<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 26, 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 25, 1995, the last reported sale
price of the Common Stock on the New York Stock Exchange was $20.38 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 1,
1998, at the redemption prices set forth herein, plus accrued and unpaid
interest to the date of redemption. If a Change in Control (as defined herein)
of the Company occurs, 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 1, 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) of
the Company occurs, 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 un-
paid interest to the date of repurchase. A
Change in Control will occur, subject to certain
limitations, when a person or group of related
persons (other than current management) acquires
beneficial ownership of at least 50% of the to-
tal 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
Cash dividends per
common share........... $ .20 $ .20 $ .20 $ .20 $ .20 $ .05 $ .05
Ratio of earnings to
fixed charges,
including mortgage
banking operations(2).. (3) 1.44x 1.91x 2.36x 1.99x 2.44x 2.44x
Ratio of earnings to
fixed charges,
excluding mortgage
banking
operations(2)(4)....... (3) 1.51 2.01 2.62 2.11 2.61 2.64
</TABLE>
(continued on following page)
5
<PAGE>
<TABLE>
<CAPTION>
MAY 31, AUGUST 31, 1995
-------------------------------------------- --------------------
AS
1991 1992 1993 1994 1995 ACTUAL ADJUSTED(5)
-------- -------- -------- -------- -------- -------- -----------
(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 $115,423
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED MAY 31, AUGUST 31,
-------------------------------------------- -----------------
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
HOUSING DATA(6)
Deliveries.............. 1,249 1,470 1,769 2,831 3,202 826 1,029
New contracts, net...... 1,317 1,627 2,000 2,844 3,427 718 1,284
Backlog at end of period
(units)................ 486 669 900 1,136 1,493 1,028 1,748
Backlog at end of period
($ 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) 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.
(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.
(4) 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".
(5) 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.
(6) 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 25, 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 by reference in this Prospectus.
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 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 (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 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 shares of Common Stock on any class of Capital Stock
of the Company and any subdivision, combination or reclassification of the
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 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, at less
than the then current market price (as determined in accordance with the
Indenture) of the 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 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 for 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 for 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 for 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 the fair market value of any
other consideration payable in respect of any other 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 for which no adjustment has been
made and (ii) the aggregate amount of any 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 for 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.
18
<PAGE>
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, 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 1,
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:
<TABLE>
<CAPTION>
YEARS REDEMPTION PRICE YEARS REDEMPTION PRICE
- ----- ---------------- ----- ----------------
<S> <C> <C> <C>
1998............... % 2002............... %
1999............... % 2003............... 100.00%
2000............... % 2004............... 100.00%
2001............... %
</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 of 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
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
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 Old Convertible Notes; (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>
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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>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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$75,000,000
CONTINENTAL HOMES HOLDING CORP.
% CONVERTIBLE SUBORDINATED NOTES DUE 2005
---------------
PROSPECTUS
---------------
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
---------------
, 1995
- -------------------------------------------------------------------------------
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