AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1997
REGISTRATION STATEMENT NO. 333-40741
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
ENGLE HOMES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-2214791
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
<TABLE>
<S> <C>
DAVID SHAPIRO
ENGLE HOMES, INC.
123 N.W. 13TH STREET 123 N.W. 13TH STREET
BOCA RATON, FLORIDA 33432 BOCA RATON, FLORIDA 33432
(561) 391-4012 (561) 391-4012
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENTS FOR SERVICE)
</TABLE>
---------------
SEE TABLE OF ADDITIONAL REGISTRANTS BELOW
WITH COPIES TO:
BRIAN J. WALSH, ESQ. JOHN SCHUSTER, ESQ.
GREENBERG TRAURIG HOFFMAN CAHILL GORDON & REINDEL
LIPOFF ROSEN & QUENTEL, P.A. 80 PINE STREET
1221 BRICKELL AVENUE NEW YORK, NEW YORK 10005
MIAMI, FLORIDA 33131 (212) 701-3000
(305) 579-0500 TELECOPY (212) 269-5420
TELECOPY (305) 579-0717
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
---------------
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [x]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER,
STATE OR OTHER INCLUDING AREA CODE
JURISDICTION OF I.R.S. EMPLOYER OF REGISTRANT'S PRINCIPAL
NAME INCORPORATION IDENTIFICATION NO. EXECUTIVE OFFICE
- ---------------------------------------- ----------------- -------------------- -----------------------------
<S> <C> <C> <C>
Banyan Trails, Inc. Florida 65-0775403 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Arizona, Inc. Florida 65-0482568 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Atlanta, Inc. Florida 65-0357420 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Broward, Inc. Florida 65-0389397 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Colorado, Inc. Florida 65-0496809 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Gulf Coast, Inc. Florida 65-0429651 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Lake Bernadette, Inc. Florida 59-3288055 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/North Carolina, Inc. Florida 65-0482564 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Orlando, Inc. Florida 65-0326491 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Palm Beach, Inc. Florida 65-0388379 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Pembroke, Inc. Florida 65-0470740 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Southwest Florida, Inc. Florida 65-0559002 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Texas, Inc. Florida 65-0424508 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Virginia, Inc. Florida 65-0482565 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Greenleaf Homes, Inc. Florida 65-0762713 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Pembroke Falls Realty, Inc. Florida 65-0698225 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Preferred Builders Realty, Inc. Florida 59-2552841 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Preferred Home Mortgage Company Florida 65-0325930 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
St. Tropez At Boca Golf, Inc. Florida 65-0304088 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Universal Land Title, Inc. Florida 59-2630287 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Engle Homes/Arizona Construction, Inc. Arizona 86-0873699 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
Universal Land Title of Colorado, Inc. Colorado 84-1281298 123 N.W. 13th Street
Boca Raton, Florida 33432
(561) 391-4012
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 22, 1997
P R O S P E C T U S
$75,000,000
Engle Homes, Inc.
% Senior Notes due 2008
---------------
The % Senior Notes due 2008 (the "Senior Notes") are being offered
hereby (the "Notes Offering") by Engle Homes, Inc. ("Engle" or the "Company").
Interest on the Senior Notes is payable semi-annually on and of
each year, commencing , 1998. The Senior Notes mature on , 2008.
The Senior Notes will be redeemable at the option of the Company, in whole
or in part, at any time on or after , 2003 at the redemption prices set
forth herein, plus accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time on or prior to , 2001, the Company
may redeem up to 33% of the aggregate principal amount of the Senior Notes
originally issued with the net proceeds of one or more public offerings of its
common stock at a redemption price equal to % of the aggregate principal
amount of each Senior Note so redeemed, plus accrued and unpaid interest, if
any, to the date of redemption; PROVIDED, HOWEVER, that immediately after
giving effect to any such redemption, not less than $65,000,000 principal
amount of the Senior Notes remains outstanding.
In the event of a Change of Control (as defined), the Company is required
to offer to repurchase all of the Senior Notes at a price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest, if any,
to the date of repurchase. In addition, the Company will be obligated to make
an offer to repurchase Senior Notes for cash at a price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of repurchase with the net cash proceeds of certain asset sales and if the
Company's Net Worth (as defined) falls below a specified level for two
consecutive fiscal quarters.
The Senior Notes will be general unsecured obligations of the Company,
ranking senior in right of payment to all existing and future subordinated
indebtedness of the Company and PARI PASSU in right of payment with all
existing and future senior indebtedness of the Company; however, the Senior
Notes will be effectively subordinated to all secured indebtedness of the
Company and the Guarantors to the extent of the value of the assets securing
such indebtedness. The Senior Notes will be guaranteed (the "Guarantees"), on a
joint and several basis, by all of the Restricted Subsidiaries (as defined) of
the Company existing on the closing date of this Notes Offering (collectively,
the "Guarantors"). The Guarantees will be general unsecured obligations of the
Guarantors, ranking senior in right of payment to all existing and future
subordinated indebtedness of the Guarantors and PARI PASSU in right of payment
with all existing and future senior indebtedness of the Guarantors; however,
the Guarantees will be effectively subordinated to all secured indebtedness of
the Guarantors to the extent of the value of the assets securing such
indebtedness. As of October 31, 1997, after giving effect to the Offerings (as
defined) and the application of the proceeds therefrom as described under "Use
of Proceeds" assuming that all of the 1993 Notes (as defined) are converted by
the holders into Common Stock on or prior to the date of redemption, the
Company and the Guarantors collectively would have had no secured indebtedness
outstanding.
Concurrently with the Notes Offering, the Company is offering shares of
its Common Stock by means of a separate prospectus (the "Equity Offering" and
together with the Notes Offering, the "Offerings"). The consummation of the
Notes Offering and the consummation of the Equity Offering are not conditioned
upon each other.
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SEE "RISK FACTORS" BEGINNING ON PAGE 10 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE
SENIOR NOTES.
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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.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
Per Senior Note % % %
Total $ $ $
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(1) Plus accrued interest, if any, from the date of original issuance.
(2) For information regarding indemnification of the Underwriter, see
"Underwriting."
(3) Before deducting expenses estimated at $400,000, which are payable by the
Company.
---------------
The Senior Notes are offered, subject to receipt and acceptance by the
Underwriter, to prior sale and to the Underwriters' right to reject any order,
in whole or in part, and to withdraw, cancel or modify the offer without
notice. It is expected that delivery of the Senior Notes will be made at the
offices of Salomon Brothers Inc, 7 World Trade Center, New York, New York or
through the facilities of The Depository Trust Company on or about , 1998.
---------------
Salomon Smith Barney
, 1998.
<PAGE>
[Appearing on page 2 and the inside back cover of the Prospectus will be 4
color pictures of homes offered by the Company in several of the Company's
markets and a map showing such markets.]
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT
COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
SAFE HARBOR STATEMENT
The Company wishes to take advantage of the safe harbor provisions
included in the Private Securities Litigation Reform Act of 1995. Accordingly,
in addition to historical information, this Prospectus contains certain
forward-looking statements, including, but not limited to, statements regarding
the Company's future financial performance and financial condition. These
statements involve a number of risks and uncertainties. Any forward-looking
statements made by the Company herein are not guarantees of future performance,
and actual results may differ materially from those in such forward-looking
statements as a result of various factors, including but not limited to, those
referred under "Risk Factors" herein.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS OR
INCORPORATED BY REFERENCE HEREIN. UNLESS THE CONTEXT INDICATES OTHERWISE, THE
TERMS "COMPANY" AND "ENGLE" AS USED IN THIS PROSPECTUS REFER TO ENGLE HOMES,
INC., ITS PREDECESSORS AND ITS SUBSIDIARIES. FISCAL YEAR REFERENCES ARE TO THE
RESPECTIVE FISCAL YEAR ENDED OCTOBER 31.
THE COMPANY
Engle Homes, Inc. designs, constructs, markets and sells detached
single-family residences, townhomes, patio homes and condominiums to entry
level and move-up buyers, retirees and second-home, seasonal buyers. Engle
operates in nine geographic markets: Broward County, Palm Beach County and
Martin County in South Florida; Orlando in Central Florida; Tampa, Sarasota,
Naples and Fort Myers on the west coast of Florida; Denver, Colorado; Dallas,
Texas; Virginia and Maryland; Raleigh, North Carolina; Phoenix, Arizona; and
Atlanta, Georgia. The Company offers a variety of home styles at prices ranging
from approximately $80,000 to over $400,000 with an average sales price in
fiscal 1997 of approximately $203,000. In addition, the Company operates a
mortgage company which provides mortgages primarily to its home buyers in all
of its geographic markets and a title company which provides services to its
home buyers and third parties in Florida and Denver, Colorado.
Engle is a leading Florida homebuilder. The Company believes that it is
the number two and number four builder of single-family homes in South Florida
and Central Florida, respectively, based on revenues from unit closings for the
twelve months ended June 30, 1997. Florida is the number one homebuilding state
in the United States in terms of total housing starts. In addition, Florida is
currently the fourth largest state based upon total population and has
consistently ranked among the top four states in population growth over the
past seven decades.
Since 1993, Engle has expanded into eight of the top 20 homebuilding
markets in the nation through both start-up operations and the acquisition of a
homebuilder in Denver, Colorado. In fiscal 1997, approximately 32% of the
Company's revenues from home sales were generated outside of the Florida
markets as compared to none in fiscal 1993. Most recently, in fiscal 1997 Engle
entered both the Phoenix, Arizona and Atlanta, Georgia markets through start-up
operations.
Over the past five years, the Company's total revenues have grown from
$137.4 million in fiscal 1993 to $425.3 million in fiscal 1997, with annual
EBITDA (as defined) growing from $15.9 million to $40.3 million over the same
period, representing compound annual growth rates of 33% and 26%, respectively.
The Company's fiscal 1997 total revenues of $425.3 million and EBITDA of $40.3
million were the highest in the Company's history. The number of homes
delivered increased from 797 in fiscal 1993 to 1,992 in fiscal 1997. At the end
of fiscal 1997, Engle was marketing homes in 68 communities.
BUSINESS STRATEGY
Engle believes that its success has been due to its market-oriented
approach which it applies to each of the following: (i) identifying new
markets; (ii) acquiring land; and (iii) diversifying its product offerings and
price ranges to appeal to most segments of the home buying public. Engle
believes that this strategy enables it to respond more rapidly to changing
market conditions.
EXPAND IN EXISTING AND NEW MARKETS. The Company has successfully expanded
its operations through both start-up operations in new and existing markets and
the acquisition of a homebuilder in Denver, Colorado. Within its existing
markets, the Company believes that it is able to gain greater
3
<PAGE>
market share by increasing the number of residential projects, thereby
leveraging its existing management structure and enhancing profitability
through economies of scale. As part of its strategy to further diversify
geographically, the Company continually seeks and evaluates market expansion
opportunities, including potential acquisitions of homebuilding companies. The
Company seeks to expand into geographic markets with significant single-family
home permit activity, substantial job growth, a diversified economy and an
availability of strong management with local market expertise. Since its
initial public offering in January 1992, the Company has expanded into eight
new geographic markets.
OFFER A BROAD SELECTION OF PRODUCTS. The Company designs its homes to
appeal to a wide variety of home buyers, including entry level and move-up
buyers, retirees and second-home, seasonal buyers. Accordingly, the Company
offers a number of home styles and price ranges at various locations in each
market, including golf and waterfront communities in certain markets. Engle's
product offerings include semi-custom estate homes, detached single-family
residences, townhomes, semi-detached patio-homes/duplexes and condominiums.
Management believes that the Company's long-standing policy of product
diversification enables it to respond more rapidly to changing market
conditions.
SELECTIVELY ACQUIRE LAND. The Company maintains a land acquisition policy
designed to enhance profitability and return on capital while minimizing the
risks associated with investments in land. Engle seeks to identify and acquire
superior locations in each market and offer a number of communities with
diverse products and sales prices. The Company prefers to acquire improved
residential lots ready for construction by entering into option contracts,
whenever possible, or through outright purchases. The Company also acquires
tracts of land that require site improvements prior to the start of home
construction. Occasionally, Engle purchases larger parcels of undeveloped land
suited for master-planned communities, primarily in South Florida. When
acquiring larger parcels, the Company typically contracts to sell portions of
improved or unimproved land to other builders as a source of additional revenue
thereby reducing the Company's investment. In addition, when economically
advantageous to the Company, Engle enters into partnership or joint venture
agreements with other major homebuilders to purchase and develop well located
parcels of land. The Company generally purchases land only after required
zoning entitlements have been obtained.
MAINTAIN STRINGENT COST CONTROLS. The Company believes that maintaining
stringent cost controls is a key factor in achieving profitability. The Company
seeks to reduce its costs and risks by (i) obtaining required zoning
entitlements prior to purchasing land, (ii) using subcontractors to perform
home construction and site improvement work on a fixed price basis, (iii)
minimizing inventory of unsold homes, (iv) improving construction cycle time
for new homes, (v) using its position as a leading homebuilder to obtain
national volume discounts on construction materials and favorable pricing from
subcontractors and (vi) maintaining a sophisticated management information
system that allows it to monitor homebuilding production, scheduling and
budgeting on a daily basis.
COMMITMENT TO CUSTOMER SATISFACTION. The Company is dedicated to providing
customer satisfaction through quality construction and customer service.
Divisional managers are responsible for the quality of construction and the
level of customer satisfaction in their respective divisions.
EXPERIENCED MANAGEMENT WITH DECENTRALIZED OPERATING STRUCTURE. To serve
the needs of each of its markets, the Company relies upon the expertise of its
division managers, each of whom has significant experience in the homebuilding
industry. In order to align corporate and divisional profit goals, division
managers receive bonuses based on the return on assets of their respective
divisions. The division managers benefit from Engle's corporate expertise in
sales and marketing, land acquisition, financial services and its centralized
accounting department. The Company believes that this interaction between the
divisional managers and corporate management provides enhanced operating
results.
4
<PAGE>
RECENT DEVELOPMENTS
On October 17, 1997, the Company announced the early redemption of $15.0
million principal amount of its 7% Convertible Subordinated Notes due 2003 (the
"1993 Notes"). On November 18, 1997, the Company redeemed $14.6 million
aggregate principal amount of the 1993 Notes at a price of 104.2% of the
principal amount thereof, plus accrued interest. As a result of such
redemption, 1,042,432 shares of Common Stock will be eliminated from
consideration in calculating diluted earnings per share after fiscal 1997. An
extraordinary charge of approximately $600,000 (net of income tax benefit) will
be recorded in the first quarter of fiscal 1998 for the early retirement of the
1993 Notes. Prior to the redemption, $406,000 aggregate principal amount of the
1993 Notes called for redemption were converted by the holders into 28,996
shares of Common Stock and an additional $75,000 aggregate principal amount of
the 1993 Notes were converted into 5,357 shares. After November 18, 1997 and
prior to the date of this Prospectus, an additional $80,000 principal amount of
the 1993 Notes were converted into 5,713 shares of Common Stock. The Company
intends to use a portion of the net proceeds of the Equity Offering to fund the
redemption of all of the remaining outstanding principal amount of the 1993
Notes which are not converted into Common Stock on or prior to the date of
redemption. See "Use of Proceeds" and "Capitalization."
The Company is currently in discussions with a group of banks to obtain an
unsecured revolving credit facility to be used for working capital and general
corporate purposes. If obtained, the new facility would be used to replace all
of the Company's existing lines of credit, other than its financial services
debt.
The Company has reached a non-binding agreement in principle to acquire
substantially all of the assets of a Jacksonville, Florida based homebuilder.
The Company believes that this acquisition would complement its existing
presence in Florida and further strengthen its position as a leading Florida
homebuilder. Pursuant to the proposed acquisition, the Company would pay an
aggregate cash purchase price of approximately $7.0 million, depending on the
final valuation of the assets being acquired. The assets include approximately
100 lots, 230 lots under option and 35 homes in backlog. In addition, ancillary
to consummation of the proposed acquisition, the Company would enter into an
option agreement, whereby, at the Company's option, the Company would acquire
substantially all of the assets of a related management company on or prior to
March 31, 1999 for an aggregate cash purchase price of approximately $4.6
million. Consummation of the proposed acquisition is subject to a number of
conditions, including (i) the negotiation and execution of definitive purchase
and management agreements, (ii) the Company's satisfactory completion of its
due diligence investigation, and (iii) approval by the Company's Board of
Directors. Although the Company is in the process of negotiating definitive
documentation and conducting its due diligence investigation, there can be no
assurance that the proposed acquisition will be consummated.
The principal executive offices of the Company are located at 123 N.W.
13th Street, Suite 300, Boca Raton, Florida 33432, and its telephone number is
(561) 391-4012.
5
<PAGE>
THE NOTES OFFERING
<TABLE>
<S> <C>
Securities offered......... $75,000,000 aggregate principal amount of %
Senior Notes due 2008 (the "Senior Notes").
Maturity Date............ , 2008.
Interest Rate and
Payment Dates.............. The Senior Notes will bear interest at the rate of
% per annum. Interest will accrue from the Issue
Date (as defined) and will be payable
semi-annually on and of each year,
commencing , 1998.
Optional Redemption........ The Senior Notes will be redeemable at the
option of the Company, in whole or in part, at any
time on or after , 2003 at the redemption
prices set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption. In
addition, at any time on or prior to , 2001,
the Company may redeem up to 33% of the aggregate
principal amount of the Senior Notes with the net
proceeds of one or more public offerings of its
common stock at a redemption price equal to %
of the aggregate principal amount of each Senior
Note so redeemed, plus accrued and unpaid
interest, if any, to the date of redemption;
PROVIDED, HOWEVER, that immediately after giving
effect to any such redemption, not less than
$65,000,000 principal amount of the Senior Notes
remains outstanding. See "Description of the
Senior Notes--Optional Redemption."
Offers to Purchase......... In the event of a Change of Control (as
defined), the Company is required to offer to
repurchase all of the Senior Notes at a price
equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any,
to the date of repurchase. See "Description of the
Senior Notes--Certain Covenants--Change of
Control." In addition, the Company will be
obligated to make an offer to repurchase Senior
Notes for cash at a price equal to 100% of the
principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase with
the net cash proceeds of certain asset sales and
if the Company's Net Worth (as defined) falls
below a specified level for two consecutive fiscal
quarters. See "Description of the Senior
Notes--Certain Covenants--Maintenance of Net
Worth" and "--Limitation on Asset Sales."
Ranking.................... The Senior Notes will be general unsecured
obligations of the Company, ranking senior in
right of payment to all existing and future
subordinated indebtedness of the Company and PARI
PASSU in right of payment with all existing and
future senior indebtedness of the Company;
however, the Senior Notes will be effectively
subordinated to all secured indebtedness of the
Company to the extent of the value of the assets
securing such indebtedness. As of October 31,
1997, after giving effect to the Offerings and the
application of the proceeds therefrom as described
under "Use of Proceeds" assuming that all of the
1993 Notes are converted into Common Stock on or
prior to the date
6
<PAGE>
of redemption, the Company and the Guarantors
would have had no secured indebtedness
outstanding.
Guarantees................. The Senior Notes will be guaranteed (the
"Guarantees"), on a joint and several basis, by
all of the Restricted Subsidiaries (as defined) of
the Company existing on the closing date of this
Notes Offering (collectively, the "Guarantors").
The Guarantees will be general unsecured
obligations of the Guarantors, ranking senior in
right of payment to all existing and future
subordinated indebtedness of the Guarantors and
PARI PASSU in right of payment with all existing
and future senior indebtedness of the Guarantors;
however, the Guarantees will be effectively
subordinated to all secured indebtedness of the
Guarantors to the extent of the value of the
assets securing such Indebtedness. See
"Description of the Senior Notes--The Guarantees."
Certain Covenants.......... The Indenture (as defined) will impose certain
limitations on the ability of the Company and its
Restricted Subsidiaries to, among other things,
incur additional indebtedness, pay dividends or
make certain other restricted payments and
investments, consummate certain asset sales, enter
into certain transactions with affiliates,
redesignate an Unrestricted Subsidiary (as
defined) to be a Restricted Subsidiary, designate
a Restricted Subsidiary as an Unrestricted
Subsidiary, incur liens, merge or consolidate with
any other person or sell, assign, transfer, lease,
convey or otherwise dispose of all or
substantially all of its assets. The Indenture
will also impose limitations on the Company's
ability to restrict the ability of its Restricted
Subsidiaries to pay dividends or make certain
payments to the Company or any of its Restricted
Subsidiaries. See "Description of the Senior
Notes--Certain Covenants."
Use of Proceeds............ The net proceeds of the Notes Offering are
estimated to be approximately $72,725,000. Such
net proceeds will be used to repay outstanding
amounts under certain of the Company's lines of
credit. See "Use of Proceeds."
</TABLE>
CONCURRENT OFFERING
Concurrently with the Notes Offering the Company is offering shares of its
Common Stock by means of a separate prospectus. The consummation of the Notes
Offering and the consummation of the Equity Offering are not conditioned upon
each other. The net proceeds of the Equity Offering will be used to redeem the
remaining outstanding principal amount of the 1993 Notes which are not
converted by the holders into Common Stock on or prior to the date of
redemption, to repay outstanding amounts under certain of the Company's lines
of credit and any remainder for general corporate purposes. See "Use of
Proceeds."
RISK FACTORS
Investment in the Senior Notes involves certain risks discussed under
"Risk Factors" that should be considered by prospective investors.
7
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Home sales .................................... $ 133,970 $ 215,716 $ 216,059
Cost of home sales ........................... 112,352 183,752 184,888
--------- --------- ---------
Homebuilding gross profit ..................... 21,618 31,964 31,171
--------- --------- ---------
Land sales .................................... 611 2,931 20,964
Cost of land sales ........................... 498 2,577 17,332
--------- --------- ---------
Land gross profit ........................... 113 354 3,632
--------- --------- ---------
Financial services income, net ............... 558 898 1,158
Other income, net .............................. 2,247 1,358 1,573
--------- --------- ---------
Total gross profit ........................... 24,536 34,574 37,534
--------- --------- ---------
Selling, marketing, general and
administrative expenses ..................... 12,741 19,993 24,466
Depreciation and amortization .................. 1,677 2,402 3,532
--------- --------- ---------
Income before income taxes .................. 10,118 12,179 9,536
Provision for income taxes ..................... 3,820 4,604 3,624
--------- --------- ---------
Net income(2) ................................. $ 6,298 $ 7,575 $ 5,912
========= ========= =========
Net income per share--fully diluted(2) ......... $ 0.81 $ 0.96 $ 0.74
Weighted average number of shares outstanding--
fully diluted ................................. 8,131 8,817 9,132
OTHER FINANCIAL DATA:
EBITDA(4) .................................... $ 15,924 $ 22,293 $ 19,972
Interest incurred .............................. 4,068 7,183 13,750
Ratio of EBITDA to interest incurred ......... 3.91x 3.10x 1.45x
Ratio of homebuilding debt to EBITDA ......... 4.01x 4.46x 7.38x
Ratio of earnings to fixed charges(5) ......... 3.14x 2.56x 1.18x
SUMMARY OPERATING DATA:
Units:
Deliveries .................................... 797 1,225 1,137
Backlog at end of period ..................... 687 560 804
Aggregate sales value of backlog ............... $ 119,491 $ 108,200 $ 161,900
Average sales price of homes in backlog ...... 174 193 201
<CAPTION>
PRO FORMA
AS ADJUSTED
1996 1997 1997(1)
------------- ------------- --------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Home sales .................................... $ 303,972 $ 404,407 $404,407
Cost of home sales ........................... 260,651 345,295 343,056
--------- --------- --------
Homebuilding gross profit ..................... 43,321 59,112 61,351
--------- --------- --------
Land sales .................................... 17,571 7,685 7,685
Cost of land sales ........................... 15,589 7,095 7,095
--------- --------- --------
Land gross profit ........................... 1,982 590 590
--------- --------- --------
Financial services income, net ............... 1,796 2,678 3,858
Other income, net .............................. 1,485 1,513 1,513
--------- --------- --------
Total gross profit ........................... 48,584 63,893 67,312
--------- --------- --------
Selling, marketing, general and
administrative expenses ..................... 31,906 39,620 39,620
Depreciation and amortization .................. 2,977 2,374 2,466
--------- --------- --------
Income before income taxes .................. 13,701 21,899 25,226
Provision for income taxes ..................... 5,206 8,431 9,712
--------- --------- --------
Net income(2) ................................. $ 8,495 $ 13,468 $15,514
========= ========= ========
Net income per share--fully diluted(2) ......... $ 1.03 $ 1.58 $ 1.42(3)
Weighted average number of shares outstanding--
fully diluted ................................. 9,251 9,246 10,904
OTHER FINANCIAL DATA:
EBITDA(4) .................................... $ 28,221 $ 40,339 $41,519
Interest incurred .............................. 15,272 15,623 13,029
Ratio of EBITDA to interest incurred ......... 1.85x 2.58x 3.19x
Ratio of homebuilding debt to EBITDA ......... 5.39x 3.77x 2.77x
Ratio of earnings to fixed charges(5) ......... 1.63x 2.40x 2.93x
SUMMARY OPERATING DATA:
Units:
Deliveries .................................... 1,567 1,992 1,992
Backlog at end of period ..................... 1,016 869 869
Aggregate sales value of backlog ............... $ 210,300 $ 173,989 $173,989
Average sales price of homes in backlog ...... 207 200 200
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1997
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED(6)
---------- ---------------
<S> <C> <C>
BALANCE SHEET DATA
Cash ............................................. $ 16,546 $ 20,247
Homebuilding inventories ........................ 230,108 230,108
Total assets .................................... 288,412 293,937(7)
Homebuilding bank credit facilities ............ 82,064 --
% Senior Notes due 2008 ........................ -- 75,000
11-3/4% Senior Notes due 2000 .................... 40,000 40,000
7% Convertible Subordinated Notes due 2003 ...... 30,000 --
Total homebuilding debt ........................ 152,064 115,000
Total debt(8) ................................. 166,593 115,000
Shareholders' equity ........................... 93,180 150,533
</TABLE>
8
<PAGE>
- ---------------
(1) Pro forma for (i) the redemption on November 18, 1997, of $14,594,000
aggregate principal amount of the 1993 Notes at a price of 104.2% of the
principal amount thereof, plus accrued interest, and the conversion of
$561,000 aggregate principal amount of the 1993 Notes into 40,066 shares
of Common Stock, (ii) the issuance and sale of the Common Stock in the
Equity Offering at an assumed price of $17.00, (iii) the sale of the
Senior Notes in the Notes Offering with an assumed interest rate of 9.5%,
and (iv) the application of the estimated net proceeds from the Offerings
as described under "Use of Proceeds" assuming that all of the 1993 Notes
are converted by the holders into Common Stock on or prior to the date of
redemption, as if each of these transactions had occurred on November 1,
1996. See "Capitalization." The 1993 Notes are currently callable at
104.2% of the principal amount thereof and have a conversion price of
$14.00 per share (an effective conversion price, excluding accrued
interest, of $14.59). The closing sale price of the Common Stock as
reported on the Nasdaq National Market on December 18, 1997, was $17.00.
As a result, the Company anticipates that substantially all of the 1993
Notes will be converted by the holders into Common Stock prior to being
redeemed.
(2) Effective November 1, 1993, the Company adopted statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes," which requires
an asset and liability method of accounting for income taxes. The Company
recorded a benefit of $1,332,000 in the first quarter of fiscal 1994 as a
cumulative effect on prior years of this accounting change which has been
excluded from the calculation of net income. Additionally, pro forma as
adjusted net income and income per share exclude the extraordinary charge
of $596,000, net of income taxes, or $.05 per share on a fully diluted
basis, resulting from the elimination of deferred loan costs and the
premium paid in connection with the redemption of $14,594,000 aggregate
principal amount of the 1993 Notes on November 18, 1997.
(3) Assuming all of the remaining outstanding 1993 Notes are redeemed, pro
forma as adjusted fully diluted net income per share for fiscal 1997 would
have been $1.52 (excluding the extraordinary charge of $1,203,000, net of
income taxes, or $.12 per share, resulting from the elimination of
deferred loan costs and the premium paid in connection with the redemption
of $14,594,000 aggregate principal amount of the 1993 Notes on November
18, 1997 and the redemption of the remaining outstanding $14,845,000
aggregate principal amount of the 1993 Notes).
(4) EBITDA is defined as operating income before amortization of capitalized
interest expense included in the cost of goods sold, depreciation and
other amortization. EBITDA is a widely accepted financial indicator of a
company's ability to service debt. However, EBITDA should not be construed
as an alternative to operating income or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of the Company's
operating performance or as a measure of liquidity.
(5) Computed by dividing earnings by fixed charges. "Earnings" consist of
income from operations before income taxes, plus amortization of
previously capitalized interest included in costs of sales and fixed
charges, exclusive of capitalized interest. "Fixed charges" consist of
interest costs incurred, including capitalized interest costs plus
amortization of loan costs and that portion of operating lease rental
expense deemed to be representative of interest.
(6) Pro forma for (i) the redemption on November 18, 1997, of $14,594,000
aggregate principal amount of the 1993 Notes at a price of 104.2% of the
principal amount thereof, plus accrued interest, and the conversion of
$561,000 aggregate principal amount of the 1993 Notes into 40,066 shares
of Common Stock, (ii) the issuance and sale of the Common Stock in the
Equity Offering at an assumed price of $17.00, (iii) the sale of the
Senior Notes in the Notes Offering with an assumed interest rate of 9.5%,
and (iv) the application of the estimated net proceeds from the Offerings
as described under "Use of Proceeds" assuming that all of the 1993 Notes
are converted by the holders into Common Stock on or prior to the date of
redemption. See "Capitalization." The 1993 Notes are currently callable at
104.2% of the principal amount thereof and have a conversion price of
$14.00 per share (an effective conversion price, excluding accrued
interest, of $14.59). The closing sale price of the Common Stock as
reported on the Nasdaq National Market on December 18, 1997, was $17.00.
As a result, the Company anticipates that substantially all of the 1993
Notes will be converted by the holders into Common Stock prior to being
redeemed.
(7) Reflects the estimated professional fees and expenses associated with the
Note Offering and the write-off of the unamortized deferred financing
costs related to the 1993 Notes. A breakdown of the estimated costs and
write-off follows (in thousands):
<TABLE>
<S> <C>
Financing fees and debt issuance costs ................................. $1,875
Legal and professional fees and other costs .............................. 400
Write-off of unamortized deferred financing costs (net of income taxes) (451)
------
$1,824
======
</TABLE>
(8) Total debt includes financial services debt.
9
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER
THE FACTORS SET FORTH BELOW PRIOR TO INVESTING IN THE SENIOR NOTES OFFERED
HEREBY.
GENERAL REAL ESTATE, ECONOMIC, INTEREST RATES AND OTHER CONDITIONS
The homebuilding industry is cyclical and affected by changes in general
and local economic and other conditions including employment levels,
demographic considerations, availability of financing, interest rate levels,
consumer confidence and housing demand. In addition, homebuilders are subject
to various risks, many of them outside the control of the homebuilder including
competitive overbuilding, availability and cost of building lots, materials and
labor, adverse weather conditions which can cause delays in construction
schedules, cost overruns, changes in government regulations, and increases in
real estate taxes and other local government fees. The Company cannot predict
whether interest rates will be at levels attractive to prospective home buyers.
If interest rates increase, and in particular mortgage interest rates, the
Company's business could be adversely affected. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
"Business--Competition and Market Factors."
LEVERAGE; POTENTIAL ADVERSE EFFECT OF INDEBTEDNESS ON FUTURE OPERATIONS
As of October 31, 1997, after giving effect to (i) the redemption on
November 18, 1997, of $14,594,000 aggregate principal amount of the 1993 Notes
and the conversion of $561,000 aggregate principal amount of the 1993 Notes,
(ii) the Offerings and (iii) the application of the estimated net proceeds from
the Offerings as described under "Use of Proceeds" assuming that all of the
1993 Notes are converted into Common Stock on or prior to the date of
redemption, the outstanding indebtedness of the Company would have been
$115,000,000 and the Company would have had stockholders' equity of
approximately $150,533,000. In addition, subject to restrictions in the
indenture (the "1994 Indenture") governing the Company's 113/4% Senior Notes
due 2000 (the "1994 Notes") and the indenture governing the Senior Notes, the
Company may incur additional indebtedness in the future, some of which may be
secured. The Company's ability to make required debt service payments in the
future will be dependent on the Company's operating results, which are subject
to financial, economic and other factors affecting the Company that are beyond
its control. No assurance can be given that the Company will be able to make
required debt service payments. See "Use of Proceeds" and "Capitalization."
The degree to which the Company is leveraged could have an adverse impact
on the Company, including (i) increased vulnerability to adverse general
economic and market conditions, (ii) impaired ability to expand and to respond
to increased competition, (iii) impaired ability to obtain additional financing
for future working capital, capital expenditures, general corporate or other
purposes and (iv) requiring that a significant portion of cash provided by
operating activities be used for the payment of debt obligations, thereby
reducing funds available for operations and future business opportunities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-- Liquidity and Capital Resources" and "Description of Certain
Indebtedness."
GEOGRAPHIC CONCENTRATION; RISKS OF EXPANSION
The Company's operations are situated in South Florida; Central Florida;
the west coast of Florida; Denver, Colorado; Dallas, Texas; Virginia and
Maryland; Raleigh, North Carolina; Phoenix, Arizona; and Atlanta, Georgia.
Adverse general economic conditions in these markets could have a material
adverse impact on the operations of the Company. For fiscal 1997, approximately
68% of the Company's housing revenue and a significant portion of the Company's
operating income were derived from operations in its Florida markets. The
Company's performance could be significantly affected by changes in these
markets. The Company expanded into two new geographic markets, Phoenix,
Arizona,
10
<PAGE>
and Atlanta, Georgia, in fiscal 1997. New markets may prove to be less stable
and may involve delays, problems and expenses not typically found by the
Company in the existing markets with which it is familiar. See "Business."
LAND DEVELOPMENT ACTIVITIES
The Company develops land for some of its subdivisions, which occasionally
may consist of large tracts of land suited for master-planned communities.
Acquiring land and committing the financial and managerial resources to develop
such land involve significant risks. Before a subdivision generates any
revenue, material expenditures are required for items such as acquiring land
and constructing subdivision infrastructure (such as roads and utilities).
SIGNIFICANT VOTING CONTROL BY PRINCIPAL SHAREHOLDERS
Following the closing of the Equity Offering and assuming that none of the
outstanding 1993 Notes have been converted, Alec Engelstein, the Company's
Chairman, President and Chief Executive Officer, and Harry Engelstein, the
Company's Executive Vice President and Chief Construction Officer, will
together beneficially own a total of approximately 36.9% of the outstanding
Common Stock (35.4% if the Underwriters' over-allotment option is exercised in
full) and together will continue to have significant voting power with respect
to the election of the Board of Directors of the Company, and in general, the
determination of the outcome of various matters submitted to the shareholders
of the Company for approval.
DEPENDENCE ON KEY EXECUTIVES
The Company is managed by a relatively small number of executive officers.
The loss of the services of one or more of these executive officers,
particularly Alec Engelstein, the Company's Chairman, President and Chief
Executive Officer, could have an adverse effect on the Company's business and
operations. See "Management."
HOLDING COMPANY STRUCTURE; FRAUDULENT CONVEYANCE CONCERNS
The Company is a holding company which derives substantially all of its
operating income from its subsidiaries. The Company must rely on dividends and
other distributions from its subsidiaries to generate the funds necessary to
meet its obligations, including the payment of principal and interest on the
Senior Notes. The ability of the Company's subsidiaries to pay such dividends
or make such distributions will be subject to, among other things, applicable
state laws and, under certain circumstances, restrictions contained in
agreements or debt instruments that the Company or its subsidiaries may enter
into after the date of the Indenture. All of the subsidiaries of the Company
have jointly and severally guaranteed the Senior Notes. In addition, the Senior
Notes and the Guarantees will be effectively subordinated to all secured
indebtedness of the Company and the Guarantors, respectively, to the extent of
the assets securing such indebtedness. As of October 31, 1997, after giving
effect to the Offerings and the application of the proceeds therefrom as
described under "Use of Proceeds" assuming that all of the 1993 Notes are
converted by the holders into Common Stock on or prior to the date of
redemption, the Company and the Guarantors collectively would have had no
secured indebtedness outstanding.
The Guarantees may be subject to review under federal or state fraudulent
conveyance law. To the extent that a court were to find that (x) a Guarantee
was incurred by a Guarantor with intent to hinder, delay, or defraud any
present or future creditor, or the Guarantor contemplated insolvency with a
design to prefer one or more creditors to the exclusion in whole or in part of
others, or (y) such Guarantor did not receive fair consideration or reasonable
equivalent value for issuing its Guarantee and such Guarantor (i) was
insolvent, (ii) was rendered insolvent by reason of the issuance of such
Guarantee, (iii) was engaged or about to engage in a business or transaction
for which the remaining assets of such Guarantor constituted unreasonably small
capital to carry on its business, or (iv) intended
11
<PAGE>
to incur, or believed that it would incur, debts beyond its ability to pay such
debts as they matured, a court could avoid or subordinate such Guarantee in
favor of the Guarantor's creditors. Among other things, a legal challenge of a
Guarantee on fraudulent conveyance grounds may focus on the benefits, if any,
realized by each Guarantor as a result of the issuance by the Company of the
Senior Notes. The measure of insolvency for purposes of the foregoing will vary
depending on the law of the jurisdiction being applied. Generally, however, an
entity would be considered insolvent if the sum of its debts (including
contingent or unliquidated debts) is greater than all its property at a fair
valuation or if the present fair saleable value of its assets is less than the
amount that will be required to pay its probable liability on its existing
debts as they become absolute and matured. Pursuant to the terms of the
Guarantees, the liability of each Guarantor is limited to the maximum amount of
indebtedness permitted, at the time of the grant of such Guarantee, to be
incurred in compliance with fraudulent conveyance or similar laws.
To the extent any Guarantee was avoided or subordinated as a fraudulent
conveyance, limited as described above, or held unenforceable for any other
reason, holders of the Senior Notes would, to such extent, cease to have a
claim in respect of such Guarantee and, to such extent, would be creditors
solely of the Company and any Guarantor whose Guarantee was not avoided,
subordinated, limited, or held unenforceable. In such event, the claims of the
holders of the Senior Notes against the issuer of an avoided, subordinated,
limited or unenforceable Guarantee would be subject to the prior payment of all
liabilities of such Guarantor. There can be no assurance that, after providing
for all prior claims, there would be sufficient assets to satisfy the claims of
the holders of the Senior Notes.
REPURCHASE OF SENIOR NOTES UPON A CHANGE OF CONTROL
In the event of a Change of Control, the Company will be required to offer
to repurchase all of the outstanding Senior Notes and all of the outstanding
1994 Notes at a purchase price equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any, to the repurchase date.
There can be no assurance that the Company will have sufficient funds available
or will be permitted by its other indebtedness agreements to repurchase the
Senior Notes and the 1994 Notes upon the occurrence of a Change of Control. The
Change of Control purchase feature of the Senior Notes and the 1994 Notes may
in certain circumstances make more difficult or discourage a takeover of the
Company and, thus, the removal of incumbent management. The Change of Control
purchase feature, however, is not the result of management's knowledge of any
specific effort to obtain control of the Company by means of a merger, tender
offer, solicitation or otherwise, or part of a plan by management to adopt a
series of anti-takeover provisions. See "Description of the Senior
Notes--Certain Covenants--Change of Control" and "Description of Certain
Indebtedness--The 1994 Notes."
COMPETITION
The homebuilding industry is highly competitive and fragmented. The
Company competes in each of its markets with numerous national, regional and
local builders, including some builders with greater financial resources.
Builders of new homes compete not only for home buyers, but also for desirable
properties, raw materials and skilled subcontractors. The Company also competes
for residential sales with individual sales of existing homes and available
rental housing. See "Business--Competition and Market Factors."
GOVERNMENTAL REGULATION
In developing housing communities, the Company must obtain the approval of
numerous government authorities regulating such matters as permitted land uses
and levels of density, the installation of utility services such as water and
waste disposal and the dedication of acreage for open space, parks, schools and
other community purposes. Several authorities in Florida and other states have
imposed impact fees as a means of defraying the cost of providing certain
governmental services to developing areas and the amount of these fees has
increased significantly during recent years. Many state laws require the use of
specific construction materials which reduce the need for energy-consuming
12
<PAGE>
heating and cooling systems. Local governments also, at times, declare
moratoriums on the issuance of building permits and impose other restrictions
in areas where sewage treatment facilities and other public facilities do not
reach minimum standards. The Company is also subject to a variety of Federal,
State and local statutes, ordinances, rules and regulations concerning
protection of health and the environment. The particular environmental laws
which apply to any given community vary greatly according to the community
site, the site's environmental conditions and the present and former uses of
the site. Prior to consummating the purchase of land, the Company engages
independent environmental engineers to evaluate such land for the presence of
hazardous or toxic materials, wastes or substances. Such governmental
regulation may result in delays, cause the Company to incur substantial
compliance and other costs and prohibit or severely restrict development in
certain regions or areas, which could have an adverse effect on the Company's
business and results of operations. See "Business--Government Regulation and
Environmental Matters."
To varying degrees, certain permits and approvals will be required to
complete the residential developments currently being planned by the Company.
The ability of the Company to obtain necessary approvals and permits for these
projects is often beyond the Company's control, and could restrict or prevent
the development of otherwise desirable property. The length of time necessary
to obtain permits and approvals increases the carrying costs of unimproved
property acquired for the purpose of development and construction. In addition,
the continued effectiveness of permits already granted is subject to factors
such as changes in policies, rules and regulations and their interpretation and
application.
ABSENCE OF PUBLIC MARKET
The Senior Notes are a new issue of securities which have no established
trading market. It is expected that the Senior Notes will be sold to a limited
number of investors. The Company has been advised by the Underwriter that it
intends to make a market in the Senior Notes after the consummation of this
Offering; however, the Underwriter is not obligated to do so, and any such
market-making, if commenced, may be terminated at any time without notice. No
assurance can be given as to the liquidity of the trading market, if any, for
the Senior Notes.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Notes Offering are estimated to
be approximately $72.7 million after deducting the estimated underwriting
discounts and offering expenses payable by the Company. The Company intends to
use the entire net proceeds of the Notes Offering to repay outstanding amounts
under certain of the Company's homebuilding lines of credit (the "Homebuilding
Lines of Credit").
Assuming the Equity Offering, which is expected to occur concurrently with
the Notes Offering, is consummated, the net proceeds to the Company from the
sale of the shares of Common Stock in the Equity Offering are estimated to be
approximately $42.8 million ($49.3 million if the Underwriters' overallotment
option is exercised in full), assuming an offering price of $17.00 per share
and after deducting the estimated underwriting discounts and offering expenses
payable by the Company. The Company intends to use up to approximately $15.5
million of the net proceeds of the Equity Offering to fund the redemption of
all of the remaining outstanding principal amount of the 1993 Notes which are
not converted into Common Stock on or prior to the date of redemption at a
price of 104.2% of the principal amount thereof and to use the remaining net
proceeds to repay outstanding amounts under the Homebuilding Lines of Credit.
To the extent that the 1993 Notes are converted into Common Stock on or prior
to the date of redemption, the Company intends to use any remaining net
proceeds, first, to repay additional outstanding amounts under the Homebuilding
Lines of Credit; second, to repay outstanding amounts under the Company's
financial services line of credit (the "Financial Services Line of Credit");
and, any remainder, for general corporate purposes.
The Homebuilding Lines of Credit bear interest at rates varying from LIBOR
plus 3.00% to prime plus .50%, bore a weighted average interest rate of 9.28%
per annum during fiscal 1997 and had approximately $104.5 million outstanding
at November 30, 1997, of which approximately $19.0 million matures in 1998,
approximately $42.2 million matures in 1999, approximately $41.9 million
matures in 2000 and approximately $1.4 million matures thereafter. The
Financial Services Line of Credit bears interest at a rate of prime minus .25%,
bore a weighted average interest rate of 8.125% per annum during fiscal 1997
and had approximately $12.0 million outstanding at November 30, 1997 which
matures in April 1998. As of November 30, 1997, after giving effect to the
Offerings and the application of the net proceeds therefrom as described above
assuming that all of the 1993 Notes are converted into Common Stock on or prior
to the date of redemption, no amounts would have been outstanding under the
Homebuilding Lines of Credit and approximately $1.0 million would have been
outstanding under the Financial Services Line of Credit and approximately
$121.0 million and $17.0 million, respectively, would have been available to
the Company for additional borrowings thereunder. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and Note 5 to the Company's Consolidated Financial
Statements.
14
<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the
Company at October 31, 1997, (ii) the pro forma capitalization of the Company
at October 31, 1997, after giving effect to the redemption on November 18, 1997
of $14,594,000 aggregate principal amount of the 1993 Notes at a price of
104.2% of the principal amount thereof, plus accrued interest, and the
conversion of $561,000 aggregate principal amount of the 1993 Notes into 40,066
shares of Common Stock, as if such events had occurred on October 31, 1997, and
(iii) the pro forma capitalization of the Company as adjusted to reflect the
issuance and sale of the Common Stock in the Equity Offering, the sale of the
Senior Notes in the Notes Offering and the application of the estimated net
proceeds from the Offerings as described under "Use of Proceeds" assuming that
all of the 1993 Notes are converted into Common Stock on or prior to the date
of redemption. This table should be read in conjunction with the Company's
Consolidated Financial Statements and notes thereto and "Management's
Discussion and Analysis of Results of Operations and Financial Condition," each
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1997
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- ----------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Cash ...................................................... $ 16,546 $ 16,546 $ 20,247
======== ========= ==========
Debt
Homebuilding debt
Bank credit facilities(1) ................................. $ 82,064 $ 97,271 $ --
% Senior Notes due 2008 ................................. -- -- 75,000
11-3/4% Senior Notes due 2000 ............................. 40,000 40,000 40,000
7% Convertible Subordinated Notes due 2003 ............... 30,000 14,845 --
-------- --------- ----------
Total homebuilding debt ................................. 152,064 152,116 115,000
-------- --------- ----------
Financial services debt .................................... 14,529 14,529 --
-------- --------- ----------
Total debt ............................................. 166,593 166,645 115,000(2)
-------- --------- ------------
Shareholders' equity
Common Stock ($.01 par value, 25,000,000 shares authorized;
6,931,693 actual shares issued and outstanding; 6,971,759
shares issued and outstanding pro forma; 10,732,117 shares
issued and outstanding pro forma as adjusted)(3) ......... 69 70 107
Additional paid-in capital ................................. 47,852 48,405 105,763
Retained earnings(4) ....................................... 45,259 44,663 44,663
-------- --------- ------------
Total shareholders' equity .............................. 93,180 93,138 150,533(2)
-------- --------- ------------
Total capitalization ....................................... $259,773 $259,783 $ 265,533
======== ========= ============
</TABLE>
- ----------------
(1) The Company is currently in discussions with a group of banks to obtain an
unsecured revolving credit facility to be used for working capital and
general corporate purposes. If obtained, the new facility would be used to
replace all of the Company's existing lines of credit, other than
financial services debt.
(2) If all of the remaining $14,845,000 aggregate principal amount of the 1993
Notes were redeemed with the proceeds of the Equity Offering pursuant to
the Company's call for redemption, pro forma as adjusted total debt and
total shareholders' equity as of October 31, 1997 would have been
$126,768,000 and $135,304,000, respectively. After November 18, 1997 and
prior to the date of this Prospectus, an additional $80,000 principal
amount of the 1993 Notes were converted into 5,713 shares of Common Stock.
The 1993 Notes are currently callable at 104.2% of the principal amount
thereof and have a conversion price of $14.00 per share (an effective
conversion price of $14.59). The closing price of the Common Stock on the
Nasdaq National Market on December 18, 1997 was $17.00.
(3) Excludes 606,500 shares of Common Stock subject to outstanding options as
of October 31, 1997, of which options to purchase 502,000 shares were
exercisable on that date.
(4) Pro forma amount includes an adjustment to reflect the extraordinary charge
of approximately $600,000, net of income taxes, resulting from the
elimination of deferred loan costs and the premium paid in connection with
the redemption of $14,594,000 aggregate principal amount of the 1993 Notes
on November 18, 1997.
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected consolidated financial and operating data of the
Company were derived from the Company's consolidated financial statements as of
and for the years ended October 31, 1993 through 1997 which have been audited
by BDO Seidman, LLP, independent certified public accountants. The information
presented below should be read in conjunction with the Company's Consolidated
Financial Statements and notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this Prospectus or incorporated by reference herein.
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
---------------------------------------------------------------------
1993 1994 1995 1996 1997
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues .......................................... $ 137,386 $ 224,459 $ 244,528 $ 332,088 $ 425,295
Costs and expenses:
Cost of sales--homes .............................. 112,352 183,752 184,888 260,651 345,295
Cost of sales--land .............................. 498 2,577 17,332 15,589 7,095
Selling, marketing, general & administrative ...... 12,741 19,993 24,466 31,906 39,620
Depreciation & amortization ........................ 1,677 2,402 3,532 2,977 2,374
Financial services ................................. 0 3,556 4,774 7,264 9,012
--------- --------- --------- --------- ---------
Total costs and expenses ........................... 127,268 212,280 234,992 318,387 403,396
--------- --------- --------- --------- ---------
Income before income taxes ........................ 10,118 12,179 9,536 13,701 21,899
--------- --------- --------- --------- ---------
Net income(1) ....................................... $ 6,298 $ 7,575 $ 5,912 $ 8,495 $ 13,468
========= ========= ========= ========= =========
Net income per share
Primary .......................................... $ 0.95 $ 1.13 $ 0.85 $ 1.20 $ 1.94
Fully diluted .................................... 0.81 0.96 0.74 1.03 1.58
Weighted average number of shares outstanding
Primary .......................................... 6,650 6,674 6,989 7,108 6,951
Fully diluted .................................... 8,131 8,817 9,132 9,251 9,246
Cash dividends .................................... $ 1,064 $ 1,066 $ 1,109 $ 1,109 $ 1,109
OTHER FINANCIAL DATA:
EBITDA(2) .......................................... $ 15,924 $ 22,293 $ 19,972 $ 28,221 $ 40,339
Interest incurred ................................. 4,068 7,183 13,750 15,272 15,623
Ratio of EBITDA to interest incurred ............... 3.91x 3.10x 1.45x 1.85x 2.58x
Ratio of earnings to fixed charges(3) ............ 3.14x 2.56x 1.18x 1.63x 2.40x
SUMMARY OPERATING DATA:
Units:
Deliveries ....................................... 797 1,225 1,137 1,567 1,992
Backlog at end of period ........................ 687 560 804 1,016 869
Aggregate sales value of backlog .................. $ 119,491 $ 108,200 $ 161,900 $ 210,300 $ 173,989
Average sales price of homes in backlog ............ 174 193 201 207 200
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 31,
-------------------------------------------------------------
1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash ........................... $ 27,326 $ 13,121 $ 13,400 $ 21,700 $ 16,546
Homebuilding inventories ...... 88,902 138,428 198,664 220,564 230,108
Total assets .................. 143,991 188,913 251,918 284,789 288,412
Total homebuilding debt ...... 63,794 99,428 147,454 152,117 152,064
Total debt(4) .................. 66,575 102,341 153,927 165,123 166,593
Shareholders' equity ......... 58,102 66,303 74,106 81,492 93,180
</TABLE>
16
<PAGE>
- ----------------
(1) Effective November 1, 1993, the Company adopted statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes," which requires
an asset and liability method of accounting for income taxes. The Company
recorded a benefit of $1,332,000 in the first quarter of fiscal 1994 as a
cumulative effect on prior years of this accounting change which has been
excluded from the calculation of net income.
(2) EBITDA is defined as operating income before amortization of capitalized
interest expense included in the cost of goods sold, depreciation and
other amortization. EBITDA is a widely accepted financial indicator of a
company's ability to service debt. However, EBITDA should not be construed
as an alternative to operating income or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of the Company's
operating performance or as a measure of liquidity.
(3) Computed by dividing earnings by fixed charges. "Earnings" consist of
income from operations before income taxes, plus amortization of
previously capitalized interest included in costs of sales and fixed
charges, exclusive of capitalized interest costs. "Fixed Charges" consist
of interest costs incurred, including capitalized interest costs plus
amortization of loan costs and that portion of operating lease rental
expense deemed to be representative of interest.
(4) Total debt includes financial services debt.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
IS BASED UPON AND SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S CONSOLIDATED
FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN.
OVERVIEW
GENERAL. The following table sets forth for the years indicated certain
items of the Company's Consolidated Financial Statements expressed as a
percentage of the Company's total revenues:
<TABLE>
<CAPTION>
PRCENTAGE OF TOTAL REVENUES
YEAR ENDED OCTOBER 31,
------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Sales of homes ................................................ 88.4% 91.5% 95.1%
Sales of land ................................................ 8.6 5.3 1.8
Rent and other ................................................ 0.6 0.5 0.4
Financial services income .................................... 2.4 2.7 2.7
----- ----- -----
Total ...................................................... 100.0% 100.0% 100.0%
===== ===== =====
Cost of sales--homes .......................................... 75.6 78.5 81.2
Cost of sales--land .......................................... 7.0 4.7 1.7
Selling, marketing, general and administrative expenses ...... 10.0 9.6 9.3
Income before income taxes .................................... 3.9 4.1 5.1
Net income ................................................... 2.4 2.6 3.2
</TABLE>
The following tables set forth information relating to homes closed, new
sales contracts and sales backlog by operating division for fiscal years 1995,
1996 and 1997.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995 1996 1997
-------------------- -------------------- -------------------
HOMES CLOSED CLOSED PERCENT CLOSED PERCENT CLOSED PERCENT
- -------------------------- -------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
South Florida ............ 513 45.1% 624 39.8% 847 42.4%
Central Florida ......... 244 21.5 343 21.9 386 19.4
West Coast Florida ...... 56 4.9 66 4.2 84 4.2
Dallas, TX ............... 57 5.0 107 6.8 173 8.7
Denver, CO ............... 243 21.4 269 17.2 334 16.8
Virginia/Maryland ...... 18 1.6 102 6.5 103 5.2
Raleigh, NC ............ 6 0.5 56 3.6 64 3.2
Phoenix, AZ ............ -- -- -- -- 1 0.1
----- ---- ----- ---- ----- ----
Total .................. 1,137 100% 1,567 100% 1,992 100%
===== ==== ===== ==== ===== ====
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995 1996 1997
-------------------- -------------------- -------------------
NEW SALES CONTRACTS SOLD DOLLARS SOLD DOLLARS SOLD DOLLARS
- -------------------------- ------- ---------- ------- ---------- ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
South Florida ............ 698 $139,000 643 $141,200 628 $135,100
Central Florida ......... 268 48,700 378 70,500 365 69,200
West Coast Florida ...... 60 11,700 81 12,200 153 25,400
Dallas, TX ............... 62 12,500 179 30,200 148 23,800
Denver, CO ............... 217 40,500 318 59,600 346 67,800
Virginia/Maryland ...... 41 10,400 111 24,700 110 27,600
Raleigh, NC ............ 35 7,000 69 14,000 37 7,700
Phoenix, AZ ............ - - - - 58 11,500
----- -------- ----- -------- ----- --------
Total .................. 1,381 $269,800 1,779 $352,400 1,845 $368,100
===== ======== ===== ======== ===== ========
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995 1996 1997
-------------------- -------------------- -------------------
SALES BACKLOG HOMES DOLLARS HOMES DOLLARS HOMES DOLLARS
- -------------------------- ------- ---------- ------- ---------- ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
South Florida ............ 540 $110,800 559 $126,500 340 $ 72,600
Central Florida ......... 130 23,500 165 31,000 144 28,400
West Coast Florida ...... 25 4,900 39 5,800 108 18,000
Dallas, TX ............... 18 3,600 90 14,500 63 9,900
Denver, CO ............... 37 7,300 86 15,700 100 19,400
Virginia/Maryland ...... 25 6,100 34 8,000 41 10,900
Raleigh, NC ............ 29 5,700 43 8,800 16 3,400
Phoenix, AZ ............ 0 0 0 0 57 11,400
--- -------- ----- -------- --- --------
Total .................. 804 $161,900 1,016 $210,300 869 $174,000
=== ======== ===== ======== === ========
</TABLE>
BACKLOG. Sales of the Company's homes are generally made pursuant to a
standard contract which requires a down payment. The contract includes a
financing contingency which permits the customer to cancel in the event
mortgage financing at prevailing interest rates (including financing arranged
by the Company) is unobtainable within a specified period, typically four to
six weeks. The Company includes an undelivered home sale in its backlog upon
execution of the sales contract and receipt of the down payment. Revenue is
recognized only upon the closing and delivery of a home. The Company estimates
that the average period between the execution of a purchase agreement for a
home and delivery is approximately four to six months.
As of October 31, 1997, the Company's backlog was $174.0 million (869
contracts) as compared to $210.3 million (1,016 contracts) as of October 31,
1996. Excluding South Florida, the Company's backlog increased to $101.4
million (529 contracts) as of October 31, 1997 from $83.8 million (457
contracts) as of October 31, 1996, an increase of 21% (or 16% based on
contracts). The Company believes that as a result of its focus on improving
cycle times, it expects to deliver a higher percentage of backlog in subsequent
quarters.
The Company believes that the decline in South Florida backlog can be
attributed to two primary factors: (i) timing differences between recently
completed subdivisions and the opening of new subdivisions, and (ii) the
success of its pre-sale contract activity at Pembroke Falls prior to October
31, 1996. As is common practice for large projects, the Company began pre-sale
activity at Pembroke Falls prior to October 31, 1996 so that it could begin
home construction on that project immediately upon completion of site
development.
RESULTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997 COMPARED TO YEAR ENDED OCTOBER 31, 1996.
The Company's revenues from home sales during fiscal 1997 increased $100.4
million (or 33.0%) compared to fiscal 1996. The number of homes delivered by
the Company increased 27.1% (to 1,992 from 1,567) and the average selling price
of homes delivered increased 4.6% (to $203,000 from $194,000). The increase of
revenues and homes delivered is primarily attributable to a higher percentage
of backlog being delivered during fiscal 1997. Management believes that changes
in the average selling price of homes delivered from period to period are
attributable to discrete factors at each of its subdivisions, including product
mix and premium lot availability, and cannot be predicted for future periods
with any degree of certainty.
The Company's revenues from land sales decreased approximately $9.9
million (or 56.3%) during fiscal 1997 as compared to fiscal 1996 primarily as a
result of a decrease in commercial and multi-family land sales at Pembroke
Falls.
19
<PAGE>
Cost of home sales increased approximately $84.6 million (or 32.5%)
compared to fiscal 1996, primarily due to the related increase in home sales
revenues. Cost of home sales as a percentage of home sales decreased to 85.3%
from 85.7% as a result of the product mix of homes delivered.
Cost of land sales decreased approximately $8.5 million (or 54.5%) during
fiscal 1997 as compared to fiscal 1996, primarily as a result of the decrease
in land sales. Costs of land sales as a percentage of land sales increased to
92.3% from 88.7%, which was primarily attributable to lower margin single
family lots available for sale. Margins from land sales at Pembroke Falls in
fiscal 1997 were comparable to fiscal 1996.
The Company's selling, marketing, general and administrative ("S,G&A")
expenses increased approximately $7.7 million (or 24.2%) during fiscal 1997 as
compared to fiscal 1996, primarily as a result of variable selling costs
associated with the greater number of homes closed and an increase in selling
expenditures related to an increase in the number of residential subdivisions.
S,G&A expenses as a percentage of total revenues decreased from 9.6% in fiscal
1996 to 9.3% in fiscal 1997, primarily due to certain economies of scale.
Fiscal 1997 income before income taxes increased $8.2 million (or 59.8%)
as compared to fiscal 1996, primarily due to the increase in home sales
revenues.
YEAR ENDED OCTOBER 31, 1996 COMPARED TO YEAR ENDED OCTOBER 31, 1995.
The Company's revenues from home sales during fiscal 1996 increased $87.9
million (or 40.7%) compared to fiscal 1995. The number of homes delivered by
the Company increased 37.8% (to 1,567 from 1,137) and the average selling price
of homes delivered increased 2.1% (to $194,000 from $190,000). The increase of
revenues and homes delivered is primarily attributable to the record backlog of
homes under contract at the beginning of fiscal 1996 and improved sales
activity in all homebuilding divisions as compared to fiscal 1995. Management
believes that changes in the average selling price of homes delivered from
period to period are attributable to discrete factors at each of its
subdivisions, including product mix and premium lot availability, and cannot be
predicted for future periods with any degree of certainty.
The Company's revenues from land sales decreased approximately $3.4
million (or 16.2%) during fiscal 1996 as compared to fiscal 1995 primarily as a
result of a decrease in commercial and multi-family land sales at Pembroke
Falls.
Cost of home sales increased approximately $75.7 million (or 40.9%)
compared to fiscal 1995, primarily due to the related increase in home sales
revenues. Cost of home sales as a percentage of home sales is consistent with
fiscal 1995.
Cost of land sales decreased approximately $1.7 million (or 10.1%) during
fiscal 1996 as compared to fiscal 1995, primarily as a result of the decrease
in land sales. Costs of land sales as a percentage of land sales increased to
88.7% from 82.7%, which was primarily attributable to lower margin single
family lots available for sale. Margins from land sales at Pembroke falls in
fiscal 1996 were comparable to fiscal 1995.
The Company's S,G&A expenses increased approximately $7.4 million (or
30.4%) during fiscal 1996 as compared to fiscal 1995, primarily as a result of
selling costs associated with the greater number of homes closed and an
increase in selling expenditures related to an increase in the number of
residential subdivisions. S,G&A expenses as a percentage of total revenues
decreased from 10.0% in fiscal 1995 to 9.6% in fiscal 1996, primarily due to
economies of scale.
20
<PAGE>
Fiscal 1996 income before income taxes increased $4.2 million (or 43.7%)
as compared to fiscal 1995, primarily due to the increase in home sales
revenues.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL. The Company's financing needs depend upon its construction
volume, asset turnover and land acquisitions. Prior to the Company's initial
public offering, the Company's most significant source of funds were
acquisition, development and revolving construction loans provided by financial
institutions and seller financing for land purchases. In January 1992, the
Company completed an initial public offering of its Common Stock and received
net proceeds of approximately $27.3 million. In February 1993, the Company
issued an aggregate of $30.0 million principal amount of 7% Convertible
Subordinated Notes due 2003 and received net proceeds of approximately $28.7
million. In March 1994, the Company issued an aggregate of $40 million
principal amount of 113/4% Senior Notes due 2000 and received net proceeds of
approximately $38.6 million. The proceeds from these offerings were generally
used for repayment of debt, land acquisition and general corporate purposes.
The Company has two primary credit agreements (the "Agreements") with
various lending institutions which at November 13, 1997, provided for a
combined $130.0 million collateralized revolving line of credit. Borrowings
under these Agreements bear interest at rates ranging from LIBOR plus 2.50% to
prime plus .25% at the Company's election. Available borrowings under the
Agreements are limited to certain percentages of finished lots, construction
costs, land and land under development. The Company is currently in discussions
with a group of banks to obtain an unsecured revolving credit facility to be
used for working capital and general corporate purposes. If obtained, the new
facility would be used to replace all of the Company's existing lines of
credit, other than financial services debt.
At October 31, 1997, the Company had outstanding homebuilding borrowings
of approximately $152.1 million, and aggregate available funds of approximately
$18.9 million pursuant to various credit lines including the Agreements. The
Company believes that funds generated from operations and expected borrowing
availability under existing and future bank credit facilities will be
sufficient to fund the Company's working capital requirements during fiscal
1998, with the exception of major land acquisitions, if any. For a further
description of the Company's borrowings, see Note 5 of the Company's
Consolidated Financial Statements.
On October 17, 1997, the Company announced the early redemption of $15.0
million principal amount of the 1993 Notes. On November 18, 1997, the Company
redeemed approximately $14.6 million principal amount of such 1993 Notes and
$406,000 principal amount thereof were converted into 28,996 shares of Common
Stock. In order to fund this redemption, the Company established a $15.0
million short-term unsecured credit facility. In addition, $75,000 principal
amount of the 1993 Notes not previously called for redemption were converted
into 5,357 shares on November 18, 1997. After November 18, 1997 and prior to
the date of this Prospectus, an additional $80,000 principal amount of the 1993
Notes were converted into 5,713 shares of Common Stock. Following the
consummation of the Equity Offering, the Company intends to call for redemption
the remaining outstanding principal amount of the 1993 Notes to be funded with
a portion of the proceeds of the Equity Offering.
In addition, Preferred Home Mortgage Company ("PHMC") has a warehouse line
of credit of $18.0 million which is guaranteed by the Company. At October 31,
1997 the outstanding balance was $14.5 million to service origination of
mortgage loans. The Company expects to increase the warehouse line of credit to
$25.0 million to accommodate the potential growth of its mortgage banking
operations in fiscal year 1998.
LAND ACQUISITION AND CONSTRUCTION FINANCING. The Company is continually
exploring opportunities to purchase parcels of land for its homebuilding
operations and is, at any given time, in
21
<PAGE>
various stages of proposing, making offers for, and negotiating the acquisition
of various parcels, whether outright or through options. The Company has
continued to increase its land development and construction activities in
response to current and anticipated demand and expects to pursue additional
land acquisition and development opportunities in the future.
DEBT SERVICE. Scheduled and estimated maturities of the Company's
borrowings aggregate approximately $4.4 million during fiscal 1998 and
approximately $42.0 million in fiscal 1999. The Company anticipates that it
will fund the maturities of its debt and required expenditures relating to its
developments primarily with cash flow from operations and existing credit
lines, new or renewed credit lines or term loans or selling of equity or debt.
See Note 5 to the Company's Consolidated Financial Statements.
CASH FLOWS. The Company experienced negative cash flows of $2.7 million
during fiscal 1997. This is primarily the result of increasing land inventory
to meet expected sales demand and site development costs associated with
Pembroke Falls. Cash flows required by operating activities decreased $1.1
million in fiscal 1997 as compared to fiscal 1996 primarily due to the
increased pace of home deliveries. Cash flows from investing activities
decreased by $7.5 million in 1997 primarily due to a reduction in the sales of
commercial property. Cash flows from financing activities decreased by $5.4
million primarily due to a decrease in borrowings.
Management does not anticipate that PHMC's expansion of its operations
will significantly impact the Company's liquidity because the mortgages are
generally sold within a short period of time after their origination to the
Federal National Mortgage Association (FNMA) or other qualified investors. PHMC
has established the capability to retain the servicing of loans; however,
during fiscal 1997 all servicing rights were sold.
INFLATION
The Company, as well as the homebuilding industry in general, may be
adversely affected during periods of high inflation, primarily because of
higher land and construction costs. In addition, higher mortgage interest rates
may significantly affect the affordability of permanent mortgage financing to
prospective purchasers. Inflation also increases the Company's interest costs
and costs of labor and materials. The Company attempts to pass through to its
customers any increases in its costs through increased selling prices and, to
date, inflation has not had a material adverse effect on the Company's results
of operations. However, there is no assurance that inflation will not have a
material adverse impact on the Company's future results of operation.
INTEREST RATES
The Company's operations are interest rate sensitive. Overall housing
demand is adversely affected by increases in interest costs. If mortgage
interest rates increase significantly, this may negatively impact the ability
of a home buyer to secure adequate financing. Such results of higher interest
rates may result in adversely affecting the Company's revenues, gross margins
and net income.
NEW FASB PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
per Share" ("SFAS No. 128"), issued in February 1997, replaces the current
methodology for calculating and presenting earnings per share. Under SFAS No.
128, primary earnings per share will be replaced with a presentation of basic
earnings per share and fully diluted earnings per share will be replaced with
diluted earnings per share. Basic earnings per share excludes dilution and is
computed by dividing income available to common shares outstanding for the
period by the weighted average of common
22
<PAGE>
shares outstanding. Diluted earnings per share is computed similarly to fully
diluted earnings per share in accordance with the Accounting Principles Board
("APB") Opinion No. 15. The Statement will be effective for financial
statements issued by the Company after December 15, 1997. The impact of SFAS
No. 128 is not expected to be material.
SFAS No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"),
establishes standards for reporting and display of comprehensive income, its
components and accumulated balances. Comprehensive income is defined to include
all changes in equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, SFAS No. 130 requires that
all items that are required to be recognized under current accounting standards
as components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131"), which supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise," establishes standards for the
way that public enterprises report information about operating segments in
annual financial statements and requires reporting of selected information
about operating segments in interim financial statements issued to the public.
It also establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate the resources and in assessing performance.
Both SFAS No. 130 and No. 131, issued in June 1997, are effective for
financial statements for periods beginning December 15, 1997 and require
comparative information for earlier years to be restated. Due to the recent
issuance of these standards, management has been unable to fully evaluate the
impact, if any, they may have on future financial statement disclosures.
23
<PAGE>
BUSINESS
GENERAL
Engle Homes, Inc. designs, constructs, markets and sells detached
single-family residences, townhomes, patio homes and condominiums to entry
level and move-up buyers, retirees and second-home, seasonal buyers. Engle
operates in nine geographic markets: Broward County, Palm Beach County and
Martin County in South Florida; Orlando in Central Florida; Tampa, Sarasota,
Naples and Fort Myers on the west coast of Florida; Denver, Colorado; Dallas,
Texas; Virginia and Maryland; Raleigh, North Carolina; Phoenix, Arizona; and
Atlanta, Georgia. The Company offers a variety of home styles at prices ranging
from approximately $80,000 to over $400,000 with an average sales price in
fiscal 1997 of approximately $203,000. In addition, the Company operates a
mortgage company which provides mortgages primarily to its home buyers in all
of its geographic markets and a title company which provides services to its
home buyers and third parties in Florida and Denver, Colorado.
Engle is a leading Florida homebuilder. The Company believes that it is
the number two and number four builder of single-family homes in South Florida
and Central Florida, respectively, based on revenues from unit closings for the
twelve months ended June 30, 1997. Florida is the number one homebuilding state
in the United States in terms of total housing starts. In addition, Florida is
currently the fourth largest state based upon total population and has
consistently ranked among the top four states in population growth over the
past seven decades.
Since 1993, Engle has expanded into eight of the top 20 homebuilding
markets in the nation through both start-up operations and the acquisition of a
homebuilder in Denver, Colorado. In fiscal 1997, approximately 32% of the
Company's revenues from home sales were generated outside of the Florida
markets as compared to none in fiscal 1993. Most recently, in fiscal 1997 Engle
entered both the Phoenix, Arizona and Atlanta, Georgia markets through start-up
operations.
Over the past five years, the Company's total revenues have grown from
$137.4 million in fiscal 1993 to $425.3 million in fiscal 1997, with annual
EBITDA growing from $15.9 million to $40.3 million over the same period,
representing compound annual growth rates of 33% and 26%, respectively. The
Company's fiscal 1997 total revenues of $425.3 million and EBITDA of $40.3
million were the highest in the Company's history. The number of homes
delivered increased from 797 in fiscal 1993 to 1,992 in fiscal 1997. At the end
of fiscal 1997, Engle was marketing homes in 68 communities.
BUSINESS STRATEGY
Engle believes that its success has been due to its market-oriented
approach which it applies to each of the following: (i) identifying new
markets; (ii) acquiring land; and (iii) diversifying its product offerings and
price ranges to appeal to most segments of the home buying public. Engle
believes that this strategy enables it to respond more rapidly to changing
market conditions.
EXPAND IN EXISTING AND NEW MARKETS. The Company has successfully expanded
its operations through both start-up operations in new and existing markets and
the acquisition of a homebuilder in Denver, Colorado. Within its existing
markets, the Company believes that it is able to gain greater market share by
increasing the number of residential projects, thereby leveraging its existing
management structure and enhancing profitability through economies of scale. As
part of its strategy to further diversify geographically, the Company
continually seeks and evaluates market expansion opportunities, including
potential acquisitions of homebuilding companies. The Company seeks to expand
into geographic markets with significant single-family home permit activity,
substantial job growth, a diversified economy and an availability of strong
management with local market expertise. Since its initial public offering in
January 1992, the Company has expanded into eight new geographic markets.
OFFER A BROAD SELECTION OF PRODUCTS. The Company designs its homes to
appeal to a wide variety of home buyers, including entry level and move-up
buyers, retirees and second-home, seasonal buyers.
24
<PAGE>
Accordingly, the Company offers a number of home styles and price ranges at
various locations in each market, including golf and waterfront communities in
certain markets. Engle's product offerings include semi-custom estate homes,
detached single-family residences, townhomes, semi-detached patio-homes/
duplexes and condominiums. Management believes that the Company's long-standing
policy of product diversification enables it to respond more rapidly to
changing market conditions.
SELECTIVELY ACQUIRE LAND. The Company maintains a land acquisition policy
designed to enhance profitability and return on capital while minimizing the
risks associated with investments in land. Engle seeks to identify and acquire
superior locations in each market and offer a number of communities with
diverse products and sales prices. The Company prefers to acquire improved
residential lots ready for construction by entering into option contracts,
whenever possible, or through outright purchases. The Company also acquires
tracts of land that require site improvements prior to the start of home
construction. Occasionally, Engle purchases larger parcels of undeveloped land
suited for master-planned communities, primarily in South Florida. When
acquiring larger parcels, the Company typically contracts to sell portions of
improved or unimproved land to other builders as a source of additional revenue
thereby reducing the Company's investment. In addition, when economically
advantageous to the Company, Engle enters into partnership or joint venture
agreements with other major homebuilders to purchase and develop well located
parcels of land. The Company generally purchases land only after required
zoning entitlements have been obtained.
MAINTAIN STRINGENT COST CONTROLS. The Company believes that maintaining
stringent cost controls is a key factor in achieving profitability. The Company
seeks to reduce its costs and risks by (i) obtaining required zoning
entitlements prior to purchasing land, (ii) using subcontractors to perform
home construction and site improvement work on a fixed price basis, (iii)
minimizing inventory of unsold homes, (iv) improving construction cycle time
for new homes, (v) using its position as a leading homebuilder to obtain
national volume discounts on construction materials and favorable pricing from
subcontractors and (vi) maintaining a sophisticated management information
system that allows it to monitor homebuilding production, scheduling and
budgeting on a daily basis.
COMMITMENT TO CUSTOMER SATISFACTION. The Company is dedicated to providing
customer satisfaction through quality construction and customer service.
Divisional managers are responsible for the quality of construction and the
level of customer satisfaction in their respective divisions.
EXPERIENCED MANAGEMENT WITH DECENTRALIZED OPERATING STRUCTURE. To serve
the needs of each of its markets, the Company relies upon the expertise of its
division managers, each of whom has significant experience in the homebuilding
industry. In order to align corporate and divisional profit goals, division
managers receive bonuses based on the return on assets of their respective
divisions. The division managers benefit from Engle's corporate expertise in
sales and marketing, land acquisition, financial services and its centralized
accounting department. The Company believes that this interaction between the
divisional managers and corporate management provides enhanced operating
results.
LAND ACQUISITION AND DEVELOPMENT
The Company prefers to acquire improved residential lots ready for
construction by entering into option contracts, whenever possible, or through
outright purchases. The Company also acquires tracts of land that require site
improvements prior to the start of home construction. Occasionally, the Company
purchases larger tracts of land with the intention of reselling portions of the
tracts to other builders as a source of additional revenue. Specifically, the
Company purchased large tracts of land and sold parcels to other builders in
connection with the development of its master-planned communities, including
Embassy Lakes, North Passage, Lakeside Green and currently, Pembroke Falls.
Unlike the Company's more typical subdivision projects, the Company's
master-planned communities have involved significantly larger tracts of land,
greater planning and site improvement activities and the development of more
extensive recreational facilities and related amenities. The Company's master-
planned communities normally take five or more years to complete depending on
the project's size, economic conditions prevailing at the time and the
Company's strategy for the particular project. Engle's more traditional
residential developments usually take two to three years to complete.
25
<PAGE>
Management believes that the Company's Pembroke Falls project exemplifies
the opportunities available to the Company when developing master-planned
communities. In February 1994, the Company acquired this approximately 1,500
acre parcel located in southwest Broward County, Florida, a rapidly developing
housing market. The purchase price for the Pembroke Falls parcel was $25.7
million, or approximately $17,100 per acre. The Company expects to build
approximately 2,000 single-family housing units and has sold most of the
approximately 222 acres of land zoned for commercial and multi-family use.
Through October 31, 1997, approximately $45.4 million in land sales contracts
had been written, of which $34.5 million closed through fiscal 1997. Of the
remaining $10.9 million in contracts, $8.3 million are binding contracts, and
$2.6 million are contingent upon completion of an inspection period during the
next ninety days. Management believes that the purchase of this relatively
large parcel enabled the Company to obtain desirable land inventory in its
South Florida division for future development at a lower cost than if the
Company had purchased smaller parcels available for immediate construction of
homes.
The Company's land purchase agreements are typically subject to numerous
conditions, including, but not limited to, the Company's ability to obtain
necessary zoning and other governmental approvals for the proposed subdivision.
During the contingency period, the Company also confirms the availability of
utilities, conducts hazardous waste and other environmental analysis, and
completes its marketing feasibility studies.
The Company expends considerable effort in developing a design and
marketing concept for each of its subdivisions, which includes determination of
size, style and price range of the homes and, in certain projects, layout of
streets, layout of individual lots and overall community design. The product
line offered in a particular subdivision depends upon many factors, including
housing generally available in the area, the needs of the particular market and
the Company's costs of lots in the subdivision. The Company, where necessary,
undertakes development activities that include government approvals, site
planning, engineering, as well as constructing roads, sewer, water and drainage
facilities and, where applicable for recreational facilities and other
amenities.
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<PAGE>
At October 31, 1997, the Company was marketing 14 subdivisions in South
Florida; 12 in Central Florida; 10 on the west coast of Florida; 9 in Denver,
Colorado; 8 in Dallas, Texas; 8 in Virginia and Maryland; 3 in Raleigh, North
Carolina; and 4 in Phoenix, Arizona. As of October 31, 1997, the Company had
not yet begun to market any subdivisions in Atlanta, Georgia. The Company's
residential real estate inventory at October 31, 1997 was as follows:
<TABLE>
<CAPTION>
LOTS AVAILABLE
HOMES UNDER CONSTRUCTION FOR FUTURE CONSTRUCTION
--------------------------------------- -------------------------------
TOTAL LOTS
DIVISION AVAILABLE SOLD(1) SPECULATIVE(2) MODELS SOLD(1) UNSOLD OPTIONS
- ----------------------------- ----------- --------- ---------------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
South Florida(3) ............ 2,544 (4) 182 56 9 158 2,062 77
Central Florida(5) ......... 1,017 61 41 11 83 637 184
West coast Florida(6) ...... 1,706 (7) 39 15 7 69 1,179 397
Denver, CO .................. 999 54 50 1 46 405 443
Dallas, TX .................. 816 25 24 4 38 197 528
Virginia and Maryland ...... 291 26 12 7 15 129 102
Raleigh, NC ............... 270 12 9 1 4 244 --
Phoenix, AZ ............... 225 18 4 -- 39 67 97
----- --- --- -- --- ----- ---
Total ..................... 7,868 417 211 40 452 4,920 1,828
===== === === == === ===== =====
</TABLE>
- ----------------
(1) Under contract, but not delivered. See the discussion of the Company's
backlog under "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(2) Speculative units are unsold homes that are completed or under
construction.
(3) South Florida refers to Broward County, Palm Beach County and Martin
County.
(4) Includes 1,713 remaining lots in Pembroke Falls.
(5) Central Florida refers to Orlando.
(6) Florida's west coast refers to Tampa, Sarasota, Naples and Fort Myers.
(7) Includes 906 lots in Lake Bernadette in Tampa.
CONSTRUCTION
The Company acts as the general contractor for the construction of its
residential developments. Company employees monitor the construction of each
project, participate in all material design and building decisions, coordinate
the activities of subcontractors and suppliers, subject their work to quality
and cost controls and monitor compliance with zoning and building codes.
Subcontractors typically are retained for a specified project pursuant to a
contract which obligates the subcontractor to complete construction at a fixed
price.
The Company does not maintain significant inventories of construction
materials except for work in process, materials for homes under construction
and a limited amount of other construction materials. Generally, the
construction materials used in the Company's operations are readily available
from numerous sources.
MARKETING AND SALES
The Company sells its homes primarily through commissioned employees, who
typically work from sales offices located at the model homes in each Engle
subdivision, as well as through cooperating independent brokers. In all
instances, Company personnel are available to assist prospective buyers by
providing them with floorplans, price information, tours of model homes and the
selection of options and upgrades. Options and upgrades are generally priced to
have a positive effect on profit margins. Sales personnel are trained by the
Company and attend periodic meetings to be updated on the availability of
financing, construction schedules, marketing and advertising plans.
The Company advertises in newspapers, magazines and on billboards. Engle
also uses out-of-state home shows, radio, video tapes, direct mail advertising,
special promotional events, illustrated
27
<PAGE>
brochures and model homes in its comprehensive marketing program. In addition,
Engle maintains a web site on the Internet. The Company also uses a
cross-referral program that encourages Company personnel to direct customers to
other Engle subdivisions based on the customers' needs.
CUSTOMER SERVICE AND QUALITY CONTROL
The Company's customer service department is responsible for pre-closing
and post-closing customer needs. Prior to closing, a Company employee
accompanies the buyer on a home orientation and inspection tour. The Company is
continuing with its objective to provide quality construction through on-going
training programs to maintain its high quality construction standards. The
Company also provides home buyers with a limited warranty program which, in
general, provides a home buyer with a one-year warranty on workmanship and
building materials and a ten-year structural warranty. In addition, the Company
purchases, when required by local or state ordinances, builder liability
insurance for major structural defects.
FINANCIAL SERVICES
The Company's financial services subsidiaries provide mortgage banking and
title insurance services. For fiscal 1997, the financial services subsidiaries
increased their profitability to $2.7 million, an increase of 49% compared to
fiscal 1996.
MORTGAGE BANKING. In April 1992, the Company established PHMC. PHMC is a
full service mortgage banker which arranges financing through the origination
of mortgage loans to the Company's home buyers and to a lesser extent third
party loans that are not associated with homes built by the Company. PHMC is an
approved lender by the Federal National Mortgage Association ("FNMA") to
deliver loan origination to FNMA and to other investors and to service such
loans.
During fiscal 1997, PHMC originated and sold approximately $138.0 million
in mortgage loans (including servicing rights), representing a significant
portion of the Company's home buyers that requested mortgage financing.
Substantially all of PHMC's revenues are derived from mortgages on homes built
by Engle. At October 31, 1997, PHMC was originating mortgages in substantially
all Engle homebuilding divisions.
PHMC must comply with various federal and state laws and consumer credit
rules and regulations in connection with its mortgage lending activities. In
addition, the mortgage banking industry in the United States is highly
competitive. PHMC competes with other mortgage companies and financial
institutions to provide mortgage financing to both the Company's customers as
well as the general public.
TITLE SERVICES. In September 1992, the Company purchased all the
outstanding common stock of the Title Store, Inc. In May 1994, the Company
acquired all the capital stock of Universal Land Title, Inc. ("ULT"), a company
that sells, but does not underwrite, title policies and simultaneously merged
with the Title Store, Inc. to form one company. ULT currently provides title
services to the Company's home buyers in Florida and Denver, Colorado, as well
as third parties. At October 31, 1997, ULT was operating 15 offices in Florida
and four offices in Denver, Colorado.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
In developing housing communities, the Company must obtain the approval of
numerous government authorities regulating such matters as permitted land uses
and levels of density, the installation of utility services such as water and
waste disposal and the dedication of acreage for open space, parks, schools and
other community purposes. Several authorities in Florida and other states have
imposed impact fees as a means of defraying the cost of providing certain
governmental services to developing areas and the amount of these fees has
increased significantly during recent years. Many state laws require the use of
specific construction materials which reduce the need for energy-consuming
28
<PAGE>
heating and cooling systems. Local governments also, at times, declare
moratoriums on the issuance of building permits and impose other restrictions
in areas where sewage treatment facilities and other public facilities do not
reach minimum standards. To date, the governmental approval processes and the
restrictive zoning and moratoriums discussed above have not had a material
adverse effect on the Company's development activities. However, there is no
assurance that these and other restrictions will not adversely affect the
Company in the future. The Company is also subject to a variety of Federal,
State and local statutes, ordinances, rules and regulations concerning
protection of health and the environment. The particular environmental laws
which apply to any given community vary greatly according to the community
site, the site's environmental conditions and the present and former uses of
the site. These environmental laws may result in delays, cause the Company to
incur substantial compliance and other costs and prohibit or severely restrict
development in certain environmentally sensitive regions or areas. Prior to
consummating the purchase of land, the Company engages independent
environmental engineers to evaluate such land for the presence of hazardous or
toxic materials, wastes or substances. The Company has not been materially
affected to date by the presence or potential presence of such materials.
To varying degrees, certain permits and approvals will be required to
complete the residential developments currently being planned by the Company.
The ability of the Company to obtain necessary approvals and permits for these
projects is often beyond the Company's control, and could restrict or prevent
the development of otherwise desirable property. The length of time necessary
to obtain permits and approvals increases the carrying costs of unimproved
property acquired for the purpose of development and construction. In addition,
the continued effectiveness of permits already granted is subject to factors
such as changes in policies, rules and regulations and their interpretation and
application. To minimize these risks, the Company generally restricts land
purchases to tracts that have zoning entitlements.
In recent years, regulation by Federal and state authorities relating to
the sale and advertising of residential real estate has also become more
restrictive. In order to advertise and sell condominiums and other residential
real estate in many jurisdictions, the Company has been required to prepare
registration statements or other disclosure documents and, in some cases, to
file such materials with designated regulatory agencies.
COMPETITION AND MARKET FACTORS
The development and sale of residential properties is highly competitive
and fragmented. The Company competes in each of its markets with numerous
national, regional and local builders, including some builders with greater
financial resources. Builders of new homes compete not only for home buyers,
but also for desirable properties, raw materials and skilled subcontractors.
The Company also competes for residential sales with individual sales of
existing homes and available rental housing.
The housing industry is cyclical and affected by consumer confidence
levels, prevailing economic conditions generally and, in particular, by
interest rate levels. A variety of other factors affect the housing industry
and demand for new homes, including the availability of labor and materials and
increases in the costs thereof, changes in costs associated with home ownership
such as increases in property taxes and energy costs, changes in consumer
preferences, demographic trends and the availability of and changes in mortgage
financing programs.
EMPLOYEES
At October 31, 1997, the Company employed approximately 544 persons,
including sales and marketing personnel, executive, administrative and clerical
personnel, construction employees and financial services personnel.
Although none of the Company's employees are covered by collective
bargaining agreements, certain of the subcontractors which the Company engages
are represented by labor unions or are subject to collective bargaining
agreements. The Company believes that its relations with its employees and
subcontractors are good.
29
<PAGE>
PROPERTIES
The Company's corporate office is located at 123 N.W. 13th Street, Suite
300, Boca Raton, Florida 33432, where the Company leases 9,356 square feet of
office space for a term expiring in August 2006. Engle's building divisions,
PHMC and ULT branch operations lease additional office space at various
locations for their day-to-day operations. Management believes that the current
leased offices are adequate for its needs for the foreseeable future. See Note
3 of Notes to Consolidated Financial Statements for discussion of sale of
commercial properties.
LEGAL PROCEEDINGS
The Company is involved from time to time in litigation arising in the
ordinary course of business, none of which is expected to have a material
adverse effect on the Company's consolidated financial position or results of
operations.
30
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information as of December 17,
1997, regarding each of the Company's executive officers, directors and other
key employees:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ------------------------------- ----- ---------------------------------------------
<S> <C> <C>
Alec Engelstein ............... 67 Chairman of the Board, President and
Chief Executive Officer
Harry Engelstein ............ 62 Executive Vice President, Chief Construction
Officer and Director
John A. Kraynick ............ 42 Senior Vice President and Director
Lawrence R. Shawe ............ 42 Vice President--Sales and Marketing
David Shapiro ............... 42 Vice President--Finance, Chief Financial
Officer and Director
Paul M. Leikert ............... 41 Vice President--Chief Accounting Officer
Henry H. Fishkind, Ph.D ...... 48 Director
Ronald J. Korn ............... 57 Director
Alan L. Shulman ............... 65 Director
</TABLE>
ALEC ENGELSTEIN, a co-founder and Chairman of the Board of the Company,
has served as its President and Chief Executive Officer since its organization
in August 1982. Alec Engelstein has over 35 years of experience in the
homebuilding industry and has been actively engaged as a homebuilder in
southeast Florida since 1969.
HARRY ENGELSTEIN, a co-founder and director of the Company and Alec
Engelstein's brother, has served as Executive Vice President and Chief
Construction Officer since the Company's inception in August 1982. Harry
Engelstein has over 30 years of experience in home construction.
JOHN A. KRAYNICK has served as a Vice President of the Company since
August 1986 and was appointed Senior Vice President in July 1991. Mr. Kraynick
is responsible for administrative matters and coordinating the Company's
compliance with Federal, state and local regulatory requirements. Mr. Kraynick
has over 19 years of experience in the homebuilding industry.
LAWRENCE R. SHAWE has served as the Company's Vice President--Sales and
Marketing since April 1986. Mr. Shawe joined the Company in April 1984 and
since such time has been responsible for the Company's sales and marketing
efforts. Mr. Shawe has over 17 years of experience in the homebuilding
industry.
DAVID SHAPIRO joined the Company in June 1991, has served as the Company's
Chief Financial Officer since July 1991, was appointed Vice President--Finance
in October 1991 and was appointed as a director on December 17, 1997. From
January 1986 until June 1991, he served as vice president of a privately held
retail clothing company located in West Palm Beach, Florida. David Shapiro is
Alec Engelstein's son-in-law.
PAUL M. LEIKERT joined the Company in 1992 and has served as the Vice
President--Chief Accounting Officer since March 1994. Mr. Leikert is a
certified public accountant and has over 13 years of experience in the
homebuilding industry.
HENRY H. FISHKIND, PH.D., has served as a director of the Company since
October 1991 and is a member of the Compensation and Audit Committees of the
Board of Directors. Dr. Fishkind has
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<PAGE>
served as President of Fishkind & Associates, Inc., an economic and financing
consulting firm based in Orlando, Florida, since 1988. From January 1984 until
December 1987, Dr. Fishkind served as president of M.G. Lewis Econometrics,
Inc., the research subsidiary of an investment banking firm based in Winter
Park, Florida. Dr. Fishkind also serves as editor of Econocast, a quarterly
economic forecast, since 1984, and as a director of Summit Properties.
RONALD J. KORN, chairman of the Compensation and Audit Committees of the
Board of Directors, has served as a director of the Company since October 1991.
Since July 1991, Mr. Korn has served as President of Ronald Korn Consulting, a
business consulting firm, and as Chairman of the Board of Carole Korn
Interiors, Inc., an interior design firm. From August 1985 until June 1991, Mr.
Korn served as the managing partner of the Miami office of KPMG Peat Marwick, a
nationally recognized firm of independent public accountants. Mr. Korn also
serves as a director of Vacation Break USA, Inc., which develops, markets,
operates and finances vacation ownership interests in premium resort properties
and as a director of Magicworks Entertainment, Inc., which produces, manages,
promotes and merchandises live entertainment.
ALAN L. SHULMAN was appointed as a director of the Company on December 17,
1997. Mr. Shulman is currently a private investor. Mr. Shulman served on the
board of directors of Island National Bank in Palm Beach, Florida from its
inception in 1989 until April 1, 1997 and currently serves on the board of
directors of CV Reit, Inc., a New York Stock Exchange listed company.
There are no arrangements or understandings with respect to the selection
of officers or directors.
32
<PAGE>
DESCRIPTION OF THE SENIOR NOTES
The Senior Notes offered hereby are to be issued under an Indenture, dated
as of , 1998 (the "Indenture"), among the Company, the Guarantors and
American Stock Transfer & Trust Company, as Trustee (the "Trustee"), a copy of
which is an exhibit to the Registration Statement of which this Prospectus is a
part. The following summaries of certain provisions of the Indenture do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the Indenture, including the
definitions therein of certain terms. For purposes of this Description of the
Senior Notes and the Indenture, references to the "Company" include only the
Company and not its subsidiaries.
GENERAL
The Senior Notes will be limited to $120,000,000 aggregate principal
amount, $45,000,000 of which may be issued at a later date. The Senior Notes
will mature on , 2008. The Senior Notes will bear interest from the date
of issuance, or from the most recent date to which interest has been paid or
provided for, at the rate stated on the cover page hereof, payable in arrears
on and of each year, commencing , 1998, to the persons in
whose names the Senior Notes are registered at the close of business on the
day of the month in which the interest payment date occurs. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Senior Notes will be general unsecured obligations of the Company,
ranking senior in right of payment to all existing and future subordinated
indebtedness of the Company and pari passu in right of payment with all
existing and future senior indebtedness of the Company; however, the Senior
Notes will be effectively subordinated to all secured indebtedness of the
Company and the Guarantors to the extent of the value of the assets securing
such indebtedness. As of October 31, 1997, after giving effect to the Offerings
and the application of the proceeds therefrom as described under "Use of
Proceeds" assuming that all of the 1993 Notes are converted by the holders into
Common Stock on or prior to the date of redemption, the Company and the
Guarantors would have had no secured indebtedness outstanding. See "Risk
Factors--Holding Company Structure; Fraudulent Conveyance Concerns," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
Principal and premium, if any, and interest on the Senior Notes are to be
payable, and the Senior Notes offered hereby will be exchangeable and transfers
thereof will be registrable, at the offices of the Company's agent maintained
for such purposes in The City of New York; provided that payment of interest
may, at the option of the Company, be made by check mailed to a holder at his
registered address.
The Senior Notes offered hereby will be issued only in fully registered
form without coupons, in denominations of $1,000 and any integral multiple
thereof. The Senior Notes are exchangeable and transfers thereof will be
registered without charge therefor, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
THE GUARANTEES
Each of the Guarantors will (so long as they remain Subsidiaries of the
Company) unconditionally guarantee (each a "Guarantee") on a joint and several
basis all of the Company's obligations under the Senior Notes, including its
obligations to pay principal, premium, if any, and interest with respect to the
Senior Notes. The Guarantees will be general unsecured obligations of the
Guarantors, ranking senior in right of payment to all existing and future
subordinated indebtedness of the Guarantors and pari passu in right of payment
with all existing and future senior indebtedness of the Guarantors; however,
the Guarantees will be effectively subordinated to all secured indebtedness of
the Guarantors to the extent of the value of the assets securing such
indebtedness. See "Risk Factors--Holding Company Structure; Fraudulent
Conveyance Concerns." Except as provided in "Certain Covenants" below, the
Company is not restricted from selling or otherwise disposing of any of the
Guarantors.
33
<PAGE>
The Indenture will provide that each Restricted Subsidiary (other than, in
the Company's discretion, any Restricted Subsidiary the assets of which have a
book value of not more than $1,000,000) will be a Guarantor.
The Indenture provides that if all or substantially all of the assets of
any Guarantor or all of the capital stock of any Guarantor is sold (including
by issuance or otherwise) by the Company or any of its Subsidiaries in a
transaction constituting an Asset Sale, and if the Net Proceeds from such Asset
Sale are used in accordance with the covenant "Limitation on Asset Sales," then
such Guarantor (in the event of a sale or other disposition of all of the
capital stock of such Guarantor) or the corporation acquiring such assets (in
the event of a sale or other disposition of all or substantially all of the
assets of such Guarantor) shall be released and discharged of its Guarantee
obligations.
OPTIONAL REDEMPTION
The Senior Notes are redeemable at the option of the Company, in whole or
in part (in any integral multiple of $1,000), at any time on or after ,
2003, on not less than 30 days nor more than 60 days notice mailed to the
registered holders thereof at their last registered addresses, at the following
redemption prices (expressed as percentages of the principal amount thereof),
plus accrued and unpaid interest, if any, to the redemption date:
YEAR PERCENTAGE
- ----------------------------------- -----------
2003 ..................... %
2004 ..................... %
2005 and thereafter ...... 100%
In addition, if the Company consummates one or more public offerings of
its Common Stock subsequent to the date of this Prospectus and on or prior to
, 2001, the Company may, at its option, redeem up to 33% of the original
principal amount of the Senior Notes with the net proceeds of such offerings at
% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the redemption date; provided, however, that immediately after giving effect
to any such redemption not less than $65,000,000 principal amount of the Senior
Notes remains outstanding.
If less than all of the Senior Notes are to be redeemed, the Trustee will
select the particular Senior Notes (or the portions thereof) to be redeemed
either by lot, pro rata or by such other method as the Trustee shall deem fair
and appropriate, but in any such event, in such manner as complies with
applicable legal and stock exchange requirements. On or after the redemption
date, interest will cease to accrue on the Senior Notes or portions thereof
called for redemption.
CERTAIN COVENANTS
CHANGE OF CONTROL.
In the event of a Change of Control (as defined below), each holder of
Senior Notes shall have the right upon receipt of a Change of Control Notice
(as defined below), at such holder's option, to require the Company to
repurchase all of such holder's Senior Notes, or a portion thereof which is
$1,000 or any integral multiple thereof, on the date (the "Change of Control
Repurchase Date") that is 45 days after the date of the Change of Control
Notice at a price equal to 101% of the principal amount thereof, plus accrued
interest to the Change of Control Repurchase Date.
Within 30 days after the occurrence of a Change of Control, the Company
or, at the request of the Company, the Trustee, shall deliver to all holders of
record of the Senior Notes a notice (the "Change of Control Notice") of the
occurrence of such Change of Control and of the repurchase right arising as a
result thereof. The Company shall deliver a copy of the Change of Control
Notice to the Trustee. To exercise the repurchase right, on or before the 30th
day after the date of the Change of Control Notice, holders of Senior Notes
must deliver written notice to the Company (or an agent designated by the
Company for such purposes) of the holder's exercise of such right, together
with the Senior Notes with respect to which the right is being exercised, duly
endorsed for transfer. Such written notice shall be irrevocable.
34
<PAGE>
The right to require the repurchase of Senior Notes shall not continue
after a discharge of the Company from its obligations under the Senior Notes
and the Indenture with respect to the Senior Notes in accordance with the
Indenture as described under "--Defeasance" below.
If the Change of Control Repurchase Date is between a regular record date
for the payment of interest and the next succeeding interest payment date, any
Senior Note to be repurchased must be accompanied by funds equal to the
interest payable on such succeeding interest payment date on the principal
amount to be repurchased (unless such Senior Note shall have been called for
redemption, in which case no such payment shall be required), and the interest
on the principal amount of the Senior Note being repurchased will be paid on
such next succeeding interest payment date to the registered holder of such
Senior Note on the immediately preceding record date. A Senior Note repurchased
on an interest payment date need not be accompanied by any payment, and the
interest on the principal amount of the Senior Note being repurchased will be
paid on such interest payment date to the registered holder of such Senior Note
on the immediately preceding record date.
As used herein, a "Change of Control" of the Company means the occurrence
of any of the following events: (a) any "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), excluding the Permitted
Holders (as defined below), is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has
the right to acquire, whether such right is exercisable immediately, after the
passage of time, upon the happening of an event or otherwise), directly or
indirectly, of more than 50% of the total Voting Stock (as defined below) of
the Company; but only if the Permitted Holders do not have the right or ability
by voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors of the Company; (b) the Company consolidates
with, or merges with or into, another Person or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of its
assets to any Person, or any Person consolidates with, or merges with or into,
the Company, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, other than any such transaction where
immediately after such transaction no "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), excluding the Permitted
Holders, is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately, after the passage of time, upon the
happening of an event or otherwise), directly or indirectly, of more than 50%
of the total Voting Stock of the surviving or transferee corporation; but only
if the Permitted Holders do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the
Board of Directors of the Company; (c) at any time during any consecutive
two-year period, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
stockholders of the Company was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office; or (d) the Company is liquidated or
dissolved or adopts a plan of liquidation. "Permitted Holders" shall mean Alec
Engelstein and Harry Engelstein and their respective estates, affiliates and
associates (as such terms are defined in the Securities Act). "Voting Stock"
shall mean, with respect to any Person, capital stock of any class or kind
normally entitled to vote in the election of the board of directors or other
governing body of such Person.
If any repurchase pursuant to the foregoing provisions constitutes a
tender offer as defined under the Exchange Act, the Company will comply with
the requirements of Rule l4e-1 and any other tender offer rules under the
Exchange Act which then may be applicable. The Company could, in the future,
enter into certain significant transactions that would not constitute a Change
of Control with respect to the Change of Control purchase feature of the Senior
Notes. The Change of Control purchase feature of the Senior Notes may in
certain circumstances make more difficult or discourage a takeover of the
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Company and, thus, the removal of incumbent management. The Change of Control
purchase feature, however, is not the result of management's knowledge of any
specific effort to obtain control of the Company by means of a merger, tender
offer, solicitation or otherwise, or part of a plan by management to adopt a
series of anti-takeover provisions.
The meaning of the phrase "all or substantially all" as used in the
Indenture in the definition of "Change of Control" with respect to a sale of
assets varies according to the facts and circumstances of the subject
transaction, has no clearly established meaning under relevant law and is
subject to judicial interpretation. Accordingly, in certain circumstances,
there may be a degree of uncertainty in ascertaining whether a particular
transaction would involve a disposition of "all or substantially all" of the
assets of the Company, and therefore it may be unclear whether a Change of
Control has occurred and whether the Senior Notes are subject to a Change of
Control Offer.
MAINTENANCE OF NET WORTH.
In the event that the Company's Net Worth at the end of each of any two
consecutive fiscal quarters (the last day of such second fiscal quarter being
referred to as the "Trigger Date") is less than $35,000,000 (the "Minimum Net
Worth"), then the Company shall make an offer to all holders (a "Net Worth
Offer") to acquire on a pro rata basis on the date (the "Net Worth Repurchase
Date") that is 45 days following the date of the Net Worth Notice (as defined
below), Senior Notes in an aggregate principal amount equal to 10% of the
initial outstanding principal amount of the Senior Notes (or if less than 10%
of the initial aggregate principal amount of the Senior Notes issued are then
outstanding, all the Senior Notes outstanding at the time) (the "Net Worth
Offer Amount") at a purchase price of 100% of the principal amount thereof,
plus accrued interest to the Net Worth Repurchase Date (the "Net Worth Price").
The Company may credit against the Net Worth Offer Amount the principal amount
of Senior Notes acquired by the Company prior to the Trigger Date through
purchase, optional redemption or exchange. The Company, however, may not credit
a specific Note in more than one Net Worth Offer. In no event shall the failure
to meet the Minimum Net Worth at the end of any fiscal quarter be counted
toward the making of more than one Net Worth Offer. The Company shall notify
the Trustee promptly after the occurrence of any of the events specified in
this provision and shall notify the Trustee in writing if its Net Worth is
equal to or less than the Minimum Net Worth for any fiscal quarter.
Within 30 days after the Trigger Date, the Company, or, at the request of
the Company, the Trustee, shall give notice of the Net Worth Offer to each
holder (the "Net Worth Notice"). To accept a Net Worth Offer a holder shall
deliver to the Company (or to a Paying Agent designated by the Company for such
purpose), on or before the 30th day after the date of the Net Worth Notice, a
written notice of the holder's acceptance of such offer, together with the
Senior Notes with respect to which the offer is being accepted, duly endorsed
for transfer to the Company. Such written notice may be withdrawn upon further
written notice delivered to the Trustee on or prior to the third day preceding
the Net Worth Repurchase Date.
If the Net Worth Repurchase Date is between a regular record date for the
payment of interest and the next succeeding interest payment date, any Senior
Note to be repurchased must be accompanied by funds equal to the interest
payable on such succeeding interest payment date on the principal amount to be
repurchased (unless such Senior Note shall have been called for redemption, in
which case no such payment shall be required), and the interest on the
principal amount of the Senior Note being repurchased will be paid on such next
succeeding interest payment date to the registered holder of such Senior Note
on the immediately preceding record date. A Senior Note repurchased on an
interest payment date need not be accompanied by any payment, and the interest
on the principal amount of the Senior Note being repurchased will be paid on
such interest payment date to the registered holder of such Senior Note on the
immediately preceding record date.
If any repurchase pursuant to the foregoing provisions constitutes a
tender offer as defined under the Exchange Act, the Company will comply with
the requirements of Rule l4e-1 and any other tender offer rules under the
Exchange Act which then may be applicable.
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LIMITATION ON DEBT.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee or
otherwise become liable for ("Incur") any Debt, except Permitted Debt.
"Permitted Debt" means (a) Debt evidenced by the Senior Notes and the
Guarantees, (b) Debt Incurred by the Company or any Guarantor under or in
respect of a Bank Facility (including any guarantees related thereto) for
working capital or other corporate purposes or evidenced by letters of credit;
provided that the aggregate amount of all such Debt outstanding at any time
pursuant to this clause (b) may not exceed $140,000,000, (c) Debt Incurred
under a Warehouse Facility; provided that the amount of such Debt (including
funding drafts issued thereunder) outstanding at any time pursuant to this
clause (c) guaranteed by the Company or a Restricted Subsidiary may not exceed
the value of the Mortgages pledged to secure Debt thereunder, (d) Debt of the
Company to any Guarantor or of any Restricted Subsidiary of the Company to the
Company or to any Guarantor, (e) Existing Debt (without duplication of Debt
indicated under clauses (a)-(d) above) of the Company and its Restricted
Subsidiaries other than Debt to be repaid from the proceeds of the sale of the
Senior Notes, (f) Non-Recourse Debt, (g) Debt in respect of performance,
completion, guarantee, surety and similar bonds or banker's acceptances
provided by the Company or any of its Restricted Subsidiaries in the ordinary
course of business, (h) additional Debt of the Company or any Guarantor in an
amount not to exceed $7,500,000 at any time outstanding, (i) Debt referred to
in the definition of Interest Rate Protection Agreement, (j) Purchase Money
Obligations incurred in the ordinary course of business in an amount not
exceeding $5,000,000 at any time outstanding, and (k) Refinancing Debt.
Notwithstanding the foregoing, and subject to the immediately succeeding
paragraph, the Company and the Guarantors may Incur Debt if, at the time such
Debt is so Incurred and after giving effect thereto and the application of the
proceeds therefrom, the Company's Coverage Ratio shall not be less than 2.0 to
1.0.
The Company shall not, and the Company will not cause or permit any
Guarantor to, directly or indirectly, Incur any Debt that purports to be by its
terms (or by the terms of any agreement governing such Debt) subordinated to
any other Debt of the Company or of such Guarantor, as the case may be, unless
such Debt is also by its terms (or by the terms of any agreement governing such
Debt) made expressly subordinated to the Senior Notes or the Guarantee of such
Guarantor, as the case may be, to the same extent and in the same manner as
such Debt is subordinated to such other Debt.
LIMITATION ON RESTRICTED PAYMENTS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment, if, after
giving effect thereto (a) an Event of Default, or an event that through the
passage of time or the giving of notice, or both, would become an Event of
Default, shall have occurred and be continuing, or (b) the Company would be
unable to incur $1.00 of additional Debt under the second paragraph set forth
under the caption "Limitation on Debt," or (c) the aggregate amount of all
Restricted Payments made by the Company and its Restricted Subsidiaries (the
amount expended or distributed for such purposes, if other than cash, to be
determined in good faith by the board of directors of the Company) from and
after the Issue Date shall exceed the sum of (i) the aggregate of 50% of the
Consolidated Net Income of the Company accrued for the period (taken as one
accounting period) commencing with , to and including the first full
month ended immediately prior to the date of such calculation (or, in the event
Consolidated Net Income is a deficit, then minus 100% of such deficit), (ii)
the aggregate net proceeds (the amount of such proceeds, if other than cash, to
be determined in good faith by the board of directors of the Company) received
by the Company from the issuance or sale (other than to a Subsidiary of the
Company) of its capital stock (other than Redeemable Stock), including the
principal amount of any of the Convertible Notes outstanding on the Issue Date
and any other convertible or exchangeable notes issued after the Issue Date or
other convertible or exchangeable securities issued after the Issue Date, in
any such case to the extent such principal amount is converted or exchanged
into capital stock from and after the Issue Date, and options, warrants and
rights to purchase its capital
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stock (other than Redeemable Stock); PROVIDED that the net proceeds received by
the Company from the Equity Offering shall be excluded from this clause (ii),
(iii) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after the Issue Date (excluding any
Investment described in clause (4) of the following paragraph, but including
upon the redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary), an amount equal to the lesser of the return of capital with
respect to such Investment and the cost of such Investment, in either case,
reduced (but not below zero) by the excess, if any, of the cost of the
disposition of such Investment over the gain, if any, realized by the Company
or such Restricted Subsidiary in respect of such disposition of such Investment
and (iv) $5,000,000.
The foregoing paragraph will not prevent: (1) the payment of any dividend
within 60 days after the date of its declaration if such dividend could have
been made on the date of its declaration in compliance with the foregoing
provisions; (2) so long as no Default or Event of Default shall have occurred
and be continuing, the redemption, repurchase or other acquisition or
retirement of any shares of any class of capital stock of the Company or any
Subsidiary of the Company in exchange for, or out of the net cash proceeds of,
a substantially concurrent (x) capital contribution to the Company from any
Person (other than a Subsidiary of the Company) or (y) issue and sale of other
shares of capital stock (other than Redeemable Stock) of the Company to any
Person (other than to a Subsidiary of the Company); provided, however, that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase or other acquisition or retirement shall be excluded from clause
(ii) of the preceding paragraph; (3) so long as no Default or Event of Default
shall have occurred and be continuing, any redemption, repurchase or other
acquisition or retirement of subordinated Debt by exchange for, or out of the
net cash proceeds of, a substantially concurrent (x) capital contribution to
the Company from any Person (other than a Subsidiary of the Company) or (y)
issue and sale of (A) capital stock (other than Redeemable Stock) of the
Company to any Person (other than to a Subsidiary of the Company); provided,
however, that the amount of any such net cash proceeds that are utilized for
any such redemption, repurchase or other acquisition or retirement shall be
excluded from clause (ii) of the preceding paragraph; or (B) Debt of the
Company issued to any Person (other than a Subsidiary of the Company), so long
as such Debt (x) has no stated maturity earlier than , 2008, (y) has a
Weighted Average Life to Maturity equal to or greater than the remaining
Weighted Average Life to Maturity of the Senior Notes and (z) is subordinated
to the Senior Notes in the same manner and at least to the same extent as the
subordinated Debt so purchased, exchanged, redeemed, acquired or retired; (4)
Investments constituting Restricted Payments made as a result of the receipt of
non-cash consideration from any Asset Sale made pursuant to and in compliance
with the covenant described under "Limitation on Asset Sales"; (5) so long as
no Default or Event of Default has occurred and is continuing, the repurchase
or redemption of shares of capital stock from any officer, director or employee
of the Company or its Restricted Subsidiaries whose employment has been
terminated or who has died or become disabled in an aggregate amount not to
exceed $250,000 per annum; (6) so long as no Default or Event of Default shall
have occurred and be continuing, the making of Restricted Payments in an
aggregate amount not to exceed $5,000,000 and (7) the redemption of the
Convertible Notes, provided that amounts paid pursuant to clauses (1), (5) and
(6) (but not clauses (2), (3), (4) or (7)) shall reduce amounts available for
future Restricted Payments under the preceding paragraph.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, assume or otherwise cause or
suffer to exist or to become effective any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary of the Company to (a)
pay dividends or make any other distributions on its capital stock to the
Company or any of its Restricted Subsidiaries; (b) make payments in respect of
any Debt owed to the Company or any of its Restricted Subsidiaries; or (c) make
loans or advances to the Company or any of the Company's Restricted
Subsidiaries; provided, however, that the following restrictions shall not be
prohibited pursuant to this provision: (i) those contained in the Indenture, a
Bank Facility, a Warehouse Facility and Refinancing Debt (to the extent
restrictions contained in such Refinancing Debt are not more restrictive than
those
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contained in the Debt being refinanced); (ii) consensual encumbrances or
restrictions binding upon any person at the time such Person becomes a
Subsidiary of the Company; provided that such encumbrances or restrictions are
not created, incurred or assumed in contemplation of such Person becoming a
Subsidiary of the Company and do not extend to any other property of the
Company or another of its Subsidiaries; (iii) restrictions contained in
security agreements permitted by the Indenture securing Debt permitted by the
Indenture to the extent such restrictions restrict the transfer of assets
subject to such security agreements; (iv) any encumbrance or restriction
consisting of customary non-assignment provisions in leases to the extent such
provisions restrict the transfer of the leases; (v) any encumbrance or
restriction pursuant to an agreement in effect on the Issue Date; or (vi) any
restrictions with respect to a Subsidiary of the Company imposed pursuant to an
agreement which has been entered into for the sale or disposition of all or
substantially all the capital stock or assets of such Subsidiary.
LIMITATION ON LIENS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien upon or with respect to any of the assets of the Company or any
such Subsidiary, whether now owned or hereafter acquired, or on any income or
profits therefrom, other than Liens which constitute Permitted Liens at the
date such Liens are created, unless contemporaneously therewith or prior
thereto all payments due under the Indenture and the Senior Notes are secured
on an equal and ratable basis with the obligation or liability so secured until
such time as such obligation or liability is no longer secured by a Lien. The
Indenture will also provide that no Liens will be permitted to be created or
suffered to exist on any Debt from the Company in favor of any Restricted
Subsidiary.
TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into any transactions with
Affiliates of the Company unless (i) such transactions are between or among the
Company and its Restricted Subsidiaries, (ii) such transactions are in the
ordinary course of business and consistent with past practice or (iii) the
terms of such transactions are fair and reasonable to the Company or such
Restricted Subsidiary, as the case may be, and are at least as favorable as the
terms which could be obtained by the Company or such Restricted Subsidiary, as
the case may be, in a comparable transaction made on an arm's-length basis
between unaffiliated parties. In the event of any transaction or series of
transactions occurring subsequent to the Issue Date with an Affiliate of the
Company which involves in excess of $1,000,000 and is not permitted under
clause (i) of the preceding sentence, all of the disinterested members of the
Board of Directors shall by resolution determine that such transaction or
series of transactions meets the criteria set forth in clause (iii) of the
preceding sentence. In the event of any transaction or series of transactions
occurring subsequent to the Issue Date with an Affiliate of the Company which
involves in excess of $10,000,000 and is not permitted under clause (i) above,
the Company will be required to deliver to the Trustee an opinion of an
Independent Financial Advisor to the effect that the transaction is fair to the
Company or the relevant Restricted Subsidiary, as the case may be, from a
financial point of view. Notwithstanding the foregoing, such provisions do not
prohibit and will not apply to (1) any Restricted Payment which is permitted by
the "Limitation on Restricted Payments" covenant or (2) the payment of
compensation to directors of the Company who are not employees of the Company
and wages and other compensation to officers of the Company or any of its
Subsidiaries.
LIMITATION ON ASSET SALES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly consummate an Asset Sale, unless (i)
the Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined in good faith by the board of directors of the Company or
the Restricted Subsidiary, as the case may be) of the assets disposed of, and
(ii) the consideration for such Asset Sale consists of at least
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85% cash; provided that (x) the amount of liabilities assumed by the
transferee, (y) any notes or other obligations received by the Company or such
Restricted Subsidiary and immediately converted into cash or (z) with respect
to the sale or other disposition of all of the capital stock of any Restricted
Subsidiary, the amount of liabilities that remain the obligation of such
Restricted Subsidiary subsequent to such sale or other disposition, shall be
deemed to be "cash."
Within 12 months from the date that any Asset Sale is consummated, the Net
Proceeds thereof will be reinvested in Additional Assets or applied to the
redemption or repurchase of Debt of the Company which ranks pari passu with the
Senior Notes or Debt of a Restricted Subsidiary of the Company which is not
subordinated to other debt of such Restricted Subsidiary (which, in each case,
will be a permanent reduction of such Debt). To the extent that the Net
Proceeds of an Asset Sale are not so applied, the Company or such Restricted
Subsidiary, as the case may be, will, within 30 days from the expiration of
such 12-month period, use the remaining Net Proceeds (less any amounts used to
pay reasonable fees and expenses connected with a Net Proceeds Offer) to make
an offer to repurchase the Senior Notes at a price equal to 100% of the
principal amount thereof, plus accrued interest to the Net Proceeds Repurchase
Date ("a Net Proceeds Offer").
Notwithstanding the foregoing, the Net Proceeds of an Asset Sale are not
required to be applied in accordance with the preceding paragraph, unless and
until the aggregate Net Proceeds for all such Asset Sales in a 12-month period
exceeds $5,000,000.
To accept a Net Proceeds Offer a holder shall deliver to the Company (or
to a Paying Agent designated by the Company for such purpose) on or before the
30th day after the date of the Net Proceeds Offer (the "Net Proceeds Repurchase
Date"), a written notice of the holder's acceptance of the Net Proceeds Offer,
together with the Senior Notes with respect to which the offer is being
accepted, duly endorsed for transfer to the Company. Such written notice may be
withdrawn upon further written notice to the Trustee on or prior to the third
day preceding the Net Proceeds Repurchase Date.
If the Net Proceeds Repurchase Date is between a regular record date for
the payment of interest and the next succeeding interest payment date, any Note
to be repurchased must be accompanied by funds equal to the interest payable on
such succeeding interest payment date on the principal amount to be repurchased
(unless such Senior Note shall have been called for redemption, in which case
no such payment shall be required), and the interest on the principal amount of
the Senior Note being repurchased will be paid on such next succeeding interest
payment date to the registered holder of such Senior Note on the immediately
preceding record date. A Senior Note repurchased on an interest payment date
need not be accompanied by any payment, and the interest on the principal
amount of the Senior Note being repurchased will be paid on such interest
payment date to the registered holder of such Senior Note on the immediately
preceding record date.
If any repurchase pursuant to the foregoing provisions constitutes a
tender offer as defined under the Exchange Act, the Company will comply with
the requirements of Rule l4e-1 and any other tender offer rules under the
Exchange Act which then may be applicable.
Any amount of Net Proceeds remaining after a Net Proceeds Offer shall be
returned by the Trustee to the Company and may be used by the Company for any
purpose not inconsistent with the Indenture.
CERTAIN DEFINITIONS
In addition to the terms defined above, the Indenture contains, among
other things, the following definitions:
"ADDITIONAL ASSETS" means assets used or usable by the Company or any of
its Restricted Subsidiaries in the operation of the existing lines of business
of the Company and its Restricted Subsidiaries.
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"AFFILIATE" of any Person means (i) any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person and (ii) any other Person that beneficially owns at
least 10% of the voting common stock of such Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"ASSET SALE" for any Person means the sale, lease, conveyance or other
disposition (including, without limitation, by merger, consolidation or sale
and leaseback transaction, and whether by operation of law or otherwise) of any
of that Person's assets (including, without limitation, the sale or other
disposition of capital stock of any Subsidiary of such Person, whether by such
Person or such Subsidiary) outside the ordinary course of business, whether
owned on the Issue Date or subsequently acquired in one transaction or a series
of related transactions, in which such Person and/or its Subsidiaries receive
cash and/or other consideration (including, without limitation, the
unconditional assumption of Indebtedness of such Person and/or its
Subsidiaries) of $2,500,000 or more as to each such transaction or series of
related transactions; provided, however, that (i) a transaction or series of
related transactions that results in a Change of Control shall not constitute
an Asset Sale, (ii) sales, leases, conveyances or other dispositions of real
estate related to the homebuilding business of the Company or its Subsidiaries
will not constitute Asset Sales, and (iii) transactions between the Company and
any Guarantor, or among such Guarantors will not constitute Asset Sales.
"BANK FACILITY" means, collectively, one or more commitments from one or
more banks or other lending institutions to lend funds, together with any and
all agreements, documents and instruments from time to time delivered in
connection therewith as such commitments or any such agreements, documents or
instruments may be in effect or amended, amended and restated, renewed,
extended, restructured, supplemented or otherwise modified from time to time
and any credit agreement, loan agreement, note purchase agreement, indenture or
other agreement, document or instrument refinancing, refunding or otherwise
replacing such Bank Facility, whether or not with the same agent, trustee,
representative lenders or holders, and, subject to the proviso to the next
succeeding sentence, irrespective of any changes in the terms and conditions
thereof. Without limiting the generality of the foregoing, the term "Bank
Facility" shall include any amendment, amendment and restatement, renewal,
extension, restructuring, supplement or modification to any Bank Facility and
all refundings, refinancings and replacements of any Bank Facility, including
any agreement (i) extending the maturity of any Debt incurred thereunder or
contemplated thereby, (ii) adding or deleting borrowers or guarantors
thereunder; provided that such borrowers and issuers include one or more of the
Company and its Subsidiaries and their respective successors and assigns, (iii)
increasing the amount of Debt Incurred thereunder or available to be borrowed
thereunder; provided that on the date thereof such Debt would not be prohibited
by clause (b) of the definition of Permitted Debt set forth under the
"Limitation on Debt" covenant, or (iv) otherwise altering the terms and
conditions thereof in a manner not prohibited by the terms of the Indenture.
"COMMON STOCK" means the common stock, par value $.01 per share, of the
Company.
"CONSOLIDATED INTEREST EXPENSE" of the Company means, for any period, the
aggregate amount of interest which, in accordance with generally accepted
accounting principles, would be included on an income statement for the Company
and its Restricted Subsidiaries on a consolidated basis, whether expensed
directly, or included as a component of cost of goods sold, or allocated to
joint ventures or otherwise (including, but not limited to, imputed interest
included on capitalized lease obligations, all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, the net costs associated with hedging obligations, amortization of
other financing fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount or premium, if any, and all other non-cash
interest expense), excluding interest expense related to mortgage banking
operations, plus the product of (x) the sum of (i) cash dividends paid on any
Preferred Stock of the Company plus (ii) cash dividends, the principal amount
of any debt securities
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issued as a dividend, the liquidation value of any Preferred Stock issued as a
dividend and the fair market value (as determined by the Company's board of
directors in good faith) of any other non-cash dividends, in each case, paid on
any Preferred Stock of any Restricted Subsidiary of Company (other than a
Wholly-Owned Restricted Subsidiary), times (y) a fraction, the numerator of
which is one and the denominator of which is one minus the then current
effective aggregate federal, state and local tax rate of the Company, expressed
as a decimal.
"CONSOLIDATED INTEREST INCURRED" of the Company means, for any period, (a)
the aggregate amount of interest which, in accordance with generally accepted
accounting principles, would be included on an income statement for the Company
and its Restricted Subsidiaries on a consolidated basis, whether expensed
directly, or included as a component of cost of goods sold, or allocated to
joint ventures or otherwise (including, but not limited to, imputed interest
included on capitalized lease obligations, all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, the net costs associated with hedging obligations, amortization of
other financing fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount or premium, if any, and all other non-cash
interest expense), excluding interest expense related to the Company's mortgage
banking operations, plus or minus, without duplication, (b) the difference
between capitalized interest for such period and the interest component of cost
of goods sold for such period, plus (c) the product of (x) the sum of (i) cash
dividends paid on any Preferred Stock of the Company plus (ii) cash dividends,
the principal amount of any debt securities issued as a dividend, the
liquidation value of any Preferred Stock issued as a dividend and the fair
market value (as determined by the Company's Board of Directors in good faith)
of any other non-cash dividends, in each case, paid on any Preferred Stock of
any Subsidiary of the Company (other than a Wholly-Owned Restricted
Subsidiary), times (y) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective aggregate federal,
state and local tax rate of the Company, expressed as a decimal.
"CONSOLIDATED NET INCOME" of the Company, for any period, means the net
income (loss) of the Company and its Restricted Subsidiaries for such period,
determined on a consolidated basis, in accordance with generally accepted
accounting principles; provided that, without duplication, (i) the net income
of any Person, other than a Restricted Subsidiary which is consolidated with
the Company, in which any Person other than the Company and its Restricted
Subsidiaries has an interest shall be included only to the extent of the amount
of cash dividends or distributions actually paid to the Company or a Restricted
Subsidiary during such period, (ii) the net income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iii) the net income of any Subsidiary of the
Company shall be excluded to the extent such Subsidiary is prohibited, directly
or indirectly, from distributing such net income or any portion thereof to the
Company or a Restricted Subsidiary, (iv) all extraordinary gains and losses
(after taxes) that would be included on an income statement for such period
shall be excluded and (v) all gains and losses (after taxes) attributable to
Asset Sales shall be excluded; provided, that there shall be included in such
net income, without duplication, the net income of any Unrestricted Subsidiary
to the extent such net income is actually received by the Company or any of its
Restricted Subsidiaries in cash during such period.
"CONSOLIDATED NON-CASH CHARGES" of the Company means, for any period, the
aggregate depreciation, amortization and other non-cash charges (other than
reserves or expenses established in anticipation of future cash requirements
such as reserves for taxes and uncollectible accounts) of the Company and its
Restricted Subsidiaries on a consolidated basis for such period, as determined
in accordance with generally accepted accounting principles; provided that
Consolidated Non-cash Charges shall exclude (i) any charges that are not
included for the purpose of determining Consolidated Net Income, (ii) any
charges that are included for the purpose of determining Consolidated Interest
Expense or Consolidated Tax Expense and (iii) any charges representing
capitalized selling, general and administrative expenses that are expensed
during such period as cost of goods sold.
"CONSOLIDATED TANGIBLE ASSETS" of the Company as of any date means the
total amount of assets of the Company and its Restricted Subsidiaries (less
applicable reserves and less the assets securing the
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payment of Non-Recourse Debt of the Company and its Restricted Subsidiaries) on
a consolidated basis at the end of the fiscal quarter immediately preceding
such date, as determined in accordance with generally accepted accounting
principles, less: (i) unamortized debt and debt issuance expense, deferred
charges, goodwill, patents, trademarks, copyrights, and all other items which
would be treated as intangibles on the consolidated balance sheet of the
Company and its Restricted Subsidiaries prepared in accordance with generally
accepted accounting principles and (ii) appropriate adjustments on account of
minority interests of other Persons holding equity investments in Restricted
Subsidiaries, in the case of each of clauses (i) and (ii) above, as reflected
on the consolidated balance sheet of the Company and its Restricted
Subsidiaries.
"CONSOLIDATED TANGIBLE NET WORTH" of the Company means the Company's Net
Worth less unamortized debt and debt issuance expense, deferred charges,
goodwill, patents, trademarks, copyrights, and all other items which would be
treated as intangibles on the consolidated balance sheet of the Company and its
Restricted Subsidiaries prepared in accordance with generally accepted
accounting principles.
"CONSOLIDATED TAX EXPENSE" of the Company means, for any period, the
aggregate of the tax expense of the Company and its Restricted Subsidiaries for
such period, determined on a consolidated basis, in accordance with generally
accepted accounting principles.
"CONVERTIBLE NOTES" means up to $15,000,000 principal amount of the
Company's 7% Convertible Subordinated Notes due March 1, 2003.
"COVERAGE RATIO" of the Company means the ratio of the Company's EBITDA to
its Consolidated Interest Incurred for the four fiscal quarters ending
immediately prior to the date of determination. Notwithstanding clause (ii) of
the definition of Consolidated Net Income, if the Debt which is being Incurred
is Incurred in connection with an acquisition by the Company or a Restricted
Subsidiary, the Coverage Ratio shall be determined after giving effect to both
the Consolidated Interest Incurred related to the Incurrence of such Debt and
the EBITDA (x) of the Person becoming a Restricted Subsidiary of the Company or
(y) in the case of an acquisition of assets that constitute substantially all
of an operating unit or business, relating to the assets being acquired by the
Company or a Restricted Subsidiary of the Company.
"DEBT" means, as to any Person, without duplication, (a) any indebtedness
of such Person for borrowed money, (b) all indebtedness of such Person
evidenced by bonds, debentures, notes, letters of credit, drafts or similar
instruments, (c) all indebtedness of such Person to pay the deferred purchase
price of property or services, but not including accounts payable and accrued
expenses arising in the ordinary course of business, (d) all capitalized lease
obligations of such Person, (e) all Debt of others secured by a Lien on any
asset of such Person, whether or not such Debt is assumed by such Person or
guaranteed by such Person, (f) Redeemable Stock of such Person and Preferred
Stock of any Subsidiary of such Person, (g) all obligations of such Person with
respect to Interest Rate Protection Agreements and (h) all Debt of others
guaranteed by such Person. The amount of Debt of any Person at any date
pursuant to clauses (a)-(d) and (f) above shall be as would appear as a
liability upon a balance sheet of such Person prepared on a consolidated basis
in accordance with generally accepted accounting principles. Notwithstanding
the foregoing, "Debt" of the Company shall not include the amount reflected on
a consolidated balance sheet of the Company with respect to options to acquire
real property which was purchased by the Company and sold to a third party
within 360 days of such purchase for consideration at least equal to the amount
paid by the Company for such property less an amount equal to the value of such
option.
"EBITDA" for the Company, for any period, means, without duplication, the
Consolidated Net Income of the Company plus, to the extent deducted in
calculating Consolidated Net Income, the sum of (a) Consolidated Tax Expense,
(b) Consolidated Interest Expense and (c) Consolidated Non-cash Charges.
"EXISTING DEBT" means all of the Debt of the Company and its Restricted
Subsidiaries that was outstanding on the Issue Date.
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"GUARANTEE" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt of any other Person
and, without limiting the generality of the foregoing, any obligation, direct
or indirect, contingent or otherwise, of such Person to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt of such other
Person (whether by agreement to keepwell or to maintain financial condition or
otherwise), provided that the term "guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business.
"HOMEBUILDING JOINT VENTURE" means (i) any Unrestricted Subsidiary and
(ii) any person which is not a Guarantor in which the Company or any of its
Subsidiaries has an ownership interest and in which no other person has a
greater beneficial ownership interest than the beneficial ownership interest of
the Company that, in each case, was formed for and is engaged in homebuilding
operations.
"INDEPENDENT FINANCIAL ADVISOR" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified
to perform the task for which it is to be engaged.
"INTEREST RATE PROTECTION AGREEMENT" means any arrangement with any other
Person whereby, directly or indirectly, such Person is entitled to receive from
time to time periodic payments calculated by applying either a floating or a
fixed rate of interest on a stated notional amount in exchange for periodic
payments made by such Person calculated by applying a fixed or a floating rate
of interest on the same notional amount and shall include, without limitation,
interest rate swaps, caps, floors, collars and similar agreements provided that
any arrangement which is entered into by the Company or any of its Restricted
Subsidiaries in connection with Debt Incurred by the Company or any of its
Restricted Subsidiaries shall constitute Permitted Debt.
"INVESTMENT" means, with respect to any Person, any direct or indirect
loan or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any capital stock, bonds, notes, debentures or other securities
or evidences of Debt issued by, any other Person. "Investments" shall exclude
extensions of trade credit by the Company and its Subsidiaries in the ordinary
course of business in accordance with normal trade practices of the Company or
such Subsidiary, as the case may be.
"ISSUE DATE" means the original date of issuance of the Senior Notes.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
assignment (including any assignment of rights to receive payments of money
other than in connection with mortgage banking operations in the ordinary
course of business), charge, security interest or encumbrance of any kind
(including any conditional sale or other title retention agreement or any lease
in the nature thereof) in respect of such asset, any agreement to grant to any
Person any such Lien and any sale and leaseback of any asset.
"MATERIAL SUBSIDIARY" means any Restricted Subsidiary of the Company which
accounted for 10 percent or more of the Consolidated Tangible Assets or EBITDA
of the Company for the fiscal year ending immediately prior to any Default or
Event of Default.
"MORTGAGE" means a first priority mortgage or first priority deed of trust
on improved real property.
"NET PROCEEDS" with respect to any Asset Sale means (i) cash (in U.S.
dollars or freely convertible into U.S. dollars) received by the Company or any
of its Restricted Subsidiaries from such Asset Sale (including cash received as
consideration for the assumption or incurrence of liabilities incurred in
connection with or in anticipation of such Asset Sale), after (a) provision for
all income or other taxes measured by or resulting from such Asset Sale to the
Company or any of its Restricted Subsidiaries, whether or not offset by net
operating loss and tax credit carry-forwards, (b) payment of all brokerage
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commissions and the underwriting fees and, without limitation, all other fees
and expenses related to such Asset Sale, and (c) deduction of appropriate
amounts to be provided by the Company or any of its Restricted Subsidiaries as
a reserve, in accordance with generally accepted accounting principles, against
any liabilities associated with the assets sold or otherwise disposed of in
such Asset Sale (including, without limitation, pension and other
post-employment benefit liabilities and liabilities related to environmental
matters) or against any indemnification obligations associated with the sale or
other disposition of the assets sold or otherwise disposed of in such Asset
Sale, and (ii) all noncash consideration received by the Company or any of its
Restricted Subsidiaries from such Asset Sale upon the liquidation or conversion
of such consideration into cash.
"NET WORTH" of the Company means, at any date, the aggregate of capital,
surplus and retained earnings of the Company and its Restricted Subsidiaries as
would be shown on a consolidated balance sheet of the Company prepared in
accordance with generally accepted accounting principles, adjusted to exclude
(to the extent included) investments by the Company and its Subsidiaries in
joint ventures and the amount of equity attributable to Affiliates other than
Restricted Subsidiaries of such Person.
"NON-RECOURSE DEBT" with respect to any Person means Debt of such Person
for which the sole legal recourse for collection of principal and interest on
such Debt is against the specific property identified in the instruments
evidencing or securing such Debt and such property was acquired with the
proceeds of such Debt or such Debt was Incurred within 90 days after the
acquisition of such property.
"PERMITTED INVESTMENTS" of any Person means Investments of such Person in
(i) direct obligations of the United States or any agency thereof or
obligations guaranteed by the United States or any agency thereof, in each case
maturing within 180 days of the date of acquisition thereof, (ii) certificates
of deposit maturing within 180 days of the date of acquisition thereof issued
by a bank, trust company or savings and loan association which is organized
under the laws of the United States or any state thereof having capital,
surplus and undivided profits aggregating in excess of $250 million and a Keefe
Bank Watch Rating of C or better, (iii) certificates of deposit maturing within
180 days of the date of acquisition thereof issued by a bank, trust company or
savings and loan association organized under the laws of the United States or
any state thereof other than banks, trust companies or savings and loan
associations satisfying the criteria in (ii) above; provided that the aggregate
amount of all certificates of deposit issued to the Company at any one time by
any one such bank, trust company or savings and loan association will not
exceed $100,000, (iv) commercial paper given the highest rating by two
established national credit rating agencies and maturing not more than 180 days
from the date of the acquisition thereof, (v) repurchase agreements or
money-market accounts which are fully secured by direct obligations of the
United States or any agency thereof and (vi) in the case of the Company and its
Subsidiaries, (1) any receivables or loans taken by the Company or a Subsidiary
in connection with the sale of any asset otherwise permitted by the Indenture,
(2) Investments in any Guarantor, (3) Investments in the Senior Notes or Debt
PARI PASSU with the Senior Notes, (4) Investments in evidences of Debt,
securities or other property received from another Person by the Company or any
of its Restricted Subsidiaries in connection with any bankruptcy proceeding or
by reason of a composition or readjustment of debt or a reorganization of such
Person or as a result of foreclosure, perfection or enforcement of any Lien in
exchange for evidences of Debt, securities or other property of such Person
held by the Company or any of its Restricted Subsidiaries, or for other
liabilities or obligations of such other Person to the Company or any of its
Restricted Subsidiaries that were created, in accordance with the terms of the
Indenture, (5) Investments in Interest Rate Protection Agreements which
constitute Permitted Debt, (6) Investments in any Homebuilding Joint Ventures
not in excess of $20 million in the aggregate for all Homebuilding Joint
Ventures and (7) Investments in an aggregate amount outstanding not greater
than $5,000,000.
"PERMITTED LIENS" with respect to the Company and its Restricted
Subsidiaries means (i) (x) until such time as the Company shall have less than
an aggregate of $40,000,000 of maximum availability under one or more Bank
Facilities described in clause (b) of the "Limitation on Debt" covenant which
are secured by any Liens, Liens securing the Company's Bank Facility or Bank
Facilities described in clause (b) of the "Limitation on Debt" covenant, and
(y) from and after the first time at which the
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Company shall have less than an aggregate of $40,000,000 of maximum
availability under one or more Bank Facilities which are secured by Liens,
Liens on assets of the Company or any Restricted Subsidiary of the Company
securing Debt which may be incurred pursuant to the "Limitation on Debt"
covenant, provided that the aggregate amount of Debt secured by Liens
(excluding Nonrecourse Debt of the Company and Restricted Subsidiaries and Debt
outstanding under the Warehouse Facility) may not exceed 40 percent of the
Company's Consolidated Tangible Assets; (ii) Liens securing a Warehouse
Facility; provided that such Liens shall not extend to any assets other than
the mortgages, promissory notes and other collateral that secures mortgage
loans made by the Company or any of its Restricted Subsidiaries; (iii) Liens
securing Non-Recourse Debt of the Company or any Restricted Subsidiary of the
Company, provided that such Liens apply only to the property financed out of
the net proceeds of such Non-Recourse Debt within 90 days of the incurrence of
such Non-Recourse Debt; (iv) Liens securing Debt of a Person existing at the
time that such Person is merged into or consolidated with the Company or a
Restricted Subsidiary; provided that such Liens were not created in
contemplation of such merger or consolidation and do not extend to any assets
or property of the Company or any Restricted Subsidiary, other than the
surviving Person and its Subsidiaries; (v) Liens on assets or property acquired
by the Company or a Restricted Subsidiary; provided that such Liens were not
created in contemplation of such acquisition and do not extend to any other
assets or property (other than proceeds of such acquired assets or property);
(vi) Liens in respect of Interest Rate Protection Agreements which constitute
Permitted Debt; (vii) Liens for taxes, assessments or governmental charges or
claims that either (a) are not yet delinquent or (b) are being contested in
good faith by appropriate proceedings and as to which appropriate reserves have
been established or other provisions have been made in accordance with
generally accepted accounting principles; (viii) statutory Liens of landlords
and carriers', warehousemen's, mechanics', suppliers', materialmen's,
repairmen's, contractors' or other Liens imposed by law and arising in the
ordinary course of business; (ix) Liens (other than any Lien imposed by the
Employee Retirement Income Security Act of 1974, as amended) incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (x)
Liens incurred or deposits made to secure the performance of tenders, bids,
leases, statutory obligations, surety and appeal bonds, progress payments,
government contracts and other obligations of like nature (exclusive of
obligations for the payment of borrowed money), in each case, incurred in the
ordinary course of business; (xi) attachment or judgment Liens not giving rise
to a Default or Event of Default; (xii) easements, rights-of-way, restrictions
and other similar charges or encumbrances not materially interfering with the
ordinary conduct of the business of the Company or any of its Subsidiaries;
(xiii) leases or subleases granted to others not materially interfering with
the ordinary conduct of the business of the Company or any of its Restricted
Subsidiaries; (xiv) Liens securing Refinancing Debt; provided that such Liens
only extend to the assets securing the Debt being refinanced, such refinanced
Debt was previously secured and such Liens do not extend to any other assets of
the Company or the assets of any of the Company's other Subsidiaries; (xv)
Liens securing Purchase Money Obligations (including capitalized lease
obligations); (xvi) Liens existing on the Issue Date (xvii) any contract to
sell an asset provided such sale is otherwise permitted under the Indenture;
and (xviii) Liens on property or assets of any Restricted Subsidiary securing
Debt of such Restricted Subsidiary owing to the Company or one or more
Restricted Subsidiaries of the Company.
"PERSON" means any individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or agency or instrumentality thereof.
"PREFERRED STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding or issued after
the Issue Date, and including, without limitation, all classes and series of
preferred or preference stock.
"PURCHASE MONEY OBLIGATIONS" means Debt of any Person secured by Liens (i)
on property purchased, acquired, or constructed by such Person or its
Subsidiaries after the Issue Date and used in the ordinary course of business
by such Person and (ii) securing the payment of all or any part of the purchase
price or construction cost of such assets and limited to the property so
acquired and
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improvements thereof; provided that such Debt is incurred no later than 90 days
after the acquisition of such property or completion of such construction or
improvements.
"REDEEMABLE STOCK" means, with respect to any Person, any class or series
of capital stock of such Person that is redeemable at the option of the holder
(except pursuant to a change in control provision that does not (i) cause such
capital stock to become redeemable in circumstances which would not constitute
a Change of Control and (ii) require the Company to pay the redemption price
therefor prior to the Change of Control Repurchase Date) or is subject to
mandatory redemption or otherwise matures prior to the final stated maturity of
the Senior Notes.
"REFINANCING DEBT" means Debt that refunds, refinances or extends any
Senior Notes, Existing Debt (other than Existing Debt to be repaid with the net
proceeds of the offering of the Senior Notes) or other Debt incurred by the
Company or its Restricted Subsidiaries permitted under the terms of the
Indenture, but only to the extent that (i) the Refinancing Debt is subordinated
to the Senior Notes to the same extent as the Debt being refunded, refinanced
or extended, if at all, (ii) the Refinancing Debt is scheduled to mature either
(a) no earlier than the Debt being refunded, refinanced or extended, or (b)
after the maturity date of the Senior Notes, (iii) the portion, if any, of the
Refinancing Debt that is scheduled to mature on or prior to the maturity date
of the Senior Notes has a Weighted Average Life to Maturity at the time such
Refinancing Debt is Incurred that is equal to or greater than the Weighted
Average Life to Maturity of the portion of the Debt being refunded, refinanced
or extended that is scheduled to mature on or prior to the maturity date of the
Senior Notes, and (iv) the gross proceeds of such Refinancing Debt are an
amount that is equal to or less than the aggregate principal amount then
outstanding under the Debt being refunded, refinanced or extended (plus the
premiums or other payments paid in connection therewith (which shall not exceed
the stated amount of any premium or other payment required to be paid in
connection with such a renewal, extension, substitution, refunding,
refinancing, redemption, repurchase or replacement pursuant to the terms of the
Debt being renewed, extended, substituted, refunded, refinanced, amended,
modified, supplemented, redeemed, repurchased or replaced) and the expenses
incurred in connection therewith).
"RESTRICTED PAYMENTS" means with respect to the Company or any Restricted
Subsidiary (i) the declaration or payment of any dividend or other distribution
on any shares of such Person's capital stock (except (x) dividends or
distributions in additional shares of capital stock of the Company other than
Redeemable Stock or (y) the declaration or payment of any dividend or other
distribution by a Restricted Subsidiary to the Company or another Restricted
Subsidiary), (ii) any payment on account of the purchase, redemption or other
acquisition of (a) any shares of such Person's capital stock or (b) any option,
warrant or other right to acquire shares of such Person's capital stock,
except, in each case, capital stock held by the Company or a Restricted
Subsidiary, (iii) any Investment (other than a Permitted Investment) in any
Person, or (iv) any principal payment, redemption, repurchase, defeasance or
other acquisition or retirement, prior to scheduled principal payment or
scheduled maturity, of Debt of the Company or its Subsidiaries which is
subordinated in right of payment to the Senior Notes (other than Debt held by
the Company or a Restricted Subsidiary).
"RESTRICTED SUBSIDIARY" means any Subsidiary which is not an Unrestricted
Subsidiary.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation or
entity of which a majority of the capital stock having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions is at the time directly or indirectly owned by such Person or one or
more of the other Subsidiaries of that Person or (ii) any partnership or joint
venture at least a majority of the voting power of which is at the time
directly or indirectly owned by such Person or one or more of the other
Subsidiaries of that Person, or a combination thereof or a successor thereto.
"UNRESTRICTED SUBSIDIARY" means each of the Subsidiaries of the Company
(other than a Guarantor) so designated by a resolution adopted by the Board of
Directors of the Company as provided below; provided that (a) neither the
Company nor any of its other Subsidiaries (other than Unrestricted
Subsidiaries) (1) provides any direct or indirect credit support for any Debt
of such Subsidiary
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(including any undertaking, agreement or instrument evidencing such Debt) or
(2) is directly or indirectly liable for any Debt of such Subsidiary, and (b)
the creditors with respect to Debt for borrowed money of such Subsidiary have
agreed in writing that they have no recourse, direct or indirect, to the
Company or any other Subsidiary of the Company (other than Unrestricted
Subsidiaries), including, without limitation, recourse with respect to the
payment of principal or interest on any Debt of such Subsidiary. The Board of
Directors of the Company may designate an Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that (i) any such redesignation will be deemed
to be an Incurrence by the Company and its Restricted Subsidiaries of the Debt
(if any) of such redesignated Subsidiary for purposes of the "Limitation on
Debt" covenant set forth in the Indenture as of the date of such redesignation,
(ii) any Debt of such Unrestricted Subsidiary could then be Incurred in
accordance with the "Limitation on Debt" covenant set forth in the Indenture on
the date of such redesignation and (iii) the Liens of such Unrestricted
Subsidiary could then be incurred in accordance with the "Limitation on Liens"
covenant set forth in the Indenture as of the date of such redesignation.
Subject to the foregoing, the Board of Directors of the Company also may
designate any Restricted Subsidiary to be an Unrestricted Subsidiary; provided
that (i) all previous Investments by the Company and its Restricted
Subsidiaries in such Restricted Subsidiary (net of any returns previously paid
on such Investments) will be deemed to be Restricted Payments at the time of
such designation and will reduce the amount available for Restricted Payments
under the "Limitations on Restricted Payments" covenant set forth in the
Indenture, (ii) the Company and its Restricted Subsidiaries could incur $1.00
of additional Indebtedness under the Coverage Ratio test contained in the
"Limitations on Debt" covenant set forth in the Indenture and (iii) no Default
or Event of Default shall have occurred or be continuing. Any such designation
or redesignation by the Board of Directors of the Company will be evidenced to
the Trustee by the filing with the Trustee of a certified copy of the
resolution of the Board of Directors of the Company giving effect to such
designation or redesignation and an Officers' Certificate certifying that such
designation or redesignation complied with the foregoing conditions and setting
forth the underlying calculations.
"WAREHOUSE FACILITY" means a Bank Facility to finance the making of
mortgage loans originated by the Company or any of its Subsidiaries.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Debt or
portion thereof, if applicable, at any date, the number of years obtained by
dividing (i) the then outstanding principal amount of such Debt or portion
thereof, if applicable, into (ii) the sum of the products obtained by
multiplying (a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including payment at
final maturity, in respect thereof, by (b) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of
the Company of which 100% of the outstanding capital stock is owned by one or
more Wholly Owned Restricted Subsidiaries of the Company or by the Company and
one or more Wholly Owned Restricted Subsidiaries of the Company. For purposes
of this definition, any directors' qualifying shares shall be disregarded in
determining the ownership of a Subsidiary.
EVENTS OF DEFAULT
The following shall constitute Events of Default with respect to the
Senior Notes: (i) failure to pay the principal of any Senior Note when such
principal becomes due and payable at maturity, upon acceleration or otherwise;
(ii) failure to pay interest on any Senior Note when due, and such failure
continues for a 30-day period; (iii) a default in the observance or performance
of any other covenant or agreement of the Company or the Guarantors in the
Senior Note, the Guarantee or the Indenture that continues for the period and
after the notice specified below; (iv) an event of default shall have occurred
under one or more evidences of Debt of the Company or any of its Restricted
Subsidiaries (other than Non-Recourse Debt) with an outstanding aggregate
principal amount of $5,000,000 or more, whether such Debt now exists or is
created hereafter, which event of default (1) consists of the failure
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by the Company or any Restricted Subsidiary to make any payment in respect of
such Debt at its final maturity or (2) results in the acceleration of such Debt
which acceleration shall be in effect; (v) any final judgment or judgments for
payment of money in excess of $5,000,000 in the aggregate shall be rendered
against the Company or any of its Restricted Subsidiaries and shall remain
unstayed, unsatisfied or undischarged for the period and after the notice
specified below; (vi) certain events of bankruptcy, insolvency or
reorganization of the Company or Material Subsidiaries; and (vii) any
Guarantee of a Material Subsidiary ceases to be in full force and effect (other
than in accordance with the terms of such Guarantee and the Indenture) or is
declared null and void and unenforceable or found to be invalid or any
Guarantor denies its liability under its Guarantee (other than by reason of
release of a Guarantor from its Guarantee in accordance with the terms of the
Indenture and the Guarantee). The Company is required to deliver to the Trustee
within 120 days after the end of each fiscal year of the Company, an officer's
certificate stating whether or not the signatories know of any default by the
Company under the Indenture and the Senior Notes and, if any default exists,
describing such default.
A default under clause (iii) or (v) above is not an Event of Default until
the Trustee or the holders of at least 25% in principal amount of the Senior
Notes then outstanding notify the Company of the default and the Company does
not cure the default within 60 days. The notice must specify the default,
demand that it be remedied and state that the notice is a "Notice of Default."
If the holders of 25% in principal amount of Senior Notes then outstanding
request the Trustee to give such notice on their behalf, the Trustee shall do
so.
In case an Event of Default (other than an Event of Default resulting from
certain events of bankruptcy, insolvency or reorganization of the Company)
shall have occurred and be continuing, the Trustee, by notice to the Company,
or the holders of 25% of the principal amount of the Senior Notes then
outstanding, by notice to the Company and the Trustee, may declare the
principal of the Senior Notes, plus accrued interest, to be immediately due and
payable. In case an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization of the Company shall occur, such
amounts shall be due and payable without any declaration or any act on the part
of the Trustee or the holders of the Senior Notes. Any declaration of
acceleration may be rescinded and past defaults may be waived by the holders of
a majority of the principal amount of the Senior Notes then outstanding upon
conditions provided in the Indenture. Except to enforce the right to receive
payment of principal or interest when due, no holder of a Senior Note may
institute any proceeding with respect to the Indenture or for any remedy
thereunder unless such holder has previously given to the Trustee written
notice of a continuing Event of Default and unless the holders of 25% of the
principal amount of the Senior Notes then outstanding have requested the
Trustee to institute proceedings in respect of such Event of Default and have
offered the Trustee reasonable indemnity against loss, liability and expense to
be thereby incurred, the Trustee has failed so to act for 60 days after receipt
of the same and during such 60-day period the holders of a majority of the
principal amount of the Senior Notes then outstanding have not given the
Trustee a direction inconsistent with the request. Subject to certain
restrictions, the holders of a majority in principal amount of the Senior Notes
then outstanding will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee. The Trustee, however, may refuse
to follow any direction that conflicts with law or the Indenture, that is
unduly prejudicial to the rights of any holder of a Senior Note or that would
involve the Trustee in personal liability and the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent with such
direction.
MERGERS AND CONSOLIDATIONS
Neither the Company nor any Guarantor will consolidate or merge with or
into, or sell, lease, convey or otherwise dispose of all or substantially all
of its assets (including, without limitation, by way of liquidation or
dissolution), or assign any of its obligations under the Senior Notes, the
Guarantees or the Indenture (as an entirety or substantially as an entirety in
one transaction or series of related transactions), to any Person or permit any
of its Restricted Subsidiaries to do any of the foregoing (in each case other
than with the Company or another Wholly Owned Restricted Subsidiary) unless:
(i) the
49
<PAGE>
Person formed by or surviving such consolidation or merger (if other than the
Company or such Guarantor, as the case may be), or to which such sale, lease,
conveyance or other disposition or assignment will be made (collectively, the
"Successor"), is a corporation or other legal entity organized and existing
under the laws of the United States or any state thereof or the District of
Columbia, and the Successor assumes by supplemental indenture in a form
reasonably satisfactory to the Trustee all of the obligations of the Company or
such Guarantor, as the case may be, under the Senior Notes or such Guarantor's
Guarantee, as the case may be, and the Indenture, (ii) immediately after giving
effect to such transaction, no Default or Event of Default has occurred and is
continuing, (iii) immediately after giving effect to such transaction and the
use of any net proceeds therefrom, on a pro forma basis, the Consolidated
Tangible Net Worth of the Company or the Successor (in the case of a
transaction involving, the Company), as the case may be, would be at least
equal to the Consolidated Tangible Net Worth of the Company immediately prior
to such transaction and (iv) in the case of a transaction involving the
Company, immediately after giving effect to such transaction and the use of any
net proceeds therefrom, on a pro forma basis, the Coverage Ratio of the Company
or the Successor (in the case of a transaction involving the Company), as the
case may be, would be such that the Company or the Successor (in the case of a
transaction involving the Company), as the case may be, would be entitled to
Incur at least $1.00 of additional Debt under such Coverage Ratio test in the
"Limitation on Debt" covenant set forth in the Indenture. The foregoing
provisions shall not apply to a transaction involving the consolidation or
merger of a Guarantor with or into another person, or the sale, lease,
conveyance or other disposition of all or substantially all of the assets of
such Guarantor, that results in such Guarantor being released from its
Guarantee as provided under "The Guarantees" above.
DEFEASANCE
Under the terms of the Indenture and the Senior Notes, the Company, at its
option, (a) will be discharged from any and all obligations in respect of the
Senior Notes (except in each case for certain obligations to register the
transfer or exchange of Senior Notes, replace stolen, lost or mutilated Senior
Notes, maintain paying agencies and hold moneys for payment in trust) or (b)
need not comply with the covenants of the Indenture nor be subject to the
operation of the cross acceleration provisions described under "Events of
Default," in each case, if the Company irrevocably deposits with the Trustee,
in trust, money or U.S. Government Obligations (as defined in the Indenture)
which through the payment of interest thereon and principal thereof in
accordance with their terms will provide money in an amount sufficient to pay
the principal of and interest on the Senior Notes on the dates such payments
are due in accordance with the terms of the Senior Notes.
To exercise either option above, the Company is required to deliver to the
Trustee an opinion of counsel that the holders of the Senior Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance had not occurred.
In the event the Company exercises its options under clause (b) of the
second preceding paragraph and the Senior Notes are declared due and payable
because of the occurrence of any Event of Default (other than the cross
acceleration provisions described under "Events of Default" which will be
inapplicable), the amount of money and U.S. Government Obligations on deposit
with the Trustee will be sufficient to pay amounts due on the Senior Notes at
the time of their stated maturity but may not be sufficient to pay amounts due
on the Senior Notes at the time of the acceleration resulting from such Event
of Default. However, the Company shall remain liable for such payments.
REPORTS
As long as any of the Senior Notes are outstanding, the Company will
deliver to the Trustee and the Trustee will mail to each Holder within 15 days
after the filing of the same with the Commission copies of the quarterly and
annual reports and of the information, documents and other reports with respect
to the Company and the Guarantors, if any, which the Company and the Guarantors
may be
50
<PAGE>
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. The Indenture will provide that, notwithstanding that neither the
Company nor any of the Guarantors may be required to remain subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will continue to file with the Commission and provide the Trustee and Holders
with such annual and quarterly reports and such information, documents and
other reports with respect to the Company and the Guarantors as are required
under Sections 13 and 15(d) of the Exchange Act. If filing of documents by the
Company with the Commission as aforementioned in this paragraph is not
permitted under the Exchange Act, the Company shall promptly upon written
notice supply copies of such documents to any prospective holder. The Company
and each Guarantor will also comply with the other provisions of Section 314(a)
of the Trust Indenture Act.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Senior Notes may be
amended or supplemented with the consent (which may include consents obtained
in connection with a tender offer or exchange offer for Senior Notes) of the
Holders of at least a majority in principal amount of Senior Notes then
outstanding, and any existing Default or Event of Default (other than any
continuing Default or Event of Default in the payment of interest on or the
principal of the Senior Notes) under, or compliance with any provision of, the
Indenture may be waived with the consent (which may include consents obtained
in connection with a tender offer or exchange offer for Senior Notes) of the
Holders of a majority in principal amount of the Senior Notes then outstanding.
Without the consent of any Holder, the Company, the Guarantors and the Trustee
may amend the Indenture or the Senior Notes or waive any provision of the
Indenture to cure any ambiguity, defect or inconsistency, to comply with the
"Mergers and Consolidations" section set forth in the Indenture, to provide for
uncertificated Senior Notes in addition to certificated Senior Notes, to make
any change that does not adversely affect the legal rights under the Indenture
of any Holder, to comply with the qualification of the Indenture under the
Trust Indenture Act, or to reflect a Guarantor ceasing to be liable on the
Guarantees because it is no longer a Subsidiary of the Company.
Without the consent of each Holder affected, the Company may not (i)
reduce the amount of Senior Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the rate of or change the time for payment of
interest, including default interest, on any Senior Note, (iii) reduce the
principal of or change the fixed maturity of any Senior Note or alter the
provisions with respect to redemption under the "Optional Redemption" section
set forth in the Indenture, (iv) make any Senior Notes payable in money other
than that stated in the Note, (v) make any change in certain other provisions
set forth in the Indenture, (vi) adversely modify the ranking or priority of
the Senior Notes or any Guarantee, (vii) release any Guarantor from any of its
obligations under its Guarantee or the Indenture otherwise than in accordance
with the terms of the Indenture, or (viii) waive a continuing Default or Event
of Default in the payment of principal of or interest on the Senior Notes.
NO PERSONAL LIABILITY OF SHAREHOLDERS, OFFICERS, DIRECTORS OR EMPLOYEES
The Indenture will provide that no recourse for the payment of the
principal of, premium, if any, or interest on any of the Senior Notes, or for
any claim based thereon or otherwise in respect thereof, and no recourse under
or upon any obligation, covenant or agreement of the Company or any Guarantor
in the Indenture or in any of the Senior Notes or because of the creation of
any Debt represented thereby, shall be had against any shareholder, officer,
director, employee or controlling person of the Company, any Guarantor or any
successor Person thereof. Each Holder, by accepting such Senior Notes, will
waive and release all such liability.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received
51
<PAGE>
in respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest (as defined in the Indenture), it must eliminate such
conflict or resign.
The Holders of a majority in principal amount of the then outstanding
Senior Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default occurs and is not cured, the Trustee will be required, in the exercise
of its power, to use the degree of care of a prudent person in similar
circumstances in the conduct of his own affairs. Subject to such provisions,
the Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any Holder, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to the Trustee.
GOVERNING LAW
The Indenture, the Senior Notes and the Guarantees will be governed by the
internal laws of the State of New York.
52
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
THE 1993 NOTES
GENERAL. In February 1993, the Company issued $30,000,000 principal amount
of 7% Convertible Subordinated Notes due 2003 (the "1993 Notes"). The 1993
Notes mature on March 1, 2003, and bear interest at 7% per annum, payable
semi-annually on March 1 and September 1 of each year.
The following is a summary of certain material terms of the 1993 Notes and
is qualified in its entirety by reference to the indenture governing the 1993
Notes (the "1993 Indenture"). The 1993 Notes are unsecured general obligations
of the Company subordinated in right of payment to all existing and future
Senior Indebtedness (as defined in the 1993 Indenture").
CONVERSION. The 1993 Notes are convertible into Common Stock at any time
prior to maturity, unless previously redeemed, at a conversion price of $14.00
per share, subject to adjustment upon certain circumstances.
REDEMPTION. The 1993 Notes are redeemable at the option of the Company on
or after April 1, 1996, in whole or in part, at specified redemption prices
(expressed as a percentage of principal amount), together with accrued and
unpaid interest. On November 18, 1997, the Company redeemed $14,594,000
aggregate principal amount of the 1993 Notes at a price of 104.2% of the
principal amount thereof, plus accrued interest and $406,000 aggregate
principal amount of the 1993 Notes were converted into Common Stock. In
addition, $75,000 principal amount of the 1993 Notes not previously called for
redemption were converted into 5,357 shares on November 18, 1997. After
November 18, 1997 and prior to the date of this Prospectus, an additional
$80,000 principal amount of the 1993 Notes were converted into 5,713 shares of
Common Stock. Following the consummation of the Equity Offering, the Company
intends to call for redemption the remaining outstanding principal amount of
the 1993 Notes. The Company intends to use a portion of the net proceeds of the
Equity Offering to fund the redemption of the remaining outstanding principal
amount of the 1993 Notes which are not converted into Common Stock on or prior
to the date of redemption. See "Use of Proceeds."
OFFERS TO PURCHASE. In the event of a Change of Control or a Consolidated
Net Worth Deficiency (each as defined in the 1993 Indenture), the Company will
be required, subject to certain conditions, to offer to purchase all
outstanding 1993 Notes at a price equal to 100% of the principal amount thereof
together with accrued and unpaid interest.
COVENANTS. The 1993 Indenture contains covenants that, among other things,
limit the Company's ability to merge, consolidate or transfer substantially all
its assets.
GUARANTEES. Payments under the 1993 Notes are guaranteed by the
subsidiaries of the Company.
THE 1994 NOTES
GENERAL. In March 1994, the Company issued $40,000,000 principal amount of
11-3/4% Senior Notes due 2000 (the "Original 1994 Notes"). In August 1994, the
Company exchanged the Original 1994 Notes for $40,000,000 principal amount of
11-3/4% Senior Notes due 2000 (the "1994 Notes"), which are substantially
identical to the Original 1994 Notes except that the 1994 Notes are registered
under the Securities Act. The 1994 Notes mature on December 15, 2000, and bear
interest at 11-3/4% per annum, payable semi-annually on June 15 and December 15
of each year.
The following is a summary of certain material terms of the 1994 Notes and
is qualified in its entirety by reference to the indenture governing the 1994
Notes (the "1994 Indenture"). The 1994 Notes are senior unsecured obligations
of the Company, ranking PARI PASSU in right of payment to all existing and
future Senior Indebtedness (as defined in the 1994 Indenture) of the Company
and senior in right of payment to all subordinated indebtedness of the Company.
53
<PAGE>
REDEMPTION. The 1994 Notes are redeemable at the option of the Company, in
whole or in part, at any time on or after June 15, 1998, initially at 105.875%
of their principal amount plus accrued interest, declining ratably to 100% of
their principal amount plus accrued interest on and after June 15, 2000.
OFFERS TO PURCHASE. In the event of a Change of Control (as defined in the
1994 Indenture), the Company will be required, subject to certain conditions,
to offer to purchase all outstanding 1994 Notes at a price equal to 101% of the
principal amount thereof together with accrued and unpaid interest. In
addition, in the event of a Consolidated Net Worth Deficiency (as defined in
the 1994 Indenture), the Company will be required, subject to certain
conditions, to offer to purchase $4.0 million aggregate principal amount of the
1994 Notes at a price equal to 100% of the principal amount thereof together
with accrued and unpaid interest.
COVENANTS. The 1994 Indenture contains covenants that, among other things,
limit the Company's and its subsidiaries' ability to incur additional
indebtedness; make certain restricted payments; enter into transactions with
affiliates; sell their assets and capital stock; grant liens on their assets;
and merge, consolidate or transfer substantially all of their assets.
GUARANTEES. Payments under the 1994 Notes are guaranteed by the all of
the Company's existing subsidiaries and all future restricted subsidiaries.
CREDIT FACILITIES
For a description of the Company's bank credit facilities, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, par value $.01 per share, and 1,000,000 shares of Preferred
Stock, par value $.01 per share. After the consummation of the Equity Offering,
9,671,759 shares of Common Stock will be outstanding (not including 1,060,358
shares of Common Stock issuable upon conversion of the 1993 Notes). No shares
of Preferred Stock have been issued.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held
of record on all matters submitted to a vote of the shareholders. Subject to
preferential rights with respect to any outstanding Preferred Stock, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." In the event of a liquidation, dissolution or winding up of
the Company, holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities and satisfaction of preferential
rights with respect to any outstanding shares of Preferred Stock and have no
rights to convert their Common Stock into any other securities. The outstanding
shares of Common Stock are, and the Common Stock to be outstanding upon
completion of the Equity Offering will be, fully paid and nonassessable.
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.
PREFERRED STOCK
The Board of Directors is authorized to issue the Preferred Stock in one
or more series and to fix the rights, preferences, privileges and restrictions,
including the dividend rights, conversion rights, voting rights, rights and
terms of redemption, redemption price or prices, liquidation preferences and
the number of shares constituting any series or the designations of such
series, without any further vote or action by the shareholders. The issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company without further action of the shareholders.
The issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others. The Company has no present plans to issue any shares
of Preferred Stock.
CERTAIN FLORIDA LEGISLATION
The State of Florida has enacted legislation that may deter or frustrate
takeovers of Florida corporations. The Florida Control Share Act generally
provides that shares acquired in excess of certain specified thresholds will
not possess any voting rights unless such voting rights are approved by a
majority of a corporation's disinterested shareholders. The Florida Affiliated
Transactions Act generally requires supermajority approval by disinterested
shareholders or majority approval by disinterested directors of certain
specified transactions between a public corporation and holders of more than
10% of the outstanding voting shares of the corporation (or their affiliates).
55
<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, Salomon Brothers Inc (the "Underwriter") has
agreed to purchase, and the Company has agreed to sell to such Underwriter,
$75,000,000 aggregate principal amount of Senior Notes. The Underwriting
Agreement provides that the obligations of the Underwriter to pay for and
accept delivery of the Senior Notes are subject to approval of certain legal
matters by its counsel and to certain other conditions. The Underwriter is
obligated to take and pay for all of the Senior Notes offered hereby if any
such Senior Notes are taken.
The Underwriter has advised the Company that it proposes initially to
offer part of the Senior Notes directly to the public at the public offering
price set forth on the cover page of this Prospectus and part to certain
dealers at a price which represents a concession not in excess of % of the
principal amount of the Senior Notes. The Underwriter may allow, and such
dealers may reallow, a concession not in excess of % of the principal amount
of the Senior Notes to certain other dealers. After the public offering, the
public offering price and such concessions may be changed from time to time by
the Underwriter. The Underwriter has informed the Company that the Underwriter
does not intend to confirm sales to accounts over which it exercises
discretionary authority.
The Company, the Guarantors and the Underwriter have agreed to indemnify
each other against certain liabilities, including liabilities under the
Securities Act.
The Senior Notes are a new issue of securities which have no established
trading market. It is expected that the Senior Notes will be sold to a limited
number of investors. The Company has been advised by the Underwriter that it
intends to make a market in the Senior Notes after the consummation of the
Notes Offering; however, the Underwriter is not obligated to do so, and any
such market-making, if commenced, may be terminated at any time without notice.
No assurance can be given as to the liquidity of the trading market, if any,
for the Senior Notes.
The Underwriter may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Exchange Act. Over-allotment involves syndicate sales in excess of
the offering size, which creates a syndicate short position. Stabilizing
transactions permit bids for and purchases of the Senior Notes so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Senior Notes in the open market in order
to cover syndicate short positions. Penalty bids permit the Underwriter to
reclaim a selling concession from a syndicate member when the Senior Notes
originally sold by such syndicate member is purchased in a stabilizing
transaction or syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the Senior Notes to be higher than it would
otherwise be in the absence of such transactions. The Underwriter is not
required to engage in these activities, and may end any of these activities at
any time.
56
<PAGE>
LEGAL MATTERS
Certain legal matters relating to the issuance and sale of the Senior
Notes offered hereby will be passed upon for the Company by Greenberg Traurig
Hoffman Lipoff Rosen & Quentel, P.A., Miami, Florida. Certain legal matters
relating to the Notes Offering will be passed upon for the Underwriter by
Cahill Gordon & Reindel (a partnership including a professional corporation),
New York, New York.
EXPERTS
The Consolidated Financial Statements of the Company and the related
schedule included and incorporated by reference in this Prospectus and in the
Registration Statement have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods set forth in
their reports appearing elsewhere and incorporated by reference herein and in
the Registration Statement, and are included in reliance upon such reports
given upon the authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company has filed a registration statement on Form S-2 (together with
all amendments and exhibits thereto, the "Registration Statement") under the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement and the exhibits
filed as part thereof. Statements contained herein are qualified in their
entirety by reference to the Registration Statement and such exhibits.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices located at Citicorp Center, 500 West Madison,
14th Floor, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor,
New York, New York 10048. 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. The Commission also maintains a
World Wide Web site on the Internet at http://www.sec.gov that contains reports
and other information regarding registrants that file electronically with the
Commission. The Common Stock is listed on the Nasdaq National Market, and such
reports, proxy statements and other information can also be inspected at the
offices of The Nasdaq National Market, Reports Section, 1735 K Street, N.W.,
Washington, D.C. 20006.
57
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K, as amended, for the fiscal year
ended October 31, 1997, is hereby incorporated herein by reference.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to constitute
a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the request of any such person, a copy of
all of the documents which are incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to Engle Homes,
Inc., 123 N.W. 13th Street, Suite 300, Boca Raton, Florida 33432, Attention:
David Shapiro, Vice President--Finance, telephone number (561) 391-4012.
58
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
-----
Report of Independent Certified Public Accountants ......... F-2
Consolidated Balance Sheets
as of October 31, 1997 and 1996 ........................... F-3
Consolidated Statements of Income
For the Years Ended October 31, 1997, 1996 and 1995 ...... F-4
Consolidated Statements of Shareholders' Equity
For the Years Ended October 31, 1997, 1996 and 1995 ...... F-5
Consolidated Statements of Cash Flows
For the Years Ended October 31, 1997, 1996 and 1995 ...... F-6
Notes to Consolidated Financial Statements .................. F-7
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders' and Board of Directors
Engle Homes, Inc.
Boca Raton, Florida
We have audited the accompanying consolidated balance sheets of Engle
Homes, Inc., and subsidiaries as of October 31, 1997 and 1996 and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended October 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Engle
Homes, Inc. and subsidiaries at October 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended October 31, 1997 in conformity with generally accepted accounting
principles.
BDO SEIDMAN, LLP
Miami, Florida
November 10, 1997
F-2
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
1997 1996
---------- ---------
<S> <C> <C>
ASSETS
CASH
Unrestricted ......................................................... $ 15,565 $ 18,262
Restricted ............................................................ 981 3,438
INVENTORIES ............................................................ 230,108 220,564
PROPERTY AND EQUIPMENT, net .......................................... 2,623 3,599
OTHER ASSETS ......................................................... 15,803 19,406
GOODWILL, net of accumulated amortization
of $1,149 and $813, respectively .................................... 5,627 5,964
DEFERRED TAX ASSET ................................................... 3,176 550
MORTGAGE LOANS HELD FOR SALE .......................................... 14,529 13,006
-------- --------
TOTAL ASSETS ...................................................... $288,412 $284,789
======== ========
LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES .............................. $ 21,167 $ 26,170
CUSTOMER DEPOSITS ...................................................... 7,472 12,004
BORROWINGS ............................................................ 82,064 82,117
SENIOR NOTES PAYABLE, including $5,390 to related parties ............ 40,000 40,000
CONVERTIBLE SUBORDINATED NOTES ....................................... 30,000 30,000
FINANCIAL SERVICE BORROWINGS .......................................... 14,529 13,006
-------- --------
TOTAL LIABILITIES ................................................ 195,232 203,297
-------- --------
SHAREHOLDERS' EQUITY
PREFERRED STOCK, $.01 par, shares authorized 1,000,000; none issued ...
COMMON STOCK, $.01 par shares authorized 25,000,000;
issued and outstanding 6,931,693 and 6,929,200 respectively ......... 69 69
ADDITIONAL PAID-IN CAPITAL ............................................. 47,852 48,523
RETAINED EARNINGS ...................................................... 45,259 32,900
-------- --------
TOTAL SHAREHOLDERS' EQUITY ....................................... 93,180 81,492
-------- --------
$288,412 $284,789
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------
1997 1996 1995
---------- ---------- ---------
<S> <C> <C> <C>
REVENUES
Sales of homes ....................................... $404,407 $303,972 $216,059
Sales of land ....................................... 7,685 17,571 20,964
Rent and other ....................................... 1,513 1,485 1,573
Financial services ................................. 11,690 9,060 5,932
-------- -------- --------
425,295 332,088 244,528
-------- -------- --------
COSTS AND EXPENSES
Cost of sales-homes ................................. 345,295 260,651 184,888
Cost of sales-land ................................. 7,095 15,589 17,332
Selling, marketing, general and administrative ...... 39,620 31,906 24,466
Depreciation and amortization ........................ 2,374 2,977 3,532
Financial services ................................. 9,012 7,264 4,774
-------- -------- --------
403,396 318,387 234,992
-------- -------- --------
INCOME BEFORE INCOME TAXES ........................... 21,899 13,701 9,536
Provision for income taxes ........................... 8,431 5,206 3,624
-------- -------- --------
NET INCOME .......................................... $ 13,468 $ 8,495 $ 5,912
======== ======== ========
Net income per share
Primary ............................................. $ 1.94 $ 1.20 $ 0.85
======== ======== ========
Fully diluted ....................................... $ 1.58 $ 1.03 $ 0.74
======== ======== ========
Shares used in earnings per share calculations
Primary ............................................. 6,951 7,108 6,989
Fully diluted ....................................... 9,246 9,251 9,132
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- ADDITIONAL RETAINED
SHARES AMOUNT PAID-IN CAPITAL EARNINGS TOTAL
----------- -------- ----------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Amounts at October 31, 1994 ......... 6,679,200 $ 67 $45,525 $20,711 $66,303
Net income ........................ 5,912 5,912
Dividends to shareholders ......... (1,109) (1,109)
Common Stock issued in connection
with acquisition of land ......... 250,000 2 2,998 3,000
--------- ---- ------- ------- --------
Amounts at October 31, 1995 ......... 6,929,200 $ 69 $48,523 $25,514 $74,106
Net income ........................ 8,495 8,495
Dividends to shareholders ......... (1,109) (1,109)
--------- ---- ------- -------- --------
Amounts at October 31, 1996 ......... 6,929,200 $ 69 $48,523 $32,900 $81,492
Net income ........................ 13,468 13,468
Dividends to shareholders ......... (1,109) (1,109)
Distribution in connection with
land purchase ..................... (694) (694)
Common Stock issued in connection with
employee stock bonus plan ......... 2,493 23 23
--------- ---- ------- -------- --------
Amounts at October 31, 1997 ......... 6,931,693 $ 69 $47,852 $45,259 $93,180
========= ==== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------------
1997 1996 1995
------------ ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ......................................................... $ 13,468 $ 8,495 $ 5,912
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization .................................... 2,374 2,977 3,532
Impairment loss ................................................... 2,156 1,948
Deferred tax (benefit) provision ................................. (2,626) (1,508) 154
Employee stock compensation ....................................... 24
Change in assets and liabilities:
Decrease in restricted cash ....................................... 2,457 819 221
Increase in inventories .......................................... (11,700) (23,848) (56,957)
Decrease (increase) in other assets .............................. 3,231 (5,396) (822)
Increase in mortgages held for sale .............................. (1,523) (6,533) (3,910)
(Decrease) increase in accounts payable and accrued expenses ...... (5,003) 12,462 2,181
(Decrease) increase in deposits .................................... (4,532) 2,785 929
Increase in financial service borrowings ........................... 1,523 6,533 3,910
--------- -------- ---------
Net cash required by operating activities ..................... (151) (1,266) (44,850)
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment .............................. (1,282) (707) (1,567)
Proceeds from sale of property .................................... 592 7,538
--------- -------- ---------
Net cash (required) provided by investing activities ............ (690) 6,831 (1,567)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in borrowings ............................................. 47,510 94,872 105,955
Repayment of borrowings ............................................. (47,563) (90,209) (57,929)
Distribution to shareholders ....................................... (1,803) (1,109) (1,109)
--------- -------- ---------
Net cash (required) provided by financing activities ............ (1,856) 3,554 46,917
--------- -------- ---------
NET (DECREASE) INCREASE IN CASH .................................... (2,697) 9,119 500
CASH AT BEGINNING OF PERIOD .......................................... 18,262 9,143 8,643
--------- -------- ---------
CASH AT END OF PERIOD ................................................ $ 15,565 $ 18,262 $ 9,143
========= ======== =========
Supplemental disclosure of cash flow information
Interest paid ...................................................... $ 15,623 $ 15,293 $ 14,915
========= ======== =========
Income taxes paid ................................................... $ 10,324 $ 4,902 $ 3,407
========= ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND BUSINESS:
Engle Homes, Inc. and subsidiaries ("the Company") is engaged principally
in the construction and sale of residential homes and land development. The
Company's primary market is Florida with divisions in Dallas, Texas; Denver,
Colorado; Virginia and Maryland; Raleigh, North Carolina; Phoenix, Arizona and
Atlanta, Georgia. Ancillary products and services to its residential home
building include land sales to other builders, origination and sale of mortgage
loans and title services. The consolidated financial statements include the
accounts of the Company and all subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
PREPARATION OF FINANCIAL STATEMENTS:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
ASSET IMPAIRMENTS:
During fiscal 1996, the Company adopted Financial Accounting Standard
Statement No. 121 entitled "Accounting for the Impairment of Long-Lived Assets
to be Disposed of" which was not significantly different from the Company's
previous asset impairment accounting policy. The Company periodically reviews
the carrying value of certain of its assets in relation to historical results,
current business conditions and trends to identify potential situations in
which carrying value of assets may not be recoverable. If such reviews indicate
that the carrying value of such assets may not be recoverable, the Company
would estimate the undiscounted sum of the expected cash flows of such assets
to determine if such sum is less than the carrying value of such assets to
ascertain if a permanent impairment exists. If a permanent impairment exists,
the Company would determine the fair value by using quoted market prices, if
available for such assets, or if quoted market prices are not available, the
Company would discount the expected future cash flows of such assets.
CASH:
Unrestricted cash includes amounts in transit from title companies for
home closings and highly liquid investments with an initial maturity of three
months or less.
Restricted cash consists of amounts held in escrow as required by purchase
contracts or by law for rental security deposits and compensating balances for
various letters of credit.
INVENTORIES:
Inventories are stated at the lower of cost or fair value. Inventories
under development or held for development are stated at an accumulated cost
unless such cost would not be recovered from the cash flows generated by future
disposition. In this instance, such inventories are measured at fair value.
Interest, real estate taxes and similar development costs are capitalized
to land and construction costs during the development and construction period
and are amortized to costs of sales as closings occur.
F-7
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
PROPERTY AND EQUIPMENT, DEPRECIATION AND AMORTIZATION:
Property and equipment are stated at cost. Depreciation and amortization
are provided over the assets' estimated useful lives ranging from 18 months to
30 years, primarily on the straight-line method. Loan costs are deferred and
amortized over the term of the outstanding borrowings.
GOODWILL:
The Company has classified as goodwill, the excess of cost over the fair
value of the net assets of companies acquired in purchase transactions.
Goodwill is being amortized on a straight line method over 20 years.
Amortization charged to operations annually amounted to $336,550 in fiscal
1997, 1996, and 1995 respectively.
REVENUE RECOGNITION:
Revenues and profits from sales of commercial and residential real estate
and related activities are recognized when closings have occurred and the
purchaser has made a minimum down payment and other criteria for sale and
profit recognition are satisfied in accordance with generally accepted
accounting principles governing profit recognition for real estate
transactions.
SELLING AND MARKETING:
Certain selling and marketing costs associated with residential projects
are deferred and amortized as closings related to those sales occur and revenue
is recognized. The deferred selling and marketing amount was $1,300,000 at
October 31, 1997. The Company amortized selling and marketing costs of
$27,800,000, $22,100,000 and $15,600,000 in 1997, 1996 and 1995, respectively.
INCOME TAXES:
The Company accounts for income taxes under the asset and liability method
in accordance with Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes."
EARNINGS PER SHARE:
Net income per share is based on the weighted average number of shares of
Common Stock outstanding during each year, after giving effect to the stock
splits, convertible debt and stock options described in Notes 5 and 6. Such
computations are further adjusted for fully diluted purposes by assuming
conversion of the $30,000,000 7% Convertible Subordinated Notes and elimination
of related interest amortized net of taxes during the period, resulting in an
increase in net income of $1,114,000, $1,071,000 and $854,905 for the years
ended October 31, 1997, 1996 and 1995 respectively.
FINANCIAL INSTRUMENTS:
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques as appropriate, unless
otherwise disclosed, the fair values of financial instruments approximate their
recorded values.
F-8
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
STOCK BASED COMPENSATION:
On October 23, 1995, the Financial Accounting Standards Board issued a
SFAS No. 123, "Accounting for Stock-Based Compensation," which is effective for
financial statements for fiscal years beginning after December 15, 1995.
Statement No. 123 provides a fair value method of accounting for stock-based
compensation arrangements rather than the intrinsic value based method
contained in APB Opinion No. 25. The Statement does not require an entity to
adopt the new fair value based method for the purpose of preparing its basic
financial statements. Entities that retain the APB Opinion No. 25 method of
accounting will be required to display in the footnotes pro forma net income
and earnings per share information as if the fair value based method had been
adopted. The Company currently does not intend to adopt the Fair-Value Method
provided in Statement No. 123.
NEW ACCOUNTING PRONOUNCEMENTS:
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," issued in February 1997, replaces the current methodology for
calculating and presenting earnings per share. Under SFAS No. 128, primary
earnings per share will be replaced with a presentation of basic earnings per
share and fully diluted earnings per share will be replaced with diluted
earnings per share. Basic earnings per share excludes dilution and is computed
by dividing income available to common shares outstanding for the period by the
weighted average number of shares of common stock outstanding. Diluted earnings
per share is computed similarly to fully diluted earnings per share in
accordance with APB Opinion No. 15. The Statement will be effective for
financial statements issued by the Company after December 15, 1997. The impact
of SFAS No. 128 is not expected to be material.
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in equity
except those resulting from investments by owners and distributions to owners.
Among other disclosures, SFAS No. 130 requires that all items that are required
to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which supersedes SFAS No. 14, Financial Reporting for Segments of
a Business Enterprise, establishes standards for the way that public
enterprises report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate the resources and in assessing performance.
Both SFAS No. 130 and No. 131, issued in June 1997, are effective for
financial statements for periods beginning after December 15, 1997 and require
comparative information for earlier years to be restated. Due to the recent
issuance of these standards, management has been unable to fully evaluate the
impact, if any, they may have on future financial statement disclosures.
F-9
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
FINANCIAL STATEMENT RECLASSIFICATIONS:
Certain amounts reflected in the consolidated financial statements for the
years ended October 31, 1996 and 1995 have been reclassified to conform to the
presentation for the year ended October 31, 1997.
NOTE 2--INVENTORIES
Inventories consist of (dollars in thousands):
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
1997 1996
---------- ---------
<S> <C> <C>
Land and improvements for residential homes under
development .................................... $180,899 $161,590
Residential homes under construction ............ 46,049 55,715
Land zoned for commercial development ............ 1,780 1,780
Investment in unconsolidated joint ventures ...... 1,380 1,479
-------- --------
$230,108 $220,564
======== ========
</TABLE>
The investment in the unconsolidated joint venture consists of land
purchased in connection with a joint venture with US Home. Each company
maintains a fifty percent (50%) interest in the venture. The land is being
developed by the joint venture and then transferred to each joint venture
partner at the venture's cost. The Company and US Home separately market and
build the homes.
Included in inventory is the following (dollars in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------------
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Interest capitalized, beginning of period ...... $ 16,821 $ 13,092 $ 6,246
Interest incurred and capitalized ............... 15,623 15,272 13,750
Interest amortized to cost of sales ............ (16,066) (11,543) (6,904)
--------- --------- --------
Interest capitalized, end of period ............ $ 16,378 $ 16,821 $ 13,092
========= ========= ========
</TABLE>
Included in the cost of sales-homes during the years ended October 31,
1997 and 1996, are impairment losses of $2.2 million and $1.9 million,
respectively, to reduce certain projects under development to fair value.
NOTE 3--PROPERTY AND EQUIPMENT (dollars in thousands)
<TABLE>
<CAPTION>
OCTOBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Commercial properties ............... $ 1,041 $ 1,825
Other property and equipment ......... 3,835 4,756
-------- --------
4,876 6,581
Less: accumulated depreciation ...... (2,253) (2,982)
-------- --------
$ 2,623 $ 3,599
======== ========
</TABLE>
During fiscal 1996, the Company sold three commercial properties, a 38,000
square foot shopping plaza and a 60,000 square foot mixed use office building,
both located in Boca Raton, Florida, and a 95 unit rental apartment complex in
Orlando, Florida.
F-10
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--FINANCIAL SERVICES
The Company operates two financial services subsidiaries: a full service
mortgage company and a title company.
The mortgage company's activities include the origination, sale and
servicing of residential mortgages. The mortgage company has established an
$18.0 million line of credit at prime minus .25% (8.25% at October 31, 1997),
expiring April 1998, to finance mortgage originations. As of October 31, 1997,
the balance outstanding under the line of credit was approximately $14.5
million. Management does not anticipate that such expanded operations will
significantly impact the Company's liquidity because the originated mortgages
are sold within a short period of time after their origination to qualified
investors. The following is a summary of the mortgage company's results of
operations and financial position:
PREFERRED HOME MORTGAGE COMPANY
INCOME STATEMENT INFORMATION
(dollars in thousands)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER
31,
-----------------------------
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
REVENUES
Loan origination fees ............ $3,556 $3,041 $1,551
Interest ........................... 577 494 134
------ ------ ------
TOTAL REVENUES ..................... 4,133 3,535 1,685
------ ------ ------
COSTS AND EXPENSES ..................
General and administrative ......... 1,724 1,716 982
Interest ........................... 570 514 174
Application processing costs ...... 566 512 208
------ ------ ------
TOTAL EXPENSES ..................... 2,860 2,742 1,364
------ ------ ------
INCOME BEFORE TAXES ............... $1,273 $ 793 $ 321
====== ====== ======
</TABLE>
F-11
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--FINANCIAL SERVICES--(CONTINUED)
PREFERRED HOME MORTGAGE COMPANY
BALANCE SHEET INFORMATION
(dollars in thousands)
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
1997 1996
--------- --------
<S> <C> <C>
ASSETS
CASH ............................................. $ 102 $ 106
MORTGAGE LOANS HELD FOR SALE ..................... 14,529 13,006
MORTGAGE LOANS RECEIVABLE ........................ 171 360
OTHER .......................................... 559 655
ADVANCES TO PARENT (a) ........................... 1,877 331
------- -------
TOTAL ASSETS ................................. $17,238 $14,458
======= =======
LIABILITIES AND EQUITY
ACCOUNTS PAYABLE ................................. $ 66 $ 82
NOTES PAYABLE .................................... 14,529 13,006
------- -------
TOTAL LIABILITIES .............................. 14,595 13,088
SHAREHOLDERS' EQUITY ........................... 2,643 1,370
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...... $17,238 $14,458
======= =======
</TABLE>
- ----------------
(a) Certain intercompany transactions and balances are eliminated in
consolidation and have no effect on consolidated earnings or equity.
NOTE 5--BORROWINGS (dollars in thousands)
Borrowings consist of:
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
1997 1996
---------- ---------
<S> <C> <C>
Acquisition and development loans from banks, payable through
1999, with interest at floating rates (8.75% at October 31, 1997),
collateralized by inventories .................................... $ 13,357 $ 24,907
Purchase money mortgages, collateralized by inventories ......... 1,624
Revolving construction loans from banks, payable through 2000
with interest at floating rates (8.15% to 9.00% at October 31,
1997), collateralized by inventories ........................... 68,622 55,541
Other ............................................................ 85 45
-------- --------
Borrowings ...................................................... $ 82,064 82,117
Senior Notes due December 15, 2000 with interest at a fixed rate
of 11 3/4% payable semi-annually ................................. $ 40,000 $ 40,000
Convertible Subordinated Notes due March 1, 2003 with interest
at a fixed rate of 7% payable semi-annually ..................... $ 30,000 $ 30,000
-------- --------
$152,064 $152,117
======== ========
</TABLE>
On February 22, 1993, the Company sold $30,000,000 of 7% Convertible
Subordinated Notes Due 2003 (the "Notes"). The Notes are convertible into
Common Stock at a conversion price of $14.00 per share and are redeemable in
whole or in part, at the option of the Company on or after April 1, 1996.
F-12
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5--BORROWINGS--(CONTINUED)
In October 1997, the Company announced the early redemption of $15 million
of the Notes. The redemption is anticipated to be completed in November 1997 at
a redemption price of $1,042.50 per $1,000 (face value) of Notes.
The Company's loan agreements include covenants, including restrictions on
the Company's ability to pay dividends (no more than 50% of net income after
taxes for each fiscal year). Certain of such loans also require that the
principal shareholders continue to beneficially own a majority of the Company's
outstanding Common Stock and provide that the lender may, at its option,
accelerate such loans as a result of, among other things, mergers with other
entities. In addition, the Convertible Subordinated Notes and the Senior Notes
are guaranteed by all of the Company's subsidiaries on a full, unconditional,
joint and several basis. The financial statements of the subsidiary guarantors
are omitted as management has determined that they would not be material to
investors.
Maturities of borrowings are as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
- ----------------------------------
<S> <C>
1998 ........................... 4,424
1999 ........................... 42,004
2000 ........................... 74,173
2001 ........................... --
Thereafter ..................... 31,463
--------
$152,064
========
</TABLE>
The Company has approximately $18,921,000 available for future borrowings
under various acquisition and development related borrowing arrangements at
October 31, 1997.
As of October 31, 1997, the outstanding principal amount of 7% Convertible
Subordinated Notes and 113/4% Senior Notes were $30,000,000 and $40,000,000,
respectively. The aggregate fair market value of the notes, based upon their
quoted market price as of October 31, 1997, was approximately $75,610,000. All
other borrowings, due to their relative short-term maturity, approximate fair
market value as of October 31, 1997.
NOTE 6--STOCK-BASED COMPENSATION
At October 31, 1997, the Company has a fixed stock option plan which is
described below. The Company applies APB Opinion 25, Accounting for Stock
Issued to Employees, and related interpretations in accounting for the plan.
Under APB Opinion 25, if the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant,
no compensation is recognized.
Under the plan, options were authorized to be granted to purchase 850,000
common shares at not less than the fair market value at the date of grant.
Options expire ten years from the date of grant.
FASB Statement 123, Accounting for Stock-Based Compensation, requires the
Company to provide proforma information regarding net income and net income per
share as if compensation cost for the Company's stock option plan had been
determined in accordance with the fair-value based method prescribed in FASB
Statement 123. There were no options granted during the year ended October 31,
1997 and options to purchase 5,000 shares were granted during the year ended
October 31, 1996. The Company's pro forma net income and income per share under
the accounting provisions of FASB Statement 123 did not materially differ from
the reported amounts.
F-13
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--STOCK-BASED COMPENSATION--(CONTINUED)
A summary of the status of the Company's fixed stock option plan as of
October 31, 1997 and 1996, and changes during the years then ended on those
dates are presented below:
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1997 AS OF OCTOBER 31, 1996
------------------------------ --------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- ------------------ ------------ -----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year ...... 606,500 $10.76 624,000 $ 10.80
Granted .............................. -- -- 5,000 $ 9.00
Exercised .............................. -- -- -- --
Forfeited .............................. -- -- (22,500) $ 11.50
Outstanding at end of year ............ 606,500 $10.76 606,500 $ 10.76
------- ------ ------- -------
Options exercisable at year-end ...... 502,000 $11.10 387,200 $ 11.20
Weighted average fair value of options
granted during the year ............... -- -- 5,000 $ 9.00
</TABLE>
The following table summarizes information about fixed stock options
outstanding at October 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------------------------------------------- -------------------------------
NUMBER WEIGHTED AVERAGE WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICES AT 10/31/97 CONTRACTUAL LIFE EXERCISE PRICE AT 10/31/97 EXERCISE PRICE
- ------------------ ------------- ------------------ ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$9.00 - $11.50 606,500 5 years $10.76 502,000 $11.10
</TABLE>
During fiscal 1997 the Company established the 1997 Performance Bonus Plan
(the "Bonus Plan"). The Bonus Plan provides for the issuance of up to 25,000
shares at "Fair Market Value" to certain management employees. The Company
issued 2,493 shares valued at approximately $24,000 during fiscal 1997.
NOTE 7--INCOME TAXES
The income tax provision in the consolidated statements of income consists
of the following components (dollars in thousands) :
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------
1997 1996 1995
----------- ----------- -------
<S> <C> <C> <C>
Current:
Federal ...... $ 9,467 $ 5,734 $2,952
State ......... 1,589 981 518
-------- -------- ------
$ 11,056 $ 6,715 $3,470
-------- -------- ------
Deferred:
Federal ...... (2,250) (1,288) 132
State ......... (375) (221) 22
-------- -------- ------
(2,625) (1,509) 154
-------- -------- ------
Total ...... $ 8,431 $ 5,206 $3,624
======== ======== ======
</TABLE>
The provision for income taxes was different from the amount computed by
applying the statutory rate due to the effect of state income taxes.
F-14
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--INCOME TAXES--(CONTINUED)
Temporary differences which gave rise to deferred income tax assets and
liabilities at October 31, 1997 and 1996 were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------------
1997 1996
------------ -----------
<S> <C> <C>
Deferred tax liabilities:
Differences in reporting selling and marketing costs for tax
purposes. ................................................... $ 818 $ 1,185
Other ...................................................... 97 68
-------- -------
Gross deferred tax liabilities .............................. $ 915 $ 1,253
Deferred tax assets:
Inventory ................................................... 2,822 913
Property and equipment .................................... 384 534
Income recognized for tax purposes and deferred for financial
reporting purposes ....................................... 885 356
-------- -------
Gross deferred tax assets .................................... 4,091 1,803
-------- -------
Net deferred tax asset ....................................... $ (3,176) $ (550)
======== =======
</TABLE>
NOTE 8--COMMITMENTS AND CONTINGENCIES
The Company is subject to the normal obligations associated with entering
into contracts for the purchase, development and sale of real estate in the
routine conduct of its business. The Company is committed under various letters
of credit to perform certain development activities, deposits on land and lot
purchase contract deposits. Outstanding letters of credit and performance bonds
under these arrangements totaled approximately $29.2 million at October 31,
1997.
During fiscal 1996, the Company entered into an agreement for the sale and
leaseback of the Company's office/retail complex located at the Company's
headquarters in Boca Raton, Florida. The sales price was $8,000,000, which
approximated the carrying amount. The lease is classified as an operating lease
in accordance with Statement of Financial Accounting Standards No. 13,
"Accounting for Leases."
The Company and its subsidiaries occupy certain facilities under lease
arrangements. Rent expense, net of sublease income, amounted to $293,541,
$302,582, and $202,888 in fiscal 1997, 1996, and 1995, respectively. Future
minimum rental commitments for operating leases with non-cancelable terms in
excess of one year are $800,000 per year through 2006. Sublease income is
derived primarily from tenants occupying space under month-to-month and annual
leases.
The Internal Revenue Service is in the process of reviewing the Company's
tax returns for the years 1994 through 1996. While the Company cannot be
certain of the results of these audits, it believes that adjustments, if any,
will not be material.
The Company is involved, from time to time, in litigation arising in the
ordinary course of business, none of which is expected to have a material
adverse effect on the Company's consolidated financial position or results of
operations.
The Company, as well as the homebuilding industry in general, may be
adversely affected during periods of high inflation, primarily because of
higher land and construction costs. In addition, higher
F-15
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
mortgage interest rates may significantly affect the affordability of permanent
mortgage financing to prospective purchasers. Inflation also increases the
Company's interest costs and costs of labor and materials. The Company attempts
to pass through to its customers any increases in its costs through increased
selling prices and, to date, inflation has not had a material adverse effect on
the Company's results of operations. However, there is no assurance that
inflation will not have a material adverse impact on the Company's future
results of operations.
The Company's operations are interest rate sensitive. Overall housing
demand is adversely affected by increases in interest costs. If mortgage
interest rates increase significantly, this may negatively impact the ability
of a home buyer to secure adequate financing and may adversely affect the
carrying value of inventory. Such results of higher interest rates may result
in adversely affecting the Company's revenues, gross margins and net income.
NOTE 9--DEFERRED COMPENSATION PLAN
The Company has a defined contribution plan established pursuant to
Section 401(k) of the Internal Revenue Code. Employees contribute to the plan a
percentage of their salaries, subject to certain dollar limitations, and the
Company matches a portion of the employees' contributions. The Company's
contribution to the plan for the years ended October 31, 1997, 1996, and 1995
amounted to $93,000, $61,000 and $66,000, respectively.
NOTE 10--SUMMARIZED FINANCIAL INFORMATION
The securities that may be issued under a debt offering contemplated by
the Company will be guaranteed by all of the Company's subsidiaries on a full,
unconditional, joint and several basis. The financial statements of the
subsidiary guarantors are omitted as management has determined that separate
financial statements and other disclosures concerning the subsidiaries are not
material to investors.
Summarized financial information of guarantor subsidiaries are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------
1997 1996 1995
---------- ---------- ---------
<S> <C> <C> <C>
Inventory ....................................... $194,847 $204,200 $178,407
Total assets .................................... 247,966 239,402 215,204
Borrowings .................................... 51,346 50,098 50,563
Total liabilities .............................. 146,817 155,045 154,241
Revenues from the sales of homes and land ...... 339,198 282,773 198,598
Total revenues ................................. 378,996 293,103 205,209
Cost of sales homes and land .................. 293,884 241,518 167,955
Net income .................................... 10,230 11,341 8,861
</TABLE>
F-16
<PAGE>
ENGLE HOMES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11--QUARTERLY RESULTS FOR 1997 AND 1996 (UNAUDITED)
Quarterly results for the years ended October 31, 1997 and 1996 follow:
(dollars in thousands, except per share data):
<TABLE>
<CAPTION>
1997 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
------------------------------------------------------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues ................................................... $100,108 $105,120 $107,125 $112,942
Income before income taxes ................................. 4,618 4,999 5,856 6,426
Net Income ................................................. 2,840 3,074 3,602 3,952
Net income per share
Primary ................................................... 0.41 0.44 0.52 0.56
Fully diluted ............................................. 0.34 0.36 0.43 0.46
Shares used in earnings per share
calculation:
Primary ................................................... 6,989 6,962 6,963 7,047
Fully diluted ............................................. 9,132 9,105 9,106 9,246
1996
----
Revenues ................................................... $ 60,050 $ 76,034 $ 90,393 $105,611
Income before income taxes ................................. 1,306 3,304 3,990 5,101
Net Income ................................................. 810 2,048 2,474 3,163
Net income per share
Primary ................................................... 0.12 0.29 0.35 0.44
Fully diluted ............................................. 0.11 0.25 0.30 0.38
Shares used in earnings per share
calculation:
Primary ................................................... 6,989 7,037 7,120 7,108
Fully Diluted ............................................. 9,132 9,180 9,263 9,251
</TABLE>
Quarterly and year-to-date computation of per share amounts are made
independently. Therefore, the sum of per share amounts for the quarters may not
agree with per share amounts for the year.
NOTE 12--NON-CASH INVESTING AND FINANCING ACTIVITIES
During fiscal 1996 the Company sold certain commercial properties in
exchange for cash of $7.5 million and notes receivable of $3.9 million.
During fiscal 1995 the Company purchased land valued at $3.0 million in
exchange for 250,000 restricted shares of Common Stock with a minimum
guaranteed price of $12.00 a share. In connection with this transaction, the
Company recorded a deferred tax liability of $280,000 representing the
differential in the basis of the land for financial reporting and tax reporting
purposes. During fiscal 1997, the Company paid the seller approximately
$694,000 in connection with the guarantee. The guarantee expired during fiscal
1997.
F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT
RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER
IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------------------
TABLE OF CONTENTS
PAGE
----------
Prospectus Summary ........................ 3
Risk Factors .............................. 10
Use of Proceeds ........................... 14
Capitalization ........................... 15
Selected Consolidated Financial and
Operating Data ........................ 16
Management's Discussion and
Analysis of Financial Condition
and Results of Operations ............ 18
Business ................................. 24
Management .............................. 31
Description of the Senior Notes ......... 33
Description of Certain Indebtedness ...... 53
Description of Capital Stock ............ 55
Underwriting .............................. 56
Legal Matters ........................... 57
Experts ................................. 57
Available Information ..................... 57
Incorporation of Certain Documents
by Reference ........................... 58
Index to Consolidated Financial
Statements ........................... F-1
$75,000,000
ENGLE HOMES, INC.
% SENIOR NOTES
DUE 2008
[LOGO]
-----------------
P R O S P E C T U S
, 1998
-----------------
SALOMON SMITH BARNEY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that expenses payable by the Registrant in
connection with the offering described in this registration statement (other
than underwriting discounts and commissions) will be as follows:
Securities and Exchange Commission registration fee ............ $ 22,728
NASD filing fee ................................................ 8,000
Printing and engraving expenses ................................. 40,000
Accounting fees and expenses .................................... 20,000
Legal fees and expenses ....................................... 40,000
Fees and expenses (including legal fees) for qualifications under
state securities laws ....................................... 25,000
Trustee's fees and expenses .................................... 1,000
Miscellaneous ................................................... 243,272
--------
Total ......................................................... $400,000
========
All amounts except the Securities and Exchange Commission registration fee
and the NASD filing fee are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under the Florida Business Corporation Act to
indemnify its directors and officers to the extent provided in such statute.
The Registrant's Amended and Restated Articles of Incorporation provide that
the Registrant may indemnify its executive officers and directors to the
fullest extent permitted by law either now or hereafter. The Registrant has
also entered into an agreement with each of its directors and certain of its
officers wherein it has agreed to indemnify each of them to the fullest extent
permitted by law. In general, Florida law permits a Florida corporation to
indemnify its directors, officers, employees and agents, and persons serving at
the corporation's request in such capacities for another enterprise against
liabilities arising from conduct that such persons reasonably believed to be
in, or not opposed to, the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition,
each director will continue to be subject to liability for (a) violations of
the criminal law, unless the director had reasonable cause to believe his
conduct was lawful or had no reasonable cause to believe his conduct was
unlawful, (b) deriving an improper personal benefit from a transaction, (c)
voting for or assenting to an unlawful distribution, and (d) willful misconduct
or a conscious disregard for the best interests of the Registrant in a
proceeding by or in the right of the Registrant to procure a judgment in its
favor or in a proceeding by or in the right of a shareholder. The statute does
not affect a director's responsibilities under any other law, such as the
Federal securities laws or state or Federal environmental laws.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought from the Registrant, nor is the Registrant aware of any threatened
litigation that may result in claims for indemnification from the Registrant by
any officer or director.
II-1
<PAGE>
Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, the Underwriter agreed to indemnify the directors,
officers and controlling persons of the Registrant against certain civil
liabilities that may be incurred in connection with this offering, including
certain liabilities under the Act.
Pursuant to the Registration Rights Agreement incorporated by reference as
Exhibit 10.3 to this Registration Statement, certain principal shareholders of
the Registrant have agreed to indemnify the directors, officers and controlling
persons of the Registrant against certain civil liabilities that may be
incurred in connection with certain future registrations of the Registrant's
Common Stock, including certain liabilities under the Act.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- ------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement.
4.1 Form of Indenture between the Registrant and the American Stock Transfer & Trust
Company, as trustee, relating to the Senior Notes.
4.2 Form of Senior Note (included in Exhibit 4.1).
5.1 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. as to the validity of the
Senior Notes and Guarantees being registered.
10.1 Registrant's Second Amended and Restated 1991 Stock Option Plan (Compensatory Plan),
hereby incorporated by reference to Exhibit A of the Registrant's Proxy Statement for its 1996
Annual Meeting.
10.2 Indemnification Agreement between the Registrant and each of its directors and certain
executive officers, hereby incorporated by reference to Exhibit 10.2 of the Company's
Registration Statement of Form S-1 (File No. 33-58678).
10.3 Registration Rights Agreement, dated October 1991, among the Registrant, Alec Englestein,
Sheila Englestein and Harry Englestein, incorporated by reference to Exhibit 4.2 to the
Registrant's Registration Statement on Form S-1 (File No. 33-43305).
10.4 Indenture, dated as of February 12, 1993, among the Registrant, its subsidiaries and the First
National Bank of Boston, relating to the Convertible Subordinated Notes, hereby incorporated
by reference to Exhibit 4.3 of the Registrant's Registration Statement on Form S-1 (File
No. 33-58678).
10.5 Indenture, dated as of March 15, 1994, relating to the Registrant's 11.75% Senior Notes due
2000, hereby incorporated by reference to Exhibit 4.9 of the Registrant's Current Report on
Form 8-K, dated March 17, 1994.
10.6 Registrant's 1997 Performance Bonus Plan (Compensatory Plan), hereby incorporated by
reference to Exhibit 10.1 of the Registrant's Registration Statement on Form S-8 (File No.
333-39223).
11.1 Statement Regarding Computation of Per Share Earnings.*
12.1 Statement of Computation of Ratio of Earnings to Fixed Charges.*
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. (included in
Exhibit 5.1).
24.1 Powers of Attorney (included on signature page).*
25.1 Statement of Eligibility on Form T-1 of Trustee.
</TABLE>
- ----------------
* Previously filed.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
ENGLE HOMES, INC.
By: /s/ ALEC ENGELSTEIN
-------------------------------------------
Alec Engelstein, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- ------------------------------------------ ------------------
<S> <C> <C>
/s/ ALEC ENGELSTEIN Chairman of the Board, President December 22, 1997
- ----------------------------- and Chief Executive Officer
Alec Engelstein (Principal Executive Officer)
/s/ DAVID SHAPIRO Vice President--Finance, Chief December 22, 1997
- ----------------------------- Financial Officer and Director
David Shapiro (Principal Financial Officer)
* Vice President--Chief Accounting Officer December 22, 1997
- ----------------------------- (Principal Accounting Officer)
Paul Leikert
* Executive Vice President, Chief December 22, 1997
- ----------------------------- Construction Officer and Director
Harry Engelstein
* Senior Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* Director December 22, 1997
- -----------------------------
Henry H. Fishkind
* Director December 22, 1997
- -----------------------------
Ronald J. Korn
/s/ ALAN L. SHULMAN Director December 22, 1997
- -----------------------------
Alan L. Shulman
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
BANYAN TRAILS, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President and Director December 22, 1997
- ----------------------------- (Principal Executive Officer)
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
ENGLE HOMES/ARIZONA, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President December 22, 1997
- ----------------------------- (Principal Executive Officer)
Mark Upton
* Vice President and Director December 22, 1997
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
ENGLE HOMES/ARIZONA CONSTRUCTION, INC.
By: *
-------------------------------------------
Mark Upton, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- ----------------------------------- ------------------
<S> <C> <C>
* President December 22, 1997
- ----------------------------- (Principal Executive Officer)
Mark Upton
* Treasurer and Assistant Secretary December 22, 1997
- ----------------------------- (Principal Financial Officer and
Karen Murray Principal Accounting Officer)
* Director December 22, 1997
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Director December 22, 1997
- -----------------------------
David Shapiro
* Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
ENGLE HOMES/ATLANTA, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President and Director December 22, 1997
- ----------------------------- (Principal Executive Officer)
Geoffrey Brunning
* Vice President and Director December 22, 1997
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* Vice President and Director December 22, 1997
- -----------------------------
Harry Engelstein
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
ENGLE HOMES/BROWARD, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President and Director December 22, 1997
- ----------------------------- (Principal Executive Officer)
Harry Engelstein
* Vice President and Director December 22, 1997
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
(Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
ENGLE HOMES/COLORADO, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President December 22, 1997
- -----------------------------
Eric Eckberg (Principal Executive Officer)
* Vice President and Director December 22, 1997
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
(Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
ENGLE HOMES/GULF COAST, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President December 22, 1997
- ----------------------------- (Principal Executive Officer)
Joe Mattarazzo
* Vice President and Director December 22, 1997
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
ENGLE HOMES/LAKE BENADETTE, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President December 22, 1997
- ----------------------------- (Principal Executive Officer)
Joe Mattarazzo
* Vice President and Director December 22, 1997
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
ENGLE HOMES/NORTH CAROLINA, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President December 22, 1997
- ----------------------------- (Principal Executive Officer)
Timothy Franks
* Vice President and Director December 22, 1997
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
ENGLE HOMES/ORLANDO, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President and Director December 22, 1997
- ----------------------------- (Principal Executive Officer)
William Carmichael
* Vice President and Director December 22, 1997
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
ENGLE HOMES/PALM BEACH, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President and Director December 22, 1997
- ----------------------------- (Principal Executive Officer)
Harry Engelstein
* Vice President and Director December 22, 1997
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
ENGLE HOMES/PEMBROKE, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President and Director December 22, 1997
- ----------------------------- (Principal Executive Officer)
Harry Engelstein
* Vice President and Director December 22, 1997
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
ENGLE HOMES/SOUTHWEST FLORIDA, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President December 22, 1997
- ----------------------------- (Principal Executive Officer)
Robert Wolfe
* Vice President and Director December 22, 1997
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
ENGLE HOMES/TEXAS, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President December 22, 1997
- ----------------------------- (Principal Executive Officer)
Michael J. Moore
* Vice President and Director December 22, 1997
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
ENGLE HOMES/VIRGINIA, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President December 22, 1997
- ----------------------------- (Principal Executive Officer)
Bruce Leinberger
* Vice President and Director December 22, 1997
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the requi
rements for filing on Form S-2 and has duly caused this Amendment No. 1 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boca Raton, State of Florida, on December 22,
1997.
GREENLEAF HOMES, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President and Director December 22, 1997
- ----------------------------- (Principal Executive Officer)
Geoffrey Brunning
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
PEMBROKE FALLS REALTY, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President and Director December 22, 1997
- ----------------------------- (Principal Executive Officer)
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
PREFERRED BUILDERS REALTY, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President and Director December 22, 1997
- ----------------------------- (Principal Executive Officer)
Paul Ackerman
* Vice President and Director December 22, 1997
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
PREFERRED HOME MORTGAGE COMPANY
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President and Director December 22, 1997
- ----------------------------- (Principal Executive Officer)
Dan Klinger
* Vice President and Director December 22, 1997
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
ST. TROPEZ AT BOCA GOLF, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President and Director December 22, 1997
- ----------------------------- (Principal Executive Officer)
Alec Engelstein
* Vice President and Director December 22, 1997
- -----------------------------
Harry Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
UNIVERSAL LAND TITLE, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
/ * President and Director December 22, 1997
- ----------------------------- (Principal Executive Officer)
Michael Glass
* Vice President and Director December 22, 1997
- -----------------------------
Alec Engelstein
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida, on
December 22, 1997.
UNIVERSAL LAND TITLE OF COLORADO, INC.
By: /s/ DAVID SHAPIRO
-------------------------------------------
David Shapiro, Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- --------------------------------- ------------------
<S> <C> <C>
* President and Director December 22, 1997
- ----------------------------- (Principal Executive Officer)
Michael Glass
/s/ DAVID SHAPIRO Vice President, Secretary, December 22, 1997
- ----------------------------- Treasurer and Director
David Shapiro (Principal Financial Officer and
Principal Accounting Officer)
* Vice President and Director December 22, 1997
- -----------------------------
John A. Kraynick
* By: /s/ DAVID SHAPIRO
-----------------------
David Shapiro,
as Attorney-in-Fact
</TABLE>
II-26
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NO. DESCRIPTION NUMBER
- --------- ---------------------------------------------------------------------------- -----------
<S> <C> <C>
1.1 Form of Underwriting Agreement
4.1 Form of Indenture between the Registrant and the American Stock Transfer &
Trust Company, as trustee, relating to the Senior Notes
5.1 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. as to the
validity of the Senior Notes and Guarantees being registered
23.1 Consent of BDO Seidman, LLP
25.1 Statement of Eligibility on Form T-1 of Trustee
</TABLE>
EXHIBIT 1.1
$75,000,000
ENGLE HOMES, INC.
% Senior Notes due 2008
UNDERWRITING AGREEMENT
January , 1998
SALOMON BROTHERS INC
Seven World Trade Center
New York, New York 10048
Dear Sirs:
Engle Homes, Inc., a Florida corporation (the "Company"), proposes,
upon the terms and conditions set forth herein, to issue and sell $75,000,000
aggregate principal amount of its % Senior Notes due 2008 (the "Notes") to
Salomon Brothers Inc (the "Underwriter"). The Notes will be guaranteed (the
"Guarantees"), on a joint and several basis, by all of the Company's
subsidiaries which are signatories hereto (the "Guarantors"). The Notes and the
Guarantees are collectively referred to herein as the "Securities." The
Securities will be issued pursuant to the provisions of an Indenture to be dated
as of January , 1998 (the "Indenture") among the Company, the Guarantors and
American Stock Transfer & Trust Company, as Trustee (the "Trustee").
Concurrently with the issuance and sale of the Securities contemplated hereby
(the "Notes Offering"), the Company is offering 2,700,000 shares of Common Stock
(the "Equity Offering") by means of a separate prospectus. The consummation of
the Notes Offering and the consummation of the Equity Offering are not
conditioned on each other.
The Company and the Guarantors wish to confirm as follows their
agreement with you in connection with the purchase of the Securities by you.
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company and the
Guarantors have prepared and filed with the Securities and Exchange Commission
(the "Commission") in accordance with the provisions of the Securities Act of
1933, as amended, and the rules and regulations of the Commission thereunder
<PAGE>
-2-
(collectively, the "Act"), a registration statement on Form S-2 File No.
333-40741 under the Act (the "registration statement"), including a prospectus
subject to completion relating to the Securities. The term "Registration
Statement" as used in this Agreement means the registration statement (including
all financial schedules and exhibits), as amended at the time it becomes
effective, or, if the registration statement became effective prior to the
execution of this Agreement, as supplemented or amended prior to the execution
of this Agreement. If it is contemplated, at the time this Agreement is
executed, that a post-effective amendment to the registration statement will be
filed and must be declared effective before the offering of the Securities may
commence, the term "Registration Statement" as used in this Agreement means the
registration statement as amended by said post-effective amendment. The term
"Prospectus" as used in this Agreement means the prospectus in the form included
in the Registration Statement, or, if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A under the Act
and such information is included in a prospectus filed with the Commission
pursuant to Rule 424(b) under the Act, the term "Prospectus" as used in this
Agreement means the prospectus in the form included in the Registration
Statement as supplemented by the addition of the Rule 430A information contained
in the prospectus filed with the Commission pursuant to Rule 424(b). The term
"Prepricing Prospectus" as used in this Agreement means the prospectus subject
to completion in the form included in the registration statement at the time of
the initial filing of the registration statement with the Commission, and as
such prospectus shall have been amended from time to time prior to the date of
the Prospectus. If the Company elects to rely on Rule 434 under the Act, all
references to the Prospectus shall be deemed to include, without limitation, the
form of prospectus and the terms sheet contemplated by Rule 434, taken together,
provided to the Underwriters by the Company in reliance on Rule 434 under the
Act (the "Rule 434 Prospectus"). If the Company has filed or files another
registration statement with the Commission to register a portion of the
Securities pursuant to Rule 462(b) under the Act (the "Rule 462 Registration
Statement"), then any reference to "Registration Statement" herein shall be
deemed to include the Registration Statement on Form S-2 (File No. 333-40741)
and the Rule 462 Registration Statement, as each such registration statement may
be amended pursuant to the Act. Any reference in this Agreement to the
registration statement, the Registration Statement, any Prepricing Prospectus or
the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-2 under the Act.
As used herein, the
<PAGE>
-3-
term "Incorporated Documents" means the documents which are incorporated by
reference in the registration statement, the Registration Statement, any
Prepricing Prospectus, the Prospectus, or any amendment or supplement thereto.
2. AGREEMENT TO SELL AND PURCHASE. The Company hereby agrees, subject
to all the terms and conditions set forth herein, to issue and sell to you and,
upon the basis of the representations, warranties and agreements of the Company
and the Guarantors herein contained and subject to all the terms and conditions
set forth herein, you agree to purchase from the Company, at a purchase price of
% of the principal amount thereof, $75,000,000 aggregate principal amount of
Securities.
3. TERMS OF PUBLIC OFFERING. The Company has been advised by you that
you propose to make a public offering of the Securities as soon after the
Registration Statement and this Agreement have become effective as in your
judgment is advisable and initially to offer the Securities upon the terms set
forth in the Prospectus.
4. DELIVERY OF THE SECURITIES AND PAYMENT THEREFOR. Delivery to you of
and payment for the Securities shall be made at the office of Salomon Brothers
Inc, Seven World Trade Center, New York, NY 10048, at 10:00 A.M., New York City
time, on January , 1998 (the "Closing Date"). The place of closing for the
Securities and the Closing Date may be varied by agreement between you and the
Company.
The Securities will be delivered to you against payment of the purchase
price therefor in immediately available funds by wire transfer to the Company's
account specified in writing to you by the Company and registered in such names
and in such denominations as you shall request prior to 9:30 A.M., New York City
time, on the second business day preceding the Closing Date. The Securities to
be delivered to you shall be made available to you in New York City for
inspection and packaging not later than 9:30 A.M., New York City time, on the
business day next preceding the Closing Date.
5. AGREEMENTS OF THE COMPANY AND THE GUARANTORS. The Company and each
of the Guarantors, jointly and severally, agree with the Underwriter as follows:
(a) If, at the time this Agreement is executed and delivered,
it is necessary for the Registration Statement or a post-effective
amendment thereto to be declared ef-
<PAGE>
-4-
fective before the offering of the Securities may commence, the Company
and the Guarantors will endeavor to cause the Registration Statement or
such post-effective amendment to become effective as soon as possible
and will advise you promptly and, if requested by you, will confirm
such advice in writing, when the Registration Statement or such
post-effective amendment has become effective.
(b) The Company will advise you promptly and, if requested by
you, will confirm such advice in writing: (i) of any request by the
Commission for amendment of or a supplement to the Registration
Statement, any Prepricing Prospectus or the Prospectus or for
additional information; (ii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement
or of the suspension of qualification of the Securities for offering or
sale in any jurisdiction or the initiation of any proceeding for such
purpose; and (iii) within the period of time referred to in paragraph
(f) below, of any change in the Company's condition (financial or
other), business, prospects, properties, net worth or results of
operations, or of the happening of any event, which makes any statement
of a material fact made in the Registration Statement or the Prospectus
(as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the
Prospectus (as then amended or supplemented) in order to state a
material fact required by the Act or the regulations thereunder to be
stated therein or necessary in order to make the statements therein not
misleading, or of the necessity to amend or supplement the Prospectus
(as then amended or supplemented) to comply with the Act or any other
law. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company
will make every reasonable effort to obtain the withdrawal of such
order at the earliest possible time.
(c) The Company will furnish to you, without charge (i) two
signed copies of the registration statement as originally filed with
the Commission and of each amendment thereto, including financial
statements and all exhibits to the registration statement, (ii) such
number of conformed copies of the registration statement as originally
filed and of each amendment thereto, but without exhib-
<PAGE>
-5-
its, as you may request, (iii) such number of copies of the Indenture
and of the Incorporated Documents, without exhibits, as you may
request, and (iv) two copies of the exhibits to the Incorporated
Documents.
(d) The Company and the Guarantors will not file any amendment
to the Registration Statement or make any amendment or supplement to
the Prospectus of which you shall not previously have been advised or
to which, after you shall have received a copy of the document proposed
to be filed, you shall reasonably object.
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered to you, without charge, in such quantities as you
have requested, copies of each form of the Prepricing Prospectus. The
Company consents to the use, in accordance with the provisions of the
Act and with the securities or Blue Sky laws of the jurisdictions in
which the Securities are offered by you and by dealers, prior to the
date of the Prospectus, of each Prepricing Prospectus so furnished by
the Company.
(f) As soon after the execution and delivery of this Agreement
as possible and thereafter from time to time for such period as in the
opinion of counsel for the Underwriter a prospectus is required by the
Act to be delivered in connection with sales by the Underwriter or any
dealer, the Company will expeditiously deliver to the Underwriter and
each dealer, without charge, as many copies of the Prospectus (and of
any amendment or supplement thereto) as you may request. The Company
and each of the Guarantors consent to the use of the Prospectus (and of
any amendment or supplement thereto) in accordance with the provisions
of the Act and with the securities or Blue Sky laws of the
jurisdictions in which the Securities are offered by the Underwriter
and by all dealers to whom Securities may be sold, both in connection
with the offering and sale of the Securities and for such period of
time thereafter as the Prospectus is required by the Act to be
delivered in connection with sales by the Underwriter or any dealer. If
during such period of time any event shall occur that in the judgment
of the Company or in the reasonable opinion of counsel for the
Underwriter is required to be set forth in the Prospectus (as then
amended or supplemented) or should be set forth therein in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary to
supplement or amend the Prospectus in order to comply with the Act or
any other law, the Company will forthwith prepare and, subject to the
provisions of para-
<PAGE>
-6-
graph (d) above, file with the Commission an appropriate supplement or
amendment thereto, and will expeditiously furnish to the Underwriter
and dealers a reasonable number of copies thereof. In the event that
the Company and you agree that the Prospectus should be amended or
supplemented, the Company, if requested by you, will promptly issue a
press release announcing or disclosing the matters to be covered by the
proposed amendment or supplement.
(g) The Company and the Guarantors will cooperate with you and
with counsel for the Underwriter in connection with the registration or
qualification of the Securities for offering and sale by the
Underwriter and by dealers under the securities or Blue Sky laws of
such jurisdictions as you may designate and will file such consents to
service of process or other documents necessary or appropriate in order
to effect such registration or qualification; provided that in no event
shall the Company or any Guarantor be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to
take any action which would subject it to service of process in suits,
other than those arising out of the offering or sale of the Securities,
or to taxation in any jurisdiction where it is not now so subject.
(h) The Company will make generally available to its security
holders a consolidated earnings statement, which need not be audited,
covering a twelve-month period commencing after the effective date of
the Registration Statement and ending not later than 15 months
thereafter, as soon as practicable after the end of such period, which
consolidated earnings statement shall satisfy the provisions of Section
11(a) of the Act.
(i) During the period of three years hereafter, the Company
will furnish to you (i) as soon as available, a copy of each report of
the Company mailed to stockholders or filed with the Commission, and
(ii) from time to time such other information concerning the Company as
you may reasonably request.
(j) If this Agreement shall terminate or shall be terminated
after execution pursuant to any provisions hereof (otherwise than by
notice given by you terminating this Agreement pursuant to Section 10
or Section 11 hereof) or if this Agreement shall be terminated by you
because of any failure or refusal on the part of the Company to comply
with the terms or fulfill any of the condi-
<PAGE>
-7-
tions of this Agreement, the Company agrees to reimburse you for all
out-of-pocket expenses (including fees and expenses of counsel for the
Underwriter) incurred by you in connection herewith.
(k) The Company will apply the net proceeds from the sale of
the Securities substantially in accordance with the description set
forth in the Prospectus.
(l) If Rule 430A of the Act is employed, the Company will
timely file the Prospectus pursuant to Rule 424(b) under the Act and
will advise you of the time and manner of such filing.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE GUARANTORS.
The Company and each of the Guarantors, jointly and severally, represent and
warrant to you that:
(a) Each Prepricing Prospectus included as part of the
registration statement as originally filed or as part of any amendment
or supplement thereto, or filed pursuant to Rule 424 under the Act,
complied when so filed in all material respects with the provisions of
the Act. The Commission has not issued any order preventing or
suspending the use of any Prepricing Prospectus.
(b) The Company and the Guarantors have reasonable grounds to
believe that they meet all of the requirements for using Form S-2 under
the Act. The Registration Statement in the form in which it became or
becomes effective and also in such form as it may be when any
post-effective amendment thereto shall become effective and the
Prospectus and any supplement or amendment thereto when filed with the
Commission under Rule 424(b) under the Act, complied or will comply in
all material respects with the provisions of the Act and will not at
any such times contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, except that this
representation and warranty does not apply to statements in or
omissions from the Registration Statement or the Prospectus made in
reliance upon and in conformity with (i) information relating to the
Underwriter furnished to the Company in writing by the Underwriter
expressly for use therein, or (ii) the Trustee's Statement of
Eligibility and Qualification (Form T-1) under the Trust Indenture Act
of 1939, as amended (the "1939 Act").
<PAGE>
-8-
(c) The Incorporated Documents heretofore filed, when they
were filed (or, if any amendment with respect to any such document was
filed, when such amendment was filed), conformed in all material
respects with the requirements of the Exchange Act and the rules and
regulations thereunder; and no such document when it was filed (or, if
an amendment with respect to any such document was filed, when such
amendment was filed), contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading.
(d) The execution and delivery of, and the performance by the
Company and each of the Guarantors of their respective obligations
under this Agreement have been duly and validly authorized by the
Company and each of the Guarantors, as the case may be, and this
Agreement has been duly executed and delivered by the Company and each
of the Guarantors and constitutes the valid and legally binding
agreement of the Company and each of the Guarantors, enforceable
against the Company and each of the Guarantors in accordance with its
terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to creditors' rights generally or by general equitable
principles, and except as rights to indemnity and contribution
hereunder may be limited by federal or state securities laws or other
applicable laws or public policy.
(e) The Indenture has been duly and validly authorized by the
Company and each of the Guarantors and, upon its execution and delivery
by the Company and each of the Guarantors and assuming due execution
and delivery by the Trustee, will be a valid and binding agreement of
the Company and each of the Guarantors, enforceable against the Company
and each of the Guarantors in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and by general equitable principles; and has been (or
will have been) duly qualified under the 1939 Act and conforms to the
description thereof in the Registration Statement and the Prospectus.
(f) The Securities have been duly authorized by the Company
and each of the Guarantors and, when executed by the Company and each
of the Guarantors and authenticated by the Trustee in accordance with
the Indenture and deliv-
<PAGE>
-9-
ered to you against payment therefor in accordance with the terms
hereof, will have been validly issued and delivered, and will
constitute valid and binding obligations of the Company and each of the
Guarantors entitled to the benefits of the Indenture and enforceable
against the Company and each of the Guarantors in accordance with their
terms, except as enforcement thereof may be limited by (1) bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles; and the Securities will conform to
the description thereof in the Registration Statement and the
Prospectus.
(g) The authorized and outstanding capital stock of the
Company is as set forth under the captions "Capitalization" and
"Description of Capital Stock" in the Prospectus.
(h) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Florida with
full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction or
place where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure
so to register or qualify does not have a material adverse effect on
the condition (financial or other), business, properties, net worth or
results of operations of the Company and the Subsidiaries (as
hereinafter defined) taken as a whole (a "Material Adverse Effect").
(i) All of the Company's subsidiaries (collectively, the
"Subsidiaries") are listed in an exhibit to the Company's Annual Report
on Form 10-K which is incorporated by reference into the Registration
Statement. Each Subsidiary is a corporation duly organized, validly
existing and in good standing in the jurisdiction of its incorporation,
with full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction or
place where the nature of its properties or the conduct of its business
requires such registration or qualification, ex-
<PAGE>
-10-
cept where the failure so to register or qualify does not have a
Material Adverse Effect; all the outstanding shares of capital stock of
each of the Subsidiaries have been duly authorized and validly issued,
are fully paid and nonassessable, and are owned by the Company
directly, or indirectly through one of the other Subsidiaries, free and
clear of any lien, adverse claim, security interest, equity or other
encumbrance.
(j) There are no legal or governmental proceedings pending or,
to the knowledge of the Company, threatened, against the Company or any
of the Subsidiaries, or to which the Company or any of the
Subsidiaries, or to which any of their respective properties is
subject, that are required to be described in the Registration
Statement or the Prospectus but are not described as required, and
there are no agreements, contracts, indentures, leases or other
instruments that are required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement or any Incorporated Document that are not
described or filed as required by the Act or the Exchange Act.
(k) Neither the Company nor any of the Subsidiaries is in
violation of its certificate or articles of incorporation or by-laws,
or other organizational documents, or of any law, ordinance,
administrative or governmental rule or regulation applicable to the
Company or any of the Subsidiaries or of any decree of any court or
governmental agency or body having jurisdiction over the Company or any
of the Subsidiaries, or in default in any material respect in the
performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any
material agreement, indenture, lease or other instrument to which the
Company or any of the Subsidiaries is a party or by which any of them
or any of their respective properties may be bound, other than any such
violations or defaults that have not had and will not have,
individually or in the aggregate, a Material Adverse Effect.
(l) Neither the issuance and sale of the Securities, the
execution, delivery or performance of this Agreement and the Indenture
by the Company and the Guarantors, nor the consummation by the Company
and the Guarantors of the transactions contemplated hereby and thereby
(i) requires any consent, approval, authorization or other order of or
registration or filing with, any court, regulatory body,
<PAGE>
-11-
administrative agency or other governmental body, agency or official
(except such as may be required for the registration of the Securities
under the Act and the Exchange Act, qualification of the Indenture
under the 1939 Act, and compliance with the securities or Blue Sky laws
of various jurisdictions, all of which have been or will be effected in
accordance with this Agreement) or conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the
certificate or articles of incorporation or bylaws, or other
organizational documents, of the Company or any of the Subsidiaries or
(ii) conflicts or will conflict with or constitutes or will constitute
a breach of, or a default under, any agreement, indenture, lease or
other instrument to which the Company or any of the Subsidiaries is a
party or by which any of them or any of their respective properties may
be bound, or violates or will violate any statute, law, regulation or
filing or judgment, injunction, order or decree applicable to the
Company or any of the Subsidiaries or any of their respective
properties, other than any such conflicts, breaches, defaults or
violations that have not had and will not have a Material Adverse
Efect, or will result in the creation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or any of the
Subsidiaries pursuant to the terms of any agreement or instrument to
which any of them is a party or by which any of them may be bound or to
which any of the property or assets of any of them is subject.
(m) The accountants, BDO Seidman, LLP, who have certified the
financial statements included or incorporated by reference in the
Registration Statement and the Prospectus (or any amendment or
supplement thereto) are independent public accountants as required by
the Act.
(n) The financial statements, together with related schedules
and notes, included or incorporated by reference in the Registration
Statement and the Prospectus (and any amendment or supplement thereto),
present fairly the consolidated financial position, results of
operations and shareholders' equity and cash flows of the Company and
the Subsidiaries on the basis stated in the Registration Statement at
the respective dates or for the respective periods to which they apply;
such statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved, except as disclosed therein;
and the other financial and statistical informa-
<PAGE>
-12-
tion and data included or incorporated by reference in the Registration
Statement and the Prospectus (and any amendment or supplement thereto)
are accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Company and the
Subsidiaries.
(o) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the
Registration Statement and the Prospectus (or any amendment or
supplement thereto), neither the Company nor any of the Subsidiaries
has incurred any liability or obligation, direct or contingent, or
entered into any transaction, not in the ordinary course of business,
that is material to the Company and the Subsidiaries taken as a whole,
and there has not been any material change in the capital stock or
material increase, on a consolidated basis, in the short-term debt or
long-term debt, of the Company and the Subsidiaries taken as a whole,
or any material adverse change, or any development involving or which
may reasonably be expected to involve, a prospective material adverse
change, in the condition (financial or other), business, net worth or
results of operations of the Company and the Subsidiaries taken as a
whole (a "Material Adverse Change").
(p) Each of the Company and the Subsidiaries has good and
marketable title to all property (real and personal) described in the
Prospectus as being owned by it, free and clear of all liens, claims,
security interests or other encumbrances except such as are described
in the Registration Statement and the Prospectus or in a document filed
as an exhibit to the Registration Statement, and except for other
encumbrances including purchase money liens entered into in the
ordinary course of business which are not required to be described in
the Registration Statement, and all the property described in the
Prospectus as being held under lease by the Company or any Subsidiary
is held by it under valid, subsisting and enforceable leases.
(q) None of the Company and the Guarantors have distributed
and, prior to the later to occur of (i) the Closing Date and (ii)
completion of the distribution of the Securities, will distribute any
offering material in connection with the offering and sale of the
Securities other than the Registration Statement, the Prepricing
Prospec-
<PAGE>
-13-
tus, the Prospectus or other materials, if any, permitted by the Act.
(r) The Company and each of the Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits") as are necessary to own its respective
properties and to conduct its business in the manner described in the
Prospectus, subject to such qualifications as may be set forth in the
Prospectus, except such permits as may be necessary for the development
and construction on specific properties or where the failure to have
any such permits has not had and will not have a Material Adverse
Effect; the Company and each of the Subsidiaries has fulfilled and
performed all its material obligations with respect to such permits and
no event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination thereof or results in any other
material impairment of the rights of the holder of any such permit,
subject in each case to such qualification as may be set forth in the
Prospectus and except to the extent that any such revocation or
termination would not have a Material Adverse Effect; and, except as
described in the Prospectus, none of such permits contains any
restriction that is materially burdensome to the Company or any of the
Subsidiaries except such restrictions that will not have a Material
Adverse Effect.
(s) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(t) To the Company's knowledge, neither the Company nor any of
its Subsidiaries nor any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any
Subsidiary or received or retained any funds in violation of any law,
rule or regula-
<PAGE>
-14-
tion, which payment, receipt or retention of funds is of a character
required to be disclosed in the Prospectus.
(u) The Company and each of the Subsidiaries have filed all
tax returns required to be filed under applicable law, which returns
are complete and correct in all material respects, and neither the
Company nor any Subsidiary is in default in the payment of any taxes
which were payable pursuant to said returns or any assessments with
respect thereto.
(v) Except as described in the Registration Statement, no
holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the
Company because of the filing of the registration statement or
consummation of the transactions contemplated by this Agreement.
(w) The Company and the Subsidiaries own all patents,
trademarks, trademark registration, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade
secrets and rights described in the Prospectus as being owned or
possessed by them or any of them or necessary for the conduct of their
respective businesses, and the Company is not aware of any claim to the
contrary or any challenge by any other person to the rights of the
Company and the Subsidiaries with respect to the foregoing.
(x) The Company has complied with all provisions of Florida
Statutes, ss.517.075, relating to issuers doing business with Cuba.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company and each of the Guarantors, jointly and
severally, agree to indemnify and hold harmless the Underwriter and
each person, if any, who controls the Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based
upon any untrue statement or alleged untrue statement of a material
fact contained in any Prepricing Prospectus or in the Registration
Statement or the Prospectus or in any amendment or supplement thereto,
or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be
<PAGE>
-15-
stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities
or expenses arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which has been made
therein or omitted therefrom in reliance upon and in conformity with
the information relating to the Underwriter furnished in writing to the
Company by the Underwriter expressly for use in connection therewith;
provided, however, that the indemnification contained in this paragraph
(a) with respect to any Prepricing Prospectus shall not inure to the
benefit of the Underwriter (or to the benefit of the person controlling
the Underwriter) on account of any such loss, claim, damage, liability
or expense arising from the sale of the Securities by the Underwriter
to any person if a copy of the Prospectus shall not have been delivered
or sent to such person within the time required by the Act and the
regulations thereunder, and the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained
in such Prepricing Prospectus was corrected in the Prospectus, provided
that the Company has delivered the Prospectus to the Underwriter in
requisite quantity on a timely basis to permit such delivery or
sending. The foregoing indemnity agreement shall be in addition to any
liability which the Company or the Guarantors may otherwise have.
(b) If any action, suit or proceeding shall be brought against
the Underwriter or any person controlling the Underwriter in respect of
which indemnity may be sought against the Company and the Guarantors,
the Underwriter or such controlling person shall promptly notify the
Company and the Guarantors and the Company shall assume the defense
thereof, including the employment of counsel and payment of all fees
and expenses. The Underwriter or any such controlling person shall have
the right to employ separate counsel in any such action, suit or
proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of the Underwriter or
such controlling person unless (i) the Company has agreed in writing to
pay such fees and expenses, (ii) the Company has failed to assume the
defense and employ counsel, or (iii) the named parties to any such
action, suit or proceeding (including any impleaded parties) include
both the Underwriter or such controlling person and one or more of the
Company and the Guarantors and the Underwriter or such controlling
person shall have been advised by its counsel that representation
<PAGE>
-16-
of such indemnified party and the Company or the Guarantors party
thereto by the same counsel would be inappropriate under applicable
standards of professional conduct (whether or not such representation
by the same counsel has been proposed) due to actual or potential
differing interests between them (in which case the Company shall not
have the right to assume the defense of such action, suit or proceeding
on behalf of the Underwriter or such controlling person). It is
understood, however, that the Company shall, in connection with any one
such action, suit or proceeding or separate but substantially similar
or related actions, suits or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable
for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for the
Underwriter and all such controlling persons not having actual or
potential differing interests with you or among themselves, which firm
shall be designated in writing by Salomon Brothers Inc, and that all
such fees and expenses shall be reimbursed as they are incurred. The
Company and the Guarantors shall not be liable for any settlement of
any such action, suit or proceeding effected without the Company's
written consent, but if settled with such written consent, or if there
be a final judgment for the plaintiff in any such action, suit or
proceeding, the Company and the Guarantors agree to indemnify and hold
harmless the Underwriter, to the extent provided in the preceding
paragraph, and any such controlling person from and against any loss,
claim, damage, liability or expense by reason of such settlement or
judgment.
(c) The Underwriter agrees to indemnify and hold harmless the
Company, the Guarantors, their directors, their officers who sign the
Registration Statement, and any person who controls the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
to the same extent as the foregoing indemnity from the Company and the
Guarantors to the Underwriter, but only with respect to information
relating to the Underwriter furnished in writing by the Underwriter
expressly for use in the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto. If any
action, suit or proceeding shall be brought against the Company, the
Guarantors, any of their directors, any such officer, or any such
controlling person, based on the Registration Statement, the Prospectus
or any Prepricing Prospectus, or any amendment or supple-
<PAGE>
-17-
ment thereto, and in respect of which indemnity may be sought against
the Underwriter pursuant to this paragraph (c), the Underwriter shall
have the rights and duties given to the Company by paragraph (b) above
(except that if the Company shall have assumed the defense thereof the
Underwriter shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the Underwriter's expense),
and the Company, the Guarantors, their directors, any such officer, and
any such controlling person, shall have the rights and duties given to
the Underwriter by paragraph (b) above. The foregoing indemnity
agreement shall be in addition to any liability which the Underwriter
may otherwise have.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof
in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then an indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company
and the Guarantors on the one hand and the Underwriter on the other
hand from the offering of the Securities, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of
the Company and the Guarantors on the one hand and the Underwriter on
the other in connection with the statements or omissions that resulted
in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits
received by the Company and the Guarantors on the one hand and the
Underwriter on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses)
received by the Company bear to the total underwriting discounts and
commissions received by the Underwriter, in each case as set forth in
the table on the cover page of the Prospectus. The relative fault of
the Company and the Guarantors on the one hand and the Underwriter on
the other hand shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information sup-
<PAGE>
-18-
plied by the Company and the Guarantors on the one hand or by the
Underwriter on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(e) The Company, the Guarantors and the Underwriter agree that
it would not be just and equitable if contribution pursuant to this
Section 7 were determined by a pro rata allocation or by any other
method of allocation that does not take account of the equitable
considerations referred to in paragraph (d) above. The amount paid or
payable by an indemnified party as a result of the losses, claims,
damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating any claim or defending any such
action, suit or proceeding. Notwithstanding the provisions of this
Section 7, the Underwriter shall not be required to contribute any
amount in excess of the amount by which the total price of the
Securities underwritten by it and distributed to the public exceeds the
amount of any damages which the Underwriter has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending
or threatened action, suit or proceeding in respect of which any
indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such
action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or
contribution under this Section 7 shall be paid by the indemnifying
party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred. The indemnity and contribution
agreements contained in this Section 7 and the representations and
<PAGE>
-19-
warranties of the Company and the Guarantors set forth in this
Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of the
Underwriter or any person controlling the Underwriter, the Company, the
Guarantors, their directors or officers or any person controlling the
Company, (ii) acceptance of any Securities and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to
the Underwriter or any person controlling the Underwriter, or to the
Company, the Guarantors, their directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this
Section 7.
8. CONDITIONS OF UNDERWRITER'S OBLIGATION. The obligation of the
Underwriter to purchase the Securities hereunder is subject to the following
conditions:
(a) If, at the time this Agreement is executed and delivered,
it is necessary for the registration statement or a post-effective
amendment thereto to be declared effective before the offering of the
Securities may commence, the registration statement or such
post-effective amendment shall have become effective not later than
5:30 P.M., New York City time, on the date hereof, or at such later
date and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 424 and 430A under the Act shall
have been timely made; no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceeding for
that purpose shall have been instituted or, to the knowledge of the
Company or the Underwriter, threatened by the Commission, and any
request of the Commission for additional information (to be included in
the Registration Statement or the Prospectus or otherwise) shall have
been complied with to your satisfaction.
(b) Subsequent to the effective date of this Agreement, there
shall not have occurred (i) any change or any development involving a
prospective change, in or affecting the condition (financial or other),
business, properties, net worth, or results of operations of the
Company and the Subsidiaries, taken as a whole, not contemplated by the
Prospectus, which in your opinion would materially adversely affect the
market for the Securities, or (ii) any event or development relating to
or involving the Company or any officer or director of the Company
which makes
<PAGE>
-20-
any statement made in the Prospectus untrue or which, in the opinion of
the Company and its counsel or the Underwriter and its counsel,
requires the making of any addition to or change in the Prospectus in
order to state a material fact required by the Act or any other law to
be stated therein or necessary in order to make the statements therein
not misleading, if amending or supplementing the Prospectus to reflect
such event or development would, in your opinion, materially adversely
affect the market for the Securities.
(c) You shall have received on the Closing Date, an opinion of
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., Miami,
Florida, counsel for the Company, dated the Closing Date and addressed
to you to the effect that:
(i) The Company is a corporation duly incorporated
and validly existing in good standing under the laws of the
State of Florida with full corporate power and authority to
own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the
Prospectus (and any amendment or supplement thereto);
(ii) Each of the Subsidiaries is a corporation
validly existing in good standing under the laws of the
jurisdiction of its organization, with full corporate power
and authority to own, lease, and operate its properties and to
conduct its business as described in the Registration
Statement and the Prospectus (and any amendment or supplement
thereto); and all the outstanding shares of capital stock of
each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable, and are owned of
record by the Company directly, or indirectly through one of
the other Subsidiaries, and to such counsel's knowledge, free
and clear of any perfected security interest, or, to the
knowledge of such counsel after reasonable inquiry, any other
security interest, lien, adverse claim or other encumbrance;
(iii) The authorized and outstanding capital stock of
the Company was as set forth under the captions
"Capitalization--Actual" in the Prospectus and as of the
applicable date indicated therein and the authorized capital
stock of the Company conforms in
<PAGE>
-21-
all material respects as to legal matters to the description
thereof contained in the Prospectus under the caption
"Description of Capital Stock";
(iv) The Company and each Guarantor has corporate
power and authority to enter into this Agreement and to issue,
sell and deliver the Securities to the Underwriter as provided
herein, and this Agreement has been duly authorized, executed
and delivered by the Company and each of the Guarantors and is
a valid, legal and binding agreement of the Company and each
of the Guarantors, enforceable against the Company and each of
the Guarantors in accordance with its terms, except as
enforcement of rights to indemnity and contribution hereunder
may be limited by Federal or state securities or other
applicable laws or principles of public policy and subject to
the qualification that the enforceability of the Company's and
each Guarantor's obligations hereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium, and other laws relating to or affecting creditors'
rights generally and by general equitable principles;
(v) The Indenture has been duly and validly
authorized, executed and delivered by the Company and each of
the Guarantors and, assuming due execution and delivery by the
Trustee, is a valid and binding agreement of the Company and
each of the Guarantors, enforceable against the Company and
each of the Guarantors in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights generally and
by general equitable principles, and has been duly qualified
under the 1939 Act;
(vi) The Securities have been duly and validly
authorized and executed by the Company and each of the
Guarantors and, assuming due authentication of the Securities
by the Trustee in accordance with the Indenture, upon delivery
to the Underwriter against payment therefor in accordance with
the terms hereof, will have been validly issued and delivered,
and will constitute valid and binding obligations of the
Company and each of the Guarantors entitled to the benefits of
the Indenture and enforceable against the
<PAGE>
-22-
Company and each of the Guarantors in accordance with their
terms and the Indenture except as enforcement thereof may be
limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and by general equitable
principles;
(vii) Based solely on telephonic advice from the
Commission, the Registration Statement and all post-effective
amendments, if any, have become effective under the Act and,
to the knowledge of such counsel after reasonable inquiry, no
stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose
are pending before or contemplated by the Commission; and any
required filing of the Prospectus pursuant to Rule 424(b) has
been made in accordance with Rule 424(b);
(viii) Neither the Company nor any of the
Subsidiaries is (A) in violation of its respective certificate
or articles of incorporation or bylaws, or other
organizational documents, or (B) to the knowledge of such
counsel after reasonable inquiry, is in default in the
performance of any material obligation, agreement or condition
contained in any bond, debenture, note or other evidence of
indebtedness, except as may be disclosed in the Prospectus,
other than any such violations or defaults that have not had
and will not have, individually or in the aggregate, a
Material Adverse Effect;
(ix) Neither the offer, sale or delivery of the
Securities, the execution, delivery or performance of this
Agreement and the Indenture, compliance by the Company and the
Guarantors with the provisions hereof and thereof, nor
consummation by the Company and the Guarantors of the
transactions contemplated hereby and thereby, (A) conflicts or
will conflict with or constitutes or will constitute a breach
of, or a default under, the certificate or articles of
incorporation or bylaws, or other organizational documents, of
the Company or any of the Subsidiaries or any agreement,
indenture, lease or other instrument to which the Company or
any of the Subsidiaries is a party or by which any of them or
any of their respective properties is bound that is an exhibit
to the Registration Statement or to any Incorporated Docu-
<PAGE>
-23-
ment, or other material agreements known to such counsel after
reasonable inquiry, or (B) will result in the creation or
imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of the Subsidiaries,
nor (C) will any such action result in any violation of any
existing law, regulation, ruling (assuming compliance with all
applicable state securities and Blue Sky laws and all
applicable rules and regulations of the National Association
of Securities Dealers, Inc. (the "NASD")), judgment,
injunction, order or decree known to such counsel after
reasonable inquiry, applicable to the Company, the
Subsidiaries or any of their respective properties, except, in
each case, as has not had and will not have a Material Adverse
Effect;
(x) No consent, approval, authorization or other
order of, or registration or filing with, any court,
regulatory body, administrative agency or other governmental
body, agency, or official is required on the part of the
Company or the Guarantors (except (A) as have been obtained
under the Act, the Exchange Act and the 1939 Act, and (B) as
may be required under state securities or Blue Sky laws and
the rules and regulations of the NASD, as to which such
counsel need not express any opinion) for the valid issuance
and sale of the Securities to the Underwriter as contemplated
by this Agreement;
(xi) The Registration Statement and the Prospectus
and any supplements or amendments thereto (except for the
financial statements and the notes thereto and the schedules
and other financial and statistical data included therein, as
to which such counsel need not express any opinion) comply as
to form in all material respects with the requirements of the
Act; and each of the Incorporated Documents (except for the
financial statements and the notes thereto and the schedules
and other financial and statistical data included therein, as
to which counsel need not express any opinion), when filed
with the Commission under the Exchange Act, complied as to
form in all material respects with the Exchange Act and the
rules and regulations of the Commission thereunder;
(xii) The statements in the Registration Statement
and Prospectus, insofar as they are descriptions of contracts,
agreements or other legal documents, or
<PAGE>
-24-
refer to statements of law or legal conclusions, are accurate
and present fairly the information required to be shown;
(xiii) To the knowledge of such counsel after
reasonable inquiry, (A) other than as described or
contemplated in the Prospectus (or any supplement thereto),
there are no legal or governmental proceedings pending or
threatened against the Company or any of the Subsidiaries, or
to which the Company or any of the Subsidiaries, or any of
their property, is subject, which are required to be described
in the Registration Statement or Prospectus (or any amendment
or supplement thereto) and (B) there are no agreements,
contracts, indentures, leases or other instruments, that are
required to be described in the Registration Statement or the
Prospectus (or any amendment or supplement thereto) or to be
filed as an exhibit to the Registration Statement or any
Incorporated Document that are not described or filed as
required, as the case may be;
(xiv) To the knowledge of such counsel after
reasonable inquiry, neither the Company nor any of the
Subsidiaries is in violation of any law, ordinance,
administrative or governmental rule or regulation applicable
to the Company or any of the Subsidiaries or of any decree of
any court or governmental agency or body having jurisdiction
over the Company or any of the Subsidiaries, other than any
such violations that have not had and are not reasonably
expected to have a Material Adverse Effect;
(xv) Although counsel has not undertaken, except as
otherwise indicated in their opinion, to determine
independently, and does not assume any responsibility for, the
accuracy or completeness of the statements in the Registration
Statement, such counsel has participated in the preparation of
the Registration Statement and the Prospectus, including
review and discussion of the contents thereof (including
review and discussion of the contents of all Incorporated
Documents), and nothing has come to the attention of such
counsel that has caused them to believe that the Registration
Statement (including the Incorporated Documents) at the time
the Registration Statement became effective, contained an
untrue statement of a material fact or omitted to state a
material fact re-
<PAGE>
-25-
quired to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus or
any amendment or supplement to the Prospectus, as of its
respective date, and as of the Closing Date contained any
untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading (it being understood that such
counsel need express no opinion with respect to the financial
statements and the notes thereto and the schedules and other
financial and statistical data included in the Registration
Statement or the Prospectus or any Incorporated Document or
the Trustee's Statement of Eligibility on Form T-1).
In rendering their opinion as aforesaid, counsel may rely upon
an opinion or opinions, each dated the Closing Date, of other counsel
retained by them or the Company as to laws of any jurisdiction other
than the United States or the State of Florida or the State of New
York, provided that (1) each such local counsel is acceptable to the
Underwriter, (2) such reliance is expressly authorized by each opinion
so relied upon and a copy of each such opinion is delivered to the
Underwriter and is, in form and substance satisfactory to the
Underwriter and its counsel, and (3) such counsel shall state in their
opinion that they believe that they and the Underwriter are justified
in relying thereon. In rendering such opinion, such counsel may rely,
to the extent they deem proper, as to matters of fact upon certificates
of officers of the Company and of government officials, provided that a
copy of any such certificate is delivered to the Underwriter.
(d) You shall have received on the Closing Date, an opinion of
Kerry Safier, Esq., corporate counsel for the Company, dated the
Closing Date and addressed to you to the effect that:
(i) The Company and each of the Subsidiaries has full
corporate power and authority, and all necessary governmental
authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental regulatory
officials and bodies (except where the failure to so have any
such authorizations, approvals, orders, licenses,
certificates, franchises or permits, individually or in the
aggregate, would not have a Material Adverse Effect,
<PAGE>
-26-
to own their respective properties and to conduct their
respective businesses as now being conducted, as described in
the Prospectus; and the Company and each of the Subsidiaries
are duly registered and qualified to conduct its business and
is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business
requires such registration or qualification, except where the
failure so to register or qualify does not have a Material
Adverse Effect;
(ii) Except as disclosed in the Prospectus, the
Company owns of record, directly or indirectly, all the
outstanding shares of capital stock of each of the
Subsidiaries free and clear of any lien, adverse claim,
security interest, equity, or other encumbrance;
(iii) The Company and the Subsidiaries own all
patents, trademarks, trademark registrations, service marks,
service mark registrations, trade names, copyrights, licenses,
inventions, trade secrets and rights described in the
Prospectus as being owned by them or any of them or necessary
for the conduct of their respective businesses, and such
counsel is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Company and
the Subsidiaries with respect to the foregoing;
(iv) Neither the Company nor any of the Subsidiaries
is in violation of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or
any of the Subsidiaries or of any decree of any court or
governmental agency or body having jurisdiction over the
Company or any of the Subsidiaries; and
(v) Except as described in the Prospectus, there is
no holder of any security of the Company or the Guarantors or
any other person who has the right, contractual or otherwise,
to cause the Company or the Guarantors to sell or otherwise
issue to them, or to permit them to underwrite the sale of,
the Securities or the right to have any Common Stock or other
securities of the Company or the Guarantors included in the
registration statement or the right, as a result of the filing
of the registration statement, to require registration under
the Act of any shares of
<PAGE>
-27-
Common Stock or other securities of the Company or the
Guarantors.
(e) You shall have received on the Closing Date an opinion of
Cahill Gordon & Reindel (a partnership including a professional
corporation), New York, New York, counsel for the Underwriter, dated
the Closing Date and addressed to you with respect to the matters
referred to in clauses (iv) (assuming due authorization), (v) (assuming
due authorization), (vi) (assuming due authorization) (vii), (xi), and
(xv) of the foregoing paragraph (c) and such other related matters as
you may request.
(f) You shall have received letters addressed to you and dated
the date hereof and the Closing Date from BDO Seidman, LLP, independent
certified public accountants, substantially in the forms heretofore
approved by you.
(g) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall have been taken or, to the knowledge of the Company,
shall be contemplated by the Commission at or prior to the Closing
Date; (ii) there shall not have been any change in the capital stock of
the Company or the Guarantors nor any material increase in the
short-term or long-term debt of the Company and the Guarantors on a
consolidated basis (other than in the ordinary course of business) from
that set forth or contemplated in the Registration Statement or the
Prospectus (or any amendment or Supplement thereto); (iii) there shall
not have been, since the respective dates as of which information is
given in the Registration Statement and the Prospectus (or any
amendment or supplement thereto), except as may otherwise be stated in
the Registration Statement and Prospectus (or any amendment or
supplement thereto), any Material Adverse Change; (iv) the Company and
the Subsidiaries shall not have any liabilities or obligations, direct
or contingent (whether or not in the ordinary course of business), that
are material to the Company and the Subsidiaries, taken as a whole,
other than those reflected in the Registration Statement or the
Prospectus (or any amendment or supplement thereto); and (v) all the
representations and warranties of the Company and the Guarantors
contained in this Agreement shall be true and correct in all material
respects on and as of the date hereof and on and as of the Closing Date
as if made on and as of the Closing Date, and you shall have received a
certificate, dated the Closing Date and signed by the chief
<PAGE>
-28-
executive officer and the chief financial officer of the Company and
the Guarantors (or such other officers as are acceptable to you), to
the effect set forth in this Section 8(g) and in Section 8(h) hereof.
(h) The Company and the Guarantors shall not have failed at or
prior to the Closing Date to have performed or complied in all material
respects with any of its agreements herein contained and required to be
performed or complied with by it hereunder at or prior to the Closing
Date.
(i) There shall not have been any announcement by any
"nationally recognized statistical rating organization", as defined for
purposes of Rule 436(g) under the Act, that (i) it is downgrading its
rating assigned to any debt securities of the Company, or (ii) it is
reviewing its rating assigned to any debt securities of the Company
with a view to possible downgrading, or with negative implications, or
direction not determined.
(j) The Company and the Guarantors shall have furnished or
caused to be furnished to you such further certificates and documents
as you shall have reasonably requested.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to you and your counsel.
Any certificate or document signed by any officer of the Company or the
Guarantors and delivered to you or to counsel for the Underwriter, each in
connection with the purchase and sale of Securities hereunder shall be deemed a
representation and warranty by the Company or the Guarantors to the Underwriter
as to the statements made therein.
9. EXPENSES. The Company agrees to pay the following costs and expenses
and all other costs and expenses incident to the performance by it of its
obligations hereunder: (i) the preparation, printing (or reproduction), and
filing with the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the Prospectus,
each amendment or supplement to any of them, this Agreement, the Indenture and
the Statement of Eligibility and Qualification of the Trustee; (ii) the printing
(or reproduction) and delivery (including postage, air freight
<PAGE>
-29-
charges and charges for counting and packaging) of such copies of the
registration statement, each Prepricing Prospectus, the Prospectus, the
Incorporated Documents, and all amendments or supplements to any of them, as may
be reasonably requested for use in connection with the offering and sale of the
Securities; (iii) the preparation, printing (or reproduction), execution and
delivery of the Indenture and the preparation, printing, authentication,
issuance and delivery of the Securities, including any stamp taxes in connection
with the original issuance of the Securities; (iv) the printing (or
reproduction) and delivery of this Agreement, the preliminary and supplemental
Blue Sky Memoranda and all other agreements or documents printed (or reproduced)
and delivered in connection with the offering of the Securities; (v) the
registration or qualification of the Securities for offer and sale under the
securities or Blue Sky laws of the several states as provided in Section 5(g)
hereof (including the reasonable fees, expenses and disbursements of counsel for
the Underwriter relating to the preparation, printing (or reproduction), and
delivery of the preliminary and supplemental Blue Sky Memoranda and such
registration and qualification); (vi) the filing fees in connection with any
filings required to be made with the National Association of Securities Dealers,
Inc.; (vii) the fees and expenses of the Trustee; (viii) the fees and expenses
associated with obtaining ratings for the Securities from nationally recognized
statistical rating organizations; (ix) the transportation and other expenses
incurred by or on behalf of Company representatives in connection with
presentations to prospective purchasers of the Securities; and (x) the fees and
expenses of the Company's accountants and the fees and expenses of counsel
(including local and special counsel) for the Company.
10. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective:
(i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at
the time this Agreement is executed and delivered, it is necessary for the
registration statement or a post-effective amendment thereto to be declared
effective before the offering of the Securities may commence, when notification
of the effectiveness of the registration statement or such post-effective
amendment has been released by the Commission. Until such time as this Agreement
shall have become effective, it may be terminated by the Company, by notifying
you, or by the Underwriter, by notifying the Company.
Any notice under this Section 10 may be made by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
<PAGE>
-30-
11. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of the
Underwriter to the Company or the Guarantors by notice to the Company, if prior
to the Closing Date (i) trading in the Common Stock of the Company shall be
suspended or subject to any restriction or limitation not in effect on the date
of this Agreement; (ii) trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market shall have
been suspended or materially limited, (iii) a general moratorium on commercial
banking activities in New York or Florida shall have been declared by either
federal or state authorities, or (iv) there shall have occurred any outbreak or
escalation of hostilities or other international or domestic calamity, crisis or
change in political, financial or economic conditions, the effect of which on
the financial markets of the United States is such as to make it, in your
judgment, impracticable or inadvisable to commence or continue the offering of
the Securities on the terms set forth on the cover page of the Prospectus or to
enforce contracts for the resale of the Securities by the Underwriter. Notice of
such termination may be given to the Company by telegram, telecopy or telephone
and shall be subsequently confirmed by letter.
12. INFORMATION FURNISHED BY THE UNDERWRITER. The statements set forth
in the last paragraph on the cover page, the stabilization legend on the inside
cover page, and the statements in the second and fifth under the caption
"Underwriting" in any Prepricing Prospectus and in the Prospectus, constitute
the only information furnished by or on behalf of the Underwriter through you as
such information is referred to in Sections 6(b) and 7 hereof.
13. MISCELLANEOUS. Except as otherwise provided in Sections 5, 10 and
11 hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company or the Guarantors, at the
office of the Company at 123 N.W. 13th Street, Boca Raton, Florida 33432,
Attention: David Shapiro, Vice-President - Finance, with a copy to Greenberg,
Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., 1221 Brickell Avenue, Miami,
Florida 33131, Attention: Brian J. Walsh, Esq.; or (ii) if to the Underwriter at
Seven World Trade Center, New York, New York 10048, Attention: Manager,
Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
Underwriter, the Company, the Guarantors, their directors and officers, and the
other controlling persons re-
<PAGE>
-31-
ferred to in Section 7 hereof and their respective successors and assigns, to
the extent provided herein, and no other person shall acquire or have any right
under or by virtue of this Agreement. Neither the term "successor" nor the term
"successors and assigns" as used in this Agreement shall include a purchaser
from the Underwriter of any of the Securities in his status as such purchaser.
14. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
<PAGE>
-32-
Please confirm that the foregoing correctly sets forth the agreement
between the Company, the Guarantors and the Underwriter.
Very truly yours,
ENGLE HOMES, INC.
BANYAN TRAILS, INC.
ENGLE HOMES/ARIZONA, INC.
ENGLE HOMES/ATLANTA, INC.
ENGLE HOMES/BROWARD, INC.
ENGLE HOMES/COLORADO, INC.
ENGLE HOMES/GULF COAST, INC.
ENGLE HOMES/LAKE BERNADETTE, INC.
ENGLE HOMES/NORTH CAROLINA, INC.
ENGLE HOMES/ORLANDO, INC.
ENGLE HOMES/PALM BEACH, INC.
ENGLE HOMES/PEMBROKE, INC.
ENGLE HOMES/SOUTHWEST FLORIDA, INC.
ENGLE HOMES/TEXAS, INC.
ENGLE HOMES/VIRGINIA, INC.
GREENLEAF HOMES, INC.
PEMBROKE FALLS REALTY, INC.
PREFERRED BUILDERS REALTY, INC.
PREFERRED HOME MORTGAGE COMPANY
ST. TROPEZ AT BOCA GOLF, INC.
UNIVERSAL LAND TITLE, INC.
ENGLE HOMES/ARIZONA CONSTRUCTION, INC.
UNIVERSAL LAND TITLE OF COLORADO, INC.
By
--------------------------------
Name:
Title:
Confirmed as of the date first
above mentioned.
SALOMON BROTHERS INC
By
---------------------------------
Name:
Title:
EXHIBIT 4.1
================================================================================
ENGLE HOMES, INC.,
THE GUARANTORS PARTY HERETO
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Trustee
------------
Indenture
Dated as of January [ ], 1998
------------
$120,000,000
[ ]% SENIOR NOTES
DUE JANUARY [ ], 2008
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TIA INDENTURE
SECTION SECTION
- ------- ---------
310(a)(1)................................................... 7.10
(a)(2)................................................ 7.10
(a)(3)................................................ N.A.
(a)(4)................................................ N.A.
(a)(5)................................................ 7.10
(b)................................................... 7.08; 7.10; 11.02
(c)................................................... N.A.
311(a)...................................................... 7.11
(b)................................................... 7.11
(c)................................................... N.A.
312(a)...................................................... 2.05
(b)................................................... 11.03
(c)................................................... 11.03
313(a)...................................................... 7.06
(b)(1)................................................ 7.06
(b)(2)................................................ 7.06
(c)................................................... 7.06; 11.02
(d)................................................... 7.06
314(a)...................................................... 4.03; 4.04; 11.02
(b)................................................... N.A.
(c)(1)................................................ 11.04
(c)(2)................................................ 11.04
(c)(3)................................................ N.A.
(d)................................................... N.A.
(e)................................................... 11.05
(f)................................................... N.A.
315(a)...................................................... 7.01(b)
(b)................................................... 7.05; 11.02
(c)................................................... 7.01(a)
(d)................................................... 7.01(c)
(e)................................................... 6.11
316(a) (last sentence)...................................... 2.09
(a)(1)(A)............................................. 6.05
(a)(1)(B)............................................. 6.04
(a)(2)................................................ N.A.
(b)................................................... 6.06; 6.07
317(a)(1)................................................... 6.08
(a)(2)................................................ 6.09
(b)................................................... 2.04
318(a)...................................................... 11.01
318(c)...................................................... 11.01
- --------------
N.A. means Not Applicable.
This cross-reference table does not constitute a part of the Indenture.
-i-
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C>
SECTION 1.01. Definitions.........................................................1
SECTION 1.02. Other Definitions..................................................19
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act...................................................20
SECTION 1.04. Rules of Construction..............................................21
ARTICLE 2
THE SECURITIES
SECTION 2.01. Form and Dating....................................................21
SECTION 2.02. Execution and Authentication.......................................21
SECTION 2.03. Registrar and Paying Agent.........................................22
SECTION 2.04. Paying Agent to Hold Money in Trust................................23
SECTION 2.05. Securityholder Lists...............................................23
SECTION 2.06. Transfer and Exchange..............................................23
SECTION 2.07. Replacement Securities.............................................24
SECTION 2.08. Outstanding Securities.............................................24
SECTION 2.09. Securities Held by the Company or an
Affiliate.......................................................25
SECTION 2.10. Temporary Securities...............................................25
SECTION 2.11. Cancellation.......................................................25
SECTION 2.12. Defaulted Interest.................................................26
ARTICLE 3
REDEMPTION
SECTION 3.01. Notices to Trustee.................................................26
SECTION 3.02. Selection of Securities to Be
Redeemed........................................................26
SECTION 3.03. Notice of Redemption...............................................27
SECTION 3.04. Effect of Notice of Redemption.....................................27
SECTION 3.05. Deposit of Redemption Price........................................27
SECTION 3.06. Securities Redeemed in Part........................................28
-ii-
<PAGE>
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Securities..............................................28
SECTION 4.02. Maintenance of Office or Agency....................................28
SECTION 4.03. SEC Reports........................................................29
SECTION 4.04. Compliance Certificate.............................................29
SECTION 4.05. Stay, Extension and Usury Laws.....................................30
SECTION 4.06. Corporate Existence................................................30
SECTION 4.07. Notice of Default..................................................30
SECTION 4.08. Change of Control..................................................30
SECTION 4.09. Maintenance of Net Worth...........................................33
SECTION 4.10. Limitation on Debt.................................................36
SECTION 4.11. Limitation on Restricted Payments..................................37
SECTION 4.12. Limitation on Dividends and Other
Payment Restrictions Affecting
Restricted Subsidiaries.........................................39
SECTION 4.13. Limitation on Liens................................................40
SECTION 4.14. Transactions with Affiliates.......................................40
SECTION 4.15. Limitation on Asset Sales..........................................41
SECTION 4.16. Additional Guarantors..............................................44
ARTICLE 5
SUCCESSORS
SECTION 5.01. When Company May Merge, etc........................................45
SECTION 5.02. Successor Substituted..............................................46
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default..................................................47
SECTION 6.02. Acceleration.......................................................49
SECTION 6.03. Other Remedies.....................................................49
SECTION 6.04. Waiver of Past Defaults............................................50
SECTION 6.05. Control by Majority................................................50
SECTION 6.06. Limitation on Suits................................................50
SECTION 6.07. Rights of Holders to Receive
Payment.........................................................51
SECTION 6.08. Collection Suit by Trustee.........................................51
SECTION 6.09. Trustee May File Proofs of Claim...................................51
SECTION 6.10. Priorities.........................................................51
SECTION 6.11. Undertaking for Costs..............................................52
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<PAGE>
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee..................................................52
SECTION 7.02. Rights of Trustee..................................................54
SECTION 7.03. Individual Rights of Trustee.......................................54
SECTION 7.04. Trustee's Disclaimer...............................................55
SECTION 7.05. Notice of Defaults.................................................55
SECTION 7.06. Reports by Trustee to Holders......................................55
SECTION 7.07. Compensation and Indemnity.........................................55
SECTION 7.08. Replacement of Trustee.............................................56
SECTION 7.09. Successor Trustee by Merger, etc...................................57
SECTION 7.10. Eligibility; Disqualification......................................57
SECTION 7.11. Preferential Collection of Claims
Against Company.................................................58
ARTICLE 8
DEFEASANCE
SECTION 8.01. Defeasance upon Deposit of Moneys or
U.S. Government Obligations.....................................58
SECTION 8.02. Termination of the Obligations
Pursuant to Redemption..........................................60
SECTION 8.03. Survival of Company's Obligations..................................61
SECTION 8.04. Application of Trust Money.........................................61
SECTION 8.05. Repayment to Company...............................................61
SECTION 8.06. Reinstatement......................................................61
ARTICLE 9
AMENDMENTS
SECTION 9.01. Without Consent of Holders.........................................62
SECTION 9.02. With Consent of Holders............................................63
SECTION 9.03. Compliance with Trust Indenture Act................................64
SECTION 9.04. Revocation and Effect of Consents..................................64
SECTION 9.05. Notation on or Exchange of
Securities......................................................65
SECTION 9.06. Trustee Protected..................................................65
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<PAGE>
ARTICLE 10
GUARANTEE OF SECURITIES
SECTION 10.01. Guarantee.........................................................65
SECTION 10.02. Execution and Delivery of
Guarantee.......................................................68
SECTION 10.03. Additional Guarantors.............................................69
SECTION 10.04. Release of a Guarantor............................................69
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls......................................70
SECTION 11.02. Notices...........................................................70
SECTION 11.03. Communication by Holders with Other
Holders.........................................................71
SECTION 11.04. Certificate and Opinion as to
Conditions Precedent............................................71
SECTION 11.05. Statements Required in Certificate
or Opinion......................................................72
SECTION 11.06. Rules by Trustee and Agents.......................................72
SECTION 11.07. Legal Holidays. ..................................................73
SECTION 11.08. No Recourse Against Others........................................73
SECTION 11.09. Duplicate Originals...............................................73
SECTION 11.10. Governing Law. ..................................................73
SECTION 11.11. No Adverse Interpretation of Other
Agreements......................................................73
SECTION 11.12. Successors........................................................74
SECTION 11.13. Separability......................................................74
SECTION 11.14. Table of Contents, Headings, etc..................................74
SIGNATURES.......................................................................75
EXHIBIT A - FORM OF SECURITY
EXHIBIT B - FORM OF GUARANTEE
</TABLE>
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<PAGE>
INDENTURE dated as of January [ ], 1998 between ENGLE HOMES, INC., a
Florida corporation (the "Company"), the Guarantors signatory hereto (the
"Guarantors") and AMERICAN STOCK TRANSFER & TRUST COMPANY, a New York
Corporation as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Company's [ ]% Senior
Notes due 2008 (the "Securities").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"1994 INDENTURE" means the indenture governing the $40,000,000
principal amount of 11 3/4% Senior Notes due 2000 of the Company.
"1994 NOTES" means the $40,000,000 principal amount of 11 3/4% Senior
Notes due 2000 of the Company.
"ADDITIONAL ASSETS" means assets used or usable by the Company or any
of its Restricted Subsidiaries in the operation of the existing lines of
business of the Company and its Restricted Subsidiaries.
"AFFILIATE" of any Person means (i) any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person and (ii) any other Person that beneficially owns at
least 10% of the voting common stock of such Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"AGENT" means any Registrar, Paying Agent, or co-Registrar.
"ASSET SALE" for any Person means the sale, lease, conveyance or other
disposition (including, without limitation, by merger, consolidation or sale and
leaseback transaction, and whether by operation of law or otherwise) of any of
that Person's assets (including, without limitation, the sale or other
<PAGE>
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disposition of Capital Stock of any Subsidiary of such Person, whether by such
Person or such Subsidiary) outside the ordinary course of business, whether
owned on the Issue Date or subsequently acquired in one transaction or a series
of related transactions, in which such Person and/or its Subsidiaries receive
cash and/or other consideration (including, without limitation, the
unconditional assumption of Indebtedness of such Person and/or its Subsidiaries)
of $2,500,000 or more as to each such transaction or series of related
transactions; PROVIDED, HOWEVER, that (i) a transaction or series of related
transactions that results in a Change of Control will not constitute an Asset
Sale, (ii) sales, leases, conveyances or other dispositions of real estate
related to the homebuilding business of the Company or its Subsidiaries will not
constitute Asset Sales, and (iii) transactions between the Company and any
Guarantor, or among such Guarantors, will not constitute Asset Sales.
"BANK FACILITY" means, collectively, one or more commitments from one
or more banks or other lending institutions to lend funds, together with any and
all agreements, documents and instruments from time to time delivered in
connection therewith as such commitments or any such agreements, documents or
instruments may be in effect or amended, amended and restated, renewed,
extended, restructured, supplemented or otherwise modified from time to time and
any credit agreement, loan agreement, note purchase agreement, indenture or
other agreement, document or instrument refinancing, refunding or otherwise
replacing such Bank Facility, whether or not with the same agent, trustee,
representative, lenders or holders, and, subject to the proviso to the next
succeeding sentence, irrespective of any changes in the terms and conditions
thereof. Without limiting the generality of the foregoing, the term "Bank
Facility" shall include any amendment, amendment and restatement, renewal,
extension, restructuring, supplement or modification to any Bank Facility and
all refundings, refinancings and replacements of any Bank Facility, including
any agreement (i) extending the maturity of any Debt Incurred thereunder or
contemplated thereby, (ii) adding or deleting borrowers or guarantors
thereunder; PROVIDED that such borrowers and issuers include one or more of the
Company and its Subsidiaries and -their respective successors and assigns, (iii)
increasing the amount of Debt Incurred thereunder or available to be borrowed
thereunder; PROVIDED that on the date thereof such Debt would not be prohibited
by clause (b) of the definition of Permitted Debt, or (iv) otherwise altering
the terms and conditions thereof in a manner not prohibited by the terms of this
Indenture.
<PAGE>
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"CAPITAL STOCK" of any Person means any and all shares, interests,
participations or other equivalents (designated) of capital stock of such Person
and all warrants or options to acquire such capital stock.
"CHANGE OF CONTROL" of the Company shall be deemed to have occurred
upon the occurrence of any of the following events: (a) any "person" or "group"
(as such terms are used in Sections 13(d) and l4(d) of the Exchange Act),
excluding the Permitted Holders, is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person
shall be deemed to have "beneficial ownership" of all securities that such
person has the right to acquire, whether such right is exercisable immediately,
after the passage of time, upon the happening of an event or otherwise),
directly or indirectly, of more than 50% of the total Voting Stock of the
Company; but only if the Permitted Holders do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the board of directors of the Company; (b) the Company consolidates
with, or merges with or into, another Person or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of its
assets to any Person, or any Person consolidates with, or merges with or into,
the Company, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where immediately
after such transaction no "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), excluding the Permitted Holders,
is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately, after the passage of time, upon the
happening of an event or otherwise), directly or indirectly, of more than 50% of
the total Voting Stock of the surviving or transferee corporation; but only if
the Permitted Holders do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the board of
directors of the Company; (c) at any time during any consecutive two-year
period, individuals who at the beginning of such period constituted the board of
directors of the Company (together with any new directors whose election by such
board of directors or whose nomination for election by the stockholders of the
Company was approved by a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or whose
election or
<PAGE>
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nomination for election was previously so approved) cease for any reason to
constitute a majority of the board of directors of the Company then in office;
or (d) the Company is liquidated or dissolved or adopts a plan of liquidation.
"COMMON STOCK" means the common stock, par value $.01 per share, of the
Company.
"COMPANY" means the party named as such above and any other obligor
until a successor replaces it pursuant to the applicable provision hereof and
thereafter means the successor.
"CONSOLIDATED INTEREST EXPENSE" of the Company means, for any period,
the aggregate amount of interest which, in accordance with generally accepted
accounting principles, would be included on an income statement for the Company
and its Restricted Subsidiaries on a consolidated basis, whether expensed
directly, or included as a component of cost of goods sold, or allocated to
joint ventures or otherwise (including, but not limited to, imputed interest
included on capitalized lease obligations, all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, the net costs associated with hedging obligations, amortization of
other financing fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount or premium, if any, and all other non-cash
interest expense), excluding interest expense related to the Company's mortgage
banking operations, PLUS the product of (x) the sum of (i) cas dividends paid on
any Preferred Stock of the Company PLUS (ii) cash dividends, the principal
amount of any debt securities issued as a dividend, the liquidation value of any
Preferred Stock issued as a dividend and the fair market value (as determined by
the Company's board of directors in good faith) of any other non-cash dividends,
in each case, paid on any Preferred Stock of any Subsidiary of the Company
(other than a Wholly-Owned Restricted Subsidiary), times (y) a fraction, the
numerator of which is one and the denominator of which is one MINUS the then
current effective aggregate federal, state and local tax rate of the Company,
expressed as a decimal.
"CONSOLIDATED INTEREST INCURRED" of the Company means, for any period,
(a) the aggregate amount of interest which, in accordance with generally
accepted accounting principles, would be included on an income statement for the
Company and its Restricted Subsidiaries on a consolidated basis, whether
expensed directly, or included as a component of cost of goods sold, or
allocated to joint ventures or otherwise
<PAGE>
-5-
(including, but not limited to, imputed interest included on capitalized lease
obligations, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, the net costs
associated with hedging obligations, amortization of other financing fees and
expenses, the interest portion of any deferred payment obligation, amortization
of discount or premium, if any, and all other non-cash interest expense),
excluding interest expense related to the Company's mortgage banking operations,
PLUS OR MINUS, without duplication, (b) th difference between capitalized
interest for such period and the interest component of cost of goods sold for
such period, PLUS (c) the product of (x) the sum of (i) cash dividends paid on
any Preferred Stock of the Company PLUS (ii) cash dividends, the principal
amount of any debt securities issued as a dividend, the liquidation value of any
Preferred Stock issued as a dividend and the fair market value (as determined by
the Company's board of directors in good faith) of any other non-cash dividends,
in each case, paid on any Preferred Stock of any Subsidiary of the Company
(other than a Wholly-Owned Restricted Subsidiary), times (y) a fraction, the
numerator of which is one and the denominator of which is one MINUS the then
current effective aggregate federal, state and local tax rate of the Company,
expressed as a decimal.
"CONSOLIDATED NET INCOME" of the Company, for any period, means the net
income (loss) of the Company and its Restricted Subsidiaries for such period,
determined on a consolidated basis, in accordance with generally accepted
accounting principles; PROVIDED that, without duplication, (i) the net income of
any Person, other than a Restricted Subsidiary which is consolidated with the
Company, in which any Person other than the Company and its Restricted
Subsidiaries has an interest shall be included only to the extent of the amount
of cash dividends or distributions actually paid to the Company or a Restricted
Subsidiary during such period, (ii) the net income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iii) the net income of any Subsidiary of the
Company shall be excluded to the extent such Subsidiary is prohibited, directly
or indirectly, from distributing such net income or any portion thereof to the
Company or a Restricted Subsidiary, (iv) all extraordinary gains and losses
(after taxes) that would be included on an income statement for such period
shall be excluded and (v) all gains and losses (after taxes) attributable to
Asset Sales shall be excluded; PROVIDED that there shall be included in such net
income, without duplication, the net income of any Unrestricted Subsidiary to
the extent such
<PAGE>
-6-
net income is actually received by the Company or any of its Restricted
Subsidiaries in cash during such period.
"CONSOLIDATED NON-CASH CHARGES" of the Company means, for any period,
the aggregate depreciation, amortization and other non-cash charges (other than
reserves or expenses established in anticipation of future cash requirements
such as reserves for taxes and uncollectible accounts) of the Company and its
Restricted Subsidiaries on a consolidated basis for such period, as determined
in accordance with generally accepted accounting principles; PROVIDED that
Consolidated Non-cash Charges shall exclude (i) any charges that are not
included for the purpose of determining Consolidated Net Income, (ii) any
charges that are included for the purpose of determining Consolidated Interest
Expense or Consolidated Tax Expense and (iii) any charges representing
capitalized selling, general and administrative expenses that are expensed
during such period as cost of goods sold.
"CONSOLIDATED TANGIBLE ASSETS" of the Company as of any date means the
total amount of assets of the Company and its Restricted Subsidiaries (less
applicable reserves and less the assets securing the payment of Non-Recourse
Debt of the Company and its Restricted Subsidiaries) on a consolidated basis at
the end of the fiscal quarter immediately preceding such date, as determined in
accordance with generally accepted accounting principles, less: (i) unamortized
debt and debt issuance expense, deferred charges, goodwill, patents, trademarks,
copyrights, and all other items which would be treated as intangibles on the
consolidated balance sheet of the Company and its Restricted Subsidiaries
prepared in accordance with generally accepted accounting principles and (ii)
appropriate adjustments on account of minority interests of other Persons
holding equity investments in Restricted Subsidiaries, in the case of each of
clauses (i) and (ii) above, as reflected on the consolidated balance sheet of
the Company and its Restricted Subsidiaries.
"CONSOLIDATED TANGIBLE NET WORTH" of the Company means the Company's
Net Worth less unamortized debt and debt issuance expense, deferred charges,
goodwill, patents, trademarks, copyrights, and all other items which would be
treated as intangibles on the consolidated balance sheet of the Company and its
Restricted Subsidiaries prepared in accordance with generally accepted
accounting principles.
"CONSOLIDATED TAX EXPENSE" of the Company means, for any period, the
aggregate of the tax expense of the Company and
<PAGE>
-7-
its Restricted Subsidiaries for such period, determined on a consolidated basis,
in accordance with generally accepted accounting principles.
"CONVERTIBLE NOTES" means up to $15,000,000 principal amount of the
Company's 7% Convertible Subordinated Notes due March 1, 2003.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the
Trustee specified in Section 11.02 or such other address as the Trustee may give
notice of to the Company.
"COVERAGE RATIO" of the Company means the ratio of the Company's EBITDA
to its Consolidated Interest Incurred for the four fiscal quarters ending
immediately prior to the date of determination. Notwithstanding clause (ii) of
the definition of Consolidated Net Income, if the Debt which is being Incurred
is Incurred in connection with an acquisition by the Company or a Restricted
Subsidiary, the Coverage Ratio shall be determined after giving effect to both
the Consolidated Interest Incurred related to the Incurrence of such Debt and
the EBITDA (x) of the Person becoming a Restricted Subsidiary of the Company or
(y) in the case of an acquisition of assets that constitute substantially all of
an operating unit or business, relating to the assets being acquired by the
Company or a Restricted Subsidiary.
"DEBT" means, as to any Person, without duplication, (a) any
indebtedness of such Person for borrowed money, (b) all indebtedness of such
Person evidenced by bonds, debentures, notes, letters of credit, drafts or
similar instruments, (c) all indebtedness of such Person to pay the deferred
purchase price of property or services, but not including accounts payable and
accrued expenses arising in the ordinary course of business, (d) all capitalized
lease obligations of such Person, (e) all Debt of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by such Person or
guaranteed by such Person, (f) Redeemable Stock of such Person and Preferred
Stock of any Subsidiary of such Person, (g) all obligations of such Person with
respect to Interest Rate Protection Agreements and (h) all Debt of others
guaranteed by such Person. The amount of all Debt of any Person at any date
pursuant to clauses (a)-(d) and (f) above shall be as would appear as a
liability upon a balance sheet of such Person prepared on a consolidated basis
in accordance with generally accepted accounting principles. Notwithstanding the
foregoing, "Debt" of the Company shall not include the amount reflected on a
consolidated balance sheet of the Company with respect to op-
<PAGE>
-8-
tions to acquire real property which was purchased by the Company and sold to a
third party within 360 days of such purchase for consideration at least equal to
the amount paid by the Company for such property less an amount equal to the
value of such option.
"DEFAULT" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"EBITDA" for the Company, for any period, means, without duplication,
the Consolidated Net Income of the Company plus, to the extent deducted in
calculating Consolidated Net Income, the sum of (a) Consolidated Tax Expense,
(b) Consolidated Interest Expense and (c) Consolidated Non-cash Charges.
"EQUITY OFFERING" means the public offering by the Company of up to
2,700,000 shares of Common Stock by means of a prospectus dated January [ ],
1998, plus up to 405,000 additional shares of Common Stock which may be sold by
the Company pursuant to a 30-day option granted to Smith Barney Inc., Jefferies
& Company, Inc. and Southeast Research Partners, Inc.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING DEBT" means all of the Debt of the Company and its Restricted
Subsidiaries that was outstanding on the Issue Date.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt of such other Person (whether by agreement to keep-well or to maintain
financial condition or otherwise); PROVIDED that the term "guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business.
"GUARANTEE" means the guarantee of the Company's obligations hereunder
made by a Guarantor in favor of the Holders pursuant to the terms of Article 10
hereof.
"GUARANTOR" means all of the Restricted Subsidiaries of the Company
(other than, in the Company's discretion, any Restricted Subsidiary the assets
of which have a book value
<PAGE>
-9-
of not more than $1,000,000) existing on the date hereof and any person who
becomes a guarantor pursuant to Section 10.03.
"HOLDER" or "SECURITYHOLDER" means a Person in whose name a Security is
registered on the Registrar's books.
"HOMEBUILDING JOINT VENTURE" means (i) any Unrestricted Subsidiary and
(ii) any person which is not a Guarantor in which the Company or any of its
Subsidiaries has an ownership interest and in which no other person has a
greater beneficial ownership interest than the beneficial ownership interest of
the Company that, in each case, was formed for and is engaged in homebuilding
operations.
"INDENTURE" means this Indenture, as amended, supplemented or otherwise
modified from time to time, in accordance with the terms hereof.
"INDEPENDENT FINANCIAL ADVISOR" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the board of directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"INTEREST RATE PROTECTION AGREEMENT" means any arrangement with any
other Person whereby, directly or indirectly, such Person is entitled to receive
from time to time periodic payments calculated by applying either a floating or
a fixed rate of interest on a stated notional amount in exchange for periodic
payments made by such Person calculated by applying a fixed or a floating rate
of interest on the same notional amount and shall include, without limitation,
interest rate swaps, caps, floors, collars and similar agreements; PROVIDED that
any arrangement which is entered into by the Company or any of its Restricted
Subsidiaries in connection with Debt Incurred by the Company or any of its
Restricted Subsidiaries shall constitute Permitted Debt.
"INVESTMENT" means, with respect to any Person, any direct or indirect
loan or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Debt issued by, any other Person. "Investments" shall exclude
extensions of trade credit
<PAGE>
-10-
by the Company and its Subsidiaries in the ordinary course of business in
accordance with normal trade practices of the Company or such Subsidiary, as the
case may be.
"ISSUE DATE" means the original date of issuance of the Securities.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
assignment (including any assignment of rights to receive payments of money
other than in connection with mortgage banking operations in the ordinary course
of business), charge, security interest or encumbrance of any kind (including
any conditional sale or other title retention agreement or any lease in the
nature thereof) in respect of such asset and any agreement to grant to any
Person any such Lien and any sale and leaseback of any asset.
"MATERIAL SUBSIDIARY" means any Restricted Subsidiary of the Company
which accounted for 10 percent or more of the Consolidated Tangible Assets or
EBITDA of the Company for the fiscal year ending immediately prior to any
Default or Event of Default.
"MORTGAGE" means a first priority mortgage or first priority deed of
trust on improved real property.
"MORTGAGE DEBT" means such mortgage banking debt as would be listed on
the consolidated balance sheet of the Company prepared in accordance with
generally accepted accounting principles.
"NET PROCEEDS" with respect to any Asset Sale means (i) cash (in U.S.
dollars or freely convertible into U.S. dollars) received by the Company or any
of its Restricted Subsidiaries from such Asset Sale (including cash received as
consideration for the assumption or incurrence of liabilities incurred in
connection with or in anticipation of such Asset Sale), after (a) provision for
all income or other taxes measured by or resulting from such Asset Sale to the
Company or any of its Restricted Subsidiaries, whether or not offset by net
operating loss and tax credit carry-forwards, (b) payment of all brokerage
commissions and the underwriting fees and, without limitation, all other fees
and expenses related to such Asset Sale, and (c) deduction of appropriate
amounts to be provided by the Company or any of its Restricted Subsidiaries as a
reserve, in accordance with generally accepted accounting principles, against
any liabilities associated with the assets sold or otherwise disposed of in such
Asset Sale (including, without
<PAGE>
-11-
limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters) or against any indemnification
obligations associated with the sale or other disposition of the assets sold or
otherwise disposed of in such Asset Sale, and (ii) all noncash consideration
received by the Company or any of its Restricted Subsidiaries from such Asset
Sale upon the liquidation or conversion of such consideration into cash.
"NET WORTH" of the Company means, at any date, the aggregate of
capital, surplus and retained earnings of the Company and its Restricted
Subsidiaries as would be shown on a consolidated balance sheet of the Company
prepared in accordance with generally accepted accounting principles, adjusted
to exclude (to the extent included) investments by the Company and its
Subsidiaries in joint ventures and the amount of equity attributable to
Affiliates other than Restricted Subsidiaries of such Person.
"NON-RECOURSE DEBT" with respect to any Person means Debt of such
Person for which the sole legal recourse for collection of principal and
interest on such Debt is against the specific property identified in the
instruments evidencing or securing such Debt and such property was acquired with
the proceeds of such Debt or such Debt was Incurred within 90 days after the
acquisition of such property.
"OFFICER" means the Chief Executive Officer, the President, any Vice
President, the Treasurer or the Secretary of the Company or any Guarantor, as
applicable.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer or an assistant Secretary of the
Company or any Guarantor, as applicable.
"OPINION OF COUNSEL" means a written opinion from legal counsel who may
be an employee of or counsel for the Company or other counsel reasonably
acceptable to the Trustee.
"PERMITTED DEBT" means:
(a) Debt evidenced by the Securities and the Guarantees;
(b) Debt Incurred by the Company or any Guarantor under or in respect
of a Bank Facility (including any guarantees related thereto) for working
capital or other corporate
<PAGE>
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purposes or evidenced by letters of credit; PROVIDED that the aggregate amount
of all such Debt outstanding at any time pursuant to this clause (b) may not
exceed $140,000,000;
(c) Debt Incurred by the Company or any Guarantor under or in respect
of a Warehouse Facility; PROVIDED that the amount of such Debt (including
funding drafts issued thereunder) outstanding at any time pursuant to this
clause (c) guaranteed by the Company or a Restricted Subsidiary may not exceed
the value of the Mortgages pledged to secure Debt thereunder;
(d) Debt of the Company to any Guarantor or of any Restricted
Subsidiaries of the Company to the Company or to any Guarantor;
(e) Existing Debt (without duplication of Debt indicated under clauses
(a)-(d) above) of the Company and its Restricted Subsidiaries other than Debt to
be repaid from the proceeds of the sale of the Securities;
(f) Non-Recourse Debt;
(g) Debt in respect of performance, completion, guarantee, surety and
similar bonds or banker's acceptances provided by the Company or any of its
Restricted Subsidiaries in the ordinary course of business;
(h) Additional Debt of the Company or any Guarantor in an amount not to
exceed $7,500,000 at any time outstanding;
(i) Debt referred to in the definition of Interest Rate Protection
Agreement;
(j) Purchase Money Obligations incurred in the ordinary course of
business in an amount not exceeding $5,000,000 at any time outstanding; and
(k) Refinancing Debt.
"PERMITTED HOLDERS" means Alec Englestein and Harry Englestein and
their respective estates, affiliates and associates (as such terms are defined
in the Securities Act).
"PERMITTED INVESTMENTS" of any Person means Investments of such Person
in (i) direct obligations of the United States or any agency thereof or
obligations guaranteed by the United States or any agency thereof, in each case
maturing
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within 180 days of the date of acquisition thereof, (ii) certificates of deposit
maturing within 180 days of the date of acquisition thereof issued by a bank,
trust company or savings and loan association which is organized under the laws
of the United States or any state thereof having capital, surplus and undivided
profits aggregating in excess of $250 million and a Keefe Bank Watch Rating of C
or better, (iii) certificates of deposit maturing within 180 days of the date of
acquisition thereof issued by a bank, trust company or savings and loan
association organized under the laws of the United States or any state thereof
other than banks, trust companies or savings and loan associations satisfying
the criteria in (ii) above; PROVIDED that the aggregate amount of all
certificates of deposit issued to the Company at any one time by any one such
bank, trust company or savings and loan association will not exceed $100,000,
(iv) commercial paper given the highest rating by two established national
credit rating agencies and maturing not more than 180 days from the date of the
acquisition thereof, (v) repurchase agreements or money-market accounts which
are fully secured by direct obligations of the United States or any agency
thereof and (vi) in the case of the Company and its Subsidiaries, (1) any
receivables or loans taken by the Company or a Subsidiary in connection with the
sale of any asset otherwise permitted by this Indenture, (2) Investments in any
Guarantor, (3) Investments in the Securities or Debt PARI PASSU with the
Securities, (4) Investments in evidences of Debt, securities or other property
received from another Person by the Company or any of its Restricted
Subsidiaries in connection with any bankruptcy proceeding or by reason of a
composition or readjustment of debt or a reorganization of such Person or as a
result of foreclosure, perfection or enforcement of any Lien in exchange for
evidences of Debt, securities or other property of such Person held by the
Company or any of its Restricted Subsidiaries, or for other liabilities or
obligations of such other Person to the Company or any of its Restricted
Subsidiaries that were created, in accordance with the terms of this Indenture,
(5) Investments in Interest Rate Protection Agreements which constitute
Permitted Debt, (6) Investments in any Homebuilding Joint Ventures not in excess
of $20 million in the aggregate for all Homebuilding Joint Ventures and (7)
Investments in an aggregate amount outstanding not greater than $5,000,000.
"PERMITTED LIENS" with respect to the Company and its Restricted
Subsidiaries means (i) (x) until such time as the Company shall have less than
an aggregate of $40,000,000 of maximum availability under one or more Bank
Facilities described under clause (b) of the definition of "Permitted Debt"
which are secured by any Liens, Liens securing the Company's Bank Facility or
Bank Facilities de-
<PAGE>
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scribed under clause (b) of the definition of "Permitted Debt", and (y) from and
after the first time at which the Company shall have less than an aggregate of
$40,000,000 of maximum availability under one or more Bank Facilities which are
secured by Liens, Liens on assets of the Company or any Restricted Subsidiary of
the Company securing Debt which may be incurred pursuant to Section 4.10,
PROVIDED that the aggregate amount of Debt secured by Liens (excluding
Nonrecourse Debt of the Company and Restricted Subsidiaries and Debt outstanding
under the Warehouse Facility) may not exceed 40 percent of the Company's
Consolidated Tangible Assets; (ii) Liens securing a Warehouse Facility, PROVIDED
that such Liens shall not extend to any assets other than the mortgages,
promissory notes and other collateral that secures mortgage loans made by the
Company or any of its Restricted Subsidiaries; (iii) Liens securing Non-Recourse
Debt of the Company or any of its Restricted Subsidiaries, PROVIDED that such
Liens apply only to the property financed out of the net proceeds of such
Non-Recourse Debt within 90 days of the Incurrence of such Non-Recourse Debt;
(iv) Liens securing Debt of a Person existing at the time that such Person is
merged into or consolidated with the Company or a Restricted Subsidiary,
PROVIDED that such Liens were not created in contemplation of such merger or
consolidation and do not extend to any assets or property of the Company or any
Restricted Subsidiary, other than the surviving Person and its Subsidiaries; (v)
Liens on assets or property acquired by the Company or a Restricted Subsidiary,
PROVIDED that such Liens were not created in contemplation of such acquisition
and do not extend to any other assets or property (other than proceeds of such
acquired assets or property); (vi) Liens in respect of Interest Rate Protection
Agreements which constitute Permitted Debt; (vii) Liens for taxes, assessments
or governmental charges or claims that either (a) are not yet delinquent or (b)
are being contested in good faith by appropriate proceedings and as to which
appropriate reserves have been established or other provisions have been made in
accordance with generally accepted accounting principles; (viii) statutory Liens
of landlords and carriers', warehousemen's, mechanics', suppliers',
materialmen's, repairmen's, contractors' or other Liens imposed by law and
arising in the ordinary course of business; (ix) Liens (other than any Lien
imposed by the Employee Retirement Income Security Act of 1974, as amended)
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and
<PAGE>
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other types of social security; (x) Liens incurred or deposits made to secure
the performance of tenders, bids, leases, statutory obligations, surety and
appeal bonds, progress payments, government contracts and other obligations of
like nature (exclusive of obligations for the payment of borrowed money), in
each case, incurred in the ordinary course of business; (xi) attachment or
judgment Liens not giving rise to a Default or Event of Default; (xii)
easements, rights-of-way, restrictions and other similar charges or encumbrances
not materially interfering with the ordinary conduct of the business of the
Company or any of its RESTRICTED Subsidiaries; (xiii) leases or subleases
granted to others not materially interfering with the ordinary conduct of the
business of the Company or any of its Restricted Subsidiaries; (xiv) Liens
securing Refinancing Debt; PROVIDED that such Liens only extend to the assets
securing the Debt being refinanced, such refinanced Debt was previously secured
and such Liens do not extend to any other assets of the Company or the assets of
any of the Company's other Subsidiaries; (xv) Liens securing Purchase Money
Obligations (including capitalized lease obligations); (xvi) Liens existing on
the Issue Date; (xvii) any contract to sell an asset provided such sale is
otherwise permitted under this Indenture; and (xviii) Liens on property or
assets of any Restricted Subsidiary securing Debt of such Restricted Subsidiary
owing to the Company or one or more Restricted Subsidiaries of the Company.
"PERSON" means any individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or agency or instrumentality thereof.
"PREFERRED STOCK" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's preferred or preference stock whether now outstanding or issued
after the Issue Date, and including, without limitation, all classes and series
of preferred or preference stock.
"PRINCIPAL" of a debt security means the principal of the security plus
the premium, if any, on the security.
"PURCHASE MONEY OBLIGATIONS" means Debt of any Person secured by Liens
(i) on property purchased, acquired, or constructed by such Person or its
Subsidiaries after the Issue Date and used in the ordinary course of business by
such Person and (ii) securing the payment of all or any part of the pur-
<PAGE>
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chase price or construction cost of such assets and limited to the property so
acquired and improvements thereof; PROVIDED that such Debt is incurred no later
than 90 days after the acquisition of such property or completion of such
construction or improvements.
"REDEEMABLE STOCK" means, with respect to any Person, any class or
series of Capital Stock of such Person that is redeemable at the option of the
holder (except pursuant to a change in control provision that does not (i) cause
such Capital Stock to become redeemable in circumstances which would not
constitute a Change of Control and (ii) require the Company to pay the
redemption price therefor prior to the Change of Control Repurchase Date) or is
subject to mandatory redemption or otherwise matures prior to the final stated
maturity of the Securities.
"REFINANCING DEBT" means Debt that refunds, refinances or extends any
Securities, Existing Debt (other than Existing Debt to be repaid with the net
proceeds of the offering of the Securities) or other Debt Incurred by the
Company or its Restricted Subsidiaries permitted under the terms of this
Indenture, but only to the extent that (i) the Refinancing Debt is subordinated
to the Securities to the same extent as the Debt being refunded, refinanced or
extended, if at all, (ii) the Refinancing Debt is scheduled to mature either (a)
no earlier than the Debt being refunded, refinanced or extended, or (b) after
the maturity date of the Securities, (iii) the portion, if any, of the
Refinancing Debt that is scheduled to mature on or prior to the maturity date of
the Securities has a Weighted Average Life to Maturity at the time such
Refinancing Debt is Incurred that is equal to or greater than the Weighted
Average Life to Maturity of the portion of the Debt being refunded, refinanced
or extended that is scheduled to mature on or prior to the maturity date of the
Securities, and (iv) the gross proceeds of such Refinancing Debt are an amount
that is equal to or less than the aggregate principal amount then outstanding
under the Debt being refunded, refinanced or extended (plus the premiums or
other payments paid in connection therewith (which shall not exceed the stated
amount of any premium or other payment required to be paid in connection with
such a renewal, extension, substitution, refunding, refinancing, redemption,
repurchase or replacement pursuant to the terms of the Debt being renewed,
extended, substituted, refunded, refinanced, amended, modified, supplemented,
redeemed, repurchased or replaced) and the expenses incurred in connection
therewith).
<PAGE>
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"RESTRICTED PAYMENTS" means with respect to the Company or any
Restricted Subsidiary (i) the declaration or payment of any dividend or other
distribution on any shares of such Person's Capital Stock (except (x) dividends
or distributions in additional shares of Capital Stock of the Company other than
Redeemable Stock or (y) the declaration or payment of any dividend or other
distribution by a Restricted Subsidiary to the Company or another Restricted
Subsidiary), (ii) any payment on account of the purchase, redemption or other
acquisition of (a) any shares of such Person's Capital Stock or (b) any option,
warrant or other right to acquire shares of such Person's Capital Stock, except,
in each case, Capital Stock held by the Company or a Restricted Subsidiary,
(iii) any Investment (other than a Permitted Investment) in any Person, or (iv)
any principal payment, redemption, repurchase, defeasance or other acquisition
or retirement, prior to scheduled principal payment or scheduled maturity, of
Subordinated Debt of the Company or its Subsidiaries.
"RESTRICTED SUBSIDIARY" means any Subsidiary which is not an
Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means the Securities described above issued under this
Indenture.
"SUBORDINATED DEBT" means, with respect to the Company and its
Restricted Subsidiaries, all Debt of such Person which is, pursuant to its
terms, expressly subordinated in right of payment to the Securities or the
Guarantees (other than Debt held by the Company or a Restricted Subsidiary).
"SUBSIDIARY" means, with respect to any Person, (i) any corporation or
entity of which a majority of the capital stock having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions is at the time directly or indirectly owned by such Person or one or
more of the other Subsidiaries of that Person or (ii) any partnership or joint
venture at least a majority of the voting power of which is at the time directly
or indirectly owned by such Person or one or more of the other Subsidiaries of
that Person, or a combination thereof or a successor thereto.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the date of this Indenture, except as provided in
Section 9.03.
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"TRUST OFFICER" means any officer of the Trustee assigned by the
Trustee to administer its corporate trust matters.
"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it and thereafter means the successor.
"UNRESTRICTED SUBSIDIARY" means each of the Subsidiaries of the Company
(other than a Guarantor) so designated by a resolution adopted by the board of
directors of the Company as provided below; PROVIDED that (a) neither the
Company nor any of its other Subsidiaries (other than Unrestricted Subsidiaries)
(1) provides any direct or indirect credit support for any Debt of such
Subsidiary (including any undertaking, agreement or instrument evidencing such
Debt) or (2) is directly or indirectly liable for any Debt of such Subsidiary,
and (b) the creditors with respect to Debt for borrowed money of such Subsidiary
have agreed in writing that they have no recourse, direct or indirect, to the
Company or any other Subsidiary of the Company (other than Unrestricted
Subsidiaries), including, without limitation, recourse with respect to the
payment of principal or interest on any Debt of such Subsidiary. The board of
directors of the Company may designate an Unrestricted Subsidiary to be a
Restricted Subsidiary; PROVIDED that (i) any such redesignation will be deemed
to be an Incurrence by the Company and its Restricted Subsidiaries of the Debt
(if any) of such redesignated Subsidiary for purposes of Section 4.10 hereof as
of the date of such redesignation, (ii) any Debt of such Unrestricted Subsidiary
could then be Incurred in accordance with Section 4.10 on the date of such
redesignation and (iii) the Liens of such Unrestricted Subsidiary could then be
incurred in accordance with Section 4.13 hereof as of the date of such
redesignation. Subject to the foregoing, the board of directors of the Company
also may designate any Restricted Subsidiary to be an Unrestricted Subsidiary;
PROVIDED that (i) all previous Investments by the Company and its Restricted
Subsidiaries in such Restricted Subsidiary (net of any returns previously paid
on such Investments) will be deemed to be Restricted Payments at the time of
such designation and will reduce the amount available for Restricted Payments
under Section 4.11 hereof, (ii) the Company and its Restricted Subsidiaries
could incur $1.00 of additional Indebtedness under the Coverage Ratio test
contained in Section 4.10 hereof and (iii) no Default or Event of Default shall
have occurred or be continuing. Any such designation or redesignation by the
board of directors of the Company will be evidenced to the Trustee by the filing
with the Trustee of a certified
<PAGE>
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copy of the resolution of the board of directors of the Company giving effect to
such designation or redesignation and an Officers' Certificate certifying that
such designation or redesignation complied with the foregoing conditions and
setting forth the underlying calculations.
"U.S. GOVERNMENT OBLIGATIONS" means direct non-callable obligations of,
or non-callable obligations guaranteed by, the United States of America for the
payment of which the full faith and credit of the United States of America is
pledged.
"VOTING STOCK" means, with respect to any Person, Capital Stock of any
class or kind normally entitled to vote in the election of the board of
directors or other governing body of such Person.
"WAREHOUSE FACILITY" means a Bank Facility to finance the making of
mortgage loans originated by the Company or any of its Subsidiaries.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Debt or
portion thereof, if applicable, at any date, the number of years obtained by
dividing (i) the then outstanding principal amount of such Debt or portion
thereof, if applicable, into (ii) the sum of the products obtained by
multiplying (a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including payment at
final maturity, in respect thereof, by (b) th number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the making of such
payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of
the Company of which 100% of the outstanding Capital Stock is owned by one or
more Wholly Owned Restricted Subsidiaries of the Company or by the Company and
one or more Wholly Owned Restricted Subsidiaries of the Company. For purposes of
this definition, any directors' qualifying shares shall be disregarded in
determining the ownership of a Subsidiary.
SECTION 1.02. OTHER DEFINITIONS.
TERM DEFINED IN SECTION
"Bankruptcy Law".................................. 6.01
"business day".................................... 11.07
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"Change of Control Notice"........................ 4.08
"Change of Control Price"......................... 4.08
"Change of Control Repurchase
Date"........................................ 4.08
"Change of Control Repurchase
Right"....................................... 4.08
"Custodian........................................ 6.01
"Discharged"...................................... 8.01
"Event of Default"................................ 6.01
"Incur"........................................... 4.10
"Legal Holiday"................................... 11.07
"Minimum Net Worth"............................... 4.09
"Net Proceeds Offer".............................. 4.15
"Net Proceeds Offer Notice"....................... 4.15
"Net Worth"....................................... 4.09
"Net Worth Offer Amount".......................... 4.09
"Net Worth Price"................................. 4.09
"Net Worth Repurchase Date"....................... 4.09
"Net Worth Repurchase Right"...................... 4.09
"Paying Agent".................................... 2.03
"Purchase Amount"................................. 4.15
"Registrar"....................................... 2.03
"Successor"....................................... 5.01
"Trigger Date".................................... 4.09
SECTION 1.03. Incorporation by Reference of Trust INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company.
<PAGE>
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All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC Rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles in effect on the date hereof;
(3) "or" is NOT exclusive;
(4) words in the singular include the plural and in the plural
include the singular;
(5) provisions apply to successive events and transactions;
and
(6) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section
or other Subdivision.
ARTICLE 2
THE SECURITIES
SECTION 2.01. FORM AND DATING.
The Securities and the Trustee's certificate of authentication shall be
substantially in the form set forth in Exhibit A, which is incorporated in and
forms a part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange Rule or usage. Each Security shall
be dated the date of its authentication.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Securities.
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If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication; and the Trustee shall, upon a written order or
orders of the Company signed by two Officers or by an Officer and an Assistant
Treasurer or Assistant Secretary of the Company, authenticate and make
available, for delivery such Securities. The order shall specify the amount of
Securities to be authenticated and the date on which such Securities are to be
authenticated. The aggregate principal amount of Securities outstanding at any
time may not exceed $120,000,000 except as provided in Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities may be presented for registration of
transfer or for exchange ("Registrar") and an office or agency where Securities
may be presented for payment ("Paying Agent"); provided that payment of interest
may, at the option of the Company, be made by check mailed to a Holder at his
registered address. The Registrar shall keep a register of the Securities and of
their transfer and exchange. The Company may appoint or change one or more
co-Registrars and one or more additional paying agents without notice and may
act in any such capacity on its own be-
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half. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall notify
the Trustee of the name and address of any Agent not a party to this Indenture.
If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall
act as such, and shall be entitled to appropriate compensation therefor pursuant
to Section 7.07.
The Company initially appoints the Trustee as Paying Agent and
Registrar.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
Each Paying Agent shall hold in trust for the benefit of the
Securityholders or the Trustee all moneys held by such Paying Agent for the
payment of principal of or interest on the Securities, and shall notify the
Trustee of any default by the Company in making any such payment. While any such
default continues, the Trustee may require a Paying Agent to pay all money held
by it to the Trustee. The Company at any time may require a Paying Agent to pay
all money held by it to the Trustee. Upon payment over to the Trustee, such
Paying Agent shall have no further liability for the money. If the Company acts
as Paying Agent, it shall segregate and hold as a separate trust fund all money
held by it as Paying Agent.
SECTION 2.05. SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee on or before each interest payment date and at such other times
as the Trustee may request in writing a list, in such form and as of such date
as the Trustee may reasonably require, of the names, addresses and tax
identification numbers of Securityholders.
SECTION 2.06. TRANSFER AND EXCHANGE.
Where Securities are presented to the Registrar or a co-Registrar with
a request to register the transfer or to exchange them for an equal principal
amount of Securities of other authorized denominations, the Registrar shall
register
<PAGE>
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the transfer or make the exchange if the requirements of Section 8-401(l) of the
New York Uniform Commercial Code are met. To permit registrations of transfer
and exchanges, the Trustee shall authenticate Securities at the Registrar's
request. The Company or the Trustee, as the case may be, shall not be required
(a) to issue, authenticate, register the transfer of or exchange any Security
during a period beginning at the opening of business 15 days before the mailing
of a notice, of redemption of the Securities selected for redemption under
Section 3.02 and ending at the close of business on the day of such mailing, or
(b) to register the transfer of or exchange any Security so selected for
redemption in whole or in part, except the unredeemed portion of Securities
being redeemed in part.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any transfer, registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 2.10, 3.06 or 9.05 not involving any
transfer.
SECTION 2.07. REPLACEMENT SECURITIES.
If the Holder of a Security claims that the Security has been
mutilated, lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Security if the requirements of Section
8-405 of the New York Uniform Commercial Code are met and, in the case of a
mutilated Security, such mutilated Security is surrendered to the Trustee. If
required by the Trustee or the Company, an indemnity bond must be sufficient, in
the judgment of both, to protect the Company, the Trustee, or any Agent from any
loss which any of them may suffer if a Security is replaced. The Company or the
Trustee may charge for its expenses in replacing a Security.
In case any such mutilated, destroyed or wrongfully taken Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security when due.
Every replacement Security is an additional obligation of the Company.
<PAGE>
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SECTION 2.08. OUTSTANDING SECURITIES.
Securities outstanding at any time are all the Securities authenticated
by the Trustee except for those cancelled by it, those delivered to it for
cancellation and those described in this Section as not outstanding. A Security
does not cease to be outstanding because the Company or one of its subsidiaries
or Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it, or a court
holds, that the replaced Security is held by a BONA FIDE purchaser.
If the Paying Agent (other than the Company) holds on a redemption
date, repurchase date or maturity date money sufficient to pay Securities
payable on that date, then on and after that date, such Securities shall be
deemed to be no longer outstanding and interest on them shall cease to accrue.
SECTION 2.09. SECURITIES HELD BY THE COMPANY OR AN AFFILIATE.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or a Subsidiary or an Affiliate shall be disregarded, except that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Securities which the
Trustee actually knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Securities surrendered to them for
<PAGE>
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registration of transfer, exchange or payment. The Trustee shall cancel all
Securities surrendered for registration of transfer, exchange, payment or
cancellation and may destroy cancelled Securities and deliver a certificate of
any such destruction to the Company. The Company may not issue new Securities to
replace Securities that it has paid or delivered to the Trustee for
cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If and to the extent the Company defaults in a payment of interest on
the Securities, it shall pay the defaulted interest in any lawful manner plus,
to the extent not prohibited by applicable statute or case law, interest payable
on the defaulted interest. It may pay the defaulted interest to the persons who
are Securityholders on a subsequent special record date. The Company shall fix
such record date and payment date. At least 15 days before the record date, the
Company shall mail to Securityholders a notice that states the record date,
payment date and amount of interest to be paid.
ARTICLE 3
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company wants to redeem a portion of the Securities pursuant to
paragraph 5 of the Securities, it shall notify the Trustee at least 60 days
prior to the redemption date (unless a shorter notice period shall be
satisfactory to the Trustee) of the redemption date and the principal amount of
Securities to be redeemed.
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all the Securities are to be redeemed, the Trustee shall
select the particular Securities (or portions thereof) to be redeemed on either
a pro rata basis or by lot or such other method as the Trustee shall determine
to be fair and appropriate, such determination to be final and conclusive for
all purposes hereunder, but in any event, in such manner as complies with
applicable legal and stock exchange requirements. The Trustee shall make the
selection from Securities outstanding not previously called for redemption. The
Trustee may select for redemption portions of the principal of Securities
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that have denominations larger than $1,000. Securities and portions of them it
selects shall be in amounts of $1,000 or whole multiples of $1,000. Provisions
of this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail by first-class mail a notice of redemption to each Holder
whose Securities are to be redeemed.
The notice shall identify the Securities and the principal amount
thereof to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price (including the amount of accrued
interest to be paid on the Securities called for redemption);
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price; and
(5) that interest on Securities called for redemption ceases
to accrue on and after the redemption date.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event the
Company will provide the Trustee with the information required by clauses (1)
through (5).
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once a notice of redemption is mailed, Securities or portions thereof
called for redemption become due and payable on the redemption date at the
redemption price and, on and after such date (unless the Company shall default
in the payment of the redemption price), such Securities shall cease to bear
interest. Upon surrender to the Paying Agent, such Securities shall be paid at
the redemption price plus accrued interest to the redemption date.
<PAGE>
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SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or before 12:00 Noon on the redemption date, the Company shall
deposit with the Paying Agent money in funds immediately available on the
redemption date sufficient to pay the redemption price of and accrued interest
on all Securities to be redeemed on that date.
SECTION 3.06. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder a new Security equal in principal amount to
the unredeemed portion of the Security surrendered.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES.
The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities. Principal and
interest shall be considered paid on the date due if the Paying Agent holds on
that date money sufficient to pay all principal and interest then due.
The Company shall pay interest on overdue principal at the rate borne
by the Securities. The Company shall pay interest on overdue installments of
interest at the same rate to the extent not prohibited by applicable statute or
case law.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities may be surrendered for registration
of transfer or exchange and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Company will
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee.
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The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
PROVIDED, HOWEVER, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
in the Borough of Manhattan, The City of New York, an agency of the Company in
accordance with Section 2.03.
SECTION 4.03. SEC REPORTS.
The Company shall deliver to the Trustee and the Trustee will mail to
each Holder within 15 days after the Company files with the SEC copies of the
quarterly and annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe) with respect to the Company and the Guarantors, if any,
which the Company and the Guarantors may be required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act. The Company also shall
comply with the other provisions of TIA /section/ 314(a).
Notwithstanding that neither the Company nor any of the Guarantors may
be required to remain subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, the Company will continue to file with the SEC and
provide the Trustee and Holders with such annual and quarterly reports and such
information, documents and other reports with respect to the Company and the
Guarantors as are required under Sections 13 and 15(d) of the Exchange Act. If
filing of documents by the Company with the SEC as aforementioned in this
paragraph is not permitted under the Exchange Act, the Company shall promptly
upon written notice supply copies of such documents to any prospective holder.
SECTION 4.04. COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee within 120 days after the end
of each fiscal year of the Company an Officers' Certificate stating whether or
not the signatories know of any Default by the Company in performing any of its
obliga-
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tions under this Indenture and the Securities. If they do know of any such
Default, the certificate shall describe the Default and its status.
SECTION 4.05. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may law-fully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
SECTION 4.06. CORPORATE EXISTENCE.
Subject to Article 5, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate existence of each of its Restricted Subsidiaries in
accordance with the respective organizational documents of each Restricted
Subsidiary and the rights (charter and statutory), licenses and franchises to
the Company and its Restricted Subsidiaries; PROVIDED, HOWEVER, that the Company
shall not be required to preserve any such right, license or franchise, or the
corporate existence of any Restricted Subsidiary if, in the judgment of the
board of directors of the Company, (i) such preservation or existence is not
material to the conduct of business of the Company and (ii) the loss of such
right, license or franchise or the dissolution of such Restricted Subsidiary
does not have a material adverse impact on the Holders.
SECTION 4.07. NOTICE OF DEFAULT.
In the event that any Default under Section 6.01 hereof shall occur the
Company will give prompt written notice of such Default to the Trustee.
SECTION 4.08. CHANGE OF CONTROL.
(a) In the event that there shall occur a Change of Control of the
Company, each Holder of a Security shall have the right (a "Change of Control
Repurchase Right") upon receipt
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of a Change of Control Notice (as defined below), at such Holder's option, to
require the Company to repurchase any Securities of such Holder or any portion
of the principal amount thereof which is $1,000 or any integral multiple
thereof, on the date (the "Change of Control Repurchase Date") that is 45 days
after the date of the Change of Control Notice, or, if such 45th day is a Legal
Holiday, the next subsequent day which is not a Legal Holiday, at a price equal
to 101% of the principal amount thereof, plus accrued interest to the Change of
Control Repurchase Date (the "Change of Control Price"). The right to require
the repurchase of Securities shall not continue after a discharge of the Company
from its obligations with respect to the Securities in accordance with Article
8.
(b) Within 30 days after the occurrence of a Change of Control, the
Company, or, at the request of the Company, the Trustee, shall give notice of
the occurrence of the Change of Control and of the Change of Control Repurchase
Right set forth herein to each Holder (the "Change of Control Notice"). The
Company shall also deliver a copy of the Change of Control Notice to the
Trustee. Any such notice shall contain all instructions and materials necessary
to enable such Holders to deliver Securities pursuant to the Change of Control
Repurchase Right including,-without limitation, the following:
(1) the Change of Control Repurchase Date;
(2) the date by which the Change of Control Repurchase Right
must be exercised;
(3) the Change of Control Price;
(4) that Securities are to be surrendered for payment of the
Change of Control Price; and
(5) that the exercise of the Change of Control Repurchase
Right is irrevocable.
(c) To exercise a Change of Control Repurchase Right a Holder shall
deliver to the Company (if it is acting as its own Paying Agent) or to a Paying
Agent designated by the Company for such purpose in the notice referred to above
on or before the 30th day after the date of the Change of Control Notice, or, if
such day is a Legal Holiday, the next subsequent day which is not a Legal
Holiday, (i) written notice of the Holder's exercise of such right, which notice
shall set forth the name of the Holder, the principal amount of Securities (or
portions thereof) to be repurchased and a statement that an
<PAGE>
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election to exercise the Change of Control Repurchase Right is being made
thereby, and (ii) the Securities with respect to which the Change of Control
Repurchase Right is being exercised, duly endorsed for transfer to the Company,
and the Holder of such Securities shall be entitled to receive from the Company
(if it is acting as its own Paying Agent) or such Paying Agent a nontransferable
receipt of deposit evidencing such deposit. Such written notice shall be
irrevocable.
If the Change of Control Repurchase Date is between a regular record
date for the payment of interest and the next succeeding interest payment date,
any Security to be repurchased must be accompanied by funds equal to the
interest payable on such succeeding interest payment date on the principal
amount to be repurchased (unless such Security shall have been called for
redemption, in which case no such payment shall be required), and the interest
on the principal amount of the Security being repurchased will be paid on such
next succeeding interest payment date to the registered holder of such Security
on the immediately preceding record date. A Security repurchased on an interest
payment date need not be accompanied by any payment, and the interest on the
principal amount of the Security being repurchased will be paid on such interest
payment date to the registered holder of such Security on the immediately
preceding record date.
(d) In the event a Change of Control Repurchase Right shall be
exercised in accordance with the terms hereof, the Company shall pay or cause to
be paid the applicable Change of Control Price with respect to the Securities as
to which the Change of Control Repurchase Right shall have been exercised to the
Holder on the Change of Control Repurchase Date.
(e) On or prior to a Change of Control Repurchase Date, the Company
shall deposit with the Trustee or with a Paying Agent (or, if the Company is
acting as its own Paying Agent, segregate and hold in trust in accordance with
Section 2.04) an amount of money sufficient to pay the Change of Control Price
payable in respect of all of the Securities which are to be repurchased on that
date.
(f) Both the notice of the Company and the notice of the Holder having
been given as specified in this Section 4.08, the Securities so to be
repurchased shall, on the Change of Control Repurchase Date, become due and
payable at the Change of Control Price applicable thereto and from and after
such date (unless the Company shall default in the payment of the Change of
Control Price) such Securities shall cease to bear
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interest. If any Security shall not be paid upon surrender thereof for
repurchase, the principal shall, until paid, bear interest from the Change of
Control Repurchase Date at the rate borne by such Security.
(g) Any Security which is to be submitted for repurchase only in part
shall be delivered pursuant to this Section 4.08 (with, if the Company or the
Trustee so requires, due endorsement by, or a written instrument of transfer in
form satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and make available for delivery to
the Holder of such Security without any service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder, of the
same tenor and in aggregate principal amount equal to and in exchange for the
portion of the principal of such Security not submitted for repurchase.
(h) If any repurchase pursuant to the foregoing provisions constitutes
a tender offer as defined under the Exchange Act, the Company will comply with
the requirements of Rule l4e-1 and any other tender offer rules under the
Exchange Act which then may be applicable.
SECTION 4.09. MAINTENANCE OF NET WORTH.
(a) In the event that the Company's Net Worth at the end of each of any
two consecutive fiscal quarters (the last day of such second fiscal quarter
being referred to as the "Trigger Date") is less than $35,000,000 (the "Minimum
Net Worth"), then the Company shall make an offer to all Holders (a "Net Worth
Offer") to acquire on a pro rata basis on the date (the "Net Worth Repurchase
Date") that is 45 days following the date of the Net Worth Notice (as defined
below), Securities in an aggregate principal amount equal to 10% of the initial
outstanding principal amount of the Securities (or if less than 10% of the
initial aggregate principal amount of the Securities issued are then
outstanding, all the Securities outstanding at the time) (the "Net Worth Offer
Amount") at a purchase price of 100% of the principal amount thereof, plus
accrued interest to the Net Worth Repurchase Date (the "Net Worth Price"). The
Company may credit against the Net Worth Offer Amount the principal amount of
Securities acquired by the Company prior to the Trigger Date through purchase,
optional redemption or exchange. The Company, however, may not credit a specific
Security in more than one Net Worth Offer. In no event shall the failure to meet
the Minimum Net Worth at the end of any fiscal quarter
<PAGE>
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be counted toward the making of more than one Net Worth Offer. The Company shall
notify the Trustee promptly after the occurrence of any of the events specified
in this Section 4.09 and shall notify the Trustee in writing if its Net Worth is
equal to or less than the Minimum Net Worth for any fiscal quarter.
(b) Within 30 days after the Trigger Date, the Company, or, at the
request of the Company, the Trustee, shall give notice of the Net Worth Offer to
each Holder (the "Net Worth Notice"). The Company shall also deliver a copy of
the Net Worth Notice to the Trustee. Any such notice shall contain all
instructions and materials necessary to enable such Holders to deliver
Securities pursuant to the Net Worth Offer including, without limitation, the
following:
(1) the Net Worth Repurchase Date;
(2) the date by which the Net Worth Offer must be accepted by
a Holder;
(3) the Net Worth Price and the Net Worth Offer Amount; and
(4) that Securities are to be surrendered for payment of the
Net Worth Price.
(c) To accept a Net Worth Offer a Holder shall deliver to the Company
(if it is acting as its own Paying Agent) or to a Paying Agent designated by the
Company for such purpose in the Net Worth Notice, on or before the 30th day
after the date of the Net Worth Notice, or, if such day is a Legal Holiday, the
next subsequent day which is not a Legal Holiday, (i) written notice of the
Holder's acceptance of such offer, which notice shall set forth the name of the
Holder, the principal amount of Securities (or portions thereof) to be
repurchased, a statement that an acceptance of the Net Worth Offer is being made
thereby and (ii) the Securities with respect to which the Net Worth Offer is
being accepted, duly endorsed for transfer to the Company, and the Holder of
such Securities shall be entitled to receive from the Company (if it is acting
as its own Paying Agent) or such Paying Agent a nontransferable receipt of
deposit evidencing such deposit. Such written notice may be withdrawn upon
further written notice delivered to the Trustee on or prior to the third day
preceding the Net Worth Repurchase Date.
If the Net Worth Repurchase Date is between a regular record date for
the payment of interest and the next succeeding
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interest payment date, any Security to be repurchased must be accompanied by
funds equal to the interest payable on such succeeding interest payment date on
the principal amount to be repurchased (unless such Security shall have been
called for redemption, in which case no such payment shall be required), and the
interest on the principal amount of the Security being repurchased will be paid
on such next succeeding interest payment date to the registered holder of such
Security on the immediately preceding record date. A Security repurchased on an
interest payment date need not be accompanied by any payment, and the interest
on the principal amount of the Security being repurchased will be paid on such
interest payment date to the registered holder of such Security on the
immediately preceding record date.
(d) In the event a Net Worth Offer is accepted in accordance with the
terms hereof, the Company shall pay or cause to be paid the applicable Net Worth
Price with respect to the Securities as to which the Net Worth Offer shall have
been accepted (on a pro rata basis up to the Net Worth Offer Amount, plus
accrued interest) to the Holder on the Net Worth Repurchase Date.
(e) On the Net Worth Repurchase Date, the Company shall deliver to the
Trustee the amount of Securities to be credited against the Net Worth Offer
Amount and shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust in
accordance with Section 2.04) an amount of money sufficient to pay the Net Worth
Price payable in respect of all of the Securities which are to be repurchased on
that date, but in no event shall the Company be obligated to deposit an amount
in excess of the Net Worth Offer Amount, plus accrued interest.
(f) Both the notice of the Company and the notice of the Holder having
been given as specified in this Section 4.09, the Securities to be repurchased
shall, on the Net Worth Repurchase Date, become due and payable at the Net Worth
Price applicable thereto and from and after such date (unless the Company shall
default in the payment of the Net Worth Price) such Securities shall cease to
bear interest. If any Security shall not be paid upon surrender thereof for
repurchase, the principal and interest (to the extent lawful) shall, until paid,
bear interest from the Net Worth Repurchase Date at the rate borne by such
Security.
(g) Any Security which is to be submitted for repurchase only in part
shall be delivered (with, if the Company or
<PAGE>
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the Trustee so requires, due endorsement by, or a written instrument of transfer
in form satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and make available for delivery to
the Holder of such Security without any service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder, of the
same tenor and in aggregate principal amount equal to and in exchange for the
portion of the principal of such Security not submitted for repurchase.
(h) If any repurchase pursuant to the foregoing provisions constitutes
a tender offer as defined under the Exchange Act, the Company will comply with
the requirements of Rule l4e-1 and any other tender offer rules under the
Exchange Act which then may be applicable.
SECTION 4.10. LIMITATION ON DEBT.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee or
otherwise become liable for ("Incur") any Debt, except Permitted Debt.
Notwithstanding the foregoing, and subject to the immediately
succeeding paragraph, the Company and the Guarantors may Incur Debt if, at the
time such Debt is so Incurred and after giving effect thereto and the
application of the proceeds therefrom, the Company's Coverage Ratio shall not be
less than 2.0 to 1.0.
The Company will not, and will not cause or permit any Guarantor to,
directly or indirectly, Incur any Debt that purports to be by its terms (or by
the terms of any agreement governing such Debt) subordinated to any other Debt
of the Company or of such Guarantor, as the case may be, unless such Debt is
also by its terms (or by the terms of any agreement governing such Debt) made
expressly subordinated to the Securities or the Guarantee of such Guarantor, as
the case may be, to the same extent and in the same manner as such Debt is
subordinated to such other Debt.
For purposes of this Section 4.10, any waiver, extension or
continuation of any or all mandatory prepayments or installment payments or the
maturity date of any of the Debt Incurred pursuant to this Section 4.10 shall
not be or be deemed
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to be the Incurrence of Debt by the Company or its Restricted Subsidiaries.
SECTION 4.11. LIMITATION ON RESTRICTED PAYMENTS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment, if, after
giving effect thereto:
(a) an Event of Default, or an event that through the passage
of time or the giving of notice, or both, would become an Event of
Default, shall have occurred and be continuing; or
(b) the Company would be unable to Incur $1.00 of additional
Debt under the second paragraph set forth under Section 4.10; or
(c) the aggregate amount of all Restricted Payments made by
the Company and its Restricted Subsidiaries (the amount expended or
distributed for such purposes, if other than cash, to be determined in
good faith by the board of directors of the Company) from and after the
Issue Date shall exceed the sum of:
(i) the aggregate of 50% of the Consolidated Net
Income of the Company accrued for the period (taken as one
accounting period) commencing with January 1, 1998 to and
including the first full month ended immediately prior to the
date of such calculation (or, in the event Consolidated Net
Income is a deficit, then minus 100% of such deficit);
(ii) the aggregate net proceeds (the amount of such
proceeds, if other than in cash, to be determined in good
faith by the board of directors of the Company) received by
the Company from the issuance or sale (other than to a
Subsidiary of the Company) of its Capital Stock (other than
Redeemable Stock), including the principal amount of any of
the Convertible Notes outstanding on the Issue Date and any
other convertible or exchangeable notes issued after the Issue
Date or other convertible or exchangeable securities issued
after the Issue Date, in any such case to the extent such
principal amount is converted or exchanged into Capital Stock
from and after the Issue Date, and options, warrants and
rights to purchase its Capital Stock (other than Re-
<PAGE>
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deemable Stock); PROVIDED that the net proceeds received by
the Company from the Equity Offering shall be excluded from
this clause (ii);
(iii) in the case of the disposition or repayment of
any Investment constituting a Restricted Payment made after
the Issue Date (excluding any Investment described in clause
(iv) of the following paragraph, but including upon the
redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary), an amount equal to the lesser of the return of
capital with respect to such Investment and the cost of such
Investment, in either case, reduced (but not below zero) by
the excess, if any, of the cost of the disposition of such
Investment over the gain, if any, realized by the Company or
such Restricted Subsidiary in respect of such disposition of
such Investment; and
(iv) $5,000,000.
The foregoing paragraphs will not prevent (i) the payment of any
dividend within 60 days after the date of its declaration if such dividend could
have been made on the date of its declaration in compliance with the foregoing
provisions; (ii) so long as no Default or Event of Default shall have occurred
and be continuing, the redemption, repurchase or other acquisition or retirement
of any shares of any class of Capital Stock of the Company or any Subsidiary of
the Company in exchange for, or out of the net cash proceeds of, a substantially
concurrent (x) capital contribution to the Company from any Person (other than a
Subsidiary of the Company) or (y) issue and sale of other shares of Capital
Stock (other than Redeemable Stock) of the Company to any Person (other than to
a Subsidiary of the Company); PROVIDED, HOWEVER, that the amount of any such net
proceeds that are utilized for any such redemption, repurchase or other
acquisition or retirement shall be excluded from clause (ii) of the preceding
paragraph; (iii) so long as no Default or Event of Default shall have occurred
and be continuing, any redemption, repurchase or other acquisition or retirement
of Subordinated Debt by exchange for, or out of the net cash proceeds of, a
substantially concurrent (x) capital contribution to the Company from any Person
(other than a Subsidiary of the Company) or (y) issue and sale of (A) Capital
Stock (other than Redeemable Stock) of the Company to any Person (other than to
a Subsidiary of the Company); PROVIDED, HOWEVER, that the amount of any such net
cash proceeds that are utilized for any such redemption, repurchase or other
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acquisition or retirement shall be excluded from clause (ii) of the preceding
paragraph; or (B) Debt of the Company issued to any Person (other than a
Subsidiary of the Company), so long as such Debt (x) has no stated maturity
earlier than January [ ], 2008, (y) has a Weighted Average Life to Maturity
equal to or greater than the remaining Weighted Average Life to Maturity of the
Securities and (z) is subordinated to the Securities in the same manner and at
least to the same extent as the Subordinated Debt so purchased, exchanged,
redeemed, acquired or retired; (iv) Investments constituting Restricted Payments
made as a result of the receipt of non-cash consideration from any Asset Sale
made pursuant to and in compliance with Section 4.15; (v) so long as no Default
or Event of Default has occurred and is continuing, the repurchase or redemption
of shares of Capital Stock from any officer, director or employee of the Company
or its Restricted Subsidiaries whose employment has been terminated or who has
died or become disabled in an aggregate amount not to exceed $250,000 per annum;
(vi) so long as no Default or Event of Default shall have occurred and be
continuing, the making of Restricted Payments in an aggregate amount not to
exceed $5,000,000; and (vii) the redemption of the Convertible Notes; PROVIDED
that amounts paid pursuant to clauses (i), (v) and (vi) (but not clauses (ii),
(iii), (iv) or (vii)) shall reduce amounts available for future Restricted
Payments under the first paragraph of this Section 4.11.
SECTION 4.12. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, assume or otherwise cause or
suffer to exist or to become effective any consensual encumbrance or restriction
on the ability of any Restricted Subsidiary of the Company to (a) pay dividends
or make any other distributions on its Capital Stock to the Company or any of
its Restricted Subsidiaries; (b) make payments in respect of any Debt owed to
the Company or any of its Restricted Subsidiaries; or (c) make loans or advances
to the Company or any of the Company's Restricted Subsidiaries; PROVIDED,
HOWEVER, that the following restrictions shall not be prohibited pursuant to
this Section 4.12: (i) those contained in this Indenture, a Bank Facility, a
Warehouse Facility, and Refinancing Debt (to the extent restrictions contained
in such Refinancing Debt are not more restrictive than those contained in the
Debt being refinanced); (ii) consensual encumbrances or restrictions binding
upon any Person at the time such Person
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becomes a Subsidiary of the Company, PROVIDED that such encumbrances or
restrictions are not created, incurred or assumed in contemplation of such
Person becoming a Subsidiary of the Company and do not extend to any other
property of the Company or another of its Subsidiaries; (iii) restrictions
contained in security agreements permitted by this Indenture securing Debt
permitted by this Indenture to the extent such restrictions restrict the
transfer of assets subject to such security agreements; (iv) any encumbrance or
restriction consisting of customary nonassignment provisions in leases to the
extent such provisions restrict the transfer of the leases; (v) any encumbrance
or restriction pursuant to an agreement in effect on the Issue Date; or (vi) any
restrictions with respect to a Subsidiary of the Company imposed pursuant to an
agreement which has been entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Subsidiary.
SECTION 4.13. LIMITATION ON LIENS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien upon or with respect to any of the assets of the Company or any
such Subsidiary, whether now owned or hereafter acquired, or on any income or
profits therefrom, other than Liens which constitute Permitted Liens at the date
such Liens are created, unless contemporaneously therewith or prior thereto all
payments due under this Indenture and the Securities are secured on an equal and
ratable basis with the obligation or liability so secured until such time as
such obligation or liability is no longer secured by a Lien. Notwithstanding the
foregoing, the Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on any Debt from the Company in favor of any Restricted
Subsidiary.
SECTION 4.14. TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into any transactions with
Affiliates of the Company unless (i) such transactions are between or among the
Company and its Restricted Subsidiaries, (ii) such transactions are in the
ordinary course of business and consistent with past practice or (iii) the terms
of such transactions are as fair and reasonable to the Company or such
Restricted Subsidiary, as the case may be, and are at least as favorable at the
terms which could
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be obtained by the Company or such Restricted Subsidiary, as the case may be, in
a comparable transaction made on an arm's-length basis between unaffiliated
parties. In the event of any transaction or series of transactions occurring
subsequent to the Issue Date with an Affiliate of the Company which involves in
excess of $1,000,000 and is not permitted under clause (i) of the preceding
sentence, all of the disinterested members of the board of directors shall by
resolution determine that such transaction or series of transactions meets the
criteria set forth in clause (iii) of the preceding sentence. In the event of
any transaction or series of transactions occurring subsequent to the Issue Date
with an Affiliate of the Company which involves in excess of $10,000,000 and is
not permitted under clause (i) above, the Company will be required to deliver to
the Trustee an opinion of an Independent Financial Advisor to the effect that
the transaction is fair to the Company or the relevant Restricted Subsidiary, as
the case may be, from a financial point of view. Notwithstanding the foregoing,
such provisions do not prohibit and will not apply to (1) any Restricted Payment
which is permitted by Section 4.11 or (2) the payment of compensation to
directors of the Company who are not employees of the Company and wages and
other compensation to officers of the Company or any of its Subsidiaries.
SECTION 4.15. LIMITATION ON ASSET SALES.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, consummate an Asset Sale, unless (i)
the Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined in good faith by the board of directors of the Company or
the Restricted Subsidiary, as the case may be) of the assets disposed of, and
(ii) the consideration for such Asset Sale consists of at least 85% cash;
PROVIDED that (x) the amount of liabilities assumed by the transferee, (y) any
notes or other obligations received by the Company or such Restricted Subsidiary
and immediately converted into cash or (z) with respect to the sale or other
disposition of all of the Capital Stock of any Restricted Subsidiary, the amount
of liabilities that remain the obligation of such Restricted Subsidiary
subsequent to such sale or other disposition, shall be deemed to be "cash".
(b) Within 12 months from the date that any Asset Sale is consummated,
the Net Proceeds thereof shall be reinvested in Additional Assets or applied to
the redemption or repurchase of Debt of the Company which ranks PARI PASSU with
the
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Securities or Debt of a Restricted Subsidiary of the Company which is not
subordinated to other debt of such Restricted Subsidiary (which, in each case,
shall be a permanent reduction of such Debt). To the extent that the Net
Proceeds of an Asset Sale are not so applied, the Company or such Restricted
Subsidiary, as the case may be, shall, within 30 days from the expiration of
such 12-month period, use the remaining Net Proceeds (less any amounts used to
pay reasonable fees and expenses connected with a Net Proceeds Offer (as defined
below)) to make an offer (a "Net Proceeds Offer") to repurchase the Securities
at a price equal to 100% of the principal amount thereof, plus accrued interest
to the date of such repurchase, which date shall be on or before the 30th day
after the date of the Net Proceeds Offer (the "Net Proceeds Repurchase Date"),
in accordance with the provisions of clause (c) below.
Notwithstanding the foregoing, the Net Proceeds of an Asset Sale are
not required to be applied in accordance with the preceding paragraph, unless
and until the aggregate Net Proceeds for all such Asset Sales in a 12-month
period exceeds $5,000,000.
(c) If the Company or one of its Restricted Subsidiaries is required to
make a Net Proceeds Offer pursuant to clause (b) above, the Company or such
Restricted Subsidiary, or, at the request of the Company, the Trustee, shall
give notice of the Net Proceeds Offer to each Holder (the "Net Proceeds Offer
Notice"). The Company shall also deliver a copy of the Net Proceeds Offer Notice
to the Trustee. Any such notice shall contain all instructions and materials
necessary to enable such Holders to deliver Securities pursuant to the Net
Proceeds Offer including, without limitation, the following:
(1) the Net Proceeds Repurchase Date;
(2) the date by which the Net Proceeds Offer must be accepted;
(3) the applicable amount of Net Proceeds being applied to the
repurchase of Securities in the Net Proceeds Offer (the "Purchase
Amount"); and
(4) that Securities are to be surrendered for payment.
To accept a Net Proceeds Offer a Holder shall deliver to the Company
(if it is acting as its own Paying Agent) or to
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a Paying Agent designated by the Company for such purpose in the notice referred
to above on or before the Net Proceeds Repurchase Date, or, if such day is a
Legal Holiday, the next subsequent day which is not a Legal Holiday, (i) written
notice of the Holder's acceptance of the Net Proceeds Offer, which notice shall
set forth the name of the Holder, the principal amount of Securities (or
portions thereof) to be repurchased and a statement that an election to accept
the Net Proceeds Offer is being made thereby and (ii) the Securities with
respect to which the Net Proceeds Offer is being accepted, duly endorsed for
transfer to the Company, and the Holder of such Securities shall be entitled to
receive from the Company (if it is acting as its own Paying Agent) or such
Paying Agent a nontransferable receipt of deposit evidencing such deposit. Such
written notice may be withdrawn upon further written notice to the Trustee on or
prior to the third day preceding the Net Proceeds Repurchase Date.
If the Net Proceeds Repurchase Date is between a regular record date
for the payment of interest and the next succeeding interest payment date, any
Security to be repurchased must be accompanied by funds equal to the interest
payable on such succeeding interest payment date on the principal amount to be
repurchased (unless such Security shall have been called for redemption, in
which case no such payment shall be required), and the interest on the principal
amount of the Security being repurchased will be paid on such next succeeding
interest payment date to the registered holder of such Security on the
immediately preceding record date. A Security repurchased on an interest payment
date need not be accompanied by any payment, and the interest on the principal
amount of the Security being repurchased will be paid on such interest payment
date to the registered holder of such Security on the immediately preceding
record date.
In the event a Net Proceeds Offer shall be accepted in accordance with
the terms hereof, the Company shall pay or cause to be paid the pro rata portion
of the Purchase Amount with respect to the Securities as to which the Net
Proceeds Offer shall have been accepted to the Holder on the Net Proceeds
Repurchase Date.
On or prior to a Net Proceeds Repurchase Date, the Company shall
deposit with the Trustee or with a Paying Agent (or, if the Company is acting as
its own Paying Agent, segregate and hold in trust in accordance with Section
2.04) an amount of money equal to the Purchase Amount.
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Both the notice of the Company and the notice of the Holder having been
given as specified above, the Securities to be repurchased shall, on the Net
Proceeds Repurchase Date, become due and payable and from and after such date
(unless the Company shall default in the payment of the Purchase Amount) such
Securities shall cease to bear interest. If any Security shall not be paid upon
surrender thereof for repurchase, the principal and interest shall, until paid,
bear interest from the Net Proceeds Repurchase Date at the rate borne by such
Security.
Any Security which is to be submitted for repurchase only in part shall
be delivered pursuant to this provision (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and make available for delivery to the Holder of
such Security without any service charge, a new Security or Securities, of any
authorized denomination as requested by such Holder, of the same tenor and in
aggregate principal amount equal to and in exchange for the portion of the
principal of such Security not submitted for repurchase.
If any repurchase pursuant to the foregoing provisions constitutes a
tender offer as defined under the Exchange Act, the Company will comply with the
requirements of Rule 14e-1 and any other tender offer rules under the Exchange
Act which then may be applicable.
(d) Any amount of Net Proceeds remaining after a Net Proceeds Offer
shall be returned by the Trustee to the Company and may be used by the Company
for any purpose not inconsistent with this Indenture.
SECTION 4.16. ADDITIONAL GUARANTORS.
The Company shall cause any Subsidiary with a net book value greater
than $10,000,000 which is designated as a Restricted Subsidiary to,
simultaneously with its designation as a Restricted Subsidiary, execute and
deliver (i) a supplemental indenture to this Indenture, providing for the
guarantee of payment of the Securities by such Subsidiary pursuant to the terms
of Article Ten hereof and Exhibit B hereto and (ii) a guarantee in the form of
Exhibit B hereto.
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ARTICLE 5
SUCCESSORS
SECTION 5.01. WHEN COMPANY MAY MERGE, ETC.
Neither the Company nor any Guarantor shall consolidate or merge with
or into, or sell, lease, convey or otherwise dispose of all or substantially all
of its assets (including, without limitation, by way of liquidation or
dissolution), or assign any of its obligations under the Securities, the
Guarantees or this Indenture (as an entirety or substantially as an entirety in
one transaction or a series of related transactions), to any Person or permit
any of its Restricted Subsidiaries to do any of the foregoing (in each case
other than with the Company or another Wholly Owned Restricted Subsidiary)
unless:
(1) the Person formed by or surviving any such consolidation
or merger (if other than the Company or such Guarantor, as the case may
be), or to which such sale, lease, conveyance or other disposition or
assignment will be made (collectively, the "Successor"), is a
corporation or other legal entity organized and existing under the laws
of the United States, any State thereof or the District of Columbia;
(2) the Successor assumes by supplemental indenture in a form
reasonably satisfactory to the Trustee all of the obligations of the
Company or such Guarantor, as the case may be, under the Securities or
such Guarantor's Guarantee, as the case may be, and this Indenture;
(3) immediately after giving effect to such transaction no
Default or Event of Default has occurred and is continuing;
(4) immediately after giving effect to such transaction and
the use of any net proceeds therefrom, on a pro forma basis, the
Consolidated Tangible Net Worth of the Company or the Successor (in the
case of a transaction involving the Company), as the case may be, would
be at least equal to the Consolidated Tangible Net Worth of the Company
immediately prior to such transaction; and
(5) in the case of a transaction involving the Company,
immediately after giving effect to such transaction
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and the use of any net proceeds therefrom, on a pro forma basis, the
Coverage Ratio of the Company or the Successor (in the case of a
transaction involving the Company), as the case may be, would be such
that the Company or the Successor (in the case of a transaction
involving the Company), as the case may be, would be entitled to Incur
at least $1.00 of additional Debt under such Coverage Ratio test set
forth in Section 4.10.
The foregoing provisions shall not apply to a transaction involving the
consolidation or merger of a Guarantor with or into another person, or the sale,
lease, conveyance or other disposition of all or substantially all of the assets
of such Guarantor, that results in such Guarantor being released from its
Guarantee as provided under its Guarantee.
Notwithstanding the foregoing, clauses (4) and (5) shall not prohibit a
transaction, the principal purpose of which is (as determined in good faith by
the board of directors of the Company) to change the state of incorporation of
the Company, and such transaction does not have as one of its purposes the
evasion of the restrictions of this Section 5.01.
The Company shall deliver to the Trustee prior to the consummation of
the proposed transaction an Officers' Certificate to the foregoing effect and an
Opinion of Counsel stating that the proposed transaction and such supplemental
indenture comply with this Indenture.
SECTION 5.02. SUCCESSOR SUBSTITUTED.
Upon any consolidation, merger, sale, assignment, transfer, lease or
other disposition of all or substantially all of the assets of the Company in
accordance with Section 5.01, the Successor shall succeed to, and be substituted
for, and may exercise every right and power of, and shall assume every duty and
obligation of, the Company under this Indenture with the same effect as if such
Successor had been named as the Company herein. When the Successor assumes all
obligations of the Company hereunder, all obligations of the predecessor shall
terminate.
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(1) the Company fails to pay interest on any Security when the
same becomes due and payable and such failure continues for a period of
30 days;
(2) the Company fails to pay the principal of any Security
when the same becomes due and payable at maturity, upon acceleration or
otherwise;
(3) the Company or any Guarantor defaults in the observance or
performance of any other covenant or agreement of the Company or the
Guarantors in the Securities, the Guarantees or this Indenture and the
default continues for the period and after the notice specified below;
(4) an event of default shall have occurred under one or more
evidences of Debt of the Company or any of its Restricted Subsidiaries
(other than Non-Recourse Debt) with an outstanding aggregate principal
amount of $5,000,000 or more, whether such Debt now exists or is
created hereafter, which event of default (i) consists of the failure
by the Company or any Restricted Subsidiary to make any payment in
respect of such Debt at its final maturity or (ii) results in the
acceleration of such Debt, which acceleration shall be in effect;
(5) any final judgment or judgments for the payment of money
in excess of $5,000,000 in the aggregate are rendered against the
Company or any of its Restricted Subsidiaries and such judgment or
judgments remain unstayed, unsatisfied or undischarged for the period
and after the notice specified below;
(6) any Guarantee of a Material Subsidiary ceases to be in
full force and effect (other than in accordance with the terms of such
Guarantee and this Indenture) or is declared null and void and
unenforceable or found to be invalid or any Guarantor denies its
liability under its Guarantee (other than by reason of release of a
Guarantor
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from its Guarantee in accordance with the terms of the Guarantee and
this Indenture);
(7) the Company or any of its Material Subsidiaries pursuant
to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of it
or for all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors; or
(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company in an
involuntary case,
(B) appoints a Custodian of the Company for all or
substantially all of its property, or
(C) orders the liquidation of the Company,
and the order or decree remains unstayed and in effect for 90
days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or State law for the relief of debtors.
The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.
A default under clause (3) or (5) is not an Event of Default until the
Trustee or the Holders of at least 25% in principal amount of the Securities
then outstanding notify the Company of the default and the Company does not cure
the default within 60 days after receipt of the notice. The notice must specify
the default, demand that it be remedied and state that the notice is a "Notice
of Default". If the Holders of 25% in principal amount of Securities then
outstanding request
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the Trustee to give such notice on their behalf, the Trustee shall do so.
The Trustee shall not be deemed to have notice of any Default hereunder
unless it shall have actual knowledge of such Default or it shall have received
written notice thereof making specific reference to such Default as a Default.
SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
Section 6.01(7) or Section 6.01(8) with respect to the Company) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at least 25%
in principal amount of the Securities then outstanding by notice to the Company
and the Trustee, may declare the principal of and accrued interest on all the
Securities to be due and payable. Upon such declaration such principal and
interest shall be due and payable immediately. If an Event of Default specified
in Section 6.01(7) or Section 6.01(8), with respect to the Company occurs, all
unpaid principal and accrued interest on the Securities then outstanding shall
IPSO FACTO become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Securityholder. The Holders of a
majority in principal amount of the Securities then outstanding by notice to the
Trustee may rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration.
SECTION 6.03. OTHER REMEDIES.
Notwithstanding any other provision of this Indenture, if an Event of
Default occurs and is continuing, the Trustee may pursue any available remedy by
proceeding at law or in equity to collect the payment of principal of or
interest on the Securities or to enforce the performance of any provision of the
Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative.
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SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Sections 6.07 and 9.02, the Holders of a majority in
principal amount of the Securities then outstanding by notice to the Trustee may
waive an existing Default and its consequences. When a Default is waived, it is
cured and ceases; but no such waiver shall extend to any other default.
SECTION 6.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the Securities then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that the Trustee determines is unduly
prejudicial to the rights of other Securityholders or would involve the Trustee
in personal liability and the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
SECTION 6.06. LIMITATION ON SUITS.
Except as provided in Section 6.07, a Securityholder may pursue a
remedy with respect to this Indenture or the Securities only if:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in principal amount of the
Securities then outstanding make a written request to the Trustee to
institute proceedings in respect of such Event of Default;
(3) such Holder or Holders offer to the Trustee reasonable
indemnity against any loss, liability or expense to be thereby incurred
(including reasonable attorneys' fees);
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of a majority in
principal amount of the Securities then outstanding do not give the
Trustee a direction inconsistent with the request.
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A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal of and interest on the
Security, on or after the respective due dates expressed in the Security, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(l) or (2) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company for the whole amount of principal and
interest remaining unpaid.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee, any
predecessor Trustee and the Securityholders allowed in any judicial proceedings
relative to the Company, its creditors or its property.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of the
Securities any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder of the Securities in
any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, rata-
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bly, without preference or priority of any kind, according to the
amounts due and payable on the Securities for principal and interest,
respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any payment by
it to Securityholders pursuant to this Section.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit other than the Trustee of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section does not apply to a suit by the Trustee, a suit
by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in
principal amount of the Securities.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others.
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(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture but need not verify the accuracy of the content
thereof.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.
(e) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity satisfactory to it against any loss,
liability or expense, including reasonable attorneys' fees.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree with the Company. Money held in trust by
the Trustee need not be segregated from other funds except to the extent
required by law.
(g) The Trustee shall not be required to give any bond or surety with
respect to the execution of its rights and powers or with respect to this
Indenture.
(h) The Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any covenants,
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conditions or agreements on the part of the Company hereunder; but the Trustee
may require of the Company full information and advice as to the performance of
the covenants, conditions and agreements as aforesaid.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate and/or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Certificate or Opinion.
(c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers.
(e) It shall not be the duty of the Trustee, except as expressly
provided herein, to ensure that any duties or obligations herein imposed upon
the Company or any other Person are performed, and, except as expressly provided
herein, the Trustee shall not be liable or responsible for the failure of any
other Person to perform any act required of it or them by this Indenture.
(f) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or an
Affiliate thereof with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights. The Trustee, however, must comply with
Sections 7.10 and 7.11.
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SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities; it shall not be accountable for the Company's
use of the proceeds from the Securities; and it shall not be responsible for any
statement in the Securities other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default occurs and is continuing and if it is actually known to
the Trustee or the Trustee has received written notice thereof, the Trustee
shall mail to each Securityholder a notice of the Default within 90 days after
it occurs. Except in the case of a Default in payment of principal of or
interest on any Security, the Trustee may withhold the notice if and so long as
it in good faith determines that withholding the notice is in the interests of
Securityholders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
If required by TIA /section/ 313(a), within 60 days after each [ ]
beginning with [ ], 1998, the Trustee shall mail to each Securityholder as
required by TIA /section/ 313(c) a brief report dated as of such date that
complies with TIA /section/ 313(a). The Trustee also shall comply with TIA
/section/ 313(b) and (c).
A copy of each report at the time of its mailing to Securityholders
shall be filed by the Trustee with the SEC and each stock exchange, if any, on
which the Securities are listed. The Company shall notify the Trustee when the
Securities are listed on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time such
compensation for its services as shall be agreed upon in writing. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred by it. Such expenses shall include
the reasonable compensation and out-of-pocket expenses of the Trustee's agents
and counsel.
The Company shall indemnify the Trustee against any loss or liability
(including the fees and expenses of counsel)
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incurred by it in connection with the administration of this trust and the
performance of its duties hereunder. The Company need not pay for any settlement
made without its consent. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnification. The Company need not reimburse any
expense or indemnify against any loss or liability incurred by the Trustee
through the Trustee's negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or (7) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Securities may remove the Trustee by so
notifying the Trustee and the Company and may appoint a successor Trustee with
the Company's consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a ma-
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jority in principal amount of the Securities may appoint a successor Trustee to
replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
Notwithstanding the replacement of the Trustee pursuant to Section
7.08, the Company's obligation to compensate the retiring Trustee under Section
7.07 for services rendered prior to its retirement shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to another corporation, the
successor corporation without any further act shall be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA /section/ 310(a)(1). The Trustee shall always have a
combined capital and surplus of at least $10,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
/section/ 310(b), PROVIDED that there shall be excluded from the op-
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eration of TIA /section/ 310(b)(1) the 1994 Indenture, the 1994 Notes and any
other indenture or indentures under which other securities, or certificates of
interest or participation in other securities, of the Company are outstanding
and meeting the requirements for exclusion set forth in TIA /section/ 310(b)(1).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA /section/ 311(a), excluding any
creditor relationship listed in TIA /section/ 311(b). A Trustee who has resigned
or been removed shall be subject to TIA /section/ 311(a) to the extent
indicated.
ARTICLE 8
DEFEASANCE
SECTION 8.01. DEFEASANCE UPON DEPOSIT OF MONEYS OR U.S. GOVERNMENT OBLIGATIONS.
This Indenture and the Guarantees shall cease to be of further effect
(except that the Company's obligations under Sections 7.07 and 8.05 hereof shall
survive) when all outstanding Securities theretofore authenticated and issued
(other than Securities which have been destroyed, lost or stolen and which have
been replaced as provided in Section 2.07 hereof) have been delivered to the
Trustee for cancellation and the Company has paid all sums payable hereunder.
Notwithstanding the first paragraph of this Section 8.01, at the
Company's option indicated by notice to the Trustee, either (a) the Company
shall be deemed to have been Discharged (as defined below) from its obligations
with respect to the Securities on the 91st day after the applicable conditions
set forth below have been satisfied or (b) the Company shall cease to be under
any obligation to comply with any term, provision or condition set forth in
Sections 4.06 through 4.15 and shall cease to be subject to the provisions of
Section 6.01(3) with respect to Sections 4.06 through 4.15 and Section 6.01(4)
with respect to the Securities at any time after the conditions set forth below
have been satisfied:
(1) the Company shall have deposited or caused to be
deposited irrevocably with the Trustee as trust funds in trust,
specifically pledged as security for, and dedicated
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solely to, the benefit of the Holders of the Securities (i) money in an
amount, or (ii) U.S. Government Obligations which through the payment
of interest and principal in respect thereof in accordance with their
terms will provide, not later than one day before the due date of any
payment, money in an amount, or (iii a combination of (i) and (ii),
sufficient, in the opinion with respect to (ii) and (iii) of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay and
discharge each installment of principal of and interest on the
outstanding Securities on the dates such installments of interest or
principal are due;
(2) the Company shall have delivered to the Trustee an Opinion
of Counsel stating that the Holders of the outstanding Securities will
not recognize income, gain or loss for Federal income tax purposes as a
result of such defeasance and will be subject to Federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such defeasance had not occurred;
(3) such deposit will not result in a breach or violation of,
or constitute a Default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(4) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit; and
(5) the Company shall have delivered to the Trustee an
Officers Certificate stating that the conditions set forth in this
Section 8.01 have been satisfied or complied with.
"Discharged" shall mean that the Company and each Guarantor shall be
deemed to have paid and discharged the entire indebtedness represented by, and
obligations under, the Securities and to have satisfied all the obligations
under this Indenture and the Guarantees relating to the Securities (and the
Trustee, upon the request of the Company and at the expense of the Company,
shall execute proper instruments acknowledging the same).
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SECTION 8.02. TERMINATION OF THE OBLIGATIONS PURSUANT TO REDEMPTION.
The Company and each Guarantor may terminate its obligations under the
Securities, this Indenture and the Guarantees (except that the Company's
obligations under Sections 7.07 and 8.05 hereof shall survive) and the Company
and the Guarantors shall be deemed to have been Discharged from its Obligations
with respect to the Securities and the Guarantees if:
(a) either (i) pursuant to Article Three, the Company shall
have given notice to the Trustee and mailed a notice of redemption to
each Holder of the redemption of all of the Securities under
arrangements satisfactory to the Trustee for the giving of such notice
or (ii) all Securities have otherwise become due and payable hereunder;
(b) the Company shall have irrevocably deposited or caused to
be deposited with the Trustee or a trustee reasonably satisfactory to
the Trustee, under the terms of an irrevocable trust agreement in form
and substance satisfactory to the Trustee, as trust funds in trust
solely for the benefit of the Holders for that purpose, money in such
amount as is sufficient without consideration of reinvestment of such
interest, to pay principal of, premium, if any, and interest on the
outstanding Securities to maturity or redemption, as certified in a
certificate of a nationally recognized firm of independent public
accountants; PROVIDED that the Trustee shall have been irrevocably
instructed to apply such money to the payment of said principal,
premium, if any, and interest with respect to the Securities;
(c) no Default of Event of Default with respect to this
Indenture or the Securities shall have occurred and be continuing on
the date of such deposit or shall occur as a result of such deposit and
such deposit will not result in a breach or violation of, or constitute
a default under, any other instrument to which the Company is a party
or by which it is bound;
(d) the Company shall have paid all other sums payable by it
hereunder; and
(e) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the conditions set forth in this
Section 8.02 have been complied with.
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SECTION 8.03. SURVIVAL OF COMPANY'S OBLIGATIONS.
Notwithstanding the satisfaction and discharge of this Indenture under
Section 8.01 or Section 8.02, the Company's obligations in Sections 2.04, 2.05,
2.06, 2.07, 2.08, 4.01, 4.02, 4.05, 7.07, 7.08, 8.04, 8.05 and 8.06, however,
shall survive until the Securities are no longer outstanding. Thereafter, the
Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive.
SECTION 8.04. APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01. It shall apply the deposited money
and the money from U.S. Government Obligations in accordance with this Indenture
to the payment of principal of and interest on the Securities.
SECTION 8.05. REPAYMENT TO COMPANY.
The Trustee and the Paying Agent shall promptly pay to the Company upon
request any excess money or securities held by them at any time. The Trustee and
the Paying Agent shall pay to the Company upon request any money held by them
for the payment of principal or interest that remains unclaimed for two years,
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once in a newspaper of general circulation in the City of New York or
mail to each such Holder notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication or mailing, any unclaimed balance of such money then
remaining will be repaid to the Company. After payment to the Company,
Securityholders entitled to the money must look to the Company for payment as
general creditors unless applicable abandoned property law designates another
person.
The Company shall indemnify Trustee to the fullest extent permissible
by law for the Trustee's failure to comply with any abandoned property or
escheat law by acting in accordance with this Section 8.05.
SECTION 8.06. REINSTATEMENT.
If the Trustee is unable to apply any money or U.S. Government
Obligations in accordance with Section 8.01 by reason of any legal proceeding or
by reason of any order or judg-
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ment of any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company's obligations under this Indenture and
the Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.01 until such time as the Trustee is permitted to apply
all such money or U.S. Government Obligations in accordance with Section 8.01;
PROVIDED, HOWEVER, that if the Company has made any payment of interest on or
principal of any Securities because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee.
ARTICLE 9
AMENDMENTS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Company and the Guarantors, with the consent of the Trustee, may
amend or supplement this Indenture, the Securities or the Guarantees without
notice to or the consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
PROVIDED that such amendment or supplement does not adversely affect
the rights of any Securityholder;
(2) to comply with Section 5.01;
(3) to provide for uncertificated Securities in addition to
certificated Securities;
(4) to make any change that does not materially adversely
affect the rights of any Securityholder hereunder, including, without
limitation, any amendments reasonably necessary to issue additional
Securities hereunder;
(5) to comply with the qualification of this Indenture under
the TIA; or
(6) to reflect a Guarantor ceasing to be liable on the
Guarantees because it is no longer a Subsidiary of the Company or to
reflect additional Guarantors.
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For the purposes of Section 9.01, the Trustee may, in its discretion,
determine whether or not the Holder of any Securities would be materially
adversely affected by any amend-, ment or supplement to this Indenture and any
such determination shall be conclusive upon every Holder, whether theretofore or
thereafter entered into. The Trustee shall, subject to the express provisions of
this Indenture, not be liable for any such determination made in good faith and
shall be entitled to, and may rely upon, an Opinion of Counsel with respect
thereto.
SECTION 9.02. WITH CONSENT OF HOLDERS.
The Company and the Guarantors, with the consent of the Trustee, may
amend or supplement this Indenture and waive any existing Default or Event of
Default (other than any continuing Default or Event of Default in the payment of
interest on or the principal of the Securities), the Securities or the
Guarantees without notice to any Securityholder but with the written consent of
the Holders of at least a majority in principal amount of the Securities then
outstanding (which may include consents obtained in connection with a tender
offer or exchange offer for the Securities). Subject to Section 6.07, the
Holders of a majority in principal amount of the Securities then outstanding may
waive compliance by the Company or any Guarantor with any provision of this
Indenture, the Securities or the Guarantees without notice to any
Securityholder. However, without the consent of each Securityholder affected, an
amendment, supplement or waiver, including a waiver pursuant to Section 6.04,
may not:
(1) reduce the amount of Securities whose Holders must consent
to an amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of
interest, including defaulted interest, on any Security;
(3) reduce the principal of or change the fixed maturity of
any Security (including, without limitation, the optional redemption
provisions, but excluding Sections 4.08, 4.09 and 4.15);
(4) waive a Default or Event of Default in the payment of
principal of or interest on any Security;
(5) make any Security payable in money other than that stated
in the Security;
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(6) make any change in Section 6.04, Section 6.07 or Section
9.02;
(7) adversely modify the terms and conditions of the
obligations of the Guarantors or ranking or priority of the Securities
or any Guarantee; or
(8) release any Guarantor from any of its obligations under
its Guarantee or this Indenture otherwise than in accordance with the
terms hereof.
Promptly after an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing the amendment.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or supplement,
but it shall be sufficient if such consent approves the substance thereof.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to this Indenture, the Securities or the Guarantees
shall comply with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Security is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent Holder may revoke
the consent as to his Security or portion of a Security if the Trustee receives
the notice of revocation before the date the amendment, supplement or waiver
becomes effective. An amendment, supplement or waiver becomes effective in
accordance with its terms and thereafter binds every Securityholder.
After an amendment, supplement or waiver becomes effective with respect
to the Securities, it shall bind every Securityholder unless it makes a change
described in any of clauses (1) through (8) of Section 9.02. In that case the
amendment, supplement or waiver shall bind each Holder of a Security who has
consented to it and; PROVIDED that notice of such amendment, supplement or
waiver is reflected on a Security that evidences the same debt as the consenting
Holder's Secur-
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ity, every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
SECTION 9.06. TRUSTEE PROTECTED.
The Trustee need not sign any amendment, supplement or waiver
authorized pursuant to this Article that adversely affects the Trustee's rights.
The Trustee shall be entitled to receive and rely upon an Opinion of Counsel and
an Officers' Certificate that any supplemental indenture complies with this
Indenture.
ARTICLE 10
GUARANTEE OF SECURITIES
SECTION 10.01. GUARANTEE.
Subject to the provisions of this Article 10, each Guarantor (which
term includes any successor Person under this Indenture and any additional
Guarantor pursuant to Section 4.16 of this Indenture) for consideration received
hereby jointly and severally unconditionally and irrevocably guarantees on a
senior basis (each a "Guarantee", and collectively, the "Guarantees") to each
Holder of a Security authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity and
enforceability of this Indenture, the Securities or the obligations of the
Company or any other Guarantor to the Holders or the Trustee hereunder or
thereunder, that: (a) the principal of, premium, if any, and interest on the
Securities will be duly and punctually paid in full when due, whether at
maturity, as a result of redemption, upon a Change of Control, as a result of a
Net Worth Offer, by acceleration or otherwise, and interest on the over-
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due principal, premium, if any, and (to the extent permitted by law) interest,
if any, on the Securities and all other payment obligations of the Company or
the Guarantors to the Holders or the Trustee hereunder or thereunder (including
fees, expenses or other) will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; (b) all other obligations under
this Indenture to the Holders or the Trustee will be duly and punctually
performed all in accordance with the terms of this Indenture and the Securities
and (c) in case of any extension of time of payment or renewal of any Securities
or any such other obligations, the same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, whether
at stated maturity, as a result of redemption, upon a Change of Control, as a
result of a Net Worth Offer, by acceleration or otherwise. Failing payment or
performance when due of any amount or obligations so guaranteed for whatever
reason, each Guarantor will be obligated to pay or perform the same immediately.
An Event of Default under this Indenture or the Securities shall constitute an
event of default under the Guarantees, and shall entitle the Holders of
Securities to accelerate the obligations of the Guarantors hereunder in the same
manner and to the same extent as the obligations of the Company.
Each of the Guarantors hereby agrees that its obligations hereunder
shall be absolute and unconditional, irrespective of, and shall be unaffected
by, the invalidity, irregularity or unenforceability of the Securities or this
Indenture, the absence of any action to enforce the same, any waiver,
modification or consent by any holder of the Securities with respect to any
provisions hereof or thereof, any release of any other Guarantor, the recovery
of any judgment against the Company, any action to enforce the same, whether or
not a Guarantee is affixed to any particular Security, or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
Guarantor. Each of the Guarantors hereby waives the benefit of diligence,
presentment, demand of payment, filing of claims with a court in the event of
merger, insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenants that its Guarantee will not be discharged except by complete
performance of the obligations contained in the Securities, this Indenture and
its Guarantee. If any Holder or the Trustee is required by any court or
otherwise to return to the Company or to any Guarantor, or any custodian,
trustee, liquidator or other similar official acting in relation to the Company
or such Guarantor, any amount paid by the Company or such Guarantor to the
Trustee or such Holder,
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its Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Guarantor further agrees that, as between it, on the one
hand, and the Holders of Securities and the Trustee, on the other hand, (a)
subject to this Article 10, the maturity of the obligations guaranteed hereby
may be accelerated as provided in Article 6 hereof for the purposes of its
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (b) in
the event of any declaration of acceleration of such obligations as provided in
Article 6 hereof, such obligations (whether or not due and payable) shall
forthwith become due and payable by such Guarantor for the purpose of its
Guarantees.
The Guarantees shall remain in full force and effect and continue to be
effective should any petition be filed by or against the Company for liquidation
or reorganization, should the Company become insolvent or make an assignment for
the benefit of creditors or should a receiver or trustee be appointed for all or
any significant part of the Company's assets, and shall, to the fullest extent
permitted by law, continue to be effective or be reinstated, as the case may be,
if at any time payment of the Securities are, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by any
obligee on the Securities, whether as a "voidable preference," "fraudulent
transfer" or otherwise, all as though such payment had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Securities shall, to the fullest extent permitted by law, be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
For purposes of this Article 10, each Guarantor's liability (a
Guarantor's "Base Guaranty Liability") shall be that amount from time to time
equal to the aggregate liability of a Guarantor hereunder, but shall be limited
to the lessor of (A) the aggregate amount of the obligation as stated in the
first sentence of this Section 10.01 with respect to the Securities or (B) the
amount, if any, which would not have (i) rendered such Guarantor "insolvent" (as
such term is defined in Section 101(29) of the Federal Bankruptcy Code and in
Section 271 of the Debtor and Creditor Law of the State of New York, as each is
in effect at the date of this Indenture) or (ii) left it with unreasonably small
capital at the time its Guarantee of the Securities was entered into, after
giving effect to the incurrence of existing Debt immediately prior to such time,
provided, that, it shall be a presumption in any
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lawsuit or other proceeding in which a Guarantor is a party that the amount
guaranteed is the amount set forth in (A) above unless a creditor, or
representative of creditors of such Guarantor or a trustee in bankruptcy of the
Guarantor, as debtor in possession, otherwise proves in such a lawsuit that the
aggregate liability of the Guarantor is limited to the amount set forth in (B).
In making any determination as to the solvency or sufficiency of capital of a
Guarantor in accordance with the previous sentence, the right of such Guarantor
to contribution from other Guarantors, to subrogation pursuant to the next
paragraph and any other rights such Guarantor may have contractual or otherwise
shall be taken into account.
Each Guarantor shall be subrogated to all rights of the Holder of any
Securities and the Trustee against the Company or any of the other Guarantors in
respect of any amounts paid to the Holder and the Trustee by such Guarantor
pursuant to the provisions of this Guarantee; provided, however, that such
Guarantor shall not be entitled to enforce, or to receive any payments arising
out of or based upon, such right of subrogation until the principal of, premium,
if any, and interest on all the Securities have been paid in full.
Nothing contained in this Article 10 or elsewhere in this Indenture or
in any Security is intended to or shall impair, as between the Guarantors and
the Holders and the Trustee, the obligation of each Guarantor, which is absolute
and unconditional, to pay the Holders and the Trustee the principal of, premium,
if any, and interest on the Securities as and when the same shall become due and
payable and to perform all other obligations in accordance with the provisions
of this Guarantee, nor shall anything herein or therein prevent the Trustee or
any Holder from exercising all remedies otherwise permitted by applicable law
upon Default under this Indenture.
The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not impair the
rights of the Holders under the Guarantees.
SECTION 10.02. EXECUTION AND DELIVERY OF GUARANTEE.
To further evidence the Guarantee set forth in Section 10.01, each
Guarantor hereby agrees that a notation of such Guarantee, substantially in the
form included in Exhibit B hereto, shall be endorsed on each Security
authenticated and delivered by the Trustee after such Guarantee is executed and
executed by either manual or facsimile signature of an officer
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of each Guarantor. The validity and enforceability of any Guarantee shall not be
affected by the fact that it is not affixed to any particular Security.
Each of the Guarantors hereby agrees that its Guarantee set forth in
Section 10.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Security a notation of such Guarantee.
If an officer of a Guarantor whose signatures is on this Indenture or a
Security no longer holds that office at the time the Trustee authenticates such
Security or at any time thereafter, such Guarantor's Guarantee of such Security
shall be valid nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of the Guarantor.
SECTION 10.03. ADDITIONAL GUARANTORS.
Any person may become a Guarantor by executing and delivering to the
Trustee (a) a supplemental indenture in form and substance satisfactory to the
Trustee, which subjects such person to the provisions of this Indenture as a
Guarantor, and (b) an Opinion of Counsel to the effect that such supplemental
indenture has been duly authorized and executed by such person and constitutes
the legal, valid, binding and enforceable obligation of such person (subject to
such customary exceptions concerning fraudulent conveyance laws, creditors'
rights and equitable principles as may be acceptable to the Trustee in its
discretion).
SECTION 10.04. RELEASE OF A GUARANTOR.
(a) Upon the sale or disposition of all of the assets or all of the
Capital Stock of a Guarantor by the Company or a Subsidiary of the Company, or
upon the consolidation or merger of a Guarantor with or into any Person (in each
case, other than to the Company or an Affiliate of the Company), such Guarantor
shall be deemed automatically and unconditionally released and discharged from
all obligations under this Article 10 without any further action required on the
part of the Trustee or any Holder, if all obligations of such Guarantor, if any,
in respect of any Indebtedness of the Company shall also terminate upon such
transaction; PROVIDED, HOWEVER, that each such Guarantor is sold or disposed of
in accordance with Sec-
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tion 4.15 hereof; PROVIDED, FURTHER, that the foregoing proviso shall not apply
to the sale or disposition of a Guarantor in a foreclosure to the extent that
such proviso would be inconsistent with the requirements of the Uniform
Commercial Code.
(b) The Trustee shall deliver an appropriate instrument evidencing the
release of a Guarantor upon receipt of a request of the Company accompanied by
an Officers' Certificate certifying as to the compliance with this Section
10.04. Any Guarantor not so released or the entity surviving such Guarantor, as
applicable, will remain or be liable under its Guarantee as provided in this
Article 10.
The Trustee shall execute any documents reasonably requested by the
Company or a Guarantor in order to evidence the release of such Guarantor from
its obligations under its Guarantee endorsed on the Securities and under this
Article 10.
Except as set forth in Articles 4 and 5 and this Section 10.04, nothing
contained in this Indenture or in any of the Securities shall prevent any
consolidation or merger of a Guarantor with or into the Company or another
Guarantor or shall prevent any sale or conveyance of the property of a Guarantor
as an entirety or substantially as an entirety to the Company or another
Guarantor.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provision shall control.
SECTION 11.02. NOTICES.
Any notice or communication by the Company or the Trustee to the other
is duly given if in writing and delivered in person, mailed by first-class mail
or by express delivery to the other's address stated in this Section 11.02. The
Company or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.
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Any notice or communication to a Securityholder shall be mailed by
first-class mail to his address shown on the register kept by the Registrar.
Failure to mail a notice or communication to a Securityholder or any defect in
it shall not affect its sufficiency with respect to other Securityholders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Securityholders, it
shall mail a copy to the Trustee and each Agent at the same time.
All notices or communications shall be in writing.
The Company's address is:
Engle Homes, Inc.
123 N.W. 13th Street
Boca Raton, Florida 33432
Attention: Corporate Secretary
The Trustee's address is:
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
Attention: Corporation Trust Department
SECTION 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA /section/ 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA /section/ 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture the Company shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any,
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provided for in this Indenture relating to the proposed action have
been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Each signer of an Officers' Certificate or an Opinion of Counsel may
(if so stated) rely, effectively, upon an Opinion of Counsel as to legal matters
and an Officers' Certificate as to factual matters if such signer reasonably and
in good faith believes in the accuracy of the document relied upon.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for their respective functions.
<PAGE>
-73-
SECTION 11.07. LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions are not required to be open in The City of New York, in the State
of New York or in the city in which the Trustee administers its corporate trust
business. If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue on that payment for the intervening
period.
A "business day" is a day other than a Legal Holiday.
SECTION 11.08. NO RECOURSE AGAINST OTHERS.
No director, officer, controlling person, employee or stockholder of
the Company, any Guarantor or any successor Person thereof shall have any
liability for any obligations, covenants or agreements of the Company or any
Guarantor under the Securities or this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. Each
Securityholder by accepting a Security waives and releases all such liability.
The waiver and releases are part of the consideration for the issue of the
Securities.
SECTION 11.09. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.10. GOVERNING LAW.
The laws of the State of New York, without regard to principles of
conflicts of law, shall govern this Indenture, the Securities and the
Guarantees.
SECTION 11.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
<PAGE>
-74-
SECTION 11.12. SUCCESSORS.
All agreements of the Company in this Indenture and the Securities
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 11.13. SEPARABILITY.
In case any provision in this Indenture or in the Securities shall be
valid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby
and a Holder shall have no claim therefor against any party hereto.
SECTION 11.14. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
<PAGE>
-75-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
AMERICAN STOCK TRANSFER &
TRUST COMPANY, as Trustee
By:
------------------------------------
Name:
Title:
ENGLE HOMES, INC.
By:
------------------------------------
Name:
Title:
BANYAN TRAILS, INC.
By:
------------------------------------
Name:
Title:
ENGLE HOMES/ARIZONA, INC.
By:
------------------------------------
Name:
Title:
ENGLE HOMES/ATLANTA, INC.
By:
------------------------------------
Name:
Title:
<PAGE>
-76-
ENGLE HOMES/BROWARD, INC.
By:
------------------------------------
Name:
Title:
ENGLE HOMES/COLORADO, INC.
By:
------------------------------------
Name:
Title:
ENGLE HOMES/GULF COAST, INC.
By:
------------------------------------
Name:
Title:
ENGLE HOMES/LAKE BERNADETTE, INC.
By:
------------------------------------
Name:
Title:
ENGLE HOMES/NORTH CAROLINA, INC.
By:
------------------------------------
Name:
Title:
ENGLE HOMES/ORLANDO, INC.
By:
------------------------------------
Name:
Title:
<PAGE>
-77-
ENGLE HOMES/PALM BEACH, INC.
By:
------------------------------------
Name:
Title:
ENGLE HOMES/PEMBROKE, INC.
By:
------------------------------------
Name:
Title:
ENGLE HOMES/SOUTHWEST FLORIDA, INC.
By:
------------------------------------
Name:
Title:
ENGLE HOMES/TEXAS, INC.
By:
------------------------------------
Name:
Title:
ENGLE HOMES/VIRGINIA, INC.
By:
------------------------------------
Name:
Title:
GREENLEAF HOMES, INC.
By:
------------------------------------
Name:
Title:
<PAGE>
-78-
PEMBROKE FALLS REALTY, INC.
By:
------------------------------------
Name:
Title:
PREFERRED BUILDERS REALTY, INC.
By:
------------------------------------
Name:
Title:
PREFERRED HOME MORTGAGE COMPANY
By:
------------------------------------
Name:
Title:
ST. TROPEZ AT BOCA GOLF, INC.
By:
------------------------------------
Name:
Title:
UNIVERSAL LAND TITLE, INC.
By:
------------------------------------
Name:
Title:
ENGLE HOMES/ARIZONA CONSTRUCTION, INC.
By:
------------------------------------
Name:
Title:
<PAGE>
-79-
UNIVERSAL LAND TITLE OF COLORADO,
INC.
By:
------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
REGISTERED [Face of Security] REGISTERED
NUMBER DOLLARS
ENGLE HOMES, INC.
................ CUSIP
[ ]% SENIOR NOTE DUE 2008
ENGLE HOMES, INC., a Florida corporation (herein called the "Company"),
for value received, hereby promises to pay to , or registered
assigns, the principal sum of Dollars on [ ], 2008, and
to pay interest thereon as provided on the reverse hereof, until the principal
hereof is paid or duly provided for.
Interest Payment Dates: [ ] and [ ]
Record Dates: [ ] and [ ]
The provisions on the back of this certificate are incorporated as if
set forth on the face hereof.
IN WITNESS WHEREOF, ENGLE HOMES, INC. has caused this instrument to be
duly signed under its corporate seal.
[SEAL] ENGLE HOMES, INC.
By:
----------------------------
[Title]
By:
----------------------------
[Title]
<PAGE>
A-2
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred
to in the within-mentioned Indenture.
AMERICAN STOCK TRANSFER & TRUST
COMPANY, as Trustee
By:
------------------------------------
Signatory
Dated:
<PAGE>
A-3
[REVERSE OF SECURITY]
ENGLE HOMES, INC.
[ ]% SENIOR NOTE DUE 2008
1. INTEREST. Engle Homes, Inc., a Florida corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
PER ANNUM shown above. The Company will pay interest semi-annually on [ ] and [
] of each year, commencing [ , 1998.] Interest on the Securities will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from the date of original issuance of the Securities set forth on the
face of this Security. Interest will be computed on the basis of a 360-day year
of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Securities
(except defaulted interest) to the persons who are registered Holders of
Securities at the close of business on the record date set forth on the face of
this Security next preceding the applicable interest payment date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
However, the Company must pay principal and interest by check payable in such
money. The Company may, at its option, mail an interest check to a Holder's
registered address.
3. PAYING AGENT AND REGISTRAR. Initially, American Stock Transfer &
Trust Company (the "Trustee") will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-registrar without notice.
The Company may act in any such capacity.
4. INDENTURE. The Company issued the Securities under an Indenture
dated as of January [ ], 1998 (the "Indenture") between the Company and the
Trustee. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb) (the "Act"), as in effect on
the date of the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
such terms. The Securities are general unsecured senior obligations of the
Company limited to $120,000,000 aggregate principal
<PAGE>
A-4
amount, $45,000,000 of which may be issued after the Issue Date (except for
Securities issued in substitution for destroyed, mutilated, lost or stolen
Securities). Terms used herein which are defined in the Indenture have the
meanings assigned to them in the Indenture.
5. OPTIONAL REDEMPTION. The Securities may be redeemed on at least 30
and not more than 60 days' notice at the option of the Company on or after [ ],
2003, in whole at any time or in part (in any integral multiple of $1,000) from
time to time, for a redemption price of [ ]% of principal amount thereof if
redeemed on or after [ ], 2003 but prior to [ ], 2004, for a redemption price of
[ ]% of principal amount thereof if redeemed on or after [ ], 2004 but prior to
[ ], 2005, and at a redemption price of 100% of the principal amount thereof if
redeemed on or after [ ], 2004, in each case, together with accrued and unpaid
interest to the redemption date.
In addition, if the Company consummates one or more public offerings of
its Common Stock subsequent to the date hereof and on or prior to [ ], 2001, the
Company may, at its option, redeem up to 33% of the original principal amount of
the Securities with the net proceeds of such offerings at [ ]% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the redemption
date; PROVIDED, HOWEVER, that immediately after giving effect to any such
redemption not less than $65,000,000 principal amount of the
Securities remains outstanding.
6. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his registered address. Securities in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000. On and after the redemption date, interest ceases to accrue on
Securities or portions of them called for redemption.
7. CHANGE OF CONTROL. In the event of a Change of Control (as defined
in the Indenture) with respect to the Company, then each Holder of the
Securities shall have the right, at the Holder's option, to require the Company
to buy such Holder's Securities including any portion thereof which is $1,000 or
any integral multiple thereof on the date (the "Change of Control Repurchase
Date") that is 45 days after the date of the Change of Control Notice at a price
equal to 101%
<PAGE>
A-5
of the principal amount thereof, plus accrued interest to the Change of Control
Repurchase Date.
8. NET WORTH OFFER. In the event that the Company's Net Worth at the
end of each of any two consecutive fiscal quarters is less than $35,000,000 (the
"Minimum Net Worth"), then the Company shall make a Net Worth Offer to all
Holders to acquire on the date (the "Net Worth Repurchase Date") that is 45 days
after the Net Worth Notice, Securities in an aggregate principal amount equal to
10% of the initial outstanding principal amount of the Securities (the "Net
Worth Offer Amount"), at a price equal to 100% of the principal amount thereof,
plus accrued interest to the Net Worth Repurchase Date. The Company may credit
against the Net Worth Offer Amount the principal amount of Securities acquired
by the Company through purchase, optional redemption or exchange prior to the
Trigger Date.
9. NET PROCEEDS OFFER. Within 12 months from the date that the Company
or any of its Restricted Subsidiaries makes any Asset Sale, the Net Proceeds
thereof shall, in accordance with Section 4.15 of the Indenture, be reinvested
in Additional Assets or used to repurchase or redeem Debt of the Company which
rank PARI PASSU with the Securities, or Debt of a Restricted Subsidiary of the
Company which is not subordinated to other Debt of such Restricted Subsidiary
(which in each case shall be a permanent reduction of such Debt) or if not so
used within 30 days from the expiration of such 12-month period, to use the
remaining Net Proceeds to make an offer to repurchase Securities at a price
equal to 100% of the principal amount thereof plus accrued interest in
accordance with the procedures set forth in the Indenture (a "Net Proceeds
Offer"). Notwithstanding the preceding sentence, a Net Proceeds Offer made in
connection with any Asset Sale need not be applied in accordance with the
preceding sentence, unless and until the aggregate Net Proceeds for all such
Asset Sales in a 12-month period exceeds $5,000,000.
10. RESTRICTIVE COVENANTS. The Indenture contains certain restrictive
covenants that limit the ability of the Company and its Restricted Subsidiaries
to incur additional indebtedness, pay dividends, make certain other
distributions, repurchase Capital Stock or subordinated indebtedness, create
certain liens, enter into certain transactions with affiliates or apply the net
proceeds from the sale of certain assets.
11. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in registered
form without coupons in denominations of
<PAGE>
A-6
$1,000 and whole multiples of $1,000. The transfer of Securities may be
registered and Securities may be exchanged as provided in the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents. No service charge shall be made for any
such registration or transfer or exchange, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith. The Registrar need not exchange or register the transfer
of any Security selected for redemption in whole or in part. Also, it need not
exchange or register the transfer of any Securities for a period of 15 days
before a selection of Securities to be redeemed.
12. PERSONS DEEMED OWNERS. The registered Holder of a Security may be
treated as its owner for all purposes.
13. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the
Indenture, the Securities or the Guarantees may be amended with the consent of
the Holders of at least a majority in principal amount of the Securities
outstanding; and any existing default or Event of Default may be waived with the
consent of the Holders of a majority in principal amount of the Securities.
Without the consent of any Securityholder, the Indenture, the Securities or the
Guarantees may be amended to cure any ambiguity, omission, defect or
inconsistency (provided that such amendment does not materially, adversely
affect the rights of any Securityholder) or to provide for uncertificated
Securities in addition to certificated Securities, to comply with Section 5.01
of the Indenture, to make any change that does not materially adversely affect
the rights of any Securityholder, to comply with the qualification of the
Indenture under the Trust Indenture Act, or to reflect a Guarantor ceasing to be
liable on the Guarantees because it is no longer a Subsidiary of the Company.
14. DEFAULTS AND REMEDIES. An Event of Default is: (i) failure to pay
the principal of any Security when such principal becomes due and payable at
maturity, upon acceleration or otherwise (ii) failure to pay interest when due,
and such failure continues for a 30-day period; (iii) a default in the
observance or performance of any other covenant or agreement of the Company or
the Guarantors in the Security, the Guarantee or the Indenture that continues
for the period and after the notice specified below; (iv) an event of default
shall have occurred under one or more evidences of Debt of the Company or any of
its Restricted Subsidiaries (other than Non-Recourse Debt) with an outstanding
aggregate principal amount
<PAGE>
A-7
of $5,000,000 or more, whether such Debt now exists or is created hereafter,
which event of default (1) consists of the failure by the Company or any
Restricted Subsidiary to make any payment in respect of such Debt at its final
maturity or (2) results in the acceleration of such Debt which acceleration
shall be in effect; (v) any final judgment or judgments for payment of money in
excess of $5,000,000 in the aggregate shall be rendered against the Company or
any of its Restricted Subsidiaries and shall remain unstayed, unsatisfied or
undischarged for the period and after the notice specified below; (vi) certain
events of bankruptcy, insolvency or reorganization of the Company or Material
Subsidiaries; and (vii) any Guarantee of a Material Subsidiary ceases to be in
full force and effect (other than in accordance with the terms of such Guarantee
and the Indenture) or is declared null and void and unenforceable or found to be
invalid or any Guarantor denies its liability under its Guarantee (other than by
reason of release of a Guarantor from its Guarantee in accordance with the terms
of the Indenture and the Guarantee). The Company is required to deliver to the
Trustee within 120 days after the end of each fiscal year of the Company, an
officer's certificate stating whether or not the signatories know of any default
by the Company under this Indenture and, if any default exists, describing such
default.
A default under clause (iii) or (v) above is not an Event of Default
until the Trustee or the holders of at least 25% in principal amount of the
Securities then outstanding notify the Company of the default and the Company
does not cure the default within 60 days. The notice must specify the default,
demand that it be remedied and state that the notice is a "Notice of Default."
If the Holders of 25% in principal amount of the Securities then outstanding
request the Trustee to give such notice on their behalf, the Trustee shall do
so.
If an Event of Default occurs (other than due to certain events of
bankruptcy, with respect to the Company) and is continuing, the Trustee, by
notice to the Company, or the Holders of at least 25% in principal amount of the
Securities may declare all the Securities to be due and payable immediately. If
an Event of Default occurs due to certain events of bankruptcy, insolvency or
reorganization, with respect to the Company, such amounts shall be due and
payable without any declaration or act on the part of the Trustee or the Holders
of the Securities. Subject to certain exceptions, the Holders of a majority in
principal amount of the Securities then outstanding by notice to the Trustee may
rescind any declaration of acceleration or waive a Default and its consequences.
Se-
<PAGE>
A-8
curityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Securities. Subject to certain
limitations, Holders of a majority in principal amount of the Securities may
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or the exercise of any trust or power conferred on the
Trustee. The Trustee may withhold from Securityholders notice of any continuing
default (except a default in payment of principal or interest) if it determines
that withholding notice is in their interests. The Company must furnish an
annual compliance certificate to the Trustee and notify the Trustee upon the
occurrence of a Default.
15. TRUSTEE DEALINGS WITH COMPANY. American Stock Transfer & Trust
Company, the Trustee under the Indenture, or any banking institution serving as
successor Trustee thereunder, in its individual or any other capacity, may make
loans to, accept deposits from, and perform services for the Company or its
Affiliates, and may otherwise deal with the Company or its Affiliates, as if it
were not the Trustee.
16. NO RECOURSE AGAINST OTHERS. A director, officer, controlling
person, employee or stockholder, as such, of the Company or any Guarantor shall
not have any liability for any obligations, covenants or agreements of the
Company or any Guarantor under the Securities or the Indenture or for any claim
based on, in respect of or by reason of such obligations, covenants or
agreements or their creation. Each Securityholder by accepting a Security waives
and releases all such liability. The waiver and releases are part of the
consideration for the issue of the Securities.
17. AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenant by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND
WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO: Engle Homes,
Inc., 123 N.W. 13th
<PAGE>
A-9
Street, Boca Raton, Florida 33432, Attention: Corporate Secretary.
<PAGE>
A-10
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to:
- -------------------------------------------------------------------------------
(Insert assignee's Soc. Sec. or Tax I.D. No.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ___________________ agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Signature(s):
------------------- --------------------------
--------------------------
(Sign exactly as your
name(s) appear(s) on the
other side of this Secu-
rity)
Signature(s) guaranteed by:
-----------------------------------------------------
(THE SIGNATURE(S) SHOULD BE
GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (Banks,
Stock Brokers, Savings and Loan
Associations, and Credit Unions)
WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION
PROGRAM PURSUANT TO S.E.C.
RULE 17Ad-15.)
<PAGE>
A-11
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.08, 4.09 or 4.15, as the case may be, of the Indenture,
check the box:
[ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.08, 4.09 or 4.15 of the Indenture, state the
amount:
$-----------------------------------
(in an integral multiple of $1,000)
Date: Signature(s):
------------------- --------------------------
--------------------------
(Sign exactly as your
name(s) appear(s) on the
other side of this Secu-
rity)
Signature(s) guaranteed by:
-----------------------------------------------------
(THE SIGNATURE(S) SHOULD BE
GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (Banks,
Stock Brokers, Savings and Loan
Associations, and Credit Unions)
WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION
PROGRAM PURSUANT TO S.E.C.
RULE 17Ad-15.)
<PAGE>
EXHIBIT B
GUARANTEE
For value received, the undersigned hereby unconditionally guarantees
to the Holder of this Security the payments of principal of, premium, if any,
and interest on this Security in the amounts and at the time when due and
interest on the overdue principal, premium, if any, and interest, if any, of
this Security, if lawful, and the payment or performance of all other
obligations of the Company under the Indenture or the Securities, to the Holder
of this Security and the Trustee, all in accordance with and subject to the
terms and limitations of this Security, Article 10 of the Indenture and this
Guarantee. This Guarantee will become effective in accordance with Article 10 of
the Indenture and its terms shall be evidenced therein. The validity and
enforceability of any Guarantee shall not be affected by the fact that it is not
affixed to any particular Security.
The obligations of the undersigned to the Holders of Securities and to
the Trustee pursuant to the Guarantee and the Indenture are expressly set forth
in Article 10 of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
<PAGE>
-2-
This Guarantee is subject to release upon the terms set forth in the
Indenture.
ENGLE HOMES, INC.
BANYAN TRAILS, INC.
ENGLE HOMES/ARIZONA, INC.
ENGLE HOMES/ATLANTA, INC.
ENGLE HOMES/BROWARD, INC.
ENGLE HOMES/COLORADO, INC.
ENGLE HOMES/GULF COAST, INC.
ENGLE HOMES/LAKE BERNADETTE, INC.
ENGLE HOMES/NORTH CAROLINA, INC.
ENGLE HOMES/ORLANDO, INC.
ENGLE HOMES/PALM BEACH, INC.
ENGLE HOMES/PEMBROKE, INC.
ENGLE HOMES/SOUTHWEST FLORIDA, INC.
ENGLE HOMES/TEXAS, INC.
ENGLE HOMES/VIRGINIA, INC.
GREENLEAF HOMES, INC.
PEMBROKE FALLS REALTY, INC.
PREFERRED BUILDERS REALTY, INC.
PREFERRED HOME MORTGAGE COMPANY
ST. TROPEZ AT BOCA GOLF, INC.
UNIVERSAL LAND TITLE, INC.
ENGLE HOMES/ARIZONA CONSTRUCTION, INC.
UNIVERSAL LAND TITLE OF COLORADO, INC.
By:
-------------------------------
Authorized Officer
EXHIBIT 5.1
December 23, 1997
Engle Homes, Inc.
123 N.W. 13th Street
Boca Raton, Florida 33432
Re: ENGLE HOMES, INC.
REGISTRATION STATEMENT ON FORM S-2 (FILE NO. 333-40741)
Ladies and Gentlemen:
We have acted as counsel to Engle Homes, Inc., a Florida corporation
(the "Company"), in connection with the proposed public offering of $75,000,000
aggregate principal amount of the Company's Senior Notes due 2007 (the "Notes")
to be issued under an indenture (the "Indenture") to be entered into among the
Company, certain subsidiaries of the Company party thereto (the "Guarantors")
and American Stock Transfer & Trust Company, as Trustee (the "Trustee"). The
Notes are proposed to be guaranteed (the "Guarantees") by the Guarantors.
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended
(the "Act").
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Registration
Statement on Form S-2 (File No. 333-40741) as filed with the Securities and
Exchange Commission (the "Commission") on November 21, 1997 and Amendment No. 1
thereto as filed with the Commission on December 23, 1997 (such Registration
Statement, as so amended, being hereinafter referred to as the "Registration
Statement"); (ii) the form of the Underwriting Agreement (the "Underwriting
Agreement") proposed to be entered into among the Company, as issuer, the
Guarantors and Smith Barney Inc., as underwriter (the "Underwriter"), filed as
an exhibit to the Registration Statement, (iii) the form of the Indenture filed
as an exhibit to the Registration Statement; (iv) the form of the Notes and
Guarantees; (v) the Company's and each of the Guarantors' Articles of
Incorporation or other corporate charter, as presently in effect; (vi) the
By-Laws of the Company and each of the Guarantors, as presently in effect; (vi)
certain resolutions of the Boards of Directors of the Company and the Guarantors
relating to the issuance and sale of the Notes and the Guarantees, respectively,
and related matters; and (vii) such other documents and instruments as we have
deemed necessary for the expression of opinions herein contained.
In making the foregoing examinations, we have assumed the legal
capacity of all natural persons, the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or
<PAGE>
photostatic copies and the authenticity of the originals of such latter
documents. As to various questions of fact material to this opinion, we have
relied, to the extent we deemed appropriate, upon representations or
certificates of officers or directors of the Company and upon documents, records
and instruments furnished to us by the Company, without independently verifying
the accuracy of such documents, records and instruments.
Members of our firm are admitted to the bar in the State of Florida and
we do not express any opinion as to the laws of any other jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that
when (i) the Registration Statement becomes effective and the Indenture has been
qualified under the Trust Indenture Act of 1939, as amended; (ii) the interest
rate, maturity, redemption and other terms of the Notes as well as the price at
which the Notes are to be sold to the Underwriter pursuant to the Underwriting
Agreement and other matters relating to the issuance and sale of the Notes have
been approved by the Company's Board of Directors; (iii) the Indenture and the
Underwriting Agreement have been duly executed and delivered; and (iv) the Notes
and the Guarantees have been duly executed, authenticated and delivered in
accordance with the terms of the Indenture and delivered to and paid for by the
Underwriter as contemplated by the Underwriting Agreement:
1. The Notes will be valid and binding obligations of the Company
entitled to the benefits of, and subject to the terms and conditions of, the
Indenture and enforceable against the Company in accordance with their terms,
except to the extent that enforcement thereof may be limited by (1) bankruptcy,
insolvency, other similar laws now or hereafter in effect relating to creditors'
rights generally and (2) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity); and
2. The Guarantees will be valid and binding obligations of the
Guarantors entitled to the benefits of, and subject to the terms and conditions
of, the Indenture and enforceable against the Guarantors in accordance with
their terms, except to the extent that enforcement thereof may be limited by (1)
bankruptcy, insolvency, other similar laws now or hereafter in effect relating
to creditors' rights generally and (2) general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in equity)
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the reference to our firm under the
caption "Legal Matters" in the prospectus comprising a part of the Registration
Statement. In giving such consent, we do not thereby admit that we are included
within the category of persons whose consent is required under Section 7 of the
Act or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ Greenberg Traurig Hoffman
Lipoff Rosen & Quentel, P.A.
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Engle Homes, Inc.
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated November 10, 1997, relating to the
consolidated financial statements of Engle Homes, Inc., which is contained in
that Prospectus, and to the incorporation by reference of our report dated
November 10, 1997 relating to the schedule appearing in the Company's annual
report on Form 10-K/A for the year ended October 31, 1997.
We also consent to the reference to us under the captions "Selected
Consolidated Financial and Operating Data" and "Experts" in the Prospectus.
BDO SEIDMAN, LLP
Miami, Florida
December 22, 1997
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------
AMERICAN STOCK TRANSFER & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-3439945
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
40 Wall Street 10005
New York, New York (Zip Code)
(Address of trustee's
principal executive offices)
-------------------------------
ENGEL HOMES, INC.
(Exact name of obligor as specified in its charter)
FLORIDA 59-2214791
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
123 N.W. 13th Street
Boca Raton, Florida 33432
(Address of principal executive (Zip Code)
offices)
-------------------------------
% SENIOR NOTES DUE 2008
(Title of the Indenture Securities)
<PAGE>
-2-
GENERAL
GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
If the obligor or any underwriter for the obligor is an affiliate of the
trustee, describe each such affiliation.
None.
VOTING SECURITIES OF THE TRUSTEE.
Furnish the following information as to each class of voting securities of the
trustee:
As of DECEMBER 22, 1997
- --------------------------------------------------------------------------------
COL. A COL. B
- --------------------------------------------------------------------------------
Title of Class Amount Outstanding
- --------------------------------------------------------------------------------
Common Shares - par value $600 per share. 1,000 shares
TRUSTEESHIPS UNDER OTHER INDENTURES.
American Stock Transfer & Trust Company is Trustee in respect of certain 11 3/4%
Senior Notes issued by Engel Homes, Inc. under an Indenture dated as of March
15, 1994.
None.
INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR
UNDERWRITERS.
None.
<PAGE>
-3-
VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
None.
VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR OFFICIALS.
None.
SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
None.
SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
None.
OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN AFFILIATES
OR SECURITY HOLDERS OF THE OBLIGOR.
None.
OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON OWNING 50
PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
None.
INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
None.
DEFAULTS BY THE OBLIGOR.
None.
AFFILIATIONS WITH THE UNDERWRITERS.
None.
FOREIGN TRUSTEE.
Not applicable.
<PAGE>
-4-
LIST OF EXHIBITS.
T-1.1 - A copy of the Organization Certificate of American Stock Transfer &
Trust Company, as amended to date including authority to commence
business and exercise trust powers was filed in connection with the
Registration Statement of Live Entertainment, Inc., File No. 33-54654,
and is incorporated herein by reference.
T-1.4 - A copy of the By-Laws of American Stock Transfer & Trust Company, as
amended to date was filed in connection with the Registration Statement
of Live Entertainment, Inc., File No. 33-54654, and is incorporated
herein by reference.
T-1.6 - The consent of the Trustee required by Section 312(b) of the Trust
Indenture Act of 1939. Exhibit A.
T-1.7 - A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority. - Exhibit B.
-------------------------------
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee,
American Stock Transfer & Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New York,
on the 22nd day of December 1997.
AMERICAN STOCK TRANSFER
& TRUST COMPANY
Trustee
By: /s/ Herbert J. Lemmer
-------------------------
Vice President
<PAGE>
EXHIBIT A
Securities and Exchange Commission
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321 (b) of the Trust Indenture Act of
1939, and subject to the limitations therein contained, American Stock Transfer
& Trust Company hereby consents that reports of examinations of said corporation
by Federal, State, Territorial or District authorities may be furnished by such
authorities to you upon request therefor.
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: /s/ Herbert J. Lemmer
-------------------------
Vice President
<PAGE>
AMERICAN STOCK TRANSFER & TRUST COMPANY
40 WALL ST.
NEW YORK, NY 10005
EXHIBIT B
CONSOLIDATED REPORT OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC OFFICES
ONLY AND TOTAL ASSETS OF LESS THAN $100 MILLION REPORT AT CLOSE OF BUSINESS ON
JUNE 30, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
<TABLE>
SCHEDULE RC - BALANCE SHEET
<CAPTION>
DOLLAR AMOUTS IN THOUSANDS
- -----------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Cash and balances due from depository institutions:
a. Noninterest-bearing balances and currency and coin
b. Interest-bearing balances 433
Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A)
b. Available-for-sale securities (from Schedule RC-B, column D) 3,537
Federal funds sold and securities purchased under agreements to resell
Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C)
b. LESS: Allowance for loan and lease losses
c. LESS: Allocated transfer risk reserve
d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a
minus 4.b and 4.c
Trading assets
Premises and fixed assets (including capitalized leases) 3,641
Other real estate owned (from Schedule RC-M)
Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M)
Customers' liability to this bank on acceptances outstanding
Intangible assets (from Schedule RC-M)
Other assets (from Schedule RC-F) 6,678
a. Total assets (sum of items 1 through 11) 14,289
b. Losses deferred pursuant to 12 U.S.C. 1823 (j)
c. Total assets and losses deferred pursuant to 12 U.S.C. 1823 (j) (sum of
items 12.a and 12.b) 14,289
<PAGE>
SCHEDULE RC - CONTINUED
DOLLAR AMOUTS IN THOUSANDS
- -----------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E)
(1) Noninterest-bearing
(2) Interest-bearing
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs
(1) Noninterest-bearing
(2) Interest-bearing
Federal funds purchased and securities sold under agreements to repurchase
a. Demand notes issued to the U.S. Treasury
b. Trading liabilities
Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases):
a. With a remaining maturity of one year or less
b. With a remaining maturity of more than one year through three years
c. With a remaining maturity of more than three years
Not applicable
Bank's liability on acceptances executed and outstanding
Subordinated notes and debentures
Other liabilities (from Schedule RC-G) 1,851
Total liabilities (sum of items 13 through 20) 1,851
Not applicable
EQUITY CAPITAL
Perpetual preferred stock and related surplus
Common stock 600
Surplus (exclude all surplus related to preferred stock) 9,289
a. Undivided profits and capital reserves 2,523
b. Net unrealized holding gains (losses) on available-for-sale securities
Cumulative foreign currency translation adjustments
a. Total equity capital (sum of items 23 through 27) 12,438
b. Losses deferred pursuant to 12 U.S.C. 1823(j)
c. Total equity capital and losses deferred pursuant to 12 U.S.C. 1823(j) (sum
of items 28.a and 28.b) 12,438
Total liabilities, equity capital, and losses deferred pursuant to 12 U.S.C..
1823 (j) (sum of items 21 and 28.c) 14,289
</TABLE>
