<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 9, 1996
REGISTRATION NO. 333-1669
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CONTINENTAL HOMES HOLDING CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 86-0554624
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
7001 N. SCOTTSDALE ROAD
SUITE 2050
SCOTTSDALE, ARIZONA 85253
(602) 483-0006
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
DONALD R. LOBACK
CHIEF EXECUTIVE OFFICER
7001 N. SCOTTSDALE ROAD
SUITE 2050
SCOTTSDALE, ARIZONA 85253
(602) 483-0006
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
JOHN P. MITCHELL, ESQ. VINCENT J. PISANO, ESQ.
CAHILL GORDON & REINDEL SKADDEN, ARPS, SLATE,
80 PINE STREET MEAGHER & FLOM
NEW YORK, NEW YORK 10005 919 THIRD AVENUE
(212) 701-3000 NEW YORK, NEW YORK 10022
(212) 735-3000
---------------
<TABLE>
<CAPTION>
STATE OF
NAME OF ADDITIONAL INCORPORATION I.R.S. EMPLOYER
REGISTRANTS OR ORGANIZATION IDENTIFICATION NO.
- ------------------ --------------- ------------------
<S> <C> <C>
Acheter, Inc. Texas 74-2528175
CH Mortgage
Company Colorado 84-0834739
CHI Construction
Company Arizona 86-0533370
CHI Finance
Corp. Arizona 86-0527430
Continental
Homes, Inc. Delaware 86-0515339
Continental
Homes of
Florida, Inc. Florida 59-1237314
Continental
Homes of Texas,
Inc. Texas 74-2695183
KDB Homes, Inc. Delaware 86-0565376
L&W Investments
Inc. California 86-0596757
Milburn
Investments,
Inc. Texas 74-2209385
</TABLE>
<TABLE>
<CAPTION>
STATE OF
INCORPORATION I.R.S. EMPLOYER
NAME OF ADDITIONAL REGISTRANTS OR ORGANIZATION IDENTIFICATION NO.
- ------------------------------ --------------- ------------------
<S> <C> <C>
Miltex Financial IV General Partnership Texas 74-2209385
Miltex Management, Inc. Texas 74-2648358
Miltex Mortgage of Texas Limited Partnership Texas 74-2209385
Rancho Carillo, Inc. Delaware 84-0724231
R.O.S. Corporation Texas 74-2665796
Settlement Corporation Texas 74-2209385
Travis County Title Company Texas 74-2111971
</TABLE>
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement. [_]
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 9, 1996
PRELIMINARY PROSPECTUS
$150,000,000
CONTINENTAL HOMES HOLDING CORP.
% SENIOR NOTES DUE 2006
--------
The % Senior Notes due 2006 (the "Senior Notes") are being offered hereby
(the "Offering") by Continental Homes Holding Corp. (the "Company"). Interest
on the Senior Notes is payable semi-annually on and of each year,
commencing , 1996. The Senior Notes mature on , 2006.
The Senior Notes will be redeemable at the option of the Company, in whole or
in part, at any time on or after , 2001 at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, to the date of redemption. In
addition, at any time on or prior to , 1999, the Company may redeem up to
33% of the aggregate principal amount of the Senior Notes originally issued
with the net proceeds of one or more public offerings of its common stock at a
redemption price equal to % of the aggregate principal amount of each Senior
Note so redeemed, plus accrued and unpaid interest, if any, to the date of
redemption; provided, however, that immediately after giving effect to any such
redemption, not less than $100,000,000 principal amount of the Senior Notes
remains outstanding.
In the event of a Change of Control (as defined), the Company is required to
offer to repurchase all of the Senior Notes at a price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest, if any,
to the date of repurchase. In addition, the Company will be obligated to make
an offer to repurchase Senior Notes for cash at a price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of repurchase with the net cash proceeds of certain asset sales and if the
Company's Net Worth (as defined) falls below a specified level for two
consecutive fiscal quarters.
The Senior Notes will be general unsecured obligations of the Company,
ranking senior in right of payment to all existing and future subordinated
indebtedness of the Company and pari passu in right of payment with all
existing and future senior indebtedness of the Company; however, the Senior
Notes will be effectively subordinated to all secured indebtedness of the
Company to the extent of the value of the assets securing such indebtedness. As
of February 28, 1996, after giving effect to the Offering and the application
of the proceeds therefrom, the Company would have had no secured indebtedness
outstanding. The Senior Notes will be guaranteed (the "Guarantees"), on a joint
and several basis, by all of the Restricted Subsidiaries (as defined) of the
Company existing on the closing date of this Offering (collectively, the
"Guarantors"). The Guarantees will be general unsecured obligations of the
Guarantors, ranking senior in right of payment to all existing and future
subordinated indebtedness of the Guarantors and pari passu in right of payment
with all existing and future senior indebtedness of the Guarantors; however,
the Guarantees will be effectively subordinated to all secured indebtedness of
the Guarantors to the extent of the value of the assets securing such
indebtedness. As of February 28, 1996, after giving effect to the Offering and
the application of the proceeds therefrom, the Guarantors would have had
approximately $9,972,000 of secured indebtedness outstanding.
The Senior Notes have been approved for listing on the New York Stock
Exchange, subject to official notice of issuance.
--------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE
SENIOR NOTES.
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(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Senior Note........................... % % %
- --------------------------------------------------------------------------------
Total..................................... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from the date of original issuance.
(2) The Company and the Guarantors have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(3) Before deducting expenses of the Offering payable by the Company estimated
at $500,000.
--------
The Senior Notes are being offered, subject to prior sale, when, as and if
delivered to and accepted by the Underwriters and subject to certain
conditions. It is expected that delivery of the Senior Notes will be made at
the offices of Smith Barney Inc., 388 Greenwich Street, New York, New York
10013, on or about April , 1996.
--------
SMITH BARNEY INC. SALOMON BROTHERS INC
April , 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SENIOR NOTES
AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. 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, Suite 1300,
New York, New York 10048 and Chicago Regional Office, Citicorp 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 Senior Notes offered hereby. 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 Senior Notes 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;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
August 31, 1995;
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1995; and
4. The Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1996.
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 this 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.
THE COMPANY
Continental Homes Holding Corp. (the "Company") designs, constructs and sells
high quality single-family homes targeted primarily to entry-level and first-
time move-up homebuyers. As of February 28, 1996, the Company was offering
homes for sale in 64 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's
revenues from home sales have increased from approximately $130,611,000 in
fiscal 1991 to approximately $414,718,000 in fiscal 1995, while the Company's
EBITDA (as defined) has increased from approximately $14,134,000 to
approximately $43,531,000 over the same period. These increases are
attributable to internal growth as well as acquisitions of existing
homebuilders.
The Company is a leading homebuilder in the Phoenix and Austin markets. The
Phoenix metropolitan area 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 1995, the Company continued to
be the leading non-retirement homebuilder in Phoenix for the eleventh
consecutive year. The Phoenix market ranked second nationally for single-family
housing starts in calendar 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 1995 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, (iii) closely monitor construction costs using the Company's custom-
designed management information systems and (iv) maintain a supply of land to
meet anticipated homebuilding requirements for approximately two to three
years.
The Company believes that it will continue to capitalize on the operating
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
may enter such markets through either acquisitions or start-up operations.
The Company has continued to experience improved demand for its homes. The
aggregate sales value of new contracts signed increased 66% in the nine months
ended February 28, 1996 to approximately $473,351,000 representing 3,538 homes
(including approximately $24,326,000 in South Florida representing 173 homes)
as compared with approximately $284,793,000 representing 2,193 homes (including
$6,021,000 in South Florida representing 40 homes) for the nine months ended
February 28, 1995. Sales in South Florida were included from November 1, 1994.
At February 28, 1996, the Company had a backlog of signed contracts of 1,933
homes with an aggregate sales value of approximately $270,555,000, as compared
with 1,104 homes with an aggregate sales value of approximately $148,413,000 at
the same time last year. The Company expects that substantially all homes under
contract at February 28, 1996 will be delivered during the calendar year ending
December 31, 1996.
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...... $150,000,000 aggregate principal amount of % Senior
Notes due 2006 (the "Senior Notes").
Maturity Date........... , 2006.
Interest Rate and The Senior Notes will bear interest at the rate of
Payment Dates.......... % per annum. Interest will accrue from the Issue
Date (as defined) and will be payable semi-annually
on and of each year, commencing ,
1996.
Optional Redemption..... The Senior Notes will be redeemable at the option of
the Company, in whole or in part, at any time on or
after , 2001 at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, to
the date of redemption. In addition, at any time on
or prior to , 1999, the Company may redeem up to
33% of the aggregate principal amount of the Senior
Notes originally issued with the net proceeds of one
or more public offerings of its common stock at a re-
demption price equal to % of the aggregate princi-
pal of each Senior Note so redeemed, plus accrued and
unpaid interest, if any, to the date of redemption;
provided, however, that immediately after giving ef-
fect to any such redemption, not less than
$100,000,000 principal amount of the Senior Notes re-
mains outstanding. See "Description of the Senior
Notes--Optional Redemption."
Offers to Purchase...... In the event of a Change of Control (as defined), the
Company is required to offer to repurchase all of the
Senior Notes at a price equal to 101% of the aggre-
gate principal amount thereof, plus accrued and un-
paid interest, if any, to the date of repurchase. See
"Description of the Senior Notes--Certain Covenants--
Change of Control." In addition, the Company will be
obligated to make an offer to repurchase Senior Notes
for cash at a price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest, if
any, to the date of repurchase with the net cash pro-
ceeds of certain asset sales and if the Company's Net
Worth (as defined) falls below a specified level for
two consecutive fiscal quarters. See "Description of
the Senior Notes--Certain Covenants--Limitation on
Asset Sales and--Maintenance of Net Worth."
Ranking.................
The Senior Notes will be general unsecured obliga-
tions of the Company, ranking senior in right of pay-
ment to all existing and future subordinated indebt-
edness of the Company and pari passu in right of pay-
ment with all existing and future senior indebtedness
of the Company; however, the Senior Notes will be ef-
fectively subordinated to all secured indebtedness of
the Company to the extent of the value of the assets
securing such indebtedness. As of February 28, 1996,
after giving effect to the Offering and the applica-
tion of the proceeds therefrom, the Company would
have had no secured indebtedness outstanding.
Guarantees.............. The Senior Notes will be guaranteed (the "Guaran-
tees"), on a joint and several basis, by all of the
Restricted Subsidiaries (as defined) of the
4
<PAGE>
Company existing on the closing date of this Offering
(collectively, the "Guarantors"). The Guarantees will
be general unsecured obligations of the Guarantors,
ranking senior in right of payment to all existing
and future subordinated indebtedness of the Guaran-
tors and pari passu in right of payment with all ex-
isting and future senior indebtedness of the Guaran-
tors; however, the Guarantees will be effectively
subordinated to all secured indebtedness of the Guar-
antors to the extent of the value of the assets se-
curing such Indebtedness. As of February 28, 1996,
after giving effect to the Offering and the applica-
tion of the proceeds therefrom, the Guarantors would
have had approximately $9,972,000 of secured
indebtedness outstanding. See "Description of the Se-
nior Notes--The Guarantees."
Certain Covenants.......
The Indenture (as defined) will impose certain limi-
tations on the ability of the Company and its Re-
stricted Subsidiaries to, among other things, incur
additional indebtedness, pay dividends or make cer-
tain other restricted payments and investments, con-
summate certain asset sales, enter into certain
transactions with affiliates, redesignate an Unre-
stricted Subsidiary (as defined) to be a Restricted
Subsidiary, designate a Restricted Subsidiary as an
Unrestricted Subsidiary, incur liens, merge or con-
solidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all
or substantially all of its assets. The Indenture
will also impose limitations on the Company's ability
to restrict the ability of its Restricted Subsidiar-
ies to pay dividends or make certain payments to the
Company or any of its Restricted Subsidiaries and on
the ability of the Company's subsidiaries to issue
preferred stock. See "Description of the Senior
Notes--Certain Covenants."
Use of Proceeds.........
The net proceeds of this Offering are estimated to be
approximately $145,750,000. Such net proceeds will be
used to repurchase the Company's 12% Senior Notes due
1999 (the "Old Senior Notes") and to reduce certain
other indebtedness. See "Use of Proceeds."
5
<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
February 28, 1996 and for the nine months ended February 28, 1995 and 1996 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 nine months ended
February 28, 1996 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>
NINE MONTHS ENDED
YEAR ENDED MAY 31, FEBRUARY 28,
------------------------------------------------ ------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues
Home sales............. $130,611 $164,815 $200,012 $340,031 $414,718 $305,753 $405,510
Land sales............. 4,977 3,114 4,113 1,095 10,658 7,958 11,420
Mortgage banking and
title operations...... 2,930 1,905 2,426 6,967 6,707 4,945 8,357
Other income, net...... 97 590 482 527 369 380 358
-------- -------- -------- -------- -------- -------- --------
Total revenues.......... 138,615 170,424 207,033 348,620 432,452 319,036 425,645
-------- -------- -------- -------- -------- -------- --------
Costs and expenses
Homebuilding
Cost of home sales..... 106,463 135,141 161,960 277,878 339,288 250,195 330,767
Cost of land sales..... 4,994 3,156 4,766 1,499 10,958 8,183 11,485
Selling, general and
administrative
expenses.............. 15,514 18,648 20,836 37,065 46,308 33,549 45,080
Interest, net.......... 2,239 1,341 5,498 4,456 4,993 3,886 4,026
Minority interest in
age-restricted
community............. -- -- -- -- -- -- (164)
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 4,173 5,017
Interest, net.......... (51) (178) 14 (233) (199) (352) (123)
-------- -------- -------- -------- -------- -------- --------
Total costs and
expenses............... 136,796 167,321 194,618 325,483 406,987 299,634 396,088
-------- -------- -------- -------- -------- -------- --------
Equity in loss of
unconsolidated joint
ventures............... (1,342) (948) (332) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Income before taxes and
extraordinary items.... 477 2,155 12,083 23,137 25,465 19,402 29,557
Income taxes............ 361 863 4,983 10,054 11,644 8,721 12,858
-------- -------- -------- -------- -------- -------- --------
Income from operations.. 116 1,292 7,100 13,083 13,821 10,681 16,699
Extraordinary gain
(loss) from
extinguishment of
debt(1)................ -- 5,299 -- -- -- -- (859)
-------- -------- -------- -------- -------- -------- --------
Net income.............. $ 116 $ 6,591 $ 7,100 $ 13,083 $ 13,821 $ 10,681 $ 15,840
======== ======== ======== ======== ======== ======== ========
Ratio of earnings to
fixed charges,
including mortgage
banking operations(2).. (3) 1.44x 1.91x 2.36x 1.99x 2.05x 2.52x
Ratio of earnings to
fixed charges,
excluding mortgage
banking
operations(2)(4)....... (3) 1.51x 2.01x 2.62x 2.11x 2.17x 2.68x
HOUSING DATA(5)
Deliveries.............. 1,249 1,470 1,769 2,831 3,202 2,357 3,098
New contracts, net...... 1,317 1,627 2,000 2,844 3,427 2,193 3,538
Backlog at end of period
(units)................ 486 669 900 1,136 1,493 1,104 1,933
Backlog at end of period
($ value).............. $ 53,180 $ 76,215 $107,499 $147,242 $198,126 $148,413 $270,555
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
FOUR FISCAL QUARTERS ENDED
---------------------------------------------------------
MAY 31,
------------------------------------------- FEBRUARY 28,
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA(6)
EBITDA(7)............... $14,134 $17,599 $24,846 $36,923 $43,531 $58,407
Consolidated Interest
Incurred............... 10,233 9,366 12,040 13,378 19,693 22,107
Coverage Ratio.......... 1.38x 1.88x 2.06x 2.76x 2.21x 2.64x
Consolidated Interest
Incurred, as adjust-
ed(8).................. -- -- -- -- $19,254 $20,829
Coverage Ratio, as ad-
justed(8).............. -- -- -- -- 2.26x 2.80x
</TABLE>
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28, 1996
-------------------------------------------- -----------------------
1991 1992 1993 1994 1995 ACTUAL AS ADJUSTED(8)
-------- -------- -------- -------- -------- -------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Assets
Homes, lots and
improvements in
production............ $ 93,739 $116,450 $142,589 $205,369 $291,331 $332,833 $332,833
======== ======== ======== ======== ======== ======== ========
Total homebuilding as-
sets.................. $118,411 $140,598 $172,798 $266,384 $350,659 $400,175 $401,830
Mortgage banking as-
sets.................. 24,301 22,176 14,727 39,106 36,174 21,282 21,282
-------- -------- -------- -------- -------- -------- --------
Total assets........... $142,712 $162,774 $187,525 $305,490 $386,833 $421,457 $423,112
======== ======== ======== ======== ======== ======== ========
Debt
Homebuilding........... $ 82,235 $ 81,293 $106,183 $144,048 $198,814 $233,061 $246,222
Mortgage banking....... 22,146 20,448 8,604 24,271 34,011 10,980 10,980
-------- -------- -------- -------- -------- -------- --------
Total debt............. $104,381 $101,741 $114,787 $168,319 $232,825 $244,041 $257,202
======== ======== ======== ======== ======== ======== ========
Stockholders' equity.... $ 28,562 $ 44,428 $ 51,550 $ 98,560 $110,479 $125,787 $118,998
======== ======== ======== ======== ======== ======== ========
</TABLE>
- --------
(1) Fiscal 1992 reflects the retirement of a note payable at an amount less
than par. Nine months ended February 28, 1996 reflects the write-off of
unamortized discount and debt issuance costs related to the redemption of
the Company's 6 7/8% Convertible Subordinated Notes due March 15, 2002 in
December 1995.
(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) Data for fiscal 1991 excludes the Company's proportionate share of homes
sold and closed in unconsolidated joint ventures.
(6) Calculated in accordance with the definitions of such terms contained in
the Indenture and set forth herein under "Description of the Senior Notes--
Certain Definitions."
(7) EBITDA is a widely accepted financial indicator of a company's ability to
service debt. However, EBITDA should not be construed as an alternative to
operating income or to cash flows from operating activities (as determined
in accordance with generally accepted accounting principles) and should not
be construed as an indication of the Company's operating performance or as
a measure of liquidity.
(8) As adjusted to give effect to the issuance and sale by the Company of the
Senior Notes, the application of the estimated net proceeds therefrom as
described under "Use of Proceeds" (assuming an interest rate of 9.50% for
the Senior Notes and that all Old Senior Notes are acquired at a tender
price of $1,091.80 for each Old Senior Note, and the extraordinary loss,
net of taxes, related to the tender offer premium pursuant to the Offer to
Purchase (as defined) and the writeoff of debt issuance costs and the net
premium relating to the repurchase of the Old Senior Notes).
7
<PAGE>
RISK FACTORS
Prospective purchasers of the Senior 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 Senior
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 or a reduction in the
deductibility of mortgage interest for federal tax purposes 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.
LEVERAGE; POTENTIAL ADVERSE EFFECT OF INDEBTEDNESS ON FUTURE OPERATIONS
As of February 28, 1996, after giving effect to the Offering and the
application of the proceeds therefrom, the outstanding consolidated
indebtedness of the Company would have been $246,222,000 (excluding mortgage
banking related indebtedness) and the Company would have had stockholders'
equity of $118,998,000. In addition, subject to the restrictions in the
Indenture, the Company may incur additional indebtedness in the future, some of
which may be secured. The Company's ability to make required debt service
payments in the future will be dependent upon the Company's operating results,
which are subject to financial, economic and other factors affecting the
Company that are beyond its control. No assurance can be given that the Company
will be able to make required debt service payments.
The degree to which the Company is leveraged could have an adverse impact on
the Company, including (i) increased vulnerability to adverse general economic
and market conditions, (ii) impaired ability to expand and to respond to
increased competition, (iii) impaired ability to obtain additional financing
for future working capital, capital expenditures, general corporate or other
purposes and (iv) requiring that a significant portion of cash provided by
operating activities be used for the payment of debt obligations, thereby
reducing funds available for operations and future business opportunities.
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.
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.
8
<PAGE>
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.
FRAUDULENT CONVEYANCE
The Company is a holding company which derives all of its operating income
from its subsidiaries. The Company must rely on dividends and other
distributions from its subsidiaries to generate the funds necessary to meet
its obligations, including the payment of principal and interest on the Senior
Notes. The ability of the Company's subsidiaries to pay such dividends or make
such distributions will be subject to, among other things, applicable state
laws and, under certain circumstances, restrictions contained in agreements or
debt instruments that the Company or its subsidiaries may enter into after the
date of the Indenture. All of the subsidiaries of the Company have jointly and
severally guaranteed the Senior Notes.
The Guarantees may be subject to review under federal or state fraudulent
conveyance law. To the extent that a court were to find that (x) a Guarantee
was incurred by a Guarantor with intent to hinder, delay, or defraud any
present or future creditor, or the Guarantor contemplated insolvency with a
design to prefer one or more creditors to the exclusion in whole or in part of
others, or (y) such Guarantor did not receive fair consideration or reasonable
equivalent value for issuing its Guarantee and such Guarantor (i) was
insolvent, (ii) was rendered insolvent by reason of the issuance of such
Guarantee, (iii) was engaged or about to engage in a business or transaction
for which the remaining assets of such Guarantor constituted unreasonably
small capital to carry on its business, or (iv) intended to incur, or believed
that it would incur, debts beyond its ability to pay such debts as they
matured, a court could avoid or subordinate such Guarantee in favor of the
Guarantor's creditors. Among other things, a legal challenge of a Guarantee on
fraudulent conveyance grounds may focus on the benefits, if any, realized by
each Guarantor as a result of the issuance by the Company of the Senior Notes.
The measure of insolvency for purposes of the foregoing will vary depending on
the law of the jurisdiction being applied. Generally, however, an entity would
be considered insolvent if the sum of its debts (including contingent or
unliquidated debts) is greater than all its property at a fair valuation or if
the present fair saleable value of its assets is less than the amount that
will be required to pay its probable liability on its existing debts as they
become absolute and matured. Pursuant to the terms of the Guarantees, the
liability of each Guarantor is limited to the maximum amount of indebtedness
permitted, at the time of the grant of such Guarantee, to be incurred in
compliance with fraudulent conveyance or similar laws.
To the extent any Guarantee was avoided or subordinated as a fraudulent
conveyance, limited as described above, or held unenforceable for any other
reason, holders of the Senior Notes would, to such extent, cease to have a
claim in respect of such Guarantee and, to such extent, would be creditors
solely of the Company and any Guarantor whose Guarantee was not avoided,
subordinated, limited, or held unenforceable. In such event, the claims of the
holders of the Senior Notes against the issuer of an avoided, subordinated,
limited or unenforceable Guarantee would be subject to the prior payment of
all liabilities of such Guarantor. There can be no assurance that, after
providing for all prior claims, there would be sufficient assets to satisfy
the claims of the holders of the Senior Notes.
REPURCHASE OF SENIOR NOTES UPON A CHANGE OF CONTROL
In the event of a Change of Control, the Company will be required to offer
to repurchase all of the outstanding Senior Notes at a purchase price equal to
101% of the aggregate principal amount thereof, plus accrued and unpaid
interest, if any, 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 Senior Notes upon the occurrence of
a Change of Control. The Change of Control purchase feature of the Senior
Notes may in certain circumstances make more difficult or discourage a
takeover of the Company and, thus, the removal of incumbent management. The
Change of Control purchase feature, however, is not the result of
9
<PAGE>
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 the Senior Notes--Certain Covenants--Change of Control."
ABSENCE OF PUBLIC MARKET
The Senior Notes are a new issue of securities which have no established
trading market. It is expected that the Senior 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 Senior 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. In addition, the Senior Notes have been approved for listing on the
New York Stock Exchange. No assurance can be given as to the liquidity of the
trading market, if any, for the Senior Notes.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Senior Notes are
estimated to be $145,750,000. The Company intends to use approximately
$120,098,000 of the net proceeds to repurchase all of the Old Senior Notes
(excluding accrued interest) and approximately $25,652,000 of the net proceeds
to reduce temporarily outstanding amounts under certain of the Company's
revolving lines of credit (bearing interest at rates varying from prime plus
1/4% to prime plus 1/2% at February 28, 1996) which were incurred for working
capital purposes. The Company continually evaluates acquisition opportunities;
however, the Company currently has no agreements or understandings with
respect to the acquisition of any homebuilding operations.
The Company has made an offer to purchase (the "Offer to Purchase") for cash
all of the outstanding Old Senior Notes at a price equal to 109.18% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
repurchase date. If all of the Old Senior Notes are not tendered to the
Company pursuant to the Offer to Purchase, the Company may seek to acquire the
remaining Old Senior Notes by means of open market purchases or privately
negotiated acquisitions. Although it has no obligation to do so, the Company
currently intends to redeem on August 1, 1997 (the first day on which the Old
Senior Notes are redeemable) any Old Senior Notes not tendered pursuant to the
Offer to Purchase or otherwise repurchased by the Company at a redemption
price equal to 104% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the redemption date. The Old Senior Notes bear interest
at a rate of 12% per annum and mature on August 1, 1999.
10
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at February
28, 1996, and as adjusted to give effect to the issuance and sale by the
Company of the Senior Notes and the application of the estimated net proceeds
therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
FEBRUARY 28, 1996
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................ $ 19,894 $ 17,694
======== ========
Debt(1)
Homebuilding
Notes payable (including current maturities of ap-
proximately $20,624,000)(2)......................... $ 35,624 $ 9,972
% Senior Notes due 2006............................. -- 150,000
12% Senior Notes due 1999(3)......................... 111,187 --
6 7/8% Convertible Subordinated Notes due November 1,
2002................................................ 86,250 86,250
-------- --------
Total.............................................. 233,061 246,222
-------- --------
Mortgage banking
Notes payable due within one year.................... 10,268 10,268
Bonds payable........................................ 712 712
-------- --------
Total.............................................. 10,980 10,980
-------- --------
Total debt....................................... 244,041 257,202
-------- --------
Stockholders' equity
Common Stock, $.01 par value; 20,000,000 shares
authorized; 7,080,900 shares issued(4)................ 71 71
Treasury stock, at cost, 93,740 shares................. (81) (81)
Capital in excess of par value......................... 59,610 59,610
Retained earnings(5)................................... 66,187 59,398
-------- --------
Total stockholders' equity....................... 125,787 118,998
-------- --------
Total capitalization..................................... $369,828 $376,200
======== ========
</TABLE>
- --------
(1) See Note E of "Notes to Consolidated Financial Statements" incorporated
herein by reference for further information regarding the terms of the
Company's indebtedness.
(2) The Company is currently in discussions with a group of banks to obtain an
unsecured revolving credit facility to be used for working capital and
general corporate purposes. The new facility will replace all of the
Company's existing lines of credit (other than warehouse lines) which had
aggregate commitments of $90 million at February 28, 1996.
(3) Assumes all $110 million principal amount of the Old Senior Notes is
repurchased by the Company pursuant to the Offer to Purchase.
(4) Excludes 3,631,556 shares reserved for issuance upon conversion of the 6
7/8% Convertible Subordinated Notes due November 1, 2002 and 372,240
shares reserved for issuance pursuant to options granted under the
Company's stock option plans.
(5) Adjusted to reflect the extraordinary loss, net of taxes, related to the
tender offer premium pursuant to the Offer to Purchase and the write-off
of debt issuance costs and the net premium relating to the repurchase of
the Old Senior Notes.
11
<PAGE>
BUSINESS
The Company designs, constructs and sells high quality single-family homes
targeted to primarily entry-level and first-time move-up homebuyers. As of
February 28, 1996, the Company was offering homes for sale in 64 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 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. 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. The Company may enter such markets
through either acquisitions or start-up operations.
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 homebuyers 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 has 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 February 28, 1996, the Company had approximately 38 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.
12
<PAGE>
LAND ACQUISITION AND DEVELOPMENT
As of February 28, 1996, the Company operated 19 subdivisions in Phoenix, 19
subdivisions in Austin, ten subdivisions in Denver, eight 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 February 28, 1996 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....................... 3,938 827 186 50 2,798 77
Texas(2)...................... 5,574 475 178 41 4,800 80
Denver........................ 1,341 153 72 21 1,029 66
South Florida................. 1,451 111 55 18 1,239 28
Southern California........... 360 78 58 9 177 38
------ ----- --- --- ------- ----
Total......................... 12,664 1,644 549 139 10,043 289
====== ===== === === ======= ====
</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 February
28, 1995 and 1996, the Company had an aggregate of 9,864 and 10,043 unsold
lots, respectively, which represents approximately 42 and 38 months of
inventory, respectively, 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 February 28, 1996, 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.
13
<PAGE>
PRODUCT LINES
<TABLE>
<CAPTION>
LIVING AREA BASE PRICE RANGE
(SQUARE FEET) AT FEBRUARY 28, 1996
------------- --------------------
<S> <C> <C>
Phoenix
Move-up single-family................... 1,391-3,761 $105,800-$217,600
Entry-level single-family............... 1,287-2,484 $ 86,300-$162,200
Texas(1)
Move-up single-family................... 1,799-3,230 $123,300-$166,400
Entry-level single-family............... 924-2,807 $ 58,950-$153,250
Denver
Move-up single-family................... 1,820-3,096 $151,800-$235,600
Entry-level single family............... 1,358-1,822 $134,900-$145,900
South Florida
Move-up single-family................... 1,615-2,511 $134,900-$171,900
Entry-level single-family............... 1,314-2,012 $ 89,900-$140,900
Southern California
Move-up single-family................... 2,980-4,093 $389,000-$439,000
Entry-level single-family............... 1,803-3,165 $149,900-$206,900
</TABLE>
- --------
(1) Includes operations in Austin and San Antonio.
HOMES DELIVERED
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED MAY 31, ENDED FEBRUARY 28,
--------------------------- -------------------
1993 1994 1995 1995 1996
-------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Move-up single-family
Revenues (000's).......... $ 56,293 $ 128,494 $208,026 $ 155,719 $ 164,646
Units..................... 350 811 1,281 969 974
Average sales price....... $160,800 $ 158,400 $162,400 $ 160,700 $ 169,000
Entry-level single-family
Revenues (000's).......... $143,719 $ 206,615 $206,692 $ 150,034 $ 240,864
Units..................... 1,419 1,976 1,921 1,388 2,124
Average sales price....... $101,300 $ 104,600 $107,600 $ 108,100 $ 113,400
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 $ 305,753 $ 405,510
Units..................... 1,769 2,831 3,202 2,357 3,098
Average sales price....... $113,100 $ 120,100 $129,500 $ 129,700 $ 130,900
</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.
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."
14
<PAGE>
The following table summarizes information related to the Company's backlog
at the dates indicated:
<TABLE>
<CAPTION>
FEBRUARY 28,
-----------------------------
1995 1996
-------------- --------------
UNITS DOLLARS UNITS DOLLARS
----- -------- ----- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Phoenix...................................... 590 $ 76,355 904 $117,143
Texas........................................ 297 31,400 555 59,930
South Florida................................ 74 10,256 139 19,873
Denver....................................... 94 17,086 219 45,123
Southern California.......................... 49 13,316 116 28,486
----- -------- ----- --------
Total backlog.............................. 1,104 $148,413 1,933 $270,555
===== ======== ===== ========
</TABLE>
The Company anticipates that substantially all of the homes in backlog at
February 28, 1996 will be delivered during the calendar year ending December
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 43% of the
Company's homes sold in the nine months ended February 28, 1996 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.
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 each of fiscal 1995 and for the nine
months ended February 28, 1996, approximately 16% of such contracts have been
cancelled, a
15
<PAGE>
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. As a
result of such cancellations and construction procedures, at February 28, 1995
and 1996 the Company had respectively 571 and 549 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 during the third quarter of fiscal 1996, the Company sold
significantly all of the servicing rights it had previously 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.
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
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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 February 28, 1996, the Company and its subsidiaries employed approximately
508 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.
DESCRIPTION OF THE SENIOR NOTES
The Senior Notes offered hereby are to be issued under an Indenture, dated as
of April , 1996 (the "Indenture"), among the Company, the Guarantors and First
Union National Bank, as Trustee (the "Trustee"), a copy of which is an exhibit
to the Registration Statement of which this Prospectus is a part. The following
summaries of certain provisions of the Indenture do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all of
the provisions of the Indenture, including the definitions therein of certain
terms. Wherever particular defined terms of the Indenture are referred to, such
defined terms are incorporated herein by reference. For purposes of this
section and the Indenture, references to the "Company" include only the Company
and not its subsidiaries.
GENERAL
The Senior Notes will be limited to $150,000,000 aggregate principal amount.
The Senior Notes will mature on , 2006. The Senior 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 and of each year, commencing ,
1996 to the persons in whose names the Senior Notes are registered at the close
of business on the fifteenth day of the month preceding the month in which the
interest payment date occurs. Interest will be computed on the basis of a 360-
day year of twelve 30-day months.
The Senior Notes will be general unsecured obligations of the Company,
ranking senior in right of payment to all existing and future subordinated
indebtedness of the Company and pari passu in right of payment with all
existing and future senior indebtedness of the Company; however, the Senior
Notes will be effectively subordinated to all secured indebtedness of the
Company to the extent of the value of the assets securing such indebtedness. As
of February 28, 1996, after giving effect to the Offering and the application
of the proceeds therefrom, the Company would have had no secured indebtedness
outstanding.
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Principal and premium, if any, and interest on the Senior Notes are to be
payable, and the Senior Notes offered hereby 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 Senior Notes offered hereby will be issued only in fully registered form
without coupons, in denominations of $1,000 and any integral multiple thereof.
The Senior 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.
THE GUARANTEES
Each of the Guarantors will (so long as they remain Subsidiaries of the
Company) unconditionally guarantee on a joint and several basis all of the
Company's obligations under the Senior Notes, including its obligations to pay
principal, premium, if any, and interest with respect to the Senior Notes. The
Guarantees will be general unsecured obligations of the Guarantors, ranking
senior in right of payment to all existing and future subordinated
indebtedness of the Guarantors and pari passu in right of payment with all
existing and future senior indebtedness of the Guarantors; however, the
Guarantees will be effectively subordinated to all secured indebtedness of the
Guarantors to the extent of the value of the assets securing such
indebtedness. As of February 28, 1996, after giving effect to the Offering and
the application of the proceeds therefrom, the Guarantors would have had
approximately $9,972,000 of secured indebtedness outstanding. Except as
provided in "Certain Covenants" below, the Company is not restricted from
selling or otherwise disposing of any of the Guarantors.
The Indenture will provide that each Restricted Subsidiary (other than, in
the Company's discretion, any Restricted Subsidiary the assets of which have a
book value of not more than $1,000,000) will be a Guarantor.
The Indenture provides that if all or substantially all of the assets of any
Guarantor or all of the capital stock of any Guarantor is sold (including by
issuance or otherwise) by the Company or any of its Subsidiaries in a
transaction constituting an Asset Sale, and if the Net Proceeds from such
Asset Sale are used in accordance with the covenant, "Limitation on Asset
Sales," then such Guarantor (in the event of a sale or other disposition of
all of the capital stock of such Guarantor) or the corporation acquiring such
assets (in the event of a sale or other disposition of all or substantially
all of the assets of such Guarantor) shall be released and discharged of its
Guarantee obligations.
OPTIONAL REDEMPTION
The Senior Notes are 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 ,
2001, on not less than 30 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
thereof), plus accrued and unpaid interest, if any, to the redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001.............................. %
2002.............................. %
2003 and thereafter............... 100%
</TABLE>
In addition, if the Company consummates one or more public offerings of its
Common Stock subsequent to the date of this Prospectus and on or prior to
, 1999, the Company may, at its option, redeem up to 33% of the original
principal amount of the Senior Notes with the net proceeds of such offerings
at % of the principal amount thereof, plus accrued and unpaid interest, if
any, to the redemption date; provided, however, that immediately after giving
effect to any such redemption not less than $100,000,000 principal amount of
the Senior Notes remains outstanding.
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If less than all of the Senior Notes are to be redeemed, the Trustee will
select the particular Senior 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 the Senior Notes or portions thereof
called for redemption.
CERTAIN COVENANTS
Change of Control.
In the event of a Change of Control (as defined below), each holder of
Senior Notes shall have the right upon receipt of a Change of Control Notice
(as defined below), at such holder's option, to require the Company to
repurchase all of such holder's Senior Notes, or a portion thereof which is
$1,000 or any integral multiple thereof, on the date (the "Change of Control
Repurchase Date") that is 45 days after the date of the Change of Control
Notice at a price equal to 101% of the principal amount thereof, plus accrued
interest to the Change of Control Repurchase Date.
Within 30 days after the occurrence of a Change of Control, the Company or,
at the request of the Company, the Trustee, shall deliver to all holders of
record of the Senior Notes a notice (the "Change of Control Notice") of the
occurrence of such Change of Control and of the repurchase right arising as a
result thereof. The Company shall deliver a copy of the Change of Control
Notice to the Trustee. To exercise the repurchase right, on or before the 30th
day after the date of the Change of Control Notice, holders of Senior 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 Senior Notes with respect to which the right is being exercised, duly
endorsed for transfer. Such written notice shall be irrevocable.
The right to require the repurchase of Senior Notes shall not continue after
a discharge of the Company from its obligations under the Senior Notes and the
Indenture with respect to the Senior Notes in accordance with Article 8 of the
Indenture.
If the Change of Control Repurchase Date is between a regular record date
for the payment of interest and the next succeeding interest payment date, any
Senior 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 Senior 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 Senior Note being repurchased will be paid on
such next succeeding interest payment date to the registered holder of such
Senior Note on the immediately preceding record date. A Senior Note
repurchased on an interest payment date need not be accompanied by any
payment, and the interest on the principal amount of the Senior Note being
repurchased will be paid on such interest payment date to the registered
holder of such Senior Note on the immediately preceding record date.
As used herein, a "Change of Control" of the Company means the occurrence of
any of the following events: (a) any "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), excluding the
Management Group (as defined below), is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person
shall be deemed to have "beneficial ownership" of all securities that such
person has the right to acquire, whether such right is exercisable
immediately, after the passage of time, upon the happening of an event or
otherwise), directly or indirectly, of more than 50% of the total Voting Stock
(as defined below) of the Company; provided, however, that the members of the
Management Group do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors of the Company; (b) the Company consolidates with, or merges with or
into, another Person or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any Person, or
any Person consolidates with, or merges with or into, the Company, in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction
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where immediately after such transaction no "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act), excluding the
Management Group, is the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately, after the passage of
time, upon the happening of an event or otherwise), directly or indirectly, of
more than 50% of the total Voting Stock of the surviving or transferee
corporation; provided, however, that the members of the Management Group do
not have the right or ability by voting power, contract or otherwise, to elect
or designate for election a majority of the Board of Directors of the Company;
(c) at any time during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of the Company was approved
by a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office; or (d) the
Company is liquidated or dissolved or adopts a plan of liquidation. 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 (or securities convertible or
exchangeable for Common Stock) under, any such person's estate. "Voting Stock"
shall mean, with respect to any Person, Capital Stock of any class or kind
normally entitled to vote in the election of the board of directors or other
governing body of such Person.
If any repurchase pursuant to the foregoing provisions constitutes a tender
offer as defined under the Exchange Act, the Company will comply with the
requirements of Rule 14e-1 and any other tender offer rules under the Exchange
Act which then may be applicable. The Company could, in the future, enter into
certain significant transactions that would not constitute a Change of Control
with respect to the Change of Control purchase feature of the Senior Notes.
The Change of Control purchase feature of the Senior Notes may in certain
circumstances make more difficult or discourage a takeover of the Company and,
thus, the removal of incumbent management. The Change of 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.
The meaning of the phrase "all or substantially all" as used in the
Indenture in the definition of "Change of Control" with respect to a sale of
assets varies according to the facts and circumstances of the subject
transaction, has no clearly established meaning under relevant law and is
subject to judicial interpretation. Accordingly, in certain circumstances,
there may be a degree of uncertainty in ascertaining whether a particular
transaction would involve a disposition of "all or substantially all" of the
assets of the Company, and therefore it may be unclear whether a Change of
Control has occurred and whether the Senior Notes are subject to a Change of
Control Offer.
Maintenance of Net Worth.
In the event that the Company's Net Worth at the end of each of any two
consecutive fiscal quarters (the last day of such second fiscal quarter being
referred to as the "Trigger Date") is less than $20,000,000 (the "Minimum Net
Worth"), then the Company shall make an offer to all holders (a "Net Worth
Offer") to acquire on a pro rata basis on the date (the "Net Worth Repurchase
Date") that is 45 days following the date of the Net Worth Notice (as defined
below), Senior Notes in an aggregate principal amount equal to 10% of the
initial outstanding principal amount of the Senior Notes (or if less than 10%
of the aggregate principal amount of the Senior Notes issued are then
outstanding, all the Senior Notes outstanding at the time) (the "Net Worth
Offer Amount") at a purchase price of 100% of the principal amount thereof,
plus accrued interest to the Net Worth Repurchase Date (the "Net Worth
Price"). The Company may credit against the Net Worth Offer Amount the
principal amount of Senior Notes acquired by the Company prior to the Trigger
Date through purchase, optional redemption or exchange. The Company, however,
may not credit a specific Note in more than one Net Worth Offer. In no event
shall the failure to meet the Minimum Net Worth at the end of any fiscal
quarter be counted toward the making of more than one Net Worth Offer. The
Company shall notify the Trustee promptly after the
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<PAGE>
occurrence of any of the events specified in this provision and shall notify
the Trustee in writing if its Net Worth is equal to or less than the Minimum
Net Worth for any fiscal quarter.
Within 30 days after the Trigger Date, the Company, or, at the request of
the Company, the Trustee, shall give notice of the Net Worth Offer to each
holder (the "Net Worth Notice"). To accept a Net Worth Offer a holder shall
deliver to the Company (or to a Paying Agent designated by the Company for
such purpose), on or before the 30th day after the date of the Net Worth
Notice, a written notice of the holder's acceptance of such offer, together
with the Senior Notes with respect to which the offer is being accepted, duly
endorsed for transfer to the Company. Such written notice may be withdrawn
upon further written notice delivered to the Trustee on or prior to the third
day preceding the Net Worth Repurchase Date.
If the Net Worth Repurchase Date is between a regular record date for the
payment of interest and the next succeeding interest payment date, any Senior
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 Senior 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 Senior Note being repurchased will be paid on such
next succeeding interest payment date to the registered holder of such Senior
Note on the immediately preceding record date. A Senior Note repurchased on an
interest payment date need not be accompanied by any payment, and the interest
on the principal amount of the Senior Note being repurchased will be paid on
such interest payment date to the registered holder of such Senior Note on the
immediately preceding record date.
If any repurchase pursuant to the foregoing provisions constitutes a tender
offer as defined under the Exchange Act, the Company will comply with the
requirements of Rule 14e-1 and any other tender offer rules under the Exchange
Act which then may be applicable.
Limitation on Debt.
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume, guarantee or otherwise
become liable for ("Incur"), any Debt, except Permitted Debt. "Permitted Debt"
means (a) Debt evidenced by the Senior Notes and the Guarantees, (b) Debt
Incurred by the Company or any Guarantor under or in respect of a Bank
Facility (including any guarantees related thereto) for working capital or
general corporate purposes or evidenced by letters of credit; provided that
the aggregate amount of all such Debt outstanding at any time pursuant to this
clause (b) may not exceed $110,000,000, (c) Debt Incurred under a Warehouse
Facility; provided that the amount of such Debt (including funding drafts
issued thereunder) outstanding at any time pursuant to this clause (c)
guaranteed by the Company or a Restricted Subsidiary may not exceed
$30,000,000 and the amount of such Debt (excluding funding drafts issued
thereunder) may not exceed 98% of the value of the Mortgages pledged to secure
Debt thereunder, (d) Debt of the Company to any Guarantor or of any Restricted
Subsidiary of the Company to the Company or to any Guarantor, (e) Existing
Debt (without duplication of Debt indicated under clauses (a)-(d) above) of
the Company and its Restricted Subsidiaries other than Debt to be repaid from
the proceeds of the sale of the Senior Notes, (f) Non-Recourse Debt, (g) Debt
in respect of performance, completion, guarantee, surety and similar bonds or
banker's acceptances provided by the Company or any of its Restricted
Subsidiaries in the ordinary course of business, (h) additional Debt of the
Company or any Guarantor in an amount not to exceed $5,000,000 at any time
outstanding, (i) Debt referred to in the definition of Interest Rate
Protection Agreements, and (j) Refinancing Debt.
Notwithstanding the foregoing, and subject to the immediately succeeding
paragraph, the Company and the Guarantors may Incur Debt if, at the time such
Debt is so Incurred and after giving effect thereto and the application of the
proceeds therefrom, the Company's Coverage Ratio shall not be less than 2.0 to
1.0.
The Company shall not, and the Company will not cause or permit any
Guarantor to, directly or indirectly, Incur any Debt that purports to be by
its terms (or by the terms of any agreement governing such Debt) subordinated
to any other Debt of the Company or of such Guarantor, as the case may be,
unless such Debt is also by its terms (or by the terms of any agreement
governing such Debt) made expressly subordinated to the Senior Notes or the
Guarantee of such Guarantor, as the case may be, to the same extent and in the
same manner as such Debt is subordinated to such other Debt.
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Limitation on Restricted Payments.
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, make any Restricted Payment, if, after giving
effect thereto (a) an Event of Default, or an event that through the passage
of time or the giving of notice, or both, would become an Event of Default,
shall have occurred and be continuing, or (b) the Company would be unable to
incur $1.00 of additional Debt under the second paragraph set forth under the
caption "Limitation on Debt," or (c) the aggregate amount of all Restricted
Payments made by the Company and its Restricted Subsidiaries (the amount
expended or distributed for such purposes, if other than cash, to be
determined in good faith by the board of directors of the Company) from and
after the date of the Indenture shall exceed the sum of (i) the aggregate of
50% of the Consolidated Net Income of the Company accrued for the period
(taken as one accounting period) commencing with , 1996 to and including
the first full month ended immediately prior to the date of such calculation
(or, in the event Consolidated Net Income is a deficit, then minus 100% of
such deficit), (ii) the aggregate net proceeds (the amount of such proceeds,
if other than cash, to be determined in good faith by the board of directors
of the Company) received by the Company from the issuance or sale (other than
to a Subsidiary of the Company) of its Capital Stock (other than Redeemable
Stock), including the principal amount of any convertible or exchangeable
notes or other convertible or exchangeable securities that are converted or
exchanged into Capital Stock, from and after the date of the Indenture, and
options, warrants and rights to purchase its Capital Stock (other than
Redeemable Stock), (iii) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the date of the
Indenture (excluding any Investment described in clause (4) of the following
paragraph, but including upon the redesignation of an Unrestricted Subsidiary
as a Restricted Subsidiary), an amount equal to the lesser of the return of
capital with respect to such Investment and the cost of such Investment, in
either case, reduced (but not below zero) by the excess, if any, of the cost
of the disposition of such Investment over the gain, if any, realized by the
Company or such Restricted Subsidiary in respect of such disposition of such
Investment and (iv) $5,000,000.
The foregoing paragraph will not prevent: (1) the payment of any dividend
within 60 days after the date of its declaration if such dividend could have
been made on the date of its declaration in compliance with the foregoing
provisions; (2) so long as no Default or Event of Default shall have occurred
and be continuing, the redemption, repurchase or other acquisition or
retirement of any shares of any class of Capital Stock of the Company or any
Subsidiary of the Company in exchange for, or out of the net cash proceeds of,
a substantially concurrent (x) capital contribution to the Company from any
Person (other than a Subsidiary of the Company) or (y) issue and sale of other
shares of Capital Stock (other than Redeemable Stock) of the Company to any
Person (other than to a Subsidiary of the Company); provided, however, that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase or other acquisition or retirement shall be excluded
from clause (ii) of the preceding paragraph; (3) so long as no Default or
Event of Default shall have occurred and be continuing, any redemption,
repurchase or other acquisition or retirement of subordinated Debt by exchange
for, or out of the net cash proceeds of, a substantially concurrent (x)
capital contribution to the Company from any Person (other than a Subsidiary
of the Company) or (y) issue and sale of (A) Capital Stock (other than
Redeemable Stock) of the Company to any Person (other than to a Subsidiary of
the Company); provided, however, that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase or other acquisition or
retirement shall be excluded from clause (ii) of the preceding paragraph; or
(B) Debt of the Company issued to any Person (other than a Subsidiary of the
Company), so long as such Debt (x) has no stated maturity earlier than ,
2006, (y) has a Weighted Average Life to Maturity equal to or greater than the
remaining Weighted Average Life to Maturity of the Senior Notes and (z) is
subordinated to the Senior Notes in the same manner and at least to the same
extent as the subordinated Debt so purchased, exchanged, redeemed, acquired or
retired; (4) Investments constituting Restricted Payments made as a result of
the receipt of non-cash consideration from any Asset Sale made pursuant to and
in compliance with the covenant described under "Limitation on Asset Sales";
(5) so long as no Default or Event of Default has occurred and is continuing,
the repurchase or redemption of shares of Capital Stock from any officer,
director or employee of the Company or its Restricted Subsidiaries whose
employment has been terminated or who has died or become disabled in an
aggregate amount not to exceed $250,000 per annum; and (6) so long as no
Default or Event of Default shall have occurred and be continuing, the making
of Restricted Payments in an aggregate amount not to
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exceed $5,000,000, provided that amounts paid pursuant to clauses (5) and (6)
(but not clauses (1), (2), (3) or (4)) shall reduce amounts available for
future Restricted Payments.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries.
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, assume or otherwise cause or suffer to
exist or to become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or
make any other distributions on its Capital Stock to the Company or any of its
Restricted Subsidiaries; (b) make payments in respect of any Debt owed to the
Company or any of its Restricted Subsidiaries; or (c) make loans or advances
to the Company or any of the Company's Restricted Subsidiaries; provided,
however, that the following restrictions shall not be prohibited pursuant to
this provision: (i) those contained in the Indenture, a Bank Facility, a
Warehouse Facility, any Non-Recourse Debt Incurred by the Carlsbad Subsidiary
(to the extent that restrictions in such Non-Recourse Debt apply only to the
Carlsbad Subsidiary or any Subsidiary thereof) and Refinancing Debt (to the
extent restrictions contained in such Refinancing Debt are not more
restrictive than those contained in the Debt being refinanced); (ii)
consensual encumbrances or restrictions binding upon any person at the time
such Person becomes a Subsidiary of the Company; provided that such
encumbrances or restrictions are not created, incurred or assumed in
contemplation of such Person becoming a Subsidiary of the Company and do not
extend to any other property of the Company or another of its Subsidiaries;
(iii) restrictions contained in security agreements permitted by the Indenture
securing Debt permitted by the Indenture to the extent such restrictions
restrict the transfer of assets subject to such security agreements; (iv) any
encumbrance or restriction consisting of customary non-assignment provisions
in leases to the extent such provisions restrict the transfer of the leases;
(v) any encumbrance or restriction pursuant to an agreement in effect on the
date of the Indenture; or (vi) any restrictions with respect to a Subsidiary
of the Company imposed pursuant to an agreement which has been entered into
for the sale or disposition of all or substantially all the capital stock or
assets of such Subsidiary.
Limitation on Liens.
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume or permit to exist any Lien
upon or with respect to any of the assets of the Company or any such
Subsidiary, whether now owned or hereafter acquired, or on any income or
profits therefrom, other than Liens which constitute Permitted Liens at the
date such Liens are created, unless contemporaneously therewith or prior
thereto all payments due under the Indenture and the Senior Notes are secured
on an equal and ratable basis with the obligation or liability so secured
until such time as such obligation or liability is no longer secured by a
Lien. The Indenture will also provide that no Liens will be permitted to be
created or suffered to exist on any Debt from the Company in favor of any
Restricted Subsidiary and that such Debt will not be permitted to be sold,
disposed of or otherwise transferred.
Transactions with Affiliates.
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, enter into any transactions with Affiliates of the
Company unless (i) such transactions are between or among the Company and its
Restricted Subsidiaries, (ii) such transactions are in the ordinary course of
business and consistent with past practice or (iii) the terms of such
transactions are fair and reasonable to the Company or such Restricted
Subsidiary, as the case may be, and are at least as favorable as the terms
which could be obtained by the Company or such Restricted Subsidiary, as the
case may be, in a comparable transaction made on an arm's-length basis between
unaffiliated parties. In the event of any transaction or series of
transactions occurring subsequent to the date of the Indenture with an
Affiliate of the Company which involves in excess of $2,500,000 and is not
permitted under clause (i) of the preceding sentence, all of the disinterested
members of the Board of Directors shall by resolution determine that such
transaction or series of transactions meets the criteria set forth in clause
(iii) of the preceding sentence. In the event of any transaction or series of
transactions occurring subsequent to the date of the Indenture with an
Affiliate of the Company which involves in excess of $10,000,000
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and is not permitted under clause (i) above, the Company will be required to
deliver to the Trustee an opinion of an Independent Financial Advisor to the
effect that the transaction is fair to the Company or the relevant Restricted
Subsidiary, as the case may be, from a financial point of view.
Notwithstanding the foregoing, such provisions do not prohibit and will not
apply to (1) any Restricted Payment which is permitted by the "Limitation on
Restricted Payments" covenant or (2) the payment of compensation to directors
of the Company who are not employees of the Company and wages and other
compensation to officers of the Company or any of its Subsidiaries.
Limitation on Asset Sales.
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly consummate an Asset Sale, unless (i) the Company or
such Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the fair market value (as determined
in good faith by the board of directors of the Company or the Restricted
Subsidiary, as the case may be) of the assets disposed of, and (ii) the
consideration for such Asset Sale consists of at least 85% cash; provided that
(x) the amount of liabilities assumed by the transferee, (y) any notes or
other obligations received by the Company or such Restricted Subsidiary and
immediately converted into cash or (z) with respect to the sale or other
disposition of all of the Capital Stock of any Restricted Subsidiary, the
amount of liabilities that remain the obligation of such Restricted Subsidiary
subsequent to such sale or other disposition, shall be deemed to be "cash".
Within 12 months from the date that any Asset Sale is consummated, the Net
Proceeds thereof will be reinvested in Additional Assets or applied to the
redemption or repurchase of Debt of the Company which ranks pari passu with
the Senior Notes or Debt of a Restricted Subsidiary of the Company which is
not subordinated to other debt of such Restricted Subsidiary (which, in each
case, will be a permanent reduction of such Debt). To the extent that the Net
Proceeds of an Asset Sale are not so applied, the Company or such Restricted
Subsidiary, as the case may be, will, within 30 days from the expiration of
such 12-month period, use the remaining Net Proceeds (less any amounts used to
pay reasonable fees and expenses connected with a Net Proceeds Offer) to make
an offer to repurchase the Senior Notes at a price equal to 100% of the
principal amount thereof, plus accrued interest to the Net Proceeds Repurchase
Date ("a Net Proceeds Offer").
Notwithstanding the foregoing, the Net Proceeds of an Asset Sale are not
required to be applied in accordance with the preceding paragraph, unless and
until the aggregate Net Proceeds for all such Asset Sales in a 12-month period
exceeds $10,000,000.
To accept a Net Proceeds Offer a holder shall deliver to the Company (or to
a Paying Agent designated by the Company for such purpose) on or before the
30th day after the date of the Net Proceeds Offer, a written notice of the
holder's acceptance of the Net Proceeds Offer, together with the Senior Notes
with respect to which the offer is being accepted, duly endorsed for transfer
to the Company. Such written notice may be withdrawn upon further written
notice to the Trustee on or prior to the third day preceding the Net Proceeds
Repurchase Date.
If the Net Proceeds 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 Senior 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 Senior Note being repurchased will be paid on such
next succeeding interest payment date to the registered holder of such Senior
Note on the immediately preceding record date. A Senior Note repurchased on an
interest payment date need not be accompanied by any payment, and the interest
on the principal amount of the Senior Note being repurchased will be paid on
such interest payment date to the registered holder of such Senior Note on the
immediately preceding record date.
If any repurchase pursuant to the foregoing provisions constitutes a tender
offer as defined under the Exchange Act, the Company will comply with the
requirements of Rule 14e-1 and any other tender offer rules under the Exchange
Act which then may be applicable.
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Any amount of Net Proceeds remaining after a Net Proceeds Offer shall be
returned by the Trustee to the Company and may be used by the Company for any
purpose not inconsistent with the Indenture.
CERTAIN DEFINITIONS
In addition to the terms defined above, the Indenture contains, among other
things, the following definitions:
"Additional Assets" means assets used or usable by the Company or any of its
Restricted Subsidiaries in the operation of the existing lines of business of
the Company and its Restricted Subsidiaries.
"Affiliate" of any Person means (i) any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person and (ii) any other Person that beneficially owns at least 10% of
the voting common stock of such Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Asset Sale" for any Person means the sale, lease, conveyance or other
disposition (including, without limitation, by merger, consolidation or sale
and leaseback transaction, and whether by operation of law or otherwise) of
any of that Person's assets (including, without limitation, the sale or other
disposition of Capital Stock of any Subsidiary of such Person, whether by such
Person or such Subsidiary) outside the ordinary course of business, whether
owned on the date of the Indenture or subsequently acquired in one transaction
or a series of related transactions, in which such Person and/or its
Subsidiaries receive cash and/or other consideration (including, without
limitation, the unconditional assumption of Indebtedness of such Person and/or
its Subsidiaries) of $5,000,000 or more as to each such transaction or series
of related transactions; provided, however, that (i) a transaction or series
of related transactions that results in a Change of Control shall not
constitute an Asset Sale, (ii) sales, leases, conveyances or other
dispositions of real estate related to the homebuilding business of the
Company or its Subsidiaries will not constitute Asset Sales, and (iii)
transactions between the Company and any Guarantor, or among such Guarantors
will not constitute Asset Sales.
"Bank Facility" means, collectively, one or more commitments from one or
more banks or other lending institutions to lend funds, together with any and
all agreements, documents and instruments from time to time delivered in
connection therewith as such commitments or any such agreements, documents or
instruments may be in effect or amended, amended and restated, renewed,
extended, restructured, supplemented or otherwise modified from time to time
and any credit agreement, loan agreement, note purchase agreement, indenture
or other agreement, document or instrument refinancing, refunding or otherwise
replacing such Bank Facility, whether or not with the same agent, trustee,
representative lenders or holders, and, subject to the proviso to the next
succeeding sentence, irrespective of any changes in the terms and conditions
thereof. Without limiting the generality of the foregoing, the term "Bank
Facility" shall include any amendment, amendment and restatement, renewal,
extension, restructuring, supplement or modification to any Bank Facility and
all refundings, refinancings and replacements of any Bank Facility, including
any agreement (i) extending the maturity of any Debt incurred thereunder or
contemplated thereby, (ii) adding or deleting borrowers or guarantors
thereunder; provided that such borrowers and issuers include one or more of
the Company and its Subsidiaries and their respective successors and assigns,
(iii) increasing the amount of Debt Incurred thereunder or available to be
borrowed thereunder; provided that on the date thereof such Debt would not be
prohibited by clause (b) of the definition of Permitted Debt set forth under
the "Limitation on Debt" covenant, or (iv) otherwise altering the terms and
conditions thereof in a manner not prohibited by the terms of the Indenture.
"Carlsbad Property" means the 417 acres owned by the Carlsbad Subsidiary in
Carlsbad, California, located in San Diego County.
"Common Stock" means the common stock, par value $.01 per share, of the
Company.
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"Consolidated Interest Expense" of the Company means, for any period, the
aggregate amount of interest which, in accordance with generally accepted
accounting principles, would be included on an income statement for the
Company and its Restricted Subsidiaries on a consolidated basis, whether
expensed directly, or included as a component of cost of goods sold, or
allocated to joint ventures or otherwise (including, but not limited to,
imputed interest included on capitalized lease obligations, all commissions,
discounts and other fees and charges owed with respect to letters of credit
and bankers' acceptance financing, the net costs associated with hedging
obligations, amortization of other financing fees and expenses, the interest
portion of any deferred payment obligation, amortization of discount or
premium, if any, and all other non-cash interest expense), excluding interest
expense related to mortgage banking operations, plus the product of (x) the
sum of (i) cash dividends paid on any Preferred Stock of the Company plus (ii)
cash dividends, the principal amount of any debt securities issued as a
dividend, the liquidation value of any Preferred Stock issued as a dividend
and the fair market value (as determined by the Company's board of directors
in good faith) of any other non-cash dividends, in each case, paid on any
Preferred Stock of any Restricted Subsidiary of Company (other than a Wholly-
Owned Restricted Subsidiary), times (y) a fraction, the numerator of which is
one and the denominator of which is one minus the then current effective
aggregate federal, state and local tax rate of the Company, expressed as a
decimal.
"Consolidated Interest Incurred" of the Company means, for any period, (a)
the aggregate amount of interest which, in accordance with generally accepted
accounting principles, would be included on an income statement for the
Company and its Restricted Subsidiaries on a consolidated basis, whether
expensed directly, or included as a component of cost of goods sold, or
allocated to joint ventures or otherwise (including, but not limited to,
imputed interest included on capitalized lease obligations, all commissions,
discounts and other fees and charges owed with respect to letters of credit
and bankers' acceptance financing, the net costs associated with hedging
obligations, amortization of other financing fees and expenses, the interest
portion of any deferred payment obligation, amortization of discount or
premium, if any, and all other non-cash interest expense), excluding interest
expense related to the Company's mortgage banking operations, plus or minus,
without duplication, (b) the difference between capitalized interest for such
period and the interest component of cost of goods sold for such period, plus
(c) the product of (x) the sum of (i) cash dividends paid on any Preferred
Stock of the Company plus (ii) cash dividends, the principal amount of any
debt securities issued as a dividend, the liquidation value of any Preferred
Stock issued as a dividend and the fair market value (as determined by the
Company's Board of Directors in good faith) of any other non-cash dividends,
in each case, paid on any Preferred Stock of any Subsidiary of the Company
(other than a Wholly-Owned Restricted Subsidiary), times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective aggregate federal, state and local tax rate of the Company,
expressed as a decimal.
"Consolidated Net Income" of the Company, for any period, means the net
income (loss) of the Company and its Restricted Subsidiaries for such period,
determined on a consolidated basis, in accordance with generally accepted
accounting principles; provided that, without duplication, (i) the net income
of any Person, other than a Restricted Subsidiary which is consolidated with
the Company, in which any Person other than the Company and its Restricted
Subsidiaries has an interest shall be included only to the extent of the
amount of cash dividends or distributions actually paid to the Company or a
Restricted Subsidiary during such period, (ii) the net income of any Person
acquired in a pooling of interests transaction for any period prior to the
date of such acquisition shall be excluded, (iii) the net income of any
Subsidiary of the Company shall be excluded to the extent such Subsidiary is
prohibited, directly or indirectly, from distributing such net income or any
portion thereof to the Company or a Restricted Subsidiary, (iv) all
extraordinary gains and losses (after taxes) that would be included on an
income statement for such period shall be excluded and (v) all gains and
losses (after taxes) attributable to Asset Sales shall be excluded; provided,
that there shall be included in such net income, without duplication, the net
income of any Unrestricted Subsidiary to the extent such net income is
actually received by the Company or any of its Restricted Subsidiaries in cash
during such period.
"Consolidated Non-cash Charges" of the Company means, for any period, the
aggregate depreciation, amortization and other non-cash charges (other than
reserves or expenses established in anticipation of future cash requirements
such as reserves for taxes and uncollectible accounts) of the Company and its
Restricted Subsidiaries on a consolidated basis for such period, as determined
in accordance with generally accepted
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accounting principles; provided that Consolidated Non-cash Charges shall
exclude (i) any charges that are not included for the purpose of determining
Consolidated Net Income, (ii) any charges that are included for the purpose of
determining Consolidated Interest Expense or Consolidated Tax Expense and
(iii) any charges representing capitalized selling, general and administrative
expenses that are expensed during such period as cost of goods sold.
"Consolidated Tangible Assets" of the Company as of any date means the total
amount of assets of the Company and its Restricted Subsidiaries (less
applicable reserves and less the assets securing the payment of Non-Recourse
Debt of the Company and its Restricted Subsidiaries) on a consolidated basis
at the end of the fiscal quarter immediately preceding such date, as
determined in accordance with generally accepted accounting principles, less:
(i) unamortized debt and debt issuance expense, deferred charges, goodwill,
patents, trademarks, copyrights, and all other items which would be treated as
intangibles on the consolidated balance sheet of the Company and its
Restricted Subsidiaries prepared in accordance with generally accepted
accounting principles and (ii) appropriate adjustments on account of minority
interests of other Persons holding equity investments in Restricted
Subsidiaries, in the case of each of clauses (i) and (ii) above, as reflected
on the consolidated balance sheet of the Company and its Restricted
Subsidiaries.
"Consolidated Tangible Net Worth" of the Company means the Company's Net
Worth less unamortized debt and debt issuance expense, deferred charges,
goodwill, patents, trademarks, copyrights, and all other items which would be
treated as intangibles on the consolidated balance sheet of the Company and
its Restricted Subsidiaries prepared in accordance with generally accepted
accounting principles.
"Consolidated Tax Expense" of the Company means, for any period, the
aggregate of the tax expense of the Company and its Restricted Subsidiaries
for such period, determined on a consolidated basis, in accordance with
generally accepted accounting principles.
"Coverage Ratio" of the Company means the ratio of the Company's EBITDA to
its Consolidated Interest Incurred for the four fiscal quarters ending
immediately prior to the date of determination. Notwithstanding clause (ii) of
the definition of Consolidated Net Income, if the Debt which is being Incurred
is Incurred in connecting with an acquisition by the Company or a Restricted
Subsidiary, the Coverage Ratio shall be determined after giving effect to both
the Consolidated Interest Incurred related to the Incurrence of such Debt and
the EBITDA (x) of the Person becoming a Restricted Subsidiary of the Company
or (y) in the case of an acquisition of assets that constitute substantially
all of an operating unit or business, relating to the assets being acquired by
the Company or a Restricted Subsidiary of the Company.
"Debt" means, as to any Person, without duplication, (a) any indebtedness of
such Person for borrowed money, (b) all indebtedness of such Person evidenced
by bonds, debentures, notes, letters of credit, drafts or similar instruments,
(c) all indebtedness of such Person to pay the deferred purchase price of
property or services, but not including accounts payable and accrued expenses
arising in the ordinary course of business, (d) all capitalized lease
obligations of such Person, (e) all Debt of others secured by a Lien on any
asset of such Person, whether or not such Debt is assumed by such Person or
guaranteed by such Person, (f) Redeemable Stock of such Person and Preferred
Stock of any Subsidiary of such Person, (g) all obligations of such Person
with respect to Interest Rate Protection Agreements and (h) all Debt of others
guaranteed by such Person. The amount of Debt of any Person at any date
pursuant to clauses (a)-(d) and (f) above shall be as would appear as a
liability upon a balance sheet of such Person prepared on a consolidated basis
in accordance with generally accepted accounting principles. Notwithstanding
the foregoing, "Debt" of the Company shall not include the amount reflected on
a consolidated balance sheet of the Company with respect to options to acquire
real property which was purchased by the Company and sold to a third party
within 360 days of such purchase for consideration at least equal to the
amount paid by the Company for such property less an amount equal to the value
of such option.
"EBITDA" for the Company, for any period, means, without duplication, the
Consolidated Net Income of the Company plus, to the extent deducted in
calculating Consolidated Net Income, the sum of (a) Consolidated Tax Expense,
(b) Consolidated Interest Expense and (c) Consolidated Non-cash Charges.
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"Existing Debt" means all of the Debt of the Company and its Restricted
Subsidiaries that was outstanding on , 1996.
"guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt of any other Person
and, without limiting the generality of the foregoing, any obligation, direct
or indirect, contingent or otherwise, of such Person to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt of such
other Person (whether by agreement to keepwell or to maintain financial
condition or otherwise), provided that the term "guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified
to perform the task for which it is to be engaged.
"Interest Rate Protection Agreement" means any arrangement with any other
Person whereby, directly or indirectly, such Person is entitled to receive
from time to time periodic payments calculated by applying either a floating
or a fixed rate of interest on a stated notional amount in exchange for
periodic payments made by such Person calculated by applying a fixed or a
floating rate of interest on the same notional amount and shall include,
without limitation, interest rate swaps, caps, floors, collars and similar
agreements; provided that any arrangement which is entered into by the Company
or any of its Restricted Subsidiaries in connection with Debt Incurred by the
Company or any of its Restricted Subsidiaries shall constitute Permitted Debt.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Debt issued by, any other Person. "Investments" shall exclude
extensions of trade credit by the Company and its Subsidiaries in the ordinary
course of business in accordance with normal trade practices of the Company or
such Subsidiary, as the case may be.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
assignment (including any assignment of rights to receive payments of money
other than in connection with mortgage banking operations in the ordinary
course of business), charge, security interest or encumbrance of any kind
(including any conditional sale or other title retention agreement or any
lease in the nature thereof) in respect of such asset, any agreement to grant
to any Person any such Lien and any sale and leaseback of any asset.
"Material Subsidiary" means any Restricted Subsidiary of the Company which
accounted for 10 percent or more of the Consolidated Tangible Assets or EBITDA
of the Company for the fiscal year ending immediately prior to any Default or
Event of Default.
"Mortgage" means a first priority mortgage or first priority deed of trust
on improved real property.
"Net Proceeds" with respect to any Asset Sale means (i) cash (in U.S.
dollars or freely convertible into U.S. dollars) received by the Company or
any of its Restricted Subsidiaries from such Asset Sale (including cash
received as consideration for the assumption or incurrence of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such
Asset Sale to the Company or any of its Restricted Subsidiaries, whether or
not offset by net operating loss and tax credit carry-forwards, (b) payment of
all brokerage commissions and the underwriting fees and, without limitation,
all other fees and expenses related to such Asset Sale, and (c) deduction of
appropriate amounts to be provided by the Company or any of its Restricted
Subsidiaries as a reserve, in accordance with generally accepted accounting
principles, against any liabilities associated with the assets sold or
otherwise disposed of in such Asset Sale (including, without limitation,
pension and other post-employment benefit liabilities and liabilities related
to environmental matters) or against any indemnification obligations
associated with the sale or
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other disposition of the assets sold or otherwise disposed of in such Asset
Sale, and (ii) all noncash consideration received by the Company or any of its
Restricted Subsidiaries from such Asset Sale upon the liquidation or
conversion of such consideration into cash.
"Net Worth" of the Company means, at any date, the aggregate of capital,
surplus and retained earnings of the Company and its Restricted Subsidiaries
as would be shown on a consolidated balance sheet of the Company prepared in
accordance with generally accepted accounting principles, adjusted to exclude
(to the extent included) investments by the Company and its Subsidiaries in
joint ventures and the amount of equity attributable to Affiliates other than
Restricted Subsidiaries of such Person.
"Non-Recourse Debt" with respect to any Person means Debt of such Person for
which the sole legal recourse for collection of principal and interest on such
Debt is against the specific property identified in the instruments evidencing
or securing such Debt and such property was acquired with the proceeds of such
Debt or such Debt was Incurred (i) within 90 days after the acquisition of
such property or (ii) in respect of the Carlsbad Property.
"Permitted Investments" of any Person means Investments of such Person in
(i) direct obligations of the United States or any agency thereof or
obligations guaranteed by the United States or any agency thereof, in each
case maturing within 180 days of the date of acquisition thereof, (ii)
certificates of deposit maturing within 180 days of the date of acquisition
thereof issued by a bank, trust company or savings and loan association which
is organized under the laws of the United States or any state thereof having
capital, surplus and undivided profits aggregating in excess of $250 million
and a Keefe Bank Watch Rating of C or better, (iii) certificates of deposit
maturing within 180 days of the date of acquisition thereof issued by a bank,
trust company or savings and loan association organized under the laws of the
United States or any state thereof other than banks, trust companies or
savings and loan associations satisfying the criteria in (ii) above; provided
that the aggregate amount of all certificates of deposit issued to the Company
at any one time by such bank, trust company or savings and loan association
will not exceed $100,000, (iv) commercial paper given the highest rating by
two established national credit rating agencies and maturing not more than 180
days from the date of the acquisition thereof, (v) repurchase agreements or
money-market accounts which are fully secured by direct obligations of the
United States or any agency thereof and (vi) in the case of the Company and
its Subsidiaries, (1) any receivables or loans taken by the Company or a
Subsidiary in connection with the sale of any asset otherwise permitted by the
Indenture, (2) Investments in any Guarantor, (3) Investments in the Senior
Notes or Debt pari passu with the Senior Notes, (4) Investments in evidences
of Debt, securities or other property received from another Person by the
Company or any of its Restricted Subsidiaries in connection with any
bankruptcy proceeding or by reason of a composition or readjustment of debt or
a reorganization of such Person or as a result of foreclosure, perfection or
enforcement of any Lien in exchange for evidences of Debt, securities or other
property of such Person held by the Company or any of its Restricted
Subsidiaries, or for other liabilities or obligations of such other Person to
the Company or any of its Restricted Subsidiaries that were created, in
accordance with the terms of the Indenture, (5) Investments in Interest Rate
Protection Agreements which constitute Permitted Debt and (6) Investments in
an aggregate amount outstanding not greater than $30,000,000.
"Permitted Liens" with respect to the Company and its Restricted
Subsidiaries means (i) Liens on assets of the Company or any Restricted
Subsidiary of the Company securing Debt which may be incurred pursuant to the
"Limitation on Debt" covenant, provided that the aggregate amount of Debt
secured by Liens (excluding Non-Recourse Debt of the Company and Restricted
Subsidiaries and Debt outstanding under the Warehouse Facility) may not exceed
40 percent of the Company's Consolidated Tangible Assets; (ii) Liens securing
a Warehouse Facility; provided that such Liens shall not extend to any assets
other than the mortgages, promissory notes and other collateral that secures
mortgage loans made by the Company or any of its Restricted Subsidiaries;
(iii) Liens securing Non-Recourse Debt of the Company or any Restricted
Subsidiary of the Company, provided that such Liens apply only to the property
financed out of the net proceeds of such Non-Recourse Debt within 90 days of
the incurrence of such Non-Recourse Debt (except that such 90 day limitation
shall not apply with
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respect to the Carlsbad Property); (iv) Liens securing Debt of a Person
existing at the time that such Person is merged into or consolidated with the
Company or a Restricted Subsidiary; provided that such Liens were not created
in contemplation of such merger or consolidation and do not extend to any
assets or property of the Company or any Restricted Subsidiary, other than the
surviving Person and its Subsidiaries; (v) Liens on assets or property
acquired by the Company or a Restricted Subsidiary; provided that such Liens
were not created in contemplation of such acquisition and do not extend to any
other assets or property (other than proceeds of such acquired assets or
property); (vi) Liens in respect of Interest Rate Protection Agreements which
constitute Permitted Debt; (vii) Liens for taxes, assessments or governmental
charges or claims that either (a) are not yet delinquent or (b) are being
contested in good faith by appropriate proceedings and as to which appropriate
reserves have been established or other provisions have been made in
accordance with generally accepted accounting principles; (viii) statutory
Liens of landlords and carriers', warehousemen's, mechanics', suppliers',
materialmen's, repairmen's or other Liens imposed by law and arising in the
ordinary course of business; (ix) Liens (other than any Lien imposed by the
Employee Retirement Income Security Act of 1974, as amended) incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (x)
Liens incurred or deposits made to secure the performance of tenders, bids,
leases, statutory obligations, surety and appeal bonds, progress payments,
government contracts and other obligations of like nature (exclusive of
obligations for the payment of borrowed money), in each case, incurred in the
ordinary course of business; (xi) attachment or judgment Liens not giving rise
to a Default or Event of Default; (xii) easements, rights-of-way, restrictions
and other similar charges or encumbrances not materially interfering with the
ordinary conduct of the business of the Company or any of its Subsidiaries;
(xii) leases or subleases granted to others not materially interfering with
the ordinary conduct of the business of the Company or any of its Restricted
Subsidiaries; (xiv) Liens securing Refinancing Debt; provided that such Liens
only extend to the assets securing the Debt being refinanced, such refinanced
Debt was previously secured and such Liens do not extend to any other assets
of the Company or the assets of any of the Company's other Subsidiaries;
(xv) Liens securing Purchase Money Obligations (including capitalized lease
obligations); (xvi) Liens existing on the date of the Indenture; (xvii) any
contract to sell an asset provided such sale is otherwise permitted under the
Indenture and (xviii) Liens on property or assets of any Restricted Subsidiary
securing Debt of such Restricted Subsidiary owing to the Company or one or
more Restricted Subsidiaries of the Company.
"Person" means any individual, corporation, partnership, association, trust
or other entity or organization, including a government or political
subdivision or agency or instrumentality thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding or issued after
the date of the Indenture, and including, without limitation, all classes and
series of preferred or preference stock.
"Purchase Money Obligations" means Debt of any Person secured by Liens (i)
on property purchased, acquired, or constructed by such Person or its
Subsidiaries after the date of the Indenture and used in the ordinary course
of business by such Person and (ii) securing the payment of all or any part of
the purchase price or construction cost of such assets and limited to the
property so acquired and improvements thereof; provided that such Debt is
incurred no later than 90 days after the acquisition of such property or
completion of such construction or improvements.
"Redeemable Stock" means, with respect to any Person, any class or series of
Capital Stock of such Person that is redeemable at the option of the holder
(except pursuant to a change in control provision that does not (i) cause such
Capital Stock to become redeemable in circumstances which would not constitute
a Change of Control and (ii) require the Company to pay the redemption price
therefor prior to the Change of Control Repurchase Date) or is subject to
mandatory redemption or otherwise matures prior to the final stated maturity
of the Senior Notes.
"Refinancing Debt" means Debt that refunds, refinances or extends any Senior
Notes, Existing Debt (other than Existing Debt to be repaid with the net
proceeds of the offering of the Senior Notes) or other Debt incurred
30
<PAGE>
by the Company or its Restricted Subsidiaries pursuant to the terms of the
Indenture, but only to the extent that (i) the Refinancing Debt is
subordinated to the Senior Notes to the same extent as the Debt being
refunded, refinanced or extended, if at all, (ii) the Refinancing Debt is
scheduled to mature either (a) no earlier than the Debt being refunded,
refinanced or extended, or (b) after the maturity date of the Senior Notes,
(iii) the portion, if any, of the Refinancing Debt that is scheduled to mature
on or prior to the maturity date of the Senior Notes has a Weighted Average
Life to Maturity at the time such Refinancing Debt is Incurred that is equal
to or greater than the Weighted Average Life to Maturity of the portion of the
Debt being refunded, refinanced or extended that is scheduled to mature on or
prior to the maturity date of the Senior Notes, and (iv) the gross proceeds of
such Refinancing Debt is an amount that is equal to or less than the aggregate
principal amount then outstanding under the Debt being refunded, refinanced or
extended (plus the premiums or other payments paid in connection therewith
(which shall not exceed the stated amount of any premium or other payment
required to be paid in connection with such a renewal, extension,
substitution, refunding, refinancing, redemption, repurchase or replacement
pursuant to the terms of the Debt being renewed, extended, substituted,
refunded, refinanced, amended, modified, supplemented, redeemed, repurchased
or replaced) and the expenses incurred in connection therewith).
"Restricted Payments" means with respect to the Company or any Restricted
Subsidiary (i) the declaration or payment of any dividend or other
distribution on any shares of such Person's Capital Stock ((x) except
dividends or distributions in additional shares of Capital Stock of the
Company other than Redeemable Stock or (y) the declaration or payment of any
dividend or other distribution by a Restricted Subsidiary to the Company or
another Restricted Subsidiary), (ii) any payment on account of the purchase,
redemption or other acquisition of (a) any shares of such Person's Capital
Stock or (b) any option, warrant or other right to acquire shares of such
Person's Capital Stock, except, in each case, Capital Stock held by the
Company or a Restricted Subsidiary, (iii) any Investment (other than a
Permitted Investment) in any Person, or (iv) any principal payment,
redemption, repurchase, defeasance or other acquisition or retirement, prior
to scheduled principal payment or scheduled maturity, of Debt of the Company
or its Subsidiaries which is subordinated in right of payment to the Senior
Notes (other than Debt held by the Company or a Restricted Subsidiary).
"Restricted Subsidiary" means any Subsidiary which is not an Unrestricted
Subsidiary.
"Subsidiary" means, with respect to any Person, (i) any corporation or
entity of which a majority of the capital stock having ordinary voting power
to elect a majority of the board of directors or other Persons performing
similar functions is at the time directly or indirectly owned by such Person
or one or more of the other Subsidiaries of that Person or (ii) any
partnership or joint venture at least a majority of the voting power of which
is at the time directly or indirectly owned by such Person or one or more of
the other Subsidiaries of that Person, or a combination thereof or a successor
thereto.
"Unrestricted Subsidiary" means each of the Subsidiaries of the Company
(other than a Guarantor) so designated by a resolution adopted by the Board of
Directors of the Company as provided below; provided that (a) neither the
Company nor any of its other Subsidiaries (other than Unrestricted
Subsidiaries) (1) provides any direct or indirect credit support for any Debt
of such Subsidiary (including any undertaking, agreement or instrument
evidencing such Debt) or (2) is directly or indirectly liable for any Debt of
such Subsidiary, and (b) the creditors with respect to Debt for borrowed money
of such Subsidiary have agreed in writing that they have no recourse, direct
or indirect, to the Company or any other Subsidiary of the Company (other than
Unrestricted Subsidiaries), including, without limitation, recourse with
respect to the payment of principal or interest on any Debt of such
Subsidiary. The Board of Directors of the Company may designate an
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that (i) any
such redesignation will be deemed to be an Incurrence by the Company and its
Restricted Subsidiaries of the Debt (if any) of such redesignated Subsidiary
for purposes of the "Limitation on Debt" covenant set forth in the Indenture
as of the date of such redesignation, (ii) any Debt of such Unrestricted
Subsidiary could then be Incurred in accordance with the "Limitation on Debt"
covenant set forth in the Indenture on the date of such redesignation and
(iii) the Liens of such Unrestricted Subsidiary could then be incurred in
accordance with the "Limitation on Liens" covenant set forth
31
<PAGE>
in the Indenture as of the date of such redesignation. Subject to the
foregoing, the Board of Directors of the Company also may designate any
Restricted Subsidiary to be an Unrestricted Subsidiary; provided that (i) all
previous Investments by the Company and its Restricted Subsidiaries in such
Restricted Subsidiary (net of any returns previously paid on such Investments)
will be deemed to be Restricted Payments at the time of such designation and
will reduce the amount available for Restricted Payments under the
"Limitations on Restricted Payments" covenant set forth in the Indenture,
(ii) the Company and its Restricted Subsidiaries could incur $1.00 of
additional Indebtedness under the Coverage Ratio test contained in the
"Limitations on Debt" covenant set forth in the Indenture and (iii) no Default
or Event of Default shall have occurred or be continuing. Any such designation
or redesignation by the Board of Directors of the Company will be evidenced to
the Trustee by the filing with the Trustee of a certified copy of the
resolution of the Board of Directors of the Company giving effect to such
designation or redesignation and an Officers' Certificate certifying that such
designation or redesignation complied with the foregoing conditions and
setting forth the underlying calculations.
"Warehouse Facility" means a Bank Facility to finance the making of mortgage
loans originated by the Company or any of its Subsidiaries.
"Weighted Average Life to Maturity" means, when applied to any Debt or
portion thereof, if applicable, at any date, the number of years obtained by
dividing (i) the then outstanding principal amount of such Debt or portion
thereof, if applicable, into (ii) the sum of the products obtained by
multiplying (a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including payment at
final maturity, in respect thereof, by (b) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary of the
Company of which 100% of the outstanding Capital Stock is owned by one or more
Wholly Owned Restricted Subsidiaries of the Company or by the Company and one
or more Wholly Owned Restricted Subsidiaries of the Company. For purposes of
this definition, any directors' qualifying shares shall be disregarded in
determining the ownership of a Subsidiary.
EVENTS OF DEFAULT
The following shall constitute Events of Default with respect to the Senior
Notes: (i) failure to pay the principal of any Note when such principal
becomes due and payable at maturity, upon acceleration or otherwise, (ii)
failure to pay interest when due, 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 or the Guarantors in the Note, the Guarantee or
the Indenture that continues for the period and after the notice specified
below; (iv) an event of default shall have occurred under one or more
evidences of Debt of the Company or any of its Restricted Subsidiaries (other
than Non-Recourse Debt) with an outstanding aggregate principal amount of
$5,000,000 or more, whether such Debt now exists or is created hereafter,
which event of default (1) consists of the failure by the Company or any
Restricted Subsidiary to make any payment in respect of such Debt at its final
maturity or (2) results in the acceleration of such Debt which acceleration
shall be in effect; (v) any final judgment or judgments for payment of money
in excess of $5,000,000 in the aggregate shall be rendered against the Company
or any of its Restricted Subsidiaries and shall remain unstayed, unsatisfied
or undischarged for the period and after the notice specified below; (vi)
certain events of bankruptcy, insolvency or reorganization of the Company or
Material Subsidiaries and (vii) any Guarantee of a Material Subsidiary ceases
to be in full force and effect (other than in accordance with the terms of
such Guarantee and the Indenture) or is declared null and void and
unenforceable or found to be invalid or any Guarantor denies its liability
under its Guarantee (other than by reason of release of a Guarantor from its
Guarantee in accordance with the terms of the Indenture and the Guarantee).
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 Senior Notes and, if any default exists, describing such
default.
A default under clause (iii) or (v) above is not an Event of Default until
the Trustee or the holders of at least 25% in principal amount of the Senior
Notes then outstanding notify the Company of the default and the
32
<PAGE>
Company does not cure the default within 60 days. 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 Senior Notes then
outstanding 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
certain events of bankruptcy, insolvency or reorganization of the Company)
shall have occurred and be continuing, the Trustee, by notice to the Company,
or the holders of 25% of the principal amount of the Senior Notes then
outstanding, by notice to the Company and the Trustee, may declare the
principal of the Senior 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 of the Company 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 Senior Notes. Any declaration of
acceleration may be rescinded and past defaults may be waived by the holders
of a majority of the principal amount of the Senior Notes then outstanding
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 Senior 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 Senior Notes then outstanding 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 Senior
Notes then outstanding 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.
MERGERS AND CONSOLIDATIONS
Neither the Company nor any Guarantor will consolidate or merge with or
into, or sell, lease, convey or otherwise dispose of all or substantially all
of its assets (including, without limitation, by way of liquidation or
dissolution), or assign any of its obligations under the Senior Notes, the
Guarantees or the Indenture (as an entirety or substantially as an entirety in
one transaction or series of related transactions), to any Person or permit
any of its Restricted Subsidiaries to do any of the foregoing (in each case
other than with the Company or another Wholly Owned Restricted Subsidiary)
unless: (i) the Person formed by or surviving such consolidation or merger (if
other than the Company or such Guarantor, as the case may be), or to which
such sale, lease, conveyance or other disposition or assignment will be made
(collectively, the "Successor"), is a corporation or other legal entity
organized and existing under the laws of the United States or any state
thereof or the District of Columbia, and the Successor assumes by supplemental
indenture in a form reasonably satisfactory to the Trustee all of the
obligations of the Company or such Guarantor, as the case may be, under the
Senior Notes or such Guarantor's Guarantee, as the case may be, and the
Indenture, (ii) immediately after giving effect to such transaction, no
Default or Event of Default has occurred and is continuing, (iii) immediately
after giving effect to such transaction and the use of any net proceeds
therefrom, on a pro forma basis, the Consolidated Tangible Net Worth of the
Company or the Successor (in the case of a transaction involving the Company),
as the case may be, would be at least equal to the Consolidated Tangible Net
Worth of the Company immediately prior to such transaction and (iv) in the
case of a transaction involving the Company, immediately after giving effect
to such transaction and the use of any net proceeds therefrom, on a pro forma
basis, the Coverage Ratio of the Company or the Successor (in the case of a
transaction involving the Company), as the case may be, would be such that the
Company or the Successor (in the case of a transaction involving the Company),
as the case may be, would be entitled to Incur at least $1.00 of additional
Debt under such Coverage Ratio test in the "Limitation on Debt" covenant set
forth in the Indenture. The foregoing provisions shall not apply to a
transaction involving the consolidation or merger of a Guarantor with or into
another person, or the sale, lease, conveyance or other
33
<PAGE>
disposition of all or substantially all of the assets of such Guarantor, that
results in such Guarantor being released from its Guarantee as provided under
"The Guarantees" above.
DEFEASANCE
Under the terms of the Indenture and the Senior Notes, the Company, at its
option, (a) will be Discharged from any and all obligations in respect of the
Senior Notes (except in each case for certain obligations to register the
transfer or exchange of Senior Notes, replace stolen, lost or mutilated Senior
Notes, maintain paying agencies and hold moneys for payment in trust) or (b)
need not comply with the covenants of the Indenture nor be subject to the
operation of the cross acceleration provisions described under "Events of
Default," in each case, if the Company irrevocably deposits with the Trustee,
in trust, money or U.S. Government Obligations (as defined in the Indenture)
which through the payment of interest thereon and principal thereof in
accordance with their terms will provide money in an amount sufficient to pay
the principal of and interest on the Senior Notes on the dates such payments
are due in accordance with the terms of the Senior Notes.
To exercise either option above, the Company is required to deliver to the
Trustee an opinion of counsel that the holders of the Senior Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance had not occurred.
In the event the Company exercises its options under clause (b) of the
second preceding paragraph and the Senior Notes are declared due and payable
because of the occurrence of any Event of Default (other than the cross
acceleration provisions described under "Events of Default" which will be
inapplicable), the amount of money and U.S. Government Obligations on deposit
with the Trustee will be sufficient to pay amounts due on the Senior Notes at
the time of their stated maturity but may not be sufficient to pay amounts due
on the Senior Notes at the time of the acceleration resulting from such Event
of Default. However, the Company shall remain liable for such payments.
REPORTS
As long as any of the Senior Notes are outstanding, the Company will deliver
to the Trustee and mail to each Holder within 15 days after the filing of the
same with the Commission copies of the quarterly and annual reports and of the
information, documents and other reports with respect to the Company and the
Guarantors, if any, which the Company and the Guarantors may be required to
file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
The Indenture will provide that, notwithstanding that neither the Company nor
any of the Guarantors may be required to remain subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company will
continue to file with the Commission and provide the Trustee and Holders with
such annual and quarterly reports and such information, documents and other
reports with respect to the Company and the Guarantors as are required under
Sections 13 and 15(d) of the Exchange Act. If filing of documents by the
Company with the Commission as aforementioned in this paragraph is not
permitted under the Exchange Act, the Company shall promptly upon written
notice supply copies of such documents to any prospective holder. The Company
and each Guarantor will also comply with the other provisions of Section
314(a) of the Trust Indenture Act.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Senior Notes may be
amended or supplemented with the consent (which may include consents obtained
in connection with a tender offer or exchange offer for Senior Notes) of the
Holders of at least a majority in principal amount of Senior Notes then
outstanding, and any existing Default or Event of Default (other than any
continuing Default or Event of Default in the payment of interest on or the
principal of the Senior Notes) under, or compliance with any provision of, the
Indenture may be waived with the consent (which may include consents obtained
in connection with a tender offer or exchange
34
<PAGE>
offer for Senior Notes) of the Holders of a majority in principal amount of
the Senior Notes then outstanding. Without the consent of any Holder, the
Company, the Guarantors and the Trustee may amend the Indenture or the Senior
Notes or waive any provision of the Indenture to cure any ambiguity, defect or
inconsistency, to comply with the "Mergers and Consolidations" section set
forth in the Indenture, to provide for uncertificated Senior Notes in addition
to certificated Senior Notes, to make any change that does not adversely
affect the legal rights under the Indenture of any Holder, to comply with the
qualification of the Indenture under the Trust Indenture Act, or to reflect a
Guarantor ceasing to be liable on the Guarantees because it is no longer a
Subsidiary of the Company.
Without the consent of each Holder affected, the Company may not (i) reduce
the amount of Senior Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the rate of or change the time for payment
of interest, including default interest, on any Note, (iii) reduce the
principal of or change the fixed maturity of any Note or alter the provisions
with respect to redemption under the "Optional Redemption" section set forth
in the Indenture, (iv) make any Senior Notes payable in money other than that
stated in the Note, (v) make any change in certain other provisions set forth
in the Indenture, (vi) adversely modify the ranking or priority of the Senior
Notes or any Guarantee, (vii) release any Guarantor from any of its
obligations under its Guarantee or the Indenture otherwise than in accordance
with the terms of the Indenture, or (viii) waive a continuing Default or Event
of Default in the payment of principal of or interest on the Senior Notes.
NO PERSONAL LIABILITY OF SHAREHOLDERS, OFFICERS, DIRECTORS OR EMPLOYEES
The Indenture will provide that no recourse for the payment of the principal
of, premium, if any, or interest on any of the Senior Notes, or for any claim
based thereon or otherwise in respect thereof, and no recourse under or upon
any obligation, covenant or agreement of the Company or any Guarantor in the
Indenture or in any of the Senior Notes or because of the creation of any Debt
represented thereby, shall be had against any shareholder, officer, director,
employee or controlling person of the Company, any Guarantor or any successor
Person thereof. Each Holder, by accepting such Senior Notes, will waive and
release all such liability.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest (as
defined in the Indenture), it must eliminate such conflict or resign.
The Holders of a majority in principal amount of the then outstanding Senior
Notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
occurs and is not cured, the Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent person in similar circumstances
in the conduct of his own affairs. Subject to such provisions, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder, unless such Holder shall have offered
to the Trustee security and indemnity satisfactory to the Trustee.
GOVERNING LAW
The Indenture, the Senior Notes and the Guarantees will be governed by the
internal laws of the State of New York.
35
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement
dated the date hereof, each Underwriter named below has agreed to purchase,
and the Company has agreed to sell to such Underwriter, the principal amount
of Senior Notes set forth opposite the name of such Underwriter below:
<TABLE>
<CAPTION>
NAME PRINCIPAL AMOUNT
---- ----------------
<S> <C>
Smith Barney Inc. .......................................... $
Salomon Brothers Inc........................................
------------
Total..................................................... $150,000,000
============
</TABLE>
The Underwriters are obligated to take and pay for all of the Senior Notes
offered hereby if any such Senior Notes are taken.
The Underwriters have advised the Company that they propose initially to
offer part of the Senior Notes directly to the public at the public offering
price set forth on the cover page hereof and part to certain dealers at a
price that represents a concession not in excess of % of the public offering
price of the Senior Notes. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of % of the public offering price of the
Senior Notes to certain other dealers. After the public offering, the public
offering price and such concessions may be changed from time to time by the
Underwriters. The Underwriters have informed the Company that the Underwriters
do not intend to confirm sales to accounts over which they exercise
discretionary authority.
The Company and the Guarantors have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act.
The Senior Notes are a new issue of securities which have no established
trading market. It is expected that the Senior 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 Senior 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. In addition, the Senior Notes have been approved for listing on the
New York Stock Exchange. No assurance can be given as to the liquidity of the
trading market, if any, for the Senior Notes.
Smith Barney Inc. has been retained by the Company to act as dealer manager
in connection with the Offer to Purchase. In addition, Smith Barney Inc. has
from time to time performed investment banking and other financial advisory
services for the Company in the ordinary course of business and has received
customary compensation. Smith Barney Inc. was one of the underwriters of the
Company's public offering of $86,250,000 principal amount of 6 7/8%
Convertible Subordinated Notes due November 1, 2002 in 1995.
Under the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. (the "NASD"), when more than 10% of the proceeds of a public
offering of debt securities, not including underwriting compensation, is to be
paid to a member of the NASD or an affiliate of a member, the yield at which
the debt securities are distributed to the public must be no lower than that
recommended by a "qualified independent underwriter" meeting certain
standards. Smith Barney Inc. is a member of the NASD and will receive more
than 10% of the net proceeds from the Senior Notes Offering as a result of the
use of a portion of such proceeds to repurchase approximately $17.3 million of
Old Senior Notes held by Smith Barney Inc. Salomon Brothers Inc has agreed to
act as a qualified independent underwriter in connection with pricing the
Senior Notes offered hereby and conducting due diligence. The yield on the
Senior Notes, when sold to the public at the public offering price set forth
on the cover page of this Prospectus, will be no less than that recommended by
Salomon Brothers Inc. Salomon Brothers Inc will receive no additional
compensation for its services as qualified independent underwriter.
36
<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.
37
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED
HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER
THAN THOSE TO WHICH IT RELATES NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. 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 COR-
RECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Documents by Reference.................................... 2
Prospectus Summary......................................................... 3
Risk Factors............................................................... 8
Use of Proceeds............................................................ 10
Capitalization............................................................. 11
Business................................................................... 12
Description of the Senior Notes............................................ 17
Underwriting............................................................... 36
Legal Matters.............................................................. 37
Experts.................................................................... 37
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$150,000,000
CONTINENTAL HOMES HOLDING CORP.
% SENIOR NOTES
DUE 2006
-------
PROSPECTUS
APRIL , 1996
-------
SMITH BARNEY INC.
SALOMON BROTHERS INC
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses (other than the SEC registration and NASD filing
fees) are estimated.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 51,725
NASD filing fee.................................................. 15,500
Blue Sky fees and expenses....................................... 20,000
Printing and engraving........................................... 80,000
Accountants' fees and expenses................................... 50,000
Legal fees and expenses.......................................... 175,000
Trustee fees and expenses........................................ 10,000
Miscellaneous.................................................... 97,775
--------
Total.......................................................... $500,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation, as amended, provides that the
Company shall, to the full extent permitted by Sections 102 and 145 of the
General Corporation Law of the State of Delaware, as amended from time to
time, indemnify all persons whom it may indemnify pursuant thereto and
eliminates the personal liability of its directors to the full extent
permitted by Section 102(b)(7) of the General Corporation Law of the State of
Delaware, as amended from time to time.
Section 145 of the General Corporation Law of the State of Delaware permits
a corporation to indemnify its directors and officers against expenses
(including attorney's fees), judgments, fines and amounts paid in settlements
actually and reasonably incurred by them in connection with any action, suit
or proceeding brought by third parties, if such directors or officers acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe their conduct was unlawful.
In a derivative action, i.e., one by or in the right of the corporation,
indemnification may be made only for expenses actually and reasonably incurred
by directors and officers in connection with the defense or settlement of an
action or suit, and only with respect to a matter as to which they shall have
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation, except that no
indemnification shall be made if such person shall have been adjudged liable
for negligence or misconduct in the performance of his respective duties to
the corporation, although the court in which the action or suit was brought
may determine upon application that the defendant officers or directors are
reasonably entitled to indemnity for such expenses despite such adjudication
of liability.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a corporation may eliminate or limit the personal liability of a
director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the General Corporation
Law of the State of Delaware, or (iv) for any transaction from which the
director derived an improper personal benefit. No such provision shall
eliminate or limit the liability of a director for any act or omission
occurring prior to the date when such provision becomes effective.
Section 7 of the Underwriting Agreement filed as Exhibit 1 provides that the
Underwriters named therein will indemnify and hold harmless the Company and
each director, officer or controlling person of the Company from and against
certain liabilities, including liabilities under the Securities Act of 1933.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
NUMBER EXHIBIT
------ -------
<C> <S>
1* --Form of Underwriting Agreement.
2.1 --Stock Purchase Agreement between William O. Milburn and the Company
dated July 28, 1993. Incorporated by reference to the Company's
report on Form 8-K dated July 29, 1993.
2.2(a) --Stock Purchase Agreement between Seller and the Company dated
November 3, 1994. Incorporated by reference to Exhibit 2.1 to the
Company's report on Form 8-K dated November 18, 1994.
2.2(b) --Amendment to Stock Purchase Agreement between Seller and the Company
dated November 18, 1994. Incorporated by reference to Exhibit 2.2(b)
to the Company's report on Form 10-K for the year ended May 31, 1995.
2.2(c) --Second Amendment to Stock Purchase Agreement between Seller and the
Company dated November 18, 1994. Incorporated by reference to Exhibit
2.2(c) to the Company's report on Form 10-K for the year ended May
31, 1995.
2.2(d) --Third Amendment to Stock Purchase Agreement between Seller and the
Company dated July 12, 1995. Incorporated by reference to Exhibit
2.2(d) to the Company's report on Form 10-K for the year ended May
31, 1995.
2.3 --Agreement dated as of September 18, 1995 between Robert J. and
Kathleen R. Wade and the Company. Incorporated by reference to
Exhibit 2.1 to the Company's report on Form 10-Q for the quarter
ended August 31, 1995.
4.1* --Form of Indenture.
4.2* --Form of Note (Included in Exhibit 4.1).
4.3 --Indenture dated as of November 1, 1995 between the Company and
Manufacturers and Traders Trust Company, as Trustee. Incorporated by
reference to Exhibit 4.1 to the Company's report on Form 10-Q for the
quarter ended November 30, 1995.
4.4 --Indenture dated as of August 1, 1992 between the Company and
Fidelity Bank, National Association, as Trustee. Incorporated by
reference to Exhibit 4.1 to the Company's report on Form 10-Q for the
quarter ended August 31, 1992.
4.5 --First Supplemental Indenture dated as of March 22, 1994 to the
Indenture dated as of August 1, 1992, between the Company and First
Fidelity Bank, National Association (formerly Fidelity Bank, National
Association), as Trustee. Incorporated by reference to Exhibit 4.1 to
the Company's report on Form 10-Q for the quarter ended February 28,
1994.
5* --Opinion of Cahill Gordon & Reindel.
12* --Statement of Computation of Ratio of Earnings to Fixed Charges.
23.1* --Consent of Arthur Andersen LLP
23.2* --Consent of Cahill Gordon & Reindel (included in Exhibit 5).
24** --Powers of Attorney (included on signature pages).
25* --Statement of Eligibility on Form T-1 of Trustee.
</TABLE>
- --------
* Filed herewith.
** Previously filed.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that:
For purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this Registration Statement shall be deemed to
be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
The undersigned Registrant hereby undertakes that:
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as a part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
Continental Homes Holding Corp.
/s/ Donald R. Loback
By: _________________________________
DONALD R. LOBACK
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Donald R. Loback Chairman, Chief
- ------------------------------------- Executive Officer April 8, 1996
(DONALD R. LOBACK) and Director
Chief Financial
* Officer, Treasurer April 8, 1996
- ------------------------------------- and Secretary
(KENDA B. GONZALES) (Principal
Financial Officer
and Principal
Accounting Officer)
President, Chief
* Operating Officer April 8, 1996
- ------------------------------------- and Director
(W. THOMAS HICKCOX)
Director
* April 8, 1996
- -------------------------------------
(BRADLEY S. ANDERSON)
Director
* April 8, 1996
- -------------------------------------
(JO ANN RUDD)
Director
* April 8, 1996
- -------------------------------------
(WILLIAM STEINBERG)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
Acheter, Inc.
/s/ Donald R. Loback
By: _________________________________
DONALD R. LOBACK PRESIDENT
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Donald R. Loback President and
- ------------------------------------- Director April 8, 1996
(DONALD R. LOBACK)
Treasurer (Principal
* Financial Officer April 8, 1996
- ------------------------------------- and Principal
(KENDA B. GONZALES) Accounting Officer)
Secretary and
* Director April 8, 1996
- -------------------------------------
(TIMOTHY C. WESTFALL)
Director
* April 8, 1996
- -------------------------------------
(TERRY E. MITCHELL)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
CH Mortgage Company
*
By: _________________________________
RANDY PRESENT CHAIRMAN AND
PRESIDENT
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
Chairman and
* President April 8, 1996
- -------------------------------------
(RANDY PRESENT)
Vice President,
* Treasurer and April 8, 1996
- ------------------------------------- Secretary
(JULIE COLLINS) (Principal
Financial Officer
and Principal
Accounting Officer)
/s/ Donald R. Loback Director
- ------------------------------------- April 8, 1996
(DONALD R. LOBACK)
Director
* April 8, 1996
- -------------------------------------
(W. THOMAS HICKCOX)
Director
* April 8, 1996
- -------------------------------------
(KENDA B. GONZALES)
Director
* April 8, 1996
- -------------------------------------
(RANDALL C. PRESENT)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
CHI Construction Company
*
By: _________________________________
W. THOMAS HICKCOX PRESIDENT
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
President and
* Director April 8, 1996
- -------------------------------------
(W. THOMAS HICKCOX)
Vice President,
* Treasurer and April 8, 1996
- ------------------------------------- Secretary
(KENDA B. GONZALES) (Principal
Financial Officer
and Principal
Accounting Officer)
/s/ Donald R. Loback Vice President and
- ------------------------------------- Director April 8, 1996
(DONALD R. LOBACK)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
CHI Finance Corp.
/s/ Donald R. Loback
By: _________________________________
DONALD R. LOBACKPRESIDENT
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Donald R. Loback President and
- ------------------------------------- Director April 8, 1996
(DONALD R. LOBACK)
Financial Vice
* President and April 8, 1996
- ------------------------------------- Director (Principal
(KENDA B. GONZALES) Financial Officer
and Principal
Accounting Officer)
Secretary, Treasurer
* and Director April 8, 1996
- -------------------------------------
(W. THOMAS HICKCOX)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
Continental Homes, Inc.
/s/ Donald R. Loback
By: _________________________________
DONALD R. LOBACKCHIEF EXECUTIVE
OFFICER
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Donald R. Loback Chief Executive
- ------------------------------------- Officerand Director April 8, 1996
(DONALD R. LOBACK)
Financial Vice
* President, April 8, 1996
- ------------------------------------- Treasurer and
(KENDA B. GONZALES) Secretary
(Principal
Financial Officer
and Principal
Accounting Officer)
Director
* April 8, 1996
- -------------------------------------
(W. THOMAS HICKCOX)
Director
* April 8, 1996
- -------------------------------------
(TIMOTHY C. WESTFALL)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
Continental Homes of Florida, Inc.
*
By: _________________________________
JOHN P. MORONEY PRESIDENT
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
President
* April 8, 1996
- -------------------------------------
(JOHN P. MORONEY)
Treasurer and
* Director (Principal April 8, 1996
- ------------------------------------- Financial Officer
(KENDA B. GONZALES) and Principal
Accounting Officer)
/s/ Donald R. Loback Vice President and
- ------------------------------------- Director April 8, 1996
(DONALD R. LOBACK)
Director
* April 8, 1996
- -------------------------------------
(W. THOMAS HICKCOX)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
Continental Homes of Texas, Inc.
/s/ Donald R. Loback
By: _________________________________
DONALD R. LOBACK CHAIRMAN AND
PRESIDENT
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Donald R. Loback Chairman and
- ------------------------------------- President April 8, 1996
(DONALD R. LOBACK)
Vice President and
* Treasurer April 8, 1996
- ------------------------------------- (Principal
(KENDA B. GONZALES) Financial Officer
and Principal
Accounting Officer)
Vice President and
* Director April 8, 1996
- -------------------------------------
(W. THOMAS HICKCOX)
Director
* April 8, 1996
- -------------------------------------
(TIMOTHY C. WESTFALL)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
KDB Homes, Inc.
*
By: _________________________________
DOUGLAS WILLIAM CHAMPION PRESIDENT
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
President
* April 8, 1996
- -------------------------------------
(DOUGLAS WILLIAM CHAMPION)
Treasurer and
* Secretary April 8, 1996
- ------------------------------------- (Principal
(KENDA B. GONZALES) Financial Officer
and Principal
Accounting Officer)
/s/ Donald R. Loback Vice President and
- ------------------------------------- Director April 8, 1996
(DONALD R. LOBACK)
Director
* April 8, 1996
- -------------------------------------
(TIMOTHY C. WESTFALL)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-12
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
L & W Investments, Inc.
*
By: _________________________________
CHRISTOPHER J. CHAMBERS PRESIDENT
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
President
* April 8, 1996
- -------------------------------------
(CHRISTOPHER J. CHAMBERS)
Treasurer (Principal
* Financial Officer April 8, 1996
- ------------------------------------- and Principal
(KENDA B. GONZALES) Accounting Officer)
/s/ Donald R. Loback Vice President and
- ------------------------------------- Director April 8, 1996
(DONALD R. LOBACK)
Vice President and
* Director April 8, 1996
- -------------------------------------
(W. THOMAS HICKCOX)
Director
* April 8, 1996
- -------------------------------------
(TIMOTHY C. WESTFALL)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-13
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
Milburn Investments, Inc.
/s/ Donald R. Loback
By: _________________________________
DONALD R. LOBACK PRESIDENT
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Donald R. Loback President and
- ------------------------------------- Director April 8, 1996
(DONALD R. LOBACK)
Treasurer (Principal
* Financial Officer April 8, 1996
- ------------------------------------- and Principal
(KENDA B. GONZALES) Accounting Officer)
Vice President and
* Director April 8, 1996
- -------------------------------------
(W. THOMAS HICKCOX)
Director
* April 8, 1996
- -------------------------------------
(TIMOTHY C. WESTFALL)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-14
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
Miltex Financial IV General
Partnership
/s/ Donald R. Loback
By: _________________________________
DONALD R. LOBACK PRESIDENT
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Donald R. Loback President and
- ------------------------------------- Director April 8, 1996
(DONALD R. LOBACK)
Treasurer (Principal
* Financial Officer April 8, 1996
- ------------------------------------- and Principal
(KENDA B. GONZALES) Accounting Officer)
Secretary and
* Director April 8, 1996
- -------------------------------------
(TIMOTHY C. WESTFALL)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-15
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
Miltex Management, Inc.
*
By: _________________________________
RANDALL C. PRESENT PRESIDENT
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
President
* April 8, 1996
- -------------------------------------
(RANDALL C. PRESENT)
Treasurer and
* Assistant Secretary April 8, 1996
- ------------------------------------- (Principal
(RICHARD MAREK) Financial Officer
and Principal
Accounting Officer)
/s/ Donald R. Loback Vice President and
- ------------------------------------- Director April 8, 1996
(DONALD R. LOBACK)
Secretary and
* Director April 8, 1996
- -------------------------------------
(TIMOTHY C. WESTFALL)
Director
* April 8, 1996
- -------------------------------------
(KENDA B. GONZALES)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-16
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
Miltex Mortgage of Texas Limited
Partnership
/s/ Donald R. Loback
By: _________________________________
DONALD R. LOBACK PRESIDENT
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Donald R. Loback President and
- ------------------------------------- Director April 8, 1996
(DONALD R. LOBACK)
Treasurer (Principal
* Financial Officer April 8, 1996
- ------------------------------------- and Principal
(KENDA B. GONZALES) Accounting Officer)
Secretary and
* Director April 8, 1996
- -------------------------------------
(TIMOTHY C. WESTFALL)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-17
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
Rancho Carillo, Inc.
*
By: _________________________________
CHRISTOPHER J. CHAMBERS
PRESIDENT
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
President
* April 8, 1996
- -------------------------------------
(CHRISTOPHER J. CHAMBERS)
Treasurer and
* Secretary April 8, 1996
- ------------------------------------- (Principal
(KENDA B. GONZALES) Financial Officer
and Principal
Accounting Officer)
Vice President and
* Director April 8, 1996
- -------------------------------------
(DONALD R. LOBACK)
Director
* April 8, 1996
- -------------------------------------
(TIMOTHY C. WESTFALL)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-18
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
R.O.S. Corporation
/s/ Donald R. Loback
By: _________________________________
DONALD R. LOBACK
PRESIDENT
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Donald R. Loback President
- ------------------------------------- April 8, 1996
(DONALD R. LOBACK)
Treasurer (Principal
* Financial Officer April 8, 1996
- ------------------------------------- and Principal
(KENDA B. GONZALES) Accounting Officer)
Secretary and
* Director April 8, 1996
- -------------------------------------
(TIMOTHY C. WESTFALL)
Director
* April 8, 1996
- -------------------------------------
(TERRY E. MITCHELL)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-19
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
Settlement Corporation
/s/ Donald R. Loback
By: _________________________________
DONALD R. LOBACK
PRESIDENT
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Donald R. Loback President and
- ------------------------------------- Director April 8, 1996
(DONALD R. LOBACK)
Treasurer (Principal
* Financial Officer April 8, 1996
- ------------------------------------- and Principal
(KENDA B. GONZALES) Accounting Officer)
Secretary and
* Director April 8, 1996
- -------------------------------------
(TIMOTHY C. WESTFALL)
Director
* April 8, 1996
- -------------------------------------
(TERRY E. MITCHELL)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-20
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON
APRIL 8, 1996.
Travis County Title Company
*
By: _________________________________
JACKIE MANUEL
PRESIDENT
PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
President
* April 8, 1996
- -------------------------------------
(JACKIE MANUEL)
Treasurer and
* Assistant Secretary April 8, 1996
- ------------------------------------- (Principal
(BILL MCCLENDON) Financial Officer
and Principal
Accounting Officer)
/s/ Donald R. Loback Director
- ------------------------------------- April 8, 1996
(DONALD R. LOBACK)
Director
* April 8, 1996
- -------------------------------------
(W. THOMAS HICKCOX)
Director
* April 8, 1996
- -------------------------------------
(TIMOTHY C. WESTFALL)
*BY:
/s/ Donald R. Loback
- -------------------------------------
DONALD R. LOBACK, AS ATTORNEY-
IN-FACT
II-21
<PAGE>
EXHIBIT 1
$150,000,000
CONTINENTAL HOMES HOLDING CORP.
% Senior Notes due 2006
UNDERWRITING AGREEMENT
----------------------
April , 1996
SMITH BARNEY INC.
SALOMON BROTHERS INC
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Continental Homes Holding Corp., a Delaware corporation (the "Company"),
proposes, upon the terms and conditions set forth herein, to issue and sell
$150,000,000 aggregate principal amount of its % Senior Notes due 2006 (the
"Notes") to the Underwriters named in Schedule I hereto (the "Underwriters").
The Notes will be guaranteed (the "Guarantees"), on a joint and several basis,
by all of the Company's subsidiaries which are signatories hereto (the
"Guarantors"). The Notes and the Guarantees are collectively referred to herein
as the "Securities." The Securities will be issued pursuant to the provisions
of an Indenture to be dated as of April , 1996 (the "Indenture"), among the
Company, the Guarantors and First Union National Bank, as Trustee (the
"Trustee").
The Company and the Guarantors wish to confirm as follows their agreement
with you, in connection with the several purchases of the Securities by the
Underwriters.
<PAGE>
1. Registration Statement and Prospectus. The Company and the Guarantors
-------------------------------------
have prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-3 under the Act
(the "registration statement") relating to the Securities. The term
"Registration Statement" as used in this Agreement means the registration
statement (including all financial schedules and exhibits), as amended at the
time it becomes effective, or, if the registration statement became effective
prior to the execution of this Agreement, as supplemented or amended prior to
the execution of this Agreement. If it is contemplated, at the time this
Agreement is executed, that a post-effective amendment to the registration
statement will be filed and must be declared effective before the offering of
the Securities may commence, the term "Registration Statement" as used in this
Agreement means the registration statement as amended by said post-effective
amendment. Any registration statement filed by the Company and the Guarantors
pursuant to Rule 462(b) under the Act is referred to as the "Rule 462(b)
Registration Statement," and after such filing the term Registration Statement
shall include the Rule 462(b) Registration Statement. The term "Prospectus" as
used in this Agreement means the prospectus in the form included in the
Registration Statement, or, if the prospectus included in the Registration
Statement omits information in reliance on Rule 430A under the Act and such
information is included in a prospectus filed with the Commission pursuant to
Rule 424(b) under the Act, the term "Prospectus" as used in this Agreement
means the prospectus in the form included in the Registration Statement as
supplemented by the addition of the Rule 430A information
2
<PAGE>
contained in the prospectus filed with the Commission pursuant to Rule 424(b).
The term "Prepricing Prospectus" as used in this Agreement means the prospectus
subject to completion in the form included in the registration statement at the
time of the initial filing of the registration statement with the Commission,
and as such prospectus shall have been amended from time to time prior to the
date of the Prospectus. Any reference in this Agreement to the registration
statement, the Registration Statement, any Prepricing Prospectus or the
Prospectus shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Act, as of the date
of the registration statement, the Registration Statement, such Prepricing
Prospectus or the Prospectus, as the case may be, and any reference to any
amendment or supplement to the registration statement, the Registration
Statement, any Prepricing Prospectus or the Prospectus shall be deemed to refer
to and include any documents filed after such date under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") which, upon filing, are
incorporated by reference therein, as required by paragraph (b) of Item 12 of
Form S-3. As used herein, the term "Incorporated Documents" means the documents
which at the time are incorporated by reference in the registration statement,
the Registration Statement, any Prepricing Prospectus, the Prospectus, or any
amendment or supplement thereto.
2. Agreements to Sell and Purchase. The Company hereby agrees, subject to
-------------------------------
all the terms and conditions set forth herein, to issue and sell to each
Underwriter and, upon the basis of the representations, warranties and
agreements of the Company and the Guarantors herein contained and subject to all
the terms and conditions set forth herein, each
3
<PAGE>
Underwriter agrees, severally and not jointly, to purchase from the Company, at
a purchase price of % of the principal amount thereof, the principal amount
of Securities set forth opposite the name of such Underwriter in Schedule I
hereto (or such principal amount of Securities increased as set forth in Section
10 hereof).
3. Terms of Public Offering. The Company has been advised by you that the
------------------------
Underwriters propose to make a public offering of their respective portions of
the Securities as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable and initially to offer the
Securities upon the terms set forth in the Prospectus.
4. Delivery of the Securities and Payment Therefor. Delivery to the
-----------------------------------------------
Underwriters of and payment for the Securities shall be made at the office of
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, at 10:00 A.M., New
York City time, on April , 1996 (the "Closing Date"). The place of closing for
the Securities and the Closing Date may be varied by agreement between you and
the Company.
The Securities will be delivered to you for the accounts of the
Underwriters against payment of the purchase price therefor by wire transfer of
immediately available funds to the Company and registered in such names and in
such denominations as you shall request prior to 9:30 A.M., New York City time,
on the second business day preceding the Closing Date. The Securities to be
delivered to the Underwriters shall be made available to you in New York City
for inspection and packaging not later than 9:30 A.M., New York City time, on
the business day next preceding the Closing
4
<PAGE>
Date.
5. Agreements of the Company and the Guarantors. The Company and each of
--------------------------------------------
the Guarantors, jointly and severally, agree with the Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
or any Rule 462(b) Registration Statement to be declared effective before the
offering of the Securities may commence, the Company and the Guarantors will
endeavor to cause any such registration statement or such post-effective
amendment to become effective as soon as possible and will advise you promptly
and, if requested by you, will confirm such advice in writing, when any such
registration statement or such post-effective amendment has become effective.
(b) The Company will advise you promptly and, if requested by you, will
confirm such advice in writing: (i) of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information; (ii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Securities
for offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) within the period of time referred to in paragraph (f)
below, of any change in the Company's condition (financial or other), business,
prospects, properties, net worth or results of operations, or of the happening
of any event, which, in each case, makes any statement of a material fact made
in the Registration
5
<PAGE>
Statement or the Prospectus (as then amended or supplemented) untrue or which
requires the making of any additions to or changes in the Registration Statement
or the Prospectus (as then amended or supplemented) in order to state a material
fact required by the Act or the regulations thereunder to be stated therein or
necessary in order to make the statements therein not misleading, or of the
necessity to amend or supplement the Prospectus (as then amended or
supplemented) to comply with the Act or any other law. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal of such order at the earliest possible time.
(c) The Company will furnish to you, without charge (i) three signed copies
of the registration statement as originally filed with the Commission and of
each amendment thereto, including financial statements and all exhibits to the
registration statement, (ii) such number of conformed copies of the registration
statement as originally filed and of each amendment thereto, but without
exhibits, as you may request, (iii) such number of copies of the Indenture and
of the Incorporated Documents, without exhibits, as you may request, and (iv)
three copies of the exhibits to the Incorporated Documents.
(d) The Company and the Guarantors will not file any amendment to the
Registration Statement or make any amendment or supplement to the Prospectus or,
prior to the end of the period of time referred to in the first sentence in
subsection (f) below, file any document which, upon filing becomes an
Incorporated Document, of which you shall not previously have been advised or to
which, after you shall have
6
<PAGE>
received a copy of the document proposed to be filed, you shall reasonably
object.
(e) Prior to the execution and delivery of this Agreement, the Company has
delivered to you, without charge, in such quantities as you have requested,
copies of each form of the Prepricing Prospectus. The Company and the
Guarantors consent to the use, in accordance with the provisions of the Act and
with the securities or Blue Sky laws of the jurisdictions in which the
Securities are offered by the Underwriters and by dealers, prior to the date of
the Prospectus, of each Prepricing Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this Agreement as possible
and thereafter from time to time for such period as a prospectus is required by
the Act to be delivered in connection with sales by any Underwriter or dealer,
the Company will expeditiously deliver to each Underwriter and each dealer,
without charge, as many copies of the Prospectus (and of any amendment or
supplement thereto) as you may request. The Company and each of the Guarantors
consents to the use of the Prospectus (and of any amendment or supplement
thereto) in accordance with the provisions of the Act and with the securities or
Blue Sky laws of the jurisdictions in which the Securities are offered by the
Underwriters and by all dealers to whom Securities may be sold, both in
connection with the offering and sale of the Securities and for such period of
time thereafter as the Prospectus is required by the Act to be delivered in
connection with sales by any Underwriter or dealer. If during such period of
time any event shall occur that in the judgment of the Company or in the opinion
of counsel for the
7
<PAGE>
Underwriters is required to be set forth in the Prospectus (as then amended or
supplemented) or should be set forth therein in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the Prospectus (or to
file under the Exchange Act any document which, upon filing, becomes an
Incorporated Document) in order to comply with the Act or any other law, the
Company will forthwith prepare and, subject to the provisions of paragraph (d)
above, file with the Commission an appropriate supplement or amendment thereto
(or to such document), and will expeditiously furnish to the Underwriters and
dealers a reasonable number of copies thereof. In the event that the Company
and you, as Underwriters, agree that the Prospectus should be amended or
supplemented before the Closing Date, the Company, if requested by you, will
promptly issue a press release announcing or disclosing the matters to be
covered by the proposed amendment or supplement.
(g) The Company and the Guarantors will cooperate with you and with counsel
for the Underwriters in connection with the registration or qualification of the
Securities for offering and sale by the Underwriters and by dealers under the
securities or Blue Sky laws of such jurisdictions as you may designate and will
file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification; provided that
in no event shall the Company or any Guarantor be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to service of process in suits, other than those
arising out of the offering or sale of the Securities, or to taxation in any
jurisdiction where it is not now so subject.
8
<PAGE>
(h) The Company will make generally available to its security holders a
consolidated earnings statement, which need not be audited, covering a twelve-
month period commencing after the effective date of the Registration Statement
and ending not later than 15 months thereafter, as soon as practicable after the
end of such period, which consolidated earnings statement shall satisfy the
provisions of Section 11(a) of the Act.
(i) So long as any of the Securities are outstanding, the Company will
furnish to you (i) as soon as available, a copy of each report of the Company
mailed to stockholders or filed with the Commission, and (ii) from time to time
such other information concerning the Company as you may request.
(j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than pursuant to the
second paragraph of Section 10 hereof or by notice given by you terminating this
Agreement pursuant to Section 10 or Section 11 hereof) or if this Agreement
shall be terminated by the Underwriters because of any failure or refusal on the
part of the Company or the Guarantors to comply with the terms or fulfill any of
the conditions of this Agreement, the Company agrees to reimburse the
Underwriters for all out-of-pocket expenses (including reasonable fees and
expenses of counsel for the Underwriters) incurred by you in connection
herewith.
(k) The Company will apply the net proceeds from the sale of the Securities
substantially in accordance with the description set forth in the Prospectus.
9
<PAGE>
(l) If Rule 430A of the Act is employed, the Company will timely file the
Prospectus pursuant to Rule 424(b) under the Act and will advise you of the time
and manner of such filing.
6. Representations and Warranties of the Company and the Guarantors. The
----------------------------------------------------------------
Company and each of the Guarantors, jointly and severally, represent and warrant
to each Underwriter that:
(a) The Prepricing Prospectus, dated March 28, 1996, included as part of
the registration statement as originally filed or as part of any amendment or
supplement thereto, or filed pursuant to Rule 424 under the Act, complied when
so filed in all material respects with the provisions of the Act. The
Commission has not issued any order preventing or suspending the use of any
Prepricing Prospectus.
(b) The Company and the Guarantors have reasonable grounds to believe that
they meet all of the requirements for filing on Form S-3 under the Act. The
registration statement in the form in which it became or becomes effective and
also in such form as it may be when any post-effective amendment thereto shall
become effective, any Rule 462(b) Registration Statement in the form in which it
becomes effective, and the Prospectus (and any supplement or amendment thereto)
when filed with the Commission under Rule 424(b) under the Act, complied or will
comply in all material respects with the provisions of the Act and will not at
any such times contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except that this representation and warranty does not
apply to
10
<PAGE>
statements in or omissions from the registration statement or the prospectus
made in reliance upon and in conformity with (i) information relating to any
Underwriter furnished to the Company in writing by or on behalf of any
Underwriter expressly for use therein, or (ii) the Trustee's Statement of
Eligibility and Qualification (Form T-1) under the Trust Indenture Act of 1939,
as amended (the "1939 Act").
(c) The Incorporated Documents heretofore filed, when they were filed (or,
if any amendment with respect to any such document was filed, when such
amendment was filed), complied in all material respects with the requirements of
the Exchange Act and the rules and regulations thereunder, any further
Incorporated Documents so filed during the period a prospectus is required by
the Act to be delivered in connection with sales by any Underwriter or dealer
will, when they are filed, comply in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder; no such document
when it was filed (or, if an amendment with respect to any such document was
filed, when such amendment was filed), contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading; and no such
further document, when it is filed during the period a prospectus is required by
the Act to be delivered in connection with sales by any Underwriter or dealer,
will contain an untrue statement of a material fact or will omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading.
(d) The financial statements of the Company and its subsidiaries set
forth in the Registration Statement
11
<PAGE>
and Prospectus (and any amendment and supplement thereto) fairly present in all
material respects the financial condition of the Company and its subsidiaries as
of the dates indicated and the results of operations and changes in financial
position for the periods therein specified in conformity with generally accepted
accounting principles consistently applied throughout the periods involved
(except as otherwise stated therein).
(e) The Company and each of its subsidiaries has been duly
incorporated and is an existing corporation in good standing under the laws of
its jurisdiction of incorporation, has all requisite power and authority
(corporate and other) to conduct its business as described in the Registration
Statement and Prospectus and is duly qualified to do business in each
jurisdiction in which it owns or leases real property or in which the conduct of
its business requires such qualification, except where the failure to be so
qualified, considering all such cases in the aggregate, would not have a
material adverse effect on the business, properties, financial position or
results of operations of the Company and its subsidiaries taken as a whole; and
all of the outstanding shares of capital stock of each such subsidiary have been
duly authorized and validly issued, are fully paid and non-assessable and
(except as otherwise stated in the Registration Statement) are owned
beneficially by the Company subject to no security interest, other encumbrance
or adverse claim. Except for the Company's 6-7/8% Convertible Subordinated Notes
due November 2002 and options to purchase common stock granted pursuant to the
Company's stock option plans, there are no outstanding rights, warrants or
options to acquire, or instruments convertible into or exchangeable for, any
shares of capital stock or other
12
<PAGE>
equity interest in the Company or any of its subsidiaries.
(f) All of the outstanding shares of the Company's common stock, par
value $.01 per share (the "Common Stock"), and all other equity securities of
the Company have been duly authorized and are validly issued, fully paid and
non-assessable. The stockholders of the Company have no preemptive rights with
respect to the Common Stock. No person has any rights to the registration of
securities by reason of the Company's filing the Registration Statement with the
Commission or otherwise.
(g) Except as contemplated in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, neither the Company nor any of its subsidiaries has incurred
any liabilities or obligations, direct or contingent, or entered into any
transactions, not in the ordinary course of business, that are material to the
Company and its subsidiaries taken as a whole, and there has not been any
material change, on a consolidated basis, in the capital stock, current
liabilities or long-term obligations of the Company and its subsidiaries taken
as a whole, or any material adverse change, in the condition (financial or
other), business, net worth, results of operations or properties of the Company
and its subsidiaries taken as a whole.
(h) Except as set forth in the Prospectus, neither the Company nor
any of its subsidiaries is in violation, and, to the best knowledge of the
Company, no director, officer, or employee of the Company or any of its
subsidiaries is in violation, of any law, ordinance,
13
<PAGE>
administrative or governmental rule or regulation or court decree (including,
without limitation, any relating to environmental regulation) applicable to it
or them, and there is not pending or, to the knowledge of the Company,
threatened any action, suit, or proceeding (including, without limitation, any
relating to environmental regulation) to which the Company or any of its
subsidiaries is a party, or, to the best knowledge of the Company, to which any
director, officer or employee of the Company is a party, before or by any court
or governmental agency or body, that in either case might result in any material
adverse change in the condition (financial or other), business, net worth or
results of operations of the Company and its subsidiaries taken as a whole, or
might materially and adversely affect the properties or assets thereof.
(i) There are no contracts or documents of the Company or any of its
subsidiaries that are required to be filed as exhibits to the Registration
Statement or to the Incorporated Documents by the Act or the Exchange Act and
the rules and regulations thereunder that have not been so filed.
(j) Each of this Agreement and the Indenture has been duly
authorized, executed and delivered by the Company and each Guarantor and each is
a legal, valid and binding agreement of the Company and each Guarantor
enforceable in accordance with its terms, except to the extent that (a)
enforcement thereof may be limited by (1) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (2) general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity); and (b) with respect to this Agreement, as rights to
14
<PAGE>
indemnity and contribution hereunder may be limited by federal or state laws
relating to securities or the policies underlying such laws.
(k) The Indenture has been duly qualified under the 1939 Act,
complies with the applicable provisions of the 1939 Act and conforms in all
material respects to the description thereof in the Registration Statement and
the Prospectus.
(l) The Securities will conform in all material respects to the
description thereof in the Registration Statement and the Prospectus. The
Securities have been duly authorized by the Company and each of the Guarantors,
as applicable, and, when executed and authenticated in accordance with the
Indenture and delivered to you against payment therefor in accordance with the
terms hereof and the Indenture, will have been validly issued and delivered and
will constitute valid and binding obligations of the Company and the Guarantors
enforceable against the Company and the Guarantors in accordance with their
terms, except as such enforcement may be limited by (1) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (2) general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity).
(m) The performance of this Agreement and the Indenture and the
consummation of the transactions herein and therein contemplated, will not
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, any agreement or instrument to which the Company or
any of its subsidiaries is a party or by which it or any of them
15
<PAGE>
is bound or to which any of the property of the Company or any of its
subsidiaries is subject, the charter or bylaws of the Company or any of its
subsidiaries, or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties, which breach, violation or
default, with respect to any such agreement or instrument, would have a material
adverse effect on the condition (financial or other), business, net worth,
results of operations or properties of the Company and its subsidiaries taken as
a whole; no consent, approval, authorization or order of, or filing with, any
court or governmental agency or body is required for the consummation of the
transactions contemplated by this Agreement or the Indenture in connection with
the issuance or sale of the Securities, except such as may be required under the
Act or state securities or Blue Sky laws; and the Company and each of the
Guarantors has full corporate power and authority to authorize, issue and sell
the Securities as contemplated by this Agreement and the Indenture.
Neither the Company nor any Guarantor has taken nor will take,
directly or indirectly, any action designed to cause or result in stabilization
or manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities.
(n) The Company and each of its subsidiaries has all material
governmental licenses, certificates, permits, authorizations, approvals,
franchises or other rights necessary to engage in the business currently
conducted by it as described in the Prospectus, except such as may be necessary
for the development of and construction on specific
16
<PAGE>
properties or as do not materially adversely affect the condition (financial or
other), business, net worth, results of operations or properties of the Company
and its subsidiaries taken as a whole, and the Company has no reason to believe
that any governmental body or agency is considering limiting, suspending or
revoking any such license, certificate, permit, authorization, approval,
franchise or right.
(o) Neither the Company nor any of its subsidiaries is in breach or
violation of any of the terms and provisions of, or in default under, any
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which it or any of them is bound or to which any of the property of
the Company or any of its subsidiaries is subject, which breach, violation or
default would have a material adverse effect on the condition (financial or
other), business, net worth, results of operations or properties of the Company
and its subsidiaries taken as a whole.
(q) The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended.
(r) The Company has complied with all provisions of Florida Statutes,
(S)517.075, relating to issuers doing business in Cuba.
(s) The Offer to Purchase and Consent Solicitation Statement,
including, the documents incorporated by reference, the Consent and Letter of
Transmittal and consent to the Proposed Amendment, and any other documents,
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materials or filings (collectively, as amended or supplemented from time to
time, the "Offer and Solicitation Materials") relating to the Company's offer to
purchase for cash all of the Company's 12% Senior Notes due 1999 and the
solicitation by the Company of consents from holders of such Notes to a proposed
amendment to the indenture governing such Notes, did not, as of their date, and
do not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
7. Indemnification and Contribution. (a) The Company and each of
--------------------------------
the Guarantors, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Prepricing Prospectus or in the Registration Statement or the Prospectus or in
any amendment or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to such
Underwriter furnished in writing to the Company by or on behalf of any
Underwriter expressly for use in connection therewith; provided, however, that
the
18
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indemnification contained in this paragraph (a) with respect to any Prepricing
Prospectus shall not inure to the benefit of any Underwriter (or to the benefit
of any person controlling such Underwriter) on account of any such loss, claim,
damage, liability or expense arising from the sale of the Securities by such
Underwriter to any person if a copy of the Prospectus shall not have been
delivered or sent to such person within the time required by the Act and the
regulations thereunder, and the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in such Prepricing
Prospectus was corrected in the Prospectus, provided that the Company has
delivered the Prospectus to the Underwriters in requisite quantity on a timely
basis to permit such delivery or sending. The foregoing indemnity agreement
shall be in addition to any liability which the Company may otherwise have.
(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company and the Guarantors, such Underwriter
or such controlling person shall promptly notify the Company and the Company
shall assume the defense thereof, including the employment of counsel and
payment of all fees and expenses. Such Underwriter or any such controlling
person shall have the right to employ separate counsel in any such action, suit
or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or such
controlling person unless (i) the Company has agreed in writing to pay such fees
and expenses, (ii) the Company has failed to assume the defense and employ
counsel, or (iii) the named parties to any such action, suit or proceeding
(including any impleaded parties) include both
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such Underwriter or such controlling person and the Company or the Guarantors
and such Underwriter or such controlling person shall have been advised by its
counsel that representation of such indemnified party and the Company or the
Guarantors by the same counsel would be inappropriate under applicable standards
of professional conduct (whether or not such representation by the same counsel
has been proposed) due to actual or potential differing interests between them
(in which case the Company shall not have the right to assume the defense of
such action, suit or proceeding on behalf of such Underwriter or such
controlling person). It is understood, however, that the Company or the
Guarantors shall, in connection with any one such action, suit or proceeding or
separate but substantially similar or related actions, suits or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Underwriters and controlling persons not having actual or potential
differing interests with you or among themselves, which firm shall be designated
in writing by Smith Barney Inc., and that all such fees and expenses shall be
reimbursed as they are incurred. The Company and the Guarantors shall not be
liable for any settlement of any such action, suit or proceeding effected
without their written consent, but if settled with such written consent, or if
there be a final judgment for the plaintiff in any such action, suit or
proceeding, the Company and the Guarantors agree to indemnify and hold harmless
any Underwriter, to the extent provided in the preceding paragraph, and any such
controlling person from and against any loss, claim, damage, liability or
expense by reason of such settlement or judgment.
20
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(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, the Guarantors, their directors, their officers
who sign the Registration Statement, and any person who controls the Company or
the Guarantors within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, to the same extent as the foregoing indemnity from the Company and
the Guarantors to each Underwriter, but only with respect to information
relating to such Underwriter furnished in writing by or on behalf of such
Underwriter expressly for use in the Registration Statement, the Prospectus or
any Prepricing Prospectus, or any amendment or supplement thereto. If any
action, suit or proceeding shall be brought against the Company, the Guarantors
any of their directors, any such officer, or any such controlling person, based
on the Registration Statement, the Prospectus or any Prepricing Prospectus, or
any amendment or supplement thereto, and in respect of which indemnity may be
sought against any Underwriter pursuant to this paragraph (c), such Underwriter
shall have the rights and duties given to the Company by paragraph (b) above
(except that if the Company shall have assumed the defense thereof such
Underwriter shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the fees and expenses of
such counsel shall be at such Underwriter's expense), and the Company, the
Guarantors, their directors, any such officer, and any such controlling person,
shall have the rights and duties given to the Underwriters by paragraph (b)
above. The foregoing indemnity agreement shall be in addition to any liability
which the Underwriters may otherwise have.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under
21
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paragraphs (a) or (c) hereof in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then an indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Guarantors on the one hand and
the Underwriters on the other hand from the offering of the Securities, or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company and the Guarantors on the one hand and the Underwriters on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Guarantors on the one hand and the Underwriters on the other shall be deemed to
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Company and the Guarantors on the one hand and the Underwriters on the other
hand shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
and the Guarantors on the one hand or by the Underwriters on the other hand and
the parties' relative intent, knowledge, access to information and
22
<PAGE>
opportunity to correct or prevent such statement or omission.
(e) The Company, the Guarantors and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by a pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in paragraph (d) above.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price of the Securities underwritten by it and distributed to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 7 are several
in proportion to the respective principal amounts of Securities set forth
opposite their names in Schedule I hereto (or such principal amounts of
Securities increased as set forth in Section 10 hereof) and not joint.
(f) No indemnifying party shall, without the prior
23
<PAGE>
written consent of the indemnified party, effect any settlement of any pending
or threatened action, suit or proceeding in respect of which any indemnified
party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7, the
agreements of the Company and the Guarantors set forth in this Agreement and the
representations and warranties of the Company and the Guarantors set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, the Guarantors, their directors or
officers or any person controlling the Company, (ii) acceptance of any
Securities and payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Underwriter or any person controlling any
Underwriter, or to the Company, the Guarantors, their directors or officers, or
any person controlling the Company or the Guarantors, shall be entitled to the
benefits of the indemnity, contribution and reimbursement agreements contained
in this Section 7.
8. Conditions of Underwriters' Obligations. The several obligations
---------------------------------------
of the Underwriters to purchase the
24
<PAGE>
Securities hereunder are subject to the following conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the registration statement or a post-effective amendment thereto
or the Rule 462(b) Registration Statement to be declared effective before the
offering of the Securities may commence, the registration statement or such
post-effective amendment and such Rule 462(b) Registration Statement shall have
become effective not later than 5:30 P.M., New York City time, on the date
hereof, or at such later date and time as shall be consented to in writing by
you, and all filings, if any, required by Rules 424 and 430A under the Act shall
have been timely made; no stop order suspending the effectiveness of the
registration statement or the Rule 462(b) Registration Statement, if any, shall
have been issued and no proceeding for that purpose shall have been instituted
or, to the knowledge of the Company or any Underwriter, threatened by the
Commission, and any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the satisfaction of the staff of the Commission.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting the condition (financial or other), business,
properties, net worth, or results of operations of the Company and its
subsidiaries, taken as a whole, not contemplated by the Prospectus, which in
your opinion, as Underwriters, would materially adversely affect the market for
the Securities, or (ii) any event or development relating to or involving the
Company or any officer or director of the Company or involving
25
<PAGE>
any of its subsidiaries which makes any statement made in the Prospectus untrue
or which, in the opinion of the Company and its counsel or the Underwriters and
their counsel, requires the making of any addition to or change in the
Prospectus in order to state a material fact required by the Act or any other
law to be stated therein or necessary in order to make the statements therein
not misleading, if amending or supplementing the Prospectus to reflect such
event or development would, in your opinion, as Underwriters of the
Underwriters, materially adversely affect the market for the Securities.
(c) You shall have received on the Closing Date, an opinion of Cahill
Gordon & Reindel, counsel for the Company, dated the Closing Date and addressed
to you, as Underwriters, to the effect that:
(i) Each of the Company and each of its subsidiaries incorporated in
the State of Delaware (each a "Delaware Guarantor") has been duly incorporated
and is an existing corporation in good standing under the laws of its
jurisdiction of incorporation; has all requisite corporate power and authority
to conduct its business as described in the Registration Statement and
Prospectus and is duly qualified to do business in each jurisdiction in which
such counsel has been advised it owns or leases real property or in which the
conduct of its business requires such qualification, except where the failure to
be so qualified, considering all such cases in the aggregate, would not have a
material adverse effect on the business, net worth, properties, financial
position or results of operations of the Company and its subsidiaries taken as a
whole; all of the outstanding shares of capital stock of each such Guarantor
have been duly autho-
26
<PAGE>
rized and validly issued, are fully paid and non-assessable and, to the
knowledge of such counsel (except as otherwise stated in the Registration
Statement), are owned beneficially by the Company subject to no security
interest, other encumbrance or adverse claim; and to the knowledge of such
counsel, except for the Company's 6-7/8% Convertible Subordinated Notes due
November 2002 and options to purchase common stock granted pursuant to the
Company's stock option plans, there are no outstanding rights, warrants or
options to acquire, or instruments convertible into or exchangeable for, any
shares of capital stock or other equity interest in the Company or any of its
subsidiaries;
(ii) All of the outstanding shares of Common Stock have been duly
authorized and are validly issued, fully paid and non-assessable;
(iii) Based solely on telephonic advice from the Commission, the
Registration Statement and any Rule 462(b) Registration Statement have become
effective under the Act; any required filing of the Prospectus pursuant to Rule
424(b) has been made in accordance with Rule 424(b); and to such counsel's
knowledge, no stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement have been issued and no
proceeding for that purpose has been instituted or threatened by the Commission;
(iv) The Registration Statement when it became effective, any Rule
462(b) Registration Statement when it became effective and the Prospectus and
any amendment or supplement thereto, on the date of filing thereof with the
Commission and at the Closing Date, appeared to comply as to
27
<PAGE>
form in all material respects with the requirements of the Act; and the
Incorporated Documents, when they were filed with the Commission under the
Exchange Act, appeared to comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder (it
being understood that such counsel need express no opinion as to the financial
statements or other financial and statistical data included in any of the
documents mentioned in this clause and as to the Statement of Eligibility on
Form T-1);
(v) There is no statute or contract or other document known to such
counsel of a character required to be described in the Registration Statement,
the Prospectus or the Incorporated Documents or to be filed as an exhibit to the
Registration Statement or the Incorporated Documents, which is not described or
filed as required;
(vi) The Company and each Delaware Guarantor have corporate authority
to enter into this Agreement and the Indenture and to issue the Securities.
Each of this Agreement and the Indenture has been duly authorized, executed and
delivered by the Company and each Delaware Guarantor. Assuming due
authorization, execution and delivery by the parties thereto other than the
Company and any Delaware Guarantor, each of this Agreement and the Indenture is
the legal, valid and binding obligation of the Company and each Guarantor,
enforceable against it in accordance with its terms, except that (a) the
enforceability thereof may be subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' and debtors' rights and remedies generally, (b)
the remedy of specific performance and injunctive and other forms of equitable
relief may be
28
<PAGE>
subject to equitable defenses and to the discretion of the court before which
any proceedings therefor may be brought and (c) rights to indemnification and
contribution under this Agreement may be limited by Federal and state securities
laws or the policies underlying such laws;
(vii) The Indenture has been duly qualified under the 1939 Act and
conforms in all material respects to the description thereof in the Registration
Statement and the Prospectus;
(viii) The Securities conform in all material respects to the
description thereof in the Prospectus. The Securities have been duly authorized
by the Company and each Delaware Guarantor and, when executed and authenticated
in accordance with the terms of the Indenture and delivered to the Underwriters
against payment therefor in accordance with the terms of this Agreement and the
Indenture, will have been validly issued and delivered by the Company and each
Delaware Guarantor. Assuming due authorization, execution and delivery by the
parties thereto other than the Company and the Delaware Guarantors, each of this
Agreement and the Indenture will constitute valid and binding obligations of the
Company and each Guarantor enforceable against the Company and each Guarantor in
accordance with their terms, subject to (a) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, or other similar laws now or hereafter
in effect relating to creditors' and debtors' rights and remedies generally and
(b) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceedings therefor may be brought;
29
<PAGE>
(ix) The execution and delivery of this Agreement, the Indenture and
the Securities, the performance of this Agreement, the Indenture and the
Securities and the consummation of the transactions herein and therein
contemplated, will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute or any material
agreement or instrument known to such counsel to which the Company or any
Delaware Guarantor is a party or by which it is bound or to which any of the
property of the Company or any Delaware Guarantor is subject, the Company's
charter or by-laws, the charter or by-laws of any Delaware Guarantor or any
order, rule or regulation known to such counsel of any court or governmental
agency or body having jurisdiction over the Company or any Delaware Guarantor or
any of their properties; and no consent, approval, authorization or order of, or
filing with, any court or governmental agency or body is required for the
consummation of the transactions contemplated by this Agreement or the Indenture
in connection with the issuance or sale of the Securities by the Company and the
Delaware Guarantors, except such as have been obtained under the Act and such as
may be required under state securities laws (as to which such counsel need
express no opinion) in connection with the purchase and distribution of the
Securities by the Underwriters;
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company and the
Guarantors, representatives of the independent public accountants for the
Company, your representatives and representatives of your counsel at which the
contents of the Offer and Solicitation Materials, the Registration Statement and
the Prospectus and related matters were discussed and, although such counsel is
30
<PAGE>
not passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Offer and
Solicitation Materials, Registration Statement and the Prospectus, on the basis
of the foregoing (relying as to materiality to a large extent upon the opinions
of officers and other representatives of the Company), no facts have come to
such counsel's attention that lead them to believe either that the Registration
Statement or any Rule 462(b) Registration Statement, at the time they became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Offer and Solicitation Materials
and the Prospectus, as of their respective dates and as of the Closing Date,
contained an untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being understood
that such counsel is not requested to and need not express any comment with
respect to the financial statements and schedules and other financial and
statistical data included or incorporated by reference in the Offer and
Solicitation Materials, the Registration Statement or Prospectus and the
Statement of Eligibility on Form T-1).
(d) You shall have received on the Closing Date, an opinion of Timothy
C. Westfall, Esq., general counsel to the Company, dated the Closing Date and
addressed to you, as Underwriters, to the effect that:
(i) Each of the Company's subsidiaries incorporated in the State of
Arizona (each an "Arizona Guarantor") has been duly incorporated and is an
existing corporation in
31
<PAGE>
good standing under the laws of the State of Arizona; has all requisite
corporate power and authority to conduct its business as described in the
Registration Statement and Prospectus and is duly qualified to do business in
each jurisdiction in which it owns or leases real property or in which the
conduct of its business requires such qualification, except where the failure to
be so qualified, considering all such cases in the aggregate, would not have a
material adverse effect on the business, net worth, properties, financial
position or results of operations of the Company and its subsidiaries taken as a
whole; all of the outstanding shares of capital stock of each Arizona Guarantor
have been duly authorized and validly issued, are fully paid and non-assessable
and, to the knowledge of such counsel, (except as otherwise stated in the
Registration Statement) are owned beneficially by the Company subject to no
security interest, other encumbrance or adverse claim, and there are no
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, any shares of capital stock or other equity interest
in the Arizona Guarantors;
(ii) There are no legal or governmental proceedings pending or
threatened to which the Company or any Arizona Guarantor is a party or to which
any of its property or assets is subject, including ordinary routine litigation
incidental to its business, which are, considered in the aggregate, likely to
result in any material adverse effect on the business, properties, net worth,
financial position or results of operations of the Company and its subsidiaries
taken as a whole;
(iii) Each Arizona Guarantor has corporate authority to enter into
this Agreement and the Indenture and
32
<PAGE>
to issue its Guarantee. Each of this Agreement and the Indenture has been duly
authorized, executed and delivered by each Arizona Guarantor
(iv) The Guarantees of the Arizona Guarantors have been duly
authorized by the Arizona Guarantors and, when the Securities are executed and
authenticated in accordance with the terms of the Indenture and delivered to the
Underwriters against payment therefor in accordance with the terms of this
Agreement and the Indenture, will have been validly issued and delivered;
(v) The execution and delivery of this Agreement, the Indenture and
the Guarantees by the Arizona Guarantors and the performance of this Agreement,
the Indenture and the Guarantees and the consummation of the transactions herein
and therein contemplated by the Arizona Guarantors, will not result in a breach
or violation of any of the terms and provisions of, or constitute a default
under, any statute or any material agreement or instrument known to such counsel
to which any Arizona Guarantor is a party or by which it is bound or to which
any of the property of any Arizona Guarantor is subject, any Arizona Guarantor's
charter or by-laws, or any order, rule or regulation known to such counsel of
any court or governmental agency or body having jurisdiction over any Arizona
Guarantor or any of its properties; and no consent, approval, authorization or
order of, or filing with, any court or governmental agency or body is required
for the consummation by the Arizona Guarantors of the transactions contemplated
by this Agreement or the Indenture in connection with the issuance or sale of
the Securities, except such as have been obtained under the Act and such as may
be required under state securities laws (as to
33
<PAGE>
which such counsel need express no opinion) in connection with the purchase and
distribution of the Securities by the Underwriters.
(e) You shall have received on the Closing Date, an opinion of
Christopher J. Chambers, Esq., general counsel to L&W Investments, dated the
Closing Date and addressed to you, as Underwriters of the Underwriters, to the
effect that:
(i) L&W Investments, Inc., a California corporation and a wholly-
owned subsidiary of the Company ("L&W"), is a corporation duly organized and
validly existing under the laws of the State of California and has the power and
authority to engage in its business as currently conducted;
(ii) L&W has corporate authority to enter into this Agreement and the
Indenture and to issue its Guarantee. Each of this Agreement and the Indenture
has been duly authorized, executed and delivered by L&W;
(iii) L&W's Guarantee has been duly authorized by L&W and, when the
Securities are executed and authenticated in accordance with the terms of the
Indenture and delivered to the Underwriters against payment therefor in
accordance with the terms of this Agreement and the Indenture, will have been
validly issued and delivered;
(iv) The execution and delivery of this Agreement, the Indenture and
its Guarantee by L&W and the performance of this Agreement, the Indenture and
its Guarantee and the consummation of the transactions herein and therein
contemplated by L&W, will not result in a breach or violation
34
<PAGE>
of any of the terms and provisions of, or constitute a default under, any
statute or any material agreement or instrument known to such counsel to which
L&W is a party or by which it is bound or to which any of the property of L&W is
subject, L&W's charter or by-laws, or any order, rule or regulation known to
such counsel of any court or governmental agency or body having jurisdiction
over L&W or any of its properties; and no consent, approval, authorization or
order of, or filing with, any court or governmental agency or body is required
for the consummation by L&W of the transactions contemplated by this Agreement
or the Indenture in connection with the issuance or sale of the Securities,
except such as have been obtained under the Act and such as may be required
under state securities laws (as to which such counsel need express no opinion)
in connection with the purchase and distribution of the Securities by the
Underwriters.
(f) You shall have received on the Closing Date, an opinion of Terry
E. Mitchell, Esq., general counsel to Milburn Investments, Inc., dated the
Closing Date and addressed to you, as Underwriters of the Underwriters, to the
effect that:
(i) Milburn Investments, Inc., Continental Homes of Texas, Inc.,
Miltex Management, Inc., Homeco, Inc., Travis County Title Company, Acheter,
Inc., R.O.S. Corporation and Settlement Corporation, each a Texas corporation
and a wholly-owned subsidiary of the Company, Miltex Financial IV General
Partnership and Miltex Mortgage of Texas Limited Partnership, each a Texas
partnership (each a "Texas Guarantor"), are corporations or partnerships, as
applicable, duly organized and validly existing under the laws of the State of
Texas and have the power and authority to engage in their businesses as
currently conducted; [all of the out-
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<PAGE>
standing shares of capital stock of each Texas Guarantor which is a Texas
corporation have been duly authorized and validly issued, are fully paid and
non-assessable and, to the knowledge of such counsel, (except as otherwise
stated in the Registration Statement) are owned beneficially by the Company
subject to no security interest, other encumbrance or adverse claim, and there
are no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or other
equity interest in the Texas Guarantors;]
[(ii) There are no legal or governmental proceedings pending or
threatened to which the Company or any Texas Guarantor is a party or to which
any of its property or assets is subject, including ordinary routine litigation
incidental to its business, which are, considered in the aggregate, likely to
result in any material adverse effect on the business, properties, net worth,
financial position or results of operations of the Company and its subsidiaries
taken as a whole;]
(iii) Each Texas Guarantor has authority (corporate or other) to
enter into this Agreement and the Indenture and to issue its Guarantee. Each of
this Agreement and the Indenture has been duly authorized, executed and
delivered by each Texas Guarantor;
(iv) The Guarantees of the Texas Guarantors have been duly authorized
and, when the Securities are executed and authenticated in accordance with the
terms of the Indenture and delivered to the Underwriters against payment
therefor in accordance with the terms of this Agreement and the Indenture, will
have been validly issued and delivered ;
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<PAGE>
(v) The execution and delivery of this Agreement, the Indenture and
the Guarantees by the Texas Guarantors and the performance of this Agreement,
the Indenture and the Guarantees and the consummation of the transactions herein
and therein contemplated by the Texas Guarantors, will not result in a breach
or violation of any of the terms and provisions of, or constitute a default
under, any statute or any material agreement or instrument known to such counsel
to which any Texas Guarantor is a party or by which it is bound or to which any
of the property of any Texas Guarantor is subject, any Texas Guarantor's
charter, by-laws, partnership agreement or other constituent document, or any
order, rule or regulation known to such counsel of any court or governmental
agency or body having jurisdiction over any Texas Guarantor or any of its
properties; and no consent, approval, authorization or order of, or filing with,
any court or governmental agency or body is required for the consummation by the
Texas Guarantors of the transactions contemplated by this Agreement or the
Indenture in connection with the issuance or sale of the Securities, except such
as have been obtained under the Act and such as may be required under state
securities laws (as to which such counsel need express no opinion) in connection
with the purchase and distribution of the Securities by the Underwriters;
(g) You shall have received on the Closing Date, an opinion of Davis &
Ceriani, P.C., counsel to CH Mortgage Company, dated the Closing Date and
addressed to you, as Underwriters of the Underwriters, to the effect that:
(i) CH Mortgage Company, a Colorado corporation and a wholly-owned
subsidiary of the Company ("CH Mortgage"), is a corporation duly organized and
validly
37
<PAGE>
existing under the laws of the State of Colorado and has the power and authority
to engage in its business as currently conducted;
(ii) CH Mortgage has corporate authority to enter into this Agreement
and the Indenture and to issue its Guarantee. Each of this Agreement and the
Indenture has been duly authorized, executed and delivered by CH Mortgage;
(iii) CH Mortgage's Guarantee has been duly authorized by CH Mortgage
and, when the Securities are executed and authenticated in accordance with the
terms of the Indenture and delivered to the Underwriters against payment
therefor in accordance with the terms of this Agreement and the Indenture, will
have been validly issued and delivered;
(iv) The execution and delivery of this Agreement, the Indenture and
its Guarantee by CH Mortgage and, the performance of this Agreement, the
Indenture and its Guarantee and the consummation of the transactions herein and
therein contemplated by CH Mortgage and will not result in a breach or violation
of any of the terms and provisions of, or constitute a default under, any
statute or any material agreement or instrument known to such counsel to which
CH Mortgage is a party or by which it is bound or to which any of the property
of CH Mortgage is subject, CH Mortgage's charter or by-laws, or any order, rule
or regulation known to such counsel of any court or governmental agency or body
having jurisdiction over CH Mortgage or any of its properties; and no consent,
approval, authorization or order of, or filing with, any court or governmental
agency or body is required for the consummation by CH Mortgage of the
transactions contemplated by this Agreement or the Indenture in connection with
the
38
<PAGE>
issuance or sale of the Securities, except such as have been obtained under the
Act and such as may be required under state securities laws (as to which such
counsel need express no opinion) in connection with the purchase and
distribution of the Securities by the Underwriters.
(h) You shall have received on the Closing Date, an opinion of
Salomon, Kanner, Damian & Rodriguez, P.A., counsel to Continental Homes of
Florida, Inc., dated the Closing Date and addressed to you, as Underwriters of
the Underwriters, to the effect that:
(i) Continental Homes of Florida, Inc., a Florida corporation and a
wholly-owned subsidiary of the Company ("CH Florida"), is a corporation duly
organized and validly existing under the laws of the State of Florida and has
the power and authority to engage in its business as currently conducted;
(ii) CH Florida has corporate authority to enter into this Agreement
and the Indenture and to issue its Guarantee. Each of this Agreement and the
Indenture has been duly authorized, executed and delivered by CH Florida;
(iii) CH Florida's Guarantee has been duly authorized by CH Florida
and, when the Securities are executed and authenticated in accordance with the
terms of the Indenture and delivered;
(iv) The execution and delivery of this Agreement, the Indenture and
its Guarantee, by CH Florida and the performance of this Agreement, the
Indenture and its Guarantee and the consummation of the transactions herein and
39
<PAGE>
therein contemplated by CH Florida, will not result in a breach or violation of
any of the terms and provisions of, or constitute a default under, any statute
or any material agreement or instrument known to such counsel to which CH
Florida is a party or by which it is bound or to which any of the property of CH
Florida is subject, CH Florida's charter or by-laws, or any order, rule or
regulation known to such counsel of any court or governmental agency or body
having jurisdiction over CH Florida or any of its properties; and no consent,
approval, authorization or order of, or filing with, any court or governmental
agency or body is required for the consummation by CH Florida of the
transactions contemplated by this Agreement or the Indenture in connection with
the issuance or sale of the Securities, except such as have been obtained under
the Act and such as may be required under state securities laws (as to which
such counsel need express no opinion) in connection with the purchase and
distribution of the Securities by the Underwriters.
(i) You shall have received on the Closing Date an opinion of Skadden,
Arps, Slate, Meagher & Flom, counsel for the Underwriters, dated the Closing
Date and addressed to you, as Underwriters of the Underwriters, with respect to
the matters referred to in clauses (iii), (iv), (vi) through (viii) and (x) of
the foregoing paragraph (c) and such other related matters as you may request.
(j) You shall have received letters addressed to you, as Underwriters
of the Underwriters, and dated the date hereof and the Closing Date from Arthur
Andersen LLP, independent certified public accountants, substantially in the
forms heretofore approved by you.
40
<PAGE>
(k) (i) No stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement, if any, shall have been
issued and no proceedings for that purpose shall have been taken or, to the
knowledge of the Company, shall be contemplated by the Commission at or prior to
the Closing Date; (ii) there shall not have been any change in the capital stock
of the Company nor any material increase in the short-term or long-term debt of
the Company or its subsidiaries (other than in the ordinary course of business)
from that set forth or contemplated in the Registration Statement or the
Prospectus (or any amendment or supplement thereto); (iii) there shall not have
been, since the respective dates as of which information is given in the
Registration Statement and the Prospectus (or any amendment or supplement
thereto), except as may otherwise be stated in the Registration Statement and
Prospectus (or any amendment or supplement thereto), any material adverse change
in the condition (financial or other), business, prospects, properties, net
worth or results of operations of the Company and its subsidiaries taken as a
whole; (iv) the Company and its subsidiaries shall not have any liabilities or
obligations, direct or contingent (whether or not in the ordinary course of
business), that are material to the Company and its Subsidiaries, taken as a
whole, other than those reflected in the Registration Statement or the
Prospectus (or any amendment or supplement thereto); and (v) all the
representations and warranties of the Company and the Guarantors contained in
this Agreement shall be true and correct on and as of the date hereof and on and
as of the Closing Date as if made on and as of the Closing Date, and you shall
have received certificates, dated the Closing Date and signed by the chief
executive officer and the chief financial officer of the Company and the Chief
Financial Officer of each
41
<PAGE>
of the Guarantors (or such other officers as are acceptable to you), to the
effect set forth in this Section 8(k) and in Section 8(l) hereof.
(l) The Company and the Guarantors shall not have failed at or prior
to the Closing Date to have performed or complied with any of its agreements
herein contained and required to be performed or complied with by it hereunder
at or prior to the Closing Date.
(m) There shall not have been any announcement by any "nationally
recognized statistical rating organization", as defined for purposes of Rule
436(g) under the Act, that (i) it is downgrading its rating assigned to any debt
securities of the Company, or (ii) it is reviewing its rating assigned to any
debt securities of the Company with a view to possible downgrading, or with
negative implications, or direction not determined.
(n) The Company and the Guarantors shall have furnished or caused to
be furnished to you such further certificates and documents as you shall have
reasonably requested.
(o) The Securities have been authorized for listing on the New York
Stock Exchange, Inc., subject to notice of issuance.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are satisfactory in form
and substance to you and your counsel.
42
<PAGE>
Any certificate or document signed by any officer of the Company or
the Guarantors and delivered to you, as Underwriters of the Underwriters, or to
counsel for the Underwriters, shall be deemed a representation and warranty by
the Company or the Guarantors to each Underwriter as to the statements made
therein.
9. Expenses. The Company agrees to pay the following costs and
--------
expenses and all other costs and expenses incident to the performance by it of
its obligations hereunder: (i) the preparation, printing (or reproduction), and
filing with the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the Prospectus,
each amendment or supplement to any of them, this Agreement, the Indenture and
the Statement of Eligibility of the Trustee; (ii) the printing (or reproduction)
and delivery (including postage, air freight charges and charges for counting
and packaging) of such copies of the registration statement, each Prepricing
Prospectus, the Prospectus, the Incorporated Documents, and all amendments or
supplements to any of them, as may be reasonably requested for use in connection
with the offering and sale of the Securities; (iii) the preparation, printing
(or reproduction), execution and delivery of the Indenture and the preparation,
printing, authentication, issuance and delivery of the Securities, including any
stamp taxes in connection with the original issuance of the Securities; (iv) the
printing (or reproduction) and delivery of the preliminary and supplemental Blue
Sky Memoranda and all other agreements or documents printed (or reproduced) and
delivered in connection with the offering of the Securities; (v) the listing of
the Securities on the New York Stock Exchange, Inc. and the registration of the
Securities under the Exchange Act; (vi) the registration
43
<PAGE>
or qualification of the Securities for offer and sale under the securities or
Blue Sky laws of the several states as provided in Section 5(g) hereof
(including the reasonable fees, expenses and disbursements of counsel for the
Underwriters relating to the preparation, printing (or reproduction), and
delivery of the preliminary and supplemental Blue Sky Memoranda and such
registration and qualification); (vii) the filing fees in connection with any
filings required to be made with the National Association of Securities Dealers,
Inc.; (viii) the fees and expenses of the Trustee; (ix) the fees and expenses
associated with obtaining ratings for the Securities from nationally recognized
statistical rating organizations; (x) the transportation and other expenses
incurred by or on behalf of Company representatives in connection with
presentations to prospective purchasers of the Securities; and (xi) the fees and
expenses of the Company's accountants and the fees and expenses of counsel
(including local and special counsel) for the Company.
10. Effective Date of Agreement. This Agreement shall become
---------------------------
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the registration statement or a post-effective amendment thereto or any Rule
462(b) Registration Statement to be declared effective before the offering of
the Securities may commence, when notification of the effectiveness of any such
registration statement or such post-effective amendment has been released by the
Commission. Until such time as this Agreement shall have become effective, it
may be terminated by the Company, by notifying you, or by you, as Underwriters
of the Underwriters, by notifying the Company.
44
<PAGE>
If either of the Underwriters shall fail or refuse to purchase the
Securities which it is obligated to purchase on the Closing Date, and
arrangements satisfactory to the non-defaulting Underwriter and the Company for
the purchase of such Securities by the non-defaulting Underwriter or by another
party or parties satisfactory to the non-defaulting Underwriter and the Company
are not made within thirty-six (36) hours after such default, this Agreement
shall terminate without liability on the part of the non-defaulting Underwriter
or the Company. In any such case which does not result in termination of this
Agreement, either the non-defaulting Underwriter or the Company shall have the
right to postpone the Closing Date, but in no event for longer than seven (7)
days, in order that the required changes, if any, in the Registration Statement
and the Prospectus or any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve the defaulting Underwriter
from liability in respect of such default under this Agreement. The term
"Underwriter" as used in this Agreement includes, for all purposes of this
Agreement, any party not identified in this Agreement who purchases Securities
which a defaulting Underwriter is obligated, but fails or refuses, to purchase.
Any notice under this Section 10 may be made by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
11. Termination of Agreement. This Agreement shall be subject to
------------------------
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company or the Guarantors by notice to the Company, if prior
to the Closing Date, (i) trading in the Common Stock of the Company shall be
45
<PAGE>
suspended or subject to any restriction or limitation not in effect on the date
of this Agreement; (ii) trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market shall have
been suspended or materially limited, (iii) a general moratorium on commercial
banking activities in New York or Arizona shall have been declared by either
federal or state authorities, or (iv) there shall have occurred any outbreak or
escalation of hostilities or other international or domestic calamity, crisis or
change in political, financial or economic conditions, the effect of which on
the financial markets of the United States is such as to make it, in your
judgment, impracticable or inadvisable to commence or continue the offering of
the Securities on the terms set forth on the cover page of the Prospectus or to
enforce contracts for the resale of the Securities by the Underwriters. Notice
of such termination may be given to the Company by telegram, telecopy or
telephone and shall be subsequently confirmed by letter.
12. Information Furnished by the Underwriters. The statements set
-----------------------------------------
forth in the last paragraph on the cover page, the stabilization legend on the
inside cover page, and the statements in the first and third paragraphs under
the caption "Underwriting" in any Prepricing Prospectus and in the Prospectus,
constitute the only information furnished by or on behalf of the Underwriters
through you as such information is referred to in Sections 6(b) and 7 hereof.
13. Miscellaneous. Except as otherwise provided in Sections 5, 10
-------------
and 11 hereof, notice given pursuant to any provision of this Agreement shall be
in writing and shall be delivered (i) if to the Company or the Guarantors, at
the office of the Company at 7001 N. Scottsdale Road, Suite 2050,
46
<PAGE>
Scottsdale, Arizona 85253, Attention: Donald R. Loback, Chief Executive
Officer, with a copy to: Cahill Gordon & Reindel, 80 Pine Street, New York, New
York 10005, Attention: John P. Mitchell, Esq.; or (ii) if to you, as
Underwriters of the Underwriters, care of Smith Barney Inc., 388 Greenwich
Street, New York, New York 10013, Attention: Manager, Investment Banking
Division, with a copy to Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue,
New York, New York 10022, Attention: Vincent Pisano.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company, the Guarantors, their respective directors and
officers, and the other controlling persons referred to in Section 7 hereof and
their respective successors and assigns, to the extent provided herein, and no
other person shall acquire or have any right under or by virtue of this
Agreement. Neither the term "successor" nor the term "successors and assigns"
as used in this Agreement shall include a purchaser from any Underwriter of any
of the Securities in his status as such purchaser.
14. Applicable Law; Counterparts. This Agreement shall be governed
----------------------------
by and construed in accordance with the laws of the State of New York applicable
to contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
47
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Underwriters.
Very truly yours,
CONTINENTAL HOMES HOLDING CORP.
By ........................
Chairman of the Board
ACHETER, INC.
By ........................
(Title)
CH MORTGAGE COMPANY
By ........................
(Title)
CHI CONSTRUCTION COMPANY
By ........................
(Title)
CHI FINANCE CORP.
By ........................
(Title)
CONTINENTAL HOMES, INC.
By ........................
(Title)
48
<PAGE>
CONTINENTAL HOMES OF
FLORIDA, INC.
By ........................
(Title)
CONTINENTAL HOMES OF TEXAS, INC.
By ........................
(Title)
KDB HOMES, INC.
By ........................
(Title)
L&W INVESTMENTS INC.
By ........................
(Title)
MILBURN INVESTMENTS, INC.
By ........................
(Title)
MILTEX FINANCIAL IV GENERAL
PARTNERSHIP
By ........................
(Title)
49
<PAGE>
MILTEX MANAGEMENT, INC.
By ........................
(Title)
MILTEX MORTGAGE OF TEXAS
LIMITED PARTNERSHIP
By ........................
(Title)
RANCHO CARILLO, INC.
By ........................
(Title)
R.O.S. CORPORATION
By ........................
(Title)
SETTLEMENT CORPORATION
By ........................
(Title)
50
<PAGE>
TRAVIS COUNTY TITLE COMPANY
By ........................
(Title)
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule I
hereto.
SMITH BARNEY INC.
SALOMON BROTHERS INC
As Underwriters
By SMITH BARNEY INC.
By ..........................
Managing Director
51
<PAGE>
SCHEDULE I
CONTINENTAL HOMES HOLDING CORP.
Principal Amount
Underwriter of Securities
- ----------- ----------------------
Smith Barney Inc. .........................
Salomon Brothers Inc ......................
____________
Total..... ____________
<PAGE>
EXHIBIT 4.1
================================================================================
CONTINENTAL HOMES HOLDING CORP.,
THE GUARANTORS PARTY HERETO
AND
FIRST UNION NATIONAL BANK,
as
Trustee
---------------
Indenture
Dated as of April , 1996
---------------
$150,000,000
% SENIOR NOTES
DUE APRIL , 2006
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
---------------------
TIA Indenture
Section Section
- ------- ---------
310(a)(1).......................... 7.11
(a)(2)....................... 7.11
(a)(3)....................... N.A.
(a)(4)....................... N.A.
(a)(5)....................... 7.11
(b).......................... 7.09; 7.11; 11.02
(c).......................... N.A.
311(a)............................. 7.12
(b).......................... 7.12
(c).......................... N.A.
312(a)............................. 2.05
(b).......................... 11.03
(c).......................... 11.03
313(a)............................. 7.07
(b)(1)....................... N.A.
(b)(2)....................... N.A.
(c).......................... 7.07; 11.02
(d).......................... 7.06
314(a)............................. 4.07; 11.02
(b).......................... N.A.
(c)(1)....................... 11.04
(c)(2)....................... 11.04
(c)(3)....................... N.A.
(d).......................... N.A.
(e).......................... 11.05
(f).......................... N.A.
315(a)............................. 7.01(b)
(b).......................... 7.05; 11.02
(c).......................... 7.01(a)
(d).......................... 7.01(c)
(e).......................... 6.11
316(a)(last sentence).............. 2.09
(a)(1)(A).................... 6.05
(a)(1)(B).................... 6.04
(a)(2)....................... N.A.
(b).......................... 6.07
317(a)(1).......................... 6.08
(a)(2)....................... 6.09
(b).......................... 2.04
318(a)............................. 11.01
(c)............................. 11.01
- -------------
N.A. means Not Applicable.
This cross-reference table does not constitute a part of the Indenture.
-i-
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
1.01. Definitions ..........................................
1.02. Other Definitions.....................................
1.03. Incorporation by Reference of Trust
Indenture Act.......................................
1.04. Rules of Construction.................................
ARTICLE TWO
THE SECURITIES
2.01. Form and Dating.......................................
2.02. Execution and Authentication..........................
2.03. Registrar and Paying Agent............................
2.04. Paying Agent to Hold Money in Trust...................
2.05. Securityholder Lists..................................
2.06. Transfer and Exchange.................................
2.07. Replacement Securities................................
2.08. Outstanding Securities................................
2.09. Securities Held by the Company or
an Affiliate........................................
2.10. Temporary Securities..................................
2.11. Cancellation..........................................
2.12. Defaulted Interest....................................
ARTICLE THREE
REDEMPTION
3.01. Notices to Trustee....................................
3.02. Selection of Securities to Be Redeemed................
3.03. Notice of Redemption..................................
3.04. Effect of Notice of Redemption........................
3.05. Deposit of Redemption Price...........................
3.06. Securities Redeemed in Part...........................
ARTICLE FOUR
COVENANTS
4.01. Payment of Securities.................................
4.02. Maintenance of Office or Agency.......................
4.03. SEC Reports...........................................
4.04. Compliance Certificate................................
4.05. Stay, Extension and Usury Laws........................
4.06. Corporate Existence...................................
4.07. Notice of Default.....................................
4.08. Change of Control.....................................
-ii-
<PAGE>
Section Page
- ------- ----
4.09. Maintenance of Net Worth..............................
4.10. Limitation on Debt....................................
4.11. Limitation on Restricted Payments.....................
4.12. Limitation on Dividends and Other Payment.............
Restrictions Affecting Subsidiaries...................
4.13. Limitation on Liens...................................
4.14. Transactions with Affiliates..........................
4.15. Limitation on Asset Sales.............................
4.16. Additional Guarantors.................................
ARTICLE FIVE
SUCCESSORS
5.01. When Company May Merge, etc. .........................
5.02. Successor Substituted.................................
ARTICLE SIX
DEFAULTS AND REMEDIES
6.01. Events of Default.....................................
6.02. Acceleration..........................................
6.03. Other Remedies........................................
6.04. Waiver of Past Defaults...............................
6.05. Control by Majority...................................
6.06. Limitation on Suits............................... ...
6.07. Rights of Holders to Receive Payment..................
6.08. Collection Suit by Trustee............................
6.09. Trustee May File Proofs of Claim......................
6.10. Priorities............................................
6.11. Undertaking for Costs.................................
ARTICLE SEVEN
TRUSTEE
7.01. Duties of Trustee.....................................
7.02. Rights of Trustee.....................................
7.03. Individual Rights of Trustee..........................
7.04. Trustee's Disclaimer..................................
7.05. Notice of Defaults....................................
7.06. Reports by Trustee to Holders.........................
7.07. Compensation and Indemnity............................
7.08. Replacement of Trustee................................
7.09. Successor Trustee by Merger, etc. ....................
7.10. Eligibility; Disqualification.........................
7.11. Preferential Collection of Claims Against
Company.............................................
-iii-
<PAGE>
Section Page
- ------- ----
ARTICLE EIGHT
DEFEASANCE
8.01. Defeasance upon Deposit of Moneys or U.S
Government Obligations..............................
8.02. Termination of Obligations Pursuant
to Redemption.......................................
8.03. Survival of Company's Obligations.....................
8.04. Application of Trust Money............................
8.05. Repayment to Company or Guarantors
8.06. Reinstatement.........................................
ARTICLE NINE
AMENDMENTS
9.01. Without Consent of Holders............................
9.02. With Consent of Holders...............................
9.03. Compliance with Trust Indenture Act...................
9.04. Revocation and Effect of Consents.....................
9.05. Notation on or Exchange of Securities.................
9.06. Trustee Protected.....................................
ARTICLE TEN
GUARANTEES
10.01. Guarantee.............................................
10.02. Execution and Delivery of Guarantee...................
10.03. Additional Guarantors.................................
10.04. Release of Guarantor..................................
ARTICLE ELEVEN
MISCELLANEOUS
11.01. Trust Indenture Act Controls..........................
11.02. Notices...............................................
11.03. Communication by Holders with Other Holders...........
11.04. Certificate and Opinion as to Conditions
Precedent...........................................
11.05. Statements Required in Certificate or
Opinion.............................................
11.06. Rules by Trustee and Agents...........................
11.07. Legal Holidays........................................
11.08. No Recourse Against Others............................
11.09. Duplicate Originals...................................
11.10. Governing Law.........................................
11.11. No Adverse Interpretation of Other
Agreements..........................................
11.12. Successors............................................
11.13. Separability..........................................
-iv-
<PAGE>
Section Page
- ------- ----
11.14. Table of Contents, Headings, etc. ....................
SIGNATURES......................................................
EXHIBIT A - FORM OF SECURITY
EXHIBIT B - FORM OF GUARANTEE
-v-
<PAGE>
INDENTURE dated as of April , 1996 between CONTINENTAL HOMES HOLDING
CORP., a Delaware corporation (the "Company"), the Guarantors signatory hereto
(the "Guarantors") and FIRST UNION NATIONAL BANK, a national banking association
organized and existing under the laws of the United States of America, as
trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Company's % Senior
Notes due 2006 (the "Securities").
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
-----------
"Additional Assets" means assets used or usable by the Company or any
-----------------
of its Restricted Subsidiaries in the operation of the existing lines of
business of the Company and its Restricted Subsidiaries.
"Affiliate" of any Person means (i) any other Person directly or
---------
indirectly controlling or controlled by or under direct or indirect common
control with such Person and (ii) any other Person that beneficially owns at
least 10% of the voting common stock of such Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means any Registrar, Paying Agent, or co-Registrar.
-----
"Asset Sale" for any Person means the sale, lease, conveyance or other
----------
disposition (including, without limitation, by merger, consolidation or sale and
leaseback transaction, and whether by operation of law or otherwise) of any of
that Person's assets (including, without limitation, the sale or other
disposition of Capital Stock of any Subsidiary of such Person, whether by such
Person or such Subsidiary) outside the ordinary course of business, whether
owned on the date of this Indenture or subsequently acquired in one transaction
or a series of related transactions, in which such Person and/or its
Subsidiaries receive cash and/or other consideration (including, without
limitation, the unconditional assumption of Indebtedness of such Person and/or
its Subsidiaries) of $5,000,000 or more as to each such transaction or series of
related transactions; provided, however, that (i) a transaction or series of
-------- -------
related transactions that results in a Change of Control will not constitute an
Asset Sale, (ii) sales, leases, conveyances or
<PAGE>
-2-
other dispositions of real estate related to the homebuilding business of the
Company or its Subsidiaries will not constitute Asset Sales, and (iii)
transactions between the Company and any Guarantor, or among such Guarantors,
will not constitute Asset Sales.
"Bank Facility" means, collectively, one or more commitments from one
-------------
or more banks or other lending institutions to lend funds, together with any and
all agreements, documents and instruments from time to time delivered in
connection therewith as such commitments or any such agreements, documents or
instruments may be in effect or amended, amended and restated, renewed,
extended, restructured, supplemented or otherwise modified from time to time and
any credit agreement, loan agreement, note purchase agreement, indenture or
other agreement, document or instrument refinancing, refunding or otherwise
replacing such Bank Facility, whether or not with the same agent, trustee,
representative, lenders or holders, and, subject to the proviso to the next
succeeding sentence, irrespective of any changes in the terms and conditions
thereof. Without limiting the generality of the foregoing, the term "Bank
Facility" shall include any amendment, amendment and restatement, renewal,
extension, restructuring, supplement or modification to any Bank Facility and
all refundings, refinancings and replacements of any Bank Facility, including
any agreement (i) extending the maturity of any Debt Incurred thereunder or
contemplated thereby, (ii) adding or deleting borrowers or guarantors
thereunder; provided that such borrowers and issuers include one or more of the
--------
Company and its Subsidiaries and their respective successors and assigns, (iii)
increasing the amount of Debt Incurred thereunder or available to be borrowed
thereunder; provided that on the date thereof such Debt would not be prohibited
--------
by clause (b) of the definition of Permitted Debt, or (iv) otherwise altering
the terms and conditions thereof in a manner not prohibited by the terms of this
Indenture.
"Capital Stock" of any Person means any and all shares, interests,
-------------
participations or other equivalents (however designated) of capital stock of
such Person and all warrants or options to acquire such capital stock.
"Carlsbad Property" means the 417 acres owned by the Carlsbad
-----------------
Subsidiary in Carlsbad, California, located in San Diego County.
"Carlsbad Subsidiary" means Rancho Carillo, Inc., a Delaware
-------------------
corporation and a Subsidiary of the Company.
"Change of Control" of the Company shall be deemed to have occurred
-----------------
upon the occurrence of any of the following events: (a) any "person" or "group"
(as such terms are used in Sections
<PAGE>
-3-
13(d) and 14(d) of the Exchange Act), excluding the Management Group, is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately, after the passage of time, upon the
happening of an event or otherwise), directly or indirectly, of more than 50% of
the total Voting Stock of the Company; provided, however, that the members of
-------- -------
the Management Group do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the Board of
Directors of the Company; (b) the Company consolidates with, or merges with or
into, another Person or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the Company
is converted into or exchanged for cash, securities or other property, other
than any such transaction where immediately after such transaction no "person"
or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act), excluding the Management Group, is the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is exercisable immediately, after the
passage of time, upon the happening of an event or otherwise), directly or
indirectly, of more than 50% of the total Voting Stock of the surviving or
transferee corporation; provided, however, that the members of the Management
-------- -------
Group do not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of Directors of the
Company; (c) at any time during any consecutive two-year period, individuals who
at the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of the Company
was approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office;
or (d) the Company is liquidated or dissolved or adopts a plan of liquidation.
"Closing Date" means the date on which the Securities are originally
------------
issued.
"Common Stock" means the common stock, par value $.01 per share, of
------------
the Company.
"Company" means the party named as such above and any
-------
<PAGE>
-4-
other obligor until a successor replaces it pursuant to the applicable provision
hereof and thereafter means the successor.
"Consolidated Interest Expense" of the Company means, for any period,
-----------------------------
the aggregate amount of interest which, in accordance with generally accepted
accounting principles, would be included on an income statement for the Company
and its Restricted Subsidiaries on a consolidated basis, whether expensed
directly, or included as a component of cost of goods sold, or allocated to
joint ventures or otherwise (including, but not limited to, imputed interest
included on capitalized lease obligations, all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, the net costs associated with hedging obligations, amortization of
other financing fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount or premium, if any, and all other non-cash
interest expense), excluding interest expense related to the Company's mortgage
banking operations, plus the product of (x) the sum of (i) cash dividends paid
----
on any Preferred Stock of the Company plus (ii) cash dividends, the principal
----
amount of any debt securities issued as a dividend, the liquidation value of any
Preferred Stock issued as a dividend and the fair market value (as determined by
the Company's board of directors in good faith) of any other non-cash dividends,
in each case, paid on any Preferred Stock of any Restricted Subsidiary of the
Company (other than a Wholly-Owned Restricted Subsidiary), times (y) a fraction,
the numerator of which is one and the denominator of which is one minus the then
-----
current effective aggregate federal, state and local tax rate of the Company,
expressed as a decimal.
"Consolidated Interest Incurred" of the Company means, for any period,
------------------------------
(a) the aggregate amount of interest which, in accordance with generally
accepted accounting principles, would be included on an income statement for the
Company and its Restricted Subsidiaries on a consolidated basis, whether
expensed directly, or included as a component of cost of goods sold, or
allocated to joint ventures or otherwise (including, but not limited to, imputed
interest included on capitalized lease obligations, all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, the net costs associated with hedging obligations,
amortization of other financing fees and expenses, the interest portion of any
deferred payment obligation, amortization of discount or premium, if any, and
all other non-cash interest expense), excluding interest expense related to the
Company's mortgage banking operations, plus or minus, without duplication, (b)
---- -- -----
the difference between capitalized interest for such period and the interest
component of cost of goods sold for such period, plus (c) the product of (x) the
----
sum of (i) cash dividends paid on any Preferred Stock of the Company plus
----
<PAGE>
-5-
(ii) cash dividends, the principal amount of any debt securities issued as a
dividend, the liquidation value of any Preferred Stock issued as a dividend and
the fair market value (as determined by the Company's Board of Directors in good
faith) of any other non-cash dividends, in each case, paid on any Preferred
Stock of any Restricted Subsidiary of the Company (other than a Wholly-Owned
Restricted Subsidiary), times (y) a fraction, the numerator of which is one and
-----
the denominator of which is one minus the then current effective aggregate
-----
federal, state and local tax rate of the Company, expressed as a decimal.
"Consolidated Net Income" of the Company, for any period, means the
-----------------------
net income (loss) of the Company and its Restricted Subsidiaries for such
period, determined on a consolidated basis, in accordance with generally
accepted accounting principles; provided that, without duplication, (i) the net
--------
income of any Person, other than a Restricted Subsidiary which is consolidated
with the Company, in which any Person other than the Company and its Restricted
Subsidiaries has an interest in shall be included only to the extent of the
amount of cash dividends or distributions actually paid to the Company or a
Restricted Subsidiary during such period, (ii) the net income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded, (iii) the net income of any Subsidiary of
the Company shall be excluded to the extent such Subsidiary is prohibited,
directly or indirectly, from distributing such net income or any portion thereof
to the Company or a Restricted Subsidiary, (iv) all extraordinary gains and
losses (after taxes) that would be included on an income statement for such
period shall be excluded and (v) all gains and losses (after taxes) attributable
to Asset Sales shall be excluded; provided that there shall be included in such
--------
net income, without duplication, the net income of any Unrestricted Subsidiary
to the extent such net income is actually received by the Company or any of its
Restricted Subsidiaries in cash during such period.
"Consolidated Non-cash Charges" of the Company means, for any period,
-----------------------------
the aggregate depreciation, amortization and other non-cash charges (other than
reserves or expenses established in anticipation of future cash requirements
such as reserves for taxes and uncollectible accounts) of the Company and its
Restricted Subsidiaries on a consolidated basis for such period, as determined
in accordance with generally accepted accounting principles; provided that
--------
Consolidated Non-cash Charges shall exclude (i) any charges that are not
included for the purpose of determining Consolidated Net Income, (ii) any
charges that are included for the purpose of determining Consolidated Interest
Expense or Consolidated Tax Expense and (iii) any charges representing
capitalized selling, general and administrative expenses that are expensed
during such period as
<PAGE>
-6-
cost of goods sold.
"Consolidated Tangible Assets" of the Company as of any date means the
----------------------------
total amount of assets of the Company and its Restricted Subsidiaries (less
applicable reserves and less the assets securing the payment of Non-Recourse
Debt of the Company and its Restricted Subsidiaries) on a consolidated basis at
the end of the fiscal quarter immediately preceding such date, as determined in
accordance with generally accepted accounting principles, less: (i) unamortized
debt and debt issuance expense, deferred charges, goodwill, patents, trademarks,
copyrights, and all other items which would be treated as intangibles on the
consolidated balance sheet of the Company and its Restricted Subsidiaries
prepared in accordance with generally accepted accounting principles and (ii)
appropriate adjustments on account of minority interests of other Persons
holding equity investments in Restricted Subsidiaries, in the case of each of
clauses (i) and (ii) above, as reflected on the consolidated balance sheet of
the Company and its Restricted Subsidiaries.
"Consolidated Tangible Net Worth" of the Company means the Company's
-------------------------------
Net Worth less unamortized debt and debt issuance expense, deferred charges,
goodwill, patents, trademarks, copyrights, and all other items which would be
treated as intangibles on the consolidated balance sheet of the Company and its
Restricted Subsidiaries prepared in accordance with generally accepted
accounting principles.
"Consolidated Tax Expense" of the Company means, for any period, the
------------------------
aggregate of the tax expense of the Company and its Restricted Subsidiaries for
such period, determined on a consolidated basis, in accordance with generally
accepted accounting principles.
"Corporate Trust Office of the Trustee" shall be at the address of the
-------------------------------------
Trustee specified in Section 11.02 or such other address as the Trustee may give
notice of to the Company.
"Coverage Ratio" of the Company means the ratio of the Company's
--------------
EBITDA to its Consolidated Interest Incurred for the four fiscal quarters ending
immediately prior to the date of determination. Notwithstanding clause (ii) of
the definition of Consolidated Net Income, if the Debt which is being Incurred
is Incurred in connection with an acquisition by the Company or a Restricted
Subsidiary, the Coverage Ratio shall be determined after giving effect to both
the Consolidated Interest Incurred related to the Incurrence of such Debt and
the EBITDA (x) of the Person becoming a Restricted Subsidiary of the Company or
(y) in the case of an acquisition of assets that constitute substantially all of
an operating unit or business, relating to the assets being acquired by the
Company or a Restricted
<PAGE>
-7-
Subsidiary.
"Debt" means, as to any Person, without duplication, (a) any
----
indebtedness of such Person for borrowed money, (b) all indebtedness of such
Person evidenced by bonds, debentures, notes, letters of credit, drafts or
similar instruments, (c) all indebtedness of such Person to pay the deferred
purchase price of property or services, but not including accounts payable and
accrued expenses arising in the ordinary course of business, (d) all capitalized
lease obligations of such Person, (e) all Debt of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by such Person or
guaranteed by such Person, (f) Redeemable Stock of such Person and Preferred
Stock of any Subsidiary of such Person, (g) all obligations of such Person with
respect to Interest Rate Protection Agreements and (h) all Debt of others
guaranteed by such Person. The amount of all Debt of any Person at any date
pursuant to clauses (a)-(d) and (f) above shall be as would appear as a
liability upon a balance sheet of such Person prepared on a consolidated basis
in accordance with generally accepted accounting principles. Notwithstanding
the foregoing, "Debt" of the Company shall not include the amount reflected on a
consolidated balance sheet of the Company with respect to options to acquire
real property which was purchased by the Company and sold to a third party
within 360 days of such purchase for consideration at least equal to the amount
paid by the Company for such property less an amount equal to the value of such
option.
"Default" means any event which is, or after notice or passage of time
-------
or both would be, an Event of Default.
"EBITDA" for the Company, for any period, means, without duplication,
------
the Consolidated Net Income of the Company plus, to the extent deducted in
calculating Consolidated Net Income, the sum of (a) Consolidated Tax Expense,
(b) Consolidated Interest Expense and (c) Consolidated Non-cash Charges.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Existing Debt" means all of the Debt of the Company and its
-------------
Restricted Subsidiaries that was outstanding on the Closing Date.
"guarantee" by any Person means any obligation, contingent or
---------
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt of such other Person (whether by agreement to keep-well
<PAGE>
-8-
or to maintain financial condition or otherwise); provided that the term
--------
"guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business.
"Guarantee" means the guarantee of the Company's obligations hereunder
---------
made by a Guarantor in favor of the Holders pursuant to the terms of Article 10
hereof.
"Guarantor" means all of the Restricted Subsidiaries of the Company
---------
existing on the date hereof and any person who becomes a guarantor pursuant to
Section 10.03.
"Holder" or "Securityholder" means a Person in whose name a Security
------ --------------
is registered on the Registrar's books.
"Indenture" means this Indenture, as amended, supplemented or
---------
otherwise modified from time to time, in accordance with the terms hereof.
"Independent Financial Advisor" means a firm (i) which does not, and
-----------------------------
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Interest Rate Protection Agreement" means any arrangement with any
----------------------------------
other Person whereby, directly or indirectly, such Person is entitled to receive
from time to time periodic payments calculated by applying either a floating or
a fixed rate of interest on a stated notional amount in exchange for periodic
payments made by such Person calculated by applying a fixed or a floating rate
of interest on the same notional amount and shall include, without limitation,
interest rate swaps, caps, floors, collars and similar agreements; provided that
--------
any arrangement which is entered into by the Company or any of its Restricted
Subsidiaries in connection with Debt Incurred by the Company or any of its
Restricted Subsidiaries shall constitute Permitted Debt.
"Investment" means, with respect to any Person, any direct or indirect
----------
loan or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Debt issued by, any other Person. "Investments" shall exclude
extensions of trade credit by the Company and its Subsidiaries in the ordinary
course of business in accordance with normal trade practices of the Company or
such Subsidiary, as the case may be.
<PAGE>
-9-
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
----
assignment (including any assignment of rights to receive payments of money
other than in connection with mortgage banking operations in the ordinary course
of business), charge, security interest or encumbrance of any kind (including
any conditional sale or other title retention agreement or any lease in the
nature thereof) in respect of such asset and any agreement to grant to any
Person any such Lien and any sale and leaseback of any asset.
"Management Group" means the executive officers of the Company as of
----------------
the date of this Indenture, members of their immediate families, certain trusts
for their benefit, and legal representatives of, or heirs, beneficiaries or
legatees receiving Common Stock (or securities convertible or exchangeable for
Common Stock) under, any such person's estate.
"Material Subsidiary" means any Restricted Subsidiary of the Company
-------------------
which accounted for 10 percent or more of the Consolidated Tangible Assets or
EBITDA of the Company for the fiscal year ending immediately prior to any
Default or Event of Default.
"Mortgage" means a first priority mortgage or first priority deed of
--------
trust on improved real property.
"Mortgage Debt" means such mortgage banking debt as would be listed on
-------------
the consolidated balance sheet of the Company prepared in accordance with
generally accepted accounting principles.
"Net Proceeds" with respect to any Asset Sale means (i) cash (in U.S.
------------
dollars or freely convertible into U.S. dollars) received by the Company or any
of its Restricted Subsidiaries from such Asset Sale (including cash received as
consideration for the assumption or incurrence of liabilities incurred in
connection with or in anticipation of such Asset Sale), after (a) provision for
all income or other taxes measured by or resulting from such Asset Sale to the
Company or any of its Restricted Subsidiaries, whether or not offset by net
operating loss and tax credit carry-forwards, (b) payment of all brokerage
commissions and the underwriting fees and, without limitation, all other fees
and expenses related to such Asset Sale, and (c) deduction of appropriate
amounts to be provided by the Company or any of its Restricted Subsidiaries as a
reserve, in accordance with generally accepted accounting principles, against
any liabilities associated with the assets sold or otherwise disposed of in
such Asset Sale (including, without limitation, pension and other post-
employment benefit liabilities and liabilities related to environmental matters)
or against any indemnification obligations associated with the sale or other
<PAGE>
-10-
disposition of the assets sold or otherwise disposed of in such Asset Sale, and
(ii) all noncash consideration received by the Company or any of its Restricted
Subsidiaries from such Asset Sale upon the liquidation or conversion of such
consideration into cash.
"Net Worth" of the Company means, at any date, the aggregate of
---------
capital, surplus and retained earnings of the Company and its Restricted
Subsidiaries as would be shown on a consolidated balance sheet of the Company
prepared in accordance with generally accepted accounting principles, adjusted
to exclude (to the extent included) investments by the Company and its
Subsidiaries in joint ventures and the amount of equity attributable to
Affiliates other than Restricted Subsidiaries of the Company.
"Non-Recourse Debt" with respect to any Person means Debt of such
-----------------
Person for which the sole legal recourse for collection of principal and
interest on such Debt is against the specific property identified in the
instruments evidencing or securing such Debt and such property was acquired with
the proceeds of such Debt or such Debt was Incurred (i) within 90 days after the
acquisition of such property or (ii) in respect of the Carlsbad Property.
"Officer" means the Chief Executive Officer, the President, any Vice
-------
President, the Treasurer or the Secretary of the Company or any Guarantor, as
applicable.
"Officers' Certificate" means a certificate signed by two Officers or
---------------------
by an Officer and an Assistant Treasurer or an Assistant Secretary of the
Company or any Guarantor, as applicable.
"Opinion of Counsel" means a written opinion from legal counsel who
------------------
may be an employee of or counsel for the Company or other counsel reasonably
acceptable to the Trustee.
"Permitted Debt" means:
--------------
(a) Debt evidenced by the Securities and the Guarantees;
(b) Debt Incurred by the Company or any Guarantor under or in respect
of a Bank Facility (including any guarantees related thereto) for working
capital or general corporate purposes or evidenced by letters of credit;
provided that the aggregate amount of all such Debt outstanding at any time
- --------
pursuant to this clause (b) may not exceed $110,000,000;
(c) Debt Incurred under a Warehouse Facility; provided
--------
<PAGE>
-11-
that the amount of such Debt (including funding drafts issued thereunder)
outstanding at any time pursuant to this clause (c) guaranteed by the Company or
a Restricted Subsidiary may not exceed $30,000,000 and the amount of such Debt
(excluding funding drafts issued thereunder) shall not exceed 98% of the value
of the Mortgages pledged to secure Debt thereunder;
(d) Debt of the Company to any Guarantor or of any Restricted
Subsidiary of the Company to the Company or to any Guarantor;
(e) Existing Debt (without duplication of Debt indicated under clauses
(a)-(d) above) of the Company and its Restricted Subsidiaries other than Debt to
be repaid from the proceeds of the sale of the Securities;
(f) Non-Recourse Debt;
(g) Debt in respect of performance, completion, guarantee, surety and
similar bonds or banker's acceptances provided by the Company or any of its
Restricted Subsidiaries in the ordinary course of business;
(h) Additional Debt of the Company or any Guarantor in an amount not
exceeding $5,000,000 at any time outstanding;
(i) Debt referred to in the definition of Interest Rate Protection
Agreement; and
(j) Refinancing Debt.
"Permitted Investments" of any Person means Investments of such Person
---------------------
in (i) direct obligations of the United States or any agency thereof or
obligations guaranteed by the United States or any agency thereof, in each case
maturing within 180 days of the date of acquisition thereof, (ii) certificates
of deposit maturing within 180 days of the date of acquisition thereof issued by
a bank, trust company or savings and loan association which is organized under
the laws of the United States or any state thereof having capital, surplus and
undivided profits aggregating in excess of $250 million and a Keefe Bank Watch
Rating of C or better, (iii) certificates of deposit maturing within 180 days of
the date of acquisition thereof issued by a bank, trust company or savings and
loan association organized under the laws of the United States or any state
thereof other than banks, trust companies or savings and loan associations
satisfying the criteria in (ii) above; provided that the aggregate amount of all
--------
certificates of deposit issued to the Company at any one time by such bank,
trust company or savings and loan association will not exceed $100,000, (iv)
commercial paper given the highest rating by two established national credit
<PAGE>
-12-
rating agencies and maturing not more than 180 days from the date of the
acquisition thereof, (v) repurchase agreements or money-market accounts which
are fully secured by direct obligations of the United States or any agency
thereof and (vi) in the case of the Company and its Subsidiaries, (1) any
receivables or loans taken by the Company or a Subsidiary in connection with the
sale of any asset otherwise permitted by this Indenture, (2) Investments in any
Guarantor, (3) Investments in the Securities or Debt pari passu with the
----------
Securities, (4) Investments in evidences of Debt securities or other property
received from another Person by the Company or any of its Restricted
Subsidiaries in connection with any bankruptcy proceeding or by reason of a
composition or readjustment of debt or a reorganization of such Person or as a
result of foreclosure, perfection or enforcement of any Lien in exchange for
evidences of Debt, securities or other property of such Person held by the
Company or any of its Restricted Subsidiaries, or for other liabilities or
obligations of such other Person to the Company or any of its Restricted
Subsidiaries that were created, in accordance with the terms of this Indenture,
(5) Investments in Interest Rate Protection Agreements which constitute
Permitted Debt and (6) Investments in an aggregate amount outstanding not
greater than $30,000,000.
"Permitted Liens" with respect to the Company and its Restricted
---------------
Subsidiaries means (i) Liens on assets of the Company or any Restricted
Subsidiary of the Company securing Debt which may be incurred pursuant to
Section 4.10 hereof, provided that the aggregate amount of Debt secured by Liens
--------
(excluding Non-Recourse Debt of the Company and its Restricted Subsidiaries and
Debt outstanding under a Warehouse Facility) may not exceed 40 percent of the
Company's Consolidated Tangible Assets; (ii) Liens securing a Warehouse
Facility, provided that such Liens shall not extend to any assets other than the
--------
mortgages, promissory notes and other collateral that secures mortgage loans
made by the Company or any of its Restricted Subsidiaries; (iii) Liens securing
Non-Recourse Debt of the Company or any of its Restricted Subsidiaries, provided
that such Liens apply only to the property financed out of the net proceeds of
such Non-Recourse Debt within 90 days of the Incurrence of such Non-Recourse
Debt (except that such 90 day limitation shall not apply with respect to the
Carlsbad Property) (iv) Liens securing Debt of a Person existing at the time
that such Person is merged into or consolidated with the Company or a Restricted
Subsidiary, provided that such Liens were not created in contemplation of such
--------
merger or consolidation and do not extend to any assets or property of the
Company or any Restricted Subsidiary, other than the surviving Person and its
Subsidiaries; (v) Liens on assets or property acquired by the Company or a
Restricted Subsidiary, provided that such Liens were not created in
--------
contemplation of such acquisition and do not extend to any other assets or
<PAGE>
-13-
property (other than proceeds of such acquired assets or property); (vi) Liens
in respect of Interest Rate Protection Agreements which constitute Permitted
Debt; (vii) Liens for taxes, assessments or governmental charges or claims that
either (a) are not yet delinquent or (b) are being contested in good faith by
appropriate proceedings and as to which appropriate reserves have been
established or other provisions have been made in accordance with generally
accepted accounting principles; (viii) statutory Liens of landlords and
carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's or
other Liens imposed by law and arising in the ordinary course of business; (ix)
Liens (other than any Lien imposed by the Employee Retirement Income Security
Act of 1974, as amended) incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security; (x) Liens incurred or deposits made to secure
the performance of tenders, bids, leases, statutory obligations, surety and
appeal bonds, progress payments, government contracts and other obligations of
like nature (exclusive of obligations for the payment of borrowed money), in
each case, incurred in the ordinary course of business; (xi) attachment or
judgment Liens not giving rise to a Default or Event of Default; (xii)
easements, rights-of-way, restrictions and other similar charges or encumbrances
not materially interfering with the ordinary conduct of the business of the
Company or any of its Subsidiaries; (xiii) leases or subleases granted to others
not materially interfering with the ordinary conduct of the business of the
Company or any of its Restricted Subsidiaries; (xiv) Liens securing Refinancing
Debt; provided that such Liens only extend to the assets securing the Debt being
--------
refinanced, such refinanced Debt was previously secured and such Liens do not
extend to any other assets of the Company or the assets of any of the Company's
other Subsidiaries; (xv) Liens securing Purchase Money Obligations (including
capitalized lease obligations); (xvi) Liens existing on the date hereof; (xvii)
any contract to sell an asset provided such sale is otherwise permitted under
this Indenture; and (xviii) Liens on property or assets of any Restricted
Subsidiary securing Debt of such Restricted Subsidiary owing to the Company or
one or more Restricted Subsidiaries of the Company.
"Person" means any individual, corporation, partnership, association,
------
trust or other entity or organization, including a government or political
subdivision or agency or instrumentality thereof.
"Preferred Stock" means, with respect to any Person, any and all
---------------
shares, interests, participations or other equivalents (however designated) of
such Person's preferred or preference stock whether now outstanding or issued
after the date of this Indenture, and including, without limitation, all classes
<PAGE>
-14-
and series of preferred or preference stock.
"principal" of a debt security means the principal of the security
---------
plus the premium, if any, on the security.
"Purchase Money Obligations" means Debt of any Person secured by Liens
--------------------------
(i) on property purchased, acquired, or constructed by such Person or its
Subsidiaries after the date of this Indenture and used in the ordinary course of
business by such Person and (ii) securing the payment of all or any part of the
purchase price or construction cost of such assets and limited to the property
so acquired and improvements thereof; provided that such Debt is incurred no
later than 90 days after the acquisition of such property or completion of such
construction or improvements.
"Redeemable Stock" means, with respect to any Person, any class or
----------------
series of Capital Stock of such Person that is redeemable at the option of the
holder (except pursuant to a change in control provision that does not (i) cause
such Capital Stock to become redeemable in circumstances which would not
constitute a Change of Control and (ii) require the Company to pay the
redemption price therefor prior to the Change of Control Repurchase Date) or is
subject to mandatory redemption or otherwise matures prior to the final stated
maturity of the Securities.
"Refinancing Debt" means Debt that refunds, refinances or extends any
----------------
Securities, Existing Debt (other than Existing Debt to be repaid with the net
proceeds of the offering of the Securities) or other Debt Incurred by the
Company or its Restricted Subsidiaries pursuant to the terms of this Indenture,
but only to the extent that (i) the Refinancing Debt is subordinated to the
Securities to the same extent as the Debt being refunded, refinanced or
extended, if at all, (ii) the Refinancing Debt is scheduled to mature either (a)
no earlier than the Debt being refunded, refinanced or extended, or (b) after
the maturity date of the Securities, (iii) the portion, if any, of the
Refinancing Debt that is scheduled to mature on or prior to the maturity date of
the Securities has a Weighted Average Life to Maturity at the time such
Refinancing Debt is Incurred that is equal to or greater than the Weighted
Average Life to Maturity of the portion of the Debt being refunded, refinanced
or extended that is scheduled to mature on or prior to the maturity date of the
Securities and (iv) the gross proceeds of such Refinancing Debt are an amount
that is equal to or less than the aggregate principal amount then outstanding
under the Debt being refunded, refinanced or extended (plus the premiums or
other payments paid in connection therewith (which shall not exceed the stated
amount of any premium or other payment required to be paid in connection with
such a renewal, extension,
<PAGE>
-15-
substitution, refunding, refinancing, redemption, repurchase or replacement
pursuant to the terms of the Debt being renewed, extended, substituted,
refunded, refinanced, amended, modified, supplemented, redeemed, repurchased or
replaced) and the expenses incurred in connection therewith).
"Restricted Payments" means with respect to the Company or any
-------------------
Restricted Subsidiary (i) the declaration or payment of any dividend or other
distribution on any shares of such Person's Capital Stock (except (x) dividends
or distributions in additional shares of Capital Stock of the Company other than
Redeemable Stock or (y) the declaration or payment of any dividend or other
distribution by a Restricted Subsidiary to the Company or another Restricted
Subsidiary), (ii) any payment on account of the purchase, redemption or other
acquisition of (a) any shares of such Person's Capital Stock or (b) any option,
warrant or other right to acquire shares of such Person's Capital Stock,
except, in each case, Capital Stock held by the Company or a Restricted
Subsidiary, (iii) any Investment (other than a Permitted Investment) in any
Person, or (iv) any principal payment, redemption, repurchase, defeasance or
other acquisition or retirement, prior to scheduled principal payment or
scheduled maturity, of Subordinated Debt of the Company or its Restricted
Subsidiaries.
"Restricted Subsidiary" means any Subsidiary which is not an
---------------------
Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
---
"Securities" means the Securities described above issued under this
----------
Indenture.
"Subordinated Debt" means, with respect to the Company and its
-----------------
Restricted Subsidiaries, all Debt of such Person which is, pursuant to its
terms, expressly subordinated in right of payment to the Securities or the
Guarantees (other than Debt held by the Company or a Restricted Subsidiary).
"Subsidiary" means, with respect to any Person, (i) any corporation or
----------
entity of which a majority of the capital stock having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions is at the time directly or indirectly owned by such Person or one or
more of the other Subsidiaries of that Person or (ii) any partnership or joint
venture at least a majority of the voting power of which is at the time directly
or indirectly owned by such Person or one or more of the other Subsidiaries of
that Person, or a combination thereof or a successor thereto.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.
---
<PAGE>
-16-
Code (S)(S) 77aaa-77bbbb) as in effect on the date of this Indenture, except as
provided in Section 9.03.
"Trust Officer" means any officer of the Trustee assigned by the
-------------
Trustee to administer its corporate trust matters.
"Trustee" means the party named as such in this Indenture until a
-------
successor replaces it and thereafter means the successor.
"Unrestricted Subsidiary" means each of the Subsidiaries of the
-----------------------
Company (other than a Guarantor) so designated by a resolution adopted by the
Board of Directors of the Company as provided below; provided that (a) neither
--------
the Company nor any of its other Subsidiaries (other than Unrestricted
Subsidiaries) (1) provides any direct or indirect credit support for any Debt of
such Subsidiary (including any undertaking, agreement or instrument evidencing
such Debt) or (2) is directly or indirectly liable for any Debt of such
Subsidiary, and (b) the creditors with respect to Debt for borrowed money of
such Subsidiary have agreed in writing that they have no recourse, direct or
indirect, to the Company or any other Subsidiary of the Company (other than
Unrestricted Subsidiaries), including, without limitation, recourse with respect
to the payment of principal or interest on any Debt of such Subsidiary. The
Board of Directors of the Company may designate an Unrestricted Subsidiary to be
a Restricted Subsidiary; provided that (i) any such redesignation will be deemed
--------
to be an Incurrence by the Company and its Restricted Subsidiaries of the Debt
(if any) of such redesignated Subsidiary for purposes of Section 4.10 hereof as
of the date of such redesignation, (ii) any Debt of such Unrestricted Subsidiary
could then be Incurred in accordance with Section 4.10 on the date of such
redesignation and (iii) the Liens of such Unrestricted Subsidiary could then be
incurred in accordance with Section 4.13 hereof as of the date of such
redesignation. Subject to the foregoing, the Board of Directors of the Company
also may designate any Restricted Subsidiary to be an Unrestricted Subsidiary;
provided that (i) all previous Investments by the Company and its Restricted
- --------
Subsidiaries in such Restricted Subsidiary (net of any returns previously paid
on such Investments) will be deemed to be Restricted Payments at the time of
such designation and will reduce the amount available for Restricted Payments
under Section 4.11 hereof, (ii) the Company and its Restricted Subsidiaries
could incur $1.00 of additional Indebtedness under the Coverage Ratio test
contained in Section 4.10 hereof and (iii) no Default or Event of Default shall
have occurred or be continuing. Any such designation or redesignation by the
Board of Directors of the Company will be evidenced to the Trustee by the filing
with the Trustee of a
<PAGE>
-17-
certified copy of the resolution of the Board of Directors of the Company giving
effect to such designation or redesignation and an Officers' Certificate
certifying that such designation or redesignation complied with the foregoing
conditions and setting forth the underlying calculations.
"U.S. Government Obligations" means direct non-callable obligations
---------------------------
of, or non-callable obligations guaranteed by, the United States of America for
the payment of which the full faith and credit of the United States of America
is pledged.
"Voting Stock" means with respect to any Person, Capital Stock of any
------------
class or kind normally entitled to vote in the election of the board of
directors or other governing body of such Person.
"Warehouse Facility" means a Bank Facility to finance the making of
------------------
mortgage loans originated by the Company or any of its Subsidiaries.
"Weighted Average Life to Maturity" means, when applied to any Debt or
---------------------------------
portion thereof, if applicable, at any date, the number of years obtained by
dividing (i) the then outstanding principal amount of such Debt or portion
thereof, if applicable, into (ii) the sum of the products obtained by
multiplying (a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including payment at
final maturity, in respect thereof, by (b) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary
----------------------------------
of the Company of which 100% of the outstanding Capital Stock is owned by one or
more Wholly Owned Restricted Subsidiaries of the Company or by the Company and
one or more Wholly Owned Restricted Subsidiaries of the Company. For purposes
of this definition, any directors' qualifying shares shall be disregarded in
determining the ownership of a Subsidiary.
SECTION 1.02. Other Definitions.
-----------------
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Bankruptcy Law".................................. 6.01
"business day".................................... 11.07
"Change of Control Notice"........................ 4.08
"Change of Control Price"......................... 4.08
"Change of Control Repurchase
Date"......................................... 4.08
"Change of Control Repurchase
</TABLE>
<PAGE>
-18-
<TABLE>
<S> <C>
Right"........................................ 4.08
"Custodian"....................................... 6.01
"Discharged"...................................... 8.01
"Event of Default"................................ 6.01
"Incur"........................................... 4.10
"Legal Holiday"................................... 11.07
"Minimum Net Worth"............................... 4.09
"Net Proceeds Offer".............................. 4.15
"Net Proceeds Offer Notice"....................... 4.15
"Net Worth"....................................... 4.09
"Net Worth Notice"................................ 4.09
"Net Worth Offer"................................. 4.09
"Net Worth Offer Amount".......................... 4.09
"Net Worth Price"................................. 4.09
"Net Worth Repurchase Date"....................... 4.09
"Net Worth Repurchase Right"...................... 4.09
"Paying Agent".................................... 2.03
"Purchase Amount"................................. 4.15
"Registrar........................................ 2.03
"Successor"....................................... 5.01
"Trigger Date".................................... 4.09
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act.
-----------------------------------
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. Rules of Construction.
---------------------
<PAGE>
-19-
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles in effect
on the date hereof;
(3) "or" is not exclusive;
(4) words in the singular include the plural and in the plural include
the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
Subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
---------------
The Securities and the Trustee's certificate of authentication shall
be substantially in the form set forth in Exhibit A, which is incorporated in
and forms a part of this Indenture. The Securities may have notations, legends
or endorsements required by law, stock exchange rule or usage. Each Security
shall be dated the date of its authentication.
SECTION 2.02. Execution and Authentication.
----------------------------
Two Officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.
The Trustee shall authenticate Securities for original issue in the
aggregate principal amount of up to $150,000,000,
<PAGE>
-20-
upon a written order or orders of the Company signed by two Officers or by an
Officer and an Assistant Treasurer or Assistant Secretary of the Company. The
order shall specify the amount of Securities to be authenticated and the date on
which the original issue of such Securities is to be authenticated. The
aggregate principal amount of Securities outstanding at any time may not exceed
the amount of Securities issued pursuant to this paragraph except as provided in
Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
--------------------------
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be presented for registration
of transfer or for exchange ("Registrar") and an office or agency where
Securities may be presented for payment ("Paying Agent"). The Registrar shall
keep a register of the Securities and of their transfer and exchange. The
Company may appoint or change one or more co-Registrars and one or more
additional paying agents without notice and may act in any such capacity on its
own behalf. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee of the name and address of any Agent not a party to this
Indenture. If the Company fails to maintain a Registrar or Paying Agent, the
Trustee shall act as such, and shall be entitled to appropriate compensation
therefor pursuant to Section 7.07.
The Company initially appoints the Trustee as Paying Agent and
Registrar.
SECTION 2.04. Paying Agent to Hold Money in
Trust.
-----------------------------
Each Paying Agent shall hold in trust for the benefit of the
Securityholders or the Trustee all moneys held by such
<PAGE>
-21-
Paying Agent for the payment of principal of or interest on the Securities, and
shall notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, such Paying Agent shall have no further liability for the
money. If the Company acts as Paying Agent, it shall segregate and hold as a
separate trust fund all money held by it as Paying Agent.
SECTION 2.05. Securityholder Lists.
--------------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee on or before each interest payment date and at such other times
as the Trustee may request in writing a list, in such form and as of such date
as the Trustee may reasonably require, of the names, addresses and tax
identification numbers of Securityholders.
SECTION 2.06. Transfer and Exchange.
---------------------
Where Securities are presented to the Registrar or a co-Registrar with
a request to register the transfer or to exchange them for an equal principal
amount of Securities of other authorized denominations, the Registrar shall
register the transfer or make the exchange if the requirements of Section 8-
401(1) of the New York Uniform Commercial Code are met. To permit registrations
of transfer and exchanges, the Trustee shall authenticate Securities at the
Registrar's request. The Company or the Trustee, as the case may be, shall not
be required (a) to issue, authenticate, register the transfer of or exchange any
Security during a period beginning at the opening of business 15 days before the
mailing of a notice of redemption of the Securities selected for redemption
under Section 3.02 and ending at the close of business on the day of such
mailing, or (b) to register the transfer of or exchange any Security so selected
for redemption in whole or in part, except the unredeemed portion of Securities
being redeemed in part.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any transfer, registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 2.10, 3.06 or 9.05 not involving any
transfer.
SECTON 2.07. Replacement Securities.
----------------------
<PAGE>
-22-
If the Holder of a Security claims that the Security has been
mutilated, lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Security if the requirements of Section
8-405 of the New York Uniform Commercial Code are met and, in the case of a
mutilated Security, such mutilated Security is surrendered to the Trustee. If
required by the Trustee or the Company, an indemnity bond must be sufficient, in
the judgment of both, to protect the Company, the Trustee, or any Agent from any
loss which any of them may suffer if a Security is replaced. The Company or the
Trustee may charge for its expenses in replacing a Security.
In case any such mutilated, destroyed or wrongfully taken Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security when due.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities.
----------------------
Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation and those described in this Section as not outstanding.
A Security does not cease to be outstanding because the Company or one of its
subsidiaries or Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it, or a court
holds, that the replaced Security is held by a bona fide purchaser.
---- ----
If the Paying Agent (other than the Company) holds on a redemption
date, repurchase date or maturity date money sufficient to pay Securities
payable on that date, then on and after that date, such Securities shall be
deemed to be no longer outstanding and interest on them shall cease to accrue.
SECTION 2.09. Securities Held by the Company or an Affiliate.
----------------------------------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or a Subsidiary or an Affiliate shall be disregarded, except that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Securities which the
Trustee actually knows are so owned shall be so disregarded.
<PAGE>
-23-
SECTION 2.10. Temporary Securities.
--------------------
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities.
2.11. Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee shall cancel all Securities surrendered for registration
of transfer, exchange, payment or cancellation and may destroy cancelled
Securities and deliver a certificate of any such destruction to the Company.
The Company may not issue new Securities to replace Securities that it has paid
or delivered to the Trustee for cancellation.
2.12. Defaulted Interest.
------------------
If and to the extent the Company defaults in a payment of interest on
the Securities, it shall pay the defaulted interest in any lawful manner plus,
to the extent not prohibited by applicable statute or case law, interest payable
on the defaulted interest. It may pay the defaulted interest to the persons who
are Securityholders on a subsequent special record date. The Company shall fix
such record date and payment date. At least 15 days before the record date, the
Company shall mail to Securityholders a notice that states the record date,
payment date and amount of interest to be paid.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
------------------
If the Company wants to redeem a portion of the Securities pursuant to
paragraph 5 of the Securities, it shall notify the Trustee at least 60 days
prior to the redemption date (unless a shorter notice period shall be
satisfactory to the Trustee) of the redemption date and the principal amount of
Securities to be redeemed.
<PAGE>
-24-
SECTION 3.02. Selection of Securities to Be Redeemed.
--------------------------------------
If less than all the Securities are to be redeemed, the Trustee shall
select the particular Securities (or portion thereof) to be redeemed on either a
pro rata basis or by lot or such other method as the Trustee shall determine,
such determination to be final and conclusive for all purposes hereunder, but in
any event, in such manner as complies with applicable legal and stock exchange
requirements. The Trustee shall make the selection from Securities outstanding
not previously called for redemption. The Trustee may select for redemption
portions of the principal of Securities that have denominations larger than
$1,000. Securities and portions of them it selects shall be in amounts of
$1,000 or whole multiples of $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption.
SECTION 3.03. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail by first-class mail a notice of redemption to each Holder
whose Securities are to be redeemed.
The notice shall identify the Securities and the principal amount
thereof to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price (including the amount of accrued interest to
be paid on the Securities called for redemption);
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price; and
(5) that interest on Securities called for redemption ceases to accrue
on and after the redemption date.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event
the Company will provide the Trustee with the information required by clauses
(1) through (5).
SECTION 3.04. Effect of Notice of Redemption.
------------------------------
Once a notice of redemption is mailed, Securities
<PAGE>
-25-
called for redemption become due and payable on the redemption date at the
redemption price and, on and after such date (unless the Company shall default
in the payment of the redemption price), such Securities shall cease to bear
interest. Upon surrender to the Paying Agent, such Securities shall be paid at
the redemption price plus accrued interest to the redemption date.
SECTION 3.05. Deposit of Redemption Price.
---------------------------
On or before 12:00 Noon on the redemption date, the Company shall
deposit with the Paying Agent money in funds immediately available on the
redemption date sufficient to pay the redemption price of and accrued interest
on all Securities to be redeemed on that date.
SECTION 3.06. Securities Redeemed in Part.
---------------------------
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder a new Security equal in principal amount to
the unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
---------------------
The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities. Principal and
interest shall be considered paid on the date due if the Paying Agent holds on
that date money sufficient to pay all principal and interest then due.
The Company shall pay interest on overdue principal at the rate borne
by the Securities. The Company shall pay interest on overdue installments of
interest at the same rate to the extent not prohibited by applicable statute or
case law.
SECTION 4.02. Maintenance of Office or Agency.
-------------------------------
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities may be surrendered for registration
of transfer or exchange and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Company will
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office
<PAGE>
-26-
or agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
- -------- -------
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee in the Borough of Manhattan, The City of New York, an agency of the
Company in accordance with Section 2.03.
SECTION 4.03. SEC Reports.
-----------
The Company shall deliver to the Trustee and mail to each Holder
within 15 days after it files them with the SEC copies of the quarterly and
annual reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the SEC may by rules and regulations
prescribe) with respect to the Company and the Guarantors, if any, which the
Company and the Guarantors may be required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act. The Company also shall comply with the
other provisions of TIA (S) 314(a).
Notwithstanding that neither the Company nor any of the Guarantors may
be required to remain subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, the Company and the Guarantors will continue to file
with the SEC and provide the Trustee and Holders with such annual and quarterly
reports and such information, documents and other reports with respect to the
Company and the Guarantors as are required under Sections 13 and 15(d) of the
Exchange Act. If filing of documents by the Company with the SEC as
aforementioned in this paragraph is not permitted under the Exchange Act, the
Company shall promptly upon written notice supply copies of such documents to
any prospective holder.
SECTION 4.04. Compliance Certificate.
----------------------
The Company shall deliver to the Trustee within 120 days after the end
of each fiscal year of the Company an Officers' Certificate stating whether or
not the signatories
<PAGE>
-27-
know of any Default by the Company in performing any of its obligations under
this Indenture or the Securities. If they do know of any such Default, the
certificate shall describe the Default and its status.
SECTION 4.05. Stay, Extension and Usury Laws.
------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
SECTION 4.06. Corporate Existence.
-------------------
Subject to Article 5, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate existence of each of its Restricted Subsidiaries in
accordance with the respective organizational documents of each Restricted
Subsidiary and the rights (charter and statutory), licenses and franchises to
the Company and its Restricted Subsidiaries; provided, however, that the Company
-------- -------
shall not be required to preserve any such right, license or franchise, or the
corporate existence of any Restricted Subsidiary if, in the judgment of the
Board of Directors of the Company, (i) such preservation or existence is not
material to the conduct of business of the Company and (ii) the loss of such
right, license or franchise or the dissolution of such Restricted Subsidiary
does not have a material adverse impact on the Holders.
SECTION 4.07. Notice of Default.
-----------------
In the event that any Default under Section 6.01 hereof shall occur
the Company will give prompt written notice of such Default to the Trustee.
SECTION 4.08. Change of Control.
-----------------
(a) In the event that there shall occur a Change of Control of the
Company, each Holder of a Security shall have the right (a "Change of Control
Repurchase Right") upon receipt of a Change of Control Notice (as defined
below), at such Holder's option, to require the Company to repurchase any
Securities of
<PAGE>
-28-
such Holder or any portion of the principal amount thereof which is $1,000 or
any integral multiple thereof, on the date (the "Change of Control Repurchase
Date") that is 45 days after the date of the Change of Control Notice, or, if
such 45th day is a Legal Holiday, the next subsequent day which is not a Legal
Holiday, unless otherwise required by applicable law, at a price equal to 101%
of the principal amount thereof, plus accrued interest to the Change of Control
Repurchase Date (the "Change of Control Price"). The right to require the
repurchase of Securities shall not continue after a discharge of the Company
from its obligations with respect to the Securities in accordance with Article
8.
(b) Within 30 days after the occurrence of a Change of Control, the
Company, or, at the request of the Company, the Trustee, shall give notice of
the occurrence of the Change of Control and of the Change of Control Repurchase
Right set forth herein to each Holder (the "Change of Control Notice"). The
Company shall also deliver a copy of the Change of Control Notice to the
Trustee. Any such notice shall contain all instructions and materials necessary
to enable such Holders to deliver Securities pursuant to the Change of Control
Repurchase Right including, without limitation, the following:
(1) the Change of Control Repurchase Date;
(2) the date by which the Change of Control Repurchase Right must be
exercised;
(3) the Change of Control Price;
(4) that Securities are to be surrendered for payment of the Change of
Control Price; and
(5) that the exercise of the Change of Control Repurchase Right is
irrevocable.
(c) To exercise a Change of Control Repurchase Right a Holder shall
deliver to the Company (if it is acting as its own Paying Agent) or to a Paying
Agent designated by the Company for such purpose in the notice referred to
above on or before the 30th day after the date of the Change of Control Notice,
or, if such day is a Legal Holiday, the next subsequent day which is not a Legal
Holiday, (i) written notice of the Holder's exercise of such right, which notice
shall set forth the name of the Holder, the principal amount of Securities (or
portions thereof) to be repurchased and a statement that an election to exercise
the Change of Control Repurchase Right is being made thereby, and (ii) the
Securities with respect to which the Change of Control Repurchase Right is being
exercised, duly endorsed for transfer to the Company, and the Holder of such
Securities shall be
<PAGE>
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entitled to receive from the Company (if it is acting as its own Paying Agent)
or such Paying Agent a nontransferable receipt of deposit evidencing such
deposit. Such written notice shall be irrevocable.
If the Change of Control Repurchase Date is between a regular record
date for the payment of interest and the next succeeding interest payment date,
any Security to be repurchased must be accompanied by funds equal to the
interest payable on such succeeding interest payment date on the principal
amount to be repurchased (unless such Security shall have been called for
redemption, in which case no such payment shall be required), and the interest
on the principal amount of the Security being repurchased will be paid on such
next succeeding interest payment date to the registered holder of such Security
on the immediately preceding record date. A Security repurchased on an interest
payment date need not be accompanied by any payment, and the interest on the
principal amount of the Security being repurchased will be paid on such interest
payment date to the registered holder of such Security on the immediately
preceding record date.
(d)In the event a Change of Control Repurchase Right shall be
exercised in accordance with the terms hereof, the Company shall pay or cause to
be paid the applicable Change of Control Price with respect to the Securities as
to which the Change of Control Repurchase Right shall have been exercised to the
Holder on the Change of Control Repurchase Date.
(e)On or prior to a Change of Control Repurchase Date, the Company
shall deposit with the Trustee or with a Paying Agent (or, if the Company is
acting as its own Paying Agent, segregate and hold in trust in accordance with
Section 2.04) an amount of money sufficient to pay the Change of Control Price
payable in respect of all of the Securities which are to be repurchased on that
date.
(f) Both the notice of the Company and the notice of the Holder having
been given as specified in this Section 4.08, the Securities so to be
repurchased shall, on the Change of Control Repurchase Date, become due and
payable at the Change of Control Price applicable thereto and from and after
such date (unless the Company shall default in the payment of the Change of
Control Price) such Securities shall cease to bear interest. If any Security
shall not be paid upon surrender thereof for repurchase, the principal shall,
until paid, bear interest from the Change of Control Repurchase Date at the rate
borne by such Security.
(g) Any Security which is to be submitted for repurchase only in part
shall be delivered pursuant to this
<PAGE>
-30-
Section 4.08 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company shall execute, and the Trustee shall authenticate
and make available for delivery to the Holder of such Security without any
service charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, of the same tenor and in aggregate principal amount
equal to and in exchange for the portion of the principal of such Security not
submitted for repurchase.
(h) If any repurchase pursuant to the foregoing provisions constitutes
a tender offer as defined under the Exchange Act, the Company will comply with
the requirements of Rule 14e-1 and any other tender offer rules under the
Exchange Act which then may be applicable.
SECTION 4.09. Maintenance of Net Worth.
------------------------
(a) In the event that the Company's Net Worth at the end of each of
any two consecutive fiscal quarters (the last day of such second fiscal quarter
being referred to as the "Trigger Date") is less than $20,000,000 (the "Minimum
Net Worth"), then the Company shall make an offer to all Holders (a "Net Worth
Offer") to acquire on a pro rata basis on the date (the "Net Worth Repurchase
Date") that is 45 days following the date of the Net Worth Notice (as defined
below), Securities in an aggregate principal amount equal to 10% of the initial
outstanding principal amount of the Securities (or if less than 10% of the
aggregate principal amount of the Securities originally issued are then
outstanding, all the Securities outstanding at the time) (the "Net Worth Offer
Amount") at a purchase price of 100% of the principal amount thereof, plus
accrued interest to the Net Worth Repurchase Date (the "Net Worth Price"). The
Company may credit against the Net Worth Offer Amount the principal amount of
Securities acquired by the Company prior to the Trigger Date through purchase,
optional redemption or exchange. The Company, however, may not credit a
specific Security in more than one Net Worth Offer. In no event shall the
failure to meet the Minimum Net Worth at the end of any fiscal quarter be
counted toward the making of more than one Net Worth Offer. The Company shall
notify the Trustee promptly after the occurrence of any of the events specified
in this Section 4.09 and shall notify the Trustee in writing if its Net Worth is
equal to or less than the Minimum Net Worth for any fiscal quarter.
(b) Within 30 days after the Trigger Date, the Company, or, at the
request of the Company, the Trustee, shall give notice of the Net Worth Offer to
each Holder (the "Net Worth Notice"). The Company shall also deliver a copy of
the Net Worth
<PAGE>
-31-
Notice to the Trustee. Any such notice shall contain all instructions and
materials necessary to enable such Holders to deliver Securities pursuant to the
Net Worth Offer including, without limitation, the following:
(1) the Net Worth Repurchase Date;
(2) the date by which the Net Worth Offer must be accepted by a
Holder;
(3) the Net Worth Price and the Net Worth Offer Amount; and
(4) that Securities are to be surrendered for payment of the Net Worth
Price.
(c) To accept a Net Worth Offer a Holder shall deliver to the Company
(if it is acting as its own Paying Agent) or to a Paying Agent designated by the
Company for such purpose in the Net Worth Notice, on or before the 30th day
after the date of the Net Worth Notice, or, if such day is a Legal Holiday, the
next subsequent day which is not a Legal Holiday, (i) written notice of the
Holder's acceptance of such offer, which notice shall set forth the name of the
Holder, the principal amount of Securities (or portions thereof) to be
repurchased, a statement that an acceptance of the Net Worth Offer is being made
thereby and (ii) the Securities with respect to which the Net Worth Offer is
being accepted, duly endorsed for transfer to the Company, and the Holder of
such Securities shall be entitled to receive from the Company (if it is acting
as its own Paying Agent) or such Paying Agent a nontransferable receipt of
deposit evidencing such deposit. Such written notice may be withdrawn upon
further written notice delivered to the Trustee on or prior to the third day
preceding the Net Worth Repurchase Date.
If the Net Worth Repurchase Date is between a regular record date for
the payment of interest and the next succeeding interest payment date, any
Security to be repurchased must be accompanied by funds equal to the interest
payable on such succeeding interest payment date on the principal amount to be
repurchased (unless such Security shall have been called for redemption, in
which case no such payment shall be required), and the interest on the principal
amount of the Security being repurchased will be paid on such next succeeding
interest payment date to the registered holder of such Security on the
immediately preceding record date. A Security repurchased on an interest
payment date need not be accompanied by any payment, and the interest on the
principal amount of the Security being repurchased will be paid on such interest
payment date to the registered holder of such Security on the immediately
preceding record date.
<PAGE>
-32-
(d) In the event a Net Worth Offer is accepted in accordance with the
terms hereof, the Company shall pay or cause to be paid the applicable Net Worth
Price with respect to the Securities as to which the Net Worth Offer shall have
been accepted (on a pro rata basis up to the Net Worth Offer Amount, plus
accrued interest) to the Holder on the Net Worth Repurchase Date.
(e) On the Net Worth Repurchase Date, the Company shall deliver to the
Trustee the amount of Securities to be credited against the Net Worth Offer
Amount and shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust in
accordance with Section 2.04) an amount of money sufficient to pay the Net Worth
Price payable in respect of all of the Securities which are to be repurchased on
that date, but in no event shall the Company be obligated to deposit an amount
in excess of the Net Worth Offer Amount, plus accrued interest.
(f) Both the notice of the Company and the notice of the Holder having
been given as specified in this Section 4.09, the Securities to be repurchased
shall, on the Net Worth Repurchase Date, become due and payable at the Net
Worth Price applicable thereto and from and after such date (unless the Company
shall default in the payment of the Net Worth Price) such Securities shall cease
to bear interest. If any Security shall not be paid upon surrender thereof for
repurchase, the principal and interest (to the extent lawful) shall, until paid,
bear interest from the Net Worth Repurchase Date at the rate borne by such
Security.
(g) Any Security which is to be submitted for repurchase only in part
shall be delivered (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and make available for delivery to the Holder of such
Security without any service charge, a new Security or Securities, of any
authorized denomination as requested by such Holder, of the same tenor and in
aggregate principal amount equal to and in exchange for the portion of the
principal of such Security not submitted for repurchase.
(h) If any repurchase pursuant to the foregoing provisions constitutes
a tender offer as defined under the Exchange Act, the Company will comply with
the requirements of Rule 14e-1 and any other tender offer rules under the
Exchange Act which then may be applicable.
SECTION 4.10. Limitation on Debt.
------------------
<PAGE>
-33-
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee or
otherwise become liable for ("Incur") any Debt, except Permitted Debt.
Notwithstanding the foregoing, and subject to the immediately
succeeding paragraph, the Company and its Restricted Subsidiaries may Incur Debt
if, at the time such Debt is so Incurred and after giving effect thereto and the
application of the proceeds therefrom, the Company's Coverage Ratio shall not be
less than 2.0 to 1.0.
The Company will not, and will not cause or permit any Guarantor to,
directly or indirectly, Incur any Debt that purports to be by its terms (or by
the terms of any agreement governing such Debt) subordinated to any other Debt
of the Company or of such Guarantor, as the case may be, unless such Debt is
also by its terms (or by the terms of any agreement governing such Debt) made
expressly subordinated to the Securities or the Guarantee of such Guarantor, as
the case may be, to the same extent and in the same manner as such Debt is
subordinated to such other Debt.
For purposes of this Section 4.10, any waiver, extension or
continuation of any or all mandatory prepayments or installment payments or the
maturity date of any of the Debt Incurred pursuant to this Section 4.10 shall
not be or be deemed to be the Incurrence of Debt by the Company or its
Restricted Subsidiaries.
SECTION 4.11. Limitation on Restricted Payments.
---------------------------------
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment, if, after
giving effect thereto:
(a) an Event of Default, or an event that through the passage of time
or the giving of notice, or both, would become an Event of Default, shall
have occurred and be continuing;
(b) the Company would be unable to Incur $1.00 of additional Debt
under the second paragraph set forth under Section 4.10; or
(c) the aggregate amount of all Restricted Payments made by the
Company and its Restricted Subsidiaries (the amount expended or distributed
for such purposes, if other than cash, to be determined in good faith by
the Board of Directors of the Company) from and after the date of this
Indenture shall exceed the sum of:
<PAGE>
-34-
(i) the aggregate of 50% of the Consolidated Net Income of the Company
accrued for the period (taken as one accounting period) commencing
with April 1, 1996 to and including the first full month ended
immediately prior to the date of such calculation (or, in the event
Consolidated Net Income is a deficit, then minus 100% of such
deficit);
(ii) the aggregate net proceeds (the amount of such proceeds, if
other than in cash, to be determined in good faith by the Board of
Directors of the Company) received by the Company from the issuance
or sale (other than to a Subsidiary of the Company) of its Capital
Stock (other than Redeemable Stock), including the principal amount of
any convertible or exchangeable notes or other convertible or
exchangeable securities that are converted or exchanged into Capital
Stock, from and after the date of this Indenture, and options,
warrants and rights to purchase its Capital Stock (other than
Redeemable Stock);
(iii) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the date of
this Indenture (excluding any Investment described in clause (iv) of
the following paragraph, but including upon the redesignation of an
Unrestricted Subsidiary as a Restricted Subsidiary), an amount equal
to the lesser of the return of capital with respect to such Investment
and the cost of such Investment, in either case, reduced (but not
below zero) by the excess, if any, of the cost of the disposition of
such Investment over the gain, if any, realized by the Company or such
Restricted Subsidiary in respect of such disposition of such
Investment; and
(iv) $5,000,000.
The foregoing paragraphs will not prevent (i) the payment of any
dividend within 60 days after the date of its declaration if such dividend could
have been made on the date of its declaration in compliance with the foregoing
provisions; (ii) so long as no Default or Event of Default shall have occurred
and be continuing, the redemption, repurchase or other acquisition or retirement
of any shares of any class of Capital Stock of the Company or any Subsidiary of
the Company in exchange for, or out of the net cash proceeds of, a substantially
concurrent (x) capital contribution to the Company from any Person (other than a
Subsidiary of the Company) or (y) issue and sale of other shares of Capital
Stock (other than Redeemable Stock) of the Company to any Person (other than to
a Subsidiary of the Company); provided, however, that the amount of any such net
-------- -------
proceeds that are
<PAGE>
-35-
utilized for any such redemption, repurchase or other acquisition or retirement
shall be excluded from clause (ii) of the preceding paragraph; (iii) so long as
no Default or Event of Default shall have occurred and be continuing, any
redemption, repurchase or other acquisition or retirement of Subordinated Debt
by exchange for, or out of the net cash proceeds of, a substantially concurrent
(x) capital contribution to the Company from any Person (other than a Subsidiary
of the Company) or (y) issue and sale of (A) Capital Stock (other than
Redeemable Stock) of the Company to any Person (other than to a Subsidiary of
the Company); provided, however, that the amount of any such net proceeds that
-------- -------
are utilized for any such redemption, repurchase or other acquisition or
retirement shall be excluded from clause (ii) of the preceding paragraph; or (B)
Debt of the Company issued to any Person (other than a Subsidiary of the
Company), so long as such Debt (x) has no stated maturity earlier than ,
2006, (y) has a Weighted Average Life to Maturity equal to or greater than the
remaining Weighted Average Life to Maturity of the Securities and (z) is
subordinated to the Securities in the same manner and at least to the same
extent as the Subordinated Debt so purchased, exchanged, redeemed, acquired or
retired; (iv) Investments constituting Restricted Payments made as a result of
the receipt of non-cash consideration from any Asset Sale made pursuant to and
in compliance with Section 4.15; (v) so long as no Default or Event of Default
has occurred and is continuing, the repurchase or redemption of shares of
Capital Stock from any officer, director or employee of the Company or its
Restricted Subsidiaries whose employment has been terminated or who has died or
become disabled in an aggregate amount not to exceed $250,000 per annum; and
(vi) so long as no Default or Event of Default shall have occurred and be
continuing, the making of Restricted Payments in an aggregate amount not to
exceed $5,000,000, provided that amounts paid pursuant to clauses (v) and (vi)
(but not clauses (i), (ii), (iii) or (iv)) shall reduce amounts available for
future Restricted Payments.
SECTION 4.12. Limitation on Dividends and Other
Payment Restrictions Affecting
Restricted Subsidiaries.
---------------------------------
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, assume or otherwise cause or
suffer to exist or to become effective any consensual encumbrance or restriction
on the ability of any Restricted Subsidiary of the Company to (a) pay dividends
or make any other distributions on its Capital Stock to the Company or any of
its Restricted Subsidiaries; (b) make payments in respect of any Debt owed to
the Company or any of its Restricted Subsidiaries; or (c) make loans or advances
to the Company or any of the Company's Restricted Subsidiaries; provided,
--------
however, that the following restrictions shall not be
- -------
<PAGE>
-36-
prohibited pursuant to this Section 4.12: (i) those contained in this
Indenture, a Bank Facility, a Warehouse Facility, any Non-Recourse Debt Incurred
by the Carlsbad Subsidiary (to the extent that restrictions in such Non-Recourse
Debt apply only to the Carlsbad Subsidiary or any Subsidiary thereof) and
Refinancing Debt (to the extent restrictions contained in such Refinancing Debt
are not more restrictive than those contained in the Debt being refinanced);
(ii) consensual encumbrances or restrictions binding upon any Person at the time
such Person becomes a Restricted Subsidiary of the Company, provided that such
--------
encumbrances or restrictions are not created, incurred or assumed in
contemplation of such Person becoming a Restricted Subsidiary of the Company and
do not extend to any other property of the Company or another of its Restricted
Subsidiaries; (iii) restrictions contained in security agreements permitted by
this Indenture securing Debt permitted by this Indenture to the extent such
restrictions restrict the transfer of assets subject to such security
agreements; (iv) any encumbrance or restriction consisting of customary non-
assignment provisions in leases to the extent such provisions restrict the
transfer of the leases; (v) any encumbrance or restriction pursuant to an
agreement in effect on the date of this Indenture; or (vi) any restrictions with
respect to a Restricted Subsidiary of the Company imposed pursuant to an
agreement which has been entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary.
SECTION 4.13. Limitation on Liens.
-------------------
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien upon or with respect to any of the assets of the Company or any
such Restricted Subsidiary, whether now owned or hereafter acquired, or on any
income or profits therefrom, other than Liens which constitute Permitted Liens
at the date such Liens are created, unless contemporaneously therewith or prior
thereto all payments due under this Indenture and the Securities are secured on
an equal and ratable basis with the obligation or liability so secured until
such time as such obligation or liability is no longer secured by a Lien.
SECTION 4.14. Transactions with Affiliates.
----------------------------
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into any transactions with
Affiliates of the Company unless (i) such transactions are between or among the
Company and its Restricted Subsidiaries, (ii) such transactions are in the
ordinary course of business and consistent with past practice or (iii) the terms
of such transactions are as fair and reasonable to the Company or
<PAGE>
-37-
such Restricted Subsidiary, as the case may be, as in a comparable transaction
made on an arm's-length basis between unaffiliated parties. In the event of any
transaction or series of transactions occurring subsequent to the Closing Date
with an Affiliate of the Company which involves in excess of $2,500,000 and is
not permitted under clause (i) or (ii) of the preceding sentence, all of the
disinterested members of the Board of Directors shall by resolution determine
that such transaction or series of transactions meets the criteria set forth in
clause (iii) of the preceding sentence. In the event of any transaction or
series of transactions occurring subsequent to the Closing Date with an
Affiliate of the Company which involves in excess of $10,000,000 and is not
permitted under clause (i) above, the Company will be required to deliver to the
Trustee an opinion of an Independent Financial Advisor to the effect that the
transaction is fair to the Company or the relevant Restricted Subsidiary, as the
case may be, from a financial point of view. Notwithstanding the foregoing,
such provisions do not prohibit and will not apply to (1) any Restricted Payment
which is permitted by Section 4.11 or (2) the payment of compensation to
directors of the Company who are not employees of the Company and wages and
other compensation to officers of the Company or any of its Subsidiaries.
SECTION 4.15. Limitation on Asset Sales.
-------------------------
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, consummate an Asset Sale unless (i) the
Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined in good faith by the board of directors of the Company) of
the assets disposed of, and (ii) the consideration for such Asset Sale consists
of at least 85% cash; provided that (x) the amount of liabilities assumed by the
--------
transferee, (y) any notes or other obligations received by the Company or such
Restricted Subsidiary and immediately converted into cash or (z) with respect
to the sale or other disposition of all of the Capital Stock of any Restricted
Subsidiary, the amount of liabilities that remain the obligation of such
Restricted Subsidiary subsequent to such sale or other disposition, shall be
deemed to be "cash".
(b) Within 12 months from the date that any Asset Sale is consummated,
the Net Proceeds thereof shall be reinvested in Additional Assets or applied to
the redemption or repurchase of Debt of the Company which ranks pari passu with
----------
the Securities or Debt of a Restricted Subsidiary of the Company which is not
subordinated to other debt of such Restricted Subsidiary (which, in each case,
shall be a permanent reduction of such Debt). To the extent that the Net
Proceeds of an Asset Sale are not so
<PAGE>
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applied, the Company or such Restricted Subsidiary, as the case may be, shall,
within 30 days from the expiration of such 12-month period, use the remaining
Net Proceeds (less any amounts used to pay reasonable fees and expenses
connected with a Net Proceeds Offer (as defined below)) to make an offer (a "Net
Proceeds Offer") to repurchase the Securities at a price equal to 100% of the
principal amount thereof, plus accrued interest to the date of such repurchase,
which date shall be the 45th day after the date of the Net Proceeds Offer Notice
(the "Net Proceeds Repurchase Date"), in accordance with the provisions of
clause (c) below.
Notwithstanding the foregoing, the Net Proceeds of an Asset Sale are
not required to be applied in accordance with the preceding paragraph, unless
and until the aggregate Net Proceeds for all such Asset Sales in a 12-month
period exceeds $1,000,000.
(c) If the Company or one of its Restricted Subsidiaries is required
to make a Net Proceeds Offer pursuant to clause (b) above, the Company or such
Restricted Subsidiary, or, at the request of the Company, the Trustee, shall
give notice of the Net Proceeds Offer to each Holder (the "Net Proceeds Offer
Notice"). The Company shall also deliver a copy of the Net Proceeds Offer
Notice to the Trustee. Any such notice shall contain all instructions and
materials necessary to enable such Holders to deliver Securities pursuant to the
Net Proceeds Offer including, without limitation, the following:
(1) the Net Proceeds Repurchase Date,
(2) the date by which the Net Proceeds Offer must be accepted;
(3) the applicable amount of Net Proceeds being applied to the
repurchase of Securities in the Net Proceeds Offer (the "Purchase Amount");
and
(4) that Securities are to be surrendered for payment.
To accept a Net Proceeds Offer a Holder shall deliver to the Company
(if it is acting as its own Paying Agent) or to a Paying Agent designated by the
Company for such purpose in the notice referred to above on or before the 30th
day after the date of the Net Proceeds Offer, or, if such day is a Legal
Holiday, the next subsequent day which is not a Legal Holiday, (i) written
notice of the Holder's acceptance of the Net Proceeds Offer, which notice shall
set forth the name of the Holder, the principal amount of Securities (or
portions thereof) to be repurchased and a statement that an election to accept
the Net Proceeds Offer is being made thereby and (ii) the Securities with
respect to which the Net Proceeds Offer is being accepted, duly
<PAGE>
-39-
endorsed for transfer to the Company, and the Holder of such Securities shall be
entitled to receive from the Company (if it is acting as its own Paying Agent)
or such Paying Agent a nontransferable receipt of deposit evidencing such
deposit. Such written notice may be withdrawn upon further written notice to
the Trustee on or prior to the third day preceding the Net Proceeds Repurchase
Date.
If the Net Proceeds Repurchase Date is between a regular record date
for the payment of interest and the next succeeding interest payment date, any
Security to be repurchased must be accompanied by funds equal to the interest
payable on such succeeding interest payment date on the principal amount to be
repurchased (unless such Security shall have been called for redemption, in
which case no such payment shall be required), and the interest on the principal
amount of the Security being repurchased will be paid on such next succeeding
interest payment date to the registered holder of such Security on the
immediately preceding record date. A Security repurchased on an interest
payment date need not be accompanied by any payment, and the interest on the
principal amount of the Security being repurchased will be paid on such interest
payment date to the registered holder of such Security on the immediately
preceding record date.
In the event a Net Proceeds Offer shall be accepted in accordance with
the terms hereof, the Company shall pay or cause to be paid the pro rata portion
of the Purchase Amount with respect to the Securities as to which the Net
Proceeds Offer shall have been accepted to the Holder on the Net Proceeds
Repurchase Date.
On or prior to a Net Proceeds Repurchase Date, the Company shall
deposit with the Trustee or with a Paying Agent (or, if the Company is acting as
its own Paying Agent, segregate and hold in trust in accordance with Section
2.04) an amount of money equal to the Purchase Amount.
Both the notice of the Company and the notice of the Holder having
been given as specified above, the Securities to be repurchased shall, on the
Net Proceeds Repurchase Date, become due and payable and from and after such
date (unless the Company shall default in the payment of the Purchase Amount)
such Securities shall cease to bear interest. If any Security shall not be paid
upon surrender thereof for repurchase, the principal and interest shall, until
paid, bear interest from the Net Proceeds Repurchase Date at the rate borne by
such Security.
Any Security which is to be submitted for repurchase only in part
shall be delivered pursuant to this provision (with, if the Company or the
Trustee so requires, due endorsement by, or
<PAGE>
-40-
a written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall authenticate and
make available for delivery to the Holder of such Security without any service
charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, of the same tenor and in aggregate principal amount
equal to and in exchange for the portion of the principal of such Security not
submitted for repurchase.
If any repurchase pursuant to the foregoing provisions constitutes a
tender offer as defined under the Exchange Act, the Company will comply with the
requirements of Rule 14e-1 and any other tender offer rules under the Exchange
Act which then may be applicable.
(d) Any amount of Net Proceeds remaining after a Net Proceeds Offer
shall be returned by the Trustee to the Company and may be used by the Company
for any purpose not inconsistent with the Indenture.
SECTION 4.16. Additional Guarantors.
---------------------
The Company shall cause any Subsidiary with a net book value greater
than $10,000,000 which is designated as a Restricted Subsidiary to,
simultaneously with its designation as a Restricted Subsidiary, execute and
deliver (i) a supplemental indenture to this Indenture, providing for the
guarantee of payment of the Securities by such Subsidiary pursuant to the terms
of Article Ten hereof and Exhibit B hereto and (ii) a guarantee in the form of
Exhibit B hereto.
ARTICLE FIVE
SUCCESSORS
SECTION 5.01. When Company May Merge, etc.
---------------------------
Neither the Company nor any Guarantor shall consolidate or merge with
or into, or sell, lease, convey or otherwise dispose of all or substantially all
of its assets (including, without limitation, by way of liquidation or
dissolution), or assign any of its obligations under the Securities, the
Guarantees or this Indenture (as an entirety or substantially as an entirety in
one transaction or a series of related transactions), to any Person or permit
any of its Restricted Subsidiaries to do any of the foregoing (in each case
other than with the Company or another wholly owned Restricted Subsidiary)
unless:
<PAGE>
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(1) the person formed by or surviving any such consolidation or merger
(if other than the Company or such Guarantor, as the case may be), or to
which such sale, lease, conveyance or other disposition or assignment will
be made (collectively, the "Successor"), is a Person organized and existing
under the laws of the United States, any State thereof or the District of
Columbia;
(2) the Successor assumes by supplemental indenture in a form
reasonably satisfactory to the Trustee all of the obligations of the
Company or such Guarantor, as the case may be, under the Securities or such
Guarantor's Guarantee, as the case may be, and this Indenture;
(3) immediately after giving effect to such transaction no Default or
Event of Default has occurred and is continuing;
(4) immediately after giving effect to such transaction and the use of
any net proceeds therefrom, on a pro forma basis, the Consolidated Tangible
Net Worth of the Company or the Successor (in the case of a transaction
involving the Company), as the case may be, would be at least equal to the
Consolidated Tangible Net Worth of the Company immediately prior to such
transaction; and
(5) in the case of a transaction involving the Company, immediately
after giving effect to such transaction and the use of any net proceeds
therefrom, on a pro forma basis, the Coverage Ratio of the Company or the
Successor (in the case of a transaction involving the Company), as the case
may be, would be such that the Company or the Successor (in the case of a
transaction involving the Company), as the case may be, would be entitled
to Incur at least $1.00 of additional Debt under such Coverage Ratio test
set forth in Section 4.10.
The foregoing provisions shall not apply to a transaction involving the
consolidation or merger of a Guarantor with or into another person, or the sale,
lease, conveyance or other disposition of all or substantially all of the assets
of such Guarantor, that results in such Guarantor being released from its
Guarantee as provided under its Guarantee.
Notwithstanding the foregoing, clauses (4) and (5) shall not prohibit
a transaction, the principal purpose of which is (as determined in good faith by
the board of directors of the Company) to change the state of incorporation of
the Company, and such transaction does not have as one of its purposes the
evasion of the restrictions of this Section 5.01.
<PAGE>
-42-
The Company shall deliver to the Trustee prior to the consummation of
the proposed transaction an Officers' Certificate to the foregoing effect and an
Opinion of Counsel stating that the proposed transaction and such supplemental
indenture comply with this Indenture.
SECTION 5.02. Successor Substituted.
---------------------
Upon any consolidation, merger, sale, assignment, transfer, lease or
other disposition of all or substantially all of the assets of the Company in
accordance with Section 5.01, the Successor shall succeed to, and be substituted
for, and may exercise every right and power of, and shall assume every duty and
obligation of, the Company under this Indenture with the same effect as if such
Successor had been named as the Company herein. When the Successor assumes all
obligations of the Company hereunder, all obligations of the predecessor shall
terminate.
ARTICLE SIX
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default.
-----------------
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any Security
when the same becomes due and payable and the default continues for a
period of 30 days;
(2) the Company defaults in the payment of the principal of any
Security when the same becomes due and payable at maturity, upon
acceleration or otherwise;
(3) the Company or any Guarantor fails to comply with any of its other
agreements in the Securities, the Guarantees or this Indenture and the
default continues for the period and after the notice specified below;
(4) an event of default shall have occurred under one or more
evidences of Debt of the Company or any of its Restricted Subsidiaries
(other than Non-Recourse Debt) with an outstanding aggregate principal
amount of $5,000,000 or more, whether such Debt now exists or is created
hereafter, which event of default (i) consists of the failure by the
Company or any Restricted Subsidiary to make any payment in respect of such
Debt at its final maturity or (ii) results in the acceleration of such
Debt, which acceleration shall be in effect;
<PAGE>
-43-
(5) a final judgment or judgments for the payment of money in excess
of $5,000,000 in the aggregate are rendered against the Company or any of
its Restricted Subsidiaries and such judgment or judgments remain
unstayed, unsatisfied or undischarged for the period and after the notice
specified below;
(6) any Guarantee of a Material Subsidiary ceases to be in full force
and effect (other than in accordance with the terms of such Guarantee and
this Indenture) or is declared null and void and unenforceable or found to
be invalid or any Guarantor denies its liability under its Guarantee (other
than by reason of release of a Guarantor from its Guarantee in accordance
with the terms of the Guarantee and this Indenture);
(7) the Company or any of its Material Subsidiaries pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case,
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors;
or
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company in an involuntary case,
(B) appoints a Custodian of the Company for all or substantially
all of its property, or
(C) orders the liquidation of the Company,
and the order or decree remains unstayed and in effect for 90 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or State law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
A default under clause (3) or (5) is not an Event of Default until the
Trustee or the Holders of at least 25% in
<PAGE>
-44-
principal amount of the Securities then outstanding notify the Company of the
default and the Company does not cure the default within 60 days 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 Securities then outstanding request the Trustee to give such
notice on their behalf, the Trustee shall do so.
The Trustee shall not be deemed to have notice of any Default
hereunder unless it shall have actual knowledge of such Default or it shall have
received written notice thereof making specific reference to such Default as a
Default.
SECTION 6.02. Acceleration.
------------
If an Event of Default (other than an Event of Default specified in
Section 6.01(7) or Section 6.01(8), with respect to the Company) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at least 25%
in principal amount of the Securities then outstanding by notice to the Company
and the Trustee, may declare the principal of and accrued interest on all the
Securities to be due and payable. Upon such declaration such principal and
interest shall be due and payable immediately. If an Event of Default specified
in Section 6.01(7) or Section 6.01(8), with respect to the Company occurs, all
unpaid principal and accrued interest on the Securities then outstanding shall
ipso facto become and be immediately due and payable without any declaration or
- ---- -----
other act on the part of the Trustee or any Securityholder. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of the acceleration.
SECTION 6.03. Other Remedies.
--------------
Notwithstanding any other provision of this Indenture, if an Event of
Default occurs and is continuing, the Trustee may pursue any available remedy by
proceeding at law or in equity to collect the payment of principal of or
interest on the Securities or to enforce the performance of any provision of
the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
<PAGE>
-45-
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative.
SECTION 6.04. Waiver of Past Defaults.
-----------------------
Subject to Sections 6.07 and 9.02, the Holders of a majority in
principal amount of the Securities then outstanding by notice to the Trustee may
waive an existing Default and its consequences. When a Default is waived, it is
cured and ceases; but no such waiver shall extend to any other default.
SECTION 6.05. Control by Majority.
-------------------
The Holders of a majority in principal amount of the Securities then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that the Trustee determines is unduly
prejudicial to the rights of other Securityholders or would involve the Trustee
in personal liability and the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
SECTION 6.06. Limitation on Suits.
-------------------
Except as provided in Section 6.07, a Securityholder may pursue a
remedy with respect to this Indenture or the Securities only if:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in principal amount of the Securities
then outstanding make a written request to the Trustee to institute
proceedings in respect of such Event of Default;
(3) such Holder or Holders offer to the Trustee reasonable indemnity
against any loss, liability or expense (including reasonable attorneys'
fees);
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of a majority in principal
amount of the Securities then outstanding do not give the Trustee a
direction inconsistent with the request.
<PAGE>
-46-
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Security to receive payment of principal of and interest on the
Security, on or after the respective due dates expressed in the Security, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default specified in Section 6.01(1) or (2) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company for the whole amount of principal and
interest remaining unpaid.
SECTION 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee, any predecessor Trustee and the Securityholders allowed in any judicial
proceedings relative to the Company, its creditors or its property.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of the
Securities any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder of the Securities in
any such proceeding.
SECTION 6.10. Priorities.
----------
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
-----
Second: to Securityholders for amounts due and unpaid on the
------
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
<PAGE>
-47-
Third: to the Company.
-----
The Trustee may fix a record date and payment date for any payment by
it to Securityholders pursuant to this Section.
SECTION 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit other than the Trustee of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section does not apply to a suit by the Trustee, a
suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10%
in principal amount of the Securities.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are specifically
set forth in this Indenture and no others.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture but need
not verify the accuracy of the content thereof.
(c) The Trustee may not be relieved from liability for
<PAGE>
-48-
its own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.
(e) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it against any loss,
liability or expense, including reasonable attorneys' fees.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree with the Company. Money held in trust by
the Trustee need not be segregated from other funds except to the extent
required by law.
(g) The Trustee shall not be required to give any bond or surety with
respect to the execution of its rights and powers or with respect to this
Indenture.
(h) The Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any covenants, conditions or agreements on the part
of the Company hereunder; but the Trustee may require of the Company full
information and advice as to the performance of the covenants, conditions and
agreements as aforesaid.
SECTION 7.02. Rights of Trustee.
-----------------
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate and/or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes
<PAGE>
-49-
or omits to take in good faith in reliance on such Certificate or Opinion.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers.
(e) It shall not be the duty of the Trustee, except as expressly
provided herein, to ensure that any duties or obligations herein imposed upon
the Company or any other Person are performed, and, except as expressly provided
herein, the Trustee shall not be liable or responsible for the failure of any
other Person to perform any act required of it or them by this Indenture.
(f) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder.
SECTION 7.03. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or an
Affiliate thereof with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights. The Trustee, however, must comply
with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities; it shall not be accountable for the Company's
use of the proceeds from the Securities; and it shall not be responsible for any
statement in the Securities other than its certificate of authentication.
SECTION 7.05. Notice of Defaults.
------------------
If a Default occurs and is continuing and if it is actually known to
the Trustee or the Trustee has received written notice thereof, the Trustee
shall mail to each Securityholder a notice of the Default within 90 days after
it occurs. Except in the case of a Default in payment of principal of or
interest on any Security, the Trustee may withhold the notice if and so long as
it in good faith determines that withholding the notice is in the interests of
Securityholders.
<PAGE>
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SECTION 7.06. Reports by Trustee to Holders.
-----------------------------
If required by TIA (S) 313(a), within 60 days after each May 15
beginning with May 15, 1996, the Trustee shall mail to each Securityholder as
required by TIA (S) 313(c) a brief report dated as of such date that complies
with TIA (S) 313(a). The Trustee also shall comply with TIA (S) 313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed by the Trustee with the SEC and each stock exchange, if any, on
which the Securities are listed. The Company shall notify the Trustee when the
Securities are listed on any stock exchange.
SECTION 7.07. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time such
compensation for its services as shall be agreed upon in writing. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred by it. Such expenses shall include
the reasonable compensation and out-of-pocket expenses of the Trustee's agents
and counsel.
The Company shall indemnify the Trustee against any loss or liability
(including the fees and expenses of counsel) incurred by it in connection with
the administration of this trust and the performance of its duties hereunder.
The Company need not pay for any settlement made without its consent. The
Trustee shall notify the Company promptly of any claim for which it may seek
indemnification. The Company need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee through the Trustee's
negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or (7) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
----------------------
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the
<PAGE>
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successor Trustee's acceptance of appointment as provided in this Section.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Securities may remove the Trustee by so
notifying the Trustee and the Company and may appoint a successor Trustee with
the Company's consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
Notwithstanding the replacement of the Trustee pursuant
<PAGE>
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to Section 7.08, the Company's obligation to compensate the retiring Trustee
under Section 7.07, for services rendered prior to its retirement shall continue
for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
--------------------------------
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to another corporation, the
successor corporation without any further act shall be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1). The Trustee shall always have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply with TIA (S)
310(b).
SECTION 7.11. Preferential Collection of Claims
Against Company.
---------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated.
ARTICLE EIGHT
DEFEASANCE
SECTION 8.01. Defeasance upon Deposit of Moneys
or U.S. Government Obligations.
---------------------------------
This Indenture and the Guarantees shall cease to be of further effect
(except that the Company's obligations under Sections 7.07 and 8.05 hereof
shall survive) when all outstanding Securities theretofore authenticated and
issued (other than Securities which have been destroyed, lost or stolen and
which have been replaced as provided in Section 2.07 hereof) have been delivered
to the Trustee for cancellation and the Company has paid all sums payable
hereunder.
Notwithstanding the first paragraph of this Section 8.01, at the
Company's option indicated by notice to the Trustee, either (a) the Company
shall be deemed to have been Discharged (as defined below) from its obligations
with respect to the Securities on the 91st day after the applicable conditions
set forth below have been satisfied or (b) the Company shall cease to
<PAGE>
-53-
be under any obligation to comply with any term, provision or condition set
forth in Sections 4.06 through 4.15 and shall cease to be subject to the
provisions of Section 6.01(3) with respect to Sections 4.06 through 4.15 and
Section 6.01(4) with respect to the Securities at any time after the conditions
set forth below have been satisfied:
(1) the Company shall have deposited or caused to be deposited
irrevocably with the Trustee as trust funds in trust, specifically pledged
as security for, and dedicated solely to, the benefit of the Holders of the
Securities (i) money in an amount, or (ii) U.S. Government Obligations
which through the payment of interest and principal in respect thereof in
accordance with their terms will provide, not later than one day before the
due date of any payment, money in an amount, or (iii) a combination of (i)
and (ii), sufficient, in the opinion with respect to (ii) and (iii) of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge each installment of principal of and interest on the outstanding
Securities on the dates such installments of interest or principal are due;
(2) the Company shall have delivered to the Trustee an Opinion of
Counsel stating that the Holders of the outstanding Securities will not
recognize income, gain or loss for Federal income tax purposes as a result
of such defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such defeasance had not occurred;
(3) such deposit will not result in a breach or violation of, or
constitute a Default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(4) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit; and
(5) the Company shall have delivered to the Trustee an Officers
Certificate stating that the conditions set forth in this Section 8.01 have
been satisfied or complied with.
"Discharged" shall mean that the Company and each Guarantor shall be
deemed to have paid and discharged the entire indebtedness represented by, and
obligations under, the Securities and to have satisfied all the obligations
under this Indenture and the Guarantees relating to the Securities (and the
Trustee, upon the request of the Company and at the expense of
<PAGE>
-54-
the Company, shall execute proper instruments acknowledging the same).
SECTION 8.02. Termination of the Obligations
Pursuant to Redemption.
------------------------------
The Company and each Guarantor may terminate its obligations under the
Securities, this Indenture and the Guarantees (except that the Company's
obligations under Sections 7.07 and 8.05 hereof shall survive) and the Company
and the Guarantors shall be deemed to have been Discharged from its Obligations
with respect to the Securities and the Guarantees if:
(a) either (i) pursuant to Article Three, the Company shall have given
notice to the Trustee and mailed a notice of redemption to each Holder of
the redemption of all of the Securities under arrangements satisfactory to
the Trustee for the giving of such notice or (ii) all Securities have
otherwise become due and payable hereunder;
(b) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee reasonably satisfactory to the
Trustee, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee, as trust funds in trust solely for
the benefit of the Holders for that purpose, money in such amount as is
sufficient without consideration of reinvestment of such interest, to pay
principal of, premium, if any, and interest on the outstanding Securities
to maturity or redemption, as certified in a certificate of a nationally
recognized firm of independent public accountants; provided that the
--------
Trustee shall have been irrevocably instructed to apply such money to the
payment of said principal, premium, if any, and interest with respect to
the Securities;
(c) no Default of Event of Default with respect to this Indenture or
the Securities shall have occurred and be continuing on the date of such
deposit or shall occur as a result of such deposit and such deposit will
not result in a breach or violation of, or constitute a default under, any
other instrument to which the Company is a party or by which it is bound;
and
(d) the Company shall have paid all other sums payable by it
hereunder;
(e) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the conditions set forth in this Section 8.02 have
been complied with.
<PAGE>
-55-
SECTION 8.03. Survival of Company's Obligations.
---------------------------------
Notwithstanding the satisfaction and discharge of the Indenture under
Section 8.01 or Section 8.02, the Company's obligations in Sections 2.04, 2.05,
2.06, 2.07, 2.08, 4.01, 4.02, 4.05, 7.07, 7.08, 8.04, 8.05 and 8.06, however,
shall survive until the Securities are no longer outstanding. Thereafter, the
Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive.
SECTION 8.04. Application of Trust Money.
--------------------------
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01. It shall apply the deposited money
and the money from U.S. Government Obligations in accordance with this Indenture
to the payment of principal of and interest on the Securities.
SECTION 8.05. Repayment to Company.
--------------------
The Trustee and the Paying Agent shall promptly pay to the Company
upon request any excess money or securities held by them at any time. The
Trustee and the Paying Agent shall pay to the Company upon request any money
held by them for the payment of principal or interest that remains unclaimed for
two years, provided, however, that the Trustee or such Paying Agent, before
being required to make any such repayment, may at the expense of the Company
cause to be published once in a newspaper of general circulation in the City of
New York or mail to each such Holder notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication or mailing, any unclaimed balance of such
money then remaining will be repaid to the Company. After payment to the
Company, Securityholders entitled to the money must look to the Company for
payment as general creditors unless applicable abandoned property law designates
another person.
The Company shall indemnify Trustee to the fullest extent permissible
by law for the Trustee's failure to comply with any abandoned property or
escheat law by acting in accordance with this Section 8.05.
SECTION 8.06. Reinstatement.
-------------
If the Trustee is unable to apply any money or U.S. Government
Obligations in accordance with Section 8.01 by reason of any legal proceeding or
by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Company's
obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had occurred pursuant to Sec-
<PAGE>
-56-
tion 8.01 until such time as the Trustee is permitted to apply all such money or
U.S. Government Obligations in accordance with Section 8.01; provided, however,
-------- -------
that if the Company has made any payment of interest on or principal of any
Securities because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee.
ARTICLE NINE
AMENDMENTS
SECTION 9.01. Without Consent of Holders.
--------------------------
The Company and the Guarantors, with the consent of the Trustee, may
amend or supplement this Indenture, the Securities or the Guarantees without
notice to or the consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency; provided
--------
that such amendment or supplement does not adversely affect the rights of
any Securityholder;
(2) to comply with Section 5.01;
(3) to provide for uncertificated Securities in addition to
certificated Securities;
(4) to make any change that does not materially adversely affect the
rights of any Securityholder hereunder;
(5) to comply with the qualification of this Indenture under the TIA;
or
(6) to reflect a Guarantor ceasing to be liable on the Guarantees
because it is no longer a Subsidiary of the Company or to reflect
additional Guarantors.
For the purposes of Section 9.01, the Trustee may, in its discretion,
determine whether or not the Holder of any Securities would be materially
adversely affected by any amendment or supplement to this Indenture and any such
determination shall be conclusive upon every Holder, whether theretofore or
thereafter entered into. The Trustee shall, subject to the express provisions
of this Indenture, not be liable for any such determination made in good faith
and shall be entitled to, and may rely upon, an Opinion of Counsel with respect
thereto.
<PAGE>
-57-
SECTION 9.02. With Consent of Holders.
-----------------------
The Company and the Guarantors, with the consent of the Trustee, may
amend or supplement this Indenture, the Securities or the Guarantees without
notice to any Securityholder but with the written consent of the Holders of at
least a majority in principal amount of the Securities then outstanding.
Subject to Section 6.07, the Holders of a majority in principal amount of the
Securities then outstanding may waive compliance by the Company or any Guarantor
with any provision of this Indenture, the Securities or the Guarantees without
notice to any Securityholder. However, without the consent of each
Securityholder affected, an amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of interest on
any Security;
(3) reduce the principal of or change the fixed maturity of any
Security (including, without limitation, the optional redemption
provisions, but excluding Sections 4.08, 4.09 and 4.15);
(4) waive a Default or Event of Default in the payment of principal of
or interest on any Security;
(5) make any Security payable in money other than that stated in the
Security;
(6) make any change in Section 6.04, Section 6.07 or Section 9.02;
(7) adversely modify the terms and conditions of the obligations of
the Guarantors or ranking or priority of the Securities or any Guarantee;
or
(8) release any Guarantor from any of its obligations under its
Guarantee or this Indenture otherwise than in accordance with the terms
hereof.
Promptly after an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing the amendment.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or supplement,
but it shall be sufficient if such consent approves the substance thereof.
<PAGE>
-58-
SECTION 9.03. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to this Indenture, the Securities or the Guarantees
shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
---------------------------------
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Security is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent Holder may revoke
the consent as to his Security or portion of a Security if the Trustee receives
the notice of revocation before the date the amendment, supplement or waiver
becomes effective. An amendment, supplement or waiver becomes effective in
accordance with its terms and thereafter binds every Securityholder.
After an amendment, supplement or waiver becomes effective with
respect to the Securities, it shall bind every Securityholder unless it makes a
change described in any of clauses (1) through (8) of Section 9.02. In that
case the amendment, supplement or waiver shall bind each Holder of a Security
who has consented to it and, provided that notice of such amendment, supplement
--------
or waiver is reflected on a Security that evidences the same debt as the
consenting Holder's Security, every subsequent Holder of a Security or portion
of a Security that evidences the same debt as the consenting Holder's Security.
SECTION 9.05. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
SECTION 9.06. Trustee Protected.
-----------------
The Trustee need not sign any amendment, supplement or waiver
authorized pursuant to this Article that adversely affects the Trustee's rights.
The Trustee shall be entitled to receive and rely upon an Opinion of Counsel and
an Officers' Certificate that any supplemental indenture complies with the
Indenture.
<PAGE>
-59-
ARTICLE TEN
GUARANTEE OF SECURITIES
SECTION 10.01. Guarantee.
---------
Subject to the provisions of this Article 10, each Guarantor (which
term includes any successor Person under this Indenture and any additional
Guarantor pursuant to Section 4.16 of this Indenture) for consideration received
hereby jointly and severally unconditionally and irrevocably guarantees on a
senior basis (each a "Guarantee", and collectively, the "Guarantees") to each
Holder of a Security authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity and
enforceability of this Indenture, the Securities or the obligations of the
Company or any other Guarantor to the Holders or the Trustee hereunder or
thereunder, that: (a) the principal of, premium, if any, and interest on the
Securities will be duly and punctually paid in full when due, whether at
maturity, as a result of redemption, upon a Change of Control, as a result of a
Net Worth Offer, by acceleration or otherwise, and interest on the overdue
principal, premium, if any, and (to the extent permitted by law) interest, if
any, on the Securities and all other payment obligations of the Company or the
Guarantors to the Holders or the Trustee hereunder or thereunder (including
fees, expenses or other) will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (b) in case of any extension
of time of payment or renewal of any Securities, the same will be promptly paid
in full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise. Failing
payment or performance when due of any amount or obligations so guaranteed for
whatever reason, each Guarantor will be obligated to pay or perform the same
immediately. An Event of Default under this Indenture or the Securities shall
constitute an event of default under the Guarantees, and shall entitle the
Holders of Securities to accelerate the obligations of the Guarantors hereunder
in the same manner and to the same extent as the obligations of the Company.
Each of the Guarantors hereby agrees that its obligations hereunder
shall be absolute and unconditional, irrespective of, and shall be unaffected
by, the invalidity, irregularity or unenforceability of the Securities or this
Indenture, the absence of any action to enforce the same, any waiver,
modification or consent by any holder of the Securities with respect to any
provisions hereof or thereof, any release of any other Guarantor, the recovery
of any judgment against the Company, any action to enforce the same, whether or
not a Guarantee is affixed to any particular Security, or any other
<PAGE>
-60-
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a Guarantor. Each of the Guarantors hereby waives the benefit of
diligence, presentment, demand of payment, filing of claims with a court in the
event of merger insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenants that its Guarantee will not be discharged except by complete
performance of the obligations contained in the Securities, this Indenture and
its Guarantee. If any Holder or the Trustee is required by any court or
otherwise to return to the Company or to any Guarantor, or any custodian,
trustee, liquidator or other similar official acting in relation to the Company
or such Guarantor, any amount paid by the Company or such Guarantor to the
Trustee or such Holder, its Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect. Each Guarantor further agrees
that, as between it, on the one hand, and the Holders of Securities and the
Trustee, on the other hand, (a) subject to this Article 10, the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of its Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (b) in the event of any declaration of acceleration of
such obligations as provided in Article 6 hereof, such obligations (whether or
not due and payable) shall forthwith become due and payable by such Guarantor
for the purpose of its Guarantees.
[The Guarantees shall remain in full force and effect and continue to
be effective should any petition be filed by or against the Company for
liquidation or reorganization, should the Company become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of the Company's assets, and shall, to
the fullest extent permitted by law, continue to be effective or be reinstated,
as the case may be, if at any time payment of the Securities are, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee on the Securities, whether as a "voidable preference,"
"fraudulent transfer" or otherwise, all as though such payment had not been
made. In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Securities shall, to the fullest extent
permitted by law, be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.]
For purposes of this Article 10, each Guarantor's liability (a
Guarantor's "Base Guaranty Liability") shall be that amount from time to time
equal to the aggregate liability of a Guarantor hereunder, but shall be limited
to the lessor of (A) the aggregate amount of the obligation as stated in the
first
<PAGE>
-61-
sentence of this Section 10.01 with respect to the Securities or (B) the amount,
if any, which would not have (i) rendered such Guarantor "insolvent" (as such
term is defined in Section 101(29) of the Federal Bankruptcy Code and in Section
271 of the Debtor and Creditor Law of the State of New York, as each is in
effect at the date of this Indenture) or (ii) left it with unreasonably small
capital at the time its Guarantee of the Securities was entered into, after
giving effect to the incurrence of existing Debt immediately prior to such time
provided, that, it shall be a presumption in any lawsuit or other proceeding in
which a Guarantor is a party that the amount guaranteed is the amount set forth
in (A) above unless a creditor, or representative of creditors of such Guarantor
or a trustee in bankruptcy of the Guarantor, as debtor in possession, otherwise
proves in such a lawsuit that the aggregate liability of the Guarantor is
limited to the amount set forth in (B). In making any determination as to the
solvency or sufficiency of capital of a Guarantor in accordance with the
previous sentence, the right of such Guarantor to contribution from other
Guarantors, to subrogation pursuant to the next paragraph and any other rights
such Guarantor may have contractual or otherwise shall be taken into account.
Each Guarantor shall be subrogated to all rights of the Holder of any
Securities and the Trustee against the Company or any of ther other Guarantors
in respect of any amounts paid to the Holder and the Trustee by such Guarantor
pursuant to the provisions of this Guarantee; provided, however, that such
Guarantor shall not be entitled to enforce, or to receive any payments arising
out of or based upon, such right of subrogation until the principal of, premium,
if any, and interest on all the Securities have been paid in full.
Nothing contained in this Article 10 or elsewhere in this Indenture or
in any Security is intended to or shall impair, as between the Guarantors and
the Holders and the Trustee, the obligation of each Guarantor, which is absolute
and unconditional, to pay the Holders and the Trustee the principal of, premium,
if any, and interest on the Securities as and when the same shall become due and
payable and to perform all other obligations in accordance with the provisions
of this Guarantee, nor shall anything herein or therein prevent the Trustee or
any Holder from exercising all remedies otherwise permitted by applicable law
upon Default under this Indenture.
The Guarantors shall have the right to seek contribution from any non-
paying Guarantor so long as the exercise of such right does not impair the
rights of the Holders under the Guarantees.
<PAGE>
-62-
SECTION 10.02. Execution and Delivery of Guarantee.
-----------------------------------
To further evidence the Guarantee set forth in Section 10.01, each
Guarantor hereby agrees that a notation of such Guarantee, substantially in the
form included in Exhibit B hereto, shall be endorsed on each Security
authenticated and delivered by the Trustee after such Guarantee is executed and
executed by either manual or facsimile signature of an officer of each
Guarantor. The validity and enforceability of any Guarantee shall not be
affected by the fact that it is not affixed to any particular Security.
Each of the Guarantors hereby agrees that its Guarantee set forth in
Section 10.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Security a notation of such Guarantee.
If an officer of a Guarantor whose signatures is on this Indenture or
a Security no longer holds that office at the time the Trustee authenticates
such Security or at any time thereafter, such Guarantor's Guarantee of such
Security shall be valid nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of the Guarantor.
SECTION 10.03. Additional Guarantors.
---------------------
Any person may become a Guarantor by executing and delivering to the
Trustee (a) a supplemental indenture in form and substance satisfactory to the
Trustee, which subjects such person to the provisions of this Indenture as a
Guarantor, and (b) an Opinion of Counsel to the effect that such supplemental
indenture has been duly authorized and executed by such person and constitutes
the legal, valid, binding and enforceable obligation of such person (subject to
such customary exceptions concerning fraudulent conveyance laws, creditors'
rights and equitable principles as may be acceptable to the Trustee in its
discretion).
SECTION 10.04. Release of a Guarantor.
----------------------
(a) Upon the sale or disposition of all of the assets or all of the
Capital Stock of a Guarantor by the Company or a Subsidiary of the Company, or
upon the consolidation or merger of a Guarantor with or into any Person (in each
case, other than to the Company or an Affiliate of the Company), such Guarantor
shall be deemed automatically and unconditionally released and discharged from
all obligations under this Article 10 without any
<PAGE>
-63-
further action required on the part of the Trustee or any Holder, if all
obligations of such Guarantor, if any, in respect of any Indebtedness of the
Company shall also terminate upon such transaction; provided, however, that each
-------- -------
such Guarantor is sold or disposed of in accordance with Section 4.15 hereof;
provided, further, that the foregoing proviso shall not apply to the sale or
- -------- -------
disposition of a Guarantor in a foreclosure to the extent that such proviso
would be inconsistent with the requirements of the Uniform Commercial Code.
(b) The Trustee shall deliver an appropriate instrument evidencing the
release of a Guarantor upon receipt of a request of the Company accompanied by
an Officers' Certificate certifying as to the compliance with this Section
10.04. Any Guarantor not so released or the entity surviving such Guarantor, as
applicable, will remain or be liable under its Guarantee as provided in this
Article 10.
The Trustee shall execute any documents reasonably requested by the
Company or a Guarantor in order to evidence the release of such Guarantor from
its obligations under its Guarantee endorsed on the Securities and under this
Article 10.
Except as set forth in Articles 4 and 5 and this Section 10.04,
nothing contained in this Indenture or in any of the Securities shall prevent
any consolidation or merger of a Guarantor with or into the Company or another
Guarantor or shall prevent any sale or conveyance of the property of a Guarantor
as an entirety or substantially as an entirety to the Company or another
Guarantor.
SECTION ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provision shall control.
SECTION 11.02. Notices.
-------
Any notice or communication by the Company or the Trustee to the other
is duly given if in writing and delivered in person, mailed by first-class mail
or by express delivery to the other's address stated in this Section 11.02. The
Company or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.
<PAGE>
-64-
Any notice or communication to a Securityholder shall be mailed by
first-class mail to his address shown on the register kept by the Registrar.
Failure to mail a notice or communication to a Securityholder or any defect in
it shall not affect its sufficiency with respect to other Securityholders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Securityholders, it
shall mail a copy to the Trustee and each Agent at the same time.
All notices or communications shall be in writing.
The Company's address is:
Continental Homes Holding Corp.
7001 N. Scottsdale Road
Suite 2050
Scottsdale, Arizona 85252
Attention: Corporate Secretary
The Trustee's address is:
First Union National Bank
123 South Broad Street
Philadelphia, Pennsylvania 19109
Attention: Corporation Trust Department
SECTION 11.03. Communication by Holders with
Other Holders.
-----------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA (S) 312(c).
SECTION 11.04. Certificate and Opinion as
to Conditions Precedent.
--------------------------
Upon any request or application by the Company to the Trustee to take
any action under this Indenture the Company shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
<PAGE>
-65-
(2) an Opinion of Counsel stating that, in the opinion of such counsel, all
such conditions precedent have been complied with.
Each signer of an Officers' Certificate or an Opinion of Counsel may
(if so stated) rely, effectively, upon an Opinion of Counsel as to legal matters
and an Officers' Certificate as to factual matters if such signer reasonably and
in good faith believes in the accuracy of the document relied upon.
SECTION 11.05. Statements Required in Certificate
or Opinion.
----------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
SECTION 11.06. Rules by Trustee and Agents.
---------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for their respective functions.
SECTION 11.07. Legal Holidays.
--------------
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions are not required to be open in The City of New York, in the State
of New York or in the city in which the Trustee administers its corporate trust
business. If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not
<PAGE>
-66-
a Legal Holiday, and no interest shall accrue on that payment for the
intervening period.
A "business day" is a day other than a Legal Holiday.
SECTION 11.08. No Recourse Against Others.
--------------------------
No director, officer, employee or stockholder of the Company, any
Guarantor or any successor Person thereof shall have any liability for any
obligations of the Company under the Securities or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Securityholder by accepting a Security waives and releases all
such liability. The waiver and releases are part of the consideration for the
issue of the Securities.
SECTION 11.09. Duplicate Originals.
-------------------
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.10. Governing Law.
-------------
The laws of the State of New York, without regard to principles of
conflicts of law, shall govern this Indenture and the Securities.
SECTION 11.11. No Adverse Interpretation
of Other Agreements.
-------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 11.12. Successors.
----------
All agreements of the Company in this Indenture and the Securities
shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.
SECTION 11.13. Separability.
------------
In case any provision in this Indenture or in the Securities shall be
valid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby
and a Holder shall have no claim therefor against any party hereto.
<PAGE>
-67-
SECTION 11.14. Table of Contents, Headings, etc.
--------------------------------
The Table of Contents, Cross-Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
<PAGE>
-68-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.
FIRST UNION NATIONAL BANK, as Trustee
By:
------------------------------------
Name:
Title:
CONTINENTAL HOMES HOLDING CORP.
By:
------------------------------------
Name:
Title:
ACHETER, INC.
By:
------------------------------------
Name:
Title:
CH MORTGAGE COMPANY
By:
------------------------------------
Name:
Title:
CHI CONSTRUCTION COMPANY
By:
------------------------------------
Name:
Title:
<PAGE>
-69-
CHI FINANCE CORP.
By:
------------------------------------
Name:
Title:
CONTINENTAL HOMES, INC.
By:
------------------------------------
Name:
Title:
CONTINENTAL HOMES OF FLORIDA, INC.
By:
------------------------------------
Name:
Title:
CONTINENTAL HOMES OF TEXAS, INC.
By:
------------------------------------
Name:
Title:
KDB HOMES, INC.
By:
------------------------------------
Name:
Title:
L&W INVESTMENTS INC.
By:
------------------------------------
Name:
Title:
<PAGE>
-70-
MILBURN INVESTMENTS, INC.
By:
------------------------------------
Name:
Title:
MILTEX FINANCIAL IV GENERAL
PARTNERSHIP
By:
------------------------------------
Name:
Title:
MILTEX MANAGEMENT, INC.
By:
------------------------------------
Name:
Title:
MILTEX MORTGAGE OF TEXAS
LIMITED PARTNERSHIP
By:
------------------------------------
Name:
Title:
RANCHO CARILLO, INC.
By:
------------------------------------
Name:
Title:
R.O.S. CORPORATION
By:
------------------------------------
Name:
Title:
<PAGE>
-71-
SETTLEMENT CORPORATION
By:
------------------------------------
Name:
Title:
TRAVIS COUNTY TITLE COMPANY
By:
------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
REGISTERED [Face of Security] REGISTERED
NUMBER DOLLARS
CONTINENTAL HOMES HOLDING CORP.
............. CUSIP
% SENIOR NOTE DUE 2006
CONTINENTAL HOMES HOLDING CORP., a Delaware corporation (herein called
the "Company"), for value received, hereby promises to pay to
or registered assigns, the principal sum of Dollars on
April , 2006, and to pay interest thereon as provided on the reverse hereof,
until the principal hereof is paid or duly provided for.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
The provisions on the back of this certificate are incorporated as if
set forth on the face hereof.
IN WITNESS WHEREOF, CONTINENTAL HOMES HOLDING CORP. has caused this
instrument to be duly signed under its corporate seal.
[SEAL] CONTINENTAL HOMES HOLDING CORP.
By:
------------------------------------
[Title]
By:
------------------------------------
[Title]
<PAGE>
A-2
TRUSTEES'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred
to in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK, as Trustee
By: ______________________________
Signatory
Dated:
<PAGE>
A-3
[REVERSE OF SECURITY]
CONTINENTAL HOMES HOLDING CORP.
% SENIOR NOTE DUE 2006
1. Interest. Continental Homes Holding Corp., a Delaware
--------
corporation (the "Company"), promises to pay interest on the principal amount of
this Security at the rate per annum shown above. The Company will pay interest
--- -----
semi-annually on April 1 and October 1 of each year, commencing October 1, 1996.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance of the Securities set forth on the face of this Security.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment. The Company will pay interest on the
-----------------
Securities (except defaulted interest) to the persons who are registered Holders
of Securities at the close of business on the record date set forth on the face
of this Security next preceding the applicable interest payment date. Holders
must surrender Securities to a Paying Agent to collect principal payments. The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
However, the Company must pay principal and interest by check payable in such
money. It may mail an interest check to a Holder's registered address.
3. Paying Agent and Registrar. Initially, First Union National Bank
--------------------------
(the "Trustee") will act as Paying Agent and Registrar. The Company may change
any Paying Agent, Registrar or co-registrar without notice. The Company may act
in any such capacity.
4. Indenture. The Company issued the Securities under an Indenture
---------
dated as of April , 1996 (the "Indenture") between the Company and the
Trustee. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "Act"), as in effect on
the date of the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
such terms. The Securities are general unsecured senior obligations of the
Company limited to $150,000,000 aggregate principal amount (except for
Securities issued in substitution for destroyed, mutilated, lost or stolen
Securities). Terms used herein which are defined in the Indenture have the
meanings assigned to them in the Indenture.
<PAGE>
A-4
5. Optional Redemption. The Securities may be redeemed on at least
-------------------
30 and not more than 60 days' notice at the option of the Company on or after
, 2001, in whole at any time or in part (in any integral multiple of $1,000)
from time to time, for a redemption price of % of principal amount thereof
if redeemed on or after , 2001 but prior to , 2002, at a
redemption price of % if redeemed on or after , 2002 but prior to
, 2003 and at a redemption price of % principal amount thereof if redeemed on
or after , 2003, in each case, together with accrued and unpaid interest
to the redemption date.
In addition, if the Company consummates one or more public offerings
of its Common Stock subsequent to the date hereof and on or prior to ,
1999, the Company may, at its option, redeem up to 33% of the original principal
amount of the Securities with the net proceeds of such offerings at % of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
redemption date; provided, however, that immediately after giving effect to any
-------- -------
such redemption not less than $100,000,000 principal amount of the Securities
remains outstanding.
6. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. On and after the redemption date, interest ceases to
accrue on Securities or portions of them called for redemption.
7. Change of Control. In the event of a Change of Control (as
-----------------
defined in the Indenture) with respect to the Company, then each Holder of the
Securities shall have the right, at the Holder's option, to require the Company
to buy such Holder's Securities including any portion thereof which is $1,000 or
any integral multiple thereof on the date (the "Change of Control Repurchase
Date") that is 45 days after the date of the Change of Control Notice at a price
equal to 101% of the principal amount thereof, plus accrued interest to the
Change of Control Repurchase Date.
8. Net Worth Offer. In the event that the Company's Net Worth at
---------------
the end of each of any two consecutive fiscal quarters is less than $20,000,000
(the "Minimum Net Worth"), then the Company shall make a Net Worth Offer to
acquire on the date (the "Net Worth Repurchase Date") that is 45 days after the
Net Worth Notice, Securities in an amount equal to 10% of the initial
outstanding principal amount of the Securities, at a price equal to 100% of the
principal amount thereof, plus accrued interest to the Net Worth Repurchase
Date. The Company may credit against
<PAGE>
A-5
the Net Worth Offer Amount the principal amount of Securities acquired by the
Company through purchase, optional redemption or exchange prior to the Trigger
Date.
9. Net Proceeds Offer. Within 12 months from the date that the
------------------
Company or any of its Restricted Subsidiaries makes any Asset Sale, the Net
Proceeds thereof shall, in accordance with Section 4.15, be reinvested in
Additional Assets or used to repurchase or redeem Debt of the Company which rank
pari passu with the Securities, or Debt of a Restricted Subsidiary of the
- ---- -----
Company which is not subordinated to other Debt of such Restricted Subsidiary
(which in each case shall be a permanent reduction of such Debt) or if not so
used within such 12-month period, to use the remaining Net Proceeds to make an
offer to repurchase Securities at a price equal to 100% of the principal amount
thereof plus accrued interest in accordance with the procedures set forth in the
Indenture (a "Net Proceeds Offer"). Notwithstanding the preceding sentence, a
Net Proceeds Offer made in connection with any Asset Sale need not be applied in
accordance with the preceding sentence, unless and until the aggregate Net
Proceeds for all such Other Asset Sales in a 12-month period exceeds
$10,000,000.
10. Restrictive Covenants. The Indenture contains certain
---------------------
restrictive covenants that limit the ability of the Company and its Subsidiaries
to incur additional indebtedness, pay dividends, make certain other
distributions, repurchase Capital Stock or subordinated indebtedness, create
certain liens, enter into certain transactions with affiliates or apply the net
proceeds from the sale of certain assets.
11. Denominations, Transfer, Exchange. The Securities are in
---------------------------------
registered form without coupons in denominations of $1,000 and whole multiples
of $1,000. The transfer of Securities may be registered and Securities may be
exchanged as provided in the Indenture. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents.
No service charge shall be made for any such registration or transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. The Registrar
need not exchange or register the transfer of any Security selected for
redemption in whole or in part. Also, it need not exchange or register the
transfer of any Securities for a period of 15 days before a selection of
Securities to be redeemed.
12. Persons Deemed Owners. The registered Holder of a Security may
---------------------
be treated as its owner for all purposes.
13. Amendments and Waivers. Subject to certain
----------------------
<PAGE>
A-6
exceptions, the Indenture, the Securities or the Guarantees may be amended with
the consent of the Holders of at least a majority in principal amount of the
Securities outstanding; and any existing default may be waived with the consent
of the Holders of a majority in principal amount of the Securities. Without the
consent of any Securityholder, the Indenture, the Securities or the Guarantees
may be amended to cure any ambiguity, omission, defect or inconsistency
(provided that such amendment does not materially, adversely affect the rights
of any Securityholder) or to provide for uncertificated Securities in addition
to certificated Securities, to comply with Section 5.01 of the Indenture or to
make any change that does not materially adversely affect the rights of any
Securityholder.
14. Defaults and Remedies. An Event of Default is: (i) failure to
---------------------
pay the principal of any Security when such principal becomes due and payable at
maturity, upon acceleration or otherwise, (ii) failure to pay interest when due,
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 or
the Guarantors in the Security, the Guarantee or the Indenture that continues
for the period and after the notice specified below; (iv) an event of default
shall have occurred under one or more evidences of Debt of the Company or any of
its Restricted Subsidiaries (other than Non-Recourse Debt) with an outstanding
aggregate principal amount of $5,000,000 or more, whether such Debt now exists
or is created hereafter, which event of default (1) consists of the failure by
the Company or any Restricted Subsidiary to make any payment in respect of such
Debt at its final maturity or (2) results in the acceleration of such Debt which
acceleration shall be in effect; (v) any final judgment or judgments for payment
of money in excess of $5,000,000 in the aggregate shall be rendered against the
Company or any of its Restricted Subsidiaries and shall remain unstayed,
unsatisfied or undischarged for the period and after the notice specified below;
(vi) certain events of bankruptcy, insolvency or reorganization of the Company
or Material Subsidiaries and (vii) any Guarantee of a Material Subsidiary ceases
to be in full force and effect (other than in accordance with the terms of such
Guarantee and the Indenture) or is declared null and void and unenforceable or
found to be invalid or any Guarantor denies its liability under its Guarantee
(other than by reason of release of a Guarantor from its Guarantee in accordance
with the terms of the Indenture and the Guarantee).
A default under clause (iii) or (v) above is not an Event of Default
until the Trustee or the holders of at least 25% in principal amount of the
Securities then outstanding notify the Company of the default and the Company
does not cure the default within 60 days.
<PAGE>
A-7
If an Event of Default occurs (other than due to certain events of
bankruptcy, with respect to the Company) and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities may declare all
the Securities to be due and payable immediately. If an Event of Default occurs
due to certain events of bankruptcy, with respect to the Company, such amounts
shall be due and payable without any declaration on the part of the Trustee or
the Holders of the Securities. Subject to certain exceptions, the Holders of a
majority in principal amount of the Securities by notice to the Trustee may
waive a Default and its consequences. Securityholders may not enforce the
Indenture or the Securities except as provided in the Indenture. The Trustee
may require indemnity satisfactory to it before it enforces the Indenture or the
Securities. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
default (except a default in payment of principal or interest) if it determines
that withholding notice is in their interests. The Company must furnish an
annual compliance certificate to the Trustee and notify the Trustee upon the
occurrence of a Default.
15. Trustee Dealings with Company. First Union National Bank, the
-----------------------------
Trustee under the Indenture, or any banking institution serving as successor
Trustee thereunder, in its individual or any other capacity, may make loans to,
accept deposits from, and perform services for the Company or its Affiliates,
and may otherwise deal with the Company or its Affiliates, as if it were not the
Trustee.
16. No Recourse Against Others. A director, officer, employee or
--------------------------
stockholder, as such, of the Company or any Guarantor shall not have any
liability for any obligations of the Company or any Guarantor under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Securityholder by accepting
a Security waives and releases all such liability. The waiver and releases are
part of the consideration for the issue of the Securities.
17. Authentication. This Security shall not be valid until
--------------
authenticated by the manual signature of the Trustee or an authenticating agent.
18. Abbreviations. Customary abbreviations may be used in the name
-------------
of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenant by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
<PAGE>
A-8
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO:
Continental Homes Holding Corp., 7001 N. Scottsdale Road, Suite 2050,
Scottsdale, Arizona 85253, Attention: Corporate Secretary.
<PAGE>
A-9
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to:
- --------------------------------------------------------------------------------
(Insert assignee's Soc. Sec. or Tax I.D. No.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ______________________ agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him.
Date: __________________ Signature(s):___________________________
_____________________
(Sign exactly as your
name(s) appear(s) on
the other side of
this Security)
Signature(s) guaranteed by:____________________________________________________
(All signatures must be guaranteed by a member of
a national securities exchange or of the National
Association of Securities Dealers, Inc. or by a
commercial bank or trust company located in the
United States)
<PAGE>
A-10
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.08, 4.09 or 4.15, as the case may be, of the Indenture,
check the box:
[_]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.08, 4.09 or 4.15 of the Indenture, state the
amount:
$ ___________________________________
(in an integral multiple of $1,000)
Date: ______________________ Signature(s): _________________
_______________________________
(Sign exactly as your name(s)
appear(s) on the other side of
this Security)
Signature(s) guaranteed by: __________________________________
(All signatures must be guaranteed
by a member of a national
securities exchange or of the
National Association of
Securities Dealers, Inc. or by a
commercial bank or trust company
located in the United States)
<PAGE>
EXHIBIT B
GUARANTEE
---------
For value received, the undersigned hereby unconditionally guarantees
to the Holder of this Security the payments of principal of, premium, if any,
and interest on this Security in the amounts and at the time when due and
interest on the overdue principal, premium, if any, and interest, if any, of
this Security, if lawful, and the payment of all other obligations of the
Company under the Indenture or the Securities, to the Holder of this Security
and the Trustee, all in accordance with and subject to the terms and limitations
of this Security, Article 10 of the Indenture and this Guarantee. This
Guarantee will become effective in accordance with Article 10 of the Indenture
and its terms shall be evidenced therein. The validity and enforceability of
any Guarantee shall not be affected by the fact that it is not affixed to any
particular Security.
The obligations of the undersigned to the Holders of Securities and to
the Trustee pursuant to the Guarantee and the Indenture are expressly set forth
in Article 10 of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
[NAME OF GUARANTOR]
By:_________________
Name:
Title:
<PAGE>
EXHIBIT 5
[LETTERHEAD OF CAHILL GORDON & REINDEL]
April 8, 1996
Continental Homes Holding Corp.
7001 N. Scottsdale Road
Suite 2050
Scottsdale, Arizona 85253
Ladies and Gentlemen:
We have examined a copy of the Registration Statement on
Form S-3 (No. 333-1669) filed by Continental Homes Holding Corp.
(the "Company") and its subsidiaries (collectively, the "Subsid-
iaries") with the Securities and Exchange Commission on March 13,
1996 relating to the registration pursuant to the provisions of
the Securities Act of 1933, as amended (the "Act"), of
(i) $150,000,000 principal amount of Senior Notes due 2006 of the
Company (the "Notes") and (ii) the guarantees (collectively, the
"Guarantees") issued by the Subsidiaries in connection with the
Notes. The Notes and the Guarantees are to be issued under an
Indenture (the "Indenture") among the Company, the Subsidiaries
and First Union National Bank, as trustee (the "Trustee"). In
rendering this opinion, we have reviewed such documents and made
such investigation as we deemed appropriate.
<PAGE>
-2-
We are of the opinion that (subject to compliance with
the pertinent provisions of the Act and, with respect to the
Indenture, the Notes and the Guarantees, the Trust Indenture Act
of 1939, as amended, and to compliance with such securities or
"blue sky" laws of any jurisdiction as may be applicable):
1. When the Indenture has been duly authorized, exe-
cuted and delivered by the proper officers of the Company, the
Subsidiaries and the Trustee, and when the Notes have been duly
executed, authenticated, registered, issued and delivered in
accordance with the terms of the Indenture, the Notes will consti-
tute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms and entitled to
the benefits of the Indenture, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and
similar laws affecting creditors' rights and remedies generally
and subject to general principles of equity.
2. When the Indenture has been duly authorized, exe-
cuted and delivered by the proper officers of the Company, the
Subsidiaries and the Trustee, and when the Guarantees have been
duly executed, issued and delivered in accordance with the terms
of the Indenture, the Guarantees will constitute valid and binding
obligations of the Subsidiaries, enforceable against the Subsid-
iaries in accordance with their terms and entitled to the benefits
of the Indenture, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and similar laws
affecting creditors' rights and remedies generally and subject to
general principles of equity.
We hereby consent to the use of our firm's name under
the caption "Legal Matters" and to the filing of this opinion with
the Securities and Exchange Commission as an exhibit to the afore-
said Registration Statement.
Very truly yours,
/s/ Cahill Gordon & Reindel
<PAGE>
EXHIBIT 12
CONTINENTAL HOMES HOLDING CORP.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MAY 31, FEBRUARY 28,
------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges:
Rent expense.......... $ 197 $ 178 $ 165 $ 305 $ 363 $ 272 $ 272
Interest (expensed or
capitalized)--
homebuilding......... 8,889 8,662 11,896 13,378 19,528 14,184 16,598
Interest (expensed or
capitalized)--joint
ventures(1).......... 2,868 885 144 -- -- -- --
Interest--mortgage
banking.............. 2,364 1,557 1,343 2,707 2,360 1,679 1,677
------- ------- ------- ------- ------- --------- --------
Total fixed
charges............ $14,318 $11,282 $13,548 $16,390 $22,251 $ 16,135 $ 18,547
======= ======= ======= ======= ======= ========= ========
Earnings:
Income before taxes
and extraordinary
credits.............. $ 477 $ 2,155 $12,083 $23,137 $25,465 $ 19,402 $ 28,698
Fixed charges......... 14,318 11,282 13,548 16,390 22,251 16,135 18,547
Interest
capitalized(1)(2).... (3,486) 2,783 202 (920) (3,421) (2,484) (425)
------- ------- ------- ------- ------- --------- --------
Total earnings
before fixed
charges............ $11,309 $16,220 $25,833 $38,607 $44,295 $ 33,053 $ 46,820
======= ======= ======= ======= ======= ========= ========
Ratio of earnings to
fixed charges.......... (3) 1.44x 1.91x 2.36x 1.99x 2.05x 2.52x
======= ======= ======= ======= ======= ========= ========
</TABLE>
- --------
(1) Reflects the Company's proportionate share of the joint venture.
(2) Since interest capitalized is charged to interest expense when the related
assets are sold, this amount represents the change in capitalized interest
from the previous period end.
(3) Fiscal 1991 includes a pre-tax writedown of $5,000,000. After giving
effect to such writedown, earnings for the fiscal year ended May 31, 1991
were inadequate to cover fixed charges and resulted in a coverage
deficiency of $3,009,000.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated June 19, 1995
incorporated by reference in Continental Homes Holding Corp.'s Form 10-K for
the year ended May 31, 1995 and to all references to our Firm included in this
registration statement.
Phoenix, Arizona
April 3, 1996
<PAGE>
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2) __
FIRST UNION NATIONAL BANK
(Name of Trustee)
22-1147033
(I.R.S. Employer Identification No.)
101 NORTHSIDE PLAZA, ELKTON, MARYLAND
(Address of Principal Executive Offices)
21921
(Zip Code)
CONTINENTAL HOMES HOLDING CORP.
(Exact name of registrants as specified in their charters)
DELAWARE
(State of Incorporation)
86-0554624
(I.R.S. Employer Identification No.)
7001 N. SCOTTSDALE ROAD SUITE 2000, SCOTTSDALE, AZ
(602-483-0006)
(Address of Principal Executive Offices)
$150,000,000 % SENIOR NOTES DUE 2006
<PAGE>
(Title of Indenture
Securities)
1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH
IT IS SUBJECT:
Comptroller of the Currency
United States Department of the Treasury
Washington, D.C. 20219
Federal Reserve Bank (3rd District)
Philadelphia, Pennsylvania 19106
Federal Deposit Insurance Corporation
Washington, D.C. 20429
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
3. VOTING SECURITIES OF THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING SECURITIES OF
THE TRUSTEE:
Not applicable - see answer to item 13.
4. TRUSTEESHIPS UNDER OTHER INDENTURES.
IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY OTHER
SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, FURNISH THE FOLLOWING INFORMATION:
Not applicable - see answer to item 13.
2
<PAGE>
5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR
UNDERWRITERS.
IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICERS OF THE TRUSTEE
IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE, OR REPRESENTATIVE OF THE
OBLIGOR OR OF ANY UNDERWRITER FOR THE OBLIGOR, IDENTIFY EACH SUCH PERSON HAVING
ANY SUCH CONNECTION AND STATE THE NATURE OF EACH SUCH CONNECTION.
Not applicable - see answer to item 13.
6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER, AND
EXECUTIVE OFFICER OF THE OBLIGOR:
Not applicable - see answer to item 13.
7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH
DIRECTOR, PARTNER, AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER:
Not applicable - see answer to item 13.
8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO SECURITIES OF THE OBLIGOR OWNED
BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT BY THE
TRUSTEE:
Not applicable - see answer to item 13.
9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN UNDERWRITER FOR THE OBLIGOR, FURNISH
THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH UNDERWRITER ANY
OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE:
Not applicable - see answer to item 13.
3
<PAGE>
10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT VOTING SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF
THE TRUSTEE (1) OWNS 10 PERCENT OR MORE OF THE VOTING STOCK OF THE OBLIGOR OR
(2) IS AN AFFILIATE, OTHER THAN A SUBSIDIARY, OF THE OBLIGOR, FURNISH THE
FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF SUCH PERSON:
Not applicable - see answer to item 13.
11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON OWNING
50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF THE
TRUSTEE, OWNS 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR,
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH PERSON
ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE:
Not applicable - see answer to item 13.
12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
EXCEPT AS NOTED IN THE INSTRUCTIONS, IF THE OBLIGOR IS INDEBTED TO THE
TRUSTEE, FURNISH THE FOLLOWING INFORMATION:
Not applicable - see answer to item 13.
13. DEFAULTS BY THE OBLIGOR.
(a) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO THE
SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
None.
(b) IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, OR IS TRUSTEE FOR MORE THAN ONE
OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE, STATE WHETHER THERE HAS
BEEN A DEFAULT UNDER ANY SUCH INDENTURE OR SERIES, IDENTIFY THE INDENTURE OR
SERIES AFFECTED, AND EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
None.
4
<PAGE>
14. AFFILIATIONS WITH THE UNDERWRITERS.
IF ANY UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
Not applicable - see answer to item 13.
15. FOREIGN TRUSTEE.
IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE TRUSTEE IS AUTHORIZED TO
ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED UNDER THE ACT.
Not applicable - trustee is a national banking association organized under
the laws of the United States.
16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
X 1. Copy of Articles of Association of the trustee as now in effect.
---
___ 2. Copy of the Certificate of the Comptroller of the Currency dated
January 11, 1994, evidencing the authority of the trustee to transact
business.*
___ 3. Copy of the authorization of the trustee to exercise fiduciary
powers.*
X 4. Copy of existing by-laws of the trustee.
---
___ 5. Copy of each indenture referred to in Item 4, if the obligor is in
default, not applicable.
X 6. Consent of the trustee required by Section 321(b) of the Act.
---
X 7. Copy of report of condition of the trustee at the close of business on
---
December 31, 1995, published pursuant to the requirements of its
supervising authority.
___ 8. Copy of any order pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to be
qualified under the Act, not applicable.
5
<PAGE>
___ 9. Consent to service of process required of foreign trustees pursuant
to Rule 10a-4 under the Act, not applicable.
_____________________
*Previously filed with the Securities and Exchange Commission on
February 11, 1994 as an exhibit to Form T-1 in connection with Registration
Statement No. 22-73340 and incorporated herein by reference.
NOTE
The trustee disclaims responsibility for the accuracy or completeness of
information contained in this Statement of Eligibility and Qualification not
known to the trustee and not obtainable by it through reasonable investigation
and as to which information it has obtained from the obligor and has had to rely
or will obtain from the principal underwriters and will have to rely.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, First Union National Bank, a national banking association organized and
existing under the laws of the United States of America, has duly caused this
Statement of Eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Elkton and State of Maryland, on
the 27th day of March, 1996.
FIRST UNION NATIONAL BANK
By: /s/John H. Clapham
--- ---
John H. Clapham
Vice President
6
<PAGE>
EXHIBIT 1
---------
FIRST UNION NATIONAL BANK (EFF. 1/1/96)
(formerly First Fidelity Bank, National Association)
BYLAWS
------
ADOPTED: JANUARY 10, 1994; AMENDED APRIL 19, 1994
______________________________
ARTICLE I
---------
Meetings of Shareholders
------------------------
Section 1.1. Annual Meeting. The regular annual meeting of the
---------------
shareholders for the election of directors and transaction of
whatever other business may properly come before the meeting, shall
be held at the Main Office of the Association, or such other place
as the Board of Directors may designate, at 10:00 A.M., on the
second Thursday of April of each year or such other time within 90
days as may be set by the Board of Directors. If, from any cause,
an election of directors is not made on the said day, the Board of
Directors shall order the election to be held on some subsequent
day, as soon thereafter as practicable, according to the provisions
of the law; and notice thereof shall be given in the manner herein
provided for the annual meeting.
Section 1.2. Special Meetings. Except as otherwise
----------------
specifically provided by statute, special meetings of the
shareholders may be called for any purpose at any time by the Board
of Directors or by any one or more shareholders owning, in the
aggregate, not less than twenty-five percent of the stock of the
Association.
Section 1.3. Notice of Meetings. Notice of Annual and Special
------------------
meetings shall be mailed, postage prepaid, at least ten days prior
to the date thereof, addressed to each shareholder at his address
appearing on the books of the Association; but any failure to mail
such notice, or any irregularity therein, shall not affect the
validity of such meeting, or of any of the proceedings thereat. A
shareholder may waive any such notice.
Section 1.4. Organization of Meetings. The Chairman shall
------------------------
preside at all meetings of shareholders. In his absence, the
President, or a director designated by the Chairman shall preside at
such meeting.
<PAGE>
Section 1.5. Proxies. Shareholders may vote at any meeting of
-------
the shareholders by proxies duly authorized in writing. Proxies
shall be valid only for one meeting to be specified therein, and any
adjournments of such meeting. Proxies shall be dated and shall be
filed with the records of the meeting.
Section 1.6. Quorum. A majority of the outstanding capital
------
stock, represented in person or by proxy, shall constitute a quorum
at any meeting of shareholders, unless otherwise provided by law. A
majority of the votes cast shall decide every question or matter
submitted to the shareholders at any meeting, unless otherwise
provided by law or by the Articles of Association.
ARTICLE II
----------
Directors
---------
Section 2.1. Board of Directors. The Board of Directors
------------------
(hereinafter referred to as the "Board"), shall have power to manage
and administer the business and affairs of the Association. Except
as expressly limited by law, all corporate powers of the Association
shall be vested in and may be exercised by said Board.
Section 2.2. Number. The Board shall consist of not less than
------
five nor more than twenty-five persons, the exact number within such
minimum and maximum limits to be fixed and determined from time to
time by resolution of a majority of the full Board or by resolution
of the shareholders at any meeting thereof; provided, however, that
a majority of the full Board may not increase the number of
directors to a number which: (a) exceeds by more than two the number
of directors last elected by shareholders where such number was
fifteen or less; and (b) to a number which exceeds by more than four
the number of directors last elected by shareholders where such
number was sixteen or more, but in no event shall the number of
directors exceed twenty-five.
8
<PAGE>
Section 2.3. Organization Meeting. A meeting shall be held for
--------------------
the purpose of organizing the new Board and electing and appointing
officers of the Association for the succeeding year on the day of
the Annual Meeting of Shareholders or as soon thereafter as
practicable, and, in any event, within thirty days thereof. If, at
the time fixed for such meeting, there shall not be a quorum
present, the directors present may adjourn the meeting, from time to
time, until a quorum is obtained.
Section 2.4. Regular Meetings. The regular meetings of the
----------------
Board shall be held on such days and time as the directors may, by
resolution, designate; and written notice of any change thereof
shall be sent to each member. When any regular meeting of the Board
falls upon a legal holiday, the meeting shall be held on such other
day as the Board may designate.
Section 2.5. Special Meetings. Special meetings of the Board
----------------
may be called by the Chairman of the Board, or President, or at the
request of three or more directors. Each director shall be given
notice of each special meeting, except the organization meeting, at
least one day before it is to be held by facsimile, telephone,
telegram, letter or in person. Any director may waive any such
notice.
Section 2.6. Quorum. A majority of the directors shall
------
constitute a quorum at any meeting, except when otherwise provided
by law; but a less number may adjourn any meeting, from time to
time, and the meeting may be held, as adjourned without further
notice.
Section 2.7. Term of Office and Vacancy. Directors shall hold
--------------------------
office for one year and until their successors are elected and have
qualified. No person shall stand for election as a director of this
Association if at the date of his election he will have passed his
seventieth birthday; provided, however, this prohibition shall not
apply to persons who are active officers of this Association, an
affiliate bank, or its parent corporation, or a former chief
executive officer of the Association. No person, who is not an
officer or former officer of this Association, an affiliate bank, or
its parent corporation and who has discontinued the principal
position or activity the person held when
9
<PAGE>
initially elected, shall be recommended to the shareholders for
reelection; provided, however, that exceptions may be made because
of a change in principal position or activity which would be
compatible with continued service to this Association. No person
elected as a director may exercise any of the powers of his office
until he has taken the oath of office as prescribed by law. When
any vacancy occurs among the directors, the remaining members of the
Board, in accordance with the laws of the United States, may appoint
a director to fill such vacancy at any regular meeting of the Board,
or at a special meeting called for that purpose.
Section 2.8. Nominations. Nominations for election to the
-----------
Board may be made by the Executive Committee or by any stockholder
of any outstanding class of capital stock of the Association
entitled to vote for the election of directors.
Section 2.9. Communications Equipment. Any or all directors
------------------------
may participate in a meeting of the Board by means of conference
telephone or any means of communication by which all persons
participating in the meeting are able to hear each other.
Section 2.10. Action Without Meeting. Any action required or
-----------------------
permitted to be taken by the Board or committee thereof by law, the
Association's Articles of Association, or these Bylaws may be taken
without a meeting, if, prior or subsequent to the action, all
members of the Board or committee shall individually or collectively
consent in writing to the action. Each written consent or consents
shall be filed with the minutes of the proceedings of the Board or
committee. Action by written consent shall have the same force and
effect as a unanimous vote of the directors, for all purposes. Any
certificate or other documents which relates to action so taken
shall state that the action was taken by unanimous written consent
of the Board or committee without a meeting.
ARTICLE III
-----------
Committees of the Board
-----------------------
Section 3.1. Executive Committee. The Board may by resolution
-------------------
10
<PAGE>
adopted by a majority of the entire Board designate an Executive
Committee consisting of the Chairman of the Board, the President,
and not less than two other directors. Subject to the national
banking laws and the Association's Articles of Association, the
Executive Committee may exercise all the powers of the Board of
Directors with respect to the affairs of the Association, except
that the Executive Committee may not:
1. (a) exercise such powers while a quorum of the Board of
Directors is actually convened for the conduct of business,
(b) exercise any power specifically required to be exercised
by at least a majority of all the directors,
(c) act on matters committed by the Bylaws or resolution of
the Board of Directors to another committee of the board, or
(d) amend or repeal any resolution theretofore adopted by
the Board of Directors which by its terms is amendable or repealable
only by the Board;
2. amend the Articles of Association or make, alter or repeal
any Bylaw of the Association;
3. elect or appoint any director, create or fill any vacancies
in the Board of Directors or remove any director, or authorize or
approve any change in the compensation of any officer of the
Association who is also a director of the Association;
4. authorize or approve issuance or sale or contract for sale
of shares of stock of the Association, or determine the designation
and relative rights, preferences and limitations of a class or
series of shares;
5. adopt an agreement of merger or consolidation, or submit to
shareholders any action that requires shareholder approval,
including any recommendation to the shareholders concerning the
sale, lease or exchange of all or substantially all the
Association's property and assets, a dissolution of the Association
or a revocation of a previously approved dissolution; or
6. authorize an expenditure by the Association in excess of $10
million for any one item or group of related items.
11
<PAGE>
The committee shall hold regular meetings at such times as the
members shall agree and whenever called by the chairman of the
committee. A majority of the committee shall constitute a quorum
for the transaction of business. The committee shall keep a record
of its proceedings and shall report these proceedings to the Board
at the regular meetings thereof. The committee shall serve as the
nominating committee for nominations to the Board. The committee
shall provide oversight on all Community Reinvestment Act ("CRA")
matters pertaining to the Association. The committee shall also be
responsible for monitoring the CRA activities of the Association on
an on-going basis and making periodic reports on such CRA activity
to the Board.
Section 3.2. Chairman of the Executive Committee. The Board
-----------------------------------
may designate one of its members to be Chairman of the Executive
Committee who shall preside at the meetings thereof and shall
perform such duties as the Board shall assign to him from time to
time.
Section 3.3. Audit Committee. The Board shall appoint a
---------------
committee of three or more persons exclusive of the officers of this
Association which committee shall be known as the Audit Committee.
It shall be the duty of this committee at least once in every twelve
months to examine the affairs of the Association, and determine
whether it is in a sound and solvent condition and to recommend to
the Board such changes in the manner of doing business, etc., as may
seem to be desirable. The committee may cause such examination to
be made in its behalf and under its supervision by outside
accountants and may also use the services of any other persons
either inside or outside the Association to assist in its work. The
results of each examination shall be reported in writing to the
Board.
Section 3.4. Audit of Trust Department. The Audit Committee
-------------------------
shall, at least once during each calendar year and within fifteen
months of the last such audit make suitable audits of the Trust
Department or cause suitable audits to be made by auditors
responsible only to the Board, and at such time shall ascertain
whether the department has been administered in accordance with law,
Part 9 of the Regulations of the Comptroller of the Currency, and
sound fiduciary principles. In lieu of such periodic
12
<PAGE>
audit the Audit Committee, at the election of the Board, may conduct
or cause to be conducted by auditors responsible only to the Board
an adequate continuous audit system adopted by the Board. A written
report of such periodic or continuous audit shall be made to the
Board.
Section 3.5. Other Committees. The Board may appoint from time
----------------
to time other committees composed of one or more persons each, for
such purposes and with such powers as the Board may determine. The
Chairman of the Board shall have the power to designate another
person to serve on any committee during the absence or inability of
any member thereof so to serve.
Section 3.6. Directors' Emeritus. The Board may designate one
-------------------
or more persons to serve as Director Emeritus. Such Director
Emeritus shall have the right to attend any and all meetings of the
Board, but shall have no vote at such meetings. A person designated
as Director Emeritus may serve in that capacity for a period of
three years.
Section 3.7. Alternate Committee Members. The Board may, from
---------------------------
time to time, appoint one or more, but no more than three persons to
serve as alternate members of a committee, each of whom shall be
empowered to serve on that committee in place of a regular committee
member in the event of the absence or disability of that committee
member. An alternate committee member shall, when serving on a
committee, have all of the powers of a regular committee member.
Alternate committee members shall be notified of, and requested to
serve at, a particular meeting or meetings, or for particular
periods of time, by or at the direction of the chairman of the
committee or the Chairman of the Board.
ARTICLE IV
----------
Officers
--------
Section 4.1a. Appointment. The senior officers of this
-----------
Association shall be chosen by the Board and shall be the Chairman
of the Board, one
13
<PAGE>
or more Vice Chairmen, the President, the Chief Financial Officer
and such other officers as in the judgment of the Board may be from
time to time required. The Chairman of the Board and the President
shall be chosen from the Directors. The Board may designate a
person to serve as secretary of all meetings of the Board and of the
shareholders and the persons so designated shall keep accurate
minutes of such meetings.
Section 4.1b. Other Officers. The Chairman, the President, the
--------------
Chief Executive Officer, any Vice Chairman or any Senior Executive
Vice President may appoint such other officers with such titles and
duties as he may designate.
Section 4.2. Term of Office. The officers who are required by
--------------
the articles of association or the bylaws to be members of the Board
shall hold their respective offices until the Organization meeting
of the Board following the annual meeting of shareholders or until
their respective successors shall have been elected, unless they
shall resign, become disqualified or be removed from office. Each
other officer shall hold office at the pleasure of the Board. Any
officer may be removed at any time by the Board.
Section 4.3. Chairman of the Board. The chairman of the board
---------------------
shall be designated as Chairman of the Board. He shall preside at
all meetings of the stockholders and directors and he shall be a
member of all committees of the Board except the Audit Committee.
He shall have such other powers and perform such other duties as may
be prescribed from time to time by the Board. He shall be subject
only to the direction and control of the Board.
Section 4.4. President. The president shall be the chief
---------
executive officer of the Association and he shall be designated as
President and Chief Executive Officer. In the absence of the
Chairman the President shall preside at all meetings of the Board.
The President shall be a
14
<PAGE>
member of each committee of the Board except the Audit Committee.
He shall have the powers and perform the duties conferred or imposed
upon the President by the national banking laws, and he shall have
such other powers and perform such other duties as may from time to
time be imposed upon or assigned to him by the Board.
Section 4.5. Chief Financial Officer. The Chief Financial
-----------------------
Officer shall have such title as may be designated by the Board and
he shall be responsible for all monies, funds and valuables of this
Association, provide for the keeping of proper records of all
transactions of the Association, report to the Board at each regular
meeting the condition of the Association, submit to the Board, when
requested, a detailed statement of the income and expenses, be
responsible for the conduct and efficiency of all persons employed
under him, and perform such other duties as may be from time to time
assigned to him by the Board.
Section 4.6. Other Officers. All other officers shall
--------------
respectively exercise such powers and perform such duties as
generally pertain to their several offices, or as may be conferred
upon or assigned to them by the Board, the Chairman of the Board or
the President.
Section 4.7. Bond. Each officer and employee, if so required
----
by the Board, shall give bond with surety to be approved by the
Board, conditioning for the honest discharge of his duties as such
officer or employee. In the discretion of the Board, such bonds may
be individual, schedule or blanket form, and the premiums may be
paid by the Association.
ARTICLE V
---------
Trust Department
----------------
Section 5.1. Trust Department. There shall be a department of
----------------
the Association known as the Trust Department which shall perform
the fiduciary responsibilities of the Association.
Section 5.2. Trust Officer. There shall be a Trust Officer of
-------------
this
15
<PAGE>
Association whose duties shall be to manage, supervise and direct
all the activities of the Trust Department. Such persons shall do
or cause to be done all things necessary or proper in carrying on
the business of the Trust Department in accordance with the
provisions of law and applicable regulations; and shall act pursuant
to opinion of counsel where such opinion is deemed necessary.
Opinions of counsel shall be retained on file in connection with all
important matters pertaining to fiduciary activities. The Trust
Officer shall be responsible for all assets and documents held by
the Association in connection with fiduciary matters. The Trust
Officer shall perform such other duties and possess such other
powers as from time to time shall be delegated to him by the Chief
Executive Officer, the Board, the Executive Committee or these
bylaws. The President may appoint such other officers of the Trust
Department as it may deem necessary or advisable with such duties as
may be assigned and with such titles as may be designated.
Section 5.3. Trust Investment. Funds held in a fiduciary
----------------
capacity shall be invested in accordance with the instrument
establishing the fiduciary relationship and local law. Where such
instrument does not specify the character and class of the
investments to be made and does not vest in the Association a
discretion in the matter, funds held pursuant to such instrument
shall be invested in investments in which corporate fiduciaries may
invest under local law.
ARTICLE VI
----------
Stock Certificates and Transfers
--------------------------------
Section 6.1. Stock Certificates. Ownership of capital stock of
------------------
the Association shall be evidenced by certificates of stock signed
by the Chairman or President, and the Secretary, or an Assistant
Secretary. Each certificate shall state upon its face that the
stock is transferable only upon the books of the Association by the
holder thereof, or by duly authorized attorney, upon the surrender
of such certificate, and shall
16
<PAGE>
meet the requirements of Section 5139, United States Revised
Statutes, as amended.
Section 6.2. Transfers. The stock of this Association shall be
---------
assignable and transferable only on the books of this Association,
subject to the restrictions and provisions of the national banking
laws; and a transfer book shall be provided in which all assignments
and transfers of stock shall be made. When stock is transferred,
the certificates thereof shall be returned to the Association,
canceled, preserved and new certificates issued.
Section 6.3. Dividends. Dividends shall be paid to the
---------
shareholders in whose names the stock shall stand at the close of
business on the day next preceding the date when the dividends are
payable, provided, however, that the directors may fix another date
as a record date for the determination of the shareholders entitled
to receive payment thereof.
ARTICLE VII
-----------
Increase of Stock
-----------------
Section 7.1. Capital Stock. Shares of the capital stock of the
-------------
Association, which have been authorized but not issued, may be
issued from time to time for such consideration, not less than the
par value thereof, as may be determined by the Board.
ARTICLE VIII
------------
Corporate Seal
--------------
Section 8.1. Seal. The seal, an impression of which appears
----
below, is the seal of the Association as adopted by the Board of
Directors:
[Seal]
17
<PAGE>
The Chairman of the Board, the Vice Chairman, the President,
Senior Executive Vice President, Executive Vice President, Senior
Vice President, Vice President, each Assistant Vice President, the
Chief Financial Officer, the Secretary, each Assistant Secretary,
each Trust Officer, each Assistant Trust Officer or each Assistant
Cashier, shall have the authority to affix the corporate seal of
this Association and to attest to the same.
ARTICLE IX
----------
Miscellaneous Provisions
------------------------
Section 9.1. Fiscal Year. The fiscal year of the Association
-----------
shall be the calendar year.
Section 9.2. Execution of Instruments. All agreements,
------------------------
contracts, indentures, mortgages, deeds, conveyances, transfers,
certificates, declarations, receipts, discharges, releases,
satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered
or accepted in behalf of the Association by the Chairman of the
Board, or any Vice Chairman, or the President, or Senior Executive
Vice President, or Executive Vice President, or Senior Vice
President, or Vice President, or Assistant Vice President, or Chief
Financial Officer, or the Secretary, or Assistant Secretary, or, if
in connection with the exercise of fiduciary powers of the
Association, by any of said officers or by any Trust Officer or
Assistant Trust Officer, to the extent authorized by the corporate
policy of the Association, as adopted and modified from time to
time. Any such instruments may also be executed, acknowledged,
verified, delivered, or accepted in behalf of the Association in
such other manner and by such other officers as the Board may from
time to time direct.
Section 9.3. Records. The organization papers of this
-------
Association,
18
<PAGE>
the articles of association, the bylaws and any amendments thereto,
the proceedings of all regular and special meetings of the
shareholders and of the directors, the returns of the judges of
elections, and the reports of the committees of directors shall be
recorded in an appropriate minute book, and the minutes of each
meeting shall be signed by the Secretary or any other officer
appointed to act as secretary of the meeting.
Section 9.4. Banking Hours. This Association and its branch
-------------
offices shall be open on such days and during such hours as shall be
fixed from time to time by the Board.
Section 9.5. Voting Shares of Other Corporations. The
-----------------------------------
Chairman, any Vice Chairman, the President, or any Vice President is
authorized to vote, represent and exercise on behalf of this
Association all rights incident to any and all shares of stock of
any other corporation standing in the name of the Association. The
authority granted herein may be exercised by such officers in person
or by proxy or by power of attorney duly executed by said officer.
ARTICLE X
---------
Bylaws
------
Section 10.1. Inspection. A copy of the Bylaws, with all
----------
amendments thereto, shall at all times be kept in a convenient place
at the Head Office of the Association, and shall be open for
inspection to all shareholders, during banking hours.
Section 10.2. Amendments. These Bylaws may be changed or
----------
amended at any regular or special meeting of the Board by the vote
of a majority of the Directors.
19
<PAGE>
FIRST UNION NATIONAL BANK EXHIBIT 4
----------------------------------------------
ARTICLES OF ASSOCIATION
(EFFECTIVE JANUARY 1,1996)
For purposes of organizing an Association to carry on the
business of banking under the laws of the United States, the
undersigned do enter into the following Articles of Association:
FIRST. The title of this Association shall be First Union
National Bank.
SECOND. The Main Office of the Association shall be in Elkton,
County of Cecil, State of Maryland. The general business of the
Association shall be conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist
of not less than five nor more than twenty-five persons, the exact
number to be fixed and determined from time to time by resolution of
a majority of the full Board of Directors or by resolution of the
shareholders at any annual or special meeting thereof. Each
Director, during the full term of his directorship, shall own a
minimum of (a) $1,000 par value of stock of this Association or (b)
preferred or common stock of First Fidelity Bancorporation having
(i) aggregate par value equal to or greater than $1,000, (ii)
aggregate shareholders' equity equal to or greater than $1,000 or
(iii) aggregate fair market value equal to or greater than $1,000.
Any vacancy in the Board of Directors may be filled by action of the
Board of Directors.
FOURTH. There shall be an annual meeting of the shareholders
the purpose of which shall be the election of Directors and the
transaction of whatever other business may be brought before said
meeting. It shall be held at the main office or other convenient
place as the Board of Directors may designate, on the day of each
year specified therefor in the By-laws, but if no election is held
on that day, it may be held on any subsequent day according to such
lawful rules as may be presented by the
20
<PAGE>
Board of Directors.
FIFTH. (A) General. The amount of capital stock of this
-------
Association shall be (i) 25,000,000 shares of common stock of the
par value of twenty dollars ($20.00) each (the "Common Stock") and
(ii) 160,540 shares of preferred stock of the par value of one
dollar ($1.00) each (the "Non-Cumulative Preferred Stock"), having
the rights, privileges and preferences set forth below, but said
capital stock may be increased or decreased from time to time in
accordance with the provisions of the laws of the United States.
(B) Terms of the Non-Cumulative Preferred Stock.
-------------------------------------------
1. General. Each share of Non-Cumulative Preferred Stock shall
-------
be identical in all respects with the other shares of Non-Cumulative
Preferred Stock. The authorized number of shares of Non-Cumulative
Preferred Stock may from time to time be increased or decreased (but
not below the number then outstanding) by the Board of Directors.
Shares of Non-Cumulative Preferred Stock redeemed by the Association
shall be canceled and shall revert to authorized but unissued shares
of Non-Cumulative Preferred Stock.
2. Dividends.
---------
(a) General. The holders of Non-Cumulative Preferred Stock
-------
shall be entitled to receive, when, as and if declared by the Board
of Directors, but only out of funds legally available therefor, non-
cumulative cash dividends at the annual rate of $83.75 per share,
and no more, payable quarterly on the first days of December, March,
June and September, respectively, in each year with respect to the
quarterly dividend period (or portion thereof) ending on the day
preceding such respective dividend payment date, to shareholders of
record on the respective date, not exceeding fifty days preceding
such dividend payment date, fixed for that purpose by the Board of
Directors in advance of payment of each particular
21
<PAGE>
dividend. Notwithstanding the foregoing, the cash dividend to be
paid on the first dividend payment date after the initial issuance
of Non-Cumulative Preferred Stock and on any dividend payment date
with respect to a partial dividend period shall be $83.75 per share
multiplied by the fraction produced by dividing the number of days
since such initial issuance or in such partial dividend period, as
the case may be, by 360.
(b) Non-cumulative Dividends. Dividends on the shares of Non-
------------------------
Cumulative Stock shall not be cumulative and no rights shall accrue
to the holders of shares of Non-Cumulative Preferred Stock by reason
of the fact that the Association may fail to declare or pay
dividends on the shares of Non-Cumulative Preferred Stock in any
amount in any quarterly dividend period, whether or not the earnings
of the Association in any quarterly dividend period were sufficient
to pay such dividends in whole or in part, and the Association shall
have no obligation at any time to pay any such dividend.
(c) Payment of Dividends. So long as any share of Non-
--------------------
Cumulative Preferred Stock remains outstanding, no dividend
whatsoever shall be paid or declared and no distribution made on any
junior stock other than a dividend payable in junior stock, and no
shares of junior stock shall be purchased, redeemed or otherwise
acquired for consideration by the Association, directly or
indirectly (other than as a result of a reclassification of junior
stock, or the exchange or conversion of one junior stock for or into
another junior stock, or other than through the use of the proceeds
of a substantially contemporaneous sale of other junior stock),
unless all dividends on all shares of Non-Cumulative Preferred Stock
and non-cumulative Preferred Stock ranking on a parity as to
dividends with the shares of Non-Cumulative Preferred Stock for the
most recent dividend period ended prior to the date of such payment
or declaration shall have been paid in full and all dividends on all
shares of cumulative Preferred Stock ranking on a parity as to
dividends with the
22
<PAGE>
shares of Non-Cumulative Preferred Stock for the most recent
dividend period ended prior to the date of such payment or
declaration shall have been paid in full and all dividends on all
shares of Non-Cumulative Stock (not withstanding that dividends on
such stock are cumulative) for all past dividend periods shall have
been paid in full. Subject, to the foregoing, and not otherwise,
such dividends (payable in cash, stock or otherwise) as may be
determined by the Board of Directors may be declared and paid on any
junior stock from time to time out of any funds legally available
therefor, and the Non-Cumulative Stock shall not be entitled to
participate in any such dividends, whether payable in cash, stock or
otherwise. No dividends shall be paid or declared upon any shares
of any class or series of stock of the Association ranking on a
parity (whether dividends on such stock are cumulative or non-
cumulative) with the Non-Cumulative Preferred Stock in the payment
of dividends for any period unless at or prior to the time of such
payment or declaration all dividends payable on the Non-Cumulative
Preferred Stock for the most recent dividend period ended prior to
the date of such payment or declaration shall have been paid in
full. When dividends are not paid in full, as aforesaid, upon the
Non-Cumulative Preferred Stock and any other series of Preferred
Stock ranking on a parity as to dividends (whether dividends on such
stock are cumulative or non-cumulative) with the Non-Cumulative
Preferred Stock, all dividends declared upon the Non-Cumulative
Preferred Stock and any other series of Preferred Stock ranking on a
parity as to dividends with the Non-Cumulative Preferred Stock shall
be declared pro rata so that the amount of dividends declared per
share on the Non-Cumulative Preferred Stock and such other Preferred
Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Non-Cumulative Preferred Stock
(but without any accumulation in respect of any unpaid dividends for
prior dividend periods on the shares of Non-Cumulative Stock) and
such other Preferred Stock bear to
23
<PAGE>
each other. No interest, or sum of money in lieu of interest, shall
be payable in respect of any dividend payment or payments on the
Non-Cumulative Preferred Stock which may be in arrears.
3. Voting. The holders of Non-Cumulative Preferred Stock shall
------
not have any right to vote for the election of directors or for any
other purpose.
4. Redemption.
----------
(a) Optional Redemption. The Association, at the option of the
-------------------
Board of Directors, may redeem the whole or any part of the shares
of Non-Cumulative Preferred Stock at the time outstanding, at any
time or from time to time after the fifth anniversary of the date of
original issuance of the Non-Cumulative Preferred Stock, upon notice
given as hereinafter specified, at the redemption price per share
equal to $1,000 plus an amount equal to the amount of accrued and
unpaid dividends from the immediately preceding dividend payment
date (but without any accumulation for unpaid dividends for prior
dividend periods on the shares of Non-Cumulative Preferred Stock) to
the redemption date.
(b) Procedures. Notice of every redemption of shares of Non-
----------
Cumulative Preferred Stock shall be mailed by first class mail,
postage prepaid, addressed to the holders of record of the shares to
be redeemed at their respective last addresses as they shall appear
on the books of the Association. Such mailing shall be at least 10
days and not more than 60 days prior to the date fixed for
redemption. Any notice which is mailed in the manner herein
provided shall be conclusively presumed to have been duly given,
whether or not the shareholder receives such notice, and failure
duly to give such notice by mail, or any defect in such notice, to
any holder of shares of Non-Cumulative Preferred Stock designated
for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of Non-Cumulative Preferred
Stock.
24
<PAGE>
In case of redemption of a part only of the shares of Non-
Cumulative Preferred Stock at the time outstanding the redemption
may be either pro rata or by lot or by such other means as the Board
of Directors of the Association in its discretion shall determine.
The Board of Directors shall have full power and authority, subject
to the provisions herein contained, to prescribe the terms and
conditions upon which shares of the Non-Cumulative Preferred Stock
shall be redeemed from time to time.
If notice of redemption shall have been duly given, and, if on
or before the redemption date specified therein, all funds necessary
for such redemption shall have been set aside by the Association,
separate and apart from its other funds, in trust for the pro rata
benefit of the holders of the shares called for redemption, so as to
be and continue to be available therefor, then, notwithstanding that
any certificate for shares so called for redemption shall not have
been surrendered for cancellation, all shares so called for
redemption shall no longer be deemed outstanding on and after such
redemption date, and all rights with respect to such shares shall
forthwith on such redemption date cease and terminate, except only
the right of the holders thereof to receive the amount payable on
redemption thereof, without interest.
If such notice of redemption shall have been duly given or if
the Association shall have given to the bank or trust company
hereinafter referred to irrevocable authorization promptly to give
such notice, and, if on or before the redemption date specified
therein, the funds necessary for such redemption shall have been
deposited by the Association with such bank or trust company in
trust for the pro rata benefit of the holders of the shares called
for redemption, then, notwithstanding that any certificate for
shares so called for redemption shall not have been surrendered for
cancellation, from and after the time of such deposit, all shares so
called for redemption shall no longer be deemed to be
25
<PAGE>
outstanding and all rights with respect to such shares shall
forthwith cease and terminate, except only the right of the holders
thereof to receive from such bank or trust company at any time after
the time of such deposit the funds so deposited, without interest.
The aforesaid bank or trust company shall be organized and in good
standing under the laws of the United States of America or any state
thereof, shall have capital, surplus and undivided profits
aggregating at least $50,000,000 according to its last published
statement of condition, and shall be identified in the notice of
redemption. Any interest accrued on such funds shall be paid to the
Association from time to time. In case fewer than all the shares of
Non-Cumulative Preferred Stock represented by a stock certificate
are redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
Any funds so set aside or deposited, as the case may be, and
unclaimed at the end of the relevant escheat period under applicable
state law from such redemption date shall, to the extent permitted
by law, be released or repaid to the Association, after which
repayment the holders of the shares so called for redemption shall
look only to the Association for payment thereof.
5. Liquidation.
-----------
(a) Liquidation Preference. In the event of any voluntary
----------------------
liquidation, dissolution or winding up of the affairs of the
Association, the holders of Non-Cumulative Preferred Stock shall be
entitled, before any distribution or payment is made to the holders
of any junior stock, to be paid in full an amount per share equal to
an amount equal to $1,000 plus an amount equal to the amount of
accrued and unpaid dividends per share from the immediately
preceding dividend payment date (but without any accumulation for
unpaid dividends for prior dividend periods on the shares of Non-
Cumulative Preferred Stock) per share to such distribution or
payment date (the "liquidation amount").
26
<PAGE>
In the event of any involuntary liquidation, dissolution or
winding up of the affairs of the Association, then, before any
distribution or payment shall be made to the holders of any junior
stock, the holders of Non-Cumulative Preferred Stock shall be
entitled to be paid in full an amount per share equal to the
liquidation amount.
If such payment shall have been made in full to all holders of
shares of Non-Cumulative Preferred Stock, the remaining assets of
the Association shall be distributed among the holders of junior
stock, according to their respective rights and preferences and in
each case according to their respective numbers of shares.
(b) Insufficient Assets. In the event that, upon any such
-------------------
voluntary or involuntary liquidation, dissolution or winding up, the
available assets of the Association are insufficient to pay such
liquidation amount on all outstanding shares of Non-Cumulative
Preferred Stock, then the holders of Non-Cumulative Preferred Stock
shall share ratably in any distribution of assets in proportion to
the full amounts to which they would otherwise be respectively
entitled.
(c) Interpretation. For the purposes of this paragraph 5, the
--------------
consolidation or merger of the Association with any other
corporation or association shall not be deemed to constitute a
liquidation, dissolution or winding up of the Association.
6. Preemptive Rights. The Non-Cumulative Preferred Stock is
-----------------
not entitled to any preemptive, subscription, conversion or exchange
rights in respect of any securities of the Association.
7. Definitions. As used herein with respect to the Non-
-----------
Cumulative Preferred Stock, the following terms shall have the
following meanings:
(a) The term "junior stock" shall mean the Common Stock and any
other class or series of shares of the Association hereafter
authorized over which the Non-Cumulative Preferred Stock has
preference or priority in the
27
<PAGE>
payment of dividends or in the distribution of assets on any
liquidation, dissolution or winding up of the Association.
(b) The term "accrued dividends", with respect to any share of
any class or series, shall mean an amount computed at the annual
dividend rate for the class or series of which the particular share
is a part, from, if such share is cumulative, the date on which
dividends on such share became cumulative to and including the date
to which such dividends are to be accrued, less the aggregate amount
of all dividends theretofore paid thereon and, if such share is non-
cumulative, the relevant date designated to and including the date
to which such dividends are accrued, less the aggregate amount of
all dividends theretofore paid with respect to such period.
(c) The term "Preferred Stock" shall mean all outstanding shares
of all series of preferred stock of the Association as defined in
this Article Fifth of the Articles of Association, as amended, of
the Association.
8. Restriction on Transfer. No shares of Non-Cumulative
-----------------------
Preferred Stock, or any interest therein, may be sold, pledged,
transferred or otherwise disposed of without the prior written
consent of the Association. The foregoing restriction shall be
stated on any certificate for any shares of Non-Cumulative Preferred
Stock.
9. Additional Rights. The shares of Non-Cumulative Preferred
-----------------
Stock shall not have any relative, participating, optional or other
special rights and powers other than as set forth herein.
SIXTH. The Board of Directors shall appoint one of its members
President of this Association, who shall be Chairperson of the
Board, unless the Board appoints another director to be the
Chairperson. The Board of Directors shall have the power to appoint
one or more Vice Chairmen and Vice Presidents and such other
officers and employees as may
28
<PAGE>
be required to transact the business of this Association.
The Board of Directors shall have the power to define the duties
of the officers and employees of the Association; to fix the
salaries to be paid to them; to dismiss them; to require bonds from
them and to fix the penalty thereof; to regulate the manner in which
any increase of the capital of the Association shall be made; to
manage and administer the business and affairs of the Association;
to make all By-laws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a
Board of Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change
the location of the main office to any other place permitted by law,
but subject to the approval of the Comptroller of the Currency; and
shall have the power to establish or change the location of any
branch or branches of the Association to any other location, without
the approval of the shareholders, but subject to the approval of the
Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall
continue until terminated in accordance with the laws of the United
States.
NINTH. The Board of Directors of this Association, or any one
or more shareholders owning, in the aggregate, not less than 25
percent of the stock of this Association, may call a special meeting
of shareholders at any time. Unless otherwise provided by the laws
of the United States, a notice of the time, place, and purpose of
every annual and special meeting of the shareholders shall be given
by first-class mail, postage prepaid, mailed at least ten days prior
to the date of such meeting, to each shareholder of record at his
address as shown upon the books of this Association.
TENTH. (A) Indemnification of Directors.
----------------------------
The Association shall, to the fullest extent permitted by
applicable banking, corporate and other law and regulation,
indemnify any person who
29
<PAGE>
is or was a director of the Association from and against any and all
expenses, liabilities or other losses arising in connection with any
action, suit, appeal or other proceeding, by reason of the fact that
such person is or was serving as a director of the Association and
may, to the fullest extent permitted by applicable banking,
corporate and other law and regulation, advance monies to such
persons for expenses incurred in defending any such action, suit,
appeal or other proceeding on such terms as the Association's Board
of Directors shall determine and as are required by applicable
banking, corporate and other law or regulation or interpretation by
the applicable banking regulators. The Association may purchase
insurance for the purpose of indemnifying such persons and/or
reimbursing the Association upon payment of indemnification to such
persons to the extent that indemnification is authorized by the
preceding sentences, except that insurance coverage and corporate
indemnification shall not be available in connection with a formal
order by a court or judicial or governmental body assessing civil
money penalties against such person or in the event that such
coverage or indemnification would be prohibited by applicable
banking, corporate and other law or regulation.
(B) Indemnification of Officers, Employees and Agents.
-------------------------------------------------
The Association shall indemnify any person who is or was an
officer, employee or agent of the Association or who is or was a
director, general partner, trustee or principal of another entity
serving as such at the request of the Association from and against
any and all expenses, liabilities or other losses arising in
connection with any action, suit, appeal or other proceeding, by
reason of the fact that such person is or was serving as an officer,
employee or agent of the Association or as a director of another
entity at the request of the Association, to the extent authorized
by the corporate policy of the Association, as adopted and modified
from time to time by the shareholders of the Association, except to
the extent that such indemnification would be prohibited by
30
<PAGE>
applicable banking, corporate and other law or regulation. The
Association may advance monies to such persons for expenses incurred
in defending any such action, suit, appeal or other proceeding in
accordance with the corporate policy of the Association, as adopted
and modified from time to time by the shareholders of the
Association, under such terms and procedures as are required by
applicable banking, corporate and other law or regulation or
interpretation by the applicable banking regulators, except to the
extent that such advancement would be prohibited by applicable
banking, corporate and other law or regulation. The Association may
purchase insurance for the purpose of indemnifying such persons
and/or reimbursing the Association upon payment of indemnification
to such person to the extent that indemnification is authorized by
the preceding sentence, except that insurance coverage and corporate
indemnification shall not be available in connection with a formal
order by a court or judicial or governmental body assessing civil
money penalties against such person or in the event that such
coverage or indemnification would be prohibited by applicable
banking, corporate and other law or regulation.
ELEVENTH. These Articles of Association may be amended at any
regular or special meeting of the shareholders by the affirmative
vote of the holders of a majority of the stock of this Association,
unless the vote of the holders of a greater amount of stock is
required by law, and in that case by the vote of the holders of such
greater amount.
31
<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust
Indenture Act of 1939, and in connection with the proposed issue of
Continental Homes Holding Corp.. we hereby consent that reports of
examinations by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
FIRST UNION NATIONAL BANK
By: /s/ John H. Clapham
- -
John H. Clapham
Vice President
Elkton, Maryland
March 27, 1996
<PAGE>
REPORT OF CONDITION EXHIBIT 7
Consolidating domestic and foreign subsidiaries of the First Fidelity
Bank, National Association (now First Union National Bank) of Elkton in
the state of Maryland, at the close of business on December 31, 1995,
published in response to call made by Comptroller of the Currency, under
title 12, United States Code, Section 161. Charter Number 33869
Comptroller of the Currency Northeastern District.
STATEMENT OF RESOURCES AND LIABILITIES
<TABLE>
<CAPTION>
ASSETS
Thousand of Dollars
-------------------
<S> <C>
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin......... 1,876,439
Interest-bearing balances.................................. 35,650
Securities................................................... /////////
Hold-to-maturity securities................................ 672,202
Available-for-sale securities.............................. 4,786,380
Federal funds sold and securities purchased under agreements//////////
to resell in domestic offices of the bank and of it //////////
Edge and Agreement subsidiaries, and in IBFs: //////////
Federal funds sold........................................ 30,000
Securities purchased under agreements to resell........... 369,072
Loans and lease financing receivables:
Loan and leases, net of unearned income......23,027,860
LESS: Allowance for loan and lease losses.......469,305
LESS: Allocated transfer risk reserve.................0
Loans and leases, net of unearned income, allowance, and
reserve........................................................ 22,558,555
Assets held in trading accounts................................ 76,675
Premises and fixed assets (including capitalized leases)....... 374,903
Other real estate owned........................................ 104,196
Investment in unconsolidated subsidiaries and associated //////////
companies...................................................... 19,166
Customer's liability to this bank on acceptances outstanding. 134,499
Intangible assets........................................... 785,891
Other assets................................................ 863,227
Total assets................................................ 32,686,855
LIABILITIES
Deposits:
In domestic offices...................................... 24,886,995
Noninterest-bearing......................4,687,403
Interest-bearing........................20,199,592
In foreign offices, Edge and Agreement subsidiaries,
and IBFs................................................. 1,304,436
Noninterest-bearing............................207
Interest-bearing.........................,,960,051
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its
Edge and Agreement subsidiaries, and IBFs
Federal fund purchased................................... 1,304,436
Securities sold under agreements to repurchase........... 882,846
Demand notes issued to the U.S. Treasury...................... 97,451
Trading liabilities........................................ 0
Other borrowed money:...................................... /////////
With original maturity of one year or less.............. 252,296
With original maturity of more than one year.......... 1,602
Mortgage indebtedness and obligations under capitalized leases 17,369
Bank's liability on acceptances executed and outstanding..... 134,499
Subordinated notes and debentures........................... 175,000
Other liabilities............................................ 934,256
Total liabilities................................................29,647,008
Limited-life preferred stock and related surplus............. 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus................ 160,540
Common Stock................................................. 452,156
Surplus...................................................... 1,300,080
Undivided profits and capital reserves....................... 1,127,557
Net unrealized holding gains (losses) on available-for-sale /////////
securities.................................................. ( 486)
Cumulative foreign currency translation adjustments.......... 0
Total equity capital......................................... 3,039,847
Total liabilities, limited-life preferred stock and equity... /////////
capital........................................................32,686,855
</TABLE>
