FILED PURSUANT TO RULE 424(B)(3)
REGISTRATION NO. 333-80389
PROSPECTUS
[ENGLE HOMES LOGO]
OFFER TO EXCHANGE
$100,000,000
9 1/4% SERIES C SENIOR NOTES DUE 2008
FOR
9 1/4% SERIES B SENIOR NOTES DUE 2008
THE REGISTERED NOTES
The terms of the new 9 1/4% Series C Senior Notes due 2008 that we are
offering in this prospectus aRE substantially identical to the terms of our
outstanding 9 1/4% Series B Senior Notes due 2008. The differencE between them
is that the registered notes will be freely transferable and will not have any
covenants regarding registration rights or additional interest.
MATERIAL TERMS OF THE EXCHANGE OFFER
o Expires at 5:00 p.m., New York City time, on July 29, 1999,
unless extended.
o The exchange offer is subject to customary conditions,
including the conditions that the exchange offer not violate
applicable law or any applicable interpretation of the staff
of the Securities and Exchange Commission.
o Tenders of initial notes may be withdrawn at any time prior to
the expiration of the exchange offer.
o All initial notes that are validly tendered and not withdrawn
will be exchanged for registered notes.
o We will not receive any proceeds from the exchange offer.
o All broker-dealers must comply with the registration and
prospectus delivery requirements of the Securities Act of
1933.
o We do not intend to apply for listing of the registered notes
on any securities exchange or to arrange for them to be quoted
on any quotation system.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS. PLEASE SEE "RISK
FACTORS" BEGINNING ON PAGE 9.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE REGISTERED NOTES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JUNE 29, 1999
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any documents we file at the Securities and Exchange Commission's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for information on the
operation of the Public Reference Room. Our SEC filings are also available to
the public from the SEC's Website at "http://www.sec.gov."
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and information we later file with the Securities and Exchange
Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the Securities and Exchange Commission under Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act until this offering is completed:
1. Our Annual Report on Form 10-K for the fiscal year ended October 31,
1998,
2. Our Proxy Statement for our 1999 Annual Meeting filed on January 19,
1999,
3. Our Quarterly Report on Form 10-Q for the fiscal quarter ended
January 31, 1999, and
4. Our Quarterly Report on Form 10-Q for the fiscal quarter ended April
30, 1999.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Engle Homes, Inc.
123 N.W. 13th Street
Suite 300
Boca Raton, Florida 33432
Attention: David Shapiro, Vice President - Finance
(561) 391-4012
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We may not make an offer
of the registered notes in any state where the offer is not permitted. You
should not assume that the information in this prospectus is accurate as of any
date other than the date on the front of this document.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains certain "forward-looking statements" within
the meaning of federal securities laws about our financial condition, results of
operations and business.
You can find many of these statements by looking for words such as
"believes," "expects," "anticipates," "estimates," or similar expressions used
in this prospectus.
These forward-looking statements are subject to numerous assumptions,
risks and uncertainties that may cause our actual results, performance or
achievements to be materially different form any future results, performance or
achievements expressed or implied by us in those statements. The risks and
uncertainties include those risks and uncertainties identified, among other
places, under the heading "Risk Factors" in this prospectus.
The most important factors that could prevent us from achieving our
stated goals include, but are not limited to, the following:
o Local, regional and national economic conditions;
o The effects of government regulation;
o The competitive environment in which we operate;
o Fluctuations in interest rates;
o Changes in home prices;
o The availability and cost of labor and materials; and
o Weather conditions.
Because forward-looking statements are subject to risks and
uncertainties, actual results may differ materially from those expressed or
implied by such statements. You are cautioned not to place undue reliance on
such statements, which speak only as of the date of this prospectus.
The cautionary statements contained or referred to in this section
should be considered in connection with any subsequent written or oral
forward-looking statements that we or persons acting on our behalf may issue. We
undertake no obligation to review or confirm analysts' expectations or estimates
or to release publicly any revisions to any forward-looking statements to
reflect events or circumstances after the date of this prospectus or to reflect
the occurrence of unanticipated events.
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SUMMARY
This summary highlights selected information from this prospectus and
may not contain all information that may be important to you. This prospectus
and the documents incorporated by reference in this prospectus include specific
terms of the exchange offer, as well as information regarding our business and
detailed financial data. We encourage you to read the detailed information and
financial statements appearing elsewhere in this prospectus or incorporated by
reference in this prospectus.
WHO WE ARE
We design, construct, market and sell detached single-family
residences, townhomes, patio homes and condominiums to entry level and move-up
buyers, retirees and second-home, seasonal buyers. We currently operate in nine
geographic markets:
o Broward County, Palm Beach County and Martin County in South
Florida,
o Orlando in Central Florida,
o Tampa, Sarasota, Naples and Fort Myers on the west coast of
Florida,
o Denver, Colorado,
o Dallas, Texas,
o Virginia,
o Raleigh, North Carolina,
o Phoenix, Arizona, and
o Atlanta, Georgia.
We offer a variety of home styles at prices ranging from approximately
$70,000 to over $400,000 with an average sales price in fiscal 1998 of
approximately $192,000. In addition, we operate a mortgage company which
provides mortgages primarily to our home buyers in all of the geographic markets
we operate in and a title company which provides services to our home buyers and
others in Florida, Denver, Colorado and Dallas, Texas.
We are a leading Florida homebuilder and believe we are one of the top
five builders of single-family homes in South Florida and Central Florida.
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, we have 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 1998, approximately 44% of our
revenues from home sales were generated outside of the Florida markets as
compared to none in fiscal 1993.
Over the past five years, our total revenues have grown from $224
million in fiscal 1994 to $536 million in fiscal 1998. The number of homes
delivered increased from 1,992 in fiscal 1997 to 2,605 in fiscal 1998. At the
end of fiscal 1998, we were marketing homes in 91 communities.
Our principal executive offices are located at 123 N.W. 13th Street,
Suite 300, Boca Raton, Florida 33432, and our telephone number is (561)
391-4012.
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RECENT DEVELOPMENTS
On May 26, 1999, we amended our unsecured revolving credit agreement to
provide for the following:
o the term of the facility was extended to May 2002 from May
2001,
o the aggregate committed amount was reduced to $100 million
from $170 million, and
o certain other amendments were made to the agreement to provide
us with greater financial flexibility.
THE EXCHANGE OFFER
On April 29, 1999, we issued in a private placement $100 million of our
9 1/4% Series B Senior Notes due 2008. We entered into a registration rights
agreement with the initial purchasers of these notes in which we agreed to
deliver to you this prospectus and to complete the exchange offer. You are
entitled to exchange your initial notes in the exchange offer for 9 1/4% Series
C Senior Notes due 2008 with substantially identical terms. We believe that the
registered notes to be issued in the exchange offer may be resold by you without
compliance with the registration and prospectus delivery requirements of the
Securities Act of 1933, subject to certain limited conditions.
We issued the initial notes under an indenture which grants the holders
of the initial notes certain rights. The registered notes will also be issued
under that indenture and the holders of the registered notes will have the same
rights as the holders of the initial notes. In addition, there are currently
$149,670,000 of registered notes outstanding which were also issued under this
indenture and the registered notes issued in the exchange offer will be part of
the same class as these currently outstanding registered notes.
Registration Rights Agreement..... You are entitled under the registration
rights agreement to exchange your initial
notes for registered notes with
substantially identical terms. The exchange
offer is intended to satisfy these rights.
After the exchange offer is complete, except
as set forth in the next paragraph, you will
no longer be entitled to any exchange or
registration rights with respect to your
initial notes.
The registration rights agreement requires
us to file a registration statement for a
continuous offering in accordance with Rule
415 under the Securities Act for your
benefit if you would not receive freely
tradeable registered notes in the exchange
offer or you are ineligible to participate
in the exchange offer and indicate that you
wish to have your initial notes registered
under the Securities Act. See "The Exchange
Offer - Procedures for Tendering."
The Exchange Offer................ We are offering to exchange $1,000 principal
amount of 9 1/4% Series C Senior Notes due
2008 which have been registered under the
Securities Act for each $1,000 principal
amount of 9 1/4% Series B Senior Notes due
2008 which were issued on April 29, 1999 in
a private placement. In order to be
exchanged, an initial note must be properly
tendered and accepted. All initial notes
that are validly tendered and not validly
withdrawn will be exchanged.
As of this date, there are $100 million of
initial notes and $149,670,000 of previously
issued registered notes outstanding.
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We will issue the new registered notes
promptly after the expiration of the
exchange offer.
Resales of the registered notes... We believe that registered notes to be
issued in the exchange offer may be offered
for resale, resold and otherwise transferred
by you without compliance with the
registration and prospectus delivery
provisions of the Securities Act if you meet
the following conditions:
(1) the registered notes are acquired
by you in the ordinary course of
your business,
(2) you are not engaging in and do not
intend to engage in a distribution
of the registered notes,
(3) you do not have an arrangement or
understanding with any person to
participate in the distribution of
the registered notes, and
(4) you are not an affiliate of ours,
as that term is defined in Rule 405
under the Securities Act.
If you do not meet the above conditions, you
may incur liability under the Securities Act
if you transfer any registered note without
delivering a prospectus meeting the
requirements of the Securities Act. We do
not assume or indemnify you against that
liability.
Each broker-dealer that is issued registered
notes in the exchange offer for its own
account in exchange for initial notes which
were acquired by that broker-dealer as a
result of market-making activities or other
trading activities must acknowledge that it
will deliver a prospectus meeting the
requirements of the Securities Act in
connection with any resales of the
registered notes. A broker-dealer may use
this prospectus for an offer to resell or to
otherwise transfer these registered notes.
Expiration Date................... The exchange offer will expire at 5:00 p.m.,
New York City time, on July 29, 1999, unless
we decide to extend the exchange offer. We
do not intend to extend the exchange offer,
although we reserve the right to do so.
Conditions to the Exchange Offer.. The only conditions to completing the
exchange offer are that the exchange offer
not violate applicable law or any applicable
interpretation of the staff of the SEC and
no injunction, order or decree has been
issued which would prohibit, prevent or
materially impair our ability to proceed
with the exchange offer. See "The Exchange
Offer - Conditions."
Procedures for Tendering Initial
Notes Held in the Form of
Book-Entry Interests........... The initial notes were issued as global
securities in fully registered form without
coupons. Beneficial interests in the initial
notes which are held by direct or indirect
participants in The Depository Trust Company
through certificateless depositary interests
are shown on, and
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transfers of the initial notes can be made
only through, records maintained in
book-entry form by The Depository Trust
Company with respect to its participants.
If you are a holder of an initial note held
in the form of a book-entry interest and you
wish to tender your initial notes for
exchange pursuant to the exchange offer, you
must transmit to American Stock Transfer &
Trust Company, as exchange agent, on or
prior to the expiration of the exchange
offer either:
o a written or facsimile copy of a
properly completed and executed
letter of transmittal and all other
required documents to the address
set forth on the cover page of the
letter of transmittal; or
o a computer-generated message
transmitted by means of DTC's
Automated Tender Offer Program
system and forming a part of a
confirmation of book-entry transfer
in which you acknowledge and agree
to be bound by the terms of the
letter of transmittal.
The exchange agent must also receive on or
prior to the expiration of the exchange
offer either:
o a timely confirmation of book-entry
transfer of your initial notes into
the exchange agent's account at
DTC, in accordance with the
procedure for book-entry transfers
described in this prospectus under
the heading "The Exchange
Offer--Book-Entry Transfer," or
o the documents necessary for
compliance with the guaranteed
delivery procedures described
below.
A letter of transmittal accompanies this
prospectus. By executing the letter of
transmittal or delivering a
computer-generated message through DTC's
Automated Tender Offer Program system, you
will represent to us that, among other
things:
(1) the registered notes to be acquired
by you in the exchange offer are
being acquired in the ordinary
course of your business;
(2) you are not engaging in and do not
intend to engage in a distribution
of the registered notes;
(3) you do not have an arrangement or
understanding with any person to
participate in the distribution of
the registered notes; and
(4) you are not our affiliate.
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Procedures for Tendering
Certificated Initial Notes..... If you are a holder of book-entry interests
in the initial notes, you are entitled to
receive, in limited circumstances, in
exchange for your book-entry interests,
certificated notes which are in equal
principal amounts to your book-entry
interests. See "Book-Entry; Delivery and
Form." No certificated notes are issued and
outstanding as of the date of this
prospectus. If you acquire certificated
initial notes prior to the expiration of the
exchange offer, you must tender your
certificated initial notes in accordance
with the procedures described in this
prospectus under the heading "The Exchange
Offer--Procedures for
Tendering--Certificated Initial Notes."
Special Procedures for Beneficial
Owners......................... If you are the beneficial owner of initial
notes and they are registered in the name of
a broker, dealer, commercial bank, trust
company or other nominee, and you wish to
tender your initial notes, you should
promptly contact the person in whose name
your initial notes are registered and
instruct that person to tender on your
behalf. If you wish to tender on your own
behalf, you must, prior to completing and
executing the letter of transmittal and
delivering your initial notes, either make
appropriate arrangements to register
ownership of the initial notes in your name
or obtain a properly completed bond power
from the person in whose name your initial
notes are registered. The transfer of
registered ownership may take considerable
time. See "The Exchange Offer--Procedures
for Tendering--Procedures Applicable to All
Holders."
Guaranteed Delivery Procedures.... If you wish to tender your initial notes
and:
(1) they are not immediately available,
(2) time will not permit your initial
notes or other required documents
to reach the exchange agent before
the expiration of the exchange
offer, or
(3) you cannot complete the procedure
for book-entry transfer on a timely
basis,
you may tender your initial notes in
accordance with the guaranteed delivery
procedures set forth in "The Exchange
Offer--Procedures for Tendering--Guaranteed
Delivery Procedures."
Acceptance of Initial Notes and
Delivery of registered notes... Except under the circumstances described
above under "Conditions to the Exchange
Offer," we will accept for exchange any and
all initial notes which are properly
tendered in the exchange offer prior to 5:00
p.m., New York City time, on the expiration
date. The registered notes to be issued to
you in the exchange offer will be delivered
promptly following the expiration date. See
"The Exchange Offer--Terms of the Exchange
Offer."
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Withdrawal........................ You may withdraw the tender of your initial
notes at any time prior to 5:00 p.m., New
York City time, on the expiration date. We
will return to you any initial notes not
accepted for exchange for any reason without
expense to you as promptly as we can after
the expiration or termination of the
exchange offer.
Exchange Agent.................... American Stock Transfer & Trust Company is
serving as the exchange agent in connection
with the exchange offer.
Consequences of Failure
to Exchange.................... If you do not participate in the exchange
offer, upon completion of the exchange
offer, the liquidity of the market for your
initial notes could be adversely affected.
Federal Income Tax Consequences... The exchange of the initial notes will not
be a taxable event for federal income tax
purposes. See "United States Federal Income
Tax Considerations."
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THE REGISTERED NOTES
The Registered Notes.............. $100,000,000 aggregate principal amount of
9 1/4% Series C Senior Notes due 2008 of
Engle Homes, Inc.
Maturity Date..................... February 1, 2008.
Interest Payment Dates............ Interest at will accrue from February 1,
1999, or the last interest payment date on
the initial notes, and will be payable on
each February 1 and August 1, commencing
August 1, 1999.
Guarantees........................ The registered notes are guaranteed by each
of our wholly-owned subsidiaries. If we
cannot make payments on the registered notes
when payments are due, the guarantor
subsidiaries will be obligated to make them.
Optional Redemption............... At any time on or after February 1, 2003, we
may redeem the registered notes at the
redemption prices listed in the section
"Description of the Registered Notes" under
the heading "Optional Redemption."
We may also redeem up to 33% of the
registered notes at any time before February
1, 2001, with the net proceeds of one or
more public equity offerings at the
redemption price listed in the section
"Description of the Registered Notes" under
the heading "Optional Redemption," so long
as at least 67% of the registered notes we
originally issued, including the
$149,670,000 of registered notes that are
currently outstanding, remain outstanding.
Change of Control................. Upon a change of control as described in the
section "Description of the Registered
Notes" under the heading "Certain Covenants
- Change of Control," holders of registered
notes will have the right to require us to
purchase some or all of their registered
notes at 101% of the principal amount, plus
interest to the date of purchase. We cannot
assure you that we will have sufficient
funds to purchase any of the registered
notes.
Additional Offers to Purchase..... Under certain circumstances, we may be
required to make an offer to purchase a
portion of the registered notes in the event
of certain asset sales or if our net worth
falls below a certain level for two
consecutive quarters.
Ranking........................... The registered notes are our general
obligations and will not be secured by any
collateral. Right to payment under the
registered notes will be:
o junior to the rights of our secured
creditors to the extent of their
security in our assets,
o equal with the rights of creditors
under our other unsecured
unsubordinated debt, including our
credit facility, and
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o senior to the rights of creditors
under debt expressly subordinated
to the registered notes.
The guarantees of our subsidiaries will also
not be secured by any collateral. Right to
payment under any guarantee will be:
o junior to the rights of secured
creditors to the extent of their
security in our subsidiaries'
assets,
o equal with the rights of creditors
under our subsidiaries' other
unsecured unsubordinated debt, and
o senior to the rights of creditors
under debt of our subsidiaries that
is expressly subordinated to the
guarantees of the registered notes.
Currently, neither us nor our subsidiaries
have any secured indebtedness outstanding
other than our warehouse lines of credit.
Certain Covenants................. The registered notes will be issued under an
indenture which will, among other things,
restrict our ability and the ability of our
subsidiaries to:
o borrow money,
o pay dividends on or repurchase our
common stock,
o sell certain assets,
o enter into certain transactions
with our affiliates,
o incur liens,
o merge with or into other companies,
or
o make investments in subsidiaries
that are not guarantors of the
registered notes.
For more details, see the section
"Description of the Registered Notes" under
the heading "Certain Covenants."
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RISK FACTORS
You should carefully consider the risks described below before making
an investment decision. The risks and uncertainties described below are not the
only ones that we may face. There may be additional risks and uncertainties not
presently known to us or that we currently do not believe are material that may
also impair our business operations.
If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
such case, the trading price of the registered notes could decline and you may
lose all or part of your investment.
AFTER COMPLETION OF THE EXCHANGE OFFER THE LIQUIDITY OF ANY MARKET FOR THE
INITIAL NOTES COULD BE ADVERSELY AFFECTED AND THE INITIAL NOTES MAY NO LONGER BE
ENTITLED TO ANY REGISTRATION RIGHTS.
We issued the initial notes in a private offering exempt from the
registration requirements of the Securities Act. Accordingly, you may not offer,
sell or otherwise transfer your initial notes except in compliance with the
registration requirements of the Securities Act and applicable state securities
laws or pursuant to exemptions from such registration requirements. If you do
not exchange your initial notes for registered notes in this exchange offer,
your initial notes will continue to be subject to these transfer restrictions
after the completion of this exchange offer.
After completion of this exchange offer, if you do not tender your
initial notes in this exchange offer, you will no longer be entitled to any
registration rights under the registration rights agreement, except under
limited circumstances.
To the extent initial notes are tendered and accepted in the exchange
offer, the liquidity of the trading market, if any, for the initial notes could
be adversely affected.
FUTURE CHANGES IN BUSINESS CONDITIONS COULD ADVERSELY AFFECT OUR BUSINESS,
INCLUDING OUR ABILITY TO BUILD HOMES AT PRICES OUR CUSTOMERS ARE WILLING OR ABLE
TO PAY.
The homebuilding industry is cyclical and is significantly affected by
changes in general and local economic conditions, such as:
o employment levels,
o availability of financing for home buyers,
o interest rate levels,
o consumer confidence, and
o housing demand.
An oversupply of alternatives to new homes, such as rental properties
and used homes, could depress prices and reduce margins for the sale of new
homes.
Weather conditions and natural disasters such as hurricanes, tornadoes,
earthquakes, floods and fires, can harm the homebuilding business.
Inventory risk can be substantial for homebuilders. The risks inherent
in purchasing and developing land increase as consumer demand for housing
decreases. The market value of undeveloped land, building lots and housing
inventories can fluctuate significantly as a result of changing market
conditions.
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In addition, inventory carrying costs can be significant and can result
in losses in a poorly performing project or market. In the event of significant
changes in economic or market conditions, we may have to sell homes at a loss.
In our business, we must continuously seek and make acquisitions of
land for replacement and expansion of land inventory within our current markets
and, from time to time, make acquisitions of land for expansion into new
markets. Although we employ various measures designed to manage inventory risks,
we can give no assurance that such measures will be successful.
The homebuilding industry has from time to time experienced significant
difficulties, including:
o shortages of qualified trades people,
o reliance on local contractors, who may be inadequately
capitalized,
o shortages of materials, and
o volatile increases in the cost of certain materials
(particularly increases in the price of lumber, framing and
cement, which are significant components of home construction
costs).
These difficulties could cause us to take longer and pay more costs to
build our homes. We may not be able to recapture increased costs by raising
prices in many cases because we fixed our prices up to six months in advance of
delivery by signing home sales contracts. In addition, some home buyers may
cancel or not honor their home sales contracts altogether.
FUTURE INCREASES IN INTEREST RATES COULD PREVENT POTENTIAL CUSTOMERS FROM BUYING
OUR HOMES AND ADVERSELY AFFECT OUR BUSINESS.
Virtually all our customers finance their acquisitions through lenders
providing mortgage financing. Increases in interest rates or decreases in
availability of mortgage financing could depress the market for new homes
because of the increased monthly mortgage costs to potential home buyers. Even
if potential customers do not need financing, changes in interest rates and
mortgage availability could make it harder for them to sell their homes to
potential buyers who need financing. This could adversely affect our results of
operations.
OUR SUBSTANTIAL DEBT COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND PREVENT US
FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.
We have a significant amount of debt. As of April 30, 1999, our
outstanding indebtedness was approximately $284,120,000. In addition, subject to
the restrictions in the indenture relating to the notes and in our credit
facility, we may incur additional debt in the future.
The amount of our debt could have important consequences to a holder of
the notes. For example, it could:
o make us more vulnerable in the event of a downturn in our
business or in general economic conditions,
o limit our ability to obtain additional financing for future
working capital, capital expenditures, general corporate or
other purposes
o require us to dedicate a substantial portion of our cash flow
from operations to the payment on our debt and reduce our
ability to use our cash flow for other purposes, and
o limit our flexibility in planning for, or reacting to, the
changes in our business.
Our ability to meet our debt service obligations depends on our future
performance. Numerous factors outside of our control, including changes in
financial, political and business conditions in the markets in which we do
business, affect our operating results. Any adverse changes in these factors
could adversely affect our operating results. We cannot assure you that we will
be able to generate sufficient cash flow from operations or that future
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borrowings will be available to us under our credit facility in amounts
sufficient to meet our debt service obligations, including the notes. We may
need to refinance all or a portion of our debt, including the notes, or obtain
alternative additional financing, to make required debt service payments. We
cannot be certain that we could refinance our debt or obtain alternative
additional financing on terms that are favorable to us.
Our credit facility and the indenture governing the notes contain
financial covenants. If we fail to comply with any of these covenants, our debt
could become due and payable before maturity, which could adversely affect our
operations, including our ability to make additional borrowings under our credit
facility.
OUR BUSINESS OPERATIONS ARE GEOGRAPHICALLY CONCENTRATED AND ECONOMIC DOWNTURNS
IN THE GEOGRAPHIC AREAS IN WHICH WE OPERATE WOULD ADVERSELY AFFECT OUR BUSINESS.
Our operations are located in the following areas:
o South Florida, Central Florida and the west coast of Florida,
o Denver, Colorado,
o Dallas, Texas,
o Virginia,
o Raleigh, North Carolina,
o Phoenix, Arizona, and
o Atlanta, Georgia.
Adverse general economic conditions in any of these markets could have
a material adverse impact on our operations. During our 1998 fiscal year,
approximately 56% of our housing revenue and a significant portion of our
operating income were derived from operations in Florida. Adverse economic
changes in Florida could significantly affect our operations. We expanded into
two new geographic markets, Phoenix, Arizona, and Atlanta, Georgia, in our 1997
fiscal year. We may find these new markets to be less stable than our
established markets and these new markets may involve delays, problems and
expenses we do not typically find in the existing markets with which we are
familiar.
OUR PRINCIPAL SHAREHOLDERS HAVE SIGNIFICANT VOTING CONTROL.
Alec Engelstein, our Chairman, President and Chief Executive Officer,
and Harry Engelstein, our Executive Vice President and Chief Construction
Officer, together beneficially own a total of approximately 32% of our
outstanding Common Stock and together have significant voting power with respect
to the election of our Board of Directors, and in general, the determination of
the outcome of various matters submitted to the shareholders for approval. The
interests of our principal shareholders may be in conflict with the interests of
holders of notes.
WE ARE DEPENDENT ON OUR KEY EXECUTIVES FOR OUR CONTINUED SUCCESS.
Our operations are managed by a relatively small number of executive
officers. If we were to lose the services of one or more of these executive
officers, particularly Alec Engelstein, our Chairman, President and Chief
Executive Officer, that loss could have an adverse effect on our business and
operations.
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FEDERAL AND STATE LAWS ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID
GUARANTEES AND TO REQUIRE CERTAIN PAYMENTS RECEIVED FROM GUARANTORS TO BE
RETURNED.
Although holders of the notes will be direct creditors of the
guarantors by virtue of the guarantees, existing or future creditors of any
guarantor could avoid or subordinate such guarantor's guarantee under the
fraudulent conveyance laws if they were successful in establishing that:
o the guarantee was incurred with fraudulent intent, or
o the guarantor did not receive fair consideration or reasonably
equivalent value for issuing the guarantee and the guarantor
1) was insolvent at the time of the guarantee,
2) was rendered insolvent by reason of the guarantee,
3) was engaged in a business or transaction for which
its assets constituted unreasonably small capital to
carry on its business, or
4) intended to incur, or believed that it would incur,
debt beyond its ability to pay such debt as it
matured.
The measures of insolvency for purposes of determining whether a
fraudulent conveyance occurred would vary depending upon the laws of the
relevant jurisdiction and upon the valuation assumptions and methodology applied
by the court. Generally, however, a company would be considered insolvent for
purposes of the foregoing if:
o the sum of the company's debts, including contingent,
unliquidated and unmatured liabilities, is greater than all of
such company's property at a fair valuation, or
o if the present fair saleable value of the company's assets is
less than the amount that will be required to pay the probable
liability on its existing debts as they become absolute and
matured.
WE MAY NOT HAVE THE ABILITY TO RAISE FUNDS NECESSARY TO FINANCE ANY CHANGE OF
CONTROL OFFER REQUIRED BY THE INDENTURE.
If a change of control occurs as described in the section "Description
of the Registered Notes" under the heading "Certain Covenants--Change of
Control," we will be required to offer to repurchase all of the outstanding
notes at 101% of their principal amount, together with any accrued and unpaid
interest. We cannot assure you that we will have sufficient funds available or
that we will be permitted by our other debt agreements to repurchase the notes.
HOMEBUILDING IS VERY COMPETITIVE, AND COMPETITIVE CONDITIONS COULD ADVERSELY
AFFECT OUR RESULTS OF OPERATIONS.
The homebuilding industry is highly competitive and fragmented. We
compete in each of our markets with numerous national, regional and local
builders, including some builders with greater financial resources than us.
Builders of new homes compete not only for home buyers, but also for desirable
properties, raw materials and skilled subcontractors.
The competitive conditions in the homebuilding industry could result
in:
o difficulty in acquiring suitable land at acceptable prices,
o increased selling incentives,
o lower sales, or
o delays in construction.
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<PAGE>
GOVERNMENTAL REGULATIONS COULD INCREASE THE COST AND AVAILABILITY OF OUR
DEVELOPMENT AND HOMEBUILDING PROJECTS AND ADVERSELY AFFECT OUR BUSINESS.
We are subject to extensive and complex regulations that affect the
development and homebuilding process, including zoning, density and building
standards. These regulations often provide broad discretion to the administering
governmental authorities. This can delay or increase the cost of development or
homebuilding.
We also are subject to a variety of local, state and federal laws and
regulations concerning protection of health and the environment. These
environmental laws may result in delays, may cause us to incur substantial
compliance and other costs, and can prohibit or severely restrict development
and homebuilding activity in certain environmentally sensitive regions or areas.
THE VOTING INTEREST OF THE HOLDERS OF NOTES WILL BE DILUTED.
Currently, approximately $149,670,000 of registered notes are
outstanding. The registered notes which are currently outstanding and the
registered notes to be issued in the exchange offer will be deemed to be a
single series of debt securities outstanding under the indenture. Accordingly,
the individual voting interest of each holder of registered notes will be
diluted. In addition, issuances of additional notes under the indenture, to the
extent permitted by the debt incurrence limitations of the indenture, may result
in further dilution of the individual voting interest of the holders of notes.
WE CANNOT ASSURE YOU THAT A TRADING MARKET WILL BE SUSTAINED FOR THE NOTES.
The registered notes to be issued in the exchange offer will trade as a
single class with the $149,670,000 of registered notes that are currently
outstanding. The registered notes are not listed on a securities exchange and we
do not intend to apply for listing of the registered notes on a securities
exchange. The liquidity of the trading market in the registered notes, and the
market prices quoted for the registered notes, may be adversely affected by
changes in the overall market for these types of securities and by changes in
our financial performance or prospects or in the prospects for companies in our
industry generally. As a result, we cannot assure you that an active trading
market will continue for the registered notes, that you will be able to sell the
registered notes or that, if you can sell your registered notes, you will be
able to sell them at an acceptable price.
OUR SYSTEMS MAY NOT BE YEAR 2000 COMPLIANT.
We have done an assessment of the homebuilding and corporate operations
that utilize the our significant information technology and non-information
technology systems. We believe that our information technology system is Year
2000 compliant in all material respects.
We have replaced certain non-compliant systems and are in the process
of replacing others. The systems we are in the process of replacing are not
critical to our operations. In substantially all of the cases, the replacement
or upgrading of all of these systems will occur prior to any exposure to
potential Year 2000 issues. We do not believe that our non-compliant systems
pose a material risk to our financial condition or that the cost of replacing or
upgrading our remaining non-compliant systems will have any material averse
effect. However, we cannot currently determine to what extent Year 2000 issues
will affect the systems of governmental agencies on which we are dependent for
zoning, building permits and related matters that are critical to our
operations.
We have surveyed and continue to monitor our significant vendors ,
subcontractors, suppliers and financial institutions to assess their readiness
or anticipated readiness for the Year 2000. We believe that our worst-case
scenario resulting from Year 2000 issues would be the failure of some of our
vendors, subcontractors or other third parties to achieve Year 2000 compliance,
resulting in a slowdown of our operations. We will continue to monitor our
largest suppliers, vendors and sub-contractors and attempt to minimize any
adverse effects on our operations. In addition, we are currently developing
contingency plans. While at present we do not believe the Year 2000 issue will
have a material adverse effect on our business, we cannot assure you in this
regard.
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USE OF PROCEEDS
We will not receive any cash proceeds from the exchange offer. In
consideration for issuing the registered notes as contemplated in this
prospectus, we will receive in exchange the initial notes in like principal
amount. The initial notes surrendered in exchange for the registered notes will
be retired and canceled and cannot be reissued. The issuance of the registered
notes will not result in any increase in our indebtedness.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges
for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, APRIL 30,
---------------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
----------- ---------- ---------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges (1).. 2.56x 1.18x 1.63x 2.40x 2.55x 2.24x 2.92x
<FN>
(1) 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.
</FN>
</TABLE>
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
Upon the issuance of the initial notes under the purchase agreement,
the initial purchasers and their respective assignees became entitled to the
benefits of the registration rights agreement. Under the registration rights
agreement, we are required to:
o use our reasonable best efforts to cause the registration
statement to declared effective no later than 150 days after
the date the initial notes were issued,
o keep the exchange offer open for not less than 30 days (or
longer if required by applicable law) after we notify holders
of the notes of the exchange offer, and
o use reasonable best efforts to complete the exchange offer as
soon as practicable, but no later than 150 days after the date
on which we issued the initial notes.
The exchange offer being made by this prospectus is intended to satisfy
our obligations under the registration rights agreement. If we fail to fulfill
such obligations, the holders of outstanding initial notes are entitled to
receive "Additional Interest" until we have fulfilled such obligations, at the
rate of 0.50%, which rate will increase by an additional 0.50% at the beginning
of each 90-day period that we must pay Additional Interest, provided that any
such increase in the interest rate may not exceed 1.5%. All amounts of accrued
Additional Interest will be payable in cash on the same interest payment dates
as the notes.
EFFECT OF THE EXCHANGE OFFER
Based on interpretations by the SEC staff contained in no-action
letters issued to third parties, we believe that you may offer for resale,
resell and otherwise transfer the registered notes issued to you under the
exchange offer without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that you can represent that:
o you are acquiring the registered notes in the ordinary course
of your business;
o you have no arrangements or understandings with any person to
participate in the exchange offer for the purpose of
distributing the registered notes; and
o you are not an "affiliate" (as defined in Rule 405 of the
Securities Act) of ours.
If you are not able to make these representations, you are a
"Restricted Holder." As a Restricted Holder, you will not be able to participate
in the exchange offer, may not rely on the SEC staff positions set forth in the
Exxon Capital Holdings Corporation no-action letter and similar no-action
letters and may only sell your initial notes as part of a registration statement
containing the selling security holder information required by Item 507 of SEC
Regulation S-K, or under an exemption from the registration requirement of the
Securities Act.
In addition, each broker-dealer, other than a Restricted Holder, that
receives registered notes for its own account in exchange for initial notes
which were acquired by such broker-dealer as a result of market-making or other
trading activities (a "Participating Broker-Dealer") may be a statutory
underwriter and must acknowledge in the letter of transmittal that it will
deliver a prospectus meeting the requirements of the Securities Act upon any
resale of such registered notes. The letter of transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Based upon interpretations by the SEC staff, we believe that a Participating
Broker-Dealer may offer for resale, resell and otherwise transfer registered
notes issued under the exchange offer upon compliance with the prospectus
delivery requirements, but without compliance with the registration
requirements, of the Securities Act. This prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating
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Broker-Dealer as part of their resales. We have agreed that, for a period of 90
days after the completion of the exchange offer, we will make this prospectus
available to any broker-dealer for use by the broker-dealer in any resale. By
acceptance of this exchange offer, each broker-dealer that receives registered
notes under the exchange offer agrees to notify us prior to using this
prospectus in a sale or transfer of registered notes. For more information,
please see the section "Plan of Distribution."
To the extent initial notes are tendered and accepted in the exchange
offer, the principal amount of outstanding initial notes will decrease with a
resulting decrease in the liquidity in the market for the initial notes. Initial
notes that are still outstanding following the completion of the exchange offer
will continue to be subject to transfer restrictions.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions contained in this
prospectus and in the letter of transmittal, we will accept any and all initial
notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time,
on the expiration date. As of the date of this prospectus, $100 million
principal amount of the initial notes is outstanding. We will issue $1,000
principal amount at maturity of registered notes in exchange for each $1,000
principal amount at maturity of outstanding initial notes accepted in the
exchange offer. Holders may tender some or all of their initial notes under the
exchange offer. However, initial notes may be tendered only in integral
multiples of $1,000.
The form and terms of the registered notes will be substantially
identical to the form and terms of the initial notes, except that:
o the offering of the registered notes has been registered under
the Securities Act;
o the registered notes will not be subject to transfer
restrictions;
o the registered notes will be issued free of any covenants
regarding registration rights and free of any provision for
Additional Interest; and
o the registered notes will evidence the same debt as the
initial notes and will be entitled to the benefits of the
indenture under which initial notes were, and the registered
notes will be, issued.
You do not have any appraisal or dissenters rights under law or the
indenture in the exchange offer. We intend to conduct the exchange offer in
accordance with the applicable requirements of the Exchange Act.
We will be deemed to have accepted validly tendered initial notes when,
as and if we have given oral notice, promptly confirmed in writing, or written
notice of the acceptance to the exchange agent. The exchange agent will act as
agent for the tendering holders for the purpose of receiving the registered
notes from us.
If we do not accept for exchange any tendered initial notes because of
an invalid tender, the occurrence of other events described in this prospectus
or otherwise, certificates for any such unaccepted initial notes will be
returned to you, without expense, as promptly as practicable after the
expiration date.
If you tender initial notes in the exchange offer, you will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes relating to the exchange of initial
notes under the exchange offer. We will pay all charges and expenses, other than
underwriting discounts and commissions and transfer taxes, as part of the
exchange offer. See "--Fees and Expenses."
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<PAGE>
EXPIRATION DATE, EXTENSIONS, AMENDMENTS
The term "expiration date" means 5:00 p.m., New York City time, on July
29, 1999, unless we, in our sole discretion, extend the exchange offer, in which
case the term "expiration date" shall mean the latest date and time to which the
exchange offer is extended.
In order to extend the exchange offer, we will notify the exchange
agent of any extension by oral notice (promptly confirmed in writing) or written
notice and will make a public announcement that we have extended the exchange
offer prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date unless otherwise required by applicable law
or regulation.
We have the right, in our reasonable discretion, (1) to delay accepting
any initial notes, to extend the exchange offer or, if any of the conditions set
forth below under "Conditions" shall not have been satisfied, to terminate the
exchange offer, by giving oral or written notice of such delay, extension or
termination to the exchange agent, or (2) to amend the terms of the exchange
offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by a public announcement.
If we believe that we have made a material amendment of the terms of the
exchange offer, we will promptly disclose such amendment in a manner reasonably
calculated to inform the holders of the notes of such amendment and we will
extend the exchange offer to the extent required by law.
Without limiting the manner in which we may choose to make public
announcement of any delay, extension, termination or amendment of the exchange
offer, we shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
PROCEDURES FOR TENDERING
BOOK-ENTRY INTERESTS
The initial notes were issued as global securities in fully registered
form without interest coupons. Beneficial interests in the global securities,
held by direct or indirect participants in The Depository Trust Company ("DTC"
or the "Depositary"), are shown on, and transfers of these interests are
effected only through, records maintained in book-entry form by DTC with respect
to its participants.
If you hold your initial notes in the form of book-entry interests and
you wish to tender your initial notes for exchange pursuant to the exchange
offer, you must transmit to the exchange agent on or prior to the expiration
date either:
(1) a written or facsimile copy of a properly completed and duly
executed letter of transmittal, including all other documents
required by such letter of transmittal, to the exchange agent at
the address set forth on the cover page of the letter of
transmittal, or
(2) a computer-generated message transmitted by means of DTC's
Automated Tender Offer Program system and received by the
exchange agent and forming a part of a confirmation of
book-entry transfer, in which you acknowledge and agree to be
bound by the terms of the letter of transmittal.
In addition, in order to deliver initial notes held in the form of
book-entry interests:
(A) a timely confirmation of book-entry transfer of such notes into
the exchange agent's account at DTC pursuant to the procedure
for book-entry transfers described below under "--Book-Entry
Transfer" must be received by the exchange agent prior to the
expiration date, or
(B) you must comply with the guaranteed delivery procedures
described below.
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THE METHOD OF DELIVERY OF INITIAL NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND
RISK. INSTEAD OF DELIVERY BY MAIL, WE RECOMMEND THAT YOU USE AN OVERNIGHT OR
HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. YOU SHOULD NOT SEND
THE LETTER OF TRANSMITTAL OR INITIAL NOTES TO US. YOU MAY REQUEST YOUR BROKER,
DEALER, COMMERCIAL BANK, TRUST COMPANY, OR NOMINEE TO EFFECT THE ABOVE
TRANSACTIONS FOR YOU.
CERTIFICATED INITIAL NOTES
Only registered holders of certificated initial notes may tender those
notes in the exchange offer. If your initial notes are certificated notes and
you wish to tender those notes for exchange pursuant to the exchange offer, you
must transmit to the exchange agent on or prior to the expiration date, a
written or facsimile copy of a properly completed and duly executed letter of
transmittal, including all other required documents, to the address set forth
below under "--Exchange Agent." In addition, in order to validly tender your
certificated initial notes:
(1) the certificates representing your initial notes must be
received by the exchange agent prior to the expiration date,
or
(2) you must comply with the guaranteed delivery procedures
described below.
PROCEDURES APPLICABLE TO ALL HOLDERS
If you tender an initial note and you do not withdraw the tender prior
to the expiration date, you will have made an agreement with us in accordance
with the terms and subject to the conditions set forth in this prospectus and in
the letter of transmittal.
If your initial notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and you wish to tender your
notes, you should contact the registered holder promptly and instruct the
registered holder to tender on your behalf. If you wish to tender on your own
behalf, you must, prior to completing and executing the letter of transmittal
and delivering your initial notes, either make appropriate arrangements to
register ownership of the initial notes in your name or obtain a properly
completed bond power from the registered holder. The transfer of registered
ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed by an eligible institution unless:
(A) initial notes tendered in the exchange offer are tendered
either
(1) by a registered holder who has not completed the box
entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the letter of
transmittal, or
(2) for the account of an eligible institution; and
(B) the box entitled "Special Registration Instructions" on the
letter of transmittal has not been completed.
If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantee must be by a financial institution,
which includes most banks, savings and loan associations and brokerage houses,
that is a participant in the Securities Transfer Agents Medallion Program, the
New York Stock Exchange Medallion Program or the Stock Exchanges Medallion
Program.
If the letter of transmittal is signed by a person other than you, your
initial notes must be endorsed or accompanied by a properly completed bond power
and signed by you as your name appears on those initial notes.
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<PAGE>
If the letter of transmittal or any initial notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing. Unless we waive this
requirement, in this instance you must submit with the letter of transmittal
proper evidence satisfactory to us of their authority to act on your behalf.
We will determine, in our sole discretion, all questions regarding the
validity, form, eligibility, including time of receipt, acceptance and
withdrawal of tendered initial notes. This determination will be final and
binding. We reserve the absolute right to reject any and all initial notes not
properly tendered or any initial notes our acceptance of which would, in the
opinion of our counsel, be unlawful. We also reserve the right to waive any
defects, irregularities or conditions of tender as to particular initial notes.
Our interpretation of the terms and conditions of the exchange offer, including
the instructions in the letter of transmittal, will be final and binding on all
parties.
You must cure any defects or irregularities in connection with tenders
of your initial notes within the time period we will determine unless we waive
that defect or irregularity. Although we intend to notify you of defects or
irregularities with respect to your tender of initial notes, neither we, the
exchange agent nor any other person will incur any liability for failure to give
this notification. Your tender will not be deemed to have been made and your
notes will be returned to you if:
(1) you improperly tender your initial notes,
(2) you have not cured any defects or irregularities in your
tender, and
(3) we have not waived those defects, irregularities or improper
tender.
The exchange agent will return your notes, unless otherwise provided in
the letter of transmittal, as soon as practicable following the expiration of
the exchange offer.
In addition, we reserve the right in our sole discretion to:
(1) purchase or make offers for, or offer registered notes for,
any initial notes that remain outstanding subsequent to the
expiration of the exchange offer,
(2) terminate the exchange offer, and
(3) to the extent permitted by applicable law, purchase notes in
the open market, in privately negotiated transactions or
otherwise.
The terms of any of these purchases or offers could differ from the
terms of the exchange offer.
By tendering, you will represent to us that, among other things:
(1) the registered notes to be acquired by you in the exchange
offer are being acquired in the ordinary course of your
business,
(2) you are not engaging in and do not intend to engage in a
distribution of the registered notes to be acquired by you in
the exchange offer,
(3) you do not have an arrangement or understanding with any
person to participate in the distribution of the registered
notes to be acquired by you in the exchange offer, and
(4) you are not our "affiliate," as defined under Rule 405 of the
Securities Act.
In all cases, issuance of registered notes for initial notes that are
accepted for exchange in the exchange offer will be made only after timely
receipt by the exchange agent of certificates for your initial notes or a timely
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book-entry confirmation of your initial notes into the exchange agent's account
at DTC, a properly completed and duly executed letter of transmittal, or a
computer-generated message instead of the letter of transmittal, and all other
required documents. If any tendered initial notes are not accepted for any
reason set forth in the terms and conditions of the exchange offer or if initial
notes are submitted for a greater principal amount than you desire to exchange,
the unaccepted or non-exchanged initial notes, or initial notes in substitution
therefor, will be returned without expense to you. In addition, in the case of
initial notes tendered by book-entry transfer into the exchange agent's account
at DTC pursuant to the book-entry transfer procedures described below, the
non-exchanged initial notes will be credited to your account maintained with
DTC, as promptly as practicable after the expiration or termination of the
exchange offer.
GUARANTEED DELIVERY PROCEDURES
If you desire to tender your initial notes and your initial notes are
not immediately available or one of the situations described in the immediately
preceding paragraph occurs, you may tender if:
(1) you tender through an eligible financial institution,
(2) on or prior to 5:00 p.m., New York City time, on the
expiration date, the exchange agent receives from an eligible
institution, a written or facsimile copy of a properly
completed and duly executed letter of transmittal and notice
of guaranteed delivery, substantially in the form provided by
us, and
(3) the certificates for all certificated initial notes, in proper
form for transfer, or a book-entry confirmation, and all other
documents required by the letter of transmittal, are received
by the exchange agent within three NYSE trading days after the
date of execution of the notice of guaranteed delivery.
The notice of guaranteed delivery may be sent by facsimile
transmission, mail or hand delivery. The notice of guaranteed delivery must set
forth:
(1) your name and address,
(2) the amount of initial notes you are tendering, and
(3) a statement that your tender is being made by the notice of
guaranteed delivery and that you guarantee that within three
New York Stock Exchange trading days after the execution of
the notice of guaranteed delivery, the eligible institution
will deliver the following documents to the exchange agent:
(A) the certificates for all certificated initial notes
being tendered, in proper form for transfer or a
book-entry confirmation of tender,
(B) a written or facsimile copy of the letter of
transmittal, or a book-entry confirmation instead of
the letter of transmittal, and
(C) any other documents required by the letter of
transmittal.
BOOK-ENTRY TRANSFER
The exchange agent will establish an account with respect to the
book-entry interests at DTC for purposes of the exchange offer promptly after
the date of this prospectus. You must deliver your book-entry interest by
book-entry transfer to the account maintained by the exchange agent at DTC. Any
financial institution that is a participant in DTC's systems may make book-entry
delivery of book-entry interests by causing DTC to transfer the book-entry
interests into the exchange agent's account at DTC in accordance with DTC's
procedures for transfer.
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If one of the following situations occur:
(1) you cannot deliver a book-entry confirmation of book-entry
delivery of your book-entry interests into the exchange
agent's account at DTC, or
(2) you cannot deliver all other documents required by the letter
of transmittal to the exchange agent prior to the expiration
date,
then you must tender your book-entry interests according to the
guaranteed delivery procedures discussed above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of initial notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration
date.
To withdraw a tender of initial notes in the exchange offer, a written
or facsimile transmission notice of withdrawal must be received by the exchange
agent at its address listed in this prospectus prior to 5:00 p.m., New York City
time, on the expiration date. Any notice of withdrawal must:
o specify the name of the person having deposited the initial
notes to be withdrawn,
o identify the initial notes to be withdrawn, including the
certificate number or numbers and principal amount of such
initial notes,
o be signed by the holder in the same manner as the original
signature on the letter of transmittal by which the initial
notes were tendered, including any required signature
guarantees, or be accompanied by documents of transfer
sufficient to have the trustee with respect to the initial
notes register the transfer of the initial notes into the name
of the person withdrawing the tender, and
o specify the name in which any initial notes are to be
registered if different from that of the person that deposited
the initial notes to be withdrawn.
If the initial notes have been delivered under the book-entry procedure
set forth above under "--Procedures for Tendering," any notice of withdrawal
must specify the name and number of the participant's account at DTC to be
credited with the withdrawn initial notes.
We will determine, in our sole discretion, all questions as to the
validity, form and eligibility, including time of receipt, of withdrawal
notices. Our determination shall be final and binding on all parties. Any
initial notes withdrawn will be deemed not to have been validly tendered for
purposes of the exchange offer and registered notes will not be issued in
exchange for such withdrawn initial notes unless the withdrawn initial notes are
validly retendered. Properly withdrawn initial notes may be retendered by
following one of the procedures described above under "--Procedures for
Tendering" at any time prior to the expiration date.
Any initial notes that are tendered but not accepted due to withdrawal,
rejection of tender or termination of the exchange offer will be returned as
soon as practicable to the holder without cost to the holder (or, in the case of
initial notes tendered by book-entry transfer into the exchange agent's account
at the book-entry transfer facility under the book-entry transfer procedures
described above, these initial notes will be credited to an account maintained
with such book-entry transfer facility for the initial notes).
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<PAGE>
CONDITIONS
Notwithstanding any other term of the exchange offer, we are not
required to accept for exchange any initial notes, and may terminate the
exchange offer as provided in this prospectus before the acceptance of any
initial notes, if:
o the exchange offer will violate applicable law or any
applicable interpretation of the SEC staff;
o the initial notes are not tendered in accordance with the
exchange offer;
o you do not represent that you are acquiring the registered
notes in the ordinary course of your business, and that you
have no arrangement or understanding with any person to
participate in a distribution of the registered notes; or
o any action or proceeding is instituted or threatened in any
court or by before any governmental agency with respect to the
exchange offer which, in our judgment, would reasonably be
expected to impair our ability to proceed with the exchange
offer.
These conditions are for our sole benefit and we may be asserted them
regardless of the circumstances giving rise to any a condition or may be waived
by us in whole or in part at any time and from time to time in our reasonable
discretion. Our failure at any time to exercise any of the foregoing rights
shall not be deemed a waiver of the right and each right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
If we determine in our reasonable judgment that any of the conditions
are not satisfied, we may (1) refuse to accept any initial notes and return all
tendered initial notes to the tendering holders (or, in the case of initial
notes delivered by book-entry transfer within DTC, credit any initial notes to
the account maintained within DTC by the participant in DTC which delivered the
notes), (2) extend the exchange offer and retain all initial notes tendered
prior to the expiration of the exchange offer, subject, however, to the rights
of holders to withdraw the tenders of initial notes (see "Withdrawal of Tenders"
above) or (3) waive the unsatisfied conditions with respect to the exchange
offer and accept all properly tendered initial notes which have not been
withdrawn. If a waiver constitutes a material change to the exchange offer, we
will promptly disclose the waiver by means of a prospectus supplement that will
be distributed to the registered holders, and we will extend the exchange offer
for a period of five to ten business days, depending upon the significance of
the waiver and the manner of disclosure to the registered holders, if the
exchange offer would otherwise expire during such five to ten business day
period.
EXCHANGE AGENT
American Stock Transfer & Trust Company has been appointed as exchange
agent for the exchange offer. Delivery of letters of transmittal and any other
required documents, questions, requests for assistance, and requests for
additional copies of this prospectus or of the letter of transmittal should be
directed to the exchange agent as follows:
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL, BY FACSIMILE (ELIGIBLE INSTITUTIONS ONLY):
OVERNIGHT COURIER OR HAND DELIVERY:
(718) 234-5001
American Stock Transfer & Trust Company Attention: Exchange Department
40 Wall Street
New York, New York 10005 Confirmed by Telephone: (718) 921-8200
Attention: Exchange Department (Originals of all documents submitted by facsimile
should be sent promptly by hand, overnight courier or
registered or certified mail.)
</TABLE>
Delivery to other than the above address or facsimile number will not
constitute a valid delivery.
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FEES AND EXPENSES
We will pay expenses of soliciting tenders. The principal solicitation
is being made by mail; however, additional solicitation may be made by
facsimile, telephone or in person by our officers and regular employees.
We have not retained any dealer-manager as part of the exchange offer
and will not make any payments to brokers, dealers or others soliciting
acceptance of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for services and will reimburse it for its
reasonable out-of-pocket expenses under the exchange offer. We will also pay the
reasonable fees and expenses of one firm acting as counsel for the initial
purchasers. Expenses include fees and expenses of the exchange agent and
trustee, accounting and legal fees and printing costs, among others.
TRANSFER TAXES
You must pay all transfer taxes, if any, applicable to the exchange of
initial notes under the exchange offer. If satisfactory evidence of payment of
the taxes or exemption therefrom is not submitted with the letter of
transmittal, the amount of the transfer taxes will be billed directly to you.
ACCOUNTING TREATMENT
The registered notes will be recorded at the same carrying value as the
initial notes on the date of the exchange. Accordingly, we will recognize no
gain or loss for accounting purposes. The expenses of the exchange offer and the
unamortized expenses relating to the issuance of the initial notes will be
amortized over the term of the registered notes.
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DESCRIPTION OF THE REGISTERED NOTES
The initial notes were issued under an indenture, dated as of June 12,
1998, among us, our subsidiaries which are guarantors of the notes and American
Stock Transfer & Trust Company, as trustee. The registered notes will be issued
under the same indenture. We have summarized selected provisions of the
indenture and the notes below.
In this summary description of the notes, all references to "Engle
Homes," "we," "our," and "us" are to Engle Homes, Inc., excluding its
subsidiaries, unless the context clearly indicates otherwise. We have used in
this summary description capitalized terms that we have defined below under
"--Glossary."
GENERAL
The indenture provided for the initial issuance of up to $150 million
principal amount of registered notes of which $149,670,000 are currently
outstanding. The indenture also provides us the flexibility to issue additional
notes in the future, subject to the limitations described below under "--Certain
Covenants - Limitation on Debt," pursuant to which we issued the initial notes.
Any initial notes that remain outstanding after the completion of the exchange
offer, together with the currently outstanding registered notes and thee
registered notes issued in exchange for the initial notes will be treated as a
single class of debt securities under the indenture. The initial notes, the
currently outstanding registered notes, the registered notes to be issued in the
exchange offer and any additional notes issued under the indenture are
collectively referred to as the "notes" in this summary description of the
notes.
The notes will mature on February 1, 2008 and will bear interest at
9.25% per year.
We:
o will pay interest semi-annually on February 1 and August 1 of
each year, commencing August 1, 1999,
o will pay interest to the persons in whose names a note is
registered at the close of business on the January 15 and July
15 before date interest will be paid,
o will compute interest on the basis of a 360-day year
consisting of twelve 30-day months,
o will make payments on the notes at the offices of the trustee,
and
o may make payments by wire transfer for notes held in
book-entry form or by check mailed to the address of the
person entitled to the payment as it appears in the note
register.
The notes will be issued only in fully registered form without coupons,
in denominations of $1,000 and any integral multiple thereof. The notes are
exchangeable and transfers of the notes will be registered without charge, but
we may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection a transfer.
The notes are our general obligations and are not secured by any
collateral. The notes rank equally in right of payment with all our other
existing and future senior unsecured and unsubordinated debt, including our
credit facility, and senior to all our subordinated debt.
Holders of our secured debt and secured debt of our subsidiaries will
have claims to the assets constituting collateral for that debt. If we are
involved in any dissolution, liquidation or reorganization, our secured debt
holders would be paid before holders of the notes receive any amounts due under
the notes to the extent of the value of the assets securing that debt. If the
value of the collateral is not enough to pay off the secured debt, secured
creditors
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would be entitled to share claims with holders of notes with respect to any
other of our assets. Currently, neither us nor our subsidiaries have any secured
debt outstanding other than our warehouse lines of credit.
THE GUARANTEES
Our payment obligations under the notes are jointly and severally
guaranteed by our subsidiaries. The guarantees are the general obligation of
each subsidiary guarantor and are not secured by any collateral. The guarantees
rank equally in right of payment with each subsidiary guarantor's other existing
and future senior unsecured and unsubordinated debt, including the subsidiary
guarantors guarantees of our obligations under our credit facility, and senior
to all subordinated debt of the subsidiary guarantors.
Holders of secured debt of the subsidiary guarantors will have claims
to the assets constituting collateral for that debt. If any subsidiary guarantor
is involved in any dissolution, liquidation or reorganization, its secured debt
holders would be paid before holders of the notes receive any amounts due under
the guarantee from that subsidiary guarantor to the extent of the value of the
assets securing that debt.
Except as provided in "Certain Covenants" below, we are not restricted
from selling or otherwise disposing of any of our subsidiaries that guarantee
the notes.
The indenture provides that each of our subsidiaries that is a
Restricted Subsidiary (other than, in our discretion, any Restricted Subsidiary
the assets of which have a book value of not more than $1,000,000) will be
guarantee our obligations under the notes.
The indenture provides that if we or any of our subsidiaries sell all
or substantially all of the assets, or all of the capital stock, of any of our
other subsidiaries that guarantees the notes 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 the subsidiary guarantor (in
the event of a sale or other disposition of all of the capital stock of the
subsidiary 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 the
subsidiary guarantor) shall be released and discharged of its obligations to
guarantee the notes.
OPTIONAL REDEMPTION
On or after February 1, 2003, we may elect to redeem some or all of the
notes. We will provide the holders at least 30 but not more than 60 days' notice
of our intent to redeem.
If we elect to redeem the notes, we may do so at the following prices,
which are expressed in percentages of principal amount, if redeemed during the
twelve-month period beginning on February 1 of the year listed below:
YEAR PERCENTAGE
---- ----------
2003.................................... 104.625%
2004.................................... 103.083%
2005.................................... 101.542%
2006 and thereafter..................... 100.000%
We will also pay accrued interest to, but excluding, the date of
redemption. If a redemption date occurs on an interest payment date, the
interest will be payable to the holder of record as of the record date.
In addition, if we consummate one or more public offerings of our
common stock after June 8, 1998 and on or prior to February 1, 2001, we may, at
our option, redeem up to 33% of the original aggregate principal amount of the
notes with the net proceeds of such offerings at 109.250% 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 67% of the original aggregate principal amount of the
notes remains outstanding.
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If we do not redeem all the notes, the trustee will select the notes to
be redeemed either by lot, pro rata or by any other method as the trustee
considers fair and appropriate, as long as the method complies with applicable
legal and stock exchange requirements. On or after the redemption date, interest
will cease to accrue on the notes or portions thereof called for redemption.
CERTAIN COVENANTS
CHANGE OF CONTROL.
In the event of a Change of Control, each holder of notes may require
us to repurchase all or any part which is equal to $1,000 or a multiple of
$1,000 of that holder's notes at a purchase price equal to 101% of the principal
amount of the notes to be repurchased, plus accrued interest, on the 45th day
after the date of the Change of Control Notice (the "Change of Control
Repurchase Date").
Within 30 days after the occurrence of a Change of Control, we or, at
our request, the trustee, will deliver to all holders of record of the notes a
notice (the "Change of Control Notice") of the occurrence of the Change of
Control and of the repurchase right. We will 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 notes
must deliver written notice to us (or an agent designated by us for such
purposes) of the holder's exercise of such right, together with the notes with
respect to which the right is being exercised, duly endorsed for transfer. Such
written notice shall be irrevocable.
The right to require the repurchase of notes shall not continue after
we have been discharged from our obligations under the notes and the indenture
with respect to the 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 note to be repurchased must be accompanied by funds equal to the interest
payable on such succeeding interest payment date on the principal amount to be
repurchased (unless such note shall have been called for redemption, in which
case no such payment shall be required), and the interest on the principal
amount of the note being repurchased will be paid on such next succeeding
interest payment date to the registered holder of such note on the immediately
preceding record date. A note repurchased on an interest payment date need not
be accompanied by any payment, and the interest on the principal amount of the
note being repurchased will be paid on such interest payment date to the
registered holder of such note on the immediately preceding record date.
A "Change of Control" will be deemed to have occurred when:
o any person or group is or becomes the beneficial owner of
shares representing more than 50% of our voting stock;
o we
(A) consolidate with or merge into any other entity or
any other entity merges into us and our outstanding
common stock is changed or exchanged for other assets
or securities unless our stockholders immediately
bore the transaction own immediately following the
transaction more than 50% of the combined voting
power of the entity resulting from the transaction in
substantially the same proportion as their ownership
of our voting stock immediately before the
transaction, or
(B) sell, assign, convey, transfer, lease or otherwise
dispose of all or substantially all of our assets to
any person, or
o at any time during any consecutive two-year period,
individuals who at the beginning of such period constituted
our Board of Directors (together with any new directors whose
election by such Board of
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Directors or whose nomination for election by our stockholders
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 our Board of Directors then in office; or
o we are liquidated or dissolved or adopt a plan of liquidation.
In the case of the first two bulled points, a Change of Control will
not be deemed to have occurred if after consummation of the transaction Alec
Engelstein or Harry Engelstein or their respective estates, affiliates and
associates have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of our Board of Directors.
If any repurchase pursuant to the foregoing provisions constitutes a
tender offer as defined under the Exchange Act, we will comply with the
requirements of Rule l4e-1 and any other tender offer rules under the Exchange
Act which then may be applicable. We 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 notes. The Change of
Control purchase feature of the notes may in certain circumstances make more
difficult or discourage a takeover of us 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 us 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 our assets, and
therefore it may be unclear whether a Change of Control has occurred and whether
the notes are subject to a Change of Control Offer.
MAINTENANCE OF NET WORTH.
If our Net Worth at the end of any two fiscal quarters in a row (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 we must offer (a "Net
Worth Offer") to acquire equally from all holders of notes on the date (the "Net
Worth Repurchase Date") that is 45 days following the date of the Net Worth
Notice, 10% of the original outstanding principal amount of the notes (or if
less than 10% of the original aggregate principal amount of the notes issued are
then outstanding, all the 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"). We
may credit against the Net Worth Offer Amount the principal amount of notes
acquired by us prior to the Trigger Date through purchase, optional redemption
or exchange. We, 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. We will notify the trustee promptly after the occurrence of any of
the events specified in this provision and shall notify the trustee in writing
if our Net Worth is equal to or less than the Minimum Net Worth for any fiscal
quarter.
Within 30 days after the Trigger Date, we, or, at our request, 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 must deliver to us, 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 notes with respect to which
the offer is being accepted, duly endorsed for transfer to us. 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 note
to be repurchased must be accompanied by funds equal to the interest payable on
such succeeding interest payment date on the principal amount to be repurchased
(unless such note shall have been called for redemption, in which case no such
payment shall be required), and the interest on the principal
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amount of the note being repurchased will be paid on such next succeeding
interest payment date to the registered holder of such note on the immediately
preceding record date. A note repurchased on an interest payment date need not
be accompanied by any payment, and the interest on the principal amount of the
note being repurchased will be paid on such interest payment date to the
registered holder of such note on the immediately preceding record date.
If any repurchase pursuant to the foregoing provisions constitutes a
tender offer as defined under the Exchange Act, we will comply with the
requirements of Rule l4e-1 and any other tender offer rules under the Exchange
Act which then may be applicable.
LIMITATION ON DEBT.
We may not, and we will not allow any of our Restricted Subsidiaries
to, directly or indirectly, create, incur, assume, guarantee or otherwise become
liable for any debt, except the following:
o debt evidenced by the notes and the guarantees of the notes,
o debt incurred by us or any subsidiary 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, that is not in excess of
$140,000,000,
o debt incurred under a Warehouse Facility not in excess of the
value of the Mortgages pledged to secure debt thereunder,
o our debt to any subsidiary guarantor or of any our Restricted
Subsidiaries to us or to any subsidiary guarantor,
o debt which was outstanding on February 2, 1998,
o Non-Recourse Debt,
o debt in respect of performance, completion, guarantee, surety
and similar bonds or banker's acceptances provided by us or
any of our Restricted Subsidiaries in the ordinary course of
business,
o additional debt in an amount not to exceed $7,500,000 at any
time outstanding,
o debt referred to in the definition of Interest Rate Protection
Agreement,
o Purchase Money Obligations incurred in the ordinary course of
business in an amount not exceeding $5,000,000 at any time
outstanding, and
o Refinancing Debt.
In addition to the types of debt listed above, we and our Restricted
Subsidiaries may incur debt if, at the time such debt is so incurred and after
giving effect to the debt and the application of the proceeds of the debt, our
Coverage Ratio is not less than 2.0 to 1.0.
We will not, and we will not allow any of our Restricted Subsidiaries
to, directly or indirectly, incur any debt that is subordinated to any other of
our debt or the debt of any subsidiary guarantor unless that debt is also
subordinated to the notes or the guarantee of the subsidiary guarantor in the
same manner.
LIMITATION ON RESTRICTED PAYMENTS.
We may not, and we will not allow any of our Restricted Subsidiaries
to, make any Restricted Payment, if, after giving effect to the proposed
Restricted Payment:
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o an event of default has occurred and is continuing,
o we would not be able to incur $1.00 of additional debt under
Coverage Ratio test set forth under the caption "--Limitation
on Debt" above, or
o the aggregate amount of all Restricted Payments made by us and
our Restricted Subsidiaries (the amount of any Restricted
Payment not made in cash to be determined in good faith by our
board of directors) from and after February 2, 1998 exceeds
the sum of:
(1) 50% of our aggregate Consolidated Net Income accrued
during the period beginning on February 1, 1998 and
ending on the last day of the first full month ending
immediately prior to the date of the proposed
Restricted Payment (or, if Consolidated Net Income is
a deficit, then minus 100% of such deficit), plus
(2) the aggregate net proceeds (the amount of such
proceeds, if other than cash, to be determined in
good faith by our board of directors) received by us
from the issuance or sale (other than to a
Subsidiary) of our capital stock (other than
Redeemable Stock), including the principal amount of
any convertible or exchangeable notes issued after
February 2, 1998 or other convertible or exchangeable
securities issued after February 2, 1998, to the
extent converted or exchanged into capital stock from
and after February 2, 1998, and options, warrants and
rights to purchase its capital stock (other than
Redeemable Stock); plus
(3) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made
after February 2, 1998 (excluding any Investment
described in fourth bullet point 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 us or the Restricted Subsidiary in
respect of such disposition of such Investment, plus
(4) $5,000,000.
So long as no default or event of default has occurred and is
continuing, these provisions will not prevent:
o 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,
o the redemption, repurchase or other acquisition or retirement
of any shares of any class of our capital stock or the capital
stock of any Subsidiary in exchange for, or out of the net
cash proceeds of, a substantially concurrent
(A) capital contribution to the us from any person other
than a Subsidiary or
(B) issue and sale of other shares of our capital stock
(other than Redeemable Stock) to any person other
than a Subsidiary; 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 (2) of
the third bullet point of the preceding paragraph,
o 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
(A) capital contribution to us from any person other than
a Subsidiary or
(B) issue and sale of
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(x) our capital stock (other than Redeemable
Stock) to any person other than to a
Subsidiary; 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 (2)
of the third bullet point of the preceding
paragraph; or
(y) our debt issued to any person other than a
Subsidiary, so long as the debt (1) has no
stated maturity earlier than February 1,
2008, (2) has a Weighted Average Life to
Maturity equal to or greater than the
remaining Weighted Average Life to Maturity
of the notes and (3) is subordinated to the
notes in the same manner and at least to the
same extent as the subordinated debt
purchased, exchanged, redeemed, acquired or
retired,
o 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,"
o the repurchase or redemption of shares of capital stock from
any of officer, director or employee of us or our Restricted
Subsidiaries whose employment has been terminated or who has
died or become disabled in an aggregate amount not to exceed
$250,000 per annum; and
o the making of Restricted Payments in an aggregate amount not
to exceed $5,000,000.
Amounts paid pursuant to the first, fifth and sixth bullet points above
shall reduce amounts available for future Restricted Payments.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.
We will not, and we will not allow any of our Restricted Subsidiaries
to, create, assume or otherwise cause or suffer to exist or to become effective
any consensual encumbrance or restriction on the ability of any of our
Restricted Subsidiaries to
o pay dividends or make any other distributions on its capital
stock to us or any of our Restricted Subsidiaries,
o make payments in respect of any debt owed to us or any of our
Restricted Subsidiaries, or
o make loans or advances to us or any of our Restricted
Subsidiaries.
These provisions will not prohibit the following restrictions:
o 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 contained in the debt being refinanced);
o consensual encumbrances or restrictions binding upon any
person at the time such person becomes a Subsidiary if the
encumbrance or restriction is not created, incurred or assumed
in contemplation of such person becoming a Subsidiary and does
not extend to any of our other property or property of another
of Subsidiaries
o 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;
o any encumbrance or restriction consisting of customary
non-assignment provisions in leases to the extent such
provisions restrict the transfer of the leases,
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o any encumbrance or restriction pursuant to an agreement in
effect on February 2, 1998, or
o any restrictions with respect to a Subsidiary 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 the Subsidiary.
LIMITATION ON LIENS.
We will not, and we will not allow any of our Restricted Subsidiaries
to, create, incur, assume or permit to exist any Lien upon or with respect to
any of our assets or any Subsidiary, whether now owned or hereafter acquired, or
on any income or profits therefrom. This restriction does not apply to Permitted
Liens.
TRANSACTIONS WITH AFFILIATES.
We will not, and we will not allow any of our Restricted Subsidiaries
to, enter into any transactions with any of our Affiliates unless
o the transactions are between or among us and our Restricted
Subsidiaries,
o the transactions are in the ordinary course of business and
consistent with past practice, or
o the terms of the transactions are fair and reasonable to us or
the Restricted Subsidiary, and are at least as favorable as
the terms which we could obtain 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 February 2, 1998 with one of our Affiliates which involves in
excess of $1,000,000 and is not permitted under the first bullet point above,
all of the disinterested members of our Board of Directors shall by resolution
determine that such transaction or series of transactions meets the criteria set
forth in the third bullet point above. In the event of any transaction or series
of transactions occurring subsequent to February 2, 1998 with one of our
Affiliates which involves in excess of $10,000,000 and is not permitted under
the first bullet point above, we must deliver to the trustee an opinion of an
Independent Financial Advisor to the effect that the transaction is fair to us
or the relevant Restricted Subsidiary from a financial point of view.
These provisions will not apply to the following:
o any Restricted Payment which is permitted by the "Limitation
on Restricted Payments" covenant or
o the payment of compensation to our directors who are not our
employees and wages and other compensation to our officers.
LIMITATION ON ASSET SALES.
We will not, and we will not allow any of our Restricted Subsidiaries
to, consummate an Asset Sale, unless:
o we or the Restricted Subsidiary receive consideration at the
time of the Asset Sale at least equal to the fair market value
(as determined in good faith by our board of directors or the
board of directors of the Restricted Subsidiary) of the assets
disposed of, and
o the consideration for such Asset Sale consists of at least 85%
cash.
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For purposes of the above provision, the following shall be considered
"cash":
o the amount of liabilities assumed by the transferee,
o any notes or other obligations received by us or the
Restricted Subsidiary and immediately converted into cash, or
o 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 the Restricted
Subsidiary subsequent to the sale or other disposition.
Within 12 months from the date that any Asset Sale is consummated, the
Net Proceeds of the Asset Sale will be reinvested in Additional Assets or
applied to the redemption or repurchase of our debt which ranks equally with the
notes or debt of a Restricted Subsidiary which is not subordinated to other debt
of the 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, we or the Restricted Subsidiary 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 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 us 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 notes with respect to which the offer is being
accepted, duly endorsed for transfer to us. 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 note shall have been called for redemption, in which
case no such payment shall be required), and the interest on the principal
amount of the note being repurchased will be paid on such next succeeding
interest payment date to the registered holder of such note on the immediately
preceding record date. A note repurchased on an interest payment date need not
be accompanied by any payment, and the interest on the principal amount of the
note being repurchased will be paid on such interest payment date to the
registered holder of such note on the immediately preceding record date.
If any repurchase pursuant to the foregoing provisions constitutes a
tender offer as defined under the Exchange Act, we 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 us and may be used by us for any purpose not
inconsistent with the indenture.
EVENTS OF DEFAULT
Each of the following is an "events of default" with respect to the
notes:
o failure to pay the principal of any note when such principal
becomes due and payable at maturity, upon acceleration or
otherwise;
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o failure to pay interest on any note when due, and such failure
continues for a 30-day period;
o a default in the observance or performance of any other
covenant or agreement of Engle Homes or the Guarantors in the
note, the guarantee or the indenture that continues for the
period and after the notice specified below;
o an event of default shall have occurred under one or more
evidences of our debt or debt of any of our Restricted
Subsidiaries (other than Non-Recourse Debt) with an
outstanding aggregate principal amount of $5,000,000 or more,
and the event of default (1) consists of the failure by Engle
Homes 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;
o any final judgment or judgments for payment of money in excess
of $5,000,000 in the aggregate shall be rendered against us or
any of our Restricted Subsidiaries and shall remain unstayed,
unsatisfied or undischarged for the period and after the
notice specified below;
o certain events of bankruptcy, insolvency or reorganization of
Engle Homes or Material Subsidiaries; and
o 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 subsidiary
guarantor denies its liability under its guarantee (other than
by reason of release of a subsidiary guarantor from its
guarantee in accordance with the terms of the indenture and
the guarantee).
We are required to deliver to the trustee within 120 days after the end
of each fiscal year, an officer's certificate stating whether or not the
signatories know of any default by us under the indenture and the notes and, if
any default exists, describing such default.
A default under the third or fifth bullet point above is not an event
of default until the trustee or the holders of at least 25% in principal amount
of the notes then outstanding notify us of the default and we do not cure the
default within 60 days.
The notice must:
o specify the default,
o demand that the default be remedied, and
o state that the notice is a "Notice of Default."
If the holders of 25% in principal amount of 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 Engle Homes)
shall have occurred and be continuing, the trustee, by notice to us, or the
holders of 25% of the principal amount of the notes then outstanding, by notice
to us and the trustee, may declare the principal of the notes, plus accrued
interest, to be immediately due and payable. In case an event of default
resulting from certain events of bankruptcy, insolvency or reorganization of
Engle Homes shall occur, such amounts shall be due and payable without any
declaration or any act on the part of the trustee or the holders of the notes.
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 notes then
outstanding upon conditions provided in the indenture. Except to enforce the
right to receive payment of principal or interest when due, no holder of a note
may institute any proceeding with respect to the indenture or for any remedy
thereunder unless such holder has previously given to the trustee written notice
of a continuing event of default and unless the holders of 25% of the principal
amount of
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the notes then outstanding have requested the trustee to institute proceedings
in respect of such event of default and have offered the trustee reasonable
indemnity against loss, liability and expense to be thereby incurred, the
trustee has failed so to act for 60 days after receipt of the same and during
such 60-day period the holders of a majority of the principal amount of the
notes 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 notes then outstanding will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the trustee or exercising any trust or power conferred on the trustee. The
trustee, however, may refuse to follow any direction that conflicts with law or
the indenture, that is unduly prejudicial to the rights of any holder of a note
or that would involve the trustee in personal liability and the trustee may take
any other action deemed proper by the trustee which is not inconsistent with
such direction.
MERGERS AND CONSOLIDATIONS
Neither we nor any subsidiary 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 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
our Restricted Subsidiaries to do any of the foregoing (in each case other than
with Engle Homes or another Wholly Owned Restricted Subsidiary) unless:
o the Person formed by or surviving such consolidation or merger
(if other than Engle Homes or the subsidiary 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 Engle Homes or such Guarantor, as the case may be, under
the notes or such Guarantor's Guarantee, as the case may be,
and the indenture,
o immediately after giving effect to such transaction, no
default or event of default has occurred and is continuing,
o 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 Engle Homes or the
Successor (in the case of a transaction involving, Engle
Homes), as the case may be, would be at least equal to the
Consolidated Tangible Net Worth of Engle Homes immediately
prior to such transaction and
o in the case of a transaction involving Engle Homes,
immediately after giving effect to such transaction and the
use of any net proceeds therefrom, on a pro forma basis, the
Coverage Ratio of Engle Homes or the Successor (in the case of
a transaction involving Engle Homes), as the case may be,
would be such that Engle Homes or the Successor (in the case
of a transaction involving Engle Homes), 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 subsidiary guarantor with or into another person,
or the sale, lease, conveyance or other disposition of all or substantially all
of the assets of such subsidiary guarantor, that results in such subsidiary
guarantor being released from its guarantee as provided under "The Guarantees"
above.
DEFEASANCE
Under the terms of the indenture and the notes, if we irrevocably
deposit 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
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and interest on the notes on the dates such payments are due in accordance with
the terms of the notes, we, at our option,
o will be discharged from any and all obligations in respect of
the notes (except in each case for certain obligations to
register the transfer or exchange of notes, replace stolen,
lost or mutilated notes, maintain paying agencies and hold
moneys for payment in trust) or
o 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."
To exercise either option above, we are required to deliver to the
trustee an opinion of counsel that the holders of the 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 we exercise our option under the second bullet point above
and the 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 notes at the time of their stated maturity but may not be
sufficient to pay amounts due on the notes at the time of the acceleration
resulting from such event of default. However, we shall remain liable for such
payments.
REPORTS
As long as any of the notes are outstanding, we will deliver to the
trustee and the trustee will mail to each holder of notes 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 us
and the subsidiary guarantors, if any, which we and the subsidiary guarantors
may be required to file with the Commission pursuant to Section 13 or 15(d) of
the Exchange Act. The indenture provides that, notwithstanding that neither us
nor any of the subsidiary guarantors may be required to remain subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, we will
continue to file with the Commission and provide the trustee and holders of the
notes with such annual and quarterly reports and such information, documents and
other reports with respect to us as are required under Sections 13 and 15(d) of
the Exchange Act. If our filing of documents with the Commission as
aforementioned in this paragraph is not permitted under the Exchange Act, we
shall promptly upon written notice supply copies of such documents to any
prospective holder of notes. In addition, the indenture requires that for so
long as any of the notes remain outstanding we will make available to any
prospective purchaser of the notes or beneficial owner of the notes in
connection with any sale thereof the information required by Rule 144A(d)(4)
under the Securities Act, until such time as either we have consummated the
exchange offer or the holders of notes have disposed of their notes pursuant to
an effective registration statement filed by us.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the indenture or the notes may be
amended or supplemented with the consent (which may include consents obtained in
connection with a tender offer or exchange offer for notes) of the holders of at
least a majority in principal amount of 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 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 notes) of the holders of a majority in principal amount of
the notes then outstanding.
Without the consent of any holder of notes, we and the trustee may
amend the indenture or the notes or waive any provision of the indenture to:
o cure any ambiguity, defect or inconsistency,
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o comply with the "Mergers and Consolidations" section set forth
in the indenture,
o provide for uncertificated notes in addition to certificated
notes,
o make any change that does not adversely affect the legal
rights under the indenture of any holder of notes,
o comply with the qualification of the indenture under the Trust
Indenture Act, or
o reflect a subsidiary guarantor ceasing to be liable on the
guarantees because it is no longer a Subsidiary of Engle
Homes.
Without the consent of each holder of notes affected, we may not
o reduce the amount of notes whose holders must consent to an
amendment, supplement or waiver,
o reduce the rate of or change the time for payment of interest,
including default interest, on any note,
o reduce the principal of or change the fixed maturity of any
note or alter the provisions with respect to redemption under
the "Optional Redemption" section set forth in the indenture,
o make any notes payable in money other than that stated in the
note,
o make any change in certain other provisions set forth in the
indenture,
o adversely modify the ranking or priority of the notes or any
guarantee,
o release any subsidiary guarantors from any of its obligations
under its guarantee or the indenture otherwise than in
accordance with the terms of the indenture, or
o waive a continuing default or event of default in the payment
of principal of or interest on the notes.
NO PERSONAL LIABILITY OF SHAREHOLDERS, OFFICERS, DIRECTORS OR EMPLOYEES
The indenture provides that no recourse for the payment of the
principal of, premium, if any, or interest on any of the notes, or for any claim
based thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of Engle Homes or any subsidiary guarantor in
the indenture or in any of the notes or because of the creation of any debt
represented thereby, shall be had against any shareholder, officer, director,
employee or controlling person of Engle Homes, any subsidiary guarantor or any
successor Person thereof. Each Holder, by accepting such 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 Engle Homes, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest (as defined
in the indenture), it must eliminate such conflict or resign.
The Holders of a majority in principal amount of the then outstanding
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
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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 notes and the guarantees will be governed by the
internal laws of the State of New York.
GLOSSARY
"ADDITIONAL ASSETS" means assets used or usable by us or any of our
Restricted Subsidiaries in the operation of our existing lines of business.
"AFFILIATE" of any Person means
(1) any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with
such Person and
(2) 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 February 2, 1998, 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.
The following shall not constitute an "Asset Sale":
(1) a transaction or series of related transactions that results
in a Change of Control,
(2) sales, leases, conveyances or other dispositions of real
estate related to the homebuilding business of Engle Homes or
its Subsidiaries, and
(3) transactions between us and any subsidiary guarantor, or among
our subsidiary guarantors.
"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 (1) extending the maturity of any Debt incurred thereunder or
contemplated thereby, (2) adding or deleting borrowers or guarantors thereunder;
provided that such borrowers and issuers include one or more of Engle Homes and
its Subsidiaries and their respective successors and assigns, (3)
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increasing the amount of Debt Incurred thereunder or available to be borrowed
thereunder, or (4) otherwise altering the terms and conditions thereof in a
manner not prohibited by the terms of the indenture.
"CONSOLIDATED INTEREST EXPENSE" of Engle Homes 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 Engle Homes
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 (1) the SUM of (a) cash dividends paid on any
Preferred Stock of Engle Homes PLUS (b) 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 our 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 (2) 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 Engle Homes, expressed
as a decimal.
"CONSOLIDATED INTEREST INCURRED" of Engle Homes means, for any period,
(1) the aggregate amount of interest which, in accordance with
generally accepted accounting principles, would be included on
an income statement for Engle Homes 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 our mortgage banking operations, PLUS or
MINUS, without duplication,
(2) the difference between capitalized interest for such period
and the interest component of cost of goods sold for such
period, PLUS
(3) the PRODUCT of
(a) the SUM of
(x) cash dividends paid on any Preferred Stock
of Engle Homes PLUS
(y) 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 our Board of
Directors in good faith) of any other
non-cash dividends, in each case, paid on
any Preferred Stock of any Subsidiary of
Engle Homes (other than a Wholly-Owned
Restricted Subsidiary), TIMES
(b) 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 Engle Homes, expressed as a decimal.
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"CONSOLIDATED NET INCOME" of Engle Homes, for any period, means the net
income (loss) of Engle Homes and its Restricted Subsidiaries for such period,
determined on a consolidated basis, in accordance with generally accepted
accounting principles; provided that, without duplication,
(1) the net income of any Person, other than a Restricted
Subsidiary which is consolidated with Engle Homes, in which
any Person other than Engle Homes 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 Engle Homes or a Restricted Subsidiary during
such period,
(2) 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,
(3) the net income of any Subsidiary of Engle Homes shall be
excluded to the extent such Subsidiary is prohibited, directly
or indirectly, from distributing such net income or any
portion thereof to Engle Homes or a Restricted Subsidiary,
(4) all extraordinary gains and losses (after taxes) that would be
included on an income statement for such period shall be
excluded and
(5) 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 Engle Homes or any of its Restricted
Subsidiaries in cash during such period.
"CONSOLIDATED NON-CASH CHARGES" of Engle Homes 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 Engle Homes and its
Restricted Subsidiaries on a consolidated basis for such period, as determined
in accordance with generally accepted accounting principles.
Consolidated Non-cash Charges shall not include the following:
(1) any charges that are not included for the purpose of
determining Consolidated Net Income,
(2) any charges that are included for the purpose of determining
Consolidated Interest Expense or Consolidated Tax Expense, and
(3) any charges representing capitalized selling, general and
administrative expenses that are expensed during such period
as cost of goods sold.
"CONSOLIDATED TANGIBLE ASSETS" of Engle Homes as of any date means the
total amount of assets of Engle Homes and its Restricted Subsidiaries (less
applicable reserves and less the assets securing the payment of Non-Recourse
Debt of Engle Homes 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 the following as
reflected on the consolidated balance sheet of Engle Homes and its Restricted
Subsidiaries:
(1) 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 Engle Homes and its Restricted Subsidiaries
prepared in accordance with generally accepted accounting
principles, and
(2) appropriate adjustments on account of minority interests of
other Persons holding equity investments in Restricted
Subsidiaries.
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"CONSOLIDATED TANGIBLE NET WORTH" of Engle Homes means our 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 Engle Homes and its Restricted
Subsidiaries prepared in accordance with generally accepted accounting
principles.
"CONSOLIDATED TAX EXPENSE" of Engle Homes means, for any period, the
aggregate of the tax expense of Engle Homes and its Restricted Subsidiaries for
such period, determined on a consolidated basis, in accordance with generally
accepted accounting principles.
"COVERAGE RATIO" of Engle Homes means the ratio of our EBITDA to its
Consolidated Interest Incurred for the four fiscal quarters ending immediately
prior to the date of determination. Notwithstanding clause (2) of the definition
of Consolidated Net Income, if the Debt which is being Incurred is Incurred in
connection with an acquisition by Engle Homes 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 (a) of
the Person becoming a Restricted Subsidiary of Engle Homes or (b) 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 Engle Homes or a
Restricted Subsidiary of Engle Homes.
"DEBT" means the following as to any Person:
(1) any indebtedness of such Person for borrowed money,
(2) all indebtedness of such Person evidenced by bonds,
debentures, notes, letters of credit, drafts or similar
instruments,
(3) 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,
(4) 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,
(5) Redeemable Stock of such Person and Preferred Stock of any
Subsidiary of such Person,
(6) all obligations of such Person with respect to Interest Rate
Protection Agreements, and
(7) all Debt of others guaranteed by such Person.
"Debt" of Engle Homes shall not include the amount reflected on a
consolidated balance sheet of Engle Homes with respect to options to acquire
real property which was purchased by Engle Homes and sold to a third party
within 360 days of such purchase for consideration at least equal to the amount
paid by Engle Homes for such property less an amount equal to the value of such
option.
"EBITDA" for Engle Homes, for any period, means, without duplication,
(1) the Consolidated Net Income of Engle Homes PLUS,
(2) the SUM of the following to the extent deducted in calculating
Consolidated Net Income:
(a) Consolidated Tax Expense,
(b) Consolidated Interest Expense, and
(c) Consolidated Non-cash Charges.
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"EXISTING DEBT" means all of the Debt of Engle Homes and its Restricted
Subsidiaries that was outstanding on February 2, 1998.
"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
(1) any Unrestricted Subsidiary and
(2) any person which is not a Guarantor in which Engle Homes 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 Engle Homes that, in
each case, was formed for and is engaged in homebuilding
operations.
"INDEPENDENT FINANCIAL ADVISOR" means a firm
(1) which does not, and whose directors, officers and employees or
Affiliates do not, have a direct or indirect financial
interest in Engle Homes and
(2) which, in the judgment of our Board of Directors, 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 Engle Homes or any of its Restricted
Subsidiaries in connection with Debt Incurred by Engle Homes 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 Engle Homes and its Subsidiaries in the ordinary
course of business in accordance with normal trade practices of Engle Homes or
such Subsidiary, as the case may be.
"ISSUE DATE" means the original date of issuance of the 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 Engle Homes
which accounted for 10 percent or more of our Consolidated Tangible Assets or
EBITDA for the fiscal year ending immediately prior to any Default or Event of
Default.
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"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
(1) cash (in U.S. dollars or freely convertible into U.S. dollars)
received by Engle Homes 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 Engle Homes 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
Engle Homes 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
(2) all noncash consideration received by Engle Homes or any of
its Restricted Subsidiaries from such Asset Sale upon the
liquidation or conversion of such consideration into cash.
"NET WORTH" of Engle Homes means, at any date, the aggregate of
capital, surplus and retained earnings of Engle Homes and its Restricted
Subsidiaries as would be shown on a consolidated balance sheet of Engle Homes
prepared in accordance with generally accepted accounting principles, adjusted
to exclude (to the extent included) investments by Engle Homes 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
(1) 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,
(2) 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,
(3) 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 (2) above; provided that the aggregate amount of
all certificates of deposit issued to
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Engle Homes at any one time by any one such bank, trust
company or savings and loan association will not exceed
$100,000,
(4) 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,
(5) repurchase agreements or money-market accounts which are fully
secured by direct obligations of the United States or any
agency thereof and
(6) in the case of Engle Homes and its Subsidiaries,
(a) any receivables or loans taken by Engle Homes or a
Subsidiary in connection with the sale of any asset
otherwise permitted by the indenture,
(b) Investments in any Guarantor,
(c) Investments in the notes or Debt PARI PASSU with the
notes,
(d) Investments in evidences of Debt, securities or other
property received from another Person by Engle Homes
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 Engle Homes or any of
its Restricted Subsidiaries, or for other liabilities
or obligations of such other Person to Engle Homes or
any of its Restricted Subsidiaries that were created,
in accordance with the terms of the indenture,
(e) Investments in Interest Rate Protection Agreements
which constitute Permitted Debt,
(f) Investments in any Homebuilding Joint Ventures not in
excess of $20 million in the aggregate for all
Homebuilding Joint Ventures, and
(g) Investments in an aggregate amount outstanding not
greater than $5,000,000.
"PERMITTED LIENS" with respect to Engle Homes and its Restricted
Subsidiaries means
(1) Liens on assets of Engle Homes or any Restricted Subsidiary of
Engle Homes 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
Engle Homes and Restricted Subsidiaries and Debt outstanding
under the Warehouse Facility) may not exceed 40 percent of our
Consolidated Tangible Assets;
(2) 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 Engle Homes or any of its Restricted
Subsidiaries;
(3) Liens securing Non-Recourse Debt of Engle Homes or any
Restricted Subsidiary of Engle Homes, 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;
(4) Liens securing Debt of a Person existing at the time that such
Person is merged into or consolidated with Engle Homes 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 Engle Homes or any
Restricted Subsidiary, other than the surviving Person and its
Subsidiaries;
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(5) Liens on assets or property acquired by Engle Homes 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);
(6) Liens in respect of Interest Rate Protection Agreements which
constitute Permitted Debt;
(7) 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;
(8) 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;
(9) 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;
(10) 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;
(11) attachment or judgment Liens not giving rise to a Default or
Event of Default;
(12) easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially interfering with the
ordinary conduct of the business of Engle Homes or any of its
Subsidiaries;
(13) leases or subleases granted to others not materially
interfering with the ordinary conduct of the business of Engle
Homes or any of its Restricted Subsidiaries;
(14) 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 Engle Homes or the assets of any
of our other Subsidiaries;
(15) Liens securing Purchase Money Obligations (including
capitalized lease obligations);
(16) Liens existing on February 2, 1998;
(17) any contract to sell an asset provided such sale is otherwise
permitted under the indenture; and
(18) Liens on property or assets of any Restricted Subsidiary
securing Debt of such Restricted Subsidiary owing to Engle
Homes or one or more Restricted Subsidiaries of Engle Homes.
"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 outstanding on or issued
after February 2, 1998, and including, without limitation, all classes and
series of preferred or preference stock.
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"PURCHASE MONEY OBLIGATIONS" means Debt of any Person secured by Liens
(1) on property purchased, acquired, or constructed by such Person
or its Subsidiaries after February 2, 1998 and used in the
ordinary course of business by such Person and
(2) securing the payment of all or any part of the purchase price
or construction cost of such assets and limited to the
property so acquired and improvements thereof; provided that
such Debt is incurred no later than 90 days after the
acquisition of such property or completion of such
construction or improvements.
"REDEEMABLE STOCK" means, with respect to any Person, any class or
series of capital stock of such Person that is redeemable at the option of the
holder (except pursuant to a change in control provision that does not (1) cause
such capital stock to become redeemable in circumstances which would not
constitute a Change of Control and (2) require Engle Homes 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 notes.
"REFINANCING DEBT" means Debt that refunds, refinances or extends any
notes, Existing notes, Existing Debt (other than Existing Debt to be repaid with
the net proceeds of the offering of the notes) or other Debt incurred by Engle
Homes or its Restricted Subsidiaries permitted under the terms of the indenture,
but only to the extent that
(1) the Refinancing Debt is subordinated to the notes to the same
extent as the Debt being refunded, refinanced or extended, if
at all,
(2) 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 notes,
(3) the portion, if any, of the Refinancing Debt that is scheduled
to mature on or prior to the maturity date of the notes has a
Weighted Average Life to Maturity at the time such Refinancing
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 notes, and
(4) 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 Engle Homes or any
Restricted Subsidiary
(1) the declaration or payment of any dividend or other
distribution on any shares of such Person's capital stock,
except
(a) dividends or distributions in additional shares of
capital stock of Engle Homes other than Redeemable
Stock or
(b) the declaration or payment of any dividend or other
distribution by a Restricted Subsidiary to Engle
Homes or another Restricted Subsidiary,
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(2) 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 Engle Homes or a Restricted
Subsidiary,
(3) any Investment (other than a Permitted Investment) in any
Person, or
(4) any principal payment, redemption, repurchase, defeasance or
other acquisition or retirement, prior to scheduled principal
payment or scheduled maturity, of Debt of Engle Homes or its
Subsidiaries which is subordinated in right of payment to the
notes (other than Debt held by Engle Homes or a Restricted
Subsidiary).
"RESTRICTED SUBSIDIARY" means any Subsidiary which is not an
Unrestricted Subsidiary.
"SUBSIDIARY" means, with respect to any Person,
(1) 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
(2) 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 Engle Homes
(other than a Guarantor) so designated by a resolution adopted by the Board of
Directors of Engle Homes.
Only Subsidiaries which meet the following conditions may be designated
an Unrestricted Subsidiary:
(1) neither Engle Homes nor any of its other Subsidiaries (other
than Unrestricted Subsidiaries) may
(a) provide any direct or indirect credit support for any
Debt of such Subsidiary (including any undertaking,
agreement or instrument evidencing such Debt) or
(b) be directly or indirectly liable for any Debt of such
Subsidiary, and
(2) 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 Engle Homes or any other Subsidiary of
Engle Homes (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 Engle Homes may designate an Unrestricted
Subsidiary to be a Restricted Subsidiary under the following conditions:
(1) any such redesignation will be deemed to be an Incurrence by
Engle Homes 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,
(2) 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
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(3) 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.
The Board of Directors of Engle Homes may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary under the following conditions:
(1) all previous Investments by Engle Homes 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,
(2) Engle Homes 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
(3) no Default or Event of Default shall have occurred or be
continuing. Any such designation or redesignation by the Board
of Directors of Engle Homes 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 Engle Homes 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 Engle Homes 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 (1) the then outstanding principal amount of such Debt or portion
thereof, if applicable, into (2) 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
Engle Homes of which 100% of the outstanding capital stock is owned by one or
more Wholly Owned Restricted Subsidiaries of Engle Homes or by Engle Homes and
one or more Wholly Owned Restricted Subsidiaries of Engle Homes. For purposes of
this definition, any directors' qualifying shares shall be disregarded in
determining the ownership of a Subsidiary.
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BOOK-ENTRY; DELIVERY AND FORM
So long as the Depositary or its nominee is the registered owner of a
global note, the Depositary or its nominee, as the case may be, will be the sole
holder of the notes represented thereby for all purposes under the indenture.
Except as otherwise provided in this section, the beneficial owners of the
global notes representing the notes will not be entitled to receive physical
delivery of certificated notes and will not be considered the holders thereof
for any purpose under the indenture, and no global note representing the
book-entry notes shall be exchangeable or transferable. Accordingly, each
beneficial owner must rely on the procedures of the Depositary and, if such
beneficial owner is not a Participant, then such beneficial owner must rely on
the procedures of the Participant through which such beneficial owner owns its
interest in order to exercise any rights of a holder under such global note or
the indenture. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in certificated form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a global note representing the notes.
The global notes representing the notes will be exchangeable for
certificated notes of like tenor and terms and of differing authorized
denominations aggregating a like principal amount, only if
(1) the Depositary notifies us that it is unwilling or unable to
continue as Depositary for the global notes,
(2) the Depositary ceases to be a clearing agency registered under
the Securities Exchange Act,
(3) we in our sole discretion determines that the global notes
shall be exchangeable for certificated notes, or
(4) there shall have occurred and be continuing an event of
default under the indenture with respect to the notes.
Upon any such exchange, the certificated notes shall be registered in
the names of the beneficial owners of the global notes representing the notes,
which names shall be provided by the Depositary's relevant Participants (as
identified by the Depositary) to the Trustee.
The following is based on information furnished by the Depositary:
The Depositary will act as the securities depositary for the
notes. The notes will be issued as fully registered securities
registered in the name of Cede & Co. (the Depositary's partnership
nominee). Fully registered global notes will be issued for the notes,
in the aggregate principal amount of such issue, and will be deposited
with the Depositary.
The Depositary is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. The Depositary holds
securities that its participants ("Participants") deposit with the
Depositary. The Depositary also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges,
in deposited securities through electronic computerized book-entry
changes to Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants of
the Depositary ("Direct Participants") include securities brokers and
dealers (including the Initial Purchasers), banks, trust companies,
clearing corporations and certain other organizations. The Depositary
is owned by a number of its Direct Participants, including the Initial
Purchasers and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers,
Inc. Access to the Depositary's system is also available to others such
as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct
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Participant, either directly or indirectly ("Indirect Participants").
The rules applicable to the Depositary and its Participants are on file
with the SEC.
Purchases of notes under the Depositary's system must be made
by or through Direct Participants, which will receive a credit for such
notes on the Depositary's record. The ownership interest of each actual
purchaser of each Note represented by a global note ("Beneficial
Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchase, but Beneficial
Owners are expected to receive written confirmations providing details
of the transaction, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which such Beneficial
Owner entered into the transaction. Transfers of ownership interests in
the global notes representing the notes are to be accomplished by
entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners of the global notes representing
the notes will not receive certificated notes representing their
ownership interests therein, except in the event that use of the
book-entry system for such notes is discontinued.
To facilitate subsequent transfers, all global notes
representing the notes which are deposited with, or on behalf of, the
Depositary are registered in the name of the Depositary's nominee, Cede
& Co. The deposit of global notes with, or on behalf of, the Depositary
and their registration in the name of Cede & Co. will effect no change
in beneficial ownership. The Depositary has no knowledge of the actual
Beneficial Owners of the global notes representing the notes; the
Depositary's records reflect only the identity of the Direct
Participants to whose accounts such notes are credited, which may or
may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by the
Depositary to Direct Participants, by Direct Participants to Indirect
Participants, and by Direct and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to
time.
Neither the Depositary nor Cede & Co. will consent or vote with
respect to the global notes representing the notes. Under its usual
procedure, the Depositary mails an Omnibus Proxy to Engle Homes as soon
as possible after the applicable record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts the notes are credited on the applicable record date
(identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and/or interest, if any, payments
on the global notes representing the notes will be made to the
Depositary. The Depositary's practice is to credit Direct Participants'
accounts on the applicable payment date in accordance with their
respective holdings shown on the Depositary's records unless the
Depositary has reason to believe that it will not receive payment on
such date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form
or registered in "street name," and will be the responsibility of such
Participant and not of the Depositary, the Trustee or Engle Homes,
subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of principal, premium, if any, and/or
interest, if any, to the Depositary is the responsibility of Engle
Homes or the Trustee, disbursement of such payments to Direct
Participants shall be the responsibility of the Depositary, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
The Depositary may discontinue providing its services as
securities depositary with respect to the notes at any time by giving
reasonable notice to Engle Homes or the Trustee. Under such
circumstances, in the event that a successor securities depositary is
not obtained, certificated notes are required to be printed and
delivered.
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We may decide to discontinue use of the system of book-entry transfers
through the Depositary (or a successor securities depositary). In that event,
certificated notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that we believe to be
reliable, but we take no responsibility for its accuracy.
The Depositary has further advised us that management of the Depositary
is aware that some computer applications, systems, and the like for processing
data ("Systems") that are dependent upon calendar dates, including dates before,
on, and after January 1, 2000, may encounter "Year 2000 problems." The
Depositary has informed its Participants and other members of the financial
community (the "Industry") that it has developed and is implementing a program
so that its Systems, as the same relate to the timely payment of distributions
(including principal and income payments) to securityholders, book-entry
deliveries, and settlement of trades within the Depositary ("Depositary
Services"), continue to function appropriately. This program includes a
technical assessment and a remediation plan, each of which is complete.
Additionally, the Depositary's plan includes a testing phase, which is expected
to be completed within appropriate time frames.
However, the Depositary's ability to perform properly its service is
also dependent upon other parties, including but not limited to issuers and
their agents, as well as the Depositary's Direct Participants and Indirect
Participants and third party vendors from whom the Depositary licenses software
and hardware, and third party vendors on whom the Depositary relies for
information or the provision of services, including telecommunication and
electrical utility service providers, among others. The Depositary has informed
the Industry that it is contacting (and will continue to contact) third party
vendors from whom the Depositary acquires services to: (1) impress upon them the
importance of such services being Year 2000 compliance; and (2) determine the
extent of their efforts for Year 2000 remediation (and, as appropriate, testing)
of their services. In addition, the Depositary is in the process of developing
such contingency plans as it deems appropriate.
According to the Depositary, the foregoing information with respect to
the Depositary has been provided to the Industry for informational purposes only
and is not intended to serve as a representation, warranty, or contract
modification of any kind.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
For U.S. federal income tax purposes, the exchange of an initial note
for a registered note pursuant to the exchange offer should not be treated as a
taxable exchange for U.S. federal income tax purposes. In that event, holders
who exchange their initial notes for registered notes would not recognize
income, gain or loss for U.S. federal income tax purposes. In addition, a
holder's tax basis in the registered notes would be equal to its adjusted basis
in the initial notes, and its holding period would include the period during
which it held the initial notes. Persons considering the exchange of initial
notes for registered notes pursuant to the exchange offer should consult their
own tax advisors concerning the application of the U.S. federal tax laws to
their particular situations as well as any consequences arising under the laws
of any other taxing jurisdiction.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives registered notes in exchange for
initial notes for its own account pursuant to the exchange offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such registered notes. This prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection with resales of
registered notes received in exchange for initial notes where such initial notes
were acquired as a result of market-making activities or other trading
activities. We have agreed that we will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale for a period of 180 days after consummation of the exchange offer, or
such shorter period as will terminate when all initial notes acquired by
broker-dealers for their own accounts as a result of market-making activities or
other trading activities have been exchanged for registered notes and resold by
such broker-dealers. A broker-dealer that delivers such a prospectus to
purchasers in connection with such resales will be subject to certain of the
civil liability provisions under the Securities Act and will be bound by the
provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations).
We will not receive any proceeds from any sale of registered notes by
broker-dealers. registered notes received in exchange for initial notes pursuant
to the exchange offer by broker-dealers for their own account pursuant to the
exchange offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the registered notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such registered notes. Any
broker-dealer that resells registered notes that were received by it for its own
account pursuant to the exchange offer in exchange for initial notes pursuant to
the exchange offer and any broker or dealer that participates in a distribution
of such registered notes may be deemed to be an "underwriter" within the meaning
of the Securities Act and any profit on any such resale of registered notes and
any commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act.
For a period of 180 days after consummation of the exchange offer, or
such shorter period as will terminate when all initial notes acquired by
broker-dealers for their own accounts as a result of market-making activities or
other trading activities have been exchanged for registered notes and resold by
such broker-dealers, we will promptly send additional copies of this prospectus
and any amendment or supplement to this prospectus to any broker-dealer that
requests such documents in the letter of transmittal. We have agreed to
indemnify such broker-dealers against certain liabilities, including liabilities
under the Securities Act.
LEGAL MATTERS
The validity of the registered notes offered hereby will be passed upon
by Greenberg Traurig, P.A.
EXPERTS
The Consolidated Financial Statements of Engle Homes and the related
schedule incorporated by reference in this prospectus have been audited by BDO
Seidman, LLP, independent certified public accountants, to the extent and for
the periods set forth in their reports incorporated by reference herein, and are
incorporated by reference in reliance upon such reports given upon the authority
of said firm as experts in auditing and accounting.
51
<PAGE>
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We have not authorized any dealer, sales representative or any other person to
give any information or to make any representations not contained in this
prospectus or the accompanying letter of transmittal. This prospectus and the
accompanying letter of transmittal do not offer to sell or buy
any securities in any jurisdiction where it is unlawful.
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TABLE OF CONTENTS
PAGE
----
Where You Can Find More Information.....................i
Cautionary Statement Regarding Forward-Looking
Statements...........................................ii
Summary.................................................1
Risk Factors............................................9
Use of Proceeds........................................14
Ratio of Earnings to Fixed Charges.....................14
The Exchange Offer.....................................15
Description of the Registered Notes....................24
Book Entry; Delivery and Form..........................48
United States Federal Income Tax Considerations........50
Plan of Distribution...................................51
Legal Matters..........................................51
Experts................................................51
[ENGLE HOMES LOGO]
ENGLE HOMES, INC.
OFFER TO EXCHANGE
$100,000,000
9 1/4% SERIES C SENIOR NOTES DUE 2008
FOR ANY AND ALL OUTSTANDING
9 1/4% SERIES B SENIOR NOTES DUE 2008
--------------------
PROSPECTUS
--------------------
JUNE 29, 1999
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