<PAGE> 1
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED JUNE 10, 1996)
$100,000,000
LOGO
THE RYLAND GROUP, INC.
8 1/4% SENIOR SUBORDINATED NOTES DUE 2008
------------------------------
Interest on the 8 1/4% Senior Subordinated Notes due 2008 (the "Notes") is
payable semi-annually on April 1 and October 1 of each year commencing, October
1, 1998. The Notes will mature on April 1, 2008. The Notes are not redeemable
prior to April 1, 2003. On and after that date, the Notes are redeemable at any
time at the option of the Company, in whole or in part, at the redemption prices
set forth herein plus accrued and unpaid interest, if any, to the date of
redemption. The Notes will be unsecured subordinated obligations of the Company
and will rank equally and ratably with all other unsecured subordinated
indebtedness of the Company which is not guaranteed by or otherwise an
obligation of a subsidiary of the Company.
The Notes will be represented by one or more Global Securities (as herein
defined) registered in the name of The Depository Trust Company ("DTC") or its
nominee. Interests in the Global Securities will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its
participants. Except as provided herein, Notes in definitive form will not be
issued. See "Description of the 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 PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSION(2) COMPANY(3)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note....................................... 99.161% 1.036% 98.125%
Total.......................................... $99,161,000 $1,036,000 $98,125,000
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from the date of issuance.
(2) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses, payable by the Company, estimated at $85,000.
------------------------------
The Notes are being offered, subject to prior sale, by the Underwriter
when, as and if issued to and accepted by the Underwriter, and subject to
various prior conditions. The Underwriter reserves the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that delivery of the Notes will be made in book entry form through the
facilities of DTC against payment therefor, on or about April 13, 1998.
NATIONSBANC MONTGOMERY SECURITIES LLC
The date of this Prospectus Supplement is April 8, 1998.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."
No Person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus Supplement or the Prospectus, and, if given or made, such information
or representations must not be relied upon as having been authorized. This
Prospectus Supplement and the Prospectus do not constitute an offer to sell or
the solicitation of an offer to buy any securities other than the securities to
which they relate or any offer to sell or the solicitation of any offer to buy
such securities in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus Supplement nor the Prospectus
nor any sale made hereunder or thereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof or thereof or that the information contained or
incorporated by reference herein or therein is correct as of any time subsequent
to the date of such information.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT
<S> <C>
PAGE
----
The Offering................................................ S- 3
Incorporation of Certain Documents by Reference............. S- 4
Risk Factors................................................ S- 5
Use of Proceeds............................................. S- 8
Capitalization.............................................. S- 9
Description of Notes........................................ S-10
Underwriting................................................ S-21
Experts..................................................... S-21
Legal Opinions.............................................. S-21
PROSPECTUS
Available Information....................................... 2
Incorporation of Certain Documents by Reference............. 2
The Corporation............................................. 3
Ratio of Earnings to Fixed Charges.......................... 3
Use of Proceeds............................................. 4
Description of Debt Securities.............................. 4
Plan of Distribution........................................ 10
Validity of Securities...................................... 11
Experts..................................................... 11
</TABLE>
S-2
<PAGE> 3
THE OFFERING
SECURITIES OFFERED......... $100,000,000 principal amount of 8 1/4% Senior
Subordinated Notes due 2008 (the "Notes").
INTEREST PAYMENT DATES..... April 1 and October 1, commencing October 1, 1998.
MATURITY DATE.............. April 1, 2008.
OPTIONAL REDEMPTION........ On or after April 1, 2003, the Company may redeem
the Notes, in whole or in part, at the redemption
prices set forth herein, plus accrued and unpaid
interest thereon to the date of redemption.
RANKING.................... Subordinated to Senior Debt of the Company. The
Company will not incur any Indebtedness (as defined
herein) which is subordinated to Senior Debt of the
Company but senior to the Notes.
OFFERS TO PURCHASE......... In the event of a Change of Control (as defined
herein), each holder of Notes may require the
Company to repurchase such holder's Notes at 101%
of their principal amount, plus accrued and unpaid
interest, if any, to the date of purchase.
The Company will be required to make an offer to
repurchase 10% of the original outstanding
principal amount of the Notes at 100% of their
principal amount, plus accrued and unpaid interest,
if the Company's Adjusted Consolidated Net Worth
(as defined herein), which excludes the net worth
attributable to the Real Estate Joint Ventures, the
Financial Services Subsidiaries (as defined
herein), and the Limited-Purpose Subsidiaries (as
defined herein), does not exceed $125 million, at
the end of each of two consecutive fiscal quarters.
CERTAIN COVENANTS.......... The Indenture will contain certain covenants which,
among other things, limit the payment of dividends,
the making of certain distributions, certain loans
and investments in Unrestricted Subsidiaries (as
defined herein), Real Estate Joint Ventures (as
defined herein) and Affiliates (as defined herein),
the incurrence of additional Indebtedness and
entering into certain transactions with certain
Affiliates. Although the Indenture contains
limitations concerning the amount of Indebtedness
the Company and its Restricted Subsidiaries may
incur, the Company and its Subsidiaries will retain
the ability to incur significant additional
borrowing. The limitations on incurrence of
Indebtedness generally do not restrict borrowings
of the financial services segment. See "Description
of the Notes."
USE OF PROCEEDS............ The Company intends to use the net proceeds from
the offering of the Notes to redeem, after July 15,
1998, the Company's $100 million aggregate
principal amount 10 1/2% Senior Subordinated Notes
due 2002. Pending such use, the Company intends to
use the net proceeds to repay outstanding amounts
under the Company's revolving credit facility and
short-term indebtedness. See "Use of Proceeds."
S-3
<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission pursuant
to the Exchange Act are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K, as amended, for the
fiscal year ended December 31, 1997;
(b) The Company's Current Report on Form 8-K dated March 31, 1998; and
(c) The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A and any amendments or reports filed for
the purpose of updating such description.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Certain statements contained and incorporated by reference in this
Prospectus Supplement and the accompanying Prospectus regarding matters that are
not historical facts, including, among others, statements regarding the
Company's and management's belief or expectation with respect to matters such as
operating margins, closings from new communities, land acquisitions, housing
inventories, return on invested capital, homebuilding results and market
conditions, are forward looking statements (as such term is defined in the
Securities Act of 1933, as amended). Because such statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward looking statements. Factors that could cause actual
results to differ materially include, but are not limited to, those discussed
herein under "Risk Factors."
S-4
<PAGE> 5
RISK FACTORS
Prospective investors should carefully consider the specific factors set
forth below as well as the other information included or incorporated by
reference in this Prospectus Supplement or the accompanying Prospectus before
deciding to invest in the Notes offered hereby.
REAL ESTATE, ECONOMIC AND CERTAIN OTHER CONDITIONS
The Company is significantly affected by the cyclical nature of the
homebuilding industry, which is sensitive to fluctuations in economic activity,
interest rates and levels of consumer confidence, the effects of which differ
among the various geographic markets in which the Company operates. Sales of new
homes are also affected by market conditions for resale homes and rental
properties. Certain of the markets in which the Company operates have at times
in the past experienced a significant decline in housing demand. There can be no
assurance that such declines will not occur in the future.
Inventory risk can be substantial for homebuilders. The market value of
undeveloped land, building lots and housing inventories can fluctuate
significantly as a result of changing market conditions. In addition, inventory
carrying costs can be significant and can result in losses in a poorly
performing project or market. In the event of significant changes in economic or
market conditions, there can be no assurance that the Company will not dispose
of certain subdivision inventories on a bulk or other basis which may result in
a loss. The Company must, in the ordinary course of its business, continuously
seek and make acquisitions of land for expansion into new markets as well as for
replacement and expansion of land inventory within its current markets. Although
the Company employs various measures designed to manage inventory risks, there
can be no assurance that such measures will be successful. See "Business -- Land
Acquisition and Development" in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 (the "1997 10-K").
CONTRIBUTION OF FINANCIAL SERVICES SEGMENT
The financial services segment was a significant source of profits for the
Company in recent years. The Company repositioned its financial services segment
in recent years through a strategy consisting of (1) focusing on retail mortgage
loan originations and improving the efficiency of these activities by
establishing regional operating centers, (2) divesting of non-core assets and
lines of business, including the sale of loan servicing rights, (3) leveraging
its affiliation with the Company's homebuilding segment to increase its capture
rate for builder loans and (4) reaching mortgage customers directly at the point
of sale through the use of technology. The Company recently announced the sale,
as of March 31, 1998, of a majority of the remaining balance of its loan
servicing portfolio. As a result, the Company expects that the operating
performance of this segment will contribute a much smaller percentage of the
Company's total operating earnings in the future. Consequently, the Company's
future results will be substantially dependent upon the performance of the
homebuilding segment. See "Business -- Financial Services" in the 1997 10-K.
LEVERAGE AND LIQUIDITY
At December 31, 1997, after giving effect to the issuance of the Notes
offered hereby and the application of the net proceeds therefrom, the Company
would have had total consolidated homebuilding debt of approximately $316.1
million and a ratio of total consolidated homebuilding debt to stockholders'
equity of approximately 1.05 to 1.0. Of this amount, $116.1 million represents
senior indebtedness of the Company. In addition, at December 31, 1997, the
financial services subsidiaries had outstanding debt of $340.6 million and the
limited-purpose subsidiaries segment had outstanding non-recourse debt of $136.9
million, none of which has been guaranteed by the Company.
The ability of the Company to meet its debt service obligations will be
dependent upon the future performance of the Company, which, in turn, will be
subject to general economic conditions and to financial, competitive, business
and other factors, including factors beyond the Company's control. The level of
the Company's leverage could restrict its flexibility in responding to changing
business and economic conditions. If
S-5
<PAGE> 6
the Company is at any time unable to generate sufficient cash flow from
operations to service its debt, it may be required to seek refinancing for all
or a portion of that debt or to obtain additional financing. There can be no
assurance that any such refinancing would be possible or that any additional
financing could be obtained on terms that are favorable or acceptable to the
Company.
The Company's unsecured revolving credit facility, other senior debt and
senior subordinated debt instruments contain financial covenants with which the
Company currently is in compliance. Significant losses in the Company's
homebuilding segment could result in the violation of one or more of these
covenants. The Company's revolving credit facility is guaranteed by its
homebuilding subsidiaries.
A significant portion of the homebuilding operations and all of the
financial services business are conducted through subsidiaries. Accordingly, the
Company derives a significant portion of its operating income and cash flows
from its homebuilding and financial services subsidiaries, and relies on these
subsidiaries to generate the funds necessary to meet its obligations, including
the payment of principal and interest on the Notes. The ability of the Company's
subsidiaries to pay dividends or otherwise make payments to the Company will be
subject to, among other things, applicable state laws. In addition, the ability
of the financial services segment to provide funds to the Company is subject to
certain restrictions in its debt instruments. There can be no assurance that the
Company will be able to realize from these subsidiaries any funds required to
meet its principal or interest obligations on the Notes.
SUBORDINATION OF THE NOTES
The Notes will be subordinated and junior in right of payment to all Senior
Debt of the Company. At December 31, 1997, on a pro forma basis after giving
effect to the sale of the Notes and the application of the proceeds therefrom,
the Senior Debt of the Company, excluding subsidiary indebtedness, would have
been $116.1 million.
Because of the subordination of the Notes, in the event of any payment or
distribution of assets of the Company in any dissolution, insolvency, bankruptcy
or other similar proceeding, holders of Senior Debt must be paid in full before
the holders of the Notes may be paid and amounts otherwise payable to the
holders of the Notes will be paid to the holders of Senior Debt until the Senior
Debt is paid in full. By reason of this subordination, in the event of the
dissolution, insolvency or bankruptcy of the Company, holders of the Notes may
recover less, ratably, than holders of Senior Debt and other creditors of the
Company, or may recover nothing. In addition, the Company is required to stop
making payments of principal and interest on the Notes if there is a continuing
default with respect to Senior Debt that would permit the holders of such Senior
Debt to accelerate payment of that debt and the Company receives notice of the
default as provided in the Indenture. See "Description of the Notes."
The Company's financial services segment and a significant portion of its
homebuilding operations are conducted through subsidiaries and any right of the
Company to receive assets of these subsidiaries upon the liquidation or
recapitalization of any such subsidiaries (and the consequent right of holders
of the Notes to participate in those assets) will be subject to the claims of
such subsidiaries' creditors, except to the extent that the Company is itself
recognized as a creditor of any such subsidiary. Even in the event the Company
is recognized as a creditor of a subsidiary, the Company's claims would still be
subject to any security interests in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that of the Company. Included in the
Company's consolidated liabilities, as of December 31, 1997, the Company had
outstanding $340.6 million of financial services segment subsidiary debt and
$136.9 million of non-recourse limited-purpose subsidiary segment debt, none of
which has been guaranteed by the Company and all of which is structurally senior
to the Notes.
INTEREST RATE RISK
The Company's lines of business can be significantly affected by interest
rates. The level and expected direction of interest rates can adversely affect
the sales of new homes, the profitability of such sales, the level of mortgage
originations and refinancings and the value of and interest spread earned on
mortgage-backed
S-6
<PAGE> 7
securities held for sale, any of which could have an adverse impact on results
of operations or financial position.
COMPETITION
The residential housing industry is highly competitive, and the Company
competes in each of its markets with a large number of national, regional and
local homebuilding companies. Some of these companies are larger than the
Company and have greater financial resources. In addition, the general increase
in the availability of capital and financing in recent years has made it easier
for both large and small homebuilders to expand and enter new markets and has
increased competition. Such competition could result in difficulty in acquiring
suitable land at acceptable prices, increased selling incentives or lower sales
per community, any of which could have an adverse impact on results of
operations. See "Business -- Competition" in the 1997 10-K.
REGULATORY AND ENVIRONMENTAL MATTERS
The Company and its competitors are subject to various local, state and
federal statutes, ordinances, rules and regulations concerning zoning, building
design, construction and similar matters, including local regulation which
imposes restrictive zoning and density requirements in order to limit the number
of homes that can eventually be built within the boundaries of a particular
area. The Company may also be subject to periodic delays in its homebuilding
projects due to building moratoria in any of the areas in which it operates.
The Company and its competitors are subject to a variety of local, state
and federal statutes, ordinances, rules and regulations concerning the
protection of health and the environment. The Company is also subject to a
variety of environmental conditions that can affect its business and its
homebuilding projects. 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, as
well as adjoining properties. Environmental laws and conditions 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. See "Business -- Regulatory and
Environmental Matters" in the 1997 10-K.
NATURAL DISASTERS
The climates and geology of many of the states in which the Company
operates present increased risks of natural disasters. To the extent that
hurricanes, severe storms, earthquakes, droughts, floods, wildfires or other
natural disasters or similar events occur, the Company's business in such states
may be adversely affected.
CHANGE OF CONTROL
Upon a Change of Control (as defined herein), the Company will be required
to offer to repurchase all of the outstanding Notes at 101% of the principal
amount thereof, plus accrued and unpaid interest to the date of repurchase.
There can be no assurance that the Company will have sufficient funds available
or will be permitted by its other debt agreements to repurchase the Notes upon
the occurrence of a Change of Control. In addition, a Change of Control may
require the Company to offer to repurchase other outstanding indebtedness and
may cause a default under the Revolving Credit Facility. The inability to
repurchase all of the tendered Notes would constitute an Event of Default (as
defined herein) under the Indenture. See "Description of the Notes -- Certain
Covenants -- Change of Control."
NO PRIOR MARKET FOR THE NOTES
The Notes are a new issue of securities, have no established trading market
and may not be widely distributed. The Underwriter has notified the Company that
it intends to make a market in the Notes; however, it is not obligated to do so
and any market making may be discontinued at any time without notice. No
application will be made to list the Notes on any stock exchange. Accordingly,
no assurance can be given as to the liquidity of, trading market for or
secondary market prices for the Notes.
S-7
<PAGE> 8
USE OF PROCEEDS
The Company intends to use the net proceeds from the offering of the Notes
to redeem, after July 15, 1998, the Company's $100 million aggregate principal
amount 10 1/2% Senior Subordinated Notes due 2002 (the "2002 Notes"). The 2002
Notes currently are subject to redemption at the election of the Company,
subject to payment of an applicable redemption premium which declines to
103.9375% on July 15, 1998, at which time the Company expects to retire the 2002
Notes. Pending such use, the Company intends to use the net proceeds for
repayment of outstanding indebtedness, including approximately $20.0 million
outstanding under the Company's revolving credit facility as of April 8, 1998
and short-term notes payable of the Company's financial services segment. To the
extent such indebtedness is repaid from the proceeds of the offering of the
Notes, the Company expects to reborrow funds under such facilities to the extent
necessary to fund redemption of the 2002 Notes after July 15, 1998. The Company
may also elect to make open market purchases of the 2002 Notes. The Company
expects to receive any necessary consents under its revolving credit facility in
order to redeem or purchase the 2002 Notes, although there can be no assurance
that such consents will be obtained.
S-8
<PAGE> 9
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at December 31, 1997 and as adjusted to give effect to the sale of the
Notes and the application of the net proceeds therefrom.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------
ACTUAL AS ADJUSTED(3)
---------- --------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Debt:
Homebuilding:
Long-term debt (including current portion(1)):
Revolving credit facility(2)(3)................... $ 0 $ 5,838
Secured notes payable............................. 2,221 2,221
10 1/2% Senior Notes due 2000..................... 8,000 8,000
10 1/2% Senior Notes due 2006..................... 100,000 100,000
10 1/2% Senior Subordinated Notes due 2002(3)..... 100,000 0
9 5/8% Senior Subordinated Notes due 2004......... 100,000 100,000
8 1/4% Senior Subordinated Notes due 2008......... 0 100,000
---------- ----------
Total long-term debt-homebuilding............ 310,221 316,059
Financial Services(4)
Short-term notes payable(3)....................... 340,632 340,632
Limited-Purpose Subsidiaries(4)
Bonds payable, net................................ 136,865 136,865
---------- ----------
Total debt................................... 787,718 793,556
Total stockholder's equity.................................. 305,123 301,663
---------- ----------
Total capitalization........................................ $1,092,841 $1,095,219
========== ==========
</TABLE>
- ---------------
(1) Scheduled principal amortization through 2002 of the Company's long-term
debt (excluding amounts under the Company's revolving credit facility) as
adjusted for the sale of the Notes is as follows: $1.6 million in 1998, $0.2
million in 1999, $8.2 million in 2000, $0.2 million in 2001 and $0.1 million
in 2002.
(2) Represents Company indebtedness guaranteed by the Company's homebuilding
segment subsidiaries.
(3) The As Adjusted presentation reflects retirement of the 2002 Notes,
including borrowing of $5.8 million under the Company's revolving credit
facility to finance a portion of redemption not paid out of net proceeds of
the Notes. Pending the expected use of the net proceeds for refinancing of
the 10 1/2% Senior Subordinated Notes due 2002 after July 15, 1998, it is
expected that the net proceeds will be used to repay any outstanding amounts
under the Company's revolving credit facility and short-term notes payable.
(4) Limited-purpose subsidiaries' indebtedness represents obligations solely of
the limited-purpose subsidiaries, is non-recourse and is not guaranteed or
insured by the Company or any of its subsidiaries. In addition, the Company
has not guaranteed any of the debt of its financial services subsidiaries.
S-9
<PAGE> 10
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent is inconsistent therewith, replaces the
descriptions of the general terms and provisions of the Debt Securities set
forth in the accompanying Prospectus, to which description reference is hereby
made. Capitalized terms used but not defined herein have the meanings set forth
in the accompanying Prospectus.
GENERAL
The Notes will constitute a series of Senior Subordinated Debt Securities.
The Notes will be limited to $100 million aggregate principal amount and will
mature on April 1, 2008. The Notes will be general unsecured obligations of the
Company and will be issued in fully registered form in denominations of $1,000
or any amount in excess thereof that is an integral multiple of $1,000.
The Notes are being issued under an indenture dated as of July 15, 1992
between the Company and First Union National Bank, as successor trustee to
Security Trust Company, N.A. (the "Trustee"), as supplemented by an officers'
certificate or resolutions setting forth the terms of the Notes duly adopted
under authority of the Board of Directors of the Company or a duly authorized
committee thereof (as so supplemented, the "Indenture"). The Notes are subject
to all such terms and prospective purchasers are referred to the Indenture for a
statement thereof.
The following statements relating to the Notes and the Indenture are
summaries and do not purport to be complete. Such summaries are qualified in
their entirety by express reference to the Indenture. A copy of the Indenture is
filed with the Commission.
Interest
The Notes will bear interest from April 13, 1998 at the rate shown on the
cover page of this Prospectus Supplement, payable semi-annually on April 1 and
October 1 (each, an "Interest Payment Date") of each year, commencing on October
1, 1998, to Holders of record at the close of business on March 15 and September
15 immediately preceding each Interest Payment date. The Notes will mature on
April 1, 2008.
Optional Redemption
The Notes may be redeemed at any time on or after April 1, 2003 and prior
to maturity at the option of the Company, in whole or in part, on not less than
30 nor more than 60 days' prior notice, mailed by first-class mail to the
Holders' last addresses as they shall appear upon the register, at the following
redemption prices (expressed as percentages of the principal amount) plus
accrued and unpaid interest, if any, to the date fixed for redemption:
If redeemed during the 12-month period beginning April 1, in the year
indicated, the redemption price shall be:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003........................................................ 104.125
2004........................................................ 102.750
2005........................................................ 101.375
2006 or Thereafter.......................................... 100.000
</TABLE>
If less than all of the Notes are to be redeemed, the Trustee will select the
Notes to be redeemed on a pro rata basis. The Trustee will mail a notice of
redemption to each Holder of Notes, which notice will specify the portion of the
principal amount of such Notes to be redeemed.
The Notes will not be subject to the operation of any mandatory sinking
fund.
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<PAGE> 11
GLOBAL SECURITIES
The Notes will be represented by one or more global registered securities
(the "Global Securities"), registered in the name of a nominee of The Depositary
Trust Company, as Depositary. The provisions set forth under "Description of
Debt Securities -- Global Securities" in the accompanying Prospectus will be
applicable to the Notes. Accordingly, ownership of interests in such Global
Securities will be shown on, and the transfer thereof will be effected only
through, records maintained by the Depositary or its nominee for the Notes and
on the records of participants. Except as otherwise described under "Description
of Debt Securities -- Global Securities" in the accompanying Prospectus, owners
of beneficial interests in the Global Securities will not be entitled to receive
Notes in definitive form and will not be considered the holders of Notes.
The Depositary has advised the Company and the Underwriters as follows: the
Depositary is a limited-purpose trust company organized under New York Banking
Law, a "banking corporation" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered under the Exchange Act. DTC holds securities that persons having
accounts with DTC deposit with DTC. DTC also facilitates the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations, some of whom
(and/or their representatives) own the Depositary. Access to the Depositary's
book-entry system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Under the terms of the Indenture, the Company and the Trustee will treat
the persons in whose names the Notes are registered as the owners of such Notes
for the purpose of receiving payment of the principal of and interest on such
Notes and for all other purposes whatsoever. Therefore, neither the Company, the
Trustee nor any paying agent has any direct responsibility or liability for the
payment of principal of, or interest on, the Notes to owners of beneficial
interest in the Global Securities. The Depositary has advised the Company and
the Trustee that its current practice is, upon receipt of any payment of
principal or interest, to credit the accounts of the participants with such
payment in amounts proportionate to their respective holdings in principal
amount of beneficial interests in the Global Securities as shown in the records
of the Depositary. Payments by participants and indirect participants to owners
of beneficial interests in the Global Securities will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in "street name," and will be the
responsibility of the participants or indirect participants.
CERTAIN COVENANTS
Limitation on Restricted Payments
The Notes will provide that neither the Company nor its Restricted
Subsidiaries shall make any Restricted Payment if, at the time of such
Restricted Payment, or after giving effect thereto, (i) a Default or an Event of
Default shall have occurred and be continuing; or (ii) the aggregate amount of
Restricted Payments subsequent to March 31, 1998 would exceed the sum of: (a)
50% of the Consolidated Net Income (or, in case such Consolidated Net Income
shall be a deficit, minus 100% of such deficit) of the Company (excluding cash
dividends and distributions from Unrestricted Subsidiaries) accrued on a
cumulative basis subsequent to March 31, 1998, (b) the aggregate net cash
proceeds, including the fair market value of property other than cash (as
determined by the Board of Directors of the Company whose determinations shall
be conclusive and evidenced by a resolution of such Board of Directors filed
with the Trustee), received by the Company from the issue or sale after March
31, 1998, of Capital Stock of the Company, but excluding Disqualified Stock, (c)
cash dividends and distributions received from Unrestricted Subsidiaries after
March 31, 1998 up to, but not to exceed, the sum of the Company's and its
Restricted Subsidiaries' previous Investments in the respective Unrestricted
Subsidiary on March 31, 1998 plus any Investments thereafter
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made, plus 50% of any cash dividends received in excess thereof, (d) the amount
of any guarantee of Indebtedness or other obligation of any Person that was
initially treated as a Restricted Payment under this covenant and which has
subsequently terminated or expired, net of any amounts paid by the Company or a
Restricted Subsidiary in respect of such guarantee and (e) $50 million; or (iii)
the Company will be unable to incur an additional $1.00 of Indebtedness pursuant
to the covenant described in "Limitation on Incurrence of Indebtedness";
provided however, that the foregoing provisions shall not prevent (a) the
payment of any dividend or distribution within 60 days after the date of
declaration thereof, if the payment would have complied with the foregoing
provisions on the date of such declaration, (b) the retirement of any shares of
the Company's Capital Stock in exchange for, upon conversion of or out of the
proceeds of a substantially concurrent sale (other than to a Subsidiary of the
Company) of other shares of such Capital Stock of the Company (other than
Disqualified Stock), or (c) the redemption or retirement of Indebtedness of the
Company which is subordinate in right of payment to the Notes, in exchange for,
by conversion into, or out of the proceeds of a substantially concurrent (1)
issue or sale of Capital Stock (other than Disqualified Stock) of the Company or
(2) incurrence of Refinancing Indebtedness.
Limitation on Payment Restrictions Affecting Subsidiaries
The Notes will provide that the Company shall not, and shall not permit any
Non-Financial Services Restricted Subsidiary to, make any Investment in any
Financial Services Subsidiary, if, at the time of such Investment, such
Financial Services Subsidiary would not be permitted to pay, by dividend,
distribution, loan payment or otherwise, to the Company or such Non-Financial
Services Restricted Subsidiary the amount of the Aggregate Net Investment of the
Company and the Non-Financial Services Restricted Subsidiaries in such Financial
Services Subsidiary after giving effect to such additional Investment. In
addition, if at any time the Financial Services Subsidiaries are not permitted
to, or would by virtue of incurring additional Indebtedness become not permitted
to, pay, by dividend, distribution, loan payment or otherwise, to the Company or
its Non-Financial Services Restricted Subsidiaries, the amount of the Aggregate
Net Investment of the Company and the Non-Financial Services Restricted
Subsidiaries in the Financial Services Subsidiaries, the Financial Services
Subsidiaries may not incur any Indebtedness. Notwithstanding the foregoing, the
Financial Services Subsidiaries may incur Indebtedness during any period in
which the Financial Services Subsidiaries are not permitted to pay, by dividend,
distribution, loan payment or otherwise, to the Company and any Non-Financial
Services Restricted Subsidiary, the amount of the Aggregate Net Investment, if
after giving effect to such incurrence the total amount of Indebtedness of the
Financial Services Subsidiaries would be an amount less than or equal to the
Indebtedness of the Financial Services Subsidiaries on the date the Financial
Services Subsidiaries first were prohibited from paying to the Company and its
Non-Financial Services Restricted Subsidiaries the amount of the Aggregate Net
Investment. For purposes of the foregoing, "Aggregate Net Investment" shall mean
the cumulative amount of any Investment by the Company and its Non-Financial
Services Restricted Subsidiaries in any such Financial Services Subsidiary after
July 15, 1992 (which is the date of the Indenture), less the cumulative amount
of any cash dividends or distributions in respect of, or purchases, redemptions
or retirements of, Capital Stock, or repayment or release of any other form of
Investment, paid by such Financial Services Subsidiary to the Company or its
Non-Financial Services Restricted Subsidiaries after July 15, 1992. As of
December 31, 1997, the Aggregate Net Investment based on this definition was a
negative $135.9 million, reflecting the net dividends and distributions paid by
the Financial Services Subsidiaries to the Company and the Non-Financial
Services Restricted Subsidiaries after July 15, 1992. Accordingly, the Company
and its Non-Financial Services Restricted Subsidiaries would be entitled to make
an investment of up to $135.9 million in the Financial Services Subsidiaries
without restriction. The Notes will further provide that the Financial Services
Subsidiaries shall not amend, modify or change, or consent or agree to any
amendment, modification or change to any of the terms of, or suffer to exist,
any debt instrument to which any of the Financial Services Subsidiaries is a
party, the effect of which would be to impose restrictions on the payment of
dividends, directly or indirectly, to or for the benefit of the Company which
would limit such dividends to an aggregate amount for all Financial Services
Subsidiaries which are Restricted Subsidiaries in any fiscal year which is less
than the combined Net Income for the then-current fiscal year, determined on a
combined basis in accordance with GAAP, of the Financial Services Subsidiaries;
provided, that provisions which by their terms would impose such restrictions
only in the event of
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a default under any such debt instrument and solely as a result of such default
shall not be deemed to be included in this restriction. In addition, the Notes
will provide that the Restricted Subsidiaries other than the Financial Services
Subsidiaries shall not amend, modify or change, or consent or agree to any
amendment, modification or change to any of the terms of, or suffer to exist,
any debt instrument to which any of such Restricted Subsidiaries is a party, the
effect of which would be to impose restrictions on the payment of dividends,
directly or indirectly, to or for the benefit of the Company, except for
restrictions arising in connection with Refinancing Indebtedness which are not
more restrictive than those under the agreement creating or evidencing the
Indebtedness being refunded, refinanced or extended; provided, that provisions
which by their terms would impose such restrictions only in the event of a
default under any such debt instrument and solely as a result of such default
shall not be deemed to be included in the foregoing restriction. Notwithstanding
the foregoing, any Restricted Subsidiary which is acquired by the Company or by
any Subsidiary of the Company after the date of the issuance of the Notes will
not be subject to the restrictions contained in the preceding two sentences, so
long as that Restricted Subsidiary and any other Restricted Subsidiaries
acquired after the date of the issuance of the Notes which are not subject to
such restrictions do not in the aggregate contribute greater than 10% of the
Company's consolidated EBITDA for any one year period consisting of the last
four fiscal quarters of the Company and its Restricted Subsidiaries for which
financial statements are available, measured (a) as of the time the Company's
quarterly or year end financial statements, as applicable, are filed with the
Securities and Exchange Commission and (b) as of the date of each acquisition
(and measured on a pro forma basis giving effect to any acquisition of a
Restricted Subsidiary not owned for the entire period); provided, however, if
after any such measurement date identified in subparagraph (a), all Restricted
Subsidiaries not subject to such restrictions shall constitute more than 10% of
the Company's consolidated EBITDA as so measured on that date, the Company will
not be in default of this provision so long as the Company is in compliance on
the measurement date for the next succeeding fiscal quarter, after giving effect
to any refinancing, repayment or modification of indebtedness of any such
Restricted Subsidiaries.
Maintenance of Consolidated Net Worth
If the Company's Adjusted Consolidated Net Worth at the end of each of two
consecutive fiscal quarters (the last day of such second fiscal quarter being
referred to as the "Trigger Date") is less than $125 million, then the Company
shall make an offer to acquire (a "Net Worth Offer") on a pro rata basis on or
before the last day of the next following fiscal quarter (the "Trigger Payment
Date") Notes in an aggregate principal amount equal to 10% of the initial
outstanding principal amount of the Notes at a purchase price of 100% of
principal amount, plus accrued interest to the Trigger Payment Date. The Company
may credit against its obligation to purchase the Notes under these provisions
the principal amount of Notes acquired by the Company and surrendered for
cancellation through purchase, optional redemption or exchange subsequent to the
Trigger Date. In no event shall the failure to meet the minimum Adjusted
Consolidated Net Worth requirement set forth above at the end of any fiscal
quarter be counted toward the making of more than one such offer.
Limitation on Transactions with Affiliates
The Company may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, knowingly (other than pursuant to contractual
arrangements in effect on the date of the issuance of the Notes) conduct any
business or enter into any transaction or series of related transactions with
any Officer or director or any beneficial owner of 10% or more of any class of
Capital Stock of the Company or with any Affiliate of any such owner known to
the Company or its Restricted Subsidiaries (other than the Company or a
Restricted Subsidiary) unless (i) the terms of such business, transaction or
series of transactions are as favorable to the Company or such Restricted
Subsidiary as terms that would be obtainable at the time for a comparable
transaction or series of related transactions in arm's-length dealings with an
unrelated third person and (ii) if the business or transaction or series of
related transactions is in an aggregate amount greater than $15 million, (A) the
terms thereof are set forth in writing and (B) the Board of Directors has, by
resolution, determined that such business or transaction or series of
transactions meets the criterion set forth in (i) above. Notwithstanding the
foregoing, this provision will not apply to any transaction with any Officer or
director of
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the Company or of any Subsidiary in their capacity as officer or director
entered into in the ordinary course of business (including compensation and
employee benefit arrangements with any officer or director of the Company or of
any Subsidiary).
Limitation on Guarantees
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, guarantee any payments of or on the
Indebtedness of any Financial Services Subsidiary or any Unrestricted Subsidiary
except, the Company and any of its Restricted Subsidiaries may incur guarantee
obligations for the benefit of the Financial Services Subsidiary if the
aggregate amount of such guarantee obligations, plus the net amount of
Investments by the Company and its Restricted Subsidiaries in the Financial
Services Subsidiary after March 31, 1998 does not exceed the sum of (i) $50
million, plus (ii) an amount, if a positive number, equal to the aggregate value
of all cash dividends or distribution in respect of, or purchases, redemptions
or retirements of, Capital Stock, or release of any other form of Investment,
paid by the Financial Services Subsidiary to the Company or its Non-Financial
Service Restricted Subsidiaries after March 31, 1998. Notwithstanding the
foregoing, any Financial Services Subsidiary may, directly or indirectly,
guarantee any payments of or on the Indebtedness of any other Financial Services
Subsidiary.
Limitation on Incurrence of Indebtedness
The Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness; provided, that the Company may Incur
Indebtedness if, after giving effect to the incurrence and the receipt and
application of the proceeds thereof, either (i) the Fixed Charge Coverage Ratio
for the Company and its Restricted Subsidiaries (determined on a pro forma basis
for the last four fiscal quarters of the Company and its Restricted Subsidiaries
for which financial statements are available at the date of determination) is
greater than 2.0 to 1.0 or (ii) the ratio of Indebtedness of the Company and the
Restricted Subsidiaries (excluding, for purposes of this calculation,
Indebtedness of the Financial Services Subsidiaries) to Adjusted Consolidated
Net Worth of the Company is less than 3.5 to 1. Notwithstanding the foregoing,
the Company and its Restricted Subsidiaries may Incur: (i) Existing
Indebtedness; (ii) Non-Recourse Indebtedness; (iii) Indebtedness of the
Financial Services Subsidiaries; (iv) Refinancing Indebtedness (provided, that
for purposes of this clause (iv), application of the proceeds from the sale of
assets of the Company or its Restricted Subsidiaries in the ordinary course of
business to reduce Indebtedness and the subsequent reborrowing within six months
to purchase assets in the ordinary course of business shall be deemed to be
Refinancing Indebtedness); (v) outstanding Indebtedness of a Restricted
Subsidiary acquired by the Company after the date of the issuance of the Notes
which, when taken together with all other outstanding Indebtedness of a
Restricted Subsidiary Incurred pursuant to this clause (v) is not in excess of
10% of Homebuilding Assets and is Incurred and outstanding on or prior to the
date on which such Restricted Subsidiary was acquired by the Company (other than
Indebtedness Incurred as consideration in, or to provide all or any portion of
the funds or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became a
Subsidiary or was otherwise acquired by the Company); provided, however, that at
the time such Restricted Subsidiary is acquired by the Company, the Company
would have been able to Incur at least $1 of additional Indebtedness under the
Fixed Charge Coverage Ratio described under the caption "Limitation on
Incurrence of Indebtedness" after giving effect to the Incurrence of such
Indebtedness pursuant to this clause (v); and (vi) Indebtedness to the Company
or to Restricted Subsidiaries.
Change of Control
Upon the occurrence of a Change of Control, the Company shall offer (a
"Change of Control Offer") to purchase all outstanding Notes at a purchase price
equal to 101% of the aggregate principal amount of the outstanding Notes, plus
accrued and unpaid interest to the date of purchase.
Within 30 days after any Change of Control, the Company, or the Trustee at
the Company's request, will mail or cause to be mailed to all Holders of Notes
of record on the date of the Change of Control a notice of the occurrence of
such Change of Control and of the Holders' rights arising as a result thereof.
Such notice
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will contain instructions and materials necessary to enable Holders of Notes to
tender their Notes to the Company. Any Change of Control Offer will be conducted
in compliance with applicable tender offer rules, including Section 14(e) of the
Exchange Act and Rule 14e-1 thereunder.
Limitations on Mergers and Consolidations
The Notes will provide that the Company will not consolidate with or merge
into any other corporation or convey, transfer or lease its properties and
assets substantially as an entirety to any Person (other than a transfer of
properties and assets to one or more wholly-owned Subsidiaries of the Company),
and the Company shall not permit any Person to consolidate with or merge into
the Company or convey, transfer or lease its properties and assets substantially
as an entirety to the Company, unless: (i) in case the Company shall consolidate
with or merge into another corporation or convey, transfer or lease its
properties and assets substantially as an entirety to any Person (other than a
transfer of properties and assets to one or more wholly-owned Subsidiaries of
the Company), the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer, or
which leases, the properties and assets of the Company substantially as an
entirety (the "Successor") shall be a corporation organized and existing under
the laws of the United States of America, any State thereof or the District of
Columbia and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee, the
due and punctual payment of the principal of (and premium, if any) and interest
on all the Notes and the performance of every covenant of the Indenture on the
part of the Company to be performed or observed; (ii) immediately after giving
effect to such transaction and treating any Indebtedness which becomes an
obligation of the Company or a Subsidiary as a result of such transaction as
having been incurred by the Company or such Subsidiary at the time of such
transaction, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing; (iii) immediately after giving effect to such transaction and the
use of any net proceeds therefrom on a pro forma basis, the Consolidated Net
Worth of the Company or the Successor, as the case may be, would be at least
equal to the Consolidated Net Worth of the Company immediately prior to such
transaction; (iv) the Fixed Charge Coverage Ratio for the company and its
Restricted Subsidiaries (determined on a pro forma basis for the last four
fiscal quarters of the Company and its Restricted Subsidiaries for which
financial statements are available at the date of determination) of the Company
or the Successor, as the case may be, immediately after giving effect to such
transaction, would be such that the Company or the Successor, as the case may
be, would be entitled to Incur at least $1 of additional Indebtedness under the
Fixed Charge Coverage Ratio test described under the caption "-- Limitation on
Incurrence of Indebtedness"; and (v) in case the Company shall consolidate with
or merge into any other corporation or convey, transfer or lease its properties
and assets substantially as an entirety to any Person (other than a transfer of
properties and assets to one or more wholly-owned Subsidiaries of the Company),
the Company has delivered to the Trustee an Officers' Certificate and an Opinion
of Counsel, each stating that such consolidation, merger, conveyance, transfer
or lease and such supplemental indenture comply with the applicable provisions
of the Indenture and that all conditions precedent provided for in the Indenture
relating to such transaction have been complied with.
Limitation on Future Senior Subordinated Indebtedness
The Company will not issue, incur, create, assume, guarantee or otherwise
become liable for any Indebtedness which is subordinated in right of payment to
Senior Debt of the Company but senior in right of payment to the Notes.
EVENTS OF DEFAULT
The following shall constitute events of default with respect to the Notes:
(i) default for a period of 30 days in payment of any interest on any Note when
due; (ii) default in payment of principal of (or premium, if any, on) any Note
when due (including any default in payment pursuant to a Change of Control
Offer, a Net Worth Offer or an Excess Proceeds Offer); (iii) default in
performance of any other covenant in the Indenture with respect to the Notes or
in the Notes which continues for 60 days after written notice to the
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Company by the Trustee or by the Holders of at least 25% in principal amount of
the Notes; (iv) the occurrence of any event that results in the acceleration of
any Indebtedness (other than Non-Recourse Indebtedness) of the Company or any of
its Restricted Subsidiaries that has an outstanding principal amount of $10
million or more in the aggregate; (v) default in the payment of any principal or
interest in respect of any Indebtedness of the Company or any of its Restricted
Subsidiaries (other than Non-Recourse Indebtedness) that has an outstanding
principal amount of $20 million or more and the continuation of such default for
ten business days from the date such principal or interest payment became due
and payable (after giving effect to any applicable grace period set forth in the
documents governing such indebtedness); and (vi) certain events of bankruptcy,
insolvency or reorganization.
CERTAIN DEFINITIONS
"Adjusted Consolidated Net Worth" of the Company means the Consolidated Net
Worth of the company less (i) the pro rata Company owned portion of the
Consolidated Net Worth of each of the Unrestricted Subsidiaries, and (ii) any
Investment (other than Investments in Capital Stock) of the Company in each of
the Unrestricted Subsidiaries.
"Affiliate" of any Person means (i) any Person who, directly or indirectly,
is in control of, is controlled by or is under common control with such Person
or (ii) any Person who is a director or officer of such Person. For purposes of
this definition, control of a Person means the power, direct or indirect, to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise; and the terms "controlling" and "controlled"
have meanings correlative to the foregoing. Notwithstanding the foregoing, the
term "Affiliate" shall not include, with respect to the Company or any
Restricted Subsidiary, any Subsidiary of the Company.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents of interest in (however designated) the
equity (which includes, but is not limited to, common stock, preferred stock and
partnership and joint venture interests) of such Person.
"Capitalized Lease Obligations" of any Person means any obligation of such
Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such obligation will be the capitalized amount thereof determined in
accordance with GAAP.
A "Change in Control" of the Company will be deemed to have occurred upon
the occurrence of any of the following: (i) whether or not approved by the Board
of Directors of the Company, any Person or "group" within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 is or becomes the
beneficial owner, directly or indirectly, of securities having 30% or more of
the voting power of the Common Stock or (ii) there shall occur any consolidation
of the Company with, or merger of the Company into, any other entity, any merger
of another entity into the Company, or any sale or transfer of all or
substantially all of the assets of the Company (other than any such sale or
transfer to one or more Restricted Subsidiaries of the Company), in one
transaction or a series of related transactions, to one or more Persons (other
than (w) a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of the Company,
(x) a merger which is effected solely to change the jurisdiction of
incorporation of the Company, (y) the sale or transfer of any of the stock or
assets of the Limited-Purpose Subsidiaries, or (z) a merger pursuant to which
the holders of Common Stock of the Company prior to the effective date of such
merger hold immediately after such effective date 70% or more of the class of
stock of the surviving entity or its parent corporation that is entitled to vote
generally for the election of directors).
"Common Stock" of any Person means all Capital Stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management and policies of such Person.
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"Consolidated Interest Expense" of the Company means, for any period, the
aggregate amount of interest which, in conformity with GAAP, would be set forth
opposite the caption "interest expense" or any like caption on an income
statement for the Company and its Restricted Subsidiaries on a consolidated
basis (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 (other than interest amortized to cost of sales)) plus without
duplication, all capitalized interest for such period and all interest incurred
or paid under any guarantee of Indebtedness (including a guarantee of principal,
interest or any combination thereof) of any Person. In making such calculation
on a pro forma basis, interest attributable to Indebtedness bearing a floating
interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period.
"Consolidated Net Income" of the Company means, for any period, the
aggregate of the Net Income of the Company and its Restricted Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP,
provided that (i) the Net Income of any Person which is not a Restricted
Subsidiary or is accounted for by such Person by the equity method of accounting
shall be included only to the extent of the amount of dividends or distributions
paid to the Company or a Restricted Subsidiary by such Person, (ii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, and (iii) the
Net Income of any Subsidiary (other than a Financial Services Subsidiary) that
is subject to restrictions, direct or indirect, on the payment of dividends or
the making of distributions to such Person shall be excluded, except to the
extent dividends are actually received by the Company or a Restricted Subsidiary
from such Subsidiary.
"Consolidated Net Worth" means, with respect to any Person, the
consolidated net worth of such Person determined in accordance with GAAP.
"Consolidated Tax Expense" of the Company means, for any period, the
aggregate of the federal, state, local and foreign tax expense of the Company
and its Restricted Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final maturity date of the Notes.
"EBITDA" means earnings (loss) before (i) taxes, (ii) interest expense,
(iii) amortization of capitalized interest included in cost of sales, (iv)
equity in earnings (losses) of unconsolidated joint ventures and (v)
depreciation and amortization.
"ESOP Stock" means the Company's class of Convertible Preferred Stock
outstanding on the date of the Indenture.
"Existing Indebtedness" means all of the Indebtedness of the Company and
its Subsidiaries that is outstanding on the date of the first issuance of the
Notes.
"Financial Services Subsidiaries" means the Subsidiaries of the Company
engaged in the mortgage banking (including mortgage origination, loan servicing,
mortgage brokerage and title and escrow businesses), master servicing and
related activities, which as of the date of the first issuance of the Notes
included RMC but excluded the Limited Purpose Subsidiaries.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of (i) the
sum of Consolidated Net Income, Consolidated Interest Expense and Consolidated
Tax Expense, plus all depreciation, and without duplication, all amortization
which includes the allocation of non-cash costs to cost of sales, in each case,
for such period, of the Company and its Restricted Subsidiaries, to (ii)
Consolidated Interest Expense of the Company and its Restricted Subsidiaries for
such period, provided however, that in making such computation, the Consolidated
Interest Expense attributable to interest on any Indebtedness computed on a pro
forma basis
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and bearing a floating interest rate shall be computed as if the rate in effect
on the date of computation had been the applicable rate for the entire period.
"GAAP" means generally accepted accounting principles as in effect and
implemented by the Company.
A "Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Indebtedness of any other
Person including, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person to
purchase or pay principal of, or interest on (or advance or supply funds or
pledge assets for the purchase or payment of or payment of interest on), such
Indebtedness of such other Person (whether by agreement to provide additional
capital or to maintain financial condition or other similar agreement).
"Homebuilding Assets" means the total assets of the Company's homebuilding
business segment as reported in its consolidated financial statements prepared
in accordance with GAAP.
"Incur" means to, directly or indirectly, create, incur, assume, guaranty,
extend the maturity of, or otherwise become liable with respect to any
Indebtedness.
"Indebtedness" means (i) any liability of any Person (a) for borrowed money
or for the deferred purchase price of property or services (other than current
liabilities, including trade payables, arising in the ordinary course of
business) or which is evidenced by a note, bond, debenture or similar
instrument, and which would appear as a liability upon a balance sheet of such
Person prepared on a consolidated basis in accordance with GAAP, or (b) for the
payment of money relating to a Capitalized Lease Obligation; (ii) any liability
of any Person under any obligation incurred under letters of credit not in the
ordinary course of business; and (iii) any liability of others described in
clause (i) or (ii) with respect to which such Person had made a guarantee or
similar arrangement, directly or indirectly (to the extent of such guarantee or
arrangement), but does not include obligations in respect of performance bonds,
banker's acceptances, escrow agreements, letters of credit and surety bonds
provided in the ordinary course of business. The amount of Indebtedness of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations described above and the maximum liability of such
Person for any such contingent obligations at such date. To the extent such
Person guarantees the obligation of another Person to pay interest on
indebtedness owed by such other Person, then a designated percentage of the
interest guaranteed or the principal amount of the underlying indebtedness, as
the case may be, shall be deemed indebtedness of the referent Person. For
purposes of this definition, the amount of such deemed indebtedness of the
referent Person shall be equal to the lessor of: (a) the aggregate principal
amount of the underlying indebtedness relating to such interest guarantee or (b)
the aggregate amount of interest due and payable over the term of such
indebtedness (or the term of the Notes, if shorter) determined based upon the
rate of interest in effect as of the date of such determination, together with
the maximum prepayment premium or penalty which could become due or payable with
respect to such indebtedness if such indebtedness was prepaid prior to the
maturity of the Notes.
"Investments" means, with respect to any Person, (i) all investments by
such Person in any other Person in the form of loans, advances, capital
contributions, (ii) all guarantees of Indebtedness or other obligations of any
other Person by such Person and (iii) all purchases (or other acquisitions for
consideration) by such Person of Indebtedness, Capital Stock or other securities
of any other Person and purchases of assets outside the ordinary course of
business.
"Limited-Purpose Subsidiaries" means the Subsidiaries of the Company which
facilitate the financing of mortgage loans and mortgage-backed securities and
the securitization of mortgage-backed bonds and other related activities.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP, excluding, however, (i) any
gain (but not loss) realized upon the sale or other disposition of any real
property or equipment of such Person which is not sold or otherwise disposed of
in the ordinary course of business, and (ii) any non-cash gain (but not loss)
realized upon the sale or other disposition by such Person of any Capital Stock
or marketable securities.
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"Non-Financial Services Restricted Subsidiary" means any Restricted
Subsidiary which is not a Financial Services Subsidiary.
"Non-Recourse Indebtedness" means Indebtedness or other obligations secured
by a lien on property to the extent that the liability for such Indebtedness or
other obligations is limited to the security of the property without liability
on the part of the Company or any Subsidiary for any deficiency, including
liability by reason of any agreement by the Company or any Subsidiary to provide
additional capital or maintain the financial condition of or otherwise support
the credit of the Subsidiary incurring such Indebtedness.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Refinancing Indebtedness" means Indebtedness that solely refunds,
refinances or extends, the repayment of, any Notes, Existing Indebtedness or
other Indebtedness incurred by the Company or its Subsidiaries in accordance
with the terms of the Indenture, but only to the extent that (i) the Refinancing
Indebtedness is subordinated to the Notes to the same extent as the Indebtedness
being refunded, refinanced or extended, if at all, (ii) the Refinancing
Indebtedness is scheduled to mature either (a) no earlier than the Indebtedness
being refunded, refinanced or extended, or (b) after the maturity date of the
Notes, (iii) the portion, if any, of the Refinancing Indebtedness that is
scheduled to mature on or prior to the maturity date of the Notes has a Weighted
Average Life to Maturity at the time such Refinancing Indebtedness is incurred
that is equal to or greater than the Weighted Average Life to Maturity of the
portion of the Indebtedness being refunded, refinanced or extended that is
scheduled to mature on or prior to the maturity date of the Notes, (iv) such
Refinancing Indebtedness is in an aggregate principal amount that is equal to or
less than the aggregate principal amount then outstanding under the Indebtedness
being refunded, refinanced or extended, and (v) such Refinancing Indebtedness is
incurred by the same person that initially incurred the Indebtedness being
refunded, refinanced or extended except that (a) the Company may incur
Refinancing Indebtedness to refund, refinance or extend Indebtedness of any
Restricted Subsidiary, other than the Financial Services Subsidiaries, and (b)
any Restricted Subsidiary may incur Refinancing Indebtedness to refund,
refinance or extend Indebtedness of any Restricted Subsidiary, except that
Indebtedness of any Financial Services Subsidiaries may be refinanced only by
that Subsidiary or another Financial Services Subsidiary.
"Restricted Investment" means Investments in any Unrestricted Subsidiary or
any Affiliate of the Company.
"Restricted Payment" means (i) with respect to the Company, any Restricted
Investment made after March 31, 1998, any dividend, either in cash or in
property (except dividends payable in Capital Stock (other than Disqualified
Stock) of the Company), on, or the making by the Company of any other
distribution in respect of, its Capital Stock, now or hereafter outstanding, or
the redemption, repurchase, retirement or other acquisition for value by the
Company or any Subsidiary, directly or indirectly, of the Company's Capital
Stock or any warrants, rights (other than exchangeable or convertible
indebtedness of the Company), or options to purchase or acquire shares of any
class of the Company's Capital Stock, now or hereafter outstanding, and (ii)
with respect to any Restricted Subsidiary, any Restricted Investment made after
March 31, 1998, any dividend, either in cash or property (except (x) dividends
payable in Capital Stock, other than Disqualified Stock, of such Subsidiary and
(y) dividends or distributions payable to the Company or to a Restricted
Subsidiary of the Company) on, or the making by any Restricted Subsidiary of any
other distribution in respect of, its Capital Stock, now or hereafter
outstanding, or the redemption, repurchase, retirement or other acquisition for
value, directly or indirectly, of such Restricted Subsidiary's Capital Stock or
any warrants, rights (other than exchangeable or convertible indebtedness of any
Restricted Subsidiary), or options to purchase or acquire shares of any class of
such Restricted Subsidiary's Capital Stock now or hereafter outstanding (except
with respect to such Capital Stock or such warrants, rights or options owned by
the Company or a Restricted Subsidiary). Notwithstanding the foregoing,
Restricted Payments shall not include dividends on or distributions in respect
of, or any redemption, repurchase, retirement or acquisition for value of the
ESOP Stock.
"Restricted Subsidiaries" means each of the Subsidiaries of the Company
which is not as of a determination date, an Unrestricted Subsidiary of the
Company.
S-19
<PAGE> 20
"Senior Debt of the Company" includes (a) all indebtedness of the Company
(i) for money borrowed, (ii) evidenced by a note or similar instrument given in
connection with the acquisition of any business, properties or assets, including
securities, (iii) evidenced by notes, debentures, bonds or other instruments of
indebtedness for the payment of which the Company is responsible or liable, by
guarantees or otherwise, whether outstanding on the date of execution of the
Indenture or thereafter created, incurred or assumed, (iv) with respect to an
obligation under a swap agreement to exchange payments of a differing rate or
rates or in differing currency or currencies, or (v) with respect to any other
obligation of the Company which by agreement of the Company with or for the
benefit of the holder of such obligation is expressly made superior in right of
payment to the Notes, and (b) amendments, renewals, modifications, extensions
and refundings of any such indebtedness, liabilities, obligations or guarantees;
unless in any instrument or instruments evidencing or securing the same or
pursuant to which the same is outstanding, or in any such amendment, renewal,
extension or refunding, it is provided that such indebtedness, liabilities,
obligations or guarantees are not superior in right of payment to the Notes or
that such indebtedness, liabilities, obligations or guarantees are pari passu
with or junior in right of payment to the Notes. Senior Debt does not include
(a) any indebtedness, liability, guarantee or obligation of the Company to any
Subsidiary or to an Affiliate of the Company or any Subsidiary of the Affiliate,
or (b) any indebtedness, liability, guarantee or obligation of the Company,
which provides by its terms that such indebtedness, liability, guarantee or
obligation is subordinated in right of payment to any other indebtedness,
liability, guarantee or obligation of the Company.
"Subsidiary" means (i) a corporation, the majority of the Common Stock of
which is owned, directly or indirectly through other subsidiaries, by the
Company or a subsidiary of the Company, and (ii) any entity other than a
corporation, the majority of the Common Stock of which is owned, directly or
indirectly through other subsidiaries, by the Company or a subsidiary of the
Company.
"Unrestricted Subsidiaries" means (a) the Limited-Purpose Subsidiaries, (b)
each of the Subsidiaries so designated by a resolution adopted by the Company's
Board of Directors and whose creditors have no direct or indirect recourse
(including, but not limited to, recourse with respect to the payment of
principal or interest on Indebtedness of such Subsidiary) to the Company or a
Restricted Subsidiary and (c) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors of the Company may designate an Unrestricted Subsidiary to be
a Restricted Subsidiary, provided that any such redesignation shall be deemed to
be an incurrence by the Company and its Restricted Subsidiaries of the
Indebtedness (if any) of such redesignated Subsidiary for purposes of the
Limitation of Incurrence of Indebtedness covenant 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 shall be deemed to be
Restricted Payments at the time of such designation and shall reduce the amount
available for Restricted Payments under the Limitation on Restricted Payments
covenant in the Indenture and (ii) immediately after giving effect to such
designation and reduction of amounts available for Restricted Payments under the
Limitation on Restricted Payments covenant in the Indenture, the Company and its
Restricted Subsidiaries could make $1 of additional Restricted Payments pursuant
to the Limitation on Restricted Payments covenant in the Indenture. Any such
designation or redesignation by the Board of Directors shall be evidenced to the
Trustee by the filing with the Trustee of a certified copy of the Board
Resolution of the Company giving effect to such designation or redesignation and
of Officer's certificate certifying that such designation or redesignation
complied with the foregoing conditions and setting forth the underlying
calculations of such certificate. As of the date of the first issuance of the
Notes, the only Unrestricted Subsidiaries are Limited-Purpose Subsidiaries.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
or portion thereof (if applicable) at any date, the number of years obtained by
dividing (i) the then outstanding principal amount of such indebtedness 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.
S-20
<PAGE> 21
UNDERWRITING
Subject to the terms and conditions in the Underwriting Agreement dated the
date hereof (the "Underwriting Agreement"), the Company has agreed to sell to
NationsBanc Montgomery Securities LLC (the "Underwriter") and the Underwriter
has agreed to purchase $100,000,000 principal amount of the Notes.
Under the terms and conditions of the Underwriting Agreement, the
Underwriter will be obligated to purchase all of the Notes if any are purchased.
The Underwriter initially proposes to offer the Notes directly to the
public at the public offering price set forth on the cover page of this
Prospectus Supplement, and to certain dealers at such price less a concession
not in excess of .625% of the principal amount of the Notes. The Underwriter may
allow, and such dealers may reallow, a concession not in excess of .25% of the
principal amount of the Notes to certain other dealers. After the initial public
offering, the public offering price and such concessions may be changed.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriter that the Underwriter intends to
make a market in the Notes but is not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Notes.
In order to facilitate the offering of the Notes, the Underwriter may
engage in transactions that stabilize, maintain or otherwise affect the price of
the Notes. Specifically, the Underwriter may over-allot in connection with the
offering, creating a short position in the Notes for its own account. In
addition, to cover over-allotments or to stabilize the price of the Notes, the
Underwriter may bid for and purchase the Notes in the open market. Any of these
activities may stabilize or maintain the market price of the Notes above
independent market levels. The Underwriter is not required to engage in these
activities, and may end any of these activities at any time.
The Company has agreed to indemnify the Underwriter against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Underwriter and its respective affiliates have in the past engaged, and
may in the future engage, in investment banking business and various financing
and banking transactions with the Company in the ordinary course of their
respective businesses. In particular, NationsBank, N.A., an affiliate of
NationsBanc Montgomery Securities LLC, is agent and lender under the Company's
revolving credit facility and will receive a share of any repayment by the
Company, in accordance with NASD Rule 2710(c)(8), of amounts outstanding under
the revolving credit facility from the proceeds of the sale of the Notes.
EXPERTS
The consolidated financial statements of the Company at December 31, 1997
and 1996 and for the three years ended December 31, 1995, 1996 and 1997
incorporated by reference in this Prospectus Supplement and elsewhere in the
registration statement of which this Prospectus Supplement is a part have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon with respect thereto, and are incorporated herein by reference
in reliance upon such reports given upon the authority of such firm as experts
in accounting and auditing.
LEGAL OPINIONS
Certain legal matters will be passed upon for the Company by Piper &
Marbury L.L.P., Baltimore, Maryland. Certain legal matters will be passed upon
for the Underwriter by Simpson Thacher & Bartlett.
S-21
<PAGE> 22
$200,000,000
THE RYLAND GROUP, INC.
DEBT SECURITIES
------------------------
The Ryland Group, Inc. (the "Corporation") may from time to time offer up
to $200,000,000 aggregate principal amount of its unsecured debt securities (the
"Debt Securities") consisting of debentures, notes and/ or other unsecured
evidences of indebtedness in one or more series. The Debt Securities may be
offered as separate series in amounts, at prices and on terms to be determined
in light of market conditions at the time of offering and set forth in a
Prospectus Supplement or Prospectus Supplements. The Corporation may sell Debt
Securities to or through underwriters, or to dealers, acting as principals for
their own accounts, and reserves the right to sell Debt Securities directly to
other purchasers or through agents on its own behalf.
This Prospectus will be supplemented and accompanied by a Prospectus
Supplement which shall set forth with regard to the Debt Securities to be
offered hereunder, where applicable and relevant, the title, aggregate principal
amount, denominations, maturity, interest rate (which may be fixed or variable)
and time of payment of interest, if any, terms for redemption, if any, at the
option of the Corporation or the holder, any terms for sinking or purchase fund
payments, any terms for optional or mandatory redemption, any listing on a
securities exchange, the initial public offering price, the names of any
underwriters or agents involved in the sale of the Debt Securities, the
principal amounts, if any, to be purchased by underwriters or agents, the
compensation, if any, of such underwriters or agents and any other terms in
connection with the offering and sale of the Debt Securities in respect of which
this Prospectus is being delivered.
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.
------------------------
THE DATE OF THIS PROSPECTUS IS JUNE 10, 1996.
<PAGE> 23
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy or information statements and other
information with the Securities and Exchange Commission (the "Commission"). This
Prospectus contains information concerning the Corporation but does not contain
all of the information set forth in the Registration Statement and exhibits
thereto which the Corporation has filed with the Commission under the Securities
Act of 1933, as amended (the "Securities Act"). Such reports and other
information filed by the Corporation with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth St., N.W., Washington, D.C. 20549, and at the Regional Offices
of the Commission at 7 World Trade Center, New York, New York 10048; and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Such materials can also be inspected at the offices
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Corporation pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus and made a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other document subsequently filed with the
Commission 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 Corporation will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated by reference herein (not including
the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to: Susan Cass, Vice President, Investor Relations, The Ryland Group,
Inc., 11000 Broken Land Parkway, Columbia, Maryland 21044 (telephone number:
(410) 715-7000).
2
<PAGE> 24
THE CORPORATION
Ryland is a leading national homebuilder and a mortgage-related financial
services firm. The Corporation was incorporated in the State of Maryland in
1967. Its principal executive office is located at 11000 Broken Land Parkway,
Columbia, Maryland 21044, telephone number (410) 715-7000.
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges set forth below are computed on a
consolidated basis. On a consolidated basis, the ratios of earnings to fixed
charges include the earnings and fixed charges of Ryland Mortgage Company and
subsidiaries, and the Corporation's limited-purpose subsidiaries.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges --* 1.26 --* 1.28 1.51
</TABLE>
- ---------------
* For 1993, earnings were insufficient to cover fixed charges by $14.4 million,
primarily due to a provision of $45 million for homebuilding inventories and
joint venture investments. For 1995, earnings were insufficient to cover fixed
charges by $47.5 million, primarily due to a $45 million impairment charge
relating to homebuilding inventories and joint venture investments.
Earnings available for fixed charges represent earnings before income taxes
and fixed charges (excluding interest capitalized, net of amortization). Fixed
charges represent interest incurred, amortization of debt expense, plus that
portion of rental expense deemed to be the equivalent of interest.
3
<PAGE> 25
USE OF PROCEEDS
Except as otherwise stated in a Prospectus Supplement, the net proceeds
from the sale of the Debt Securities will be added to the general funds of the
Corporation and will be available for general corporate purposes, including the
refinancing of existing indebtedness.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement (the "Offered Debt Securities"), including
the nature of any variations from the following general provisions applicable to
such Offered Debt Securities, will be described in the Prospectus Supplement
relating to such Offered Debt Securities.
Any Senior Debt Securities (the "Senior Debt Securities") are to be issued
under an Indenture (the "Senior Indenture") between the Corporation and the
trustee identified in the applicable Prospectus Supplement (the "Senior
Trustee"). Any Subordinated Debt Securities (the "Subordinated Debt Securities")
are to be issued under an Indenture dated as of July 15, 1992 (the "Subordinated
Indenture") between the Corporation and First Union National Bank of Virginia,
as trustee. The Senior Indenture and Subordinated Indenture are sometimes
referred to collectively as the "Indenture". Each of First Union National Bank
of Virginia and the Senior Trustee is hereinafter referred to as a "Trustee" and
they are collectively referred to as "Trustees". Copies of the Indentures are
filed as exhibits to the Registration Statement of which this Prospectus is a
part. The following summaries of certain provisions of the Debt Securities and
Indentures do not purport to be complete and are subject to, and qualified in
their entirety by reference to, all the provisions of the Indentures, applicable
to a particular series of Debt Securities, including the definitions therein of
certain terms. Wherever reference is made to particular sections, articles or
defined terms of the Indentures, such sections or defined terms are incorporated
herein by reference. Certain defined terms in the Indentures are capitalized
herein and have the same meaning as in the Indenture.
GENERAL
The Indentures do not limit the amount of debentures, notes or other
evidences of indebtedness which may be issued thereunder. The Indentures provide
that Debt Securities may be issued from time to time in one or more series up to
the aggregate principal amount authorized by the Corporation for each series.
Unless otherwise specified in the Prospectus Supplement, the Senior Debt
Securities when issued will be unsecured and unsubordinated obligations of the
Corporation and will rank equally and ratably with all other unsecured and
unsubordinated indebtedness of the Corporation. The Subordinated Debt Securities
when issued will be subordinated in right of payment to the prior payment in
full of all Senior Debt (as defined below) of the Corporation, as described
under "Subordination of Subordinated Debt Securities" and in the Prospectus
Supplement applicable to an offering of Subordinated Debt Securities.
The Corporation's financial services and some of its homebuilding
operations are conducted through subsidiaries and any right of the Corporation
to receive assets of these subsidiaries upon the liquidation or recapitalization
of any such subsidiaries (and the consequent right of holders of the Debt
Securities to participate in those assets) will be subject to the claims of such
subsidiary's creditors, except to the extent that the Corporation is itself
recognized as a creditor of such subsidiary. Even in the event the Corporation
is recognized as a creditor of a subsidiary, the Corporation's claims would
still be subject to any security interests in the assets of such subsidiary and
any indebtedness of such subsidiary senior to that of the Corporation.
Accordingly, the Debt Securities will in effect be subordinated to the claims of
indebtedness of such subsidiaries against the assets of such subsidiaries. As of
December 31, 1997, $541,357,000 of the Corporation's consolidated liabilities
represents liabilities of such subsidiaries.
The Prospectus Supplement relating to the Offered Debt Securities offered
thereby will describe the following terms, where applicable, of the Offered Debt
Securities: (1) the title of the Offered Debt Securities and the series of which
the Offered Debt Securities shall be a part; (2) any limit on the aggregate
principal
4
<PAGE> 26
amount of the Offered Debt Securities; (3) the price (expressed as a percentage
of the aggregate principal amount thereof) at which the Offered Debt Securities
will be issued; (4) the date or dates (or manner of determining the same) on
which the principal of the Offered Debt Securities is payable; (5) the rate or
rates (which may be fixed or variable) per annum (or a manner of determining the
same) at which the Offered Debt Securities will bear interest, if any, and
whether the interest rate on the Offered Debt Securities may be reset upon
certain designated events; (6) the date from which such interest, if any, on the
Offered Debt Securities will accrue, the dates on which such interest, if any,
will be payable, the date on which payment of such interest, if any, will
commence and the record dates for such interest payment dates, if any, and the
extent to which, or the manner in which, any interest payable on a Global
Security on an Interest Payment Date will be paid; (7) the place or places where
principal of (and premium, if any) and interest on the Offered Debt Securities
will be payable; (8) the period or periods within which, the price or prices at
which, and the terms and conditions upon which the Offered Debt Securities may
be redeemed, in whole or in part, at the option of the Corporation; (9) the
obligation, if any, of the Corporation to redeem or purchase the Offered Debt
Securities at the option of a Holder thereof, and the period or periods within
which, the price or prices at which, and the terms and conditions upon which the
Offered Debt Securities will be redeemed or purchased, in whole or in part,
pursuant to such obligation; (10) the dates, if any, on which and the price or
prices at which the Offered Debt Securities will, pursuant to any mandatory
sinking fund provisions, or may, pursuant to any optional sinking fund
provisions or pursuant to any purchase fund provisions, be redeemed by the
Corporation, and the other detailed terms and provisions of such sinking and/or
purchase fund; (11) the denominations in which the Offered Debt Securities are
authorized to be issued; (12) if other than the full principal amount thereof,
the portion of the principal amount of the Offered Debt Securities which will be
payable upon declaration of acceleration of the maturity thereof; (13) if other
than the currency of the United States of America, the currency or currencies,
including composite currencies, in which payment of the principal of (and
premium, if any) and interest on the Offered Debt Securities will be payable;
(14) if the amount of payments of principal of (and premium, if any) or interest
on the Offered Debt Securities may be determined with reference to an index, the
manner in which such amounts will be determined; (15) whether the Offered Debt
Securities are to be issued with original issue discount within the meaning of
Section 1273(a) of the Internal Revenue Code of 1986, as amended; (16) whether
the Offered Debt Securities are to be issued in whole or in part in the form of
one or more Global Securities and, if so, the identity of the depositary, if
any, for such Global Security or Securities; (17) any addition to, or
modification or deletion of, any Events of Default or covenants provided for
with respect to the Offered Debt Securities; and (18) any other terms of the
Offered Debt Securities.
Debt Securities may be issued under the Indentures at an original issue
discount, that is sold at a discount from their principal amount. Certain
federal income tax and other considerations applicable thereto will be described
in the Prospectus Supplement relating to any such Debt Securities.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise provided in an applicable Prospectus Supplement with
respect to a series of Offered Debt Securities, the Debt Securities will be
issuable in fully registered form and in denominations of $1,000 or any integral
multiple thereof. Offered Debt Securities of a series may be issuable in whole
or in part in certificate form or in the form of one or more Global Securities,
as described below under "Global Securities."
Offered Debt Securities of any series (other than a Global Security) will
be exchangeable for other Debt Securities of the same series and of a like
aggregate principal amount and tenor of different authorized denominations. Debt
Securities may be presented for exchange as provided below, and Debt Securities
(other than a Global Security) may be presented for registration of transfer
(with the form of transfer endorsed thereon duly executed) at the Corporate
Trust Office of the applicable Trustee, without service charge and upon payment
of any taxes and other governmental charges payable in connection therewith.
Such transfer or exchange will be effected upon the Trustee (as Security
Registrar) being satisfied with the documents of title and identity of the
person making the request.
5
<PAGE> 27
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of, and premium, if any, and any interest on Debt Securities will
be made at the office of such Paying Agent or Paying Agents as the Corporation
may designate from time to time except that at the option of the Corporation
payment of any interest may be made (i) by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register or
(ii) by wire transfer to an account maintained by the Person entitled thereto.
Unless otherwise indicated in the applicable Prospectus Supplement, payment of
any installment of interest on Debt Securities will be made to the Person in
whose name such Debt Security is registered at the close of business on the
Regular Record Date for such interest.
Unless otherwise indicated in an applicable Prospectus Supplement, the
applicable Trustee will act as the Corporation's sole Paying Agent through its
principal office with respect to the Debt Securities. Any Paying Agents outside
the United States and other Paying Agents in the United States initially
designated by the Corporation for the Offered Debt Securities will be named in
an applicable Prospectus Supplement. The Corporation may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts; provided,
however, the Corporation will be required to maintain a Paying Agent in each
Place of Payment for such series.
All moneys paid by the Corporation to the applicable Trustee or a Paying
Agent for the payment of principal of, and premium, if any, and any interest on
any Debt Security which remains unclaimed at the end of two years after such
principal, premium or interest shall have become due and payable will be repaid
to the Corporation and the Holder of such Debt Security will thereafter look
only to the Corporation for payment thereof.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with or on behalf
of a depository (a "Depositary") identified in the Prospectus Supplement
relating to such series. Unless otherwise indicated in an applicable Prospectus
Supplement, Global Securities will be issued in registered form and may be
issued in either temporary or permanent form.
The specific terms of the depository arrangement with respect to any Debt
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Corporation anticipates that the following provisions will
apply to all depository arrangements.
Debt Securities which are to be represented by a Global Security to be
deposited with or on behalf of a Depositary will be registered in the name of
such Depositary or its nominee. Upon the issuance of a Global Security, the
Depositary for such Global Security will credit the respective principal amounts
of the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such depository or its nominee
("participants"). The accounts to be credited shall be designated by the
underwriters or agents of such Debt Securities or by the Corporation, if such
Debt Securities are offered and sold directly by the Corporation. Ownership of
beneficial interests in such Global Securities will be limited to participants
or persons that may hold interests through participants. Ownership of beneficial
interests by participants in such Global Securities will be shown on, and the
transfer of that ownership interest will be effected only through, records
maintained by the Depositary or its nominee for such Global Security. Ownership
of beneficial interest in Global Securities by persons that hold through
participants will be shown on, and the transfer of that ownership interest
within such participant will be effected only through, records maintained by
such participant. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture.
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Except as set forth below, owners of beneficial interests in such Global
Securities will not be entitled to have Debt Securities of the series
represented by such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Debt Securities of such series in
definitive form and will not be considered the owners or holders thereof under
the applicable Indenture.
Payment of principal of, premium, if any, and any interest on Debt
Securities registered in the name of or held by a Depositary or its nominee will
be made to the Depositary or its nominee, as the case may be, as the registered
owner or the holder of the Global Security. None of the Corporation, the
Trustee, any Paying Agent or the Security Registrar for such Debt Securities
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in a Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Corporation expects that the Depositary for a permanent Global
Security, upon receipt of any payment of principal, premium or interest in
respect of a permanent Global Security, will credit immediately participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Security as shown on the
records of such Depositary. The Corporation also expects that payments by
participants to owners of beneficial interests in such Global Security held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such participants.
A Global Security may not be transferred except as a whole by the
Depositary for such Global Security to a nominee of such depository or by a
nominee of such depository to such depository or another nominee of such
depository or by such depository or any such nominee to a successor of such
depository or a nominee of such successor. If a Depositary for a permanent
Global Security is at any time unwilling or unable to continue as depository and
a successor depository is not appointed by the Corporation with 90 days, the
Corporation will issue Debt Securities in definitive form in exchange for all of
the Global Securities representing such Debt Securities. In addition, the
Corporation may at any time and in its sole discretion determine not to have any
Debt Securities represented by one or more Global Securities and, in such event,
will issue Debt Securities in definitive form in exchange for all of the Global
Securities representing such Debt Securities. Further, if the Corporation so
specifies with respect to the Debt Securities of a series, an owner of a
beneficial interest in a Global Security representing Debt Securities of a
series may, on terms acceptable to the Corporation and the Depositary for such
Global Security, receive Debt Securities of such series in definitive form. In
any such instance, an owner of a beneficial interest in a Global Security will
be entitled to physical delivery in definitive form of Debt Securities of the
Series represented by such Global Security equal in principal amount to such
beneficial interest and to have such Debt Securities registered in its name.
EVENTS OF DEFAULT
The following shall constitute events of default with respect to Debt
Securities of any series then Outstanding: (i) default for a period of 30 days
in payment of any interest on the Debt Securities of such series when due; (ii)
default in payment of principal of (or premium, if any, on) the Debt Securities
of such series when due; (iii) default on the deposit of any sinking fund
payment, when and as due by the terms of a Debt Security of that series; (iv)
default in performance of any other covenant in the applicable Indenture with
respect to a series of Debt Securities which continues for 60 days after written
notice to the Corporation by the applicable Trustee or by the Holders of at
least 25% in principal amount of the Outstanding Debt Securities of that series;
(v) certain events of bankruptcy, insolvency or reorganization; and (vi) such
other events as may be established for the Debt Securities of a particular
series as set forth in the related Prospectus Supplement.
If an event of default with respect to Debt Securities of any series shall
occur and be continuing, the applicable Trustee or the Holders of at least 25%
in principal amount of the Outstanding Debt Securities of such series may
declare the principal (or, if the Debt Securities of that series are Original
Issue Discount Securities, such portion of the principal amount as may be
specified in the terms of that series) of all of the Debt Securities of that
series to be due and payable immediately. At any time after a declaration of
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acceleration with respect to Debt Securities of any series has been made, but
before a judgment or decree based on acceleration has been obtained, the Holders
of a majority in principal amount of the Outstanding Debt Securities of that
series may, under certain circumstances, rescind and annul such acceleration.
The Indentures provide that the applicable Trustee will, within 90 days
after the occurrence of a default, give to Holders of the series of Debt
Securities with respect to which a default has occurred notice of all uncured
defaults known to it; but, except in the case of a default in the payment of
principal (including any sinking fund payment) or interest on a series of Debt
Securities with respect to which such default has occurred, the Trustee shall be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interest of such Holders.
The Indentures provide that the applicable Trustee will be under no
obligation, subject to the duty of the Trustee during default to act with the
required standard of care, to exercise any of its rights or powers under the
applicable Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee reasonable security or indemnity.
Subject to such right of indemnification, the Indentures provide that the
Holders of a majority in principal amount of the Outstanding Debt Securities of
any series 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 upon the Trustee with respect to the Debt
Securities of that series.
The Corporation will be required to furnish to the Trustees annually a
statement as to the performance by the Corporation of its obligations under the
Indentures and as to any default in such performance.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless indicated in the Prospectus Supplement, the following provisions
will apply to the Subordinated Debt Securities.
The indebtedness evidenced by the Subordinated Debt Securities will be
subordinated in right of payment to the extent set forth in the Subordinated
Indenture to the prior payment in full of all Senior Debt of the Corporation.
Senior Debt is defined in the Subordinated Indenture to include (a) all
indebtedness of the Corporation (i) for money borrowed, (ii) evidenced by a note
or similar instrument given in connection with the acquisition of any business,
properties or assets, including securities, (iii) evidenced by notes,
debentures, bonds or other instruments of indebtedness for the payment of which
the Corporation is responsible or liable, by guarantees or otherwise, whether
outstanding on the date of execution of the Indenture or thereafter created,
incurred or assumed, (iv) with respect to an obligation under a swap agreement
to exchange payments of a differing rate or rates or in differing currency or
currencies, or (v) with respect to any other obligation of the Corporation which
by agreement of the Corporation with or for the benefit of the holder of such
obligation is expressly made superior in right of payment to the Subordinated
Debt Securities, and (b) amendments, renewals, modifications, extensions and
refundings of any such indebtedness, liabilities, obligations or guarantees;
unless in any instrument or instruments evidencing or securing the same or
pursuant to which the same is outstanding, or in any such amendment, renewal,
extension or refunding, it is provided that such indebtedness, liabilities,
obligations or guarantees are not superior in right of payment to the
Subordinated Debt Securities or that such indebtedness, liabilities, obligations
or guarantees are pari passu with or junior in right of payment to the
Subordinated Debt Securities. Senior Debt does not include (a) the Corporation's
10 1/2% Senior Subordinated Notes due July 15, 2002; (b) the Corporation's
9 5/8% Senior Subordinated Notes due June 1, 2004; (c) any indebtedness,
liability or obligation of the Corporation to any Subsidiary or to an Affiliate
of the Corporation or any Subsidiary; or (d) any indebtedness, liability,
guaranty or obligation of the Corporation, which provides by its terms that such
indebtedness, liability, guaranty or obligation is subordinated in right of
payment to any other indebtedness, liability, guaranty or obligation of the
Corporation. At December 31, 1997, the Corporation had outstanding indebtedness
in principal amount totalling $110.2 million which would have constituted Senior
Debt. The Indentures do not limit the amount of Senior Debt which the
Corporation may incur.
In the event of any voluntary or involuntary insolvency or bankruptcy
proceedings or any receivership, liquidation, reorganization, dissolution or
other winding-up of the Corporation (whether or not involving
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<PAGE> 30
insolvency or bankruptcy) or similar proceeding relating to the Corporation, its
property or its creditors as such, the holders of all Senior Debt then
outstanding will be entitled to receive payment in full of the Senior Debt
before the holders of the Subordinated Debt Securities are entitled to receive
any payment on account of the principal of, premium, if any, or interest on the
Subordinated Debt Securities. In addition, if (a) the principal on any Senior
Debt is not paid when due or any other default on Senior Debt occurs and is
continuing which permits the holders of Senior Debt to accelerate its maturity,
and (b) such non-payment of principal or other default is the subject of a
judicial proceeding or the Corporation receives notice of such a default, then
the Corporation may not pay principal or interest on any Subordinated Debt
Securities or acquire any Subordinated Debt Securities for cash or property
other than capital stock of the Corporation or other securities that are
subordinate to the Senior Debt at least to the same extent as the Subordinated
Debt Securities. If any such notice of default is provided, a similar notice of
default on any issue of Senior Debt given within nine months thereafter shall
not be effective. The Corporation may resume payments on and acquire the
Subordinated Debt Securities upon (a) the cure or waiver of the subject default,
or (b) the passage of 120 days after the notice of default is given if such
default has not become the subject of a judicial proceeding and payments are
otherwise permitted under the Indenture. By reason of the foregoing
subordination, in the event of insolvency, creditors of the Corporation who are
not holders of the Subordinated Debt Securities may recover more ratably than
holders of the Subordinated Debt Securities.
DEFEASANCE AND DISCHARGE
The Indentures provide if such provision is made applicable to the Debt
Securities of any series, that the Corporation will be discharged from any and
all obligations in respect of the Debt Securities of such series (except for
certain obligations to register the transfer or exchange of Debt Securities of
such series, to replace stolen, lost or mutilated Debt Securities of such
series, to maintain paying agencies and to hold monies for payment in trust)
upon the deposit with the applicable Trustee, or another qualified corporate
trustee, in trust, of money and/or U. S. Government Obligations which through
the payment of interest and principal in respect of such U. S. Government
Obligations in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium, if any), and each installment
of principal of (and premium, if any) and interest, if any, on the Debt
Securities of such series on the Stated Maturity of such payments and any
mandatory sinking fund payments or analogous payments applicable to the Debt
Securities of such series on the day on which such payments are due and payable
in accordance with the terms of the applicable Indenture and the Debt Securities
of such series. Such a trust may only be established if, among other things, (i)
the Corporation has received from, or there has been published by, the Internal
Revenue Service a ruling to the effect that Holders of the Debt Securities of
such series will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit, defeasance and discharge and will be
subject to federal income tax on the same amounts and in the same manner and at
the same times, as would have been the case if such deposit, defeasance and
discharge had not occurred, and (ii) the Corporation has delivered to the
Trustee an Opinion of Counsel to the effect that the Debt Securities of such
series, if then listed on The New York Stock Exchange, will not be delisted as a
result of such deposit, defeasance and discharge.
MODIFICATION AND WAIVER
The Corporation is permitted, with the consent of the Holders of not less
than a majority in principal amount of the Outstanding Debt Securities of each
series affected by the modification or amendment, to supplement the applicable
Indenture to modify or amend the rights of the Holders of the Debt Securities;
provided that no such modification or amendment shall, without the consent of
the Holder of each Outstanding Debt Security affected thereby, (i) change the
Stated Maturity of the principal of any Outstanding Debt Security or change the
Redemption Price; (ii) reduce the principal amount of or the rate of interest on
or any premium payable on redemption of any Outstanding Debt Security; (iii)
modify the manner of determination of the rate of interest so as to affect
adversely the interest of a Holder or reduce the amount of the principal of an
Original Issue Discount Debt Security; (iv) change the place or currency of
payment of principal of or interest, if any, on any Debt Security; (v) impair
the right to institute suit for the enforcement of any payment on or with
respect to any Debt Security; or (vi) reduce the percentage in principal amount
of Outstanding Debt Securities of any series, the consent of whose Holders is
necessary to modify or amend the
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<PAGE> 31
applicable Indenture or to waive compliance with, or defaults of, certain
restrictive provisions of the applicable Indenture.
The Holders of a majority in principal amount of an outstanding series of
Debt Securities may, on behalf of all the Holders of such series, waive any past
default except (i) a default in payment of the principal of (or premium, if any)
or interest, if any, on any Debt Security of such series, or (ii) a default in
respect of a covenant or provision of the applicable Indenture which cannot be
amended or modified without the consent of the Holder of each Outstanding Debt
Security of such series affected.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Corporation may, without the consent of any Holders of Outstanding Debt
Securities, consolidate or merge with or into, or transfer or lease its assets
substantially as an entirety to any Person (other than a transfer of assets to
one or more wholly-owned subsidiaries of the Corporation) and any other Person
may consolidate or merge with or into, or transfer or lease its assets
substantially as an entirety to, the Corporation, provided that (i) the Person
formed by such consolidation or into which the Corporation is merged, or the
Person which acquires or leases the assets of the Corporation substantially as
an entirety, is organized under the laws of any United States jurisdiction and
assumes the Corporation's obligations on the Debt Securities and under the
applicable Indenture, (ii) after giving effect to the transaction, no Event of
Default, and no event related to such transaction which, after notice or lapse
of time or both, would become an Event of Default, shall have happened and be
continuing, and (iii) certain other conditions are met.
CONCERNING THE TRUSTEES
The applicable Trustees will act under the Indentures as Security
Registrar, Authenticating Agent and Paying Agent unless otherwise designated by
the Corporation.
NOTICES
Notices to Holders will be transmitted by mail to the addresses of such
Holders as they appear in the Security Register.
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and construed
in accordance with, the laws of the State in which the principal office of the
Trustee is located.
PLAN OF DISTRIBUTION
The Corporation may sell Debt Securities to or through underwriters, or to
dealers, acting as principals for their own accounts, and reserves the right to
sell Debt Securities directly to other purchasers or through agents on its own
behalf. The distribution of the Debt Securities may be effected from time to
time in one or more transactions at a fixed price or prices which may be changed
from time to time, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. Each
Prospectus Supplement will describe the method of distribution of the offered
Debt Securities.
In connection with the sale of Debt Securities, underwriters and dealers
may receive compensation from the Corporation or from purchasers of Debt
Securities for whom they may act as agents, in the form of discounts,
concessions or commissions. Underwriters may sell Debt Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agents. Underwriters, dealers and agents who
participate in the distribution of Debt Securities may be deemed to be
underwriters under the Securities Act and any discounts or commissions received
by them and any profit on the resale of Debt Securities by them may be deemed to
be underwriting discounts and commissions under the Securities Act. Any such
underwriter or agent will be identified and any such compensation will be
described in the Prospectus Supplement.
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Under agreements which may be entered into by the Corporation, underwriters
and agents who participate in the distribution of Debt Securities are expected
to be entitled to indemnification by the Corporation against certain
liabilities, including liabilities under the Securities Act.
If so indicated in the Prospectus Supplement, the Corporation will
authorize underwriters or other persons acting as the Corporation's agents to
solicit offers by certain institutions to purchase Offered Debt Securities from
the Corporation pursuant to contracts providing for payment and delivery on a
future date. Institutions with which such contracts may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and others, but in all cases
such institutions must be approved by the Corporation. The obligations of any
purchaser under any such contract will be subject to the condition that the
purchase of the Offered Debt Securities shall not at the time of delivery be
prohibited under the laws of the jurisdiction to which such purchaser is
subject. The underwriters and such other agents will not have any responsibility
in respect of the validity or performance of such contracts.
VALIDITY OF SECURITIES
The legal validity of the Securities offered hereby will be passed upon for
the Corporation by Piper & Marbury, L.L.P., Baltimore, Maryland .
EXPERTS
The consolidated financial statements and schedule of the Corporation at
December 31, 1997 and 1996, and for the three years in the period ended December
31, 1997, appearing in the Corporation's Annual Report (Form 10-K) have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE
OFFERING COVERED BY THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED HEREBY IN
ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT NOR
THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
The Offering......................... S-3
Incorporation of Certain Documents by
Reference.......................... S-4
Risk Factors......................... S-5
Use of Proceeds...................... S-8
Capitalization....................... S-9
Description of Notes................. S-10
Underwriting......................... S-21
Experts.............................. S-21
Legal Opinions....................... S-21
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
The Corporation...................... 3
Ratios of Earnings to Fixed
Charges............................ 3
Use of Proceeds...................... 4
Description of Debt Securities....... 4
Plan of Distribution................. 10
Validity of Securities............... 11
Experts.............................. 11
</TABLE>
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[RYLAND LOGO]
THE RYLAND GROUP, INC.
$100,000,000
8 1/4% SENIOR SUBORDINATED NOTES
DUE 2008
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PROSPECTUS SUPPLEMENT
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NATIONSBANC MONTGOMERY
SECURITIES LLC
APRIL 8, 1998
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