost of lots in the
subdivision. The Company typically offers between three and sixteen floorplans
within the same product line in each subdivision and often offers the same
models in similar subdivisions. Models are periodically reviewed and updated to
reflect changing homebuyer preferences. Both new models and design
modifications are generally developed by Company employees.
Homes sold by the Company typically have three to five bedrooms, two or more
bathrooms and at least a two car garage. The Company offers a variety of
options and upgrades, including the placement of certain walls, the style of
kitchen and bathroom cabinetry, a selection of floor coverings and light
fixtures, patios, decks, french doors and fireplaces, which allow homebuyers to
customize their homes. Options and upgrades are generally priced to have a
positive effect on profit margins.
12
<PAGE>
PRODUCT LINES
<TABLE>
<CAPTION>
LIVING AREA BASE PRICE RANGE
(SQUARE FEET) AT AUGUST 31, 1995
------------- -------------------
<S> <C> <C>
Phoenix
Move-up single-family.................. 1,636 - 3,761 $101,900 - $184,600
Entry-level single-family.............. 1,287 - 2,484 $ 82,300 - $159,700
Texas(1)
Move-up single-family.................. 1,799 - 3,230 $122,300 - $165,400
Entry-level single-family.............. 924 - 2,630 $ 58,950 - $133,900
Denver
Move-up single-family.................. 1,820 - 3,096 $150,800 - $234,600
South Florida
Move-up single-family.................. 1,615 - 2,511 $132,900 - $168,900
Entry-level single-family.............. 1,314 - 2,012 $ 89,500 - $139,900
Southern California
Move-up single-family.................. 2,883 - 4,093 $335,000 - $439,000
Entry-level single-family.............. 1,803 - 3,165 $149,900 - $203,900
</TABLE>
- --------
(1)Includes operations in Austin and San Antonio.
HOMES DELIVERED
<TABLE>
<CAPTION>
YEAR ENDED MAY 31, QUARTER ENDED AUGUST 31,
-------------------------- -------------------------
1993 1994 1995 1994 1995
-------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Move-up single-family
Revenues (000's)....... $ 56,293 $128,494 $208,026 $ 51,376 $ 56,006
Units.................. 350 811 1,281 327 336
Average sales price.... $160,800 $158,400 $162,400 $157,100 $166,700
Entry-level single-family
Revenues (000's)....... $143,719 $206,615 $206,692 $ 53,724 $ 76,940
Units.................. 1,419 1,976 1,921 499 693
Average sales price.... $101,300 $104,600 $107,600 $107,700 $111,000
Townhomes and duplex
homes
Revenues (000's)....... $ -- $ 4,922 $ -- $ -- $ --
Units.................. -- 44 -- -- --
Average sales price.... $ -- $111,900 $ -- $ -- $ --
Total
Revenues (000's)....... $200,012 $340,031 $414,718 $105,100 $132,946
Units.................. 1,769 2,831 3,202 826 1,029
Average sales price.... $113,100 $120,100 $129,500 $127,200 $129,200
</TABLE>
Fluctuations in the number of homes delivered by product type are generally
related to product availability, market conditions or the introduction of a new
product.
13
<PAGE>
CONTRACT BACKLOG
Sales of the Company's homes are made pursuant to standard sales contracts
which require a $500 to $2,500 deposit upon signing. The contract is generally
cancellable if the customer is unable to obtain a mortgage commitment, usually
within 60 days. A sale becomes part of backlog only upon receipt of a signed
contract and a deposit. See "--Construction and Customer Service".
The following table summarizes information related to the Company's backlog
at the dates indicated:
<TABLE>
<CAPTION>
AUGUST 31,
-----------------------------
1995 1994
-------------- --------------
UNITS DOLLARS UNITS DOLLARS
----- -------- ----- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Phoenix........................................ 1,003 $126,424 613 $ 79,000
Texas.......................................... 420 46,733 274 31,004
Denver......................................... 118 23,901 99 18,109
South Florida.................................. 118 16,731 -- --
Southern California............................ 89 20,388 42 11,709
----- -------- ----- --------
Total backlog................................ 1,748 $234,177 1,028 $139,822
===== ======== ===== ========
</TABLE>
The Company anticipates that substantially all of the homes in backlog at
August 31, 1995 will be delivered during the fiscal year ending May 31, 1996.
MARKETING
The Company markets its homes to first-time and move-up buyers. Although the
Company utilizes the services of independent brokers, approximately 39% of the
Company's homes sold in fiscal 1995 were sold by Company commissioned personnel
(without the assistance of independent brokers) from sales offices located in
furnished model homes in the subdivisions. Sales personnel are trained by the
Company and attend weekly meetings to be updated on financing availability,
construction schedules and marketing and advertising plans. Company sales
personnel and independent brokers are generally paid a commission at the time
of closing of between 1% to 2% (depending on the market) and 3%, respectively,
of the sales price of the home. The Company uses radio, newspapers, magazines,
billboard displays, special promotional events and, occasionally, television in
its marketing program.
The Company builds its homes under the guidelines and specifications of the
Federal Housing Administration ("FHA") and the Veterans Administration ("VA"),
thereby providing prospective buyers the added benefits of FHA-insured and VA-
guaranteed mortgages.
CONSTRUCTION AND CUSTOMER SERVICE
The Company designs and supervises the development and building of its
projects. The construction period for the Company's homes during fiscal 1995
ranged from 100 to 180 days in Phoenix, from 75 to 120 days in Texas, from 120
to 180 days in Denver, from 90 to 120 days in South Florida and from 100 to 150
days in Southern California.
The actual construction is performed for a fixed price by independent
subcontractors, who are generally selected on a competitive basis. All stages
of construction are supervised by the Company's on-site superintendents who
coordinate the activities of subcontractors, subject their work to quality and
cost controls and monitor compliance with zoning and building codes. The
Company's management information systems also assist the Company in controlling
the costs of construction by making information available which allows the
Company to monitor subcontractor performance and expenditures. The Company
believes its relationships with its subcontractors are good.
14
<PAGE>
The Company provides homebuyers with a one-year warranty on its homes for
non-structural defects and a two-year warranty with respect to structural
defects. In addition, the Company purchases, in certain locations, builder's
liability insurance protection for major structural defects in the third
through tenth year.
In Phoenix, Denver, South Florida and Southern California, the Company
constructs homes principally against orders which are evidenced by written
contracts and modest escrow deposits. In fiscal 1995 and for the three months
ended August 31, 1995, approximately 16% and 15%, respectively, of such
contracts have been cancelled, a majority of such cancellations being
attributable to the inability of the prospective purchaser to qualify for
financing. The Company attempts to limit cancellations by training its sales
force to determine the qualification of potential homebuyers at the sales
office. The Company classifies a unit as speculative when construction
commences on a unit that does not have a written contract. The Company may
construct speculative units in order to maintain an inventory for quick
delivery or to continue the construction sequence. The majority of the
Company's speculative units are less than 50% complete. Historically, the Texas
market constructs a proportionally larger number of speculative units than the
Company's other markets. As a result of such cancellations and construction
procedures, at August 31, 1994 and August 31, 1995 the Company had respectively
540 and 451 (including 229 and 165, respectively in Texas) speculative units
under construction.
MORTGAGE BANKING
The Company commenced mortgage banking operations in 1986 and all mortgage
operations of the Company have been conducted by American Western Mortgage
Company ("AWMC") and Miltex Management, Inc., which are approved by the FHA and
VA as qualified mortgage lenders. As of July 1, 1995, all mortgage operations
of the Company are being conducted by AWMC which has changed its name to CH
Mortgage Company ("CHMC").
As a mortgage banker, CHMC completes the processing of loan applications,
performs credit checks, submits applications to mortgage lenders for approval,
and originates and sells mortgage loans. CHMC has a $25,000,000 warehouse line
of credit to fund the mortgage loans on an interim basis. CHMC bears the
interest expense and receives the interest income while mortgages are
warehoused. Accordingly, depending upon the relative interest rates of such
loans and the related mortgages and the extent to which mortgages are financed,
CHMC may have net interest income or expense during the warehouse period.
CHMC establishes its interest rates and terms to facilitate the sale of the
Company's homes through the originations of first mortgage loans utilizing
programs established by the FHA, VA, GNMA and FNMA. Interest rates are
generally established by prevailing market rates, although lower rates may be
offered from time to time to remain competitive in certain markets.
Each mortgage originated by CHMC contains the provision for a servicing fee
(which is included as a part of the monthly payment made by the mortgagor) to
be paid for the collection of, and accounting for, mortgage payments. This
servicing fee provision is a separate interest in the mortgage that may be sold
independently of, or together with, the mortgage itself. CHMC began retaining a
portion of the servicing portfolio in fiscal 1991 and from time to time may
continue to do so, although this is not expected to become a material part of
the Company's business. During fiscal 1995, the Company sold significantly all
of the servicing rights that were originated during such year, and is currently
exploring the sale of the servicing rights it retained.
COMPETITION
The single-family residential housing industry is highly competitive, and the
Company competes in each of its markets with numerous other national, regional
and local homebuilders, some of which have greater resources than the Company.
The Company's homes compete on the basis of quality, price, design, mortgage
financing terms and location. See "--Operating Strategy". The Company also
competes with developers of rental housing units and, to a lesser extent,
condominiums.
15
<PAGE>
REGULATION
The housing and mortgage banking industries are subject to extensive and
complex regulations. The Company and its subcontractors must comply with
various federal, state and local laws and regulations including zoning and
density requirements, building, environmental, advertising and consumer credit
rules and regulations as well as other rules and regulations in connection
with its homebuilding and sales activities. These include requirements as to
building materials to be used, building designs and minimum elevation of
properties. The Company's homes are inspected by local authorities where
required, and homes eligible for insurance or guarantees provided by the FHA
and VA, respectively, are subject to inspection by the FHA or VA.
The Company is also subject to a variety of local, state and federal
statutes, ordinances, rules and regulations concerning protection of health
and the environment ("environmental laws"), as well as effects of
environmental factors. The particular environmental laws which apply to any
given homebuilding site vary greatly according to the site's location, the
site's environmental condition and the present and former uses of the site.
These environmental laws may result in delays, may cause the Company to incur
substantial compliance and other costs, and can prohibit or severely restrict
homebuilding activity in certain environmentally sensitive regions or areas.
The Company's mortgage banking subsidiary must also comply with various
federal and state laws and consumer credit rules and regulations as well as
rules and regulations in connection with its mortgage lending activities.
Additionally, mortgage loans originated under the FHA, VA, FNMA and GNMA are
subject to rules and regulations imposed by such agencies.
EMPLOYEES
At August 31, 1995, the Company and its subsidiaries employed approximately
467 persons, including corporate staff, sales personnel, construction
personnel and mortgage and title staff. None of the Company's employees is
covered by a collective bargaining agreement. The Company believes that its
relations with its employees are good.
16
<PAGE>
DESCRIPTION OF NOTES
The Notes are to be issued under an Indenture, to be dated as of November 1,
1995 (the "Indenture"), between the Company and Manufacturers and Traders Trust
Company, as Trustee (the "Trustee"), a copy of which is filed as an exhibit to
the Registration Statement of which this Prospectus is a part. The following
summary of certain provisions of the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all of the
provisions of the Indenture, including the definitions therein of certain
terms. Wherever defined terms of the Indenture are referred to, such defined
terms are incorporated herein by reference.
GENERAL
The Notes will be unsecured, subordinated, general obligations of the
Company, limited in aggregate principal amount to $86,250,000, including up to
$11,250,000 principal amount solely to cover over-allotments, if any, and will
mature on November 1, 2005. The Notes will bear interest from the date of
issuance, or from the most recent date to which interest has been paid or
provided for, at the rate stated on the cover page hereof, payable in arrears
on May 1 and November 1 of each year, commencing May 1, 1996, to the persons in
whose names the Notes are registered at the close of business on the preceding
April 15 and October 15. Interest will be computed on the basis of a 360-day
year consisting of twelve 30-day months.
Principal and premium, if any, and interest on the Notes are to be payable,
and the Notes will be exchangeable and transfers thereof will be registrable,
at the offices of the Company or its agent maintained for such purposes in The
City of New York; provided that payment of interest may, at the option of the
Company, be made by check mailed to a holder at his registered address. The
Notes will be convertible at the aforesaid offices of the Company or its agent.
The Notes will be issued only in fully registered form without coupons, in
denominations of $1,000 and any integral multiple thereof. The Notes are
exchangeable and transfers thereof will be registered without charge therefor,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
When issued, the Notes will be a new issue of securities with no established
trading market. The Company has been advised by the Underwriters that they
presently intend to make a market in the Notes, but they are not obligated to
do so and may discontinue any market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for the Notes.
CONVERSION RIGHTS
The holders of the Notes will be entitled at any time prior to the close of
business on November 1, 2005, subject to prior redemption or repurchase, to
convert such Notes or portions thereof (which are $1,000 or integral multiples
thereof) into Common Stock, at the conversion rate stated on the cover page
hereof, subject to adjustment as described below. The Company may also increase
the conversion rate at any time, temporarily or otherwise, by any amount so
long as the conversion rate does not cause Common Stock to be issued at less
than its par value. The right to convert Notes called for redemption or subject
to a right of repurchase will terminate at the close of business on the second
business day prior to the redemption or repurchase date, and will be lost if
not exercised prior to that time unless the Company defaults in making the
payments due upon redemption or repurchase.
If any Note not called for redemption is converted between the record date
for the payment of interest and the next succeeding interest payment date, such
Note must be accompanied by funds equal to the interest payable on such
succeeding interest payment date on the principal amount so converted, and the
interest on the principal amount of the Note being converted will be paid on
such next succeeding interest payment date to the registered holder of such
Note on the immediately preceding record date except as provided in the
17
<PAGE>
Indenture. A Note converted on an interest payment date need not be accompanied
by any payment, and the interest on the principal amount of the Note being
converted will be paid on such interest payment date to the registered holder
of such Note on the immediately preceding record date. Subject to the aforesaid
right of the registered holder to receive interest, no payment or adjustment
will be made on conversion for interest accrued on the converted Note or for
dividends on the Common Stock issued on conversion. Fractional shares of Common
Stock shall not be issued upon conversion, but, in lieu thereof, the Company
will pay a cash adjustment based upon the market price of the Common Stock on
the first business day prior to the day of conversion, as provided in the
Indenture.
The conversion rate is subject to adjustment upon the occurrence of certain
events, including, without duplication: (a) any payment of a dividend (or other
distribution) payable in Common Stock on any class of Capital Stock of the
Company and any subdivision, combination or reclassification of Common Stock,
(b) any issuance to all holders of Common Stock of shares of Common Stock or
rights, options or warrants entitling them to subscribe for or purchase Common
Stock at less than the then current market price (as determined in accordance
with the Indenture) of Common Stock; provided, however, that if such rights,
options or warrants are only exercisable upon the occurrence of certain
triggering events, then the conversion rate will not be adjusted until such
triggering events occur, (c) any distribution to all holders of Common Stock of
evidences of indebtedness, shares of Capital Stock other than Common Stock,
cash or other assets (including securities, but excluding those dividends,
rights, options, warrants and distributions referred to in clauses (a) and (b)
above and excluding dividends and distributions paid exclusively in cash), (d)
any distribution consisting exclusively of cash (excluding any cash portion of
distributions referred to in (c) above) to all holders of Common Stock in an
aggregate amount that, combined together with (i) all other such all-cash
distributions made within the then preceding 12 months in respect of which no
adjustment has been made and (ii) any cash and the fair market value of other
consideration paid or payable in respect of any tender offer by the Company or
any of its subsidiaries for Common Stock concluded within the preceding 12
months in respect of which no adjustment has been made, exceeds 20% of the
Company's market capitalization (defined as being the product of the then
current market price of the Common Stock times the number of shares of Common
Stock then outstanding) on the record date of such distribution, and (e) the
completion of a tender offer made by the Company or any of its subsidiaries for
Common Stock that involves an aggregate consideration that, together with (i)
any cash and other consideration payable in a tender offer by the Company or
any of its subsidiaries for Common Stock expiring within the 12 months
preceding the expiration of such tender offer in respect of which no adjustment
has been made and (ii) the aggregate amount of any such all-cash distributions
referred to in (d) above to all holders of Common Stock within the 12 months
preceding the expiration of such tender offer in respect of which no
adjustments have been made, exceeds 20% of the Company's market capitalization
at the expiration of such tender offer.
If the Company distributes rights or warrants (other than those referred to
in clause (b) in the preceding paragraph) pro rata to all holders of Common
Stock, so long as any such rights or warrants have not expired or been redeemed
by the Company, the holder of any Note surrendered for conversion will be
entitled to receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion (the "Conversion Shares"), a number of
rights or warrants to be determined as follows: (i) if such conversion occurs
on or prior to the date for the distribution to the holders of Common Stock of
rights or warrants of separate certificates evidencing such rights or warrants
(the "Distribution Date"), the same number of rights or warrants to which a
holder of a number of shares of Common Stock equal to the number of Conversion
Shares is entitled at the time of such conversion in accordance with the terms
and provisions of and applicable to the rights or warrants, and (ii) if such
conversion occurs after such Distribution Date, the same number of rights or
warrants to which a holder of the number of shares of Common Stock into which
such Note was convertible immediately prior to such Distribution Date would
have been entitled on such Distribution Date in accordance with the terms and
provisions of and applicable to the rights or warrants. The conversion price of
the Notes will not be subject to adjustment on account of any declaration,
distribution or exercise of such rights or warrants.
In case of any reclassification, consolidation or merger of the Company with
or into another person or any merger of another person with or into the Company
(with certain exceptions), or in case of any sale,
18
<PAGE>
transfer or conveyance of all or substantially all of the assets of the
Company, each Note then outstanding will, without the consent of any holder of
Notes, become convertible only into the kind and amount of securities, cash and
other property receivable upon such reclassification, consolidation, merger,
sale, transfer or conveyance by a holder of the number of shares of Common
Stock into which such Note was convertible immediately prior thereto, after
giving effect to any adjustment event.
No adjustment in the conversion rate will be required unless such adjustment
would require a change of at least 1% of the price then in effect; provided,
however, that any adjustment that would otherwise be required to be made shall
be carried forward and taken into account in any subsequent adjustment.
OPTIONAL REDEMPTION BY THE COMPANY
The Notes will be redeemable at the option of the Company, in whole or in
part (in any integral multiple of $1,000), at any time on or after November 3,
1998, on not less than 15 days, nor more than 60 days, notice mailed to the
registered holders thereof at their last registered addresses, at the following
redemption prices (expressed as percentages of the principal amount), together
with accrued and unpaid interest to and including the date fixed for
redemption, if redeemed during the 12-month period beginning November 1 of the
following years (except November 3 in 1998):
<TABLE>
<CAPTION>
YEARS REDEMPTION PRICE
- ----- ----------------
<S> <C>
1998............... %
1999............... %
2000............... %
2001............... %
</TABLE>
<TABLE>
<CAPTION>
YEARS REDEMPTION PRICE
- ----- ----------------
<S> <C>
2002............... %
2003............... 100.00%
2004............... 100.00%
</TABLE>
If less than all of the Notes are to be redeemed, the Trustee will select the
particular Notes (or the portions thereof) to be redeemed either by lot, pro
rata or by such other method as the Trustee shall deem fair and appropriate,
but in any such event, in such manner as complies with applicable legal and
stock exchange requirements. On or after the redemption date, interest will
cease to accrue on Notes or portions thereof called for redemption.
The Notes will not have the benefit of any sinking fund.
REPURCHASE OF NOTES UPON A CHANGE IN CONTROL
If, at any time there occurs a Change in Control (as defined) with respect to
the Company, each holder of Notes shall have the right upon receipt of a
Repurchase Right Notice (as defined below), 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 "Repurchase
Date") that is no later than 45 days after the date of the Repurchase Right
Notice at a purchase price equal to 100% of the principal amount thereof, plus
accrued and unpaid interest to the Repurchase Date.
Within 30 days after the occurrence of a Change in Control, the Company or,
at the request of the Company, the Trustee, shall deliver to all holders of
record of the Notes a notice (the "Repurchase Right Notice") of the occurrence
of such Change in Control and of the repurchase right arising as a result
thereof. The Company shall deliver a copy of the Repurchase Right Notice to the
Trustee. To exercise the repurchase right, on or before the 30th day after the
date of the Repurchase Right Notice, holders of Notes must deliver written
notice to the Company (or an agent designated by the Company for such purposes)
of the holder's exercise of such right, together with the Notes with respect to
which the right is being exercised, duly endorsed for transfer. Such written
notice shall be irrevocable except with respect to conversions permitted prior
to the Repurchase Date.
19
<PAGE>
The right to require the repurchase of Notes shall not continue after a
discharge of the Company from its obligations under the Notes and the Indenture
with respect to the Notes in accordance with Article 8 of the Indenture.
Repurchase of the Notes may, under certain circumstances, constitute a default
or event of default under Senior Indebtedness then outstanding and, in such
instances, repurchase of the Notes would be prohibited unless and until such
default has been cured or waived. See "--Subordination". The failure to
repurchase the Notes in such instance would constitute an Event of Default. See
"--Events of Default".
If the Repurchase Date is between a regular record date for the payment of
interest and the next succeeding interest payment date, any Note to be
repurchased must be accompanied by funds equal to the interest payable on such
succeeding interest payment date on the principal amount to be repurchased
(unless such Note shall have been called for redemption, in which case no such
payment shall be required), and the interest on the principal amount of the
Note being repurchased will be paid on such next succeeding interest payment
date to the registered holder of such Note on the immediately preceding record
date. A Note repurchased on an interest payment date need not be accompanied by
any payment, and the interest on the principal amount of the Note being
repurchased will be paid on such interest payment date to the registered holder
of such Note on the immediately preceding record date.
As used herein, a "Change in Control" of the Company shall be deemed to have
occurred at such time as any person, together with its affiliates or
associates, other than the Management Group (as defined below), is or becomes
the beneficial owner, directly or indirectly, through a purchase, merger or
other acquisition transaction, of shares of capital stock of the Company
entitling such person to exercise 50% or more of the total voting power of all
shares of capital stock of the Company entitled to vote in elections of
directors; provided that a Change in Control shall not be deemed to have
occurred if either (i) the last sale price of the Common Stock for any five
trading days during the ten trading days immediately preceding the Change in
Control is at least equal to 105% of the conversion price in effect on the day
of the Change in Control or (ii) all of the consideration (excluding cash
payments for fractional shares) in the transaction or transactions constituting
the Change in Control consists of shares of common stock traded on a national
securities exchange or through NASDAQ or another comparable quotation system.
"Beneficial owner" shall be determined in accordance with Rule 13d-3, as in
effect on the date of the execution of the Indenture, promulgated by the
Securities and Exchange Commission under the Exchange Act. The "Management
Group" shall consist of the executive officers of the Company as of the date of
the Indenture, members of their immediate families, certain trusts for their
benefit, and legal representatives of, or heirs, beneficiaries or legatees
receiving Common Stock under, any such person's estate.
If the Company is required to make an offer to repurchase the Notes as a
result of the occurrence a Change in Control, there can be no assurance that
the Company will have sufficient funds available to pay the purchase price for
such Notes or will be permitted by its other indebtedness agreements to
repurchase such Notes.
If any repurchase pursuant to the foregoing provisions constitutes an "issuer
tender offer" as defined in Rule 13e-4 under the Exchange Act, the Company will
comply with the requirements of Rule 13e-4, Rule 14e-1 and any other tender
offer rules under the Exchange Act which then may be applicable, including the
filing of an Issuer Tender Offer Statement on Schedule 13E-4 with the
Securities and Exchange Commission and the furnishing of certain information
contained therein to the Note holders. The Company could, in the future, enter
into certain significant transactions that would not constitute a Change in
Control with respect to the Change in Control purchase feature of the Notes.
The Change in Control purchase feature of the Notes may in certain
circumstances make more difficult or discourage a takeover of the Company and,
thus, the removal of incumbent management. The Change in Control purchase
feature, however, is not the result of management's knowledge of any specific
effort to obtain control of the Company by means of a merger, tender offer,
solicitation or otherwise, or part of a plan by management to adopt a series of
anti-takeover provisions.
SUBORDINATION
The payment of principal of and premium, if any, and interest on the Notes
will, to the extent set forth in the Indenture, be subordinated and subject in
right of payment to the prior payment in full of all Senior
20
<PAGE>
Indebtedness of the Company, whether outstanding at the date of the Indenture
or later incurred. In the event of any default in the payment of the principal
of, or interest on, any Senior Indebtedness or any default permitting the
acceleration of Senior Indebtedness where notice of such default has been given
to the Company, no payment with respect to the principal or interest on the
Notes will be made by the Company unless and until such default has been cured
or waived. Upon any payment or distribution of the Company's assets to
creditors upon any dissolution, winding up, liquidation, reorganization,
bankruptcy, insolvency, receivership or other proceedings relating to the
Company, whether voluntary or involuntary, the holders of Senior Indebtedness
will first be entitled to receive payment in full of all amounts due thereon
before the holders of the Notes will be entitled to receive any payment upon
the principal of or premium, if any, or interest on the Notes.
By reason of such subordination, in the event of the insolvency of the
Company, holders of Notes may recover less ratably than holders of Senior
Indebtedness and other creditors of the Company.
"Senior Indebtedness" is defined in the Indenture as the principal of (and
premium, if any) and interest on (a) any and all other indebtedness and
obligations of the Company (including indebtedness of others guaranteed by the
Company) other than the Notes, whether or not contingent and whether
outstanding on the date of the Indenture or thereafter created, incurred or
assumed, which (i) is for money borrowed; (ii) is evidenced by any bond, note,
debenture or similar instrument; (iii) represents the unpaid balance on the
purchase price of any property, business, or asset of any kind; (iv) is an
obligation of the Company as lessee under any and all leases of property,
equipment or other assets required to be capitalized on the balance sheet of
the lessee under generally accepted accounting principles; (v) is a
reimbursement obligation of the Company with respect to letters of credit; (vi)
is an obligation of the Company with respect to interest swap obligations and
foreign exchange agreements; or (vii) is an obligation of others secured by a
lien to which any of the properties or assets (including, without limitation,
leasehold interests and any other tangible or intangible property rights) of
the Company are subject, whether or not the obligations secured thereby shall
have been assumed by the Company or shall otherwise be the Company's legal
liability and (b) any deferrals, amendments, renewals, extensions,
modifications and refundings of any indebtedness or obligations of the types
referred to above; provided that Senior Indebtedness shall not include (i) the
Notes; (ii) the Company's 6 7/8% Convertible Subordinated Notes due 2002; (iii)
any indebtedness or obligation of the Company which, by its terms or the terms
of the instrument creating or evidencing it, is not superior in right of
payment to the Notes; (iv) any indebtedness or obligation of the Company to any
of its subsidiaries and (v) any indebtedness or obligation incurred by the
Company in connection with the purchase of assets, materials or services in the
ordinary course of business and which constitutes a trade payable.
As of August 31, 1995, as adjusted to give effect to the issuance of the
Notes and the application of the proceeds therefrom, the amount of the
Company's Senior Indebtedness aggregated approximately $111,349,000 and the
amount of the trade payables and other indebtedness of the Company's
subsidiaries aggregated approximately $90,590,000. The Notes will be
effectively subordinated to all rights of third party creditors of the
Company's subsidiaries. The Company and its subsidiaries expect from time to
time to incur additional indebtedness, including, but not limited to, Senior
Indebtedness. The Indenture will not prohibit or limit the incurrence of such
additional indebtedness.
EVENTS OF DEFAULT
The following shall constitute Events of Default with respect to the Notes:
(i) failure to pay the principal of any Note when such principal becomes due
and payable at maturity, upon acceleration or otherwise, whether or not such
payment is prohibited by the subordination provisions of the Indenture; (ii)
failure to pay interest when due, whether or not such payment is prohibited by
the subordination provisions of the Indenture, and such failure continues for a
30-day period; (iii) a default in the observance or performance of any other
covenant or agreement of the Company in the Note or the Indenture that
continues for the period and after the notice specified below; (iv) an event of
default shall have occurred and be continuing under any other evidence of
indebtedness of the Company of any of its subsidiaries, whether such
indebtedness now
21
<PAGE>
exists or is created hereafter, which event of default results in the
acceleration of such indebtedness which, together with any such other
indebtedness so accelerated, aggregates more than $10,000,000 and such
acceleration is not rescinded or indebtedness, paid or discharged for the
period and after the notice specified below; (v) any final judgment or
judgments for payment of money in excess of $10,000,000 in the aggregate shall
be rendered against the Company or a subsidiary and shall remain unstayed,
unsatisfied or undischarged for the period and after the notice specified
below; and (vi) certain events of bankruptcy, insolvency or reorganization. The
Company is required to deliver to the Trustee within 120 days after the end of
each fiscal year of the Company, an officer's certificate stating whether or
not the signatories know of any default by the Company under the Indenture and
the Notes and, if any default exists, describing such default.
A default under clause (iii), (iv) or (v) above is not an Event of Default
until the Trustee or the holders of at least 25% in principal amount of the
Notes notify the Company of the default and the Company does not cure the
default within 60 days with respect to clauses (iii) or (v), and within 30 days
with respect to clause (iv), after receipt of the notice. The notice must
specify the default, demand that it be remedied and state that the notice is a
"Notice of Default." If the holders of 25% in principal amount of the
outstanding Notes request the Trustee to give such notice on their behalf, the
Trustee shall do so.
In case an Event of Default (other than an Event of Default resulting from
bankruptcy, insolvency or reorganization) shall have occurred and be
continuing, the Trustee, by notice to the Company, or the holders of 25% of the
principal amount of the Notes then outstanding, by notice to the Company and
the Trustee, may declare the principal amount of the Notes, plus accrued
interest, to be immediately due and payable. In case an Event of Default
resulting from certain events of bankruptcy, insolvency or reorganization shall
occur, such amounts shall be due and payable without any declaration or any act
on the part of the Trustee or the holders of the Notes. Such declaration of
acceleration may be rescinded and past defaults may be waived by the holders of
a majority of the principal amount of the Notes upon conditions provided in the
Indenture. Except to enforce the right to receive payment of principal or
interest when due, no holder of a Note may institute any proceeding with
respect to the Indenture or for any remedy thereunder unless such holder has
previously given to the Trustee written notice of a continuing Event of Default
and unless the holders of 25% of the principal amount of the Notes then
outstanding have requested the Trustee to institute proceedings in respect of
such Event of Default and have offered the Trustee reasonable indemnity against
loss, liability and expense to be thereby incurred, the Trustee has failed so
to act for 60 days after receipt of the same and during such 60-day period the
holders of a majority of the principal amount of the Notes have not given the
Trustee a direction inconsistent with the request. Subject to certain
restrictions, the holders of a majority in principal amount of the Notes will
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture, that is unduly prejudicial
to the rights of any holder of a Note or that would involve the Trustee in
personal liability and the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
MODIFICATION OF THE INDENTURE
Except in certain circumstances, the Indenture, and obligations of the
Company and the rights of the holders of the Notes may be modified by the
Company only with the consent of the holders of more than 50% in aggregate
principal amount of the outstanding Notes; but no modifications of certain
provisions of the Indenture including any modification of the terms of payment
of principal (or premium, if any) or interest or a modification adversely
affecting the terms of conversion or reducing the percentage required for
modification will be effective against any holder of Notes without such
holder's consent.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Company shall not consolidate or merge with or into any other entity or,
directly or indirectly, sell, assign, transfer or lease all or substantially
all of its assets to any person unless (i) the surviving or successor
22
<PAGE>
entity in the event of a merger or consolidation, or the person to which a
sale, assignment, transfer or lease is made (a) is an entity organized and
existing under the laws of the United States, any state thereof or the District
of Columbia and (b) expressly assumes by supplemental indenture all the
obligations of the Company under the Notes and the Indenture; and (ii)
immediately after giving effect to such transaction, no Event of Default and no
event which, after notice or lapse of time, or both, would become an Event of
Default, exists.
DISCHARGE OF INDENTURE
The Company may terminate substantially all of its obligations under the
Indenture at any time by delivering all outstanding Notes to the Trustee for
cancellation and paying any other sums payable under the Indenture.
The Company may terminate substantially all of its obligations under the
Indenture, other than the obligations to pay the principal of, premium, if any,
and interest on the Notes and to provide for the conversion of the Notes prior
to maturity, at any time during the final year of the term of the Notes, by
depositing with the Trustee or a paying agent money or non-callable United
States Government obligations sufficient to pay all remaining indebtedness of
the Notes.
GOVERNING LAW
The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York, without regard to principles of
conflicts of law.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, $.01 par value per share, and 2,000,000 shares of Preferred
Stock, $.01 par value per share (the "Preferred Stock").
COMMON STOCK
At September 30, 1995, there were 6,949,715 shares of Common Stock
outstanding (excluding treasury shares). Each holder of Common Stock is
entitled to one vote per share for the election of directors and for all other
matters to be voted on by the Company's stockholders. Holders of Common Stock
do not have cumulative voting rights.
The holders of Common Stock are entitled to receive dividends, if any, as may
be declared from time to time by the Board of Directors from funds legally
available therefor. Upon liquidation or dissolution of the Company, the holders
of Common Stock are entitled to receive pro rata all assets available for
distribution to stockholders. There are no preemptive or other subscription
rights, conversion rights, or redemption or sinking fund provisions with
respect to shares of Common Stock. All of the outstanding shares of Common
Stock are fully paid and nonassessable, and, when issued upon conversion of the
Notes in accordance with the terms of the Notes and the Indenture, the shares
of Common Stock to be issued upon conversion of the Notes will be fully paid
and nonassessable.
PREFERRED STOCK
The Board of Directors of the Company has authority to issue up to 2,000,000
shares of Preferred Stock in one or more series and to determine the rights,
preferences, privileges and restrictions for each such series. This authority
eliminates delays associated with a stockholder vote on specific issuances. The
ability of the Board of Directors to issue Preferred Stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from acquiring, a majority of the
outstanding voting stock of the Company.
23
<PAGE>
The voting and other rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of holders of any Preferred
Stock that may be issued in the future.
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Pursuant to authority conferred by Section 102 of the Delaware General
Corporation Law (the "DGCL"), the Company's Certificate of Incorporation (the
"Certificate") contains a provision providing that no director of the Company
shall be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability for
(i) any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payment of
dividends as provided in Section 174 of the DGCL and (iv) any transaction from
which the director derived an improper personal benefit. This provision is
intended to eliminate the risk that a director might incur personal liability
to the Company or its stockholders for breach of the duty of care. The
Certificate also provides that if Delaware law is amended to eliminate or limit
further the liability of directors, then the liability of a director of the
Company shall be eliminated or limited, without further stockholder action.
Section 145 of the DGCL contains provisions permitting and, in some
situations, requiring Delaware corporations, such as the Company, to provide
indemnification to their officers and directors for losses and litigation
expenses incurred in connection with their service to the corporation in those
capacities. The Company's By-Laws contain such a provision requiring
indemnification by the Company of its directors and officers to the fullest
extent permitted by law, as the law may be amended from time to time.
DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the DGCL. In
general, this statute prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
becomes an interested stockholder, unless the business combination is approved
in a prescribed manner. An "interested stockholder" is a person who, together
with affiliates and associates, owns (or within the prior three years did own)
15% or more of the corporation's voting stock. Such provisions could render the
Company more difficult to be acquired pursuant to an unfriendly acquisition by
a third party by making it more difficult for such person to obtain control of
the Company without the approval of the Board of Directors.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Norwest Bank
Minnesota, N.A.
24
<PAGE>
UNDERWRITING
Subject to the terms and subject to the conditions set forth in the
underwriting agreement (the "Underwriting Agreement") between the Company and
PaineWebber Incorporated and Smith Barney Inc. (the "Underwriters"), the
Company has agreed to issue and sell to the Underwriters severally, and the
Underwriters have severally agreed to purchase from the Company, the respective
principal amounts of Notes offered hereby set forth opposite their respective
names below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
----------- ----------------
<S> <C>
PaineWebber Incorporated................................. $
Smith Barney Inc. .......................................
-----------
Total.................................................. $75,000,000
===========
</TABLE>
The Underwriting Agreement provides that the obligation of the Underwriters
to purchase the Notes is subject to the approval of certain legal matters by
counsel and to certain other conditions. If any Notes are purchased by the
Underwriters pursuant to the Underwriting Agreement, all such Notes must be so
purchased.
The Underwriters have advised the Company that they propose to offer the
Notes to the public initially at the price to the public set forth on the cover
page of this prospectus and to certain dealers at such offering price less a
concession not to exceed % of the principal amount of the Notes. Each
Underwriter may allow, and such dealers may reallow, a concession not in excess
of % of the principal amount of the Notes to certain other dealers. After the
initial public offering of the Notes, the offering price and other selling
terms may be changed.
There is currently no public market for the Notes. The Notes are a new issue
of securities, have no established trading market and may not be widely
distributed. The Underwriters have indicated that they presently intend to make
a market in the Notes, subject to applicable laws and regulations. However, the
Underwriters are not obligated to do so and any such market-making may be
discontinued without notice at any time, at an Underwriter's sole discretion.
There can be no assurance that an active market for the Notes will develop or,
if a market does develop, at what prices the Notes will trade. If such a market
were to develop, the Notes could trade at prices that may be higher or lower
than the initial offering price thereof, depending on many factors, including
prevailing interest rates, general economic conditions, the Company's operating
results and the market for similar debt securities. To the extent that an
active trading market for the Notes does not develop, the liquidity and trading
prices for the Notes may be adversely affected.
The Company has granted to the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an additional $11,250,000
in aggregate principal amount of the Notes at the same price as the initial
$75,000,000 aggregate principal amount of the Notes to be purchased by the
Underwriters. The Underwriters may exercise such option solely to cover over-
allotments in the sale of the Notes.
The Company and its Chairman and Chief Executive Officer have agreed with the
Underwriters that they will not, without the prior written consent of the
Underwriters, offer, sell or contract to sell, or otherwise dispose of,
directly or indirectly, or announce the offering of, any shares of Common Stock
beneficially owned by them, or any securities convertible into, or exchangeable
for, such shares of Common Stock, except those offered hereby or disposed of as
bona fide gifts and except, in the case of the Company, in connection with
certain employee benefit plans, for a period of 90 days from the date of the
Underwriting Agreement.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, and to
contribute to payments that the Underwriters may be required to make in respect
thereof.
25
<PAGE>
LEGAL MATTERS
Certain legal matters relating to the issuance and sale of the Notes offered
hereby are being passed upon for the Company by Cahill Gordon & Reindel (a
partnership including a professional corporation), New York, New York, and for
the Underwriters by Skadden, Arps, Slate, Meagher & Flom, New York, New York.
EXPERTS
The audited financial statements incorporated by reference in this Prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated herein in
reliance upon the authority of said firm as experts in giving said report.
26
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Documents by Reference.................................... 2
Prospectus Summary......................................................... 3
Risk Factors............................................................... 7
Use of Proceeds............................................................ 8
Capitalization............................................................. 9
Price Range of Common Stock................................................ 10
Dividend Policy............................................................ 10
Business................................................................... 11
Description of Notes....................................................... 17
Description of Capital Stock............................................... 23
Underwriting............................................................... 25
Legal Matters.............................................................. 26
Experts.................................................................... 26
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$75,000,000
CONTINENTAL HOMES
HOLDING CORP.
% CONVERTIBLE
SUBORDINATED NOTES DUE 2005
---------------
PROSPECTUS
---------------
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
---------------
, 1995
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses (other than the registration and NASD filing fees) are
estimated.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 29,742
NASD filing fee................................................. 9,125
Blue Sky fees and expenses...................................... 20,000
Printing and engraving.......................................... 100,000
Accountants' fees and expenses.................................. 25,000
Legal fees and expenses......................................... 75,000
Trustee fees and expenses....................................... 10,000
Miscellaneous................................................... 6,133
--------
Total......................................................... $275,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation, as amended, provides that the
Company shall, to the full extent permitted by Sections 102 and 145 of the
General Corporation Law of the State of Delaware, as amended from time to time,
indemnify all persons whom it may indemnify pursuant thereto and eliminates the
personal liability of its directors to the full extent permitted by Section
102(b)(7) of the General Corporation Law of the State of Delaware, as amended
from time to time.
Section 145 of the General Corporation Law of the State of Delaware permits a
corporation to indemnify its directors and officers against expenses (including
attorney's fees), judgments, fines and amounts paid in settlements actually and
reasonably incurred by them in connection with any action, suit or proceeding
brought by third parties, if such directors or officers acted in good faith and
in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. In a
derivative action, i.e., one by or in the right of the corporation,
indemnification may be made only for expenses actually and reasonably incurred
by directors and officers in connection with the defense or settlement of an
action or suit, and only with respect to a matter as to which they shall have
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation, except that no
indemnification shall be made if such person shall have been adjudged liable
for negligence or misconduct in the performance of his respective duties to the
corporation, although the court in which the action or suit was brought may
determine upon application that the defendant officers or directors are
reasonably entitled to indemnity for such expenses despite such adjudication of
liability.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a corporation may eliminate or limit the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the General Corporation
Law of the State of Delaware, or (iv) for any transaction from which the
director derived an improper personal benefit. No such provision shall
eliminate or limit the liability of a director for any act or omission
occurring prior to the date when such provision becomes effective.
II-1
<PAGE>
Section 6 of the Underwriting Agreement filed as Exhibit 1 provides that the
Underwriters named therein will indemnify and hold harmless the Company and
each director, officer or controlling person of the Company from and against
certain liabilities, including liabilities under the Securities Act of 1933.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
NUMBER EXHIBITS
------- --------
<C> <S>
1* --Form of Underwriting Agreement.
2.1 --Stock Purchase Agreement between William O. Milburn and the Company
dated July 28, 1993. Incorporated by reference to the Company's
report on Form 8-K dated July 29, 1993.
2.2(a) --Stock Purchase Agreement between Seller and the Company dated
November 3, 1994. Incorporated by reference to Exhibit 2.1 to the
Company's report on Form 8-K dated November 18, 1994.
2.2(b) --Amendment to Stock Purchase Agreement between Seller and the Company
dated November 18, 1994. Incorporated by reference to Exhibit 2.2(b)
to the Company's Report on Form 10-K for the year ended May 31, 1995.
2.2(c) --Second Amendment to Stock Purchase Agreement between Seller and the
Company dated November 18, 1994. Incorporated by reference to Exhibit
2.2(c) to the Company's Report on Form 10-K for the year ended May
31, 1995.
2.2(d) --Third Amendment to Stock Purchase Agreement between Seller and the
Company dated July 12, 1995. Incorporated by reference to Exhibit
2.2(d) to the Company's Report on Form 10-K for the year ended May
31, 1995.
2.3 --Agreement dated as of September 18, 1995 between Robert J. and
Kathleen R. Wade and the Company. Incorporated by reference to
Exhibit 2.1 to the Company's Report on Form 10-Q for the quarter
ended August 31, 1995.
4.1* --Form of Indenture.
4.2* --Form of Note (Included in Exhibit 4.1).
4.3 --Indenture dated as of March 15, 1992 between the Company and
Manufacturers and Traders Trust Company, as Trustee. Incorporated by
reference to Exhibit 4.1 to the Company's report on Form 10-K for the
year ended May 31, 1992.
4.4 --Indenture dated as of August 1, 1992 between the Company and
Fidelity Bank, National Association, as Trustee. Incorporated by
reference to Exhibit 4.1 to the Company's report on Form 10-Q for the
quarter ended August 31, 1992.
5* --Opinion of Cahill Gordon & Reindel.
12* --Statement of Computation of Ratio of Earnings to Fixed Charges.
23.1* --Consent of Arthur Andersen LLP
23.2* --Consent of Cahill Gordon & Reindel (included in Exhibit 5).
24* --Powers of Attorney.
25* --Statement of Eligibility on Form T-1 of Trustee.
</TABLE>
- --------
* Filed herewith.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that:
For purposes of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in this Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned Registrant hereby undertakes that:
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as a part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON OCTOBER 18, 1995.
Continental Homes Holding Corp.
By: /s/ Donald R. Loback
__________________________________
DONALD R. LOBACK
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
PURSUANT TO THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN
SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Donald R. Loback
____________________________________________ Chairman, Chief October 18, 1995
(DONALD R. LOBACK) Executive
Officer and Director
*
____________________________________________ Chief Financial Officer, October 18, 1995
(KENDA B. GONZALES) Treasurer and Secretary
(Principal Financial
Officer and Principal
Accounting Officer)
*
____________________________________________ President, Chief October 18, 1995
(W. THOMAS HICKCOX) Operating Officer and
Director
*
____________________________________________ Director October 18, 1995
(BRADLEY S. ANDERSON)
*
____________________________________________ Director October 18, 1995
(JO ANN RUDD)
*
____________________________________________ Director October 18, 1995
(WILLIAM STEINBERG)
*By:
/s/ Donald R. Loback
____________________________________________
DONALD R. LOBACK, AS ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT INDEX
NUMBER DESCRIPTION
------- -------------
<C> <S>
1* --Form of Underwriting Agreement.
2.1 --Stock Purchase Agreement between William O. Milburn and the Company
dated July 28, 1993. Incorporated by reference to the Company's
report on Form 8-K dated July 29, 1993.
2.2(a) --Stock Purchase Agreement between Seller and the Company dated
November 3, 1994. Incorporated by reference to Exhibit 2.1 to the
Company's report on Form 8-K dated November 18, 1994.
2.2(b) --Amendment to Stock Purchase Agreement between Seller and the Company
dated November 18, 1994. Incorporated by reference to Exhibit 2.2(b)
to the Company's Report on Form 10-K for the year ended May 31, 1995.
2.2(c) --Second Amendment to Stock Purchase Agreement between Seller and the
Company dated November 18, 1994. Incorporated by reference to Exhibit
2.2(c) to the Company's Report on Form 10-K for the year ended May
31, 1995.
2.2(d) --Third Amendment to Stock Purchase Agreement between Seller and the
Company dated July 12, 1995. Incorporated by reference to Exhibit
2.2(d) to the Company's Report on Form 10-K for the year ended May
31, 1995.
2.3 --Agreement dated as of September 18, 1995 between Robert J. and
Kathleen R. Wade and the Company. Incorporated by reference to
Exhibit 2.1 to the Company's Report on Form 10-Q for the quarter
ended August 31, 1995.
4.1* --Form of Indenture.
4.2* --Form of Note (Included in Exhibit 4.1).
4.3 --Indenture dated as of March 15, 1992 between the Company and
Manufacturers and Traders Trust Company, as Trustee. Incorporated by
reference to Exhibit 4.1 to the Company's report on Form 10-K for the
year ended May 31, 1992.
4.4 --Indenture dated as of August 1, 1992 between the Company and
Fidelity Bank, National Association, as Trustee. Incorporated by
reference to Exhibit 4.1 to the Company's report on Form 10-Q for the
quarter ended August 31, 1992.
5* --Opinion of Cahill Gordon & Reindel.
12* --Statement of Computation of Ratio of Earnings to Fixed Charges.
23.1* --Consent of Arthur Andersen LLP
23.2* --Consent of Cahill Gordon & Reindel (included in Exhibit 5).
24* --Powers of Attorney.
25* --Statement of Eligibility on Form T-1 of Trustee.
</TABLE>
- --------
* Filed herewith.
<PAGE>
EXHIBIT 1
CONTINENTAL HOMES HOLDING CORP.
$75,000,000 __% Convertible Subordinated Notes due 2005
UNDERWRITING AGREEMENT
----------------------
November __, 1995
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
As Representatives of
the several Underwriters
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Dear Sirs:
Continental Homes Holding Corp., a Delaware corporation (the
"Company"), proposes to issue and sell an aggregate of $75,000,000 (the "Firm
Securities") principal amount of the Company's __% Convertible Subordinated
Notes due 2005 (the "Securities") to be issued pursuant to an Indenture dated as
of _________, 1995 (the "Indenture"), between the Company and Manufacturers and
Traders Trust Company, as Trustee (the "Trustee"). The Securities are
convertible into shares of common stock, par value $.01 per share, of the
Company (the "Common Stock"). The Company has also agreed to grant to you and
the other Underwriters an option (the "Option") to purchase up to an additional
$11,250,000 principal amount of
<PAGE>
Securities (the "Option Securities") on the terms and for the purposes set forth
in Section 1(b). The Firm Securities and the Option Securities are hereafter
collectively referred to as the "Securities". The Securities will be sold to
you and to the other underwriters named in Schedule I (collectively, the
"Underwriters") for whom you are acting as representatives (the
"Representatives").
The purchase price for the Securities to be paid by the several
Underwriters shall be agreed upon by the Company and the Representatives, acting
on behalf of the several Underwriters, and such agreement shall be set forth in
a separate written instrument substantially in the form of Exhibit A hereto (the
"Price Determination Agreement"). The Price Determination Agreement may take
the form of an exchange of any standard form of written telecommunication among
the Company and the Representatives and shall specify such applicable
information as is indicated in Exhibit A hereto. The offering of the Securities
will be governed by this Agreement, as supplemented by the Price Determination
Agreement. From and after the date of the execution and delivery of the Price
Determination Agreement, this Agreement shall be deemed to incorporate, and,
unless the context otherwise indicates, all references contained herein to "this
Agree-
2
<PAGE>
ment" and to the phrase "herein" shall be deemed to include the Price
Determination Agreement.
The Company confirms as follows its agreements with the
Representatives and the several other Underwriters.
1. Agreement to Sell and Purchase.
------------------------------
(a) On the basis of the representations, warranties and agreements of
the Company herein contained and subject to all the terms and conditions of this
Agreement, the Company agrees to sell to each Underwriter named below, and each
Underwriter agrees, severally and not jointly, to purchase from the Company, the
principal amount of the Firm Securities set forth opposite the name of such
Underwriter in Schedule I, plus such additional principal amount of Firm
Securities which such Underwriter may become obligated to purchase pursuant to
Section 8 hereof, all at the purchase price, to be agreed upon by the
Representatives and the Company in accordance with Section 1(c) or 1(d) and set
forth in the Price Determination Agreement. If the Company elects to rely on
Rule 430A (as hereinafter defined), Schedule I may be attached to the Price
Determination Agreement.
(b) Subject to all the terms and conditions of this Agreement, the
Company grants the Option to
3
<PAGE>
the several Underwriters to purchase, severally and not jointly, up to
$11,250,000 principal amount of Option Securities from the Company at the same
price per Security as the Underwriters shall pay for the Firm Securities. The
Option may be exercised only to cover over-allotments in the sale of the Firm
Securities by the Underwriters and may be exercised in whole or in part at any
time (but not more than once) on or before the 45th day after the date of this
Agreement (or, if the Company has elected to rely on Rule 430A, on or before the
45th day after the date of the Price Determination Agreement), upon written or
telegraphic notice (the "Option Securities Notice") by the Representatives to
the Company no later than 12:00 noon, New York City time, at least two and no
more than five business days before the date specified for closing in the Option
Securities Notice (the "Option Closing Date") setting forth the aggregate number
of Option Securities to be purchased and the time and date for such purchase.
On the Option Closing Date, the Company will issue and sell to the Underwriters
the number of Option Securities set forth in the Option Securities Notice, and
each Underwriter will purchase such percentage of the Option Securities as is
equal to the percentage of Firm Securities that such Underwriter is purchasing,
as ad-
4
<PAGE>
justed by the Representatives in such manner as they deem advisable to avoid
fractional shares.
(c) If the Company has elected not to rely on Rule 430A, the purchase
price for the Firm Securities to be paid by the several Underwriters shall be
agreed upon and set forth in the Price Determination Agreement, which shall be
dated the date hereof, and an amendment to the Registration Statement (as
hereinafter defined) containing such price information shall be filed before the
Registration Statement becomes effective.
(d) If the Company has elected to rely on Rule 430A, the purchase
price for the Firm Securities to be paid by the several Underwriters shall be
agreed upon and set forth in the Price Determination Agreement. In the event
that the Price Determination Agreement has not been executed by the close of
business on the fourth business day following the date on which the Registration
Statement becomes effective, this Agreement shall terminate forthwith, without
liability of any party to any other party except that Section 6 shall remain in
effect.
2. Delivery and Payment. Delivery of the Firm Securities shall be
--------------------
made to the Representatives for the accounts of the Underwriters against payment
of the purchase price by certified or official bank check
5
<PAGE>
payable in New York Clearing House (next-day) funds to the order of the Company
at the office of PaineWebber Incorporated, 1285 Avenue of the Americas, New
York, New York 10019. Such payment shall be made at 10:00 a.m., New York City
time, on the third business day following the date of this Agreement or, if the
Company has elected to rely on Rule 430A, the third business day after the date
on which the first bona fide offering of the Securities to the public is made by
the Underwriters or at such time on such other date, not later than [five]
business days after the date of this Agreement, as may be agreed upon by the
Company and the Representatives (such date is hereinafter referred to as the
"Closing Date").
To the extent the Option is exercised, delivery of the Option
Securities against payment by the Underwriters (in the manner specified above)
will take place at the offices specified above for the Closing Date at the time
and date (which may be the Closing Date) specified in the Option Securities
Notice.
Certificates evidencing the Securities shall be in definitive form and
shall be registered in such names and in such authorized denominations as the
Representa-
6
<PAGE>
tives shall request by written notice to the Company at least two business days
prior to the Closing Date or the Option Closing Date. For the purpose of
expediting the checking and packaging of certificates for the Securities, the
Company agrees to make such certificates available for inspection at least 24
hours prior to the Closing Date or the Option Closing Date, as the case may be.
The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the Securities by the Company to the respective
Underwriters shall be borne by the Company. The Company will pay and save each
Underwriter and any subsequent holder of the Securities harmless from any and
all liabilities with respect to or resulting from any failure or delay in paying
Federal and state stamp and other issuance taxes, if any, which may be payable
or determined to be payable in connection with the original issuance or sale to
such Underwriter of the Securities.
3. Representations and Warranties of the Company. The Company
---------------------------------------------
represents, warrants and covenants to each Underwriter that:
(a) The Company meets the requirements for use of Form S-3 and a
registration statement (Registration No. ____) on Form S-3 relating to the
Securities
7
<PAGE>
and the shares of Common Stock to be delivered upon conversion thereof,
including a preliminary prospectus and such amendments to such registration
statement as may have been required to the date of this Agreement, has been
prepared by the Company under the provisions of the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations (collectively referred to as
the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, and has been filed with the Commission. The term
"preliminary prospectus" as used herein means a preliminary prospectus as
contemplated by Rule 430 or Rule 430A ("Rule 430A") of the Rules and Regulations
included at any time as part of the registration statement. Copies of such
registration statement and amendments and of each related preliminary prospectus
have been delivered to the Representatives. If such registration statement has
not become effective, a further amendment to such registration statement,
including a form of final prospectus, necessary to permit such registration
statement to become effective will be filed promptly by the Company with the
Commission. If such registration has become effective, a final prospectus
containing information permitted to be omitted at the time of effectiveness by
Rule 430A will be filed by the
8
<PAGE>
Company with the Commission in accordance with Rule 424(b) of the Rules and
Regulations promptly after execution and delivery of the Price Determination
Agreement. The term "Registration Statement" means the registration statement
as amended at the time it becomes or became effective (the "Effective Date"),
including financial statements and all exhibits and any information deemed to be
included by Rule 430A. The term "Prospectus" means the prospectus as first
filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations
or, if no such filing is required, the form of final prospectus included in the
Registration Statement at the Effective Date. Any reference herein to the
Registration Statement, any preliminary prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 which were filed under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), on or before the Effective Date or
the date of such preliminary prospectus or the Prospectus, as the case may be.
Any reference herein to the terms "amend," "amendment" or "supplement" with
respect to the Registration Statement, any preliminary prospectus or the
Prospectus shall be deemed to refer to and include the filing of any document
under the
9
<PAGE>
Exchange Act after the Effective Date, or the date of any preliminary prospectus
or the Prospectus, as the case may be, and deemed to be incorporated therein by
reference.
(b) On the Effective Date, the date the Prospectus is first filed
with the Commission pursuant to Rule 424(b) (if required), at all times
subsequent to and including the Closing Date and, if later, the Option Closing
Date and when any post-effective amendment to the Registration Statement becomes
effective or any amendment or supplement to the Prospectus is filed with the
Commission, the Registration Statement and the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any amendment
or supplement thereto), including the financial statements included or
incorporated by reference in the Prospectus, did or will comply with the
applicable provisions of the Act, the Exchange Act, the rules and regulations
thereunder (the "Exchange Act Rules and Regulations"), the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"), the rules and regulations
thereunder (the "Trust Indenture Act Rules and Regulations") and the Rules and
Regulations and will contain all statements required to be stated therein in
accordance with the Act, the Exchange Act, the Exchange Act Rules and
Regulations and the Rules
10
<PAGE>
and Regulations. On the Effective Date and when any post-effective amendment to
the Registration Statement becomes effective, no part of the Registration
Statement, or any such amendment did or will contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein not misleading. At the Effective Date, the date the Prospectus or any
amendment or supplement to the Prospectus is filed with the Commission and at
the Closing Date, and if later, the Option Closing Date, the Prospectus did not
or will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The foregoing
representations and warranties in this Section 3(b) do not apply to any
statements or omissions made in reliance on and in conformity with information
relating to any Underwriter furnished in writing to the Company by the
Representatives specifically for inclusion in the Registration Statement or
Prospectus or any amendment or supplement thereto. For all purposes of this
Agreement, the amounts of the selling concession and reallowance set forth in
the Prospectus constitute the only information relating to any Underwriter
furnished in writing to the
11
<PAGE>
Company by the Representatives specifically for inclusion in the Registration
Statement, the preliminary prospectus or the Prospectus. The Company has not
distributed any offering material in connection with the offering or sale of the
Securities other than the Registration Statement, the preliminary prospectus,
the Prospectus or any other materials, if any, permitted by the Act. On the
Effective Date, the date the Prospectus is first filed with the Commission
pursuant to Rule 497 (if required), and at all subsequent times to and including
the Closing Date or, if later, the Option Closing Date, the Indenture will
comply with all applicable provisions of the Trust Indenture Act and the Trust
Indenture Act Rules and Regulations.
(c) The documents which are incorporated by reference in the
preliminary prospectus and the Prospectus or from which information is so
incorporated by reference, when they became effective or were filed with the
Commission, as the case may be (the "Incorporated Documents"), complied in all
material respects with the requirements of the Act or the Exchange Act, as
applicable, the Exchange Act Rules and Regulations and the Rules and
Regulations; and any documents so filed and incorporated by reference subsequent
to the Effective Date
12
<PAGE>
shall, when they are filed with the Commission, conform in all material respects
with the requirements of the Act and the Exchange Act, as applicable, the
Exchange Act Rules and Regulations and the Rules and Regulations.
(d) The financial statements of the Company and its subsidiaries set
forth in the Registration Statement and Prospectus fairly present the financial
condition of the Company and its subsidiaries as of the dates indicated and the
results of operations and changes in financial position for the periods therein
specified in conformity with generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise stated
therein).
(e) The Company and each of its subsidiaries has been duly
incorporated and is an existing corporation in good standing under the laws of
its jurisdiction of incorporation, has all requisite power and authority
(corporate and other) to conduct its business as described in the Registration
Statement and Prospectus and is duly qualified to do business in each
jurisdiction in which it owns or leases real property or in which the conduct of
its business requires such qualification, except where the failure to be so
qualified, considering all such cases in the aggregate, would not have a materi-
13
<PAGE>
al adverse effect on the business, properties, financial position or results of
operations of the Company and its subsidiaries taken as a whole; and all of the
outstanding shares of capital stock of each such subsidiary have been duly
authorized and validly issued, are fully paid and non-assessable and (except as
otherwise stated in the Registration Statement) are owned beneficially by the
Company subject to no security interest, other encumbrance or adverse claim.
Except as set forth on Schedule II hereto, there are no outstanding rights,
warrants or options to acquire, or instruments convertible into or exchangeable
for, any shares of capital stock or other equity interest in the Company or any
of its subsidiaries.
(f) All of the outstanding shares of Common Stock of the Company and
all other equity securities of the Company have been duly authorized and are
validly issued, fully paid and non-assessable and conform to the description
thereof in the Prospectus. The stockholders of the Company have no preemptive
rights with respect to the Common Stock. Except as set forth on Schedule II,
no person has any rights to the registration of securities by reason of the
Company's filing the Registration Statement with the Commission or otherwise.
14
<PAGE>
(g) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, neither the Company nor any of its subsidiaries has incurred
any liabilities or obligations, direct or contingent, or entered into any
transactions, not in the ordinary course of business, that are material to the
Company and its subsidiaries taken as a whole, and there has not been any
material change, on a consolidated basis, in the capital stock, current
liabilities or long-term obligations of the Company and its subsidiaries taken
as a whole, or any material adverse change, in the condition (financial or
other), business, net worth, results of operations or properties of the Company
and its subsidiaries taken as a whole.
(h) Except as set forth in the Prospectus, neither the Company nor
any of its subsidiaries is in violation, and, to the best knowledge of the
Company, no director, officer, or employee of the Company or any of its
subsidiaries is in violation, of any law, ordinance, administrative or
governmental rule or regulation or court decree (including, without limitation,
any relating to environmental regulation) applicable to it or them, and there is
not pending or, to the knowledge of
15
<PAGE>
the Company, threatened any action, suit, or proceeding (including, without
limitation, any relating to environmental regulation) to which the Company or
any of its subsidiaries is a party, or, to the best knowledge of the Company, to
which any director, officer or employee of the Company is a party, before or by
any court or governmental agency or body, that in either case might result in
any material adverse change in the condition (financial or other), business, net
worth or results of operations of the Company and its subsidiaries taken as a
whole, or might materially and adversely affect the properties or assets
thereof.
(i) There are no contracts or documents of the Company or any of its
subsidiaries that are required to be filed as exhibits to the Registration
Statement or to the Incorporated Documents by the Act or the Exchange Act or by
the Rule and Regulations or the Exchange Act Rules and Regulations that have not
been so filed.
(j) Each of this Agreement and the Indenture has been duly
authorized, executed and delivered by the Company and each is a legal, valid and
binding agreement of the Company enforceable in accordance with its terms,
except to the extent that (a) enforcement thereof
16
<PAGE>
may be limited by (1) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (2) general principles of equity (regardless of whether
enforcement is considered in a proceeding at law or in equity); and (b) with
respect to this Agreement, as rights to indemnity and contribution hereunder may
be limited by federal or state laws relating to securities or the policies
underlying such laws.
(k) The Indenture has been duly qualified under the Trust Indenture
Act and conforms in all material respects to the description thereof in the
Registration Statement and the Prospectus.
(l) The Securities will conform in all material respects to the
description thereof in the Prospectus. The Securities have been duly authorized
and, when executed by the Company and authenticated by the Trustee in accordance
with the Indenture and delivered to the Underwriters against payment therefor in
accordance with the terms hereof and the Indenture, will have been validly
issued and delivered and will constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforcement may be limited by (1)
17
<PAGE>
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (2) general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity). The shares of Common Stock issuable upon
conversion of the Securities have been duly authorized and reserved for issuance
and, when delivered upon conversion of the Securities, will have been validly
issued and fully paid and will be non-assessable and free of preemptive or
similar rights.
(m) The performance of this Agreement and the Indenture and the
consummation of the transactions herein and therein contemplated, including the
issuance of Common Stock upon conversion of the Securities, will not result in a
breach or violation of any of the terms and provisions of, or constitute a
default under, any agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them is bound or to which any
of the property of the Company or any of its subsidiaries is subject, the
charter or bylaws of the Company or any of its subsidiaries, or any statute or
any order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their re-
18
<PAGE>
spective properties, which breach, violation or default, with respect to any
such agreement or instrument, would have a material adverse effect on the
condition (financial or other), business, net worth, results of operations or
properties of the Company and its subsidiaries taken as a whole; no consent,
approval, authorization or order of, or filing with, any court or governmental
agency or body is required for the consummation of the transactions contemplated
by this Agreement or the Indenture in connection with the issuance or sale of
the Securities to be sold by the Company, except such as may be required under
the Act or state securities or Blue Sky laws; and the Company has full corporate
power and authority to authorize, issue and sell the Securities to be sold by it
as contemplated by this Agreement and the Indenture.
(n) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Securities.
(o) The Company and each of its subsidiaries has all material
governmental licenses, certificates, permits, authorizations, approvals,
franchises or other rights necessary to engage in the business current-
19
<PAGE>
ly conducted by it as described in the Prospectus, except such as may be
necessary for the development of and construction on specific properties or as
do not materially adversely affect the condition (financial or other), business,
net worth, results of operations or properties of the Company and its
subsidiaries taken as a whole, and the Company has no reason to believe that any
governmental body or agency is considering limiting, suspending or revoking any
such license, certificate, permit, authorization, approval, franchise or right.
(p) The Company is not in breach or violation of any of the terms and
provisions of, or in default under, any agreement or instrument to which the
Company or any of its subsidiaries is a party or by which it or any of them is
bound or to which any of the property of the Company or any of its subsidiaries
is subject, which breach, violation or default would have a material adverse
effect on the condition (financial or other), business, net worth, results of
operations or properties of the Company and its subsidiaries taken as a whole.
(q) The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as
20
<PAGE>
such terms are defined in the Investment Company Act of 1940, as amended.
4. Agreements of the Company. The Company agrees with the several
-------------------------
Underwriters as follows:
(a) The Company will not, either prior to the Effective Date or
thereafter during such period as the Prospectus is required by law to be
delivered in connection with sales of the Securities by an Underwriter or
dealer, file any amendment or supplement to the Registration Statement or the
Prospectus, unless a copy thereof shall first have been submitted to the
Representatives within a reasonable period of time prior to the filing thereof
and the Representatives shall not have objected thereto in good faith.
(b) The Company will use its best efforts to cause the Registration
Statement to become effective, and will notify the Representatives promptly, and
will confirm such advice in writing, (1) when the Registration Statement has
become effective and when any post-effective amendment thereto becomes
effective, (2) of any request by the Commission for amendments or supplements to
the Registration Statement or the Prospectus or for additional information, (3)
of the issuance by the Com-
21
<PAGE>
mission of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose or the threat
thereof, (4) of the happening of any event during the period mentioned in the
second sentence of Section 4(e) that in the judgment of the Company makes any
statement made in the Registration Statement or the Prospectus untrue or that
requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances in which they are made, not misleading and (5) of receipt by the
Company or any representative or attorney of the Company of any other
communication from the Commission relating to the Company, the Registration
Statement, any preliminary prospectus or the Prospectus. If at any time the
Commission shall issue any order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal of such order at the earliest possible moment. If the Company
has omitted any information from the Registration Statement pursuant to Rule
430A, the Company will use its best efforts to comply with the provisions of and
make all requisite filings with the Commission pursuant to
22
<PAGE>
said Rule 430A and to notify the Representatives promptly of all such filings.
(c) The Company will furnish to the Representatives, without charge,
two signed copies of the Registration Statement and of any post-effective
amendment thereto, including financial statements and schedules, and all
exhibits thereto (including any document filed under the Exchange Act and deemed
to be incorporated by reference into the Prospectus), and will furnish to the
Representatives, without charge, for transmittal to each of the other
Underwriters, a copy of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules but without
exhibits.
(d) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement.
(e) On the Effective Date, and thereafter from time to time, the
Company will deliver to each of the Underwriters, without charge, as many copies
of the Prospectus or any amendment or supplement thereto, as the Representatives
may reasonably request. The Company consents to the use of the Prospectus or
any amendment or supplement thereto by the several Underwriters and by all
23
<PAGE>
dealers to whom the Securities may be sold, both in connection with the offering
or sale of the Securities and for any period of time thereafter during which the
Prospectus is required by law to be delivered in connection therewith. If
during such period of time any event shall occur which in the judgment of the
Company or counsel to the Underwriters should be set forth in the Prospectus in
order to make any statement therein, in the light of the circumstances under
which it was made, not misleading, or if it is necessary to supplement or amend
the Prospectus to comply with law, the Company will forthwith prepare and duly
file with the Commission an appropriate supplement or amendment thereto, and
will deliver to each of the Underwriters, without charge, such number of copies
thereof as the Representatives may reasonably request. The Company shall not
file any document under the Exchange Act before the termination of the offering
of the Securities by the Underwriters if such document would be deemed to be
incorporated by reference into the Prospectus which is not approved by the
Representatives after reasonable notice thereof.
(f) Prior to any public offering of the Securities by the
Underwriters, the Company will cooperate with the Representatives and counsel to
the Under-
24
<PAGE>
writers in connection with the registration or qualification of the Securities
and the shares of Common Stock to be delivered upon conversion thereof for offer
and sale under the securities or Blue Sky laws of such jurisdictions as the
Representatives may request; provided, that in no event shall the Company be
obligated to qualify to do business in any jurisdiction where it is not now so
qualified or to take any action which would subject it to general service of
process in any jurisdiction where it is not now so subject.
(g) During the period of five years commencing on the Effective Date,
the Company will furnish to the Representatives and each other Underwriter who
may so request copies of such financial statements and other periodic and
special reports as the Company may from time to time distribute generally to the
holders of any class of its capital stock, and will furnish to the
Representatives and each other Underwriter who may so request a copy of each
annual or other report it shall be required to file with the Commission.
(h) The Company will make generally available to holders of its
securities as soon as may be practicable but in no event later than the last day
of the fifteenth full calendar month following the calendar
25
<PAGE>
quarter in which the Effective Date falls, an earnings statement (which need not
be audited but shall be in reasonable detail) for a period of 12 months ended
commencing after the Effective Date, and satisfying the provisions of Section
11(a) of the Act (including Rule 158 of the Rules and Regulations).
(i) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement is terminated, the Company will pay, or
reimburse if paid by the Representatives, all costs and expenses incident to the
performance of the obligations of the Company under this Agreement, including
but not limited to costs and expenses of or relating to (1) the preparation,
printing and filing of the Registration Statement and exhibits to it, each
preliminary prospectus, the Prospectus, any amendment or supplement to the
Registration Statement or the Prospectus and the Indenture, (2) the preparation
and delivery of certificates representing the Securities and the shares of
Common Stock to be delivered upon conversion thereof, (3) the printing of this
Agreement, the Agreement Among Underwriters, any Dealer Agreements and any
Underwriters' Questionnaire, (4) furnishing (including costs of shipping and
mailing) such copies of the Registration State-
26
<PAGE>
ment, the Prospectus and any preliminary prospectus, and all amendments and
supplements thereto, as may be requested for use in connection with the offering
and sale of the Securities by the Underwriters or by dealers to whom Securities
may be sold, (5) the listing of the Securities and the shares of Common Stock
to be delivered upon conversion thereof on the New York Stock Exchange, (6) any
filings required to be made by the Underwriters with the NASD, and the fees,
disbursements and other charges of counsel for the Underwriters in connection
therewith, (7) the registration or qualification of the Securities and the
shares of Common Stock to be delivered upon conversion thereof for offer and
sale under the securities or Blue Sky laws of such jurisdictions designated
pursuant to Section 4(f), including the fees, disbursements and other charges of
counsel to the Underwriters in connection therewith, and the preparation and
printing of preliminary, supplemental and final Blue Sky memoranda, (8) counsel
to the Company, (9) the transfer agent and registrar for the Securities and the
shares of Common Stock to be delivered upon conversion thereof, (10) the rating
of the Securities by one or more rating agencies and (11) the Trustee and any
agent of the Trustee and the fees, disbursements and other
27
<PAGE>
charges of counsel for the Trustee in connection with the Indenture and the
Securities.
(j) If this Agreement shall be terminated by the Company pursuant to
any of the provisions hereof (other than pursuant to Section 8) or if for any
reason the Company shall be unable to perform its obligations hereunder, the
Company will reimburse the several Underwriters for all out-of-pocket expenses
(including the fees, disbursements and other charges of counsel to the
Underwriters) reasonably incurred by them in connection herewith.
(k) The Company will not at any time, directly or indirectly, take
any action intended, or which might reasonably be expected, to cause or result
in, or which will constitute, stabilization of the price of the Securities or
the shares of Common Stock to be delivered upon conversion thereof to facilitate
the sale or resale of any of the Securities or such shares of Common Stock.
(l) The Company will apply the net proceeds from the offering and
sale of the Securities in the manner set forth in the Prospectus under "Use of
Proceeds".
28
<PAGE>
(m) The Company will not claim the benefit of any usury law against
any holders of Securities.
(n) The Company will not, and will cause Donald R. Loback to enter
into an agreement with the Representatives in the form set forth in Exhibit B to
the effect that he will not, for a period of 90 days after the commencement
of the public offering of the Securities, without the prior written consent of
the Representatives, sell, contract to sell or otherwise dispose of any shares
of Common Stock or rights to acquire such shares (other than pursuant to
employee stock option plans or in connection with other employee incentive
compensation arrangements).
5. Conditions of Obligations of the Underwriters. In addition to
---------------------------------------------
the execution and delivery of the Price Determination Agreement, the obligations
of each Underwriter hereunder are subject to the following conditions:
(a) Notification that the Registration Statement has become effective
shall be received by the Representatives not later than 5:00 P.M., New York City
time, on the date of this Agreement or at such later date and time as shall be
consented to in writing by the Representatives and all filings required by Rule
424 of
29
<PAGE>
the Rules and Regulations and Rule 430A shall have been made.
(b) (i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall be
pending or threatened by the Commission, (ii) no order suspending the
effectiveness of the Registration Statement or the qualification or registration
of the Securities and the shares of Common Stock to be delivered upon conversion
thereof under the securities or Blue Sky laws of any jurisdiction shall be in
effect and no proceeding for such purpose shall be pending before or threatened
or contemplated by the Commission or the authorities of any such jurisdiction,
(iii) any request for additional information on the part of the staff of the
Commission or any such authorities shall have been complied with to the
satisfaction of the staff of the Commission or such authorities and (iv) after
the date hereof no amendment or supplement to the Registration Statement or the
Prospectus shall have been filed unless a copy thereof was first submitted to
the Representatives and the Representatives did not object thereto in good
faith, and the Representatives shall have received certificates, dated the
Closing Date and signed by the Chief Executive Offi-
30
<PAGE>
cer or the Chairman of the Board of Directors of the Company and the Chief
Financial Officer of the Company (who may, as to proceedings threatened, rely
upon the best of their information and belief), to the effect of clauses (i),
(ii) and (iii).
(c) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus (i) there shall not have been a
material adverse change in the general affairs, business, business prospects,
properties, management, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, in each case other
than as set forth in or contemplated by the Registration Statement and the
Prospectus, and (ii) neither the Company nor any of its subsidiaries shall have
sustained any material loss or interference with its business or properties from
fire, explosion, flood or other casualty, whether or not covered by insurance,
or from any labor dispute or any court or legislative or other governmental
action, order or decree, which is not set forth in the Registration Statement
and the Prospectus, if in the judgment of the Representatives any such
development makes it impracticable or
31
<PAGE>
inadvisable to consummate the sale and delivery of the Securities by the
Underwriters in accordance with the terms hereof and thereof.
(d) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company or any of its
subsidiaries or any of their respective officers or directors in their
capacities as such, before or by any Federal, state or local court, commission,
regulatory body, administrative agency or other governmental body, domestic or
foreign, in which litigation or proceeding an unfavorable ruling, decision or
finding would materially and adversely affect the business, properties, business
prospects, condition (financial or otherwise) or results of operations of the
Company and its subsidiaries taken as a whole.
(e) Each of the representations and warranties of the Company
contained herein shall be true and correct in all material respects at the
Closing Date and, with respect to the Option Securities, at the Option Closing
Date, as if made at the Closing Date, and all covenants and agreements herein
contained to be performed on the part of the Company and all conditions herein
32
<PAGE>
contained to be fulfilled or complied with by the Company at or prior to the
Closing Date and, with respect to the Option Securities, at or prior to the
Option Closing Date, shall have been duly performed, fulfilled or complied with.
(f) The Representatives shall have received opinions, dated the
Closing Date and, with respect to the Option Securities, the Option Closing
Date, and satisfactory in form and substance to counsel for the Underwriters,
from Cahill Gordon & Reindel, counsel to the Company, Timothy C. Westfall,
general counsel to the Company, and Floyd Sayer Associates, counsel to L&W
Investments, to the effect set forth in Exhibits C1, C2 and C3, respectively.
(g) The Representatives shall have received an opinion, dated the
Closing Date and, with respect to the Option Securities, the Option Closing
Date, from Skadden, Arps, Slate, Meagher & Flom, counsel to the Underwriters,
with respect to the Registration Statement, the Prospectus and this Agreement,
which opinion shall be satisfactory in all respects to the Representatives.
(h) Concurrently with the execution and delivery of this Agreement,
or, if the Company elects to
33
<PAGE>
rely on Rule 430A, on the date of the Prospectus, the Accountants shall have
furnished to the Representatives a letter, dated the date of its delivery,
addressed to the Representatives and in form and substance satisfactory to the
Representatives, confirming that they are independent accountants with respect
to the Company as required by the Act and the Rules and Regulations and with
respect to the financial and other statistical and numerical information
contained or incorporated by reference in the Registration Statement. At the
Closing Date and, as to the Option Securities, the Option Closing Date, the
Accountants shall have furnished to the Representatives a letter, dated the date
of its delivery, which shall confirm, on the basis of a review in accordance
with the procedures set forth in the letter from the Accountants, that nothing
has come to their attention during the period from the date of the letter
referred to in the prior sentence to a date (specified in the letter) not more
than five days prior to the Closing Date and the Option Closing Date which would
require any change in their letter dated the date hereof if it were required to
be dated and delivered at the Closing Date and the Option Closing Date.
34
<PAGE>
(i) Concurrently with the execution and delivery of this Agreement
or, if the Company elects to rely on Rule 430A, on the date of the Prospectus,
and at the Closing Date and, as to the Option Securities, the Option Closing
Date, there shall be furnished to the Representatives an accurate certificate,
dated the date of its delivery, signed by each of the Chief Executive Officer
and the Chief Financial Officer of the Company, in form and substance
satisfactory to the Representatives, to the effect that:
(i) Each signer of such certificate has carefully examined the
Registration Statement and the Prospectus (including any documents filed
under the Exchange Act and deemed to be incorporated by reference into the
Prospectus) and (A) as of the date of such certificate, such documents are
true and correct in all material respects and do not omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein not untrue or misleading and (B) in the case of the
certificate delivered at the Closing Date and the Option Closing Date,
since the Effective Date no event has occurred as a result of which it is
necessary to amend or supplement the Prospectus in order
35
<PAGE>
to make the statements therein not untrue or misleading in any material
respect and there has been no document required to be filed under the
Exchange Act and the Exchange Act Rules and Regulations that upon such
filing would be deemed to be incorporated by reference into the Prospectus
that has not been so filed.
(ii) Each of the representations and warranties of the Company
contained in this Agreement were, when originally made, and are, at the
time such certificate is delivered, true and correct in all material
respects.
(iii) Each of the covenants required herein to be performed by
the Company on or prior to the delivery of such certificate has been duly,
timely and fully performed and each condition herein required to be
complied with by the Company on or prior to the date of such certificate
has been duly, timely and fully complied with.
(j) On or prior to the Closing Date, the Representatives shall have
received the executed agreement referred to in Section 4(n).
(k) The Securities and the shares of Common Stock to be delivered
upon conversion thereof
36
<PAGE>
shall be qualified for sale in such states as the Representatives may reasonably
request, each such qualification shall be in effect and not subject to any stop
order or other proceeding on the Closing Date and the Option Closing Date.
(l) Prior to the Closing Date, the Securities and the shares of
Common Stock to be delivered upon conversion thereof shall have been duly
authorized for listing by the New York Stock Exchange upon official notice of
issuance.
(m) The Company shall have furnished to the Representatives such
certificates, in addition to those specifically mentioned herein, as the
Representatives may have reasonably requested as to the accuracy and
completeness at the Closing Date and the Option Closing Date of any statement in
the Registration Statement or the Prospectus or any documents filed under the
Exchange Act and deemed to be incorporated by reference into the Prospectus, as
to the accuracy at the Closing Date and the Option Closing Date of the
representations and warranties of the Company herein, as to the performance by
the Company of its obligations hereunder, or as to the fulfillment of the
conditions concurrent and
37
<PAGE>
precedent to the obligations hereunder of the Representatives.
6. Indemnification.
---------------
(a) The Company will indemnify and hold harmless each Underwriter,
the directors, officers, employees and agents of each Underwriter and each
person, if any, who controls each Underwriter within the meaning of Section 15
of the Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, liabilities, expenses and damages (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Act, the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, liabilities, expenses
or damages arise out of or are based on any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment or supplement to the
Registration Statement or the Prospectus or in any docu-
38
<PAGE>
ments filed under the Exchange Act and deemed to be incorporated by reference
into the Prospectus, or the omission or alleged omission to state in such
document a material fact required to be stated in it or necessary to make the
statements in it not misleading, provided that the Company will not be liable to
the extent that such loss, claim, liability, expense or damage arises from the
sale of the Securities in the public offering to any person by an Underwriter
and is based on an untrue statement or omission or alleged untrue statement or
omission made in reliance on and in conformity with information relating to any
Underwriter furnished in writing to the Company by the Representatives on behalf
of any Underwriter expressly for inclusion in the Registration Statement, any
preliminary prospectus or the Prospectus, and provided further that the Company
will not be liable to any Underwriter, the directors, officers, employees or
agents of such Underwriter or any person controlling such Underwriter with
respect to any loss, claim, liability, expense, charge or damage arising out of
or based on any untrue statement or alleged untrue statement or omission or
alleged omission to state a material fact in any preliminary prospectus which is
corrected in the Prospectus if the person asserting any such loss, claim,
liabil-
39
<PAGE>
ity, charge or damage purchased Securities from such Underwriter but was not
sent or given a copy of the Prospectus at or prior to the written confirmation
of the sale of such Securities to such person. This indemnity agreement will be
in addition to any liability that the Company might otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company,
each person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20 of the Exchange Act, each director of the Company and
each officer of the Company who signs the Registration Statement to the same
extent as the foregoing indemnity from the Company to each Underwriter, but only
insofar as losses, claims, liabilities, expenses or damages arise out of or are
based on any untrue statement or omission or alleged untrue statement or
omission made in reliance on and in conformity with information relating to any
Underwriter furnished in writing to the Company by the Representatives on behalf
of such Underwriter expressly for use in the Registration Statement, any
preliminary prospectus or the Prospectus. This indemnity will be in addition to
any liability that each Underwriter might otherwise have.
40
<PAGE>
(c) Any party that proposes to assert the right to be indemnified
under this Section 6 will, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section 6, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party will not
relieve it from any liability that it may have to any indemnified party under
the foregoing provisions of this Section 6 unless, and only to the extent that,
such omission results in the forfeiture of substantive rights or defenses by the
indemnifying party. If any such action is brought against any indemnified party
and it notifies the indemnifying party of its commencement, the indemnifying
party will be entitled to participate in and, to the extent that it elects by
delivering written notice to the indemnified party promptly after receiving
notice of the commencement of the action from the indemnified party, jointly
with any other indemnifying party similarly notified, to assume the defense of
the action, with counsel satisfactory to the indemnified party, and after notice
from the indemnifying party to the indemnified party of its election to
41
<PAGE>
assume the defense, the indemnifying party will not be liable to the indemnified
party for any legal or other expenses except as provided below and except for
the reasonable costs of investigation subsequently incurred by the indemnified
party in connection with the defense. The indemnified party will have the right
to employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (4) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases
42
<PAGE>
the reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or
parties. All such fees, disbursements and other charges will be reimbursed by
the indemnifying party promptly as they are incurred. An indemnifying party
will not be liable for any settlement of any action or claim effected without
its written consent (which consent will not be unreasonably withheld).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the Underwriters, the
Company and the Underwriters will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of,
43
<PAGE>
any action, suit or proceeding or any claim asserted, but after deducting any
contribution received by the Company from persons other than the Underwriters,
such as persons who control the Company within the meaning of the Act, officers
of the Company who signed the Registration Statement and directors of the
Company, who also may be liable for contribution) to which the Company and any
one or more of the Underwriters may be subject in such proportion as shall be
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. If, but only if, the
allocation provided by the foregoing sentence is not permitted by applicable
law, the allocation of contribution shall be made in such proportion as is
appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Company, on the one hand,
and the
44
<PAGE>
Underwriters, on the other, with respect to the statements or omissions which
resulted in such loss, claim, liability, expense or damage, or action in respect
thereof, as well as any other relevant equitable considerations with respect to
such offering. Such relative fault shall be determined by reference to whether
the untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Representatives on behalf of the Underwriters, the intent of the parties
and their relative knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company and the Underwriters agree
that it would not be just and equitable if contributions pursuant to this
Section 6(d) were to be determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, liability, expense or damage, or action in respect
thereof, referred to above in this Section 6(d) shall be deemed to include, for
purpose of this Section 6(d), any legal or other expenses reasonably
45
<PAGE>
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this Section 6(d),
no Underwriter shall be required to contribute any amount in excess of the
underwriting discounts received by it, and no person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute as provided in
this Section 6(d) are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section 6(d), any person who
controls a party to this Agreement within the meaning of the Act will have the
same rights to contribution as that party, and each officer of the Company who
signed the Registration Statement will have the same rights to contribution as
the Company, subject in each case to the provisions hereof. Any party entitled
to contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Section 6(d), will notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not
46
<PAGE>
relieve the party or parties from whom contribution may be sought from any other
obligation it or they may have under this Section 6(d). No party will be liable
for contribution with respect to any action or claim settled without its written
consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this
Section 6 and the representations and warranties of the Company contained in
this Agreement shall remain operative and in full force and effect regardless of
(i) any investigation made by or on behalf of the Underwriters, (ii) acceptance
of any of the Securities and payment therefor or (iii) any termination of this
Agreement.
7. Termination. The obligations of the several Underwriters under
-----------
this Agreement may be terminated at any time on or prior to the Closing Date
(or, with respect to the Option Securities, on or prior to the Option Closing
Date), by notice to the Company from the Representatives, without liability on
the part of any Underwriter to the Company, if, prior to delivery and payment
for the Securities (or the Option Securities, as the case may be), in the sole
judgment of the Representatives, (i) trading in any of the equity securities of
the
47
<PAGE>
Company shall have been suspended by the Commission, by an exchange or by the
National Association of Securities Dealers Automated Quotation National Market
System, (ii) trading in securities generally on the New York Stock Exchange
shall have been suspended or limited or minimum or maximum prices shall have
been generally established on such exchange, or additional material governmental
restrictions, not in force on the date of this Agreement, shall have been
imposed upon trading in securities generally by such exchange or by order of the
Commission or any court or other governmental authority, (iii) a general banking
moratorium shall have been declared by either Federal or New York State
authorities or (iv) any material adverse change in the financial or securities
markets in the United States or in political, financial or economic conditions
in the United States or any outbreak or material escalation of hostilities or
declaration by the United States of a national emergency or war or other
calamity or crisis shall have occurred the effect of any of which is such as to
make it, in the sole judgment of the Representatives, impracticable or
inadvisable to market the Securities on the terms and in the manner contemplated
by the Prospectus.
48
<PAGE>
8. Substitution of Underwriters. If any one or more of the
----------------------------
Underwriters shall fail or refuse to purchase any of the Firm Securities which
it or they have agreed to purchase hereunder, and the aggregate principal amount
of Firm Securities which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate
principal amount of Firm Securities, the other Underwriters shall be obligated,
severally, to purchase the Firm Securities which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase, in the proportions which
the principal amount of Firm Securities which they have respectively agreed to
purchase pursuant to Section I bears to the aggregate principal amount of Firm
Securities which all such non-defaulting Underwriters have so agreed to
purchase, or in such other proportions as the Representatives may specify;
provided that in no event shall the maximum principal amount of Firm Securities
which any Underwriter has become obligated to purchase pursuant to Section I be
increased pursuant to this Section 8 by more than one-ninth of the principal
amount of Firm Securities agreed to be purchased by such Underwriter without the
prior written consent of such Underwriter. If any Underwriter or
49
<PAGE>
Underwriters shall fail or refuse to purchase any Firm Securities and the
aggregate principal amount of Firm Securities which such defaulting Underwriter
or Underwriters agreed but failed or refused to purchase exceeds one-tenth of
the aggregate principal amount of the Firm Securities and arrangements
satisfactory to the Representatives and the Company for the purchase of such
Firm Securities are not made within 48 hours after such default, this Agreement
will terminate without liability on the part of any non-defaulting Underwriter
or the Company for the purchase or sale of any Securities under this Agreement.
In any such case either the Representatives or the Company shall have the right
to postpone the Closing Date, but in no event for longer than seven days, in
order that the required changes, if any, in the Registration Statement and in
the Prospectus or in any other documents or arrangements may be effected. Any
action taken pursuant to this Section 8 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
9. Miscellaneous. Notice given pursuant to any of the provisions of
-------------
this Agreement shall be in writing and, unless otherwise specified, shall be
mailed or delivered (a) if to the Company, at the office of the
50
<PAGE>
Company, 7001 N. Scottsdale Road, Suite 2050, Scottsdale, Arizona 85253,
Attention: Donald R. Loback, Chief Executive Officer, with a copy to: Cahill
Gordon & Reindel, 80 Pine Street, New York, New York 10005, Attention: John P.
Mitchell, Esq. or (b) if to the Underwriters, to the Representatives at the
offices of PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New
York 10019, Attention: Corporate Finance Department, with a copy to: Skadden,
Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, New York 10022,
Attention: Vincent J. Pisano. Any such notice shall be effective only upon
receipt. Any notice under Section 7 or 8 may be made by telex or telephone, but
if so made shall be subsequently confirmed in writing.
This Agreement has been and is made solely for the benefit of the
several Underwriters and the Company and of the controlling persons, directors
and officers referred to in Section 6, and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" as used in this Agreement
shall not include a purchaser, as such purchaser, of Securities from any of the
several Underwriters.
51
<PAGE>
Any action required or permitted to be taken by the Representatives
under this Agreement may be taken by them jointly or by PaineWebber
Incorporated.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
This Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
The Company and the Underwriters each hereby irrevocably waive any
right they may have to trial by trial by jury in respect of any claim based upon
or arising out of this Agreement or the transactions contemplated hereby.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
CONTINENTAL HOMES HOLDING CORP.
52
<PAGE>
By: ______________________
Title:
53
<PAGE>
Confirmed as of the date first
above mentioned:
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
Acting on behalf of themselves
and as the Representatives
of the other several Underwriters
named in Schedule I hereof.
By: PAINEWEBBER INCORPORATED
By: ________________________
Title:
By: SMITH BARNEY INC.
By: ________________________
Title:
54
<PAGE>
SCHEDULE I
UNDERWRITERS
Principal Amount
of Firm Securities
Name To Be Purchased
---- ------------------
PaineWebber Incorporated $
Smith Barney Inc $
-----------
Total $75,000,000
===========
<PAGE>
SCHEDULE II
1. Stock Options
As of September 30, 1995, the Company granted and had outstanding non-
qualified stock options to purchase an aggregate 219,690 shares of Common Stock
under its 1988 Stock Incentive Plan and its Restated 1986 Stock Incentive Plan.
2. 6-7/8% Convertible Subordinated Notes due 2002
The 6-7/8% Convertible Subordinated Notes due 2002 are
convertible into 1,489,250 shares of Common Stock.
3. Wade Agreement
Until January 19, 1996, the Company has the right to buy from Kathleen
and Robert Wade (the "Wades") and the Wades have the right to sell to the
Company up to 488,000 shares of Common Stock of the Company held by the Wades at
a price of $20.50 per share.
<PAGE>
EXHIBIT A
CONTINENTAL HOMES HOLDING CORP.
-------------------------------
PRICE DETERMINATION AGREEMENT
-----------------------------
October __, 1995
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
As Representatives of the several Underwriters
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Dear Sirs:
Reference is made to the Underwriting Agreement, dated __________,
1995 (the "Underwriting Agreement"), among Continental Homes Holding Corp., a
Delaware corporation (the "Company"), and the several Underwriters named in
Schedule I thereto or hereto (the "Underwriters"), for whom PaineWebber
Incorporated and Smith Barney Inc. are acting as representatives (the
"Representatives"). The Underwriting Agreement provides for the purchase by the
Underwriters from the Company, subject to the terms and conditions set forth
therein, of an aggregate of $75,000,000 (the "Firm Securities") principal amount
of the Company's __% Convertible Subordinated Notes due 2005 (the "Securities")
to be issued pursuant to an Indenture dated as of __________, 1995 between the
Company and Manufacturers and Traders Trust Company, as Trustee. This Agreement
is the Price Determination Agreement referred to in the Underwriting Agreement.
Pursuant to Section 1 of the Underwriting Agreement, the undersigned
agree with the Representatives that the purchase price for the Firm Securities
to be paid by each of the several Underwriters shall be _____% of the aggregate
principal amount of the Firm Securities set forth opposite the name of such
Underwriter in Schedule I attached hereto [plus accrued interest, if any, from
____, 1995 to the Closing Date].
<PAGE>
The Company represents and warrants to each of the Underwriters that
the representations and warranties of the Company set forth in Section 3 of the
Underwriting Agreement are accurate as though expressly made at and as of the
date hereof.
As contemplated by the Underwriting Agreement, attached as Schedule I
is a completed list of the several Underwriters, which shall be a part of this
Agreement and the Underwriting Agreement.
THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
If the foregoing is in accordance with your understanding of the
agreement among the Underwriters and the Company, please sign and return to the
Company a counterpart hereof, whereupon this instrument along with all
counterparts and together with the Underwriting Agreement shall be a binding
agreement among the Underwriters and the Company in accordance with its terms
and the terms of the Underwriting Agreement.
Very truly yours,
CONTINENTAL HOMES HOLDING CORP.
By: ____________________
Title:
2
<PAGE>
Confirmed as of the date
first above mentioned.
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
Acting on behalf of themselves
and as the Representatives
of the other several Underwriters
named in Schedule I hereof.
By: PAINEWEBBER INCORPORATED
By: ________________________
Title:
By: SMITH BARNEY INC.
By: ________________________
Title:
3
<PAGE>
EXHIBIT B
[DATE]
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
As Representatives of the
several Underwriters
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Dear Sirs:
In consideration of the agreement of the several Underwriters, for
which PaineWebber Incorporated and Smith Barney Inc. (the "Representatives")
intend to act as Representatives to underwrite a proposed public offering (the
"Offering") of an aggregate of $75,000,000 principal amount of __% Convertible
Subordinated Notes due 2005 of Continental Homes Holding Corp., a Delaware
corporation (the "Company"), as contemplated by a registration statement with
respect to such securities filed with the Securities and Exchange Commission on
Form S-3 (Registration No. _________), the undersigned hereby agrees that the
undersigned will not, for a period of 90 days after the commencement of the
public offering of such securities, without the prior written consent of the
Representatives, offer to sell, sell, contract to sell or otherwise dispose of
any shares of the Company's common
<PAGE>
stock or rights to acquire shares of the Company's common stock.
Very truly yours,
By:___________________
Print Name:___________
2
<PAGE>
EXHIBIT C1
Form of Opinion of Cahill Gordon & Reindel,
Counsel to the Company
----------------------
1. Each of the Company and each of its subsidiaries, other than the
Company's subsidiaries incorporated in the States of Arizona and California, has
been duly incorporated and is an existing corporation in good standing under the
laws of its jurisdiction of incorporation; has all requisite corporate power and
authority to conduct its business as described in the Registration Statement and
Prospectus and is duly qualified to do business in each jurisdiction in which
such counsel has been advised it owns or leases real property or in which the
conduct of its business requires such qualification, except where the failure to
be so qualified, considering all such cases in the aggregate, would not have a
material adverse effect on the business, net worth, properties, financial
position or results of operations of the Company and its subsidiaries taken as a
whole; all of the outstanding shares of capital stock of each such subsidiary
have been duly authorized and validly issued, are fully paid and non-assessable
and, to the knowledge of such counsel, (except as otherwise stated in the Regis-
<PAGE>
tration Statement) are owned beneficially by the Company subject to no security
interest, other encumbrance or adverse claim; and to the knowledge of such
counsel, except as set forth on Schedule A hereto, there are no outstanding
rights, warrants or options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock or other equity interest in the
Company or any of its subsidiaries.
2. All of the outstanding shares of Common Stock and all other equity
securities of the Company set forth on Schedule A hereto, have been duly
authorized and validly issued, are fully paid and non-assessable and conform to
the description thereof in the Prospectus; and the stockholders of the Company
have no preemptive rights with respect to the shares of Common Stock issuable
upon conversion of the Securities.
3. The Registration Statement has become effective under the Act; if
required, the Prospectus has been filed as required by Section 3(a) hereof; and
to such counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that purpose has
been instituted or threatened by the Commission.
2
<PAGE>
4. The Registration Statement when it became effective, and the
Prospectus and any amendment or supplement thereto, on the date of filing
thereof with the Commission and at the Closing Date, appeared to comply as to
form in all material respects with the requirements of the Act and the Rules and
Regulations; and the Incorporated Documents, when they were filed with the
Commission under the Exchange Act, appeared to comply as to form in all material
respects with the requirements of the Exchange Act and the Exchange Act Rules
and Regulations (it being understood that such counsel need express no opinion
as to the financial statements or other financial data included in any of the
documents mentioned in this clause and as to the Statement of Eligibility on
Form T-1).
5. There is no statute or contract or other document known to such
counsel of a character required to be described in the Registration Statement,
the Prospectus or the Incorporated Documents or to be filed as an exhibit to the
Registration Statement or the Incorporated Documents, which is not described or
filed as required.
6. The Company has full corporate power and authority to enter into
this Agreement and the Indenture and to issue the Securities. Each of this
Agreement and
3
<PAGE>
the Indenture has been duly authorized, executed and delivered by the Company
and each is the legal, valid and binding obligation of the Company, enforceable
against it in accordance with its terms, except that (a) the enforceability
thereof may be subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' and debtors' rights and remedies generally, (b) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceedings therefor may be brought and (c) rights to
indemnification and contribution hereunder may be limited by Federal and state
securities laws or the policies underlying such laws.
7. The Indenture has been duly qualified under the Trust Indenture
Act and conforms in all material respects to the description thereof in the
Registration Statement and the Prospectus.
8. The Securities conform in all material respects to the description
thereof in the Prospectus. The Securities have been duly authorized and, when
executed by the Company and authenticated by the Trustee in accordance with the
Indenture and delivered to the Under-
4
<PAGE>
writers against payment therefor in accordance with the terms hereof and the
Indenture, will have been validly issued and delivered and will constitute valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, subject to (a) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, or other similar laws now or hereafter
in effect relating to creditors' and debtors' rights and remedies generally and
(b) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceedings therefor may be brought. The shares of
Common Stock issuable upon conversion of the Securities have been duly
authorized and reserved for issuance and, when delivered upon conversion of the
Securities, will have been validly issued and fully paid and will be non-
assessable and free of preemptive or similar rights.
9. The execution and delivery of this Agreement, the Indenture and
the Securities, the performance of this Agreement, the Indenture and the
Securities and the consummation of the transactions herein and therein
contemplated, including the issuance of Common Stock upon conversion of the
Securities, will not result in a breach
5
<PAGE>
or violation of any of the terms and provisions of, or constitute a default
under, any statute or any material agreement or instrument known to such counsel
to which the Company is a party or by which it is bound or to which any of the
property of the Company is subject, the Company's charter or by-laws, or any
order, rule or regulation known to such counsel of any court or governmental
agency or body having jurisdiction over the Company or any of its properties;
and no consent, approval, authorization or order of, or filing with, any court
or governmental agency or body is required for the consummation of the
transactions contemplated by this Agreement or the Indenture in connection with
the issuance or sale of the Securities to be sold by the Company, except such as
have been obtained under the Act and such as may be required under state
securities laws in connection with the purchase and distribution of the
Securities by the Underwriters.
10. The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended.
6
<PAGE>
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the Company, your
representatives and representatives of your counsel at which the contents of the
Registration Statement and the Prospectus and related matters were discussed
and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus, on the basis of the
foregoing (relying as to materiality to a large extent upon the opinions of
officers and other representatives of the Company), no facts have come to such
counsel's attention that lead them to believe either that the Registration
Statement at the time the Registration Statement became effective contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or that the Prospectus as of its date contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading
7
<PAGE>
(it being understood that such counsel is not requested to and need not express
any comment with respect to the financial statements and schedules and other
financial and statistical data included or incorporated by reference in the
Registration Statement or Prospectus and the Statement of Eligibility on Form
T-1).
In rendering the opinions set forth in this paragraph, Cahill Gordon &
Reindel may rely as to matters of law other than the law of the State of New
York, the General Corporation Law of the State of Delaware and the federal law
of the United States on the opinions of foreign counsel retained by it or the
Company on behalf of itself, provided that such counsel is satisfactory to you
and your counsel and that a copy of such opinion is attached to the opinion of
Cahill Gordon & Reindel.
8
<PAGE>
EXHIBIT (C)(2)
Form of Opinion of Timothy C. Westfall,
General Counsel to the Company
------------------------------
1. Each of the Company's subsidiaries incorporated in the State of
Arizona has been duly incorporated and is an existing corporation in good
standing under the laws of the State of Arizona; has all requisite corporate
power and authority to conduct its business as described in the Registration
Statement and Prospectus and is duly qualified to do business in each
jurisdiction in which it owns or leases real property or in which the conduct of
its business requires such qualification, except where the failure to be so
qualified, considering all such cases in the aggregate, would not have a
material adverse effect on the business, net worth, properties, financial
position or results of operations of the Company and its subsidiaries taken as a
whole; all of the outstanding shares of capital stock of each such subsidiary
have been duly authorized and validly issued, are fully paid and non-assessable
and, to the knowledge of such counsel, (except as otherwise stated in the
Registration Statement) are owned beneficially by the Company subject to no
security interest, other encumbrance or adverse
1
<PAGE>
claim, and except as set forth in Schedule A hereto, there are no outstanding
rights, warrants or options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock or other equity interest in such
subsidiaries.
2. There are no legal or governmental proceedings pending or
threatened to which the Company is a party or to which any of its property or
assets is subject, including ordinary routine litigation incidental to its
business, which are, considered in the aggregate, likely to result in any
material adverse effect on the business, properties, net worth, financial
position or results of operations of the Company and its subsidiaries taken as a
whole.
2
<PAGE>
EXHIBIT C2
Form of Opinion of Floyd Sayer Associates,
Counsel to L&W Investments, Inc.
--------------------------------
L&W Investments, Inc., a California corporation and a wholly-owned
subsidiary of the Company, is a corporation duly organized and validly existing
under the laws of the State of California and has the power and authority to
engage in the business authorized by its Articles of Incorporation.
1
<PAGE>
EXHIBIT 4.1
_______________________________________________________________
_______________________________________________________________
CONTINENTAL HOMES HOLDING CORP.
AND
MANUFACTURERS AND TRADERS TRUST COMPANY,
as
Trustee
____________
Indenture
Dated as of November 1, 1995
____________
$86,250,000
% CONVERTIBLE SUBORDINATED NOTES DUE 2005
_______________________________________________________________
_______________________________________________________________
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
310(a)(1)...................................... 7.10
(a)(2)...................................... 7.10
(a)(3)...................................... N.A.
(a)(4)...................................... N.A.
(b) ...................................... 7.08; 7.10; 12.02
(c) ...................................... N.A.
311(a) ...................................... 7.11
(b) ...................................... 7.11
(c) ...................................... N.A.
312(a) ...................................... 2.05
(b) ...................................... 12.03
(c) ...................................... 12.03
313(a) ...................................... 7.06
(b)(1)...................................... N.A.
(b)(2)...................................... N.A.
(c) ...................................... 7.06; 12.02
(d) ...................................... 7.06
314(a) ...................................... 4.03; 12.02
(b) ...................................... N.A.
(c)(1)...................................... 12.04
(c)(2)...................................... 12.04
(c)(3)...................................... N.A.
(d) ...................................... N.A.
(e) ...................................... 12.05
(f) ...................................... N.A.
315(a) ...................................... 7.01(b)
(b) ...................................... 7.05; 12.02
(c) ...................................... 7.01(a)
(d) ...................................... 7.01(c)
(e) ...................................... 6.11
316(a)(last sentence).......................... 2.09
(a)(1)(A)................................... 6.05
(a)(1)(B)................................... 6.04
(a)(2)...................................... N.A.
(b) ...................................... 6.07
(c) ...................................... N.A.
317(a)(1)...................................... 6.08
(a)(2)...................................... 6.09
(b) ...................................... 2.04
318(a) ...................................... 12.01
_____________
N.A. means Not Applicable.
This cross-reference table does not constitute a part of the
Indenture.
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
1.01. Definitions ............................................. 1
1.02. Other Definitions ....................................... 3
1.03. Incorporation by Reference of Trust
Indenture Act.......................................... 4
1.04. Rules of Construction ................................... 5
ARTICLE 2
THE SECURITIES
2.01. Form and Dating ......................................... 5
2.02. Execution and Authentication ............................ 5
2.03. Registrar, Paying Agent and Conversion
Agent ................................................. 7
2.04. Paying Agent to Hold Money in Trust...................... 7
2.05. Securityholder Lists .................................... 8
2.06. Transfer and Exchange ................................... 8
2.07. Replacement Securities .................................. 8
2.08. Outstanding Securities .................................. 9
2.09. Securities Held by the Company or an
Affiliate ............................................. 9
2.10. Temporary Securities .................................... 10
2.11. Cancellation ............................................ 10
2.12. Defaulted Interest ...................................... 10
ARTICLE 3
REDEMPTION
3.01. Notices to Trustee ...................................... 10
3.02. Selection of Securities to Be Redeemed .................. 10
3.03. Notice of Redemption .................................... 11
3.04. Effect of Notice of Redemption .......................... 12
3.05. Deposit of Redemption Price ............................. 12
3.06. Securities Redeemed in Part ............................. 13
ARTICLE 4
COVENANTS
4.01. Payment of Securities ................................... 13
4.02. Maintenance of Office or Agency ......................... 13
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4.03. SEC Reports ............................................. 14
4.04. Compliance Certificate .................................. 14
4.05. Stay, Extension and Usury Laws .......................... 14
4.06. Corporate Existence ..................................... 15
4.07. Notice of Default ....................................... 15
4.08. Change in Control ....................................... 15
ARTICLE 5
SUCCESSORS
5.01. When Company May Merge, etc. ............................ 19
5.02. Successor Substituted ................................... 20
ARTICLE 6
DEFAULTS AND REMEDIES
6.01. Events of Default ....................................... 20
6.02. Acceleration ............................................ 22
6.03. Other Remedies .......................................... 23
6.04. Waiver of Past Defaults ................................. 23
6.05. Control by Majority ..................................... 23
6.06. Limitation on Suits ..................................... 23
6.07. Rights of Holders to Receive Payment .................... 24
6.08. Collection Suit by Trustee .............................. 24
6.09. Trustee May File Proofs of Claim ........................ 24
6.10. Priorities .............................................. 25
6.11. Undertaking for Costs ................................... 25
ARTICLE 7
TRUSTEE
7.01. Duties of Trustee ....................................... 26
7.02. Rights of Trustee ....................................... 27
7.03. Individual Rights of Trustee ............................ 27
7.04. Trustee's Disclaimer .................................... 28
7.05. Notice of Defaults ...................................... 28
7.06. Reports by Trustee to Holders ........................... 28
7.07. Compensation and Indemnity .............................. 28
7.08. Replacement of Trustee .................................. 29
7.09. Successor Trustee by Merger, etc. ....................... 30
7.10. Eligibility; Disqualification ........................... 30
7.11. Preferential Collection of Claims
Against Company ....................................... 31
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ARTICLE 8
DISCHARGE OF INDENTURE
8.01. Termination of Company's Obligations..................... 31
8.02. Application of Trust Money .............................. 32
8.03. Repayment to Company .................................... 32
8.04. Reinstatement ........................................... 33
ARTICLE 9
AMENDMENTS
9.01. Without Consent of Holders .............................. 33
9.02. With Consent of Holders ................................. 34
9.03. Compliance with Trust Indenture Act ..................... 35
9.04. Revocation and Effect of Consents ....................... 35
9.05. Notation on or Exchange of Securities ................... 35
9.06. Trustee Protected ....................................... 36
ARTICLE 10
CONVERSION
10.01. Conversion Privilege .................................... 36
10.02. Conversion Procedure .................................... 36
10.03. Fractional Shares ....................................... 37
10.04. Taxes on Conversion ..................................... 38
10.05. Company to Provide Stock ................................ 38
10.06. Adjustment for Change in Capital Stock .................. 38
10.07. Adjustment for Shares Issued Below
Market Price .......................................... 39
10.08. Adjustment for Other Distributions ...................... 42
10.09. Adjustment for Cash Distributions ....................... 43
10.10. Adjustment for Tender or Exchange
Offers ................................................ 44
10.11. Voluntary Adjustment .................................... 45
10.12. Current Market Price .................................... 45
10.13. When Adjustment May be Deferred ......................... 45
10.14. When No Adjustment Required ............................. 46
10.15. Notice of Adjustment .................................... 46
10.16. Notice of Certain Transactions .......................... 46
10.17. Reorganization of the Company ........................... 47
10.18. Rights and Warrants ..................................... 47
10.19. Company Determination Final ............................. 48
10.20. Trustee's Disclaimer .................................... 48
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ARTICLE 11
SUBORDINATION
11.01. Agreement to Subordinate ................................ 48
11.02. Certain Definitions ..................................... 49
11.03. Liquidation; Dissolution; Bankruptcy .................... 50
11.04. Company Not to Make Payments with
Respect to Securities in Certain
Circumstances ......................................... 50
11.05. Acceleration of Securities .............................. 51
11.06. When Distribution Must Be Paid Over ..................... 51
11.07. Notice by Company ....................................... 51
11.08. Subrogation ............................................. 52
11.09. Subordination May Not Be Impaired by
Company ............................................... 52
11.10. Distribution or Notice to
Representative ........................................ 52
11.11. Rights of Trustee and Paying Agent ...................... 52
11.12. Officers' Certificate ................................... 53
11.13. Obligation of Company Unconditional ..................... 53
ARTICLE 12
MISCELLANEOUS
12.01. Trust Indenture Act Controls ............................ 54
12.02. Notices ................................................. 55
12.03. Communication by Holders with Other
Holders ............................................... 55
12.04. Certificate and Opinion as to Conditions
Precedent ............................................. 56
12.05. Statements Required in Certificate or
Opinion ............................................... 56
12.06. Rules by Trustee and Agents ............................. 57
12.07. Legal Holidays .......................................... 57
12.08. No Recourse Against Others .............................. 57
12.09. Duplicate Originals ..................................... 57
12.10. Governing Law ........................................... 57
12.11. No Adverse Interpretation of Other
Agreements ............................................ 57
12.12. Successors .............................................. 58
12.13. Separability ............................................ 58
12.14. Table of Contents, Headings, etc. ....................... 58
SIGNATURES .......................................................... 59
EXHIBIT A-FORM OF SECURITY .......................................... A-1
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<PAGE>
INDENTURE dated as of November 1, 1995 between
CONTINENTAL HOMES HOLDING CORP., a Delaware corporation (the
"Company"), and MANUFACTURERS AND TRADERS TRUST COMPANY, a duly
organized and existing banking corporation organized under the
laws of the State of New York, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the
Holders of the Company's % Convertible Subordinated Notes
due 2005 (the "Securities").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Affiliate" means any person directly or indirectly
controlling or controlled by or under direct or indirect common
control with the Company. For this purpose, "control" shall
mean the power to direct the management and policies of a
person through the ownership of securities, by contract or
otherwise.
"Agent" means any Registrar, Paying Agent, Conversion
Agent or co-Registrar.
"Board of Directors" means the Board of Directors of
the Company or any committee of the Board authorized to act for
it hereunder.
"Capital Stock" means any and all shares, interests,
participations or other equivalents (however designated) of
capital stock of the Company and all warrants or options to
acquire such capital stock.
"Common Stock" means the Common Stock, par value $.01
per share, of the Company or any security into which the Common
Stock may be converted.
"Company" means the party named as such above and any
other obligor until a successor replaces it pursuant to the
applicable provision hereof and thereafter means such
successor.
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"Corporate Trust Office of the Trustee" shall be at
the address of the Trustee specified in Section 12.02 or such
other address as the Trustee may give notice of to the Company.
"Default" means any event which is, or after notice
or passage of time or both would be, an Event of Default.
"High and Low Sale Prices" of the Common Stock on any
trading day means the average of the high and low sale price of
the Common Stock as reported on the Composite Tape for New York
Stock Exchange-Listed Stocks (or if not listed or admitted to
trading on the New York Stock Exchange, then on the principal
national securities exchange on which the Common Stock is
listed or admitted to trading, or, if not listed or admitted to
trading on any national securities exchange, then as reported
by the National Association of Securities Dealers, Inc.,
through NASDAQ or a similar organization if NASDAQ is no longer
reporting information) on such trading day or if no such sale
takes place on such day, the average of the highest bid and
lowest asked prices regular way on the New York Stock Exchange
(or if not listed or admitted to trading on such Exchange, on
the principal national securities exchange on which the Common
Stock is listed or admitted to trading, or if not listed or
admitted to trading on any national securities exchange, the
average of the highest bid and lowest asked prices as reported
by the National Association of Securities Dealers, Inc.,
through NASDAQ or a similar organization if NASDAQ is no longer
reporting information) on such trading day. If on such trading
day the Common Stock is not quoted by any such organization,
the fair market value of such Common Stock on such day, as
determined by the Board of Directors, shall be used.
"Holder" or "Securityholder" means a person in whose
name a Security is registered on the Registrar's books.
"Indenture" means this Indenture as amended from time
to time.
"Officer" means the Chief Executive Officer, the
President, the Chief Operating Officer, any Vice President, the
Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by
two Officers or by an Officer and an Assistant Treasurer or an
Assistant Secretary of the Company.
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"Opinion of Counsel" means a written opinion from
legal counsel who may be an employee of or counsel for the
Company or other counsel reasonably acceptable to the Trustee.
"person" means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or other
agency or political subdivision thereof.
"principal" of a debt security means the principal of
the security plus the premium, if any, on the security.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities described above
issued under this Indenture.
"subsidiary" means (i) a corporation a majority of
whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or
indirectly, owned by the Company, by one or more subsidiaries
of the Company or by the Company and one or more subsidiaries
thereof or (ii) any other person (other than a corporation) in
which the Company, one or more subsidiaries thereof or the
Company and one or more subsidiaries thereof, directly or
indirectly, at the date of determination thereof have at least
majority ownership interest.
"TIA" means the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbbb), as in effect on the
date of this Indenture, except as provided in Section 9.03.
"Trustee" means the party named as such in this
Indenture until a successor replaces it and thereafter means
the successor.
"Trust Officer" means any officer of the Trustee
assigned by the Trustee to administer its corporate trust
matters.
SECTION 1.02. Other Definitions.
Term Defined in Section
"Bankruptcy Law" ......................... 6.01
"business day" ........................... 12.07
"Change in Control" ...................... 4.08
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"Conversion Agent" ....................... 2.03
"Conversion Price ........................ 4.08(i)
"Conversion Shares" ...................... 10.18
"Custodian" .............................. 6.01
"Distribution Date" ...................... 10.18
"Event of Default" ....................... 6.01
"Exchange Act" ........................... 4.03
"Expiration Time" ........................ 10.10
"Legal Holiday ........................... 12.07
"Management Group" ....................... 4.08
"NASDAQ" ................................. 10.03
"NMS" .................................... 10.03
"Offer" .................................. 10.10
"Paying Agent" ........................... 2.03
"Purchased Shares" ....................... 10.10
"Registrar ............................... 2.03
"Representative" ......................... 11.02
"Repurchase Date" ........................ 4.08
"Repurchase Price" ....................... 4.08
"Repurchase Right" ....................... 4.08
"Repurchase Right Notice" ................ 4.08
"Senior Indebtedness" .................... 11.02
"U.S. Government Obligations" ............ 8.01
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act.
Whenever this Indenture refers to a provision of the
TIA, the provision is incorporated by reference in and made a
part of this Indenture.
The following TIA terms used in this Indenture have
the following meanings:
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means
the Trustee.
"obligor" on the indenture securities means the
Company.
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All other terms used in this Indenture that are
defined by the TIA, defined by TIA reference to another statute
or defined by SEC rule under the TIA have the meanings so
assigned to them.
SECTION 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined
has the meaning assigned to it in accordance with
generally accepted accounting principles in effect
on the date hereof;
(3) "or" is not exclusive;
(4) words in the singular include the plural
and in the plural include the singular;
(5) provisions apply to successive events
and transactions; and
(6) "herein," "hereof" and other words of
similar import refer to this Indenture as a whole
and not to any particular Article, Section or
other Subdivision.
ARTICLE 2
THE SECURITIES
SECTION 2.01. Form and Dating.
The Securities and the Trustee's certificate of
authentication shall be substantially in the form set forth in
Exhibit A, which is incorporated in and forms a part of this
Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage.
Each Security shall be dated the date of its authentication.
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SECTION 2.02. Execution and Authentication.
Two Officers shall sign the Securities for the
Company by manual or facsimile signature. The Company's seal
shall be reproduced on the Securities.
If an Officer whose signature is on a Security no
longer holds that office at the time the Security is
authenticated, the Security shall nevertheless be valid.
A Security shall not be valid until authenticated by
the manual signature of the Trustee. The signature shall be
conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate Securities for
original issue in the aggregate principal amount of up to
$75,000,000, upon a written order of the Company signed by two
Officers or by an Officer and an Assistant Treasurer or
Assistant Secretary of the Company; provided that if such order
directs the issuance of $75,000,000 in aggregate principal
amount of Securities, the Trustee shall, upon a second written
order not later than , 1995, authenticate additional
Securities for original issue not to exceed $11,250,000 in
aggregate principal amount as specified in the second order to
cover over-allotments, if any. Each order shall specify the
amount of Securities to be authenticated and the date on which
the original issue of Securities is to be authenticated. The
aggregate principal amount of Securities outstanding at any
time may not exceed the amount of Securities issued pursuant to
this paragraph except as provided in Section 2.07.
The Trustee may appoint an authenticating agent
acceptable to the Company to authenticate Securities. An
authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent
to deal with the Company or an Affiliate.
The Securities shall be issuable only in registered
form without coupons and only in denominations of $1,000 and
any integral multiple thereof.
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SECTION 2.03. Registrar, Paying Agent and
Conversion Agent.
The Company shall maintain in the Borough of
Manhattan, The City of New York, an office or agency where
Securities may be presented for registration of transfer or for
exchange ("Registrar"), an office or agency where Securities
may be presented for payment ("Paying Agent") and an office or
agency where Securities may be presented for conversion
("Conversion Agent"). The Registrar shall keep a register of
the Securities and of their transfer and exchange. The Company
may appoint or change one or more co-registrars, one or more
additional paying agents and one or more additional conversion
agents without notice and may act in any such capacity on its
own behalf. The term "Paying Agent" includes any additional
paying agent; the term "Conversion Agent" includes any
additional conversion agent.
The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture. The
agreement shall implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee of
the name and address of any Agent not a party to this
Indenture. If the Company fails to maintain a Registrar,
Paying Agent or Conversion Agent, the Trustee shall act as
such.
The Company initially appoints the Trustee as Paying
Agent, Registrar and Conversion Agent.
SECTION 2.04. Paying Agent to Hold Money in
Trust.
Each Paying Agent shall hold in trust for the benefit
of the Securityholders or the Trustee all moneys held by such
Paying Agent for the payment of principal of or interest on the
Securities, and shall notify the Trustee of any default by the
Company in making any such payment. While any such default
continues, the Trustee may require a Paying Agent to pay all
money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, such Paying Agent
shall have no further liability for the money. If the Company
acts as Paying Agent, it shall segregate and hold as a separate
trust fund all money held by it as Paying Agent.
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SECTION 2.05. Securityholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of
the names and addresses of Securityholders. If the Trustee is
not the Registrar, the Company shall furnish to the Trustee on
or before each interest payment date and at such other times as
the Trustee may request in writing a list, in such form and as
of such date as the Trustee may reasonably require, of the
names and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange.
Where Securities are presented to the Registrar or a
co-Registrar with a request to register the transfer or to
exchange them for an equal principal amount of Securities of
other authorized denominations, the Registrar shall register
the transfer or make the exchange if the requirements of
Section 8-401(1) of the New York Uniform Commercial Code are
met. To permit registrations of transfer and exchanges, the
Trustee shall authenticate Securities at the Registrar's
request. The Company or the Trustee, as the case may be, shall
not be required (a) to issue, authenticate, register the
transfer of or exchange any Security during a period beginning
at the opening of business 15 days before the mailing of a
notice of redemption of the Securities selected for redemption
under Section 3.02 and ending at the close of business on the
day of such mailing, or (b) to register the transfer of or
exchange any Security so selected for redemption, in whole or
in part, except the unredeemed portion of Securities being
redeemed in part.
No service charge shall be made for any registration
of transfer or exchange of Securities, but the Company may
require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
transfer, registration of transfer or exchange of Securities,
other than exchanges pursuant to Section 2.10, 3.06, 9.05 or
10.02 not involving any transfer.
SECTION 2.07. Replacement Securities.
If the Holder of a Security claims that the Security
has been mutilated, lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a
replacement Security if the requirements of Section 8-405 of
the New York Uniform Commercial Code are met and, in the case
<PAGE>
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of a mutilated Security, such mutilated Security is surrendered
to the Trustee. If required by the Trustee or the Company, an
indemnity bond must be sufficient in the judgment of both to
protect the Company, the Trustee, or any Agent from any loss
which any of them may suffer if a Security is replaced. The
Company or the Trustee may charge for its expenses in replacing
a Security.
In case any such mutilated, destroyed or wrongfully
taken Security has become or is about to become due and
payable, the Company in its discretion may, instead of issuing
a new Security, pay such Security when due.
Every replacement Security is an additional
obligation of the Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the
Securities authenticated by the Trustee except for those
converted, those cancelled by it, those delivered to it for
cancellation and those described in this Section as not
outstanding. A Security does not cease to be outstanding
because the Company or one of its subsidiaries or Affiliates
holds the Security.
If a Security is replaced pursuant to Section 2.07,
it ceases to be outstanding unless the Trustee receives proof
satisfactory to it, or a court holds, that the replaced
Security is held by a bona fide purchaser.
If the Paying Agent (other than the Company) holds on
a redemption date, repurchase date or maturity date money
sufficient to pay Securities payable on that date, then on and
after that date, such Securities shall be deemed to be no
longer outstanding and interest on them shall cease to accrue.
SECTION 2.09. Securities Held by the Company or an Affiliate.
In determining whether the Holders of the required
principal amount of Securities have concurred in any direction,
waiver or consent, Securities owned by the Company or a
subsidiary or an Affiliate shall be disregarded, except that
for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent,
only Securities which the Trustee actually knows are so owned
shall be so disregarded.
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SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery,
the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have
variations that the Company considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate definitive
Securities in exchange for temporary Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the
Trustee for cancellation. The Registrar, Paying Agent and
Conversion Agent shall forward to the Trustee any Securities
surrendered to them for registration of transfer, exchange,
payment or conversion. The Trustee shall cancel all Securities
surrendered for registration of transfer, exchange, payment,
conversion or cancellation and may destroy cancelled Securities
and deliver a certificate of any such destruction to the
Company. The Company may not issue new Securities to replace
Securities that it has paid or delivered to the Trustee for
cancellation or that any Securityholder has converted pursuant
to Article 10.
SECTION 2.12. Defaulted Interest.
If and to the extent the Company defaults in a
payment of interest on the Securities, it shall pay the
defaulted interest in any lawful manner plus, to the extent not
prohibited by applicable statute or case law, interest payable
on the defaulted interest. It may pay the defaulted interest
to the persons who are Securityholders on a subsequent special
record date. The Company shall fix such record date and
payment date. At least 15 days before the record date, the
Company shall mail to Securityholders a notice that states the
record date, payment date and amount of interest to be paid.
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ARTICLE 3
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company wants to redeem Securities pursuant to
paragraph 5 of the Securities, it shall notify the Trustee at
least 20 days prior to the redemption date (unless a shorter
notice period shall be satisfactory to the Trustee) of the
redemption date and the principal amount of Securities to be
redeemed.
SECTION 3.02. Selection of Securities to Be Redeemed.
If less than all the Securities are to be redeemed,
the Trustee shall select the Securities to be redeemed on
either a pro rata basis or by lot or such other method as the
Trustee shall deem fair and equitable, but in any event, in
such manner as complies with applicable legal and stock
exchange requirements. The Trustee shall make the selection
from Securities outstanding not previously called for
redemption. The Trustee may select for redemption portions of
the principal of Securities that have denominations larger than
$1,000. Securities and portions of them it selects shall be in
amounts of $1,000 or whole multiples of $1,000. Provisions of
this Indenture that apply to Securities called for redemption
also apply to portions of Securities called for redemption.
SECTION 3.03. Notice of Redemption.
At least 15 days but not more than 60 days before a
redemption date, the Company shall mail by first-class mail a
notice of redemption to each Holder whose Securities are to be
redeemed.
The notice shall identify the Securities and the
principal amount thereof to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price (including the amount of
accrued and unpaid interest to be paid on the Securities
called for redemption);
(3) the then current conversion rate;
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(4) the name and address of the Paying Agent and
Conversion Agent;
(5) that the right to convert Securities called for
redemption shall terminate at the close of business on the
second business day before the redemption date;
(6) that Holders who want to convert Securities must
satisfy the requirements in paragraph 8 of the Securities;
(7) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption
price;
(8) that interest on Securities called for
redemption ceases to accrue on and after the redemption
date; and
(9) the CUSIP number of the Securities.
At the Company's request, the Trustee shall give the
notice of redemption in the Company's name and at the Company's
expense.
SECTION 3.04. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities
called for redemption become due and payable on the redemption
date at the redemption price and, on and after such date
(unless the Company shall default in the payment of the
redemption price), such Securities shall cease to bear
interest. Upon surrender to the Paying Agent, such Securities
shall be paid at the redemption price plus accrued interest to
the redemption date.
SECTION 3.05. Deposit of Redemption Price.
On or before 10:00 a.m. on the redemption date, the
Company shall deposit with the Paying Agent money in funds
immediately available on the redemption date sufficient to pay
the redemption price of and accrued interest on all Securities
to be redeemed on that date. The Paying Agent shall return to
the Company, as soon as practicable, any money not required for
that purpose because of conversion of Securities.
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SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in
part, the Trustee shall authenticate for the Holder a new
Security equal in principal amount to the unredeemed portion of
the Security surrendered.
If any Security selected for partial redemption is
converted in part, the converted portion of such Security shall
be deemed (so far as may be) to be the portion selected for
redemption.
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest
on the Securities on the dates and in the manner provided in
the Securities. Principal and interest shall be considered
paid on the date due if the Paying Agent holds on that date
money sufficient to pay all principal and interest then due.
The Company shall pay interest on overdue principal
at the rate borne by the Securities. The Company shall pay
interest on overdue installments of interest at the same rate
to the extent not prohibited by applicable statute or case law.
SECTION 4.02. Maintenance of Office or Agency.
The Company will maintain in the Borough of
Manhattan, The City of New York, an office or agency where
Securities may be surrendered for registration of transfer or
exchange or conversion and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may
be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of
such office or agency. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one
or more other offices or agencies where the Securities may be
<PAGE>
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presented or surrendered for any or all such purposes and may
from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or
agency in the Borough of Manhattan, The City of New York for
such purposes. The Company will give prompt written notice to
the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust
Office of the Trustee in the Borough of Manhattan, the City of
New York, an agency of the Company in accordance with Section
2.03.
SECTION 4.03. SEC Reports.
The Company shall file with the Trustee within 15
days after it files them with the SEC copies of the annual
reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the SEC may
by rules and regulations prescribe) which the Company is
required to file with the SEC pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Company also shall comply with the other
provisions of TIA Section 314(a).
So long as the Securities remain outstanding, the
Company shall cause its annual reports to shareholders and any
other financial reports furnished by it to shareholders
generally to be mailed to the Holders at their addresses
appearing in the register of Securities maintained by the
Registrar.
SECTION 4.04. Compliance Certificate.
The Company shall deliver to the Trustee within 120
days after the end of each fiscal year of the Company an
Officers' Certificate stating whether or not the signatories
know of any Default by the Company in performing any of its
obligations under this Indenture or the Securities. If they do
know of any such Default, the certificate shall describe the
Default and its status.
SECTION 4.05. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or
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advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and
the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
SECTION 4.06. Corporate Existence.
Subject to Article 5, the Company will do or cause to
be done all things necessary to preserve and keep in full force
and effect its corporate existence and the corporate existence
of each subsidiary in accordance with the respective
organizational documents of each subsidiary and the rights
(charter and statutory), licenses and franchises to the Company
and its subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or
franchise, or the corporate existence of any subsidiary, if in
the judgment of the Board of Directors of the Company, (i) such
preservation or existence is not material to the conduct of
business of the Company and (ii) the loss of such right,
license or franchise or the dissolution of such subsidiary does
not have a material adverse impact on the Holders.
SECTION 4.07. Notice of Default.
In the event that any Default under Section 6.01
hereof shall occur the Company will give prompt written notice
of such Default to the Trustee.
SECTION 4.08. Change in Control.
(a) In the event that there shall occur a Change in
Control (as defined below) of the Company, each Holder of a
Security shall have the right (the "Repurchase Right") upon
receipt of a Repurchase Right Notice (as defined below), at
such Holder's option, to require the Company to repurchase any
Security of such Holder or any portion of the principal amount
thereof which is $1,000 or an integral multiple of $1,000, on
the date (the "Repurchase Date") that is 45 days after the date
of the Repurchase Right Notice, or, if such 45th day is a Legal
Holiday, the next subsequent day which is not a Legal Holiday,
unless otherwise required by applicable law, at a purchase
price equal to 100% of the principal amount thereof, plus
<PAGE>
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accrued and unpaid interest to the Repurchase Date (the
"Repurchase Price"). The right to require the repurchase of
Securities shall not continue after a discharge of the Company
from its obligations with respect to the Securities in
accordance with Article 8.
(b) Within 30 days after the occurrence of a Change
in Control, the Company, or, at the request of the Company, the
Trustee, shall give notice of the occurrence of the Change in
Control and of the Repurchase Right set forth herein to each
Holder (the "Repurchase Right Notice"). The Company shall also
deliver a copy of the Repurchase Right Notice to the Trustee.
Any such notice shall contain all instructions and materials
necessary to enable such Holders to deliver Securities pursuant
to the Repurchase Right including, without limitation, the
following:
(1) the Repurchase Date;
(2) the date by which the Repurchase Right must be
exercised;
(3) the Repurchase Price;
(4) that Securities are to be surrendered for
payment of the Repurchase Price;
(5) that the exercise of the Repurchase Right is
irrevocable, except that Holders who elect to exercise the
Repurchase Right will retain the right to convert
Securities submitted for repurchase until the close of
business on the second business day before the Repurchase
Date; and
(6) the then existing Conversion Rate for conversion
of Securities, the date on which the right to convert the
principal of the Securities to be repurchased will
terminate and the place or places where such Securities
may be surrendered for conversion.
(c) To exercise a Repurchase Right, a Holder shall
deliver to the Company (if it is acting as its own Paying
Agent) or to a Paying Agent designated by the Company for such
purpose in the notice referred to above on or before the 30th
day after the date of the Repurchase Right Notice, or, if such
day is a Legal Holiday, the next subsequent day which is not a
Legal Holiday, (i) written notice of the Holder's exercise of
such right, which notice shall set forth the name of the
<PAGE>
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Holder, the principal amount of Securities (or portions
thereof) to be repurchased, a statement that an election to
exercise the Repurchase Right is being made thereby and
(ii) the Securities with respect to which the Repurchase Right
is being exercised, duly endorsed for transfer to the Company,
and the Holder of such Securities shall be entitled to receive
from the Company (if it is acting as its own Paying Agent) or
such Paying Agent a nontransferable receipt of deposit
evidencing such deposit. Such written notice shall be
irrevocable, except as provided in Section 4.08(b) above. If
the Repurchase Date is between a regular record date for the
payment of interest and the next succeeding interest payment
date, any Security to be repurchased must be accompanied by
funds equal to the interest payable on such succeeding interest
payment date on the principal amount to be repurchased (unless
such Security shall have been called for redemption, in which
case no such payment shall be required), and the interest on
the principal amount of the Security being repurchased will be
paid on such next succeeding interest payment date to the
registered holder of such Security on the immediately preceding
record date. A Security repurchased on an interest payment
date need not be accompanied by any payment, and the interest
on the principal amount of the Security being repurchased will
be paid on such interest payment date to the registered holder
of such Security on the immediately preceding record date.
(d) In the event a Repurchase Right shall be
exercised in accordance with the terms hereof, the Company
shall pay or cause to be paid the applicable Repurchase Price
with respect to the Securities as to which the Repurchase Right
shall have been exercised to the Holder on the Repurchase Date.
(e) Prior to a Repurchase Date, the Company shall
deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold
in trust in accordance with Section 2.04) an amount of money
sufficient to pay the Repurchase Price payable in respect of
all of the Securities which are to be repurchased on that date.
If any Security submitted for repurchase is converted prior to
the repurchase thereof, any money deposited with the Trustee or
with any Paying Agent or so segregated and held in trust for
the redemption of such Security shall be paid to the Company on
its request, or, if then held by the Company, shall be
discharged from such trust.
(f) Both the notice of the Company and the notice of
the Holder having been given as specified in this Section 4.08,
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the Securities so to be repurchased shall, on the Repurchase
Date, become due and payable at the Repurchase Price applicable
thereto and from and after such date (unless the Company shall
default in the payment of the Repurchase Price) such Securities
shall cease to bear interest. Upon surrender of any such
Security for repurchase in accordance with said notice, such
Security shall be paid by the Company at the Repurchase Price.
If any Security shall not be paid upon surrender thereof for
repurchase, the principal and premium, if any, shall, until
paid, bear interest from the Repurchase Date at the rate borne
by such Security.
(g) Any Security which is to be submitted for
repurchase only in part shall be delivered pursuant to this
Section 4.08 (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by,
the Holder thereof or his attorney duly authorized in writing),
and the Company shall execute, and the Trustee shall
authenticate and make available for delivery to the Holder of
such Security without any service charge, a new Security or
Securities, of any authorized denomination as requested by such
Holder, of the same tenor and in aggregate principal amount
equal to and in exchange for the portion of the principal of
such Security not submitted for repurchase.
(h) If any repurchase pursuant to the foregoing
provisions constitutes an "issuer tender offer" as defined in
Rule 13e-4 under the Exchange Act, the Company will comply with
the requirements of Rule 13e-4, Rule 14e-1 and any other tender
offer rules under the Exchange Act which then may be
applicable, including the filing of an Issuer Tender Offer
Statement on Schedule 13E-4 with the SEC and the furnishing of
certain information contained therein to the Holders.
(i) As used in this Section 4.08:
A "Change in Control" of the Company shall be deemed
to have occurred at such time as any person, together with its
affiliates or associates, other than the Management Group (as
defined below) is or becomes the beneficial owner, directly or
indirectly, through a purchase, merger or other acquisition
transaction, of shares of capital stock of the Company
entitling such person to exercise 50% or more of the total
voting power of all shares of capital stock of the Company
entitled to vote in elections of directors; provided that a
Change in Control shall not be deemed to have occurred if
either (i) the
<PAGE>
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last sale price of the Common Stock for any five
trading days during the ten trading days immediately preceding
the Change in Control is at least equal to 105% of the
Conversion Price in effect on the day of the Change in Control
or (ii) all of the consideration (excluding cash payments for
fractional shares) in the transaction or transactions
constituting the Change in Control consists of shares of common
stock traded on a national securities exchange or through
NASDAQ or another comparable quotation system. "Beneficial
owner" shall be determined in accordance with Rule 13d-3, as in
effect on the date of the execution of this Indenture,
promulgated by the Securities and Exchange Commission under the
Exchange Act. The "Management Group" shall consist of the
executive officers of the Company as of the date hereof,
members of their immediate families, certain trusts for their
benefit, and legal representatives of, or heirs, beneficiaries
or legatees receiving Common Stock under, any such person's
estate.
"Conversion Price" shall be deemed to equal $1,000
divided by the conversion rate on the date of calculation.
ARTICLE 5
SUCCESSORS
SECTION 5.01. When Company May Merge, etc.
The Company shall not consolidate with or merge into,
or directly or indirectly transfer or lease all or
substantially all of its assets to, any person unless:
(1) the person formed by or surviving any such
consolidation or merger (if other than the Company), or to
which such sale or conveyance shall have been made, is a
person organized and existing under the laws of the United
States, any State thereof or the District of Columbia;
(2) the person formed by or surviving any such
consolidation or merger (if other than the Company), or to
which such sale or conveyance shall have been made,
assumes by supplemental indenture all the obligations of
the Company under the Securities and this Indenture; and
(3) immediately after giving effect to such
transaction no Default or Event of Default exists.
<PAGE>
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The Company shall deliver to the Trustee prior to the
consummation of the proposed transaction an Officers'
Certificate to the foregoing effect and an Opinion of Counsel
stating that the proposed transaction and such supplemental
indenture comply with this Indenture.
SECTION 5.02. Successor Substituted.
Upon any consolidation or merger or transfer or lease
of all or substantially all of the assets of the Company in
accordance with Section 5.01, the successor person formed by
such consolidation or into which the Company is merged or to
which such transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, and
shall assume every duty and obligation of, the Company under
this Indenture with the same effect as if such successor
corporation had been named as the Company herein. When the
successor corporation assumes all obligations of the Company
hereunder, all obligations of the predecessor corporation shall
terminate.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest
on any Security when the same becomes due and payable and
the default continues for a period of 30 days, whether or
not such payment shall be prohibited by the provisions of
Article 11 hereof;
(2) the Company defaults in the payment of the
principal of any Security when the same becomes due and
payable at maturity, upon acceleration or otherwise,
whether or not such payment shall be prohibited by the
provisions of Article 11 hereof;
(3) the Company fails to comply with any of its
other agreements in the Securities or this Indenture and
the default continues for the period and after the notice
specified below;
<PAGE>
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(4) an event of default shall have occurred and be
continuing under any security or other evidence of
indebtedness of the Company or any of its subsidiaries
whether such indebtedness now exists or shall be created
hereafter, which event of default results in an
acceleration of a principal amount of such indebtedness
which, together with any such other indebtedness so
accelerated, aggregates more than $10,000,000, and such
acceleration is not waived or rescinded or such
indebtedness, paid or discharged within a period and after
the notice specified below;
(5) a final judgment or judgments for the payment of
money in excess of $10,000,000 in the aggregate are
rendered against the Company and such judgment or
judgments remain unstayed, unsatisfied or undischarged for
the period and after the notice specified below;
(6) the Company pursuant to or within the meaning of
any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for
relief against it in an involuntary case,
(C) consents to the appointment of a Custodian
of it or for all or substantially all of its
property, or
(D) makes a general assignment for the benefit
of its creditors; or
(7) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that:
(A) is for relief against the Company in an
involuntary case,
(B) appoints a Custodian of the Company for all
or substantially all of its property, or
(C) orders the liquidation of the Company,
and the order or decree remains unstayed and in effect for
90 days.
<PAGE>
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The term "Bankruptcy Law" means Title 11, U.S. Code
or any similar Federal or state law for the relief of debtors.
The term "Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
A default under clause (3), (4) or (5) is not an
Event of Default until the Trustee or the Holders of at least
25% in principal amount of the Securities notify the Company of
the default and the Company does not cure the default within 60
days with respect to clause (3) or (5), and within 30 days with
respect to clause (4), after receipt of the notice. The notice
must specify the default, demand that it be remedied and state
that the notice is a "Notice of Default". If the Holders of
25% in principal amount of the outstanding Securities request
the Trustee to give such notice on their behalf, the Trustee
shall do so.
The Trustee shall not be deemed to have notice of any
Default hereunder unless it shall have actual knowledge of such
Default or it shall have received written notice thereof making
specific reference to such Default as a Default.
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of
Default specified in Section 6.01(6) or (7)) occurs and is
continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the Securities
by notice to the Company and the Trustee, may declare the
principal of and accrued interest on all the Securities to be
due and payable. Upon such declaration such principal and
interest shall be due and payable immediately. If an Event of
Default specified in Section 6.01(6) or (7) occurs, all unpaid
principal and accrued interest on the Securities then
outstanding shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the
Trustee or any Securityholder. The Holders of a majority in
principal amount of the Securities by notice to the Trustee may
rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all
existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely
because of the acceleration.
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SECTION 6.03. Other Remedies.
Notwithstanding any other provision of this
Indenture, if an Event of Default occurs and is continuing, the
Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of or interest on
the Securities or to enforce the performance of any provision
of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does
not possess any of the Securities or does not produce any of
them in the proceeding. A delay or omission by the Trustee or
any Securityholder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of
Default. All remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults.
Subject to Sections 6.07 and 9.02, the Holders of a
majority in principal amount of the Securities by notice to the
Trustee may waive an existing Default and its consequences.
When a Default is waived, it is cured and ceases.
SECTION 6.05. Control by Majority.
The Holders of a majority in principal amount of the
Securities 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 it. However, the
Trustee may refuse to follow any direction that conflicts with
law or this Indenture, is unduly prejudicial to the rights of
other Securityholders or would involve the Trustee in personal
liability and the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
direction.
SECTION 6.06. Limitation on Suits.
Except as provided in Section 6.07, a Securityholder
may pursue a remedy with respect to this Indenture or the
Securities only if:
(1) the Holder gives to the Trustee written notice
of a continuing Event of Default;
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(2) the Holders of at least 25% in principal amount
of the Securities make a written request to the Trustee to
institute proceedings in respect of such Event of Default;
(3) such Holder or Holders offer to the Trustee
reasonable indemnity against any loss, liability or
expense;
(4) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer
of indemnity; and
(5) during such 60-day period the Holders of a
majority in principal amount of the Securities do not give
the Trustee a direction inconsistent with the request.
A Securityholder may not use this Indenture to
prejudice the rights of another Securityholder or to obtain a
preference or priority over another Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this
Indenture, the right of any Holder of a Security to receive
payment of principal of and interest on the Security, on or
after the respective due dates expressed in the Security, or to
bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected
without the consent of the Holder.
Notwithstanding any other provision of this
Indenture, the right of any Holder of a Security to bring suit
for the enforcement of the right to convert the Security shall
not be impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(1)
or (2) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust
against the Company for the whole amount of principal and
interest remaining unpaid.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other
papers or documents as may be necessary or advisable in order
to have the claims of the Trustee, any predecessor Trustee and
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the Securityholders allowed in any judicial proceedings
relative to the Company, its creditors or its property.
Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder of the Securities any plan of
reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof,
or to authorize the Trustee to vote in respect of the claim of
any Holder of the Securities in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this
Article, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section
7.07;
Second: to holders of Senior Indebtedness to the
extent required by Article 11;
Third: to Securityholders for amounts due and unpaid
on the Securities for principal and interest, ratably,
without preference or priority of any kind, according to
the amounts due and payable on the Securities for
principal and interest, respectively; and
Fourth: to the Company.
The Trustee may fix a record date and payment date
for any payment by it to Securityholders pursuant to this
Section.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or
remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in
its discretion may require the filing by any party litigant in
the suit other than the Trustee of an undertaking to pay the
costs of the suit, and the court in its discretion may assess
reasonable costs, including reasonable attorneys' fees, against
any party litigant in the suit, having due regard to the merits
and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the
Trustee, a
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suit by a Holder pursuant to Section 6.07 or a suit
by Holders of more than 10% in principal amount of the
Securities.
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree
of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of
Default:
(1) The Trustee need perform only those duties that
are specifically set forth in this Indenture and no
others.
(2) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act
or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of
paragraph (b) of this Section 7.01.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it
is proved that the Trustee was negligent in ascertaining
the pertinent facts.
(3) The Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
<PAGE>
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accordance with a direction received by it pursuant to
Section 6.05.
(d) Every provision of this Indenture that in any
way relates to the Trustee is subject to paragraphs (a), (b)
and (c) of this Section 7.01.
(e) The Trustee may refuse to perform any duty or
exercise any right or power unless it receives indemnity
satisfactory to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on
any money received by it except as the Trustee may agree with
the Company. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by
law.
SECTION 7.02. Rights of Trustee.
(a) The Trustee may rely on any document believed by
it to be genuine and to have been signed or presented by the
proper person. The Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Trustee acts or refrains from acting,
it may require an Officers' Certificate and/or an Opinion of
Counsel. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such
Certificate or Opinion.
(c) The Trustee may act through agents and shall not
be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action
it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity
may become the owner or pledgee of Securities and may otherwise
deal with the Company or an Affiliate thereof with the same
rights it would have if it were not Trustee. Any Agent may do
the same with like rights. The Trustee, however, must comply
with Sections 7.10 and 7.11.
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SECTION 7.04. Trustee's Disclaimer.
The Trustee makes no representation as to the
validity or adequacy of this Indenture or the Securities; it
shall not be accountable for the Company's use of the proceeds
from the Securities; and it shall not be responsible for any
statement in the Securities other than its certificate of
authentication.
SECTION 7.05. Notice of Defaults.
If a Default occurs and is continuing and if it is
actually known to the Trustee or the Trustee has received
written notice thereof, the Trustee shall mail to each
Securityholder a notice of the Default within 90 days after it
occurs. Except in the case of a Default in payment of
principal of or interest on any Security, the Trustee may
withhold the notice if and so long as it in good faith
determines that withholding the notice is in the interests of
Securityholders.
SECTION 7.06. Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after
each May 1 beginning with May 1, 1996, the Trustee shall mail
to each Securityholder as required by TIA Section 313(c) a brief
report dated as of such date that complies with TIA Section 313(a).
The Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to
Securityholders shall be filed by the Trustee with the SEC and
each stock exchange, if any, on which the Securities are
listed. The Company shall notify the Trustee when the
Securities are listed on any stock exchange.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to
time such compensation for its services as shall be agreed upon
in writing. The Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred by it. Such
expenses shall include the reasonable compensation and out-of-
pocket expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any
loss or liability (including the fees and expenses of counsel)
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incurred by it in connection with the administration of this
trust and the performance of its duties hereunder. The Company
need not pay for any settlement made without its consent. The
Trustee shall notify the Company promptly of any claim for
which it may seek indemnification. The Company need not
reimburse any expense or indemnify against any loss or
liability incurred by the Trustee through the Trustee's
negligence or bad faith.
To secure the Company's payment obligations in this
Section, the Trustee shall have a lien prior to the Securities
on all money or property held or collected by the Trustee,
except that held in trust to pay principal and interest on
particular Securities.
When the Trustee incurs expenses or renders services
after an Event of Default specified in Section 6.01(6) or (7)
occurs, the expenses and the compensation for the services are
intended to constitute expenses of administration under any
Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and
appointment of a successor Trustee shall become effective only
upon the successor Trustee's acceptance of appointment as
provided in this Section.
The Trustee may resign by so notifying the Company.
The Holders of a majority in principal amount of the Securities
may remove the Trustee by so notifying the Trustee and the
Company and may appoint a successor Trustee with the Company's
consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an
insolvent;
(3) a receiver or other public officer takes charge
of the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason, the Company
shall promptly appoint a successor Trustee. Within one year
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after the successor Trustee takes office, the Holders of a
majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by
the Company.
If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Company or the Holders of at least 10% in
principal amount of the Securities may petition any court of
competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any
Holder may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written
acceptance of its appointment to the retiring Trustee and to
the Company. Thereupon the resignation or removal of the
retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee shall mail
a notice of its succession to Securityholders. The retiring
Trustee shall promptly transfer all property held by it as
Trustee to the successor Trustee, subject to the lien provided
for in Section 7.07.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into,
or transfers all or substantially all of its corporate trust
business to another corporation, the successor corporation
without any further act shall be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who
satisfies the requirements of TIA Section 310(a)(1). The Trustee
shall always have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual
report of condition. The Trustee shall comply with TIA
Section 310(b).
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SECTION 7.11. Preferential Collection of Claims
Against Company.
The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). A Trustee
who has resigned or been removed shall be subject to TIA
Section 311(a) to the extent indicated.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations.
The Company may terminate all of its obligations
under this Indenture if all Securities previously authenticated
and delivered (other than mutilated, destroyed, lost or stolen
Securities which have been replaced or paid) have been
delivered to the Trustee for cancellation or if:
(1) the Securities mature within one year or all of
them are to be called for redemption within one year under
arrangements satisfactory to the Trustee for giving the
notice of redemption;
(2) the Company irrevocably deposits in trust with
the Trustee money or U.S. Government Obligations
sufficient to pay principal of and interest on the
Securities to maturity or redemption, as the case may be.
Immediately after making the deposit, the Company shall
give notice of such event to the Securityholders;
(3) the Company has paid or caused to be paid all
sums then payable by the Company to the Trustee hereunder
as of the date of such deposit; and
(4) the Company has delivered to the Trustee an
Officers' Certificate stating that all conditions
precedent provided for herein relating to the satisfaction
and discharge of this Indenture have been complied with.
The Company may make the deposit only during the one-year
period and only if Article 11 permits it.
However, the Company's obligations in Sections 2.03, 2.04,
2.05, 2.06, 2.07, 4.01, 7.07, 7.08 and 8.03, and in Article 10,
shall survive until the Securities are no longer outstanding.
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Thereafter the Company's obligations in Sections 7.07 and 8.03
shall survive.
After a deposit pursuant to this Section 8.01, the
Trustee upon request shall acknowledge in writing the discharge
of the Company's obligations under the Securities and this
Indenture except for those surviving obligations specified
above.
In order to have money available on a payment date to
pay principal or interest on the Securities, the U.S.
Government Obligations shall be payable as to principal or
interest on or before such payment date in such amounts as will
provide the necessary money.
"U.S. Government Obligations" means direct non-
callable obligations of, or non-callable obligations guaranteed
by, the United States of America for the payment of which the
full faith and credit of the United States of America is
pledged.
SECTION 8.02. Application of Trust Money.
The Trustee shall hold in trust money or U.S.
Government Obligations deposited with it pursuant to Section
8.01. It shall apply the deposited money and the money from
U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of principal of
and interest on the Securities. Money and securities so held
in trust are not subject to the subordination provisions of
Article 11.
SECTION 8.03. Repayment to Company.
The Trustee and the Paying Agent shall promptly pay
to the Company upon request any excess money or securities held
by them at any time. The Trustee and the Paying Agent shall
pay to the Company upon request any money held by them for the
payment of principal or interest that remains unclaimed for two
years; provided, however, that the Trustee or such Paying
Agent, before being required to make any such repayment, may,
at the expense of the Company, cause to be published once in a
newspaper of general circulation in The City of New York or
cause to be mailed to each Holder, notice stating that such
money remains and that, after a date specified therein, which
shall not be less than 30 days form the date of such
publication or mailing, any unclaimed balance of such money
then remaining will be repaid to the Company. After payment to
the
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Company, Securityholders entitled to the money must look to
the Company for payment as general creditors unless an
applicable abandoned property law designates another person.
SECTION 8.04. Reinstatement.
If the Trustee or Paying Agent is unable to apply any
money or U.S. Government Obligations in accordance with Section
8.01 by reason of any legal proceeding or by reason of any
order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and
the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.01 until such time
as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with
Section 8.01; provided, however, that if the Company has made
any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such
Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.01. Without Consent of Holders.
The Company, with the consent of the Trustee, may
amend or supplement this Indenture or the Securities without
notice to or the consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or
inconsistency;
(2) to comply with Sections 5.01 and 10.14;
(3) to provide for uncertificated Securities in
addition to certificated Securities; or
(4) to make any change that does not materially
adversely affect the rights of any Securityholder.
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SECTION 9.02. With Consent of Holders.
The Company, with the consent of the Trustee, may
amend or supplement this Indenture or the Securities without
notice to any Securityholder but with the written consent of
the Holders of at least a majority in principal amount of the
Securities then outstanding. Subject to Section 6.07, the
Holders of a majority in principal amount of the Securities
then outstanding may waive compliance by the Company with any
provision of this Indenture or the Securities without notice to
any Securityholder. However, without the consent of each
Securityholder affected, an amendment, supplement or waiver,
including a waiver pursuant to Section 6.04, may not:
(1) reduce the amount of Securities whose Holders
must consent to an amendment, supplement or waiver;
(2) reduce the rate of or change the time for
payment of interest on any Security;
(3) reduce the principal of or change the fixed
maturity of any Security (including, without limitation,
the optional redemption provisions, but excluding
Section 4.08);
(4) waive a default in the payment of principal of
or interest on any Security;
(5) make any Security payable in money other than
that stated in the Security;
(6) make any change in Section 6.04, Section 6.07 or
Section 9.02; or
(7) make any change that adversely affects the right
to convert any Security, including decreasing the
conversion rate of any Security (except as such rate may
be decreased pursuant to the provisions of Article Ten
hereof).
Promptly after an amendment under this Section
becomes effective, the Company shall mail to Securityholders a
notice briefly describing the amendment.
It shall not be necessary for the consent of the
Holders under this Section to approve the particular form of
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any proposed amendment or supplement, but it shall be
sufficient if such consent approves the substance thereof.
SECTION 9.03. Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes
effective, a consent to it by a Holder of a Security is a
continuing consent by the Holder and every subsequent Holder of
a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of
the consent is not made on any Security. However, any such
Holder or subsequent Holder may revoke the consent as to his
Security or portion of a Security if the Trustee receives the
notice of revocation before the date the amendment, supplement
or waiver becomes effective. An amendment, supplement or
waiver becomes effective in accordance with its terms and
thereafter binds every Securityholder.
After an amendment, supplement or waiver becomes
effective with respect to the Securities, it shall bind every
Securityholder unless it makes a change described in any of
clauses (1) through (7) of Section 9.02. In that case the
amendment, supplement or waiver shall bind each Holder of a
Security who has consented to it and, provided that notice of
such amendment, supplement or waiver is reflected on a Security
that evidences the same debt as the consenting Holder's
Security, every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting
Holder's Security.
SECTION 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the
terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place
an appropriate notation on the Security about the changed terms
and return it to the Holder. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new
Security that reflects the changed terms.
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SECTION 9.06. Trustee Protected.
The Trustee need not sign any amendment, supplement
or waiver authorized pursuant to this Article that adversely
affects the Trustee's rights. The Trustee shall be entitled to
receive and rely upon an Opinion of Counsel and an Officers'
Certificate that any supplemental indenture complies with the
Indenture.
ARTICLE 10
CONVERSION
SECTION 10.01. Conversion Privilege.
A Holder of a Security may convert it into Common
Stock at any time during the period stated in paragraph 8 of
the Securities.
The initial conversion rate is stated in paragraph 8
of the Securities. The conversion rate is subject to
adjustment in accordance with Sections 10.06 through 10.14.
A Holder may convert a portion of a Security if the
portion is $1,000 or integral multiples thereof. Provisions of
this Indenture that apply to conversion of all of a Security
also apply to conversion of a portion of it.
SECTION 10.02. Conversion Procedure.
To convert a Security a Holder must satisfy the
requirements in paragraph 8 of the Securities. The date on
which the Holder satisfies all those requirements is the
conversion date. As soon as practicable, the Company shall
deliver to the Holder through the Conversion Agent a
certificate for the number of full shares of Common Stock
issuable upon the conversion and a check in lieu of any
fractional share. The person in whose name the certificate is
registered shall be treated as a stockholder of record on and
after the conversion date.
If any Security is converted between the record date
for the payment of interest and the next succeeding interest
payment date, such Security must be accompanied by funds equal
to the interest payable on such succeeding interest payment
date on the principal amount so converted (unless such Security
<PAGE>
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shall have been called for redemption, in which case no such
payment shall be required). A Security converted on an
interest payment date need not be accompanied by any payment,
and the interest on the principal amount of the Security being
converted will be paid on such interest payment date to the
registered Holder of such Security on the immediately preceding
record date. Subject to the aforesaid right of the registered
Holder to receive interest, no payment or adjustment will be
made on conversion for interest accrued on the converted
Security or for dividends on the Common Stock issued upon
conversion.
If a Holder converts more than one Security at the
same time, the number of full shares issuable upon the
conversion shall be based on the total principal amount of the
Securities converted.
Upon surrender of a Security that is converted in
part the Trustee shall authenticate for the Holder a new
Security equal in principal amount to the unconverted portion
of the Security surrendered.
If the last day on which a Security may be converted
is a Legal Holiday in a place where a Conversion Agent is
located, the Security may be surrendered to that Conversion
Agent on the next succeeding day that is not a Legal Holiday.
SECTION 10.03. Fractional Shares.
The Company will not issue a fractional share of
Common Stock upon conversion of a Security. Instead the
Company will deliver its check for the market value of a
fractional share. The market value of a fraction of a share is
determined as follows: Multiply the market price of a full
share by the fraction and round the result to the nearest cent.
The market price of a share of Common Stock for the
purposes of Section 10.03 is the last reported sale price of a
share of Common Stock on the principal national securities
exchange on which the shares of Common Stock are listed or
admitted to trading or on the National Association of
Securities Dealers National Market System ("NMS") on the
business day next preceding the date of conversion, or, if the
Common Stock is not then listed on an exchange, the closing
sale price (or the quoted closing bid price if there were no
sales) as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") on the business
day next
<PAGE>
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preceding the date of conversion. In the absence of
one or more such quotations, the Board of Directors shall
determine the current market price on the basis of such
quotations as it considers appropriate.
SECTION 10.04. Taxes on Conversion.
If a Holder of a Security converts it, the Company
shall pay any documentary, stamp or similar issue or transfer
tax due on the issue of shares of Common Stock upon the
conversion. However, the Holder shall pay any such tax which
is due because the shares are issued in a name other than the
Holder's name.
SECTION 10.05. Company to Provide Stock.
The Company shall reserve out of its authorized but
unissued Common Stock or its Common Stock held in treasury
enough shares of Common Stock to permit the conversion of all
of the Securities.
All shares of Common Stock which may be issued upon
conversion of the Securities shall be validly issued, fully
paid and non-assessable.
The Company will endeavor to comply with all
securities laws regulating the offer and delivery of shares of
Common Stock upon conversion of Securities and will endeavor to
list such shares on each national securities exchange on which
the Common Stock is listed.
SECTION 10.06. Adjustment for Change in
Capital Stock.
If the Company:
(1) pays a dividend or makes a distribution on its
Capital Stock in shares of its Common Stock;
(2) subdivides its outstanding shares of Common
Stock into a greater number of shares;
(3) combines its outstanding shares of Common Stock
into a smaller number of shares; or
(4) issues by reclassification of its Common Stock
any shares of its Capital Stock,
<PAGE>
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then the conversion privilege and the conversion rate in effect
immediately prior to such action shall be adjusted so that the
Holder of a Security thereafter converted may receive the
number of shares of Capital Stock of the Company which he would
have owned immediately following such action if he had
converted the Security immediately prior to such action.
The adjustment shall become effective immediately
after the record date in the case of a dividend or distribution
and immediately after the effective date in the case of a
subdivision, combination or reclassification.
If after an adjustment a Holder of a Security may,
upon conversion, receive shares of two or more classes of
Capital Stock of the Company, the Board of Directors shall
determine the allocation of the adjusted conversion rate
between or among the classes of Capital Stock. After such
allocation, the conversion privilege and the conversion rate of
each class of Capital Stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common
Stock in this Article 10.
SECTION 10.07. Adjustment for Shares Issued Below
Market Price.
If the Company issues to all holders of Common Stock
shares of Common Stock or rights, options or warrants to
subscribe for or purchase shares of Common Stock, or any
securities convertible into or exchangeable for shares of
Common Stock, or rights, options or warrants to subscribe for
or purchase such convertible or exchangeable securities
(excluding shares of Common Stock, rights, options, warrants
therefor or convertible or exchangeable securities or rights,
options, or warrants therefor issued in transactions described
in Section 10.06) at a Price Per Share (as defined and
determined according to the formula given below) lower than the
current market price (see Section 10.12) on the date of such
issuance, the conversion rate shall be adjusted in accordance
with the following formula:
AC = CC x O + N
-----------
O + (N x R)
-------
M
where:
AC = the adjusted conversion rate.
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CC = the then current conversion rate.
O = the number of shares of Common Stock outstanding
immediately prior to such issuance.
N = the "Number of Shares," which (i) in the case of shares of
Common Stock is the number of shares issued; (ii) in the
case of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of securities
convertible into or exchangeable for shares of Common
Stock, is the maximum number of shares of Common Stock
initially issuable upon exercise, conversion or exchange
thereof; and (iii) in the case of rights, options or
warrants to subscribe for or purchase convertible or
exchangeable securities, is the maximum number of shares
of Common Stock initially issuable upon the conversion or
exchange of the convertible or exchangeable securities
issuable upon the exercise of such rights, options or
warrants.
R = the proceeds received or receivable by the Company, which
(i) in the case of shares of Common Stock is the total
amount received or receivable by the Company in
consideration for the sale and issuance of the shares;
(ii) in the case of rights, options or warrants to
subscribe for or purchase shares of Common Stock or of
securities convertible into or exchangeable for shares of
Common Stock, is the total amount received or receivable
by the Company in consideration for the sale and issuance
of such rights, options, warrants or convertible or
exchangeable securities, plus the minimum aggregate amount
of additional consideration, other than the convertible or
exchangeable securities, payable to the Company upon
exercise, conversion or exchange thereof; and (iii) in the
case of rights, options or warrants to subscribe for or
purchase convertible or exchangeable securities, is the
total amount received or receivable by the Company in
consideration for the sale and issuance of such rights,
options or warrants, plus the minimum aggregate
consideration payable to the Company upon the exercise
thereof, plus the minimum aggregate amount of additional
consideration, other than the convertible or exchangeable
securities, payable upon the conversion or exchange of the
convertible or exchangeable securities; provided that in
each case the proceeds received or receivable by the
Company shall be deemed to be the amount of gross cash
proceeds without deducting therefrom any compensation paid
or discount allowed in the sale, underwriting or purchase
thereof by underwriters or
<PAGE>
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dealers or others performing similar services or any
expenses incurred in connection therewith.
M = the current market price per share of Common Stock on the
date of issue of the shares of Common Stock or the rights,
options or warrants to subscribe for or purchase shares of
Common Stock or the securities convertible into or
exchangeable for shares of Common Stock or the rights,
options or warrants to subscribe for or purchase
convertible or exchangeable securities.
"Price Per Share" shall be defined and determined
according to the following formula:
P = R
---
N
where:
P = Price Per Share
and R and N have the meanings assigned above.
If the Company shall issue shares of Common Stock or
rights, options, warrants or convertible or exchangeable
securities for a consideration consisting, in whole or in part,
of property other than cash the amount of such consideration
shall be determined in good faith by the Board of Directors
whose determination shall be conclusive and evidenced by a
resolution of the Board of Directors filed with the Trustee.
The adjustment shall be made successively whenever ay
such additional shares of Common Stock or such rights, options,
warrants or convertible or exchangeable securities are issued,
and shall become effective immediately after the date of issue
of such shares, rights, options, warrants or convertible or
exchangeable securities; provided, however, that if any such
rights, options or warrants issued by the Company as described
in this Section 10.07 are only exercisable upon the occurrence
of certain triggering events relating to control and provided
for in shareholders rights plans, then the conversion rate will
not be adjusted as provided in this Section 10.07 until such
triggering events occur.
To the extent that such rights, options or warrants
expire unexercised or to the extent any convertible or
exchangeable securities are redeemed by the Company or
<PAGE>
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otherwise cease to be convertible or exchangeable into shares
of Common Stock, the conversion rate shall be readjusted to the
conversion rate which would then be in effect had the
adjustment made upon the date of issuance of such rights,
options, warrants or convertible or exchangeable securities
been made upon the basis of the issuance of rights, options or
warrants to subscribe for or purchase only the number of shares
of Common Stock as to which such rights, options or warrants
were actually exercised and the number of shares of Common
Stock that were actually issued upon the conversion or exchange
of the convertible or exchangeable securities.
SECTION 10.08. Adjustment for Other Distributions.
If the Company distributes to all holders of its
Common Stock evidences of indebtedness, shares of Capital Stock
other than Common Stock, cash or other assets (including
securities, but other than (x) dividends or distributions
exclusively in cash or (y) any dividend or distribution for
which an adjustment is required to be made in accordance with
Section 10.06 or 10.07) the conversion rate shall be adjusted
in accordance with the following formula:
AC = CC x (O x M)
-----------
(O x M) - F
where:
AC = the adjusted conversion rate.
CC = the then current conversion rate.
O = the number of shares of Common Stock outstanding on the
record date mentioned below.
M = the current market price per share of Common Stock, as
defined in Section 10.12, on the record date mentioned
below.
F = the fair market value on the record date of the
evidences of indebtedness, assets, securities or cash
distributed. The Board of Directors shall determine the
fair market value.
The adjustment shall become effective immediately
after the record date for the determination of stockholders
entitled to receive the distribution.
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This Section does not apply to reclassifications or
distributions referred to in Section 10.06. Also, this Section
does not apply to shares issued below market price referred to
in Section 10.07.
SECTION 10.09. Adjustment for Cash Distributions.
If the Company distributes to all holders of Common
Stock cash (excluding any all-cash portions of distributions
for which an adjustment is required to be made in accordance
with Section 10.08) in an aggregate amount that, combined
together with (i) all other such all-cash distributions made
within the then preceding 12 months in respect of which no
adjustment has been made and (ii) any cash and the fair market
value of other consideration paid or payable in respect of any
tender offer by the Company for Common Stock concluded within
the preceding 12 months in respect of which no adjustment has
been made, exceeds 20% of the Company's market capitalization
(defined as being the product of the then current market price
of the Common Stock determined in accordance with Section 10.12
times the number of shares of Common Stock then outstanding) on
the record date of such distribution, the conversion rate shall
be adjusted in accordance with the following formula:
AC = CC x M
-----
M - C
where:
AC = the adjusted conversion rate.
CC = the then current conversion rate.
M = the current market price per share of Common Stock (see
Section 10.12) on the record date mentioned above.
C = the amount of cash distributed applicable to one share
of Common Stock.
Notwithstanding the foregoing, in the event that the
cash so distributed applicable to one share of Common Stock
equals or exceeds such current market price per share of Common
Stock, or such current market price exceeds such amount of cash
by less than $0.10 per share, the conversion rate shall not be
adjusted pursuant to this Section 10.09.
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The adjustment shall become effective immediately
after the record date for the determination of the stockholders
entitled to receive such distribution.
SECTION 10.10. Adjustment for Tender or Exchange Offers.
If the Company completes a tender or exchange offer
for all or any portion of the Common Stock (any such tender or
exchange offer being referred to as an "Offer") that involves
an aggregate consideration having a fair market value as of the
expiration of such Offer (the "Expiration Time") that, together
with (i) any cash and the fair market value of any other
consideration payable in respect of any other Offer, as of the
expiration of such other Offer and in respect for which no
conversion rate adjustment pursuant to this Section 10.10 has
been made, and (ii) the aggregate amount of any all-cash
distributions referred to in Section 10.09 to all holders of
Common Stock within the 12 months preceding the expiration of
such Offer for which no conversion rate adjustment pursuant to
such Section 10.09 has been made, exceeds 20% of the product of
the then current market price per share (see Section 10.12) of
the Common Stock at the Expiration Time times the number of
shares of Common Stock outstanding (including any tendered
shares) at the Expiration Time, the conversion rate shall be
adjusted in accordance with the following formula:
AC = CC x M x (O - P)
-----------
(M x O) - F
where:
AC = the adjusted conversion rate.
CC = the then current conversion rate.
M = the current market price per share of Common Stock (see
Section 10.12) at the Expiration Time.
O = the number of shares of Common Stock outstanding
(including any tendered shares) at the Expiration Time.
F = the fair market value of the aggregate consideration
payable to stockholders based on the acceptance (up to
any maximum specified in the terms of the Offer) of all
shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed so accepted being
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referred to as the "Purchase Shares"). The Board of
Directors shall determine the fair market value.
P = Purchased Shares.
The adjustment shall become effective immediately
prior to the opening of business on the day following the
Expiration Time.
SECTION 10.11. Voluntary Adjustment.
The Company at any time may increase the conversion
rate, temporarily or otherwise, by any amount but in no event
shall such conversion rate result in the issuance of Common
Stock at a price less than the par value of the Common Stock at
the time such increase is made.
SECTION 10.12. Current Market Price.
In Sections 10.07, 10.08, 10.09 and 10.10 the current
market price per share of Common Stock on any date is the
average of the last reported sale prices of a share of Common
Stock on the principal national securities exchange on which
the shares of Common Stock are listed or admitted to trading or
on the NMS, or, if the Common Stock is not then listed on an
exchange or on the NMS, the closing sale prices (or the quoted
closing bid prices if there were no sales) as reported by
NASDAQ for 30 consecutive trading days commencing 45 trading
days before the date in question. In the absence of one or
more such quotations, the Board of Directors shall determine
the current market price on the basis of such quotations as it
considers appropriate.
SECTION 10.13. When Adjustment May Be Deferred.
No adjustment in the conversion rate need be made
unless the adjustment would require a change of at least 1% in
the conversion rate. Any adjustments that are not made due to
the immediately preceding sentence shall be carried forward and
taken into account in any subsequent adjustment.
All calculations under this Article shall be made to
the nearest cent or to the nearest 1/100th of a share, as the
case may be.
<PAGE>
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SECTION 10.14. When No Adjustment Required.
Except as set forth in Section 10.07, no adjustment
in the conversion rate shall be made because the Company
issues, in exchange for cash, property or services, shares of
Common Stock, or any securities convertible into shares of
Common Stock, or securities carrying the right to purchase
shares of Common Stock or such convertible securities.
No adjustment in the conversion rate need be made for
rights to purchase or the sale of Common Stock pursuant to a
Company plan providing for reinvestment of dividends or
interest.
No adjustment in the conversion rate need be made for
a change in the par value of the Common Stock.
No adjustment need be made for a transaction referred
to in Section 10.06, 10.07, 10.08, 10.09 or 10.10 if Security-
holders are to participate in the transaction on a basis and
with notice that the Board of Directors determines to be fair
and appropriate in light of the basis and notice on which
holders of Common Stock participate in the transaction.
SECTION 10.15. Notice of Adjustment.
Whenever the conversion rate is adjusted, the Company
shall promptly mail to Securityholders a notice of the
adjustment. The Company shall file with the Trustee an
Officers' Certificate or a certificate from the Company's
independent public accountants briefly stating the facts
requiring the adjustment and the manner of computing it. The
certificate shall be conclusive evidence that the adjustment is
correct, absent manifest error.
SECTION 10.16. Notice of Certain Transactions.
If:
(1) the Company proposes to take any action that
would require an adjustment in the conversion rate,
(2) the Company proposes to take any action that
would require a supplemental indenture pursuant to Section
10.17, or
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(3) there is a proposed liquidation or dissolution
of the Company,
the Company shall mail to Securityholders a notice stating the
proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. The Company shall mail the notice
at least 15 days before such date. Failure to mail the notice
or any defect in it shall not affect the validity of the
transaction.
SECTION 10.17. Reorganization of the Company.
If the Company is a party to a transaction subject to
Section 5.01 or a merger which reclassifies or changes its
outstanding Common Stock, the successor corporation shall enter
into a supplemental indenture which shall provide that the
Holder of a Security may convert it into the kind and amount of
securities, cash or other assets which he would have owned
immediately after the consolidation, merger, transfer or lease
if he had converted the Security immediately before the
effective date of the transaction. The supplemental indenture
shall provide for adjustments which shall be as nearly
equivalent as may be practical to the adjustments provided for
in this Article 10. The successor Company shall mail to
Securityholders a notice briefly describing the supplemental
indenture.
If this Section applies, Sections 10.06, 10.07,
10.08, 10.09 and 10.10 do not apply.
SECTION 10.18. Rights and Warrants.
If the Company distributes rights or warrants (other
than those referred to in Section 10.07 above) pro rata to all
holders of Common Stock, so long as any such rights or warrants
have not expired or been redeemed by the Company, the Company
shall make proper provision so that the Holder of any Security
surrendered for conversion will be entitled to receive upon
such conversion, in addition to the shares of Common Stock
issuable upon such conversion (the "Conversion Shares"), a
number of rights or warrants to be determined as follows: (i)
if such conversion occurs on or prior to the date for the
distribution to the holders of Common Stock of rights or
warrants of separate certificates evidencing such rights or
warrants (the "Distribution Date"), the same number of rights
or warrants to which a holder of a number of shares of Common
Stock equal to
<PAGE>
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the number of Conversion Shares is entitled at
the time of such conversion in accordance with the terms and
provisions of and applicable to the rights or warrants, and
(ii) if such conversion occurs after such Distribution Date,
the same number of rights or warrants to which a holder of the
number of shares of Common Stock into which the principal
amount of such Security so converted was convertible
immediately prior to such Distribution Date would have been
entitled on such Distribution Date in accordance with the terms
and provisions of and applicable to the rights or warrants.
SECTION 10.19. Company Determination Final.
Any determination that the Board of Directors must
make pursuant to this Article 10 is conclusive, absent manifest
error.
SECTION 10.20. Trustee's Disclaimer.
The Trustee has no duty to determine when an
adjustment under this Article 10 or under the terms of the
Securities should be made, how it should be made or what it
should be. The Trustee has no duty to determine whether any
provisions of a supplemental indenture under Section 10.17 are
correct. The Trustee makes no representation as to the
validity or value of any securities or assets issued upon
conversion of Securities. The Trustee shall not be responsible
for the Company's failure to comply with this Article 10. Each
Conversion Agent other than the Company shall have the same
protection under this Section 10.20 as the Trustee.
ARTICLE 11
SUBORDINATION
SECTION 11.01. Agreement to Subordinate.
The Company agrees, and each Securityholder by
accepting a Security agrees, that the indebtedness evidenced by
the Securities and the payment of principal thereof and
interest thereon are subordinated in right of payment, to the
extent and in the manner provided in this Article 11, to the
prior payment in full of all Senior Indebtedness and that the
subordination is for the benefit of the holders of Senior
Indebtedness.
<PAGE>
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Money and securities held in trust pursuant to
Article 8 are not subject to the subordination provisions of
this Article 11.
SECTION 11.02. Certain Definitions.
"Representative" means the indenture trustee or other
trustee, agent or representative for an issue of Senior
Indebtedness.
"Senior Indebtedness" means the principal of (and
premium, if any) and interest on (a) any and all indebtedness
and obligations of the Company (including indebtedness of
others guaranteed by the Company) other than the Securities,
whether or not contingent and whether outstanding on the date
of this Indenture or thereafter created, incurred or assumed,
which (i) is for money borrowed; (ii) is evidenced by any bond,
note, debenture or similar instrument; (iii) represents the
unpaid balance on the purchase price of any property, business
or asset of any kind; (iv) is an obligation of the Company as
lessee under any and all leases of property, equipment or other
assets required to be capitalized on the balance sheet of the
lessee under generally accepted accounting principles; (v) is a
reimbursement obligation of the Company with respect to letters
of credit; (vi) are obligations of the Company with respect to
interest swap obligations and foreign exchange agreements; or
(vii) are obligations of others secured by a lien to which any
of the properties or assets (including, without limitation,
leasehold interests and any other tangible or intangible
property rights) of the Company are subject, whether or not the
obligations secured thereby shall have been assumed by the
Company or shall otherwise be the Company's legal liability and
(b) any deferrals, amendments, renewals, extensions,
modifications and refundings of any indebtedness or obligations
of the types referred to above; provided that Senior
Indebtedness shall not include (i) the Securities; (ii) the
Company's 6 7/8% Convertible Subordinated Notes due 2002;
(iii) any indebtedness or obligation of the Company which, by
its terms or the terms of the instrument creating or evidencing
it, is not superior in right of payment to the Securities;
(iv) any indebtedness or obligation of the Company to any of
its subsidiaries and (v) any indebtedness or obligation
incurred by the Company in connection with the purchase of
assets, materials or services in the ordinary course of
business and which constitutes a trade payable.
<PAGE>
-50-
SECTION 11.03. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in
a liquidation or dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(1) holders of Senior Indebtedness shall be entitled
to receive payment in full of the principal of and
interest to the date of payment on the Senior Indebtedness
before Securityholders shall be entitled to receive any
payment of principal of or interest on Securities; and
(2) until the Senior Indebtedness is paid in full,
any distribution to which Securityholders would be
entitled but for this Article 11 shall be made to holders
of Senior Indebtedness as their interests may appear,
except the Securityholders may receive securities that are
subordinated to Senior Indebtedness to at least the same
extent as the Securities.
SECTION 11.04. Company Not to Make Payments
with Respect to Securities
in Certain Circumstances.
Except for payment in or distribution of securities
that are subordinated to Senior Indebtedness to at least the
same extent as the Securities, the Company shall not make any
payment with respect to the principal of or interest on any of
the Securities, or make any other payment with respect to the
purchase or other acquisition of any of the Securities:
(a) if there shall have occurred a default in the
payment of the principal of or interest on any Senior
Indebtedness; or
(b) if there shall exist at the time of such
payment, or such payment would create, an event of default
(or an event which, with the giving of notice or the
passage of time or both, would become an event of default)
with respect to any Senior Indebtedness which would permit
the holders (or any specified proportion of such holders)
of such Senior Indebtedness to accelerate the maturity
thereof, and if notification of such default or event of
default has been given to the Company by a holder of such
Senior Indebtedness or by a trustee, agent or
Representative for an issue of Senior Indebtedness;
<PAGE>
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unless and until, in each case, whether described in clause (a)
or clause (b), such default or event of default shall have been
cured or waived in the manner required by the instrument
relating to such Senior Indebtedness or shall otherwise have
ceased to exist.
Regardless of anything to the contrary herein,
nothing shall prevent (a) any payment by the Trustee to the
Securityholders of amounts deposited with it pursuant to
Article Eight or (b) any payment by the Trustee or the Paying
Agent as permitted by Section 11.11.
SECTION 11.05. Acceleration of Securities.
If payment of the Securities is accelerated because
of an Event of Default, the Company shall promptly notify
holders of Senior Indebtedness of the acceleration.
SECTION 11.06. When Distribution Must Be Paid Over.
In the event that the Company shall make any payment
to the Trustee of the principal of or interest on the
Securities at a time when such payment is prohibited by Section
11.03 or 11.04, such payment shall be held by the Trustee, in
trust for the benefit of, and shall be paid forthwith over and
delivered to, the holders of Senior Indebtedness (pro rata as
to each of such holders on the basis of the respective amounts
of Senior Indebtedness held by them) or their Representative or
the trustee under the indenture or other agreement (if any)
pursuant to which Senior Indebtedness may have been issued, as
their respective interests may appear, for application to the
payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay all Senior Indebtedness in full in
accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of
Senior Indebtedness.
If a distribution is made to Securityholders that
because of this Article 11 should not have been made to them,
the Securityholders who receive the distribution shall hold it
in trust for holders of Senior Indebtedness and pay it over to
them as their interests may appear.
SECTION 11.07. Notice by Company.
The Company shall promptly notify the Trustee and the
Paying Agent in writing of any facts known to the Company that
<PAGE>
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would cause a payment of principal of or interest on Securities
to violate this Article 11.
SECTION 11.08. Subrogation.
After all Senior Indebtedness is paid in full and
until the Securities are paid in full, Securityholders shall be
subrogated to the rights of holders of Senior Indebtedness to
receive distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to the Security-
holders have been applied to the payment of Senior Indebted-
ness. A distribution made under this Article 11 to holders of
Senior Indebtedness which otherwise would have been made to
Securityholders is not, as between the Company and
Securityholders, a payment by the Company on Senior
Indebtedness.
SECTION 11.09. Subordination May Not Be
Impaired by Company.
No right of any holder of Senior Indebtedness to
enforce the subordination of the indebtedness evidenced by the
Securities shall be impaired by any act or failure to act by
the Company or by its failure to comply with this Indenture.
SECTION 11.10. Distribution or Notice
to Representative.
Whenever a distribution is to be made or a notice
given to holders of Senior Indebtedness, the distribution may
be made and the notice given to their Representative.
SECTION 11.11. Rights of Trustee and Paying Agent.
The Trustee or Paying Agent may continue to make
payments on the Securities until it receives written notice of
facts that would cause a payment of principal of or interest on
the Securities to violate this Article 11. Only the Company, a
Representative or a holder of an issue of Senior Indebtedness
that has no Representative may give the notice.
The Trustee shall be entitled to rely on the delivery
to it of a written notice by a person representing himself to
be a holder of Senior Indebtedness (or a Representative on
behalf of such holder) to establish that such notice has been
given by a holder of Senior Indebtedness or a Representative on
behalf of any such holder. In the event that the Trustee
<PAGE>
-53-
determines in good faith that further evidence is required with
respect to the right of any person who is a holder of Senior
Indebtedness to participate in any payment or distribution
pursuant to this Article 11, the Trustee may request such
person to furnish evidence to the reasonable satisfaction of
the Trustee as to the amount of Senior Indebtedness held by
such person, the extent to which such person is entitled to
participate in such payment or distribution and any other facts
pertinent to the rights of such person under this Article 11,
and if such evidence is not furnished the Trustee may defer any
payment to such person pending judicial determination as to the
right of such person to receive such payment or until such time
as the Trustee shall be otherwise satisfied as to the right of
such person to receive such payment.
The Trustee in its individual or any other capacity
may hold Senior Indebtedness with the same rights it would have
if it were not Trustee. Any Agent may do the same with like
rights.
The Trustee shall not be deemed to owe any fiduciary
duty to the holders of Senior Indebtedness and shall not be
liable to any such holder if it shall mistakenly pay over or
distribute to Securityholders or the Company or any other
person money or assets to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article 11 or
otherwise.
SECTION 11.12. Officers' Certificate.
If there occurs an event referred to in Section 11.03
or 11.04, the Company shall promptly give to the Trustee an
Officers' Certificate (on which the Trustee may conclusively
rely) identifying all holders of Senior Indebtedness or their
Representatives and the principal amount of Senior Indebtedness
then outstanding held by each such holder and stating the
reasons why such Officers' Certificate is being delivered to
the Trustee.
SECTION 11.13. Obligation of Company Unconditional.
Nothing contained in this Article 11 or elsewhere in
this Indenture or in any Security is intended to or shall
impair, as between the Company, its creditors other than
holders of Senior Indebtedness and the Holders of the
Securities, the obligation of the Company, which is absolute
and unconditional, to pay to the Holders of the Securities the
principal of and interest on the Securities as and when the
same shall
<PAGE>
-54-
become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of
the Holders of the Securities and creditors of the Company
other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee or the Holder of
any Security from exercising all remedies otherwise permitted
by applicable law upon default under this Indenture, subject to
the rights, if any, under this Article 11 of the holders of
Senior Indebtedness in respect of cash, property or securities
of the Company received upon the exercise of any such remedy.
Upon any distribution of assets of the Company referred to in
this Article 11, the Trustee, subject to the provisions of
Sections 7.01 and 7.02, and the Holders of the Securities shall
be entitled to rely upon any order or decree by any court of
competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings are pending, or a
certificate of the liquidating trustee or agent or other person
making any distribution to the Trustee or the Holders of the
Securities, for the purpose of ascertaining the persons
entitled to participate in such distribution, the holders of
the Senior Indebtedness and other indebtedness of the Company,
the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent
thereto or to this Article 11. Nothing contained in this
Article 11 or elsewhere in this Indenture or in any Security is
intended to or shall affect the obligation of the Company to
make, or prevent the Company from making, at ay time except
during the pendency of any dissolution, winding up, liquidation
or reorganization proceeding, and except during the continuance
of any default specified in Section 11.04 (not cured or
waived), payments at any time of the principal or of interest
on the Securities.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies
or conflicts with another provision which is required to be
included in this Indenture by the TIA, the required provision
shall control.
<PAGE>
-55-
SECTION 12.02. Notices.
Any notice or communication by the Company or the
Trustee to the other is duly given if in writing and delivered
in person, mailed by first-class mail or by express delivery to
the other's address stated in this Section 12.02. The Company
or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or
communications.
Any notice or communication to a Securityholder shall
be mailed by first-class mail to his address shown on the
register kept by the Registrar. Failure to mail a notice or
communication to a Securityholder or any defect in it shall not
affect its sufficiency with respect to other Securityholders.
If a notice or communication is mailed in the manner
provided above within the time prescribed, it is duly given,
whether or not the addressee receives it.
If the Company mails a notice or communication to
Securityholders, it shall mail a copy to the Trustee and each
Agent at the same time.
All notices or communications shall be in writing.
The Company's address is:
Continental Homes Holding Corp.
7001 N. Scottsdale Road
Suite 2050
Scottsdale, Arizona 85252
Attention: Corporate Secretary
The Trustee's address is:
Manufacturers and Traders Trust Company
One M&T Plaza
Buffalo, New York 14203
Attention: Corporate Trust Department
SECTION 12.03. Communication by Holders with
Other Holders.
Securityholders may communicate pursuant to TIA
Section 312(b) with other Securityholders with respect to their
rights under this Indenture or the Securities. The Company,
<PAGE>
-56-
the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 12.04. Certificate and Opinion as
to Conditions Precedent.
Upon any request or application by the Company to the
Trustee to take any action under this Indenture the Company
shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the
opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel stating that, in the
opinion of such counsel, all such conditions precedent
have been complied with.
Each signer of an Officers' Certificate or an Opinion
of Counsel may (if so stated) rely, effectively, upon an
Opinion of Counsel as to legal matters and an Officers'
Certificate as to factual matters if such signer reasonably and
in good faith believes in the accuracy of the document relied
upon.
SECTION 12.05. Statements Required in Certificate
or Opinion.
Each certificate or opinion with respect to
compliance with a condition or covenant provided for in this
Indenture shall include:
(1) a statement that the person making such
certificate or opinion has read such covenant or
condition;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of such person,
he has made such examination or investigation as is
necessary to enable him to express an informed opinion as
to whether or not such covenant or condition has been
complied with; and
<PAGE>
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(4) a statement as to whether or not, in the opinion
of such person, such condition or covenant has been
complied with.
SECTION 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by
or at a meeting of Securityholders. The Registrar, Paying
Agent or Conversion Agent may make reasonable rules and set
reasonable requirements for their respective functions.
SECTION 12.07. Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday or a day on
which banking institutions are not required to be open in The
City of New York, in the State of New York or in the city in
which the Trustee administers its corporate trust business. If
a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day
that is not a Legal Holiday, and no interest shall accrue on
that payment for the intervening period.
A "business day" is a day other than a Legal Holiday.
SECTION 12.08. No Recourse Against Others.
All liability described in the Securities of any
director, officer, employee or stockholder, as such, of the
Company is waived and released.
SECTION 12.09. Duplicate Originals.
The parties may sign any number of copies of this
Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
SECTION 12.10. Governing Law.
The laws of the State of New York, without regard to
principles of conflicts of law, shall govern this Indenture and
the Securities.
SECTION 12.11. No Adverse Interpretation
of Other Agreements.
This Indenture may not be used to interpret another
indenture, loan or debt agreement of the Company or a
<PAGE>
-58-
subsidiary. Any such indenture, loan or debt agreement may not
be used to interpret this Indenture.
SECTION 12.12. Successors.
All agreements of the Company in this Indenture and
the Securities shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.
SECTION 12.13. Separability.
In case any provision in this Indenture or in the
Securities shall be valid, illegal or unenforceable, the
validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby
and a Holder shall have no claim therefor against any party
hereto.
SECTION 12.14. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and
headings of the Articles and Sections of this Indenture have
been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict
any of the terms or provisions hereof.
<PAGE>
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused
this Indenture to be duly executed, and their respective
corporate seals to be hereunto affixed and attested, all as of
the day and year first above written.
CONTINENTAL HOMES HOLDING CORP.
By:
----------------------------
Title: Chief Executive Officer
MANUFACTURERS AND TRADERS TRUST
COMPANY, as Trustee
By:
----------------------------
Title:
<PAGE>
EXHIBIT A
REGISTERED [Face of Security] REGISTERED
NUMBER DOLLARS
CONTINENTAL HOMES HOLDING CORP.
............. .............
% CONVERTIBLE SUBORDINATED NOTE DUE 2005
CONTINENTAL HOMES HOLDING CORP., a Delaware corporation
(herein called the "Company"), for value received, hereby
promises to pay to or registered
assigns, the principal sum of Dollars on
November 1, 2005, and to pay interest thereon as provided on the
reverse hereof, until the principal hereof is paid or duly
provided for.
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
The provisions on the back of this certificate are
incorporated as if set forth on the face hereof.
IN WITNESS WHEREOF, CONTINENTAL HOMES HOLDING CORP. has
caused this instrument to be duly signed under its corporate
seal.
[SEAL] CONTINENTAL HOMES HOLDING CORP.
By:
-----------------------------
[Title]
By:
-----------------------------
[Title]
<PAGE>
A-2
TRUSTEES'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred
to in the within-mentioned Indenture.
Manufacturers and Traders Trust Company,
as Trustee
By: ______________________________
Signatory
Dated: ___________________
<PAGE>
A-3
[REVERSE OF SECURITY]
CONTINENTAL HOMES HOLDING CORP.
% CONVERTIBLE SUBORDINATED NOTE DUE 2005
1. Interest. Continental Homes Holding Corp., a
Delaware corporation (the "Company"), promises to pay interest on
the principal amount of this Security at the rate per annum shown
above. The Company will pay interest semi-annually on May 1 and
November 1 of each year, commencing May 1, 1996. Interest on the
Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the
date of original issuance of the Securities set forth on the face
of this Security. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest
on the Securities (except defaulted interest) to the persons who
are registered Holders of Securities at the close of business on
the record date set forth on the face of this Security next
preceding the applicable interest payment date. Holders must
surrender Securities to a Paying Agent to collect principal
payments. The Company will pay principal, premium, if any, and
interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts.
However, the Company must pay principal, premium, if any, and
interest by check payable in such money. It may mail an interest
check to a Holder's registered address.
3. Paying Agent, Registrar, Conversion Agent.
Initially, Manufacturers and Traders Trust Company (the
"Trustee") will act as Paying Agent, Registrar and Conversion
Agent. The Company may change any Paying Agent, Registrar,
Conversion Agent or co-registrar without notice. The Company may
act in any such capacity.
4. Indenture. The Company issued the Securities
under an Indenture dated as of November 1, 1995 (the "Indenture")
between the Company and the Trustee. The terms of the Securities
include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbbb) (the "Act"), as in effect
on the date of the Indenture. The Securities are subject to all
such terms, and Securityholders are referred to the Indenture and
the Act for a statement of such terms. The Securities are
<PAGE>
A-4
general unsecured subordinated obligations of the Company limited
to $86,250,000 aggregate principal amount (except for Securities
issued in substitution for destroyed, mutilated, lost or stolen
Securities). Terms used herein which are defined in the
Indenture have the meanings assigned to them in the Indenture.
5. Optional Redemption. The Securities may be
redeemed on at least 15 and not more than 60 days' notice at the
option of the Company on or after November 3, 1998, in whole at
any time or in part from time to time. The redemption price
(expressed as a percentage of principal amount) together with
accrued and unpaid interest to the redemption date, are as
follows for the 12-month period beginning November 1 of the
following years (except November 3 in 1998):
Year Percentage Year Percentage
1998 % 2002 %
1999 % 2003 100.00%
2000 % 2004 100.00%
2001 %
6. Notice of Redemption. Notice of redemption will
be mailed at least 15 days but not more than 60 days before the
redemption date to each Holder of Securities to be redeemed at
his registered address. Securities in denominations larger
than $1,000 may be redeemed in part but only in whole multiples
of $1,000. On and after the redemption date, interest ceases
to accrue on Securities or portions of them called for
redemption.
7. Change in Control. In the event of a Change in
Control (as hereinafter defined) with respect to the Company,
then each Holder of the Securities shall have the right, at the
Holder's option, to require the Company to buy such Holder's
Securities including any portion thereof which is $1,000 or any
integral multiple thereof on the date (the "Repurchase Date")
that is 45 days after the date of the Repurchase Right Notice
at a purchase price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest to the Repurchase
Date (the "Repurchase Price").
On or before the 30th day after the occurrence of a
Change in Control, the Company is obligated to give notice of
the occurrence of such Change in Control, and of the date
before which a Holder must notify the Company of such Holder's
intention to exercise the redemption option, the procedure
<PAGE>
A-5
which such Holder must follow to exercise such right. To
exercise the redemption option, the Holder of a Security must
deliver on or before the 30th day after the date of the
Repurchase Right Notice, written notice to the Company of the
Holder's exercise of such option together with the Security or
Securities with respect to which the option is being exercised,
duly endorsed for transfer. Exercise of the redemption option
by the Holder of a Security will be irrevocable, except that a
Holder who submits such Security will retain the right to
convert such Security into Common Stock until the close of
business on the second business day prior to the Repurchase
Date. If the Repurchase Date falls between any interest
payment record date and the next succeeding interest payment
date, Securities must be accompanied by payment of an amount
equal to the interest thereon which the registered Holder is to
receive on such interest payment date.
If any repurchase pursuant to the foregoing
provisions constitutes an "issuer tender offer" as defined in
Rule 13e-4 under the Exchange Act, the Company will comply with
the requirements of Rule 13e-4, Rule 14e-1 and any other tender
offer rules under the Exchange Act which then may be
applicable, including the filing of an Issuer Tender Offer
Statement on Schedule 13E-4 with the SEC and the furnishing of
certain information contained therein to the Holders.
A "Change in Control" of the Company shall be deemed
to have occurred at such time as any person, together with its
affiliates or associates, other than the Management Group (as
defined in the Indenture) is or becomes the beneficial owner,
directly or indirectly, through a purchase, merger or other
acquisition transaction, of shares of capital stock of the
Company entitling such person to exercise 50% or more of the
total voting power of all shares of capital stock of the
Company entitled to vote in elections of directors, provided
that a Change in Control shall not be deemed to have occurred
if either (i) the last sale price of the Common Stock for any
five trading days during the ten trading days immediately
preceding the Change in Control is at least equal to 105% of
the Conversion Price (as defined in the Indenture) in effect on
the day of the Change in Control or (ii) all of the
consideration (excluding cash payments for fractional shares)
in the transaction or transactions constituting the Change in
Control consists of shares of common stock traded on a national
securities exchange or through NASDAQ or another comparable
quotation system.
<PAGE>
A-6
8. Conversion. A Holder of a Security may convert
it into Common Stock of the Company at any time before the
close of business on November 1, 2005, or, if the Security is
called for redemption, the Holder may convert it at any time
before the close of business on the second business day before
the date fixed for redemption. The initial conversion rate is
shares of Common Stock per $1,000 principal amount of the
Securities, subject to adjustment under certain circumstances.
The Company will deliver a check in lieu of any fractional
share. On conversion no payment or adjustment for interest
accrued on the Securities will be made nor for dividends on the
Common Stock issued on conversion. If any Security is
converted between the record date for the payment of interest
and the next succeeding interest payment date, such Security
must be accompanied by funds equal to the interest payable on
such succeeding interest payment date on the principal amount
so converted (unless such Security shall have been called for
redemption, in which case no such payment shall be required).
A Security converted on an interest payment date need not be
accompanied by any payment, and the interest on the principal
amount of the Security being converted will be paid on such
interest payment date to the registered holder of such Security
on the immediately preceding record date.
To convert a Security a Holder must (1) complete and
sign the conversion notice on the back of the Security,
(2) surrender the Security to a Conversion Agent, (3) furnish
appropriate endorsements and transfer documents if required by
the Registrar or Conversion Agent and (4) pay any transfer or
similar tax if required. A Holder may convert a portion of a
Security if the portion is $1,000 or a whole multiple of
$1,000.
9. Subordination. The Securities are subordinated
in right of payment, in the manner and to the extent set forth
in the Indenture, to the prior payment in full of all Senior
Indebtedness (as defined in the Indenture). Each Holder by
accepting a Security agrees to such subordination and
authorizes the Trustee to give it effect.
10. Denominations, Transfer, Exchange. The
Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. The
transfer of Securities may be registered and Securities may be
exchanged as provided in the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate
endorsements and transfer documents. No service charge shall
be made for any
<PAGE>
A-7
such registration or transfer or exchange, but
the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection
therewith. The Registrar need not exchange or register the
transfer of any Security selected for redemption in whole or in
part. Also, it need not exchange or register the transfer of
any Securities for a period of 15 days before a selection of
Securities to be redeemed.
11. Persons Deemed Owners. The registered Holder of
a Security may be treated as its owner for all purposes.
12. Merger or Consolidation. The Company may not
consolidate with, or merge into, or directly or indirectly
transfer or lease all or substantially all of its assets to,
another person unless: the person is a corporation; such
corporation assumes by supplemental indenture all the
obligations of the Company under the Securities and the
Indenture; and giving effect to the transaction, no Default or
Event of Default (as defined in the Indenture) shall exist.
13. Amendments and Waivers. Subject to certain
exceptions, the Indenture or the Securities may be amended with
the consent of the Holders of at least a majority in principal
amount of the Securities outstanding; and any existing default
may be waived with the consent of the Holders of a majority in
principal amount of the Securities. Without the consent of any
Securityholder, the Indenture or the Securities may be amended
to cure any ambiguity, omission, defect or inconsistency or to
provide for uncertificated Securities in addition to
certificated Securities, to comply with Sections 5.01 and 10.16
of the Indenture or to make any change that does not materially
adversely affect the rights of any Securityholder.
14. Defaults and Remedies. An Event of Default is:
default for 30 days in payment of interest on the Securities;
default in payment of principal on the Securities when due;
failure by the Company for 60 days after notice to it to comply
with any of its other agreements in the Indenture or the
Securities; acceleration prior to maturity of other
indebtedness in excess of an aggregate of $10,000,000 which is
not rescinded or annulled within 30 days after notice; the
rendering of a final judgment or judgments against the Company
in excess of $10,000,000, which is not discharged, satisfied or
stayed within a period of 60 days after notice; and certain
events of bankruptcy or insolvency. If any Event of Default
occurs and is continuing, the Trustee or the Holders of at
least 25% in
<PAGE>
A-8
principal amount of the Securities may declare all
the Securities to be due and payable immediately. The Holders
of a majority in principal amount of the Securities by notice
to the Trustee may waive a Default and its consequences.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture
or the Securities. Subject to certain limitations, Holders of
a majority in principal amount of the Securities may direct the
Trustee in its exercise of any trust or power. The Trustee may
withhold from Securityholders notice of any continuing default
(except a default in payment of principal or interest) if it
determines that withholding notice is in their interests. The
Company must furnish an annual compliance certificate to the
Trustee.
15. Trustee Dealings with Company. Manufacturers
and Traders Trust Company, the Trustee under the Indenture, or
any banking institution serving as successor Trustee
thereunder, in its individual or any other capacity, may make
loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.
16. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Company shall
not have any liability for any obligations of the Company under
the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation.
Each Securityholder by accepting a Security waives and releases
all such liability. The waiver and releases are part of the
consideration for the issue of the Securities.
17. Authentication. This Security shall not be
valid until authenticated by the manual signature of the
Trustee or an authenticating agent.
18. Abbreviations. Customary abbreviations may be
used in the name of a Securityholder or an assignee, such as:
TEN COM (= tenants in common), TEN ENT (= tenant by the
entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON
WRITTEN REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE.
REQUESTS MAY BE MADE TO: Continental Homes Holding Corp., 7001
<PAGE>
A-9
N. Scottsdale Road, Suite 2050, Scottsdale, Arizona 85253,
Attention: Corporate Secretary.
<PAGE>
A-10
ASSIGNMENT FORM CONVERSION NOTICE
To assign this Security, fill To convert this Security
in the form below: into Common Stock of the
Company, check the box:
I or we assign and transfer _____
this Security to: /____/
__________________
To convert only part of
this Security, state the
(Insert Assignee's Soc. amount (must be in
Sec. or Tax I.D. No.) multiples of $1,000):
$
__________________________ If you want the stock
certificate made out in
__________________________ another person's name,
fill in the form below:
__________________________
__________________________ (Insert other person's
(Print or type assignee's Soc. Sec. or Tax I.D.
name, address and zip code) no.)
----------------------------
and irrevocably appoint ___
----------------------------
___________________ agent
to transfer this Security ----------------------------
on the books of the
Company. The agent may ----------------------------
substitute another (Print or type other
to act for him. person's name, address
and zip code)
- ----------------------------------------------------------------------
Date: __________________ Signature(s):________________________________
---------------------------
(Sign exactly as your
name(s) appear(s) on
the other side of this
Security)
<PAGE>
A-11
Signature(s) guaranteed by:
------------------------------------------
(All signatures must be
guaranteed by a member of a
national securities exchange or
of the National Association of
Securities Dealers, Inc. or by a
commercial bank or trust company
located in the United States)
<PAGE>
A-12
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security
repurchased by the Company pursuant to Section 4.08 of the
Indenture, check the box:
____
/___/
If you want to elect to have only part of this
Security purchased by the Company pursuant to Section 4.08 of
the Indenture, state the amount:
$ ___________________________________
(in an integral multiple of $1,000)
Date: ______________________ Signature(s): _________________
_______________________________
(Sign exactly as your name(s)
appear(s) on the other side of
this Security)
Signature(s) guaranteed by: __________________________________
(All signatures must be guaranteed
by a member of a national
securities exchange or of the
National Association of
Securities Dealers, Inc. or by a
commercial bank or trust company
located in the United States)
<PAGE>
EXHIBIT 5
CAHILL GORDON & REINDEL
Eighty Pine Street
New York, NY 10005-1702
October 19, 1995
Continental Homes Holding Corp.
7001 N. Scottsdale Road
Suite 2050
Scottsdale, Arizona 85253
Ladies and Gentlemen:
We have examined a copy of the Registration Statement on
Form S-3 filed by Continental Homes Holding Corp. (the "Company")
with the Securities and Exchange Commission on October 19, 1995
relating to the registration pursuant to the provisions of the
Securities Act of 1933, as amended (the "Act"), of (i) $86,250,000
principal amount of Convertible Subordinated Notes due 2005 of the
Company (the "Notes") (including up to $11,250,000 principal
amount of Notes whcih may be issued pursuant to an over-allotment
option) and (ii) the shares of common stock, par value $.01 per
share, of the Company (the "Conversion Stock") reserved for
issuance by the Company upon conversion of the Notes. The Notes
are to be issued under an Indenture (the "Indenture") between the
Company and Manufacturers and Traders Trust Company, as trustee
(the "Trustee"). The Conversion Stock is to be issued upon
conversion of the Notes in accordance with the terms thereof and
of the Indenture. In rendering this opinion, we have reviewed
<PAGE>
such documents and made such investigation as we deemed
appropriate.
We are of the opinion that (subject to compliance with
the pertinent provisions of the Act and, with respect to the
Indenture and the Notes, the Trust Indenture Act of 1939, as
amended, and to compliance with such securities or "blue sky" laws
of any jurisdiction as may be applicable):
1. When the Indenture has been duly executed and
delivered by the proper officers of the Company and the Trustee,
and when the Notes have been duly executed, authenticated,
registered, issued and delivered in accordance with the terms of
the Indenture, the Notes will constitute valid and binding
obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the
Indenture, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and similar laws
affecting creditors' rights and remedies generally and subject to
general principles of equity.
2. When certificates evidencing the Conversion Stock
have been duly executed, countersigned, registered, issued and
delivered upon conversion of the Notes in accordance with the
terms thereof and of the Indenture, the Conversion Stock will be
duly and validly issued and outstanding, fully paid and
nonassessable shares of common stock of the Company.
We hereby consent to the use of our firm's name under
the caption "Legal Matters" and to the filing of this opinion with
the Securities and Exchange Commission as an exhibit to the
aforesaid Registration Statement.
Very truly yours,
/s/ Cahill Gordon & Reindel
<PAGE>
EXHIBIT 12
CONTINENTAL HOMES HOLDING CORP.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED MAY 31, AUGUST 31,
----------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1994
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges:
Rent expense.......... $ 197 $ 178 $ 165 $ 305 $ 363 $ 91 $ 91
Interest (expensed or
capitalized)--
homebuilding......... 8,889 8,662 11,896 13,378 19,528 5,315 4,309
Interest (expensed or
capitalized)--joint
ventures(1).......... 2,868 885 144 -- -- -- --
Interest--mortgage
banking.............. 2,364 1,557 1,343 2,707 2,360 724 516
------- ------- ------- ------- ------- ------- -------
Total fixed charges. $14,318 $11,282 $13,548 $16,390 $22,251 $ 6,130 $ 4,916
======= ======= ======= ======= ======= ======= =======
Earnings:
Income before taxes
and extraordinary
credits.............. $ 477 $ 2,155 $12,083 $23,137 $25,465 $ 9,264 $ 8,029
Fixed charges......... 14,318 11,282 13,548 16,390 22,251 6,130 4,916
Interest capital-
ized(1)(2)........... (3,486) 2,783 202 (920) (3,421) (419) (959)
------- ------- ------- ------- ------- ------- -------
Total earnings be-
fore fixed charges. $11,309 $16,220 $25,833 $38,607 $44,295 $14,975 $11,986
======= ======= ======= ======= ======= ======= =======
Ratio of earnings to
fixed charges.......... (3) 1.44x 1.91x 2.36x 1.99x 2.44x 2.44x
======= ======= ======= ======= ======= ======= =======
</TABLE>
- --------
(1) Reflects the Company's proportionate share of the joint venture.
(2) Since interest capitalized is charged to interest expense when the related
assets are sold, this amount represents the change in capitalized interest
from the previous period end.
(3) Fiscal 1991 includes a pre-tax writedown of $5,000,000. After giving effect
to such writedown, earnings for the fiscal year ended May 31, 1991 were
inadequate to cover fixed charges and resulted in a coverage deficiency of
$3,009,000.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated June 19, 1995
incorporated by reference in Continental Homes Holding Corp.'s Form 10-K for
the year ended May 31, 1995 and to all references to our Firm included in this
registration statement.
Arthur Andersen LLP
Phoenix, Arizona, October 18, 1995.
<PAGE>
EXHIBIT 24
CONTINENTAL HOMES HOLDING CORP.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person
whose signature appears below hereby constitutes and appoints
Donald R. Loback and Kenda B. Gonzales, or any of them, his
true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign a
Registration Statement on Form S-3 (the "Registration
Statement") relating to securities of Continental Homes Holding
Corp., and to sign any and all amendments to the Registration
statement, including post-effective amendments, and
registration statements filed pursuant to Rule 462 under the
Securities Act of 1933, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each
acting alone, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Signatures Title Date
/s/ Donald R. Loback
_________________________ Chairman, Chief October 18, 1995
(Donald R. Loback) Executive Officer
and Director
/s/ Kenda B. Gonzales
_________________________ Chief Financial October 18, 1995
(Kenda B. Gonzales) Officer, Treasurer
and Secretary
/s/ W. Thomas Hickcox
_________________________ President, Chief October 18, 1995
(W. Thomas Hickcox) Operating Officer
and Director
/s/ Bradley S. Anderson
_________________________ Director October 18, 1995
(Bradley S. Anderson)
<PAGE>
/s/ Jo Ann Rudd
______________________ Director October 18, 1995
(Jo Ann Rudd)
/s/ William Steinberg
______________________ Director October 18, 1995
(William Steinberg)
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
=============
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT
OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an application to determine eligibility of a Trustee
pursuant to Section 305 (b)(2) X
-----
=============
MANUFACTURERS AND TRADERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 16-0538020
(Jurisdiction of incorporation (I.R.S. employer
or organization if not a national bank) identification No.)
One M&T Plaza
Buffalo, New York 14203
(Address of principal executive offices) (Zip Code)
=============
CONTINENTAL HOMES HOLDING CORP.
(Exact name of obligor as specified in its charter)
DELAWARE 86-0554624
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
7001 N. Scottsdale Road
Suite 2050
Scottsdale, Arizona 85253
(Address of principal executive offices) (Zip Code)
=============
CONVERTIBLE SUBORDINATED NOTES DUE 2005
(Title of indenture securities)
================================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Superintendent of Banks of the State of New York, 2 World Trade Center,
New York, NY 10047 and Albany, NY 12203.
Federal Reserve Bank of New York, 33 Liberty Street, New York, NY
10045.
Federal Deposit Insurance Corporation, Washington, D.C. 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
[Items 3 through 15 omitted pursuant to General Instruction B to Form T-1]
<PAGE>
ITEM 16. LIST OF EXHIBITS
Exhibit A. Organization Certificate of the Trustee as Now in Effect
(incorporated herein by reference to Exhibit 1, Form T-1,
Registration Statement No. 33-7309).
Exhibit B. Certificate of Authority of the Trustee to Commence Business
(incorporated herein by reference to Exhibit 2, Form T-1,
Registration Statement No. 33-7309).
Exhibit C. Authorization of the Trustee to Exercise Corporate Trust
Powers (incorporated herein by reference to Exhibit 3, Form
T-1, Registration Statement No. 33-7309).
Exhibit D. Existing By-Laws of the Trustee (incorporated herein by
reference to Exhibit 4, Form T-1, Registration Statement No.
33-7309).
Exhibit E. Not applicable.
Exhibit F. Consent of the Trustee (incorporated herein by reference to
Exhibit 6, Form T-1, Registration Statement No. 33-7309).
Exhibit G. Report of Condition of the Trustee (incorporated herein by
reference to Exhibit G, Form T-1, Registration Statement No.
33-96716).
Exhibit H. Not Applicable.
Exhibit I. Not Applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Manufacturers and Traders Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized,all in the City of Buffalo, and State of New York, on
the 16th day of October, 1995.
MANUFACTURERS AND TRADERS TRUST COMPANY
BY: /s/ Russell T. Whitley
--------------------------------------
Russell T. Whitley
Assistant Vice President
